Financial Mail April 09 2020 by SundayTimesZA

Helen Rees: the prof leading SA’s Covid-19 vaccine trial P17

Kganyago: ‘You fix your roof before the rain comes’ P28

Famous Brands: fed up with flipping burgers P41

The smoking irony of BAT’s Covid-19 ‘vaccine’ P51

www.financialmail.co.za

April 9 - April 15 2020

SA: R32.00 inc Vat Botswana: P29.20 Eswatini: SZL29.20 Zimbabwe: Z$5

“

This isn’t just a pause — it’s an entire reset of our economic system — Johann Rupert

” By Rob Rose

CONTRIBUTORS:

Malala · Dennis Davis · Delphine Govender · Justice · Bruce Whitfield · Fred Khumalo · Chris Roper

KINGJAMES 50556/R

We miss a high-five. A handshake. A walk. A run even. We miss the sounds of bustling streets and full schools at break time. Miss watching the sunset. Not hesitating to open a door. Ride in a bus. Sit next to a friend. Or give someone a hug when they need it. And the reason we’re missing all these little things? Well, that’s caused by a little thing too. So small, we can’t even see it. But in order to get back to all our favourite things, there’s just one little thing we need to do. Stay home and stay safe, South Africa.

That’s why the Motsepe family and companies associated with them, including Sanlam, have pledged R1 billion to help South Africa.

Sanlam is a Licensed Financial Services Provider.

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2020/04/06 14:52

inside

contents

financialmail.co.za April 9 - April 15, 2020

fox

features

money&investing

life

SA bookings crash and burn

Keep calm and carry on

Fed up with History’s flipping burgers Olympic hurdles

(Kyodo)

cover story

REGULARS 4 Editorials 5 Editor’s Note 6 At Home & Abroad 7 Letter 8 From the Bench 40 In Good Faith 62 Crossword 63 Backstory

FM FOX 9 Holiday Accommodation 10 Another Week 11 Trending 11 Dinner Party Intel 12 Diamonds & Dogs 12 Hot Property 13 Private Education

14 15 16 16 17 18

Digital Pattern Recognition Numbers Gimme Profile Coronavirus in Pictures

FEATURES 22 Johann Rupert 27 Known Unknowns 28 Reserve Bank 30 Coronavirus Comment 32 Property Rentals 34 Motor Industry 35 Vehicle Sales Reporting AFRICA & INTERNATIONAL 36 Chocolate

cover story

ADFOCUS 38 Lockdown

Welcome to the great 00 re set

MONEY & INVESTING 41 Famous Brands 43 Life Insurance 46 Dairy Producers 47 Mobile Operators 50 Market Watch 51 The G Spot 52 Investor’s Notebook 53 Economic Indicators 54 JSE Top Stocks

Helen Rees: the prof leading SA’s Covid-19 vaccine trial P17

Famous Brands: fed up with flipping burgers P41

The smoking irony of BAT’s Covid-19 ‘vaccine’ P51

www.financialmail.co.za

April 9 - April 15 2020

SA: R32.00 inc Vat Botswana: P29.20 Eswatini: SZL29.20 Zimbabwe: Z$5

“

This isn’t just a pause — it’s an entire reset of our economic system — Johann Rupert

FM LIFE 57 Sport 59 Inbox 60 A Moveable Feast 61 Memes

Kganyago: ‘You fix your roof before the rain comes’ P28

facebook.com/ financialmail

” By Rob Rose

CONTRIBUTORS:

· Justice Malala · Dennis Davis · Delphine Govender · Bruce Whitfield · Fred Khumalo · Chris Roper

@financialmail

Cover: Shaun Uthum

April 9 - April 15, 2020

financialmail.co.za

editorials PROHIBITION DRIES OUT THE ECONOMY

n many ways, it’s understandable that police minister Bheki Cele is virulently opposed to the demon drink. Alcohol abuse is, after all, the common factor in many of SA’s worst crimes — murder, rape, assault and domestic and sexual abuse. And there is plenty of anecdotal evidence that since the lockdown began, the weekend casualty ward burden has eased, largely thanks to the ban on the sale of alcohol. “My first prize would be that we shut down alcohol, but I know we cannot do that,” Cele said last week, referring to a continuation of the alcohol ban, post the 21-day lockdown. For the sake of Cele’s own government, if nothing else, they most certainly can’t. The alcohol industry — through sales of wine, beer and spirits; employment; tourism; and export earnings — provides important support for SA’s economy. Grape and wine production contributes about R49bn to GDP, while the industry, at last count, directly and indirectly employed 300,000 people. And, unlike many other parts of local industry, the sector’s contribution to the national GDP has been growing at least 10% a year since 2003 — which makes it one of the best-performing players in an otherwise struggling economy. You’ll also know that alcoholic beverages fuel two of SA’s finest companies on the JSE — Distell and AB InBev. These companies bring in billions in hard currency every year thanks to the sale of their world-class products. And they pay heaps to the fiscus. SA, in fact, ranks among the nine biggest wine-producing nations in the world, and in 2018, according to figures compiled by Wines of SA, 51% of wine produced in SA was exported. In other words, it’s an industry critical to the trade balance and, by extension, the stability of the rand. And the rand has been anything but stable in recent days, plunging through R19/$ after Fitch Editorial

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Editor: Rob Rose. Deputy editor: Natasha Marrian. Managing editor: Kevin O’Grady. Writers: See bylines for writers. Assistant editors: Sarah Buitendach, Shirley de Villiers, Razina Munshi, Giulietta Talevi. Contributing editor: Bruce Whitfield.

April 9 - April 15, 2020

and Moody’s downgraded the country’s credit rating. And yet, just a few weeks ago, it was close to R14/$. Of course, another major factor in the rand’s slide has been the coronavirus-inspired rush from emerging-market currencies into dollars. But the fact that SA’s wine industry has been prevented from selling its products abroad will surely have contributed. It is for this reason that changes to transport regulations published on Tuesday evening — finally allowing wine that is export-ready to be transported to ports, is such a crucial win for the lobby that pushed for it. Clearly, the province that reaps the biggest economic benefits of SA’s wine and grape industry is the DA-run Western Cape. Already, the premier, Alan Winde, has butted heads with Cele over the hastily gazetted lockdown laws on cigarettes, allowing some shops in the province to continue selling them. “The Western Cape is part of SA and this is a national law. Everybody should respect a national law,” Cele thundered in response. It is natural for the ANC to portray the Western Cape as an upstart 123RF/betelgejze “super-province”, but the economic benefits of lifting the ban on wine exports will accrue to the country as a whole — and not just through tax revenue. Obviously, we need a lockdown to defeat Covid-19, but pig-headed rules imposed for their own sake, without nuance, do SA a disservice. Cele’s underlying antipathy is manifest in other ways too — such as, ironically, in the underresourcing of the police service in Cape Town’s gang-ridden suburbs. But if the call is for national solidarity during these unprecedented times, petty political squabbles must also be set aside. x Subeditors: Dave Landau (Chief), Magdel du Preez (Deputy), Dynette du Preez. Proofreader: Norman Baines. Creative director: Debbie van Heerden. Contracted artists: Colleen Wilson, Vuyo Singiswa, Keith Tamkei. Graphics & statistics: Shaun Uthum. Photographer: Freddy Mavunda. Personal PA to the editor: Onica Buthelezi. Office assistant: Nelson Dhlamini.

JUSTICE FOR THE JESTERS

t’s so refreshing — and so rare in SA — to see politicians held accountable for their failings. This week, New Zealand Prime Minister Jacinda Ardern demoted her health minister after it emerged he had flouted lockdown regulations by driving his family to a beach 20km from his home. He wasn’t fired outright, she said, to ensure continuity of leadership amid the Covid-19 crisis. Would that such leadership was shown in SA, where the dial for political behaviour is so often set to farce. Exhibit A: transport minister Fikile “Mbaks-FearFokol-MrFix” Mbalula, who periodically emerges from self-aggrandising flights of fancy on Twitter to gift SA with contradictory — and life-threatening — information about the lockdown. Exhibit B: police minister, millinery enthusiast and guardian of SA sobriety Bheki Cele. He told SA a horrific 87,000 cases of gender-based violence had been reported in the first week of lockdown; three days later the correct figure (2,300) was quietly released — buried halfway down a wordy statement. Exhibit C: communications minister “God Stella” Ndabeni-Abrahams, the least of whose sins seems to be violating lockdown for a social lunch (documented on Instagram for posterity and idiocy). Social development minister Lindiwe Zulu must be feeling a bit better about her own Instagram gaffe round about now. But, really, what do you have to do to even get “demoted” in this country? x

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editor’s note by Rob Rose

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A LOCKDOWN TIGHTROPE The Paternoster Group reckons that SA’s lockdown will probably be extended. But sooner or later, we’ll have to find a compromise

@robrose_za roser@fm.co.za

The US has the sort of balance sheet to keep everyone inside for many months. SA doesn’t

ere we allowed to go to a pub, there’d be two questions dominating every discussion: just how long will the lockdown last, and can our economy survive it? (Actually, there’s a third question, but no-one knows quite what went wrong with Fikile Mbalula — it’s a mystery for the ages). On the lockdown, the smart money says it’ll be extended. Research this week by the Paternoster Group, a political risk consultancy headed by the redoubtable Richard Calland, puts the odds of the lockdown being extended at 50%. “To be successful, [a lockdown] needs to be coupled with the ‘Four T’ strategy of ‘Trace, Test, Track and Treat’ that the government has developed in the past fortnight ... [but it] hasn’t yet been able to roll out the programme in a manner that is cast sufficiently widely to achieve the main purpose of the lockdown,” it warns. By contrast, the Paternoster Group reckons there’s just a 5% chance the lockdown will be lifted on April 16. “This is the least likely option. Covid-19 isn’t going anywhere for a while, and in all probability, neither are you.” More plausible even (with a 30% probability), is the idea of a middle ground: lifting the most restrictive measures “to avoid the economy ossifying completely”, while being prepared to return to a full lockdown should infection rates start to rocket. In this scenario, expect a curfew instead of a lockdown, a wider definition of “essential goods” so more people can go back to work, and the chance to stack up on more wine and whisky. The question, though, is what is the best thing to do? Many people, obviously, are rightly anguished at just how searingly bad the lockdown has been for the economy. They point to Sweden as one example of a country that has decided to wait and keep its economy open. It’s similar, effectively, to the “herd immunity” experiment which Boris Johnson initially flirted with in the UK. Only, Sweden isn’t looking so hot right now. The death rate is rising rapidly: on Monday 76 Swedes died — its highest number yet of that country’s daily fatalities. Last week, the Lancet journal wrote: “The initial slow

response in countries such as the UK, the US and Sweden now looks increasingly poorly judged. As leaders scramble to acquire diagnostic tests, personal protective equipment and ventilators for overwhelmed hospitals, there is a growing sense of anger.” It added that there was an initial patchwork of harmful reactions from some leaders: from denial and misplaced optimism to passive acceptance of large-scale deaths. Thankfully, SA can’t be accused of any of that. Which is just as well — we don’t exactly have the latitude that Sweden has to indulge flights of policy whimsy. And yet, there are numerous ill-informed calls to lift the lockdown entirely, as of right now. Last week, Just One Lap founder Simon Brown sneered at someone who said that “freezing the economy will certainly kill more people”. “Based on what? A blog of a wealth manager? Maybe we should let the healthcare professionals figure this out,” Brown replied. Jean Pierre Verster, who runs Protea Capital Management and is one of the smartest investors around, says a common logical fallacy is to imagine that it’s an either/or situation. “It’s not as if option a) is that we don’t have a lockdown, people die and the economy is fine, and option b) is we close the economy to save lives. In fact, a likely scenario is that if you don’t have a lockdown, you’ll have people die and the economy could take a worse knock.” In the Swedish example, he says, you risk a situation where hospitals are so overrun that not only can’t they cope with the virus, they’re also unable to deal with routine events like accidents or cancer treatments. “I don’t think we should be running this kind of experiment on our populace, given our frailties in this country,” he says. But equally, you can’t lock down your country for a year and hope to still have much of an economy left. Paul Romer, who won the Nobel prize for economics, wrote in The New York Times this week that the US lockdown should, within a few months, shift to a targeted approach that “limits the spread of the virus but still lets most people go back to work”. His proposal is: get 25% of workers back within two months, 75% back within four. This is the middle ground. And it’s complicated: his scenario relies on widespread rollout of protective equipment to shield those who haven’t had the virus, as well as far smarter, frequent, targeted testing. Paul Krugman, another Nobel prize-winning economist, argues that the US economy is in “a medically induced coma, in which some brain functions are temporarily shut down to give the patient a chance to heal”. What needs to happen, he says, is that the government must provide life support — in the form of disaster relief, as cash — to keep the patient alive. But the US has the sort of balance sheet to keep everyone inside for many months. SA doesn’t. Of course, we haven’t seen the scale of human apocalypse that the US has either. If we’re lucky (and partly thanks to our early lockdown), we might not. However, as the Lancet journal points out, we did need a lockdown. In the end, though, the economics might dictate that SA takes the middle ground of partially lifting it sooner rather than later. x April 9 - April 15, 2020

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at home & abroad by Justice Malala THE LAGGARDS MUST BE FIRED We need the best team for the challenges that lie ahead, and this means Ramaphosa’s cabinet must be reshuffled

@justicemalala

A must insist that President Cyril Ramaphosa reshuffle his cabinet — fast. The turmoil of the past three weeks underlines that we do not have time to faff about. The laggards must go. The implementers must implement. You can’t make SA’s troubles up. As if the Covid-19 pandemic was not a big enough headache, Fitch Ratings downgraded the country further into junk just a week after Moody’s stripped SA of its last investmentgrade rating. The rand collapsed. Businesses are shutting down. When the sun finally sets on Covid-19, at least two things will be clear to many South Africans. First, after 26 years of excuses, the myth that the state is incapable of delivery will have been destroyed. We saw this with the accelerated delivery some of our ministers were suddenly capable of. They’ve been sleeping on the job all along. Second, there are some very good and capable politicians out there. They deserve to be in office. So why should we keep the laggards? Who should go? Well, South Africans have for years complained about poor service delivery. Running water for poor communities has been a big problem. The water minister in the administration of former president Jacob Zuma was constantly off playing

One of the problems with the Ramaphosa cabinet is that it retains a huge chunk of the Zuma detritus 6

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April 9 - April 15, 2020

123RF/Christophe Boisson

party politics. Water boards collapsed. The current minister, Lindiwe Sisulu, was nonchalant about her portfolio. She only acted to take extremely odd steps such as picking Mo Shaik and a public relations practitioner — both with zero water experience — as her advisers. Really? Yet when Covid-19 hit she managed to find and deploy water tankers within a week. Sisulu has been in government since 1996. She has been missing in action until now. Why does Ramaphosa keep her in the cabinet? One of the problems with the Ramaphosa cabinet is that it retains a huge chunk of the Zuma detritus. Maite Nkoana-Mashabane was utterly useless as Zuma’s international relations minister. She is invisible as Ramaphosa’s minister for women. Why is she in office? The minister of small business development, Khumbudzo Ntshavheni, could not be bothered to make a call to finance minister Tito Mboweni to ask him why the National Treasury seemed to be closed to small business during the lockdown. She tweeted instead. What is Ramaphosa running — a kindergarten? If a minister cannot make a phone call to a fellow minister then I don’t know why they are even in the same cabinet. One of them should go. Bheki Cele thinks being minister of police is akin to being a tin-pot dic-

tator who excuses every incident of police brutality on the go. With so many claims of police killings and brutality during the lockdown, Cele should be sent off to shine his shoes back home in KwaZulu-Natal. His deputy, Cassel Mathale, should not be anywhere near the police ministry when he did not raise a finger against corruption during his tenure as Limpopo premier. Which brings me to the deputy ministries. Why is the ANC Youth League’s worst-ever secretary-general, Njabulo Nzuza, deputy minister at home affairs? Why is Zuma’s former spymaster, David Mahlobo, still at human settlements? The scandalsoaked Hendrietta Bogopane-Zulu, who enriched a relative to pay for a wedding, is still at social development. S’dumo Dlamini, who destroyed Cosatu in aid of Zuma, is in charge of agriculture and land reform. Yikes! Most of these deputy ministry positions are grace and favour. Ramaphosa should scrap them. We don’t have the money anyway. There are some good ministers. Ronald Lamola shines as justice minister. Naledi Pandor is doing a great job at international relations. Ebrahim Patel spent nine years slumbering as Zuma’s intellectual enforcer, but he seemed to wake up with the Covid-19 pandemic and seemed to take the lead on economic matters. He should be fired for his years of sloth, but at least when the challenge came he was not out to lunch. Zweli Mkhize has been an inspiration during the pandemic, despite his nonstarter National Health Insurance plan and his appointment of his niece, implicated in scandals at the Public Investment Corp, as his chief of staff. But the laggards far outnumber the achievers. Ramaphosa must fire them. There is no time. x

you said...

So many empty promises, Cyril I believe all this rapture over President Cyril Ramaphosa’s dealing with the Covid-19 outbreak is premature. In his televised address, Ramaphosa assured businesses that they would be able to receive relief — quite stirring, feel-good stuff. And then the cameras were switched off and the lights dimmed. Within days I received a circular from the National Employers Association of SA in which its CEO, Gerhard Papenfus, bemoans the difficulties facing stressed businesses applying for relief [from the government]. Actually, nothing has changed. Politicians spout all sorts of promises, but rarely do these translate into any action — the Compensation Fund, state-owned enterprises, the Unemployment Insurance Fund … the list is endless. And yet people still vote for them. I am incredulous. Tony Ball Gillitts

Gallo Images/Brenton Geach

letter online Finance minister Tito Mboweni now has President Cyril Ramaphosa’s backing to reform SA’s badly listing economy All shoulders to the wheel. If you are not on the bus, we are leaving without you. Zero tolerance for corruption, ineptitude, inefficiency, and delays in processes and processing documents, tenders, certificates, business registration, permits and so on. David Fincham Stop talking, Tito, and do what is necessary for the country. But remember that it is the ANC government that put us in this painful time. Don’t use the pandemic as an excuse — it has nothing to do with the downgrade. Luxolo Yuku Our economy had to crash. The Covid-19 pandemic accelerated this and, in a way, spared us some pain. The road ahead will be very bumpy. We are all going to take a hit. But this crisis is in fact a shot in the arm — a vaccine, if you will, to bring much needed reform. Marcus Visser Did we have to wait for things to get to this point to take structural reform seriously? Beatrice Chandia

123RF.com/breizhatao

A lot of the prescriptions want to remedy this abnormal situation with traditional economic remedies. They won’t work. Lerato Tsebe It’s high time that the economic duncerati in the ANC left it to Tito Mboweni. After all, the

likes of Nomvula Mokonyane had their time to “pick up the rand” and they failed. Why can’t she do it now? This is what she said when we were experiencing the same problem of a downgrade. Let her pick the rand up! Themba M Chonco

One of the reasons we voted for Cyril Ramaphosa was to stop the rand from falling, to stop load-shedding, to create more jobs for the youth — but things are becoming worse. Blessing Jali It took former US president Barack Obama six years in office to achieve a turning point in the economic disaster left by George W Bush’s administration. Mind you, the US is one the biggest economies in the world. Do you think that nine years of economic ruin under Jacob Zuma’s administration could be reversed in just 24 months? Kgomotso Mogodiri The amazing thing is that the economy would be so easy to fix. Just stop stealing, privatise power generation, replace BEE with a small empowerment tax (which should be used to fund black entrepreneurs), stop with nationalisation and deregulate the labour market. Within six months this place will be pumping. Paul Kane Jacob Zuma is to blame for a lot of SA’s economic blues. His Gupta friends live in luxury while the poor are suffering. At least Ramaphosa is trying to curb the looting. Petro Cosh

The FM welcomes concise letters from readers. Letters must carry the name and address of the sender. They can be sent to The Editor, Financial Mail, PO Box 1744, Saxonwold 2132. E-mail fmmail@fm.co.za

good week She made her first broadcast to the nation 80 years ago, but Britain’s 93year-old matriarch, Queen Elizabeth II, is still at it. This week, she addressed the UK and the world in a speech filled with the sensible kindness that a stressed audience needed to hear. Health workers, those isolating and those helping others got a thumbs-up from Her Majesty, who ended with: “While we may have more still to endure, better days will return: we will be with our friends again; we will be with our families again; we will meet again.” x

bad week If only Fikile Mbalula, the diminutive popinjay of SA politics, had such good sense. Instead, Mbalula, who has done little to fix SA’s public transport system, despite his Twitter moniker (Mr Fix), flouted the rules on mass gatherings in his address to taxi operators last week and crumbled to pressure from an industry that continues to operate almost entirely in its own self-interest. The relaxation of lockdown regulations for taxi operators is arbitrary, potentially fatal and ridden with double standards. x April 9 - April 15, 2020

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From the Bench by Dennis Davis FINDING THE MONEY TO FIGHT COVID-19 While some call for extensive spending to combat the virus, the real trick will be obtaining the funds to do so

April 9 - April 15, 2020

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We dare not retreat to austerity at the expense of delivering basic goods and services

0.9%, and the collection of R1.4-trillion in revenue. If that revenue drops by 5%, SA will have a R70bn shortfall. So how does the country finance an additional R135bn, without damage to the long term? There is about R30bn available from the Unemployment Insurance Fund (UIF) — it should be more, but a decline in the stock market and investments leaves a smaller pot. Elsewhere, it will help if we plug the tax leakages. Current estimates of leakages in customs, income tax and VAT are north of R50bn a year. It may also be necessary to freeze public service pay rises for the current year. This will give us a further R30bn. The wealthy also need to make a

123RF

t is difficult to lift our gaze over the horrendous spectre of Covid-19 and the dystopian world we now inhabit, and peer towards the world as it will be after the pandemic is reined in. Yet this is the crucial question for our time. Recently, a group of economists penned an open letter to President Cyril Ramaphosa setting out a range of recommendations for dealing with the immediate implications of the lockdown and the weeks ahead. It is difficult, indeed churlish, to criticise their proposals, save to say that without appropriate costing they are, at best, a commendable wish list. Unlike the developed world , SA is not in a position to do “anything it takes” to stabilise and stimulate the economy. The effect of state capture, both on revenue collection and in the sheer tsunami of cash that was stolen, has compounded the problem. If only we had the billions the Guptas stashed away over the past decade to provide cash transfers to those in need today! But as it is, scarcity dictates the imperative of our priorities. These should be channelling more resources into the health-care sector, extending grants to staff who aren’t being paid by their employers, and providing meaningfully for the unemployed and informal sectors. Major support is needed for small and medium-sized businesses to ensure they can re-emerge once the economy has been reopened. Some tentative calculations have been done to establish the cost of extending child grants, support for small firms, employee tax incentives and payments to people out of work. At least R65bn is needed. But it gets more complicated. If we assume tax revenues will fall sharply due to the lockdown, the amount we need increases. The 2020 budget was predicated on GDP growth this year of

sacrifice. While there is presently no reliable information that could allow for the immediate introduction of a wealth tax, it would be possible to add a further tax bracket of, say, 50% for income above R1.5m or R2m. We could also increase dividend tax over a certain amount, or even resurrect the “loan levy system” for companies, with staggered rates from R750,000. In addition, since some of the infrastructure budgeted for will no longer be built this year, we could divert those funds. It can’t be left to the state alone to help businesses under pressure — debt relief from banks and rent holidays

from landlords are needed too. While some measure of VAT relief for small businesses is needed, we have to see if the Solidarity Fund can help there, since any erosion of the VAT base will lead to the government battling with its own cash flow. Available money is one thing; delivering it to those in need is another. Already, there have been depressing reports about the UIF’s capacity. Some economists say one alternative is to push more cash through the child grant system, or to use bargaining council structures to distribute cash to employees. Those not part of any bargaining council could be tracked by using the databases of commercial banks. Time is of the essence; millions need help today. As SA emerges from Covid-19, it is imperative that we reconfigure our economy in a focused, transformative manner in line with the constitution. We dare not retreat to austerity at the expense of delivering basic goods and services. Equally, decent health care for all, clean water, sanitation and an education system that allows all children to fulfil their talent are central to the constitution’s vision. It can no longer be an optional extra. The discriminatory effects of the lockdown should also focus attention on the shameful spatial geography inherited from apartheid. The pandemic has highlighted the crucial role of the state. The US’s chaotic handling of the pandemic is a luminous illustration of the cost of an incoherent public governance structure and incompetent federal executive. SA will emerge from the pandemic in a position to rebuild only if it is led by a capable government, accountable to the constitution and the people, and purged of the state capture that has so thwarted our best aspirations. If we can do this, it will build confidence that SA can fully participate in a newly configured global economic world. x Davis is a judge and professor of law at the University of Cape Town, and led the Davis tax committee

Digging up unusual, interesting tidbits in and around the business scene

HOLIDAY ACCOMMODATION

SA bookings crash and burn

The financial shock hitting SA’s hotel and self-catering accommodation spots could last for the rest of the year Joan Muller mullerj@fm.co.za

ý Umhlanga, Hermanus and Plettenberg Bay, usually bustling with holidaymakers during the peak Easter school break, are all but deserted. In these and other coastal hotspots, bookings worth millions of rands have been cancelled in the wake of the Covid-19 lockdown leaving letting agents, Airbnb hosts and hoteliers out of pocket. And there are fears that travel plans for the June/July and December periods will also be scrapped, given that many South Africans may no longer be able to afford a holiday this year. Leigh Mulholland, manager for letting agency Seeff ShortStay, estimates that in Cape Town alone, more than 17,000 short-term

rental properties are standing empty (including Airbnb rooms and apartments, but excluding hotel rooms). “That translates into millions of rands of lost revenue to the selfcatering sector of the tourist market,” she says. Mulholland confirms that 100% of Seeff ShortStay’s rental bookings of around 500 properties across SA for the Easter and midyear holiday seasons have been cancelled. She adds: “There have been no rebookings as yet. I believe that the outlook for tourism will be bleak for most of this year because it’s not just SA that is affected by Covid-19, but a large portion of our visitors from elsewhere in the world, especially from Europe and the US.” At Zimbali on KwaZulu Natal’s north coast, one of SA’s poshest

golf and beach resorts, the 200odd homes typically let over the Easter school holidays have also been shuttered. Andreas Wassenaar, licensee for Seeff Zimbali, says Easter bookings are usually for seven days at an average R4,000 a day, which translates into lost revenue of about R5.6m. “That’s just for Zimbali. The loss for the greater Ballito market will be much larger.” Says Wassenaar: “This is a devastating shock for the hospitality and tourism industry across our region and has a direct and immediate impact on property owners, who often rely on high-demand periods to finance running expenses of their properties.” But it’s not just Easter and June/July holiday bookings that have been cancelled. Cisca de Vries, Seeff ShortStay rental agent for Hermanus, says she’s already had a number of December cancellations. Many South Africans will be forced to stay home this

festive season given the expected financial impact of Covid-19. SA’s hotel industry will also suffer millions in lockdown-induced revenue losses. Cape Town, with a total graded hotel-room tally of about 13,000, will be hardest hit, given the closure of SA’s borders to international tourists. The Mother City coincidentally posted a noticeable uptick in occupancy over the past six to 12 months, on the back of a revival in tourism following 2018’s drought-linked slump. Latest figures from global hospitality data and analytics specialist STR show that the average hotel occupancy in SA plummeted to an average 43.5% in March (year-onyear). That’s down from February’s multiyear high of 68%. Similarly, revenue per available room, another key performance metric tracked by STR, dropped by 42.3% to R608.08. That compares to February’s average room rate of close to R1,000. The hotel industry’s losses are

April 9 - April 15, 2020

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AFP/Mladen Antonov

ANOTHER WEEK

IN NEED OF HELP Dogs fight in a crowded enclosure at Auntie Ju’s shelter for stray dogs on the outskirts of Bangkok, where 1,500 canines rescued from the streets of the Thai capital are being housed. The shelter relies on donations, and offers of food and money have dropped sharply since the Covid-19 outbreak

April 9 - April 15, 2020

NUMBERS

BY THE

expected to be far more pronounced in April, given that the government’s 21-day lockdown of nonessential businesses kicked in only at midnight on March 26. As Robert Hodson, group marketing manager for Legacy Hotels & Resorts, puts it: “All our hotels and timeshare resorts are shut down. So there is now zero occupancy and zero revenue.” The group owns more than 20 hotels and timeshare resorts across SA including the Michelangelo Hotel in Sandton, The Portswood Hotel at Cape Town’s V&A This will hit Waterfront and property Kwa Maritane owners who Bush Lodge in rely on high the Pilanesberg. The concern, demand periods to Hodson says, is finance that no-one running knows how expenses of long the lockdown could last their properties if it is extended beyond three Andreas Wassenaar weeks. And even if SA opens for business again on April 17, hotel bookings are unlikely to recover overnight. “We expect new bookings to be exceptionally slow until the domestic market starts travelling again,” he says. Hodson expects it will take a “helluva” lot longer for international travellers to return to SA’s shores. “The only positive right now is that SA is hosting a number of international sporting events next year, including the Lions rugby tour, which could support a recovery in international leisure tourists.” Meanwhile, it seems most holidaymakers forced to cancel bookings for the Easter school period will be refunded. Airbnb, for instance, is offering 100% travel credits or cash refunds for bookings made for March 14 to May 31. Hosts, too, will be reimbursed by Airbnb for service fees. The tourism department has also made available a one-off, capped grant via its Tourism Relief Fund to help subsidise the operating expenses of small businesses during the lockdown. x

Vehicle sales hurt by Covid-19

29.7% is the drop in sales of new vehicles in SA in March, against the same month last year. This is a drop of 14,150 units, according to the National Association of Automobile Manufacturers of SA (Naamsa)

21.5% (7,905 units) was the fall in vehicle exports

33,545 units sold in March: 4.4% to corporate fleets

83.6% by dealers

5.8% to government 6.2% to car rental firms

SA’s entire domestic motor industry suspended production when the lockdown began. Three working days in March are aﬀected. The worst is still to come in April

6.9%

is the SA motor industry’s contribution to GDP

R503bn

was the industry’s total revenue in 2018

80% was the drop in car sales in China in February, when a lockdown was in place in many parts of the country 50% was the drop in March

9% was the drop in sales in Italy in February, ahead of its March lockdown

35% was the drop in sales in the US in March Source: Naamsa, FM research

DINNER PARTY INTEL... “I have seen the picture of minister [Stella] Ndabeni-Abrahams sitting at a luncheon with friends … I have asked her to come and see me … to discuss the impact of visuals like those on what we are trying to do.”

The topics you have to be able to discuss this week

1. UK’s mast mania

TRENDING

Does Big Brother bother you? What will people be prepared to give up to ensure their safety during a pandemic?

Fake news had a good week. At least 20 cellphone masts across the UK have been vandalised since last Thursday, The Guardian reports, after baseless theories blamed 5G networks — which were first rolled out in Wuhan, China — for the coronavirus. However, owing to the slow rollout of 5G in the UK, most of the masts that were vandalised did not contain the technology, and the attacks merely damaged 3G and 4G equipment. Network operators are concerned about the safety of their staff after members of the public confronted engineers doing maintenance of infrastructure, sometimes filming the encounters to share on social media.

2. Beach trip makes waves

Paul Ash

ý In the republic of Georgia, many of the police stations have glass walls. The theory was that if the people could watch the police, the police would be honest. And so it was. Corruption, once endemic in the former Soviet satellite state, was stomped out of the dark corners where it once lurked. Georgia, it emerged this week, has also done much better at containing the coronavirus outbreak than many other countries. On Tuesday, the country had 195 confirmed cases, two deaths and 39 recoveries. One wonders what Georgians would have felt about the possible threat to their privacy from the government potentially tracking and tracing them on their cellphones, as SA is doing. Former Constitutional

123RF/melpomen

President Cyril Ramaphosa

Court judge Kate O’Regan has been appointed the designated judge to ensure that people’s privacy is protected as the state works with cellphone network operators to track and trace those who may have been exposed to the coronavirus. “These are uncharted waters,” O’Regan said in a radio interview this week. One of the consequences of the pandemic is what people may be prepared to give up to ensure their safety. If they were offered the choice of less privacy in return for more safety, would they grasp it with both hands? With the spread of

unhinged fake news and regular convulsions of idiocy — such as the profanity-laced video of a man and his brother cruising Lyttelton’s empty streets — most people would probably choose less privacy. In Georgia, they probably would have shrugged off the possible threat of the government abusing their privacy via their phones. They have endured far worse. Maybe they would say to South Africans balancing fear with their desire not to be big brothered ever again: deal with it, because it may save your lives. But watch your backs when the plague is done. x

New Zealand’s health minister was demoted after he flouted lockdown rules to take his family to the beach. Just a few days before the beach trip, David Clark was photographed on a mountain bike near his home in Dunedin. Clark called himself an “idiot” for breaking the rules. Prime Minister Jacinda Ardern stripped him of his associate finance minister portfolio and demoted him to the bottom of the cabinet rankings. In normal circumstances, she says, he would have been sacked. Meanwhile, Scotland’s chief medical officer resigned over the weekend after she was caught making trips to her second home — flouting her own social distancing measures.

3. Turks to get free masks Turkey has banned the sale of face masks, but will instead distribute them for free at supermarkets or directly to homes through its postal service. The country has masks in stockpiles or in production for its entire population of 82-million, to last until the pandemic ends, President Recep Tayyip Erdogan says. Turkey has made mask usage mandatory in public places, on public transport, in grocery stores and at workplaces. April 9 - April 15, 2020

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DIAMONDS & DOGS BY JAMIE CARR

HOT PROPERTY THE WOW HOUSE

Rocketing sales of fantasy nurse costumes suggest a hands-on level of appreciation 12

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Ritex

Famous Brands

Things are looking up

Bleak future for restaurants

While much initial commentary on the DIAMOND likely impact of lockdown predicted a rush to the divorce courts after a few weeks of imposed togetherness, news coming out of Germany suggests that couples are taking advantage of the situation to enjoy an unprecedented quantity of Ugandan Discussions. No less an organ than The Financial Times reports that sales of condoms and exotic sexual accessories are going through the roof, with Ritex, Germany’s largest producer of condoms, seeing sales double in March compared to the previous year. The Dating und Partnerschaft section of the company’s website offers all manner of tips for those seeking to tip the work-love balance in the right direction, which is particularly important now that social life has been closed down and there’s not even any live sport to watch. Such is the diligence with which the nation has been putting its collective back into making the best of the crisis that experts have been suggesting that the country may have to react to a baby boom around Christmas, a concern for an already overstretched medical profession. News from a leading online retailer of personal erotica says that sales in Bavaria of fantasy nurse costumes have rocketed by 3,000%, suggesting a truly hands-on level of appreciation for the heroes of the profession. On a global level Malaysia’s shutdown caused Karex, which produces 20% of the world’s condoms, to close down completely for 10 days, and it has lost 200-million units of production, raising the alarming prospect of a global shortage that could put a real dent in the morale of the populace. x

While there are few sectors that will DOG escape the impact of this unprecedented economic crisis unscathed, some are clearly more vulnerable than others, and the casual dining sector is right up at the top of the list. Across the world restaurants are shut, with some doing what they can to morph into takeaway options serviced by the likes of Deliveroo, and others merely closing the doors and laying off the staff. Those with deeppocketed owners will survive and bounce back after restrictions are lifted, but many will face a real struggle for survival. This was a sector that, in many global markets, was already struggling with rising rents and taxes, increased food costs and wage bills, as well as oversupply into a heavily traded and competitive arena. Famous Brands has announced that it will no longer provide funding to its UK chain Gourmet Burger Kitchen (GBK), for which it paid £120m in 2016 in a transaction that was a brilliant sale for its former owners, and a truly catastrophic purchase for Famous Brands. A mere two years after GBK was acquired, it admitted it was financially distressed and entered into an arrangement with its creditors, and while GBK made an excellent burger, it was caught in a devastating financial squeeze. The rest of Famous Brands’ portfolio is in lockdown for various lengths of time, and the initial periods may be extended according to the progress of the pandemic. The company is generating no revenue during this period, and while it has managed to restructure its debt, the future looks more than a little troubled. x

April 9 - April 15, 2020

WHERE: Bantry Bay, Cape Town PRICE: R75m WHO: Dogon Group Properties This unique triplex penthouse is perched on the water’s edge and boasts unsurpassed ocean views. Designed by award-winning architects SAOTA, it has four bedrooms, 3½ bathrooms, generous outdoor living spaces and a rim-flow pool. Additional features include staff accommodation, a laundry and parking for three cars.

WHERE: Kenilworth, Cape Town PRICE: From R5.49m WHO: Lew Geffen Sotheby’s International Realty New development Salisbury Mews comprises six double-storey townhouses, each offering modern open-plan living and luxury finishes such as solid wooden floors, hansgrohe bathroom fittings and Smeg ovens. Each unit has a double automated garage, a heat pump with an integrated geyser, and a state-of-the-art security system.

PRIVATE EDUCATION

Varsities gain ground For the first time, private colleges are bringing in a greater share of AdvTech’s operating profit than its popular independent school franchises Marc Hasenfuss hasenfussm@fm.co.za

ý The rapid rollout of private schools in SA over the past eight years, mainly by PSG-controlled Curro Holdings, has overshadowed the progress made in the development of a private tertiary network to rival public universities and technical institutions. But a recent investment presentation by private education conglomerate AdvTech — best known for its school brands Crawford Schools, Trinityhouse and Abbotts College — shows that its tertiary division is now its main profit hub. For the year to end-December, AdvTech reported a sprightly 25% growth in tertiary revenue to about R2.15bn, with 13% enrolment growth for the 2020 academic year. AdvTech’s tertiary hub is centred on the Independent Institute of Education (IIE), with Varsity College and Rosebank College the main brands. The division also hosts IIE MSA, the Vega School and distance learning specialist Oxbridge Academy as well as hotel and catering training brands. In the past year AdvTech disclosed that 42% of its revenue was generated by the tertiary division, compared with 40% for the SA schools division (schools elsewhere in Africa would add another 4%). The balance of revenue is generated by AdvTech’s small human resources segment. In the 2018 financial year the schools segment generated 43% of revenue, versus 39% by tertiary brands. But at operating profit level the divisional weightings are more skewed in the latest financial report, with tertiary accounting for 57% and SA-based schools 41%. This ratio was 51% to 43% in favour

Chris van der Merwe: Stadio hopes to open its first multiversity campus in January Sunday Times/Esa Alexander

of the schools segment in 2018. A further illustration of AdvTech’s compelling tertiary growth is that the division has more than doubled in five years since showing revenue of R945m in financial 2015. More impressive is the growth in operating profit over five years from R135m to R496m, with the margin stretching from just 14% in 2015 to over 25% at the end of 2019. Naturally, one of the questions at the investor presentation was whether AdvTech would consider spinning off and separately listing its tertiary hub. Rival Curro unbundled and separately listed its fledgling tertiary education division Stadio in 2017 to allow the company to develop its ambitious “multiversity” offering. AdvTech CEO Roy Douglas discounted the possibility of a separate listing in the foreseeable future — though he said this did not mean such a development could be completely ruled out. What could add further impetus to AdvTech’s growth strategy for its tertiary offering is a recent high court ruling in favour of recognising the IIE Varsity College law degree. Douglas said this set a positive precedent to address the issue of

“private universities” and private higher education institutions. “It confirms to professional bodies in all fields, including law, engineering, accountancy, teaching, nursing and psychology, that the same rules apply across the board, and that students and graduates from public and private universities and institutions must be treated equally.” While the academic impasse stemming from the Covid-19 lockdown does add an element of uncertainty in the short term, AdvTech is still spending on expansion efforts in the tertiary segment. Douglas said capital expenditure during this year and 2021 would top R300m, and include moving Varsity College Cape Town to new leased premises as well as expanding the Varsity College and Rosebank College campuses in Pretoria. Interestingly, its smaller rival, Stadio — which seems determined to rapidly build scale — has already purchased land for R110m and started the construction of its first multiversity campus. Outgoing CEO Chris van der Merwe says it hopes to open its first campus in January next year. In October Stadio also pur-

chased 100% of Southern Business School (SBS) in a deal worth R155m. This values SBS at about R600m which is significant, considering Stadio’s current market value of about R1bn. Stadio, while significantly smaller than AdvTech’s tertiary hub, is making commendable progress, with revenue touching R815m and bottom-line profit coming in at R83m. The earnings before interest and tax margin was almost 15%. Net operating cash flow was R141m (or 17c a share), which probably gave directors the comfort to enter into a R200m revolving credit facility with Standard Bank in December. This facility will be used to fund Stadio’s new developments and growth initiatives as well as working capital requirements. At last count SA’s public universities had grown enrolments by 11% to just over 1-million from 2011 to 2017. Over the same period, private higher education facilities had seen enrolments up (admittedly off a low base) 80% to 103,000. Initiatives by AdvTech and Stadio over the past three years would have already changed those numbers markedly, and seem likely to outpace public tertiary enrolment growth in years to come. x

April 9 - April 15, 2020

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DIGITAL

Machines, our health-care consultants Marcé Bester

ý At the end of December 2019 Canadian artificial intelligence (AI) start-up BlueDot picked up a cluster of unusual pneumonia cases near Wuhan in China. A few days later the US Centers for Disease Control & Prevention (CDC) noticed the flare-up. But it wasn’t until January 9 that the World Health Organisation (WHO) notified the world of a new flu-like outbreak in China. In the year 2020 it doesn’t come as a surprise that digital technology can play a critical role in the global effort to stop the spread of a virus. BlueDot uses language processing and machine learning to sift through data from hundreds of thousands of sources. These include information from official public health organisations, digital media, global airline ticketing, livestock health reports and population demographics, the company says. Its machines are trained to process immense amounts of data quicker than we can comprehend. If you’re thinking “Wow, these smart computers are on their way to replace the work of humans”, you’re mistaken. At BlueDot, the data is gathered and passed on to humans with titles. Once physicians and computer programmers review the findings they do a gut check and create the reports that are sent out (to clients, in this case). This method beats slow and unreliable official reporting. “We know governments may not be relied upon to provide information in a timely fashion,” BlueDot’s founder and CEO (and infectiousdisease specialist) Kamran Khan told Wired magazine. “We can pick 14

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lance of infectious diseases, governments across the globe — especially in parts of Europe and in the US — have been ill-equipped for the pandemic. Slow response and understanding gave public health officials a late start on gathering information quickly and co-ordinating a response. But now that most countries have turned their attention to tackling the spread, AI can be a helpful tool. AI refers to the running of

simulations on trained computers. It is as if a baby were trained to do only one thing from birth. Nothing else. That’s how these machines are “trained”, and how they “learn”. AI isn’t considered to be the same as human intelligence; it refers to the idea that machines can be trained to execute tasks in a “smart” or “intelligent” way. And then there’s machine learning. This is the process that computers use to “learn” how to execute tasks. Though it can’t think for itself, the machine can overcome obstacles by creating solutions. That’s its one job — to find solutions to problems. The first step in pinpointing a disease is very early detection, well before any of us really knows much about it — and certainly well before it has been declared a pandemic. BlueDot’s AI algorithms rely quite heavily on news reports. But the emergence of social media and online reporting has also made it easier to track unusual issues. In a scholarly paper on using social media to track an epidemic, written in 2016, US-based information systems engineer 123RF/Denis Putilov

up news of possible outbreaks, little murmurs or forums or blogs of indications of some kind of unusual event going on.” The successful implementation of these predictive modelling measures could improve our ability to stop the spread of infectious diseases even before they become problematic. It just didn’t work out that way this time, because the technology is still in its infancy. And humans tend to not trust machines much. Add to that, the hype around AI still needs to be separated from what it can really contribute. And, in cases like these, funds are still better directed at traditional health initiatives. Even though a rapid response and monitoring are key in the detection, prevention and surveil-

April 9 - April 15, 2020

Artificial intelligence tools can help predict and treat global disease crises such as the Covid-19 pandemic

Mohammed Ali Al-garadi said the popularity of social networks has created large-scale social interaction among users that generate an extensive amount of data. “Social networks have received considerable attention as a possible tool to track a pandemic because they can provide an almost realtime surveillance system at a less costly rate than traditional surveillance systems,” he wrote. BlueDot says social media postings make the data get too messy. Instead — and this is where AI goes a step further to help simulate the spread of a virus — it accesses airline ticketing data. It correctly predicted that the virus would spread from Wuhan to Bangkok, Seoul, Taipei and Tokyo in days. On a micro-level, AI can help us understand virus mutations. AI and big data analytics can help virologists simulate modern genome sequencing methods. These highresolution computer-generated simulations can give scientists more insight, especially when it comes to new unknown viruses and genetic predispositions. Researching and simulating genome sequencing is a widely discussed topic among data engineers and virologists. Though it will be a valuable tool (and we could have used it in our current situation), it’s not widely used yet. Our technological capabilities aren’t quite there, but it does seem that this reality is closer than we realise. The medical community is already implementing AI technology to help health-care professionals diagnose symptoms without the need to expose people to patients. For instance, the Tampa General Hospital in Florida uses AI to detect fever in visitors with a simple facial scan. The Sheba Medical Center in Israel is using AI-powered remote monitoring to predict respiratory failure in high-risk patients. This is done using a sensor placed under a patient’s mattress to analyse their movement and vital signs. It sends warning alerts to medical staff if the patient’s condition deteriorates, after which humans can intervene and conduct further tests. x

PATTERN RECOGNITION BY TOBY SHAPSHAK

Mobile money in a lockdown @shapshak

Imagine the difference it could make to unbanked recipients if social grants could be paid out electronically in mobile wallets

Mobile money has the immediate power to transform SA’s welfare payments

very significant tech development took place last week, though you may not have heard about it in the midst of all the coronavirus coverage. M-Pesa, the mobile payment service launched in 2007, was “acquired” by Vodacom and its Kenyan subsidiary, Safaricom, from their holding company, Vodafone. Now the most widely used mobile money service is back directly in the control of the company that made it so successful and transformed the mobile landscape in Kenya as a result. M-Pesa was the missing link the East African operator needed to commercialise the then nascent mobile community in Kenya. M-Pesa gave Safaricom the financial tool to make payments using plain old SMS and USSD, a technology that transmits basic information easily and cheaply. And its growth has been monumental. Something like 44% of Kenya’s GDP is now transacted through MPesa. This is about $500m a day, according to Vodacom. Its success has partly turned Africa into a mobile success story. Now half of all the world’s mobile money services are in Africa, according to the GSM Association, the industry’s umbrella body. Earlier this year MTN relaunched its Mobile Money (MoMo) service in SA, having shut it down in 2016 – the same year Vodacom also shuttered its equally unsuccessful attempt at bringing M-Pesa to the SA market. MTN has 30-million MoMo cus-

tomers in its other 21 countries and estimates there are 11-million South Africans who don’t have financial services it believes MoMo can provide. Financial services are an obvious opportunity for mobile operators to expand their offering to customers. And M-Pesa is a significant driver of service revenue. In its 2019 annual report, Safaricom said its M-Pesa revenue grew 19.2% to KSh75bn (or $707m). It now accounts for 31.2% of Safaricom’s service revenue, compared with 16% from mobile data. How many people are trapped at home in the Covid-19 lockdown who are dependent on their phones for an internet connection and don’t have formal financial services? All of those people are potential customers for mobile money. Imagine how different a lockdown would be for unbanked people if they could transact using M-Pesa or MoMo instead of needing to draw cash or pay with it. Imagine if the 17-million welfare grants could be disbursed electronically to recipients’ mobile wallets. No costly, potentially dangerous trips to payout stations. Mobile money has the immediate power to transform welfare payments — but not without a mountain of consultations, negotiations and enabling legislation. Vodacom CEO Shameel Joosub rightly says M-Pesa will “promote greater financial inclusion and help bridge the digital divide within the communities in which we operate”. SA needs that right now, more than ever. x Shapshak is editor-in-chief and publisher of Stuff magazine (stuff.co.za) April 9 - April 15, 2020

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BY THE NUMBERS

COVID-19 PANDEMIC: THE TOLL ON MEDICAL WORKERS Sick health-care workers 14% of Covid-19 patients in Spain are health-care workers

$597bn is the value of the global trade in medical equipment. The shortage of protective equipment for health-care workers and medical tools such as ventilators is turning into an international scramble

is the figure for Italy

is the estimated figure in China, where 3,000 doctors – half of them in Wuhan – were infected

Li Wenliang, the Chinese doctor who first raised the alarm about Covid-19, eventually died of it

1 in 4 doctors and 1 in 5 nurses in the public sector in the UK are oﬀ work at the moment, either because they are ill or self-isolating

40% of the world’s personal protective products is exported by China, Germany and the US 25% of the world’s share of face masks is produced in China

Trade in medical equipment

91 export curbs were implemented by 69 countries this year. The ‘overwhelming majority’ were enacted in March as the virus epicentre shi ed to Europe and the US

200,000 masks ordered by Germany from a US producer were allegedly ‘confiscated’ by the US government when they were in transit through Bangkok. Oﬃcials in Germany and France have clashed with Washington over what they say are US a empts to unfairly obtain safety equipment

To facilitate the ﬂow of imports, the European Commission has waived tariﬀs and VAT on medical gear until the end of July. That has reduced the price of masks in Italy by a third

The US, the world’s largest importer of medical products for the past three years, has asked carmakers such as General Motors to produce ventilators Source: The New York Times, UK Royal College of Physicians, Bloomberg

GIMME

Samsung S20 Ultra

Cool factor ★★★★★/5

A beast of a phone ý Samsung’s Galaxy S20 Ultra superphone is one of the most expensive handsets in SA, but is it worth it? It is packed with the highest specifications available on a phone — a 6.9-inch screen with a 120Hz display, 8K video support, a 108-megapixel (MP) camera and a 100x Space Zoom feature. Its 120Hz screen refresh rate (a higher rate gives a smoother picture) and shooting of video with a resolution of 8K are world firsts for a smartphone. But there are downsides. First, given its size, it’s not a pocketfriendly device. The screen has an astonishingly high resolution of 3200x1400 pixels. However, you’ll have to choose between that resolution, or a 120Hz screen refresh rate paired with a 2400x1080 resolution. Samsung does not let you max out both settings at the same 16

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time, to preserve battery life. Presented with this choice, we found that a 120Hz screen is far superior for noticeably smooth scrolling, especially if used for games. The phone is a powerhouse; it doesn’t stutter between apps or on the camera. However, the 128GB base storage is disappointingly small, given its 8K video capabilities and high-resolution images from the camera. The camera has four lenses on the rear — a 108MP wide angle, 48MP telephoto, 12MP ultra-wide, and one for depth vision. The camera handles portrait shots, bokeh effects and wide-angle shots from between 24° and 120° fairly well, and the 40MP selfiecamera is impressive. The S20 Ultra has an Exynos 990 processor, 12GB of RAM, 128GB of storage that is expandable up to 1TB, and a 5000mAh battery.

April 9 - April 15, 2020

Usability ★★★★/5

Value for money ★★★½/5

Top-notch specs aside, the S20 Ultra is let down by the software. Samsung may have been too quick to ship it — some of my pictures were noticeably out of focus or had poor exposure, an issue that was globally acknowledged. This is something that can be fixed with a software update. But at the time of our review, an update was not available in SA. The S20 Ultra is a superphone that is more powerful than most PCs. It is aimed at a niche market and people

who want to be seen carrying this beast around. It costs an eye-watering R26,999. If you feel the S20 Ultra is trying to do too much, the regular S20 phones may be better suited. x Nafisa Akabor

PROFILE Katharine Child childk@businesslive.co.za

ý If one were to list all the titles and positions held by Prof Helen Rees, who is leading the SA part of a global trial to identify treatments for Covid-19, there would be no space to write anything else. But, in a nutshell, the gynaecology professor has been involved in World Health Organisation (WHO) committees on vaccines and the elimination of polio; she is the head of SA’s medicine regulator and the scientific advisory chair of the Coalition for Epidemic Preparedness Innovations, an international group that prepares vaccine technology in expectation of epidemics such as Covid-19; and she is a scientific adviser to the US National Institutes of Health. One of her many jobs is head of the Wits Reproductive Health & HIV Institute (Wits RHI), which she co-founded in 1994 to guide health policy in SA’s new democracy. So how does she manage five jobs at once? “I have a leadership team who have their own portfolios,” she says. “They have a lot of independence. I don’t have to micromanage the work they do. They are talented leaders in their fields.” She says she’d be lost without her personal assistant, who helps schedule her day and phone calls, sometimes down to the minute. Rees is tiny, but intimidating. She is well known as a tough boss who expects an enormous amount from the employees and scientists she leads. At a party to celebrate Wits RHI’s 20 years of existence, she told staff she felt pleased when she received their e-mails written at 2am, testimony to their intense work ethic and dedication. Rees and infectious diseases doctor Jeremy Nel are leading the SA division of the Solidarity trial of four possible treatments for Covid19. It is a global trial, she explains, and the great number of international sites is designed to speed up results. Usually a trial will have one or two testing sites and then

Helen Rees Head of the SA leg of a global Covid-19 trial

Leading the way SA’s renowned expert in vaccines, HIV prevention and reproductive health will manage the local leg of a worldwide Covid-19 trial expand to more countries, but that takes years. “We need to answer these questions in months.” Under investigation is the use of the antimalarial drug chloroquine, as well as remdesivir (which was designed to treat Ebola but had poor results), and an antiretroviral (ARV) drug combo, lopinavir and ritonavir, used with and without the drug interferon. Data from the trial is monitored in real time, which means medicines that are persistently failing can be removed. Rees, an honorary professor at the London School of Hygiene & Tropical Medicine and the recipient of the Order of the British Empire in 2001 and the Order of the Baobab in 2015, is well versed in

trials, including many that didn’t succeed. She has been involved in trials to test topical vaginal gels and ARV pills for women to prevent HIV transmission. HIV prevention trials in women is a field littered with failure. In the case of gels, trial after trial shows women don’t feel comfortable using them and thus they can’t be licensed for use. Rees describes science as a “stepladder” of “failure” with incremental steps of success up the ladder. Science doesn’t stop when something doesn’t work, she says. “In the science world, if you do it properly, the research that doesn’t work will inform the field as much as the research that does.” And she knows how to run

multisite international trials. She most recently led the Echo trial that tested three different contraceptives in about 7,000 local, Kenyan and Zambian women to see if SA’s injectable contraceptive Depo Provera increased the risk of HIV transmission. It is a trial many said couldn’t be done. But doctors needed to know if SA women were at risk and Rees lobbied for the trial and elusive funding for years. Last year, Rees and her colleagues revealed there is no added risk of HIV infection from the common contraceptive. She is particularly well known for her skill at chairing of meetings. Mitch Warren, head of HIV advocacy group AVAC, writing from New York (Rees advises that board too, of course) says: “Rees is the most effective meeting chair I have ever seen. She can guide discussions (no matter how heated), ensure all voices are heard, summarise the outcome precisely and identify exactly what has to happen next. This may be why she is asked to serve on – and chair – nearly every committee, board, advisory council or individual meeting. “We all go to too many meetings, but a Helen Rees-chaired meeting is one not to miss.” So how does she do it? She listens and ensures “everyone’s views are equally respected”, she says. “When you reflect back, it is extremely important that people can hear that their view is acknowledged and taken into account.” x

April 9 - April 15, 2020

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Sergei Mikhailichenko/SOPA Images/LightRocket via Getty Images

Art installation Virus of shopping at a parking lot in Russia

CORONAVIRUS IN PICTURES

Making a statement

Alon Skuy/Sunday Times

B.A. Van Sise/NurPhoto via Getty Images

Galleries are shut but the art community is taking on the virus by moving their work into the public space

Sculpture of a severed head outside Circa on a usually busy intersection. Rosebank, Joburg

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April 9 - April 15, 2020

Brooklyn residents Naoko Okada and Ian Gillian on the streets of New York

Ollie Millington/Getty Images

Esa Alexander/Sundaytimes

Posters near the Thames in London

Majdi Fathi/NurPhoto via Getty Image

Chandan Khanna/AFP via Getty Images

People wearing face masks walk past a mural depicting Nelson Mandela in Cape Townâ&#x20AC;&#x2122;s CBD

Andrew Milligan/PA Images via Getty Images

A woman walks past a mural in a deserted Wynwood Art District, Miami

Seyllou/AFP via Getty Images

A sand artist in Gaza City works on her sculptures

Members of the Senegalese graffiti collective RBS CREW tag a wall in Dakar

A new addition to Glasgowâ&#x20AC;&#x2122;s street art captures the mood during the Covid-19 epidemic

April 9 - April 15, 2020

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executive recruitments

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April 9 - April 15, 2020

FEATURES An in-depth look at the hot button subjects of the day in SA and around the world

WELCOME TO KEEP CALM THE GREAT RESET AND CARRY ON

THE DEVIL & THE DEEP BLUE SEA

RAISING THE BAR

As the coronavirus spreads, business leaders are painting a grim picture of our economic future â&#x20AC;&#x201D; and giving ideas how the world will have to change

The cruise ships of the world have become both a metaphor for the coronavirus lockdown, and a morality tale about uncaring consumption

Plans by Ghana and Ivory Coast to levy a surcharge on cocoa to help poor West African producers could leave a bad taste in the mouths of chocoholics

Despite pressure on the Reserve Bank to do more to counter the impact of Covid-19, it plans to stay in its lane. Quasi-fiscal measures are out â&#x20AC;&#x201D; for now

April 9 - April 15, 2020

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cover story / johann rupert

WELCOME TO THE GREAT RESET As the Covid-19 pandemic spreads, business leaders are painting a grim picture of our economic future â&#x20AC;&#x201D; and are giving their ideas on how the world will have to change Rob Rose roser@fm.co.za

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April 9 - April 15, 2020

ohann Rupert, 69, is surviving the coronavirus lockdown shacked up with his extended family in GraaffReinet, the town where his father Anton was born in 1916. As far as a lockdown goes, it’s not exactly a hardship. Rupert’s views extend to the Camdeboo National Park, with its spiralling basalt cliffs set high over the Valley of Desolation, in the heart of the Karoo. It’s the sort of serenity you’d want if you’re being forced to contemplate how the decades of slog spent expanding the empire your father created — in Johann Rupert’s case, building Remgro, assembling luxury goods company Richemont, and starting investment company Reinet — are being upended by a virus few saw coming. “People speak as if this is just a blip, but I don’t think it’s like anything any of us have ever seen before,” he tells the FM. “Economists are discussing if it’s a ‘V-shaped curve’, or a ‘U-shaped curve’ — it’s all meaningless. What they don’t get is that this isn’t just a pause — it’s an entire reset of our economic system.” You might say this is characteristic of the burly and often bracingly direct Rupert, who heads SA’s second-wealthiest family, after Anglo American’s founding family, the Oppenheimers. A few years ago, The Financial Times dubbed him “Rupert the bear” for his “obsessively cautious” outlook. A year before the 2008 financial crisis, he said: “My gut feeling is that the risks are getting bigger and bigger.” In 2011, he spoke in vivid terms about how China was overheating. “I feel like I’m having a blacktie party on the top of a volcano. “The volcano is China … in the morning we put on our ties and our watches and we go, and the food’s better, and the wine’s better, and the weather is great, but let’s not kid ourselves. There is a volcano somewhere, whether it’s this year, in 10 years’ time, or in 20 years.” Rupert, if anything, embraces the moniker of sceptic. “There were a few of us whom the press used to describe as the horsemen of the apocalypse — Nouriel Roubini, Niall Ferguson and Nassim Taleb. I believed at the time that the free-enterprise system wasn’t working as it should. A few of us were very concerned,” he tells the FM.

Millions of weekly initial unemployment incsurance claims, seasonally adjusted

Covid-19, says Rupert, is the worst of all the recent crashes. In stock market terms, it’s been a rout: the US Dow fell 23% between January and April — its worst performance since the 1987 crash — while the JSE shed 22.5%. The companies controlled by Rupert haven’t been spared. Remgro’s shares have fallen 32% this year, even though it owns stakes in pretty resilient businesses, including fibre company Dark Fibre Africa, FirstRand bank and Mediclinic. More disturbing, Remgro CEO Jannie Durand said a few weeks ago that he expects the harsh conditions to “continue for at least the next couple of years”. Richemont, which owns some of the best luxury brands around, including jewellery brand Cartier, watchmaker Piaget, French fashion house Chloé and luxury penmaker Montblanc, is down 11.6%. Only Rupert’s investment company Reinet has risen, 5.1% this year on the JSE. Rupert says many people underestimate how deep and devastating Covid-19 will be. Perhaps that’s because none of us in the modern era has witnessed the economic fallout of the early 20thcentury crashes, like the Spanish Flu or the Great Depression. “When I was young, at least twice a week my parents would speak to us kids about the Great Depression,” says Rupert. “It moulded characters — my mother would keep saving until she was 82 years old, even though she didn’t need to. That’s what it did.” When the depression started in 1929, Rupert’s mother Huberte was only 10 years old. His father Anton, who would later start tobacco company Voorbrand in 1941, was a teenager at the time, and felt the squeeze just as acutely. Thanks to Covid-19, SA is facing a similar economic shock. Small businesses have closed their doors following President Cyril Ramaphosa’s lockdown, and an economy struggling for 0% GDP growth before the virus is now set for a brutal contraction.

What it means: In SA the jobless rate may rise to 50% from its present level of 38%. And many businesses, large and small, will go under

6.648m March 28

3.307m

Job shock Mcebisi Jonas, SA’s former deputy finance minister, says no-one really appreciates what the country could be in for. “People are yearning for business as usual. But

March 21

JOBLESS CLAIMS SOAR

New unemployment claims in the US soared in the second half of March

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Source: US Department of Labor April 9 - April 15, 2020

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cover story / johann rupert

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April 9 - April 15, 2020

out of the politicians’ hands,” says Rupert. “They have to restructure the economy. They’ll have to take the decision on privatising state-owned companies — today. It doesn’t make a difference if you’re running a household or a country, it’s about choices and prioritising where you spend money.” And there’s an easy place to start: the vanity project that is SAA. Before Covid-19, the airline was in ICU; today, you’d have to think there’s no pulse. Rupert is scathing about the national carrier. “If you take all the airlines cumulatively since Howard Hughes took control of TWA Airlines in 1939, they’re run at a gigantic loss. SAA is among the worst. But you can take any of the SOEs — they’ll all have to be restructured,” he says. He also dismantles the myth that the world economy was going great guns before the coronavirus struck. “SA isn’t an exception. Europe couldn’t add any jobs, even with zero percent interest rates. Worldwide, we knew something horrible was going to happen — and Covid-19 just pulled the trigger.” Less than a year ago, Rupert suggested that SA’s economic trajectory meant it was a real possibility that the country would be asking for a bailout from the International Monetary Fund (IMF) sometime in 2020. The ANC, he said, “doesn’t know what’s awaiting it”. At the time, it seemed unlikely. But in recent days, even finance minister Tito Mboweni has dipped his toe in the water, saying it may be an idea to “speak to the IMF and the World Bank about any facility that we can access for health purposes”. However, the ANC has since “rejected” this idea — a sentiment no doubt driven by the ideological hardliners who see this as

compromising SA’s fiscal sovereignty. The irony is that it’s just this ideological inflexibility that has left SA’s economy in tatters. Perhaps, if there’s one positive to be taken from this crisis, it’ll be to finally push the ANC past its ideological barrier to selling cash-guzzling state companies. What does a reset look like? If this is the big reset, it’s still unclear how the world will look once the Covid-19 cloud lifts. Rupert says: “We’re now seeing what our parents and grandparents went through dur-

Mteto Nyati

Freddy Mavunda

they don’t seem to realise we’ll never have business as usual after this. This is really huge,” he tells the FM. At best, says Jonas, we may see a 5% contraction in the economy this year. But it could be far worse, he adds, maybe closer to 10%. Of course, says Jonas, much of this is speculation, as we don’t know the economic impact of the lockdown. “It’s a hard choice: protect lives, or protect the economy. And of course you have to protect lives, but we have to do something drastic to keep the economy going,” he says. A few weeks ago, Absa senior economist Peter Worthington estimated that SA’s economy would fall by 23.5% in the three months to June on a quarter-on-quarter annualised basis. Overall, he expected SA’s economy to contract 3.1% this year. Only that’s beginning to look like too sunny a prognosis. “Since we published that forecast, the downside risks have mounted,” Worthington told the FM from Canada this week. “And those initial estimates were based on an assumption that the lockdown [would be] lifted on April 16. If that’s extended, we’re looking at something more serious.” While all countries are bleeding, some have more room to counter the shock. The US, for example, has said it will sink cash equal to 10% of its GDP into softening the blow for the economy; the UK and Germany are looking at 15%. SA doesn’t have this leeway. Says Worthington: “At the moment, we’ve only talked about measures equal to less than 1% of our GDP. What we’ll have to do as an alternative is put some energy into structural reforms, particularly of state-owned companies.” And when SA finally goes back to work, the state of unemployment — already at 38% before this crisis — will be even more gruesome. Trying to forecast just how many jobs will be lost is a “weird complicated tangle”, as there are too many unknown factors. “After the financial crisis of 2008, SA lost 850,000 jobs,” says Worthington. “It was only last year, 2019, that we finally saw private-sector jobs reach the same level as before the financial crisis. I think the job losses this time around will be greater, since the economic contraction will be so much more severe.” For an economy driven into junk status by the kleptocratic Jacob Zuma administration and a paralysed ruling party at war with itself and unwilling to make the right decisions, Covid-19 is the straw that may break its back. “At this point, the choice has been taken

ing the world wars and depression. It’ll be a reset in how we operate and how we think, and in society in general. Mankind is resilient, but it’ll be a big wake-up call.” Mteto Nyati, CEO of technology company Altron, agrees with Rupert. “There will be a huge number of small businesses, and even large enterprises, that go under,” he says. “None of us knows how long this will last, but I imagine we’re looking at between 18 and 24 months before we start to re-emerge. And that’s being optimistic.” The flip side is that SA needed to make immense structural changes before Covid-19 hit; so the pause for the virus gives the government the space to implement these changes. Nyati says this means, in particular, a hard stop to supporting basket-case stateowned companies like SAA, and renegotiating civil-servant wages. “We don’t have unlimited resources, and we’ll have even less after this,” he says. “So do we want to spend that money supporting small businesses, or do we want to support SAA? Of course we’d rather support small business. This crisis will force us to be more disciplined, and to make the right choices.” The crisis strengthens Ramaphosa’s hand in cutting public-sector wages. Nyati says labour unions will have to change their stance or risk becoming utterly irrelevant. “I don’t think the unions have the sort of negotiating power they think they do,” he says. “They’ll need to be flexible enough to protect jobs, but also create new ones. It’ll be a wake-up call to unions, as well as everyone else.” Roze Phillips, a futurist and medical doctor who is head of “people” at banking group Absa, says while it may be a big reset, it won’t be the great equaliser many are hoping for. If anything, as many people lose their jobs, it may actually amplify the gap between rich and poor; between those who have options and those who don’t.

Freddy Mavunda

Mcebisi Jonas

Roze Phillips

“Like the virus is doing to our physical bodies, it is also revealing the immune-compromised state of our business and society,” she says. “Those closer to the breadline and those more vulnerable, like those who run small businesses, will struggle to reboot.” To counter this, governments across the world will take stringent new measures to reduce this wealth gap. This could take numerous forms, says Phillips, from a wealth tax to the more radical step of paying a basic income grant to every citizen. “People will come out of this far more aware of the gap between rich and poor,“ she says. “And in a country like SA, where this [gap] is the most glaring, I worry that this may potentially spark an eruption of anger that may destabilise all of society.” Rupert, too, worries that this could spur social unrest. “More people will become unemployed. But people are already angry. You can see this in the fact that we have a resurgence of ‘strongman’ leaders, from Vladimir Putin to Donald Trump,” he says. It also means that capitalism, certainly the ideologically pure brand of free-market fundamentalism, is under siege like never before. This week, The Economist described how “for believers in limited government and open markets, Covid-19 poses a problem”.

The modern welfare state, the magazine points out, grew out of crisis and conflict — as did the tax system and nationalisation. After this crisis, governments are likely to be larger, and more powerful, than ever. Nyati says the purest, most inflexible model of capitalism has been under siege for years anyway. This crisis accentuates the need for capitalism with a greater social conscience as the rational choice. “If we just do what we’ve done in the past, it won’t work — all the people who bought our products will be out of work. “So we need to look at ways to support them,” he says. Altering investment decisions The reset also has big implications for how investments are made, and how executives allocate capital. It means, says Nyati, that investment decisions will have to be made with far more rigour and discipline. “There’ll be far stricter focus on returns. Executives will have to prioritise better, since it’ll be much harder to get investment committees to approve acquisitions. There are still huge opportunities in some sectors — cloud computing, internet security and the internet of things — but there’ll be no place to hide for poor investment discipline,” he says. Business models will also change. Says Phillips: “Those companies that have flattened bureaucracy, removed the hierarchy, will benefit from the agility this creates. Companies that are command-and-control will struggle.” And in a year’s time, you can expect to see far more people working remotely, far fewer people in the workplace, and a greater push for companies to employ more “entrepreneurially minded” people. Absa’s Worthington says you can expect companies to pivot to new products that will suit the new environment. For example, tex-

RAPID SPREAD

The coronavirus, first reported in China, is spreading quickly to other countries Covid-19 confirmed active cases 300,000 250,000 200,000

China

Europe

150,000

Other emerging markets

100,000 50,000 0 February 4 February 18 March 3 March 17 March 31 January 1 2020 2020 2020 2020 2020 2020 Note: Europe includes France, Germany, Italy, Spain and the UK. Other emerging markets include Brazil, Chile, Equador, Indonesia, India, Malaysia, Mexico, Philippines, Pakistan, Russia, SA, Thailand and Turkey Source: Haver Analytics and Johns Hopkins University April 9 - April 15, 2020

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cover story / johann rupert tile manufacturers might shift into making masks and other protective clothing for doctors and health-care workers. “We might see countries begin to realise the importance of domestic security when it comes to food and medical supplies, and that could lead to a greater reliance on localisation when it comes to certain products. We’ll possibly see more investment in health care too, and maybe, environmentally, we’ll realise that we need to be a lot more careful about how we do things,” he says. Jean Pierre Verster, CEO of Protea Capital Management, tells the FM he’s been thinking deeply about how this crisis changes investment decisions. “We’ll have to be far more discerning, for a start,” he says. “Those companies that are not in a defensive position — [those that] have lots of debt and their bankers have them over a barrel — should be avoided. In a cash flow crunch, they’re the ones that will have to have a rights issue or, worse, will go bankrupt.” And, if global recession-like conditions become the norm, even stable debt-free businesses may have to take on debt to survive, which means the landscape of vulnerability shifts further. This week Jamie Dimon, CEO of US banking group JPMorgan Chase, told his shareholders he expects a “bad recession”, with the US economy potentially plunging 35%, at worst, between March and June. Verster believes that in SA, it’ll take years for the economy to recover. “In about two to three years, I believe things will be broadly back to normal, once we’re all vaccinated. Looking at it one year from now is more difficult: some of the early vaccines will be almost ready, and parts of the world will be trying to get on with life, but it won’t be without some serious hiccups,” he says. Body on the line Sensing this vulnerability is what prompted Rupert to donate R500m of his own money, alongside R500m from Remgro, into the Sukuma Relief Programme, a fund to help small businesses pull through. Others soon followed with donations of their own — including the Oppenheimer family, Patrice Motsepe and Naspers. “Two weeks ago,” says Rupert, “I called the president and offered him the help of Business Partners, as a delivery system to help small business, which is something they’ve been doing for 38 years. And I told him I’d make a donation too.” He says his father started a small business, so he knows how peculiarly suscep26

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April 9 - April 15, 2020

Absa’s GDP projections for 2020

-1.7%

-23.5%

Overall

19%

3.7%

-3.1%

Source: Statistics South Africa, Absa Research

tible they are to cash-flow shocks. “They go under because of cash flow. And Covid-19 has hit their cash flow,” he says. In just three days, the Sukuma fund received 10,000 applications for a total of R2.8bn — three times oversubscribed. The way it works is entrepreneurs can get a one-off R25,000 grant that needn’t be repaid. Small companies can get the R25,000 plus a low-interest loan of between R250,000 and R1m, with a 12-month repayment holiday. I understand how this works,” says Rupert. “My father started small, and I started Rand Merchant Bank in 1979 with nothing. I don’t expect to see any of my money returned.” It’s somewhat ironic that it is Rupert and the other donors, who were typecast as extractive agents of “white monopoly capital” (WMC), who are putting their cash on the line. In 2013, slimy public relations outfit Bell Pottinger had been hired by the equally slimy Guptas to popularise that phrase. And, as the lightning rod for this campaign, Bell Pottinger chose to make Rupert the face of WMC. It’s somewhat Yet Rupert is proironic that it is lific as a philanRupert and other thropist. He pays for donors, who were 10,000 children to typecast as get four meals a day, extractive agents he finances a hospiof ‘white tality academy that monopoly trains disadvantaged capital’, who are people for a career in putting their cash tourism, and he gives on the line out 200 university bursaries every year. Not that he can’t afford it. The Bloomberg billionaires index puts Rupert as the 315thrichest person on the globe, with a personal fortune of $5.1bn. What that doesn’t show is that this year, Rupert’s wealth has shrunk by 30% — a $2.2bn drop. He isn’t bothered by that though. “We need to be philosophical about this. I’ve been saving for 25 years for the eventuality that we may have a disaster,” he says. “And now we do. As an Irish friend of mine said, if you’re lucky in life, how difficult is it to share some of that luck?” For him, this current moment is a chance to rethink habits — the flippant attitude to the environment and our disposable culture. Says Rupert: “A friend of mine runs a

fashion company, and he was complaining that he couldn’t get his product out of Italy, and so he’d lost the fall season. He said it was a fiasco. But my mother never had a new set of clothes every year. My wife Gaynor also doesn’t just throw away last year’s clothes.” It’s this attitude to consumption that has decimated the environment. “If we were packed in like sardines, all the humans alive today could fit into one cubic kilometre. Yet what we’ve done to our planet is just terrible. We’ve used up 70% of the globe’s raw materials and we’ve polluted the oceans. As it is, 93% of all the plastic ever created is still with us — it can’t be destroyed. We’ve really screwed up,” he says. Quite whether this will change, as part of the grand reset, no-one knows now. But let’s take a stab anyway: in Easter 2021, what is SA likely to look like? First, the good news: Covid-19 will probably be far less of a threat, either thanks to a vaccine or because it has mutated into a less deadly strain. But the economic aftershocks will still be ricocheting across SA, from Polokwane to Kimberley, from Cape Town to Durban. Unemployment, at the widest definition, may be inching towards the 50% mark, from its current 38%. Worthington says SA’s economy will bounce back somewhat after June this year — but the economic weakness will continue longer than the pandemic itself, since some firms won’t re-open and people will lose their jobs. “We expect to see mining and manufacturing pick up immediately after the lockdown, but tourism, for example, won’t come back quickly. We’ll have also seen some serious damage to the demand side of the economy as company and household balance sheets have been struck. It’ll take time,” he says. Absa’s Phillips says the country is likely to be a whole lot poorer in a year’s time, even if it’ll be a far more compassionate society. More people will be working from home, there’ll be less travel, and Ramaphosa may have found his second wind, from having handled this crisis as best he could. “But there’ll be a lot fewer people eating Easter eggs this time next year,” says Phillips. “I fear for myself — and I’m well off. So, I can’t even imagine how someone who has far less than me will find the impetus or energy to recover from this.” x

KNOWN UNKNOWNS BY DELPHINE GOVENDER

LOOK BACK FOR THE FUTURE Four months ago, you’d never have predicted where you’d be. But there’s only one guide to conquering your anxiety, especially on the markets: history

ast your mind back four months. What a state of blissful ignorance we were living in, considering what we know today. It was just three months ago, on January 11, that Chinese authorities reported their first death from a new coronavirus, first seen in the city of Wuhan. Indeed, it was only two months ago, on February 11, that the disease caused by the new virus got a name: Covid-19.

Prepared, cool-headed and disciplined investors reap greater rewards in times of panic

And just a mere month ago, on March 11, that the World Health Organisation declared Covid-19 a pandemic. Today more than 1.3-million people around the world are infected, 75,000 have died and more than half the world is under some form of lockdown. If you feel whiplashed by the speed with which your life has changed over the past 30 days, you are not alone. And your investments and the investment markets

have delivered a multiplier effect on this, with volatility, sharp and painful declines and faulty restarts the anxious and daily norm. It’s been such a surreal experience that the main adjective used most pervasively in recent weeks is the word “unprecedented”. That description covers it all: the rate at which the oil price tumbled in the early hours of March 8; the shutdown (temporarily, we hope) of entire industries; the staggering rise in global unemployment in a matter of weeks; the imminent collapse in economic growth around the world; and the anticipated obliteration of company profits. Even the uncertainty over the outcome feels unprecedented. Of course, we have seen crises before. This time, however, the combination of the far-reaching public health effects and the inexorable economic consequences of the social isolation needed to manage the pandemic makes the crisis far different to ones we have witnessed in the modern day. In the midst of this new and unfolding reality, we have only one dependable anchor to guide our current investment decisionmaking: history. True, there may be few exact reference points from the past to perfectly frame the specific construct we face today, but in the stillness of physical isolation, we should start to see through the noise caused by the herd panic. What then, according to history and experience, are some of these known knowns? The following: ● After recessions (of any shape),

there is always a recovery; ● Fundamental business value, not sentiment, is your most dependable anchor in making investment decisions; ● Long-term thinking is most effective (essential, even) when the short term is especially opaque; ● Prepared, cool-headed and disciplined investors reap greater rewards in times of panic; ● Remaining invested through the crisis provides the best potential for earning the best returns during the recovery; and ● At the peak of pessimism and minimum visibility, markets tend to punish cyclical companies that will ultimately emerge intact similarly to cyclical companies which could require capital injections to survive. But this creates material long-term mispricing in the first group, which sets the stage for outsize returns for the analytical investor. Markets, we know, tend to discount prices well in advance of poor expectations materialising — but they also recover well in advance of economic and business conditions hitting the bottom. Using bottom-up valuations as the foundation always proves to be the best leveller in terms of removing timing, emotional or behavioural fears. Over the next few weeks, global Covid-19 deaths are expected to rise before they start declining, just as asset prices will eventually stabilise before trending higher. In an update on Monday, health minister Zweli Mkhize encouraged everyone to “stay calm, focused and courageous”. This is advice equally powerful and applicable to the way we respond to our hardearned savings during this crisis. x Govender is co-founder and CIO of Perpetua Investment Managers

April 9 - April 15, 2020

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feature / reserve bank

Claire Bisseker bissekerc@fm.co.za

here is a growing chorus for SA to adopt a war footing to fight the coronavirus by copying the outsize responses of major developed economies. But with limited fiscal space, SA just doesn’t have the same firepower. Or could the Reserve Bank be doing more? With more than 1-million people infected globally, the lesson from abroad is to go early and go big in responding to the outbreak, and to employ all possible monetary and fiscal policy tools. The problem for emerging markets (EMs) is that most were running large fiscal deficits before the virus struck, and the cost of servicing these has soared due to capital flight. At $62bn in the first quarter, the outflow of foreign portfolio investment from EMs was the largest ever recorded, and roughly twice as large as at the peak of the global financial crisis, according to the Institute of International Finance.

SA is in a particularly weak fiscal position and its access to financial markets at reasonable rates severely limited. This has capped its fiscal response, even compared with other EMs. The R30bn package that the government initially put together represents only about 0.6% of GDP, against packages worth roughly 10% of GDP in the case of both the US and the UK. “If ever there was a lesson [from the coronavirus pandemic] it’s that you fix your roof before the rain comes so that it doesn’t leak when it does,” says Bank governor Lesetja Kganyago. “In economic terms, when the economy is doing well you must build your monetary and fiscal policy and financial stability buffers.” He points out that at the start of the 2008 global financial crisis, SA was running a fiscal surplus and government debt was low, inflation was within the target band, and the banks were well capitalised. “It meant we could deploy all three buffers at the same time.” 28

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April 9 - April 15, 2020

KEEP CALM AND CARRY ON Despite the pressure on the Reserve Bank to do more to counter the impact of the coronavirus, it is determined to stay in its lane. Quasi-fiscal measures are out — for now

Reserve Bank governor Lesetja Kganyago

Coming into this crisis, inflation is below the mid-point and the banks have ample capital reserves. “Can you imagine where SA would be if we hadn’t created these monetary policy and financial-stability buffers?” Kganyago asks. “It’s exactly that which has provided us with the monetary policy space to respond. If we hadn’t had that we’d be talking all sorts of problems for SA policymakers.” In SA, as in other EMs where fiscal policy is heavily constrained, the onus has shifted to central banks to do more of the heavy lifting. Increasingly, EM central banks are turning to various quantitative easing measures, including purchasing their own government’s bonds. “Until recently,” says Liam Peach, an EM economist at Capital Economics, “it would have been hard to imagine that EM central banks would join the club of advanced economies undertaking bond purchases. But the current crisis has ripped up the rule book.” The Bank and six of its EM counterparts (in Romania, Croatia, Colombia, Chile, Poland and the Philippines) introduced such measures in recent weeks. Policymakers in Brazil and the Czech Republic are also pushing for the authority to do so. Excluding the Philippines, all are buying local-currency sovereign debt on the secondary market to ease liquidity and financial-market stress. Crucially, they are not printing money to purchase bonds directly from their governments in the primary market to fund unlimited fiscal spending — a step known as “monetising the deficit”. In terms of the SA Reserve Bank Act, it is not permissible for the Bank to lend directly to the government or to print money to finance the government deficit. But even if it were legal, it wouldn’t necessarily be advisable. “I don’t think it’s appropriate for a central bank to be engaging in quasifiscal measures,” says Kganyago. “Monetising the deficit is a very dangerous thing. Even the [US Federal Reserve] can’t buy bonds in the primary market because once you do that you no longer have price discovery and the function of a bond market collapses.” Some commentators think it’s dangerous for the Bank to open the door to quantitative easing by buying government bonds in any shape or form. After all, who can forget ANC secretary-general Ace Magashule’s call last year that the Bank use “quantity easing” to make funds available for developmental purposes. But Stellenbosch University economic researchers professor Monique Reid, Dawie

van Lill and Hylton than let it get to the point where insolHollander believe the vencies caused directly by Covid-19 Bank’s track record of arise,” he says. “We need to give SA fierce independence the best possible chance of achieving gives it room to use all at least a U-shaped recovery … More the instruments at its interventions, including extraordidisposal in defence of nary interventions, are required.” financial stability, and that Kamp says that if the corporate buying bonds is completecredit market becomes logly justifiable in terms of its jammed, or if the bank system mandate. becomes unwilling to lend, more “While these measures will need to be done — with the may have some positive Bank lending to otherwise solimpacts for government, it vent firms, either directly or would be a stretch to argue that this through commercial banks. Monetising the was the primary motive,” they say. University of the Free State deficit is a very Kganyago acknowledges that there economics professor Philippe dangerous thing is a big burden on central banks the Burger suggests that the Bank Lesetja Kganyago world over to do more to counter the establish a cheap-loan prooutbreak. “We’re in a fortunate posigramme to get funding to comtion because we’ve got monetary policy space panies to protect their balance sheets until the and are able to use it. What we’ve done has worst is over. been within our mandate and in accordance He explains that instead of the National Treawith the Reserve Bank Act,” he says. sury paying a subsidy out of the fiscus to disSo far, in addition to cutting the repo rate by tressed companies, the Bank should provide 100 basis points, adding an additional repo winlow-interest loans to the banks, which in turn dow and intervening in the bond market, the use them to extend low-interest, long-term loans Bank has reduced banks’ liquidity coverage (or to help finance mortgage and other loan ratio from 100% to 80% and lowered their minrepayment holidays) to companies in distress. imum capital reserve requirements. The loans from the Bank to the banks should The Bank estimates that the cut in the repo be ring-fenced for this purpose and restricted to rate alone has put R32bn back into the hands of companies in need that were solvent prior to households and businesses through lower inter- the crisis. est costs. In addition, the latter two measures Based on the scale of assistance being conhave freed up to R240bn and R300bn respecsidered in the EU, the US and the UK, Burger tively for the banks to extend loan repayment envisages that such a programme might have to holidays or to on-lend to their customers. be scaled up to about 5%-10% of GDP. (In 2019, total domestic credit extended in SA was roughBut could the Bank be doing more? ly 80% of GDP.) Kganyago says he is taking things one day at However, Kganyago points out that the Bank a time and the jury is still out on the effects of cannot lend unsecured money to any entity. If some of the measures taken over the past two such a scheme were to be introduced, it would weeks. But he adds: “We will not hesitate to use have to be underwritten by the National Treathe tools we have.” sury, which would increase the government’s One measure the Bank contingent liabilities. As such, it would have to can still use is to lower be driven by finance minister Tito Mboweni, in What it means: the cash reserve requirepartnership with the banking sector. Though SA ment that stipulates banks “I’ve looked at the schemes in the US and UK is fiscally must keep 2.5% of their to support business and consumers and they’re constrained, adjusted liabilities with all underwritten by their treasuries, so they are at least it the Bank to protect fiscal, not monetary, policy measures,” he says. has healthy depositors. If Kganyago “If it were to happen here, we would have to monetary policy were to lower this evaluate it against the law, the mandate of the and financialrequirement, it would free Bank and [the need to maintain] its operational stability buffers up even more capital for independence.” banks to on-lend. He adds: “People come with lots of schemes.” Sanlam Investments economist Arthur Kamp The most important question is: what is the exit thinks SA’s economic interventions have been mechanism for taxpayers? A good scheme, “swift and sensible” to date, but he believes the Kganyago says, is one that breaks even or authorities will need to escalate their response. leaves the taxpayer holding a profit. “The idea is to get ahead of the problem and If Kganyago had a mantra, it would be: “Keep to arrest the downturn in the economy, rather calm and stay in your lane.” x April 9 - April 15, 2020

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feature / coronavirus comment

ost readers will be familiar with the tale of the Flying Dutchman, a ghost ship that can never make port, and is doomed to sail the seas forever. While the tale originates from the 17th-century heyday of the Dutch East India Company, the famous VOC that gave SA the twin blessings of Jan van Riebeeck and a wine industry, there have been many versions over the years. My favourite is in a book called Scenes of Infancy, written by John Leyden and published in 1803: â&#x20AC;&#x153;It is a common superstition of mariners that, in the high southern latitudes on the coast of Africa, hurricanes are frequently ushered in by the appearance of a spectre-ship, denominated the Flying Dutchman ...

THE DEVIL AND THE DEEP BLUE SEA

The cruise ships of the world have become both a metaphor for the coronavirus lockdown, and a morality tale about uncaring consumption Chris Roper

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April 9 - April 15, 2020

123RF.com/grynold

“The crew of this vessel are supposed to have been guilty of some dreadful crime, in the infancy of navigation; and to have been stricken with pestilence ... and are ordained still to traverse the ocean on which they perished, till the period of their penance expire.” In some versions of the myth, a sighting of the Flying Dutchman is an omen of doom — according to Scottish novelist Sir Walter Scott, “the worst of all possible omens”. At this point, dear reader, you’ll be thinking to yourself: “Nice! Every other columnist is writing about the coronavirus, so it’s a bit of a relief to read a history lesson plagiarised from Wikipedia. Kudos to Chris for not taking the easy topic.” Alas, the pestilence reference should have been a giveaway. I couldn’t help thinking of the Flying Dutchman when I read the story of the Holland America cruise ship Zaandam. Like the mythical ghost ship, the MS Zaandam seemed doomed to circle endlessly, unable to make port, cursed with the pestilence of Covid-19. In the slightly more prosaic prose of website Business Insider: “The MS Zaandam was a mystery cruise long before the fever began to spread about its decks. The ship’s itinerary was cancelled on March 15 due to the ongoing coronavirus pandemic, and the fact that South American ports were closing themselves off to cruise ship traffic. “The captain announced that the ship would sail ‘north’, to allow guests to disembark in an undetermined destination … Within days, the mystery around the ship would darken, the central question within its decks shifting from where the ship would go to if its passengers would ever reach home.” The cruise ships of the world have become both a metaphor for the lockdown, and a morality tale about uncaring consumption. The latest Bloomberg stats show that at least six cruise ships are still at sea with crew and passengers. As The Guardian poetically puts it: “The plight of those still adrift highlights how cruise ships have become a kind of pariah of the seas, with cities wary of becoming the next home for a potentially infected vessel.” One particular version of this morality tale could be called “The Princess and the Covid-19”. Princess Cruises apparently had to pile Princess liner disaster upon Princess liner disaster before it got the message that it was feeling the effects of Covid-19 and needed to abandon its cruises. It’s not just Princess — many cruise ships are being exposed for not doing enough to protect their passengers. The Miami New Times revealed that Norwegian Cruise Line, for example, was telling its salespeople to minimise the threat of coronavirus. One sales pitch script advised telling anyone who brought it up that the virus “cannot live in the amazingly warm

No holiday: The Diamond Princess registered 700 Covid-19 infections and eight fatalities so far Kyodo News/Getty Images

and tropical temperatures that your cruise will be sailing to”. Another script claimed: “The coronavirus can only survive in cold temperatures, so the Caribbean is a fantastic choice for your next cruise”. But to return to Princess Cruises: Australia’s New South Wales has launched a criminal investigation into the mishandling of the Ruby Princess cruise ship, now the single-largest source of Covid-19 cases in Australia. This ship’s 2,700 passengers were allowed to disembark, even though many displayed symptoms of Covid-19 and respiratory illnesses. “At least 662 people linked to the cruise have been diagnosed with Covid-19, more than 10% of Australia’s total cases,” The Guardian reports. The total number of deaths from the Ruby Princess stands at 11 — which, at time of writing, The Flying accounts for more than 30% Dutchman’s of all Australian Covid-19 mythical fatalities. mariners at The Diamond Princess, least didn’t which docked in Yokohama have to in the early days of the outendure break with 3,000 quaranshipboard tined passengers, of whom musicals and 700 tested positive, has had all-you-caneight fatalities so far. eat meals According to The Guardian: “The numbers climbed so high that the ship gets its own line in the World Health Organisation data on infections by country.” The Grand Princess, which docked in San Francisco, had at least 103 passengers test positive, and three deaths. The Coral Princess has just arrived in Miami, with 12 positive cases and two deaths. There are 18 Princess cruise ships, but you get the idea ... It’s hard to feel too much sympathy for cruise companies, given their creative taxavoidance strategies. And it’s very tempting to draw parallels with Australia’s policy around forcibly making asylum-seeker boats turn around and go back to their country of origin, or indeed the way refugee boats are regarded in general by the type of person you imagine as the stereotypical cruise ship passenger. But that would just be prejudice on my part, and I do feel a shiver of sympathy for those

passengers stuck on board, some in windowless cabins, struggling to find a port that will accept them. It must be as terrible an experience as that of our mythical mariners on the Flying Dutchman — though at least they didn’t have to endure shipboard musicals and all-youcan-eat meals. In a way, however, how we think about the tribulations of the cruise passengers and crews can be an indicative lesson. The lockdown has forced me to join the neighbourhood social media group — that paradoxical amalgam of, on the one hand, entitlement, nastiness and stupidity, and, on the other, kindness, forbearance and charity. Apparently, in the more affluent of our suburbs, there are still many people who believe that they are entitled to be treated differently to their fellow South Africans. On one post, these are the people who demand that the “guvvermint” do something, preferably involving the death penalty, about the taxi drivers who seem to think they are above the law and can just jump red lights. On the next post, the same people are accusing others of being sneaks and community traitors for pointing out that they shouldn’t be walking their dogs or jogging along the road. I’ve mentioned this famous SA motto before: it’s only a crime if someone else is doing it. Like the cruise ship passengers, stuck in their cabins as victims of their own affluence, people in lockdown are subject to the decisions of external institutions. They chose to take a cruise despite the warning signs, and we chose our government. Yes — despite the warning signs. And we’re both reliant on poorly paid, under-appreciated workers to keep our ecosystem functioning at some personal risk to themselves. In lockdown, the cruise passengers must find the trappings of their holiday cabins hard to bear, and it seems as if many of our more fortunate South Africans are starting to think that having Netflix and a garden isn’t enough. People in shacks are allowed to take a walk when they need to pee, why can’t I go for a swim? The cursed sailors of the Flying Dutchman must be chortling. We’re not doomed to circle endlessly, but instead to be fixed in one place while the world circles around us. x April 9 - April 15, 2020

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feature / property rentals

LOCKDOWN LOWDOWN With residential rental defaults set to escalate as a result of the government’s anti-coronavirus measures, tenants and landlords alike need to understand their legal options Joan Muller mullerj@fm.co.za

123RF.com

uy-to-let investors should brace themselves for a potential spike in arrears, as the government’s coronavirus-induced national lockdown could affect residential tenants’ ability to pay rent. That’s bad news for the rental housing market as a whole. It will place further pressure on buy-to-let returns, which have already been eroded by softer rental growth on the back of an oversupply of flats and townhouses in suburbs across SA. Depending on which source you use, SA’s residential tenant delinquency rate — or rate of high-risk tenants, as they are also called — already stood at 18%-26% in the fourth quarter of 2019. In other words, one in every four to five families renting a flat or townhouse is not paying rent, or is making only partial payment. The latest data from PayProp SA, the country’s largest processor of residential letting transactions, put 25.6% of all residential tenants in the fourth quarter as “high-risk”, which implies a strong likelihood of default. Limpopo had the highest percentage of highrisk tenants, at 32.9%, while North West had the lowest, at 18.5%. Michelle Dickens, MD of credit bureau TPN, which tracks tenant payment behaviour, says there is no doubt that rental arrears will escalate on the back of the government’s 21-day shutdown of nonessential businesses. “We are getting calls on a daily basis from worried tenants who have seen their income

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April 9 - April 15, 2020

dry up and can no longer afford to pay rent,” she says. “Small business owners, as well as those in the hospitality and restaurant industry who have been forced to take unpaid leave during the lockdown, are most affected.” The last time TPN recorded a sizeable uptick in tenant defaults was in 2009, in the aftermath of the global financial crisis and subsequent recession. Back then, TPN’s measure of delinquency hit a record 29%. Says Dickens: “We are now at 18%, but we could get back to 2009 levels soon, especially if SA’s unemployment rate continues to climb.” She notes that increasing rental defaults will have a longer-term effect on landlords’ returns. “Already, most landlords this year have had to be satisfied with rental increases of no more than 2%-2.5% on lease renewals. So rentals may well dip over the next six months, depending on the severity of the Covid-19 impact on household finances,” says Dickens. A looming spike in rental delinquencies on the back of the coronavirus outbreak and the government’s three-week trading ban on nonessential businesses raises important questions about the legal rights and obligations of tenants and landlords alike. The bottom line, it seems, is that residential tenants cannot use Covid-19 as an excuse not to pay rent. Retail and commercial tenants, however, may have a legal claim to a rental rebate or holiday for the duration of the lockdown.

The difference between residential and commercial tenants is that the latter — specifically those that are deemed nonessential — are prohibited by the Disaster Management Act from occupying their premises during the lockdown. And, typically, commercial leases include a force majeure clause (when one or both parties cannot fulfil their contractual obligations due to unforeseen events), which may entitle such tenants to withhold rent if they are prevented from running their businesses from the leased premises. PayProp SA CEO and lawyer Jan Davel says there has been no material change in the contractual rights and obligations of residential landlords or their tenants — despite the negative impact the lockdown may have on the residential rental market. “There is no new law, regulation or court ruling that excuses a tenant from honouring the terms of a valid lease agreement,” he says. However, Davel says this doesn’t mean the terms of a residential lease agreement

SA RENTAL MARKET SNAPSHOT (Q4 2019) Avg monthly rent: R7,844 Avg rental growth: 3.27% Avg net monthly income: R33,297 Avg damage deposit ratio: 1.27 x monthly rent Avg debt-to-income ratio: 44.9% Avg rent-to-income ratio: 28.9% Proportion of high-risk tenants: 25.6% Source: PayProp SA

No legal action can be instituted during the lockdown, as evictions are not deemed as urgent and essential matters cannot be renegotiated. He says tenants whose financial position has been impaired by the lockdown (or any other event) have the right to ask their landlords for a rental discount, deferment or deposit utilisation. “But it will be up to individual tenants and landlords to negotiate and agree on any such concessions, which must still fall within the scope of all applicable laws and regulations,” says Davel. He notes that renegotiated lease arrangements (such as payment holidays) should be put in writing and annexed to the original lease. Though landlords’ rights remain largely unchanged, the enforcement of these has been suspended temporarily — particularly when it comes to evicting delinquent tenants. Davel refers to new regulations, published in terms of the Disaster Management Act last week, which prevent landlords from instituting eviction orders during the lockdown. “Letters of demand can still be sent via e-mail to tenants, but no legal action can be instituted during the lockdown, as evictions are not deemed urgent and essential matters,” he says. Eviction processes may resume as usual once the lockdown ends. However, Davel says challenges could arise should the 21-day lockdown be extended, as this could prejudice landlords in particular. And, he says, it remains to be seen how the courts will deal with eviction orders after the lockdown. But Andrew Schaefer, MD of national property management company Trafalgar, says landlords may already be prejudiced by the lockdown. This applies particularly to property owners who signed leases with new tenants from April 1, as they stand to lose half a month’s rental income. Tenants who hadn’t taken occupation by March 26 are not allowed to move out of their current

Jan Davel

Marianne Pretorius

homes before the lockdown ends. Consequently, says Schaefer, they are not required to pay rent to the new landlord until they are able to take occupation. “And landlords will not be able to let the property to someone else during lockdown, even if it is empty,” he adds. Schaefer advises landlords and rental agents to offer a one-month lease extension to tenants who were supposed to have moved out by April 1. “In this instance, tenants will be liable for the additional month’s rent,” he says. Though landlords need to use their own discretion as to how they will assist financially stressed tenants, Schaefer suggests that tenants in good standing be asked to offer their deposits in lieu of rent, and to sign a waiver to this effect. He advises that “this should be in writing and should include a provision that the

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deposit is to be reinstated, perhaps in instalments by a certain date, and that the landlord will be able to take legal action if the tenant reneges on this arrangement”. Alternatively, Schaefer says there is no reason why landlords shouldn’t consider giving tenants a payment holiday during the lockdown (or for longer), especially if their own banks have given them similar deferments on bond instalments. In addition, landlords in some areas may qualify for a rates payment holiday, if other local councils decide to follow the lead of Stellenbosch municipality. Stellenbosch is offering residential and commercial property owners affected by the Covid-19 lockdown a three-month rates payment holiday. Businesses and households need to apply for the concession. Other municipalities have yet to announce similar concessions. However, the City of Joburg is extending rebates under its expanded social package for an additional six months. The package offers rebates on water, electricity, refuse removal and property rates to about 30,000 households living on a monthly income of less than R6,086.37. Gerhard Kotze, MD of the RealNet estate agency group, has urged local authorities to consider rates relief for property owners, as well as a delay in the utility tariff increases that would have taken effect in July. The latter will provide financial relief to homeowners as well as those who rent. Kotze says: “This would be in line with the government’s pledge to help South Africans through the economic after-effects of the lockdown, and would also protect the rates base of municipalities.” x TPN, in association with law firm Fullard Mayer

Good standing rent

Good standing consumer credit

Morrison Inc, is offering free advice on its website to help the property industry navigate the impact of the

Note: Tenants in good standing = paid rent on time and in full. Source: TPN

lockdown April 9 - April 15, 2020

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feature / motor industry

SURVIVAL OF THE FITTEST With less than nine months to go before the launch of a new industry policy, Covid-19 threatens to derail its transformation targets

David Furlonger furlongerd@fm.co.za

he government’s timetable to create a black industrial base in the SA motor industry could be at risk if the effects of Covid-19 continue to run riot through the economy. A proposal to use a R6bn industry transformation fund to help emerging, black-owned components companies survive the pandemic appears to be a nonstarter. The fund, intended to support the development of new black players in coming years, is supposed to go “live” in 2021, but there have been suggestions that some money should be made available now to bail out distressed companies. However, vehicle manufacturers, which will capitalise the fund, have yet to put in their contributions, and are unlikely to do so immediately. Tim Abbott, MD of BMW SA and president of the National Association of Automobile Manufacturers of SA, says individual members’ main responsibility in the current crisis is to their own workers. “Like it or not, we need to be looking inward,” he says. Renai Moothilal, director of the National Association of Automotive Component & Allied Manufacturers (Naacam), says a number of small companies are at risk of closure. “The outlook for employment post-crisis is not positive,” he says. That’s bad news, coming less than nine months before the start of a government programme to encourage the development of black-owned companies. The SA automotive masterplan, launching in January 2021 and incorporating an updated version of the sevenyear-old automotive production & development programme, is meant to help the industry double production and employment by 2035, and increase local content in SA-made vehicles by at least 50%. This, it is hoped, will encourage the establishment of a black-owned components supply base in a sector that’s almost exclusively white and dominated by subsidiaries of multinationals.

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April 9 - April 15, 2020

The R6bn transformation fund is an important part of the jigsaw. The target is for at least 20% of companies manufacturing subcomponents to be black-owned by 2035. This all assumes continuity of market supply and demand. But, as figures released last week show, that is no longer a safe assumption. SA new vehicle sales in March fell 29.7% from a year earlier. That was with only 3½ sales days lost to the Covid-19 national lockdown. April, with at least two weeks lost, and possibly more, if the lockdown is extended, is likely to be a “disaster”, says Cyril Zhungu, head of automotive retail finance at Standard Bank. And in coming months? No-one knows. What is clear is that the market was already on a downward trajectory — heading for its sixth decline in seven years — before Covid-19 intervened. But that was no reason for the industry to panic. Thriving export demand meant local vehicle assembly plants could continue to churn out vehicles. More than two-thirds of cars and bakkies built in SA are destined for overseas markets. At least, they were. In Europe, a major destination for SA vehicles, markets collapsed, falling 40%-86% in March, and governments have no idea when they will recover. The head of a major distributor in the UK, the destination for more than a third of SA exports, last week predicted a 96% drop in short-term sales. Even before the SA motor industry halted production two weeks ago for the lockdown, BMW, Mercedes-Benz and Ford had already

announced the shuttering of their SA plants because export demand — on which they rely more than most — had dried up. The net result of all this is that, just as they should be planning for long-term growth, the only ambition for many smaller supply companies is survival. Like other industries, they may have access to support initiatives offered by state and private sector donors. Some may benefit from a cross-industry initiative to make medical ventilators to fight Covid-19. “More than 20 Naacam members are directly involved or on standby to aid production,” says Moothilal. “Our members are also supporting production of other medical devices, using repurposed automotive capacity.” If Covid-19 continues to collapse vehicle demand and manufacture for the rest of this year, the SA motor industry could find itself with a far greater challenge to meet 2035’s production target of about 1.4-million units a year. And with many new black suppliers possibly out of the picture, empowerment targets will also be more daunting. To cap it all, the economic slowdown and growing national debt will make it harder for the government to fulfil its part of the automotive masterplan. It has pledged to improve transport infrastructure such as ports and rail networks. Unable to meet current industry requirements, these will require huge investment to cope with double the volumes in coming years. Where that money will come from, given the many demands on the post-pandemic fiscus, is not clear. The challenges just keep coming. x

feature / vehicle sales reporting

Hard break: The coronavirus pandemic could set back government’s plan to transform the country’s motor industry Getty Images/Waldo Swiegers

by key government institutions, including the activated the moment the vehicle is regisReserve Bank.” tered as sold, so someone buying what they However, Mike Mabasa, the CEO of the believe to be a new car may find that the National Association of Automobile Manufacturwarranty expires months earlier than ers of SA (Naamsa), strongly disputes the scale expected. of the problem. Motor industry ombudsman Johan van The main cause of discrepancy is a pheVreden has had to intervene in several cases nomenon known as prereporting, where dealwhere buyers were misled in this way. Every time, he says, motor ers claim “ghost” sales. The practice is companies agreed to extend particularly prevalent at year-end or With prereported warranties. However, when just before the conclusion of sales sales, someone he criticised the lack of conquarters, when dealers are under buying what they sumer transparency in prepressure to meet targets and earn believe to be a reporting, he says, “I was incentives. new car may find told the practice was none of They register vehicles as sold, then that the warranty my business”. either allocate them to the dealership expires months Naamsa, which manages demonstration (demo) fleet or park earlier than the vehicle sales figures, tries them in a yard until real customers expected to minimise the potential for can be found. Sometimes dealers act misinformation by demandon their own behalf; at other times ing detailed buyer information, as well as the they are encouraged by manufacturers or form of finance, then cross-checks this importers with their own targets to meet. against vehicle registrations on the governAccording to Mark Dommisse, chair of the ment’s eNatis traffic information service. National Automobile Dealers’ Association, some Describing the system as “robust”, dealers who have invested hundreds of millions Mabasa insists that official figures accurately of rands in their dealership facilities find it hard reflect sales. “Where there are differences, to resist supplier pressure. they are not material and we can generally John Jessup, former marketing head at BMW correct them the following month.” SA and Nissan SA and now an industry consultant, The system has taken strain this year, recalls being in a dealer’s however, as the local subsidiaries of BMW office when the manufacturand Mercedes-Benz, in line with their parent er phoned just before companies globally, have switched to quarmonth-end and offered a terly reporting. Naamsa has provided R30,000 cash incentive for monthly sales estimates, but the perceived every vehicle registered as reliability of industry figures has inevitably sold before the cut-off. been affected. Prereporting happens all Other companies are adopting quarterly over the world. Last year, reporting in major markets — a practice Fiat Chrysler agreed to pay a Mabasa thinks could eventually become the $4m penalty after being norm in SA. Quarterly reporting smooths out accused by the US Securities short-term peaks and troughs and offers a & Exchange Commission of more accurate trend guide, according to paying dealers to overstate companies. sales. More recently, BMW confirmed it was Critics, however, say loss of immediacy being investigated in the US over the veracity of will actually be damaging. its sales figures. Cyril Zhungu, head of automotive retail In Australia, KPMG has dedicated a whole finance at Standard Bank, points to the chapter of its auto dealer guide to prereporting, Covid-19 crisis in SA, which could virtually and its impact on tax and accounting practices. halt vehicle sales this month if the national The business consultancy says some dealers lockdown is extended. Under quarterly consider the practice merely to be a “timing reporting, we would learn the true April picmismatch”, because vehicles will be sold eventure only in July. tually to real customers and inaccuracies will “The Naamsa figures reflect not just what self-correct. has happened in the motor industry but also It’s not as simple as that. Several SA dealers what will happen across the economy, parand motor company executives tell the story of ticularly in those industries that rely on autohow, when the MD of an imported car brand left SA for another posting, his successor arrived motive for much of their business,” he says. “Quarterly reporting would be less accurate to find hundreds of presold vehicles in the yard. and force us to change the way we project The only way to sell them was to slash prices. and analyse.” x Then there are vehicle warranties. These are

HANGED, DRAWN, QUARTERED Will a potential change of rules improve or diminish the value of an important economic indicator? David Furlonger furlongerd@fm.co.za

ublication of monthly vehicle sales figures, a leading real-time indicator of economic activity, could be on the way out, to be replaced by quarterly aggregates. But even as the motor industry considers reducing frequency of its market data, questions are being asked about the accuracy of current figures. By one leading car dealer’s estimate, sales may be exaggerated by 5% in some months. In extreme circumstances, it could be 10%. A former dealer says: “We are talking [about] distortion of a key economic indicator relied upon

April 9 - April 15, 2020

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africa

international chocolate

RAISING THE BAR Plans by Ghana and Ivory Coast to levy a surcharge on cocoa to help poverty-stricken West African producers could leave a bad taste in the mouths of serious chocoholics Carien du Plessis

fforts to improve the lives of What it means: impoverished farmers in two of the A controversial plan to benefit poor world’s biggest cocoa-producing farmers will raise chocolate prices and countries could mean chocolate could be sunk by Covid-19 lovers pay more for Lindt and other privatelabel chocolates in future. And prices could surge even further, should the coronavirus Swiss chocolatier Lindt & Sprüngli says pandemic force long-term shutdowns and the LID will have a knock-on effect on the have an effect on harvests. price of the chocolates it makes. Mass-proBut the good news for consumers is that duced chocolate manufacturers, on the other this Easter’s chocolate supply will not be hand, are likely to tweak their recipes and affected. chocolate bar sizes to keep their consumer Ghana and Ivory Coast, which together prices the same. produce 65% of the world’s cocoa, last year Lindt & Sprüngli gets 80% of its cocoa introduced a surcharge of $400 a ton above from Ghana, and changing the bean mix in the futures price of cocoa — a so-called living its recipes by switching suppliers now could income differential (LID) — meant to benefit affect the taste. cocoa farmers. It was announced last Company spokesperson Sara Thallner October, to kick in says price rises due to the new surcharge later this year. will be felt only in October, when the new Ghanaian president season starts. She adds that the coronavirus Nana Akufo-Addo told pandemic will not affect supply for now. the Africa Investment “The seasonal Easter products were fully Forum in Joburg in distributed to the grocery trade already some November that the LID is weeks ago, before the start of the pandemic,” a “bonus” to farmers so that they “may also Thallner says. get more value out of this $100bn industry”, She explains that Lindt & Sprüngli supfrom which Ghana and Ivory Coast themports the Ghanaian and Ivory Coast governselves derive only $6bn a year. ments’ efforts “to contribute to improved “The end result of this is going to be a livelihoods of cocoa farmers”. At the same considerable enhancement of the fortunes of NO SWEET DEAL our farmers,” he said. The real price of a chocolate bar This came after a slump in cocoa prices 3% 5% 12% 20% from $3,000 a ton in Farmer Local Transport, storage Production costs 2015 to about $2,000 a taxes & & trade ton in 2017. cocoa Alhaji Alhassan Bukari, buyer head of the farmers’ union in Ghana, told AFP at the 7% 43% time the union supported Grinder/ Retail & supermarket margin the government’s move. processor Farmers felt it would help them afford fertiliser, weedkiller and extra labour to help increase Source: Oxfam/Raisetrade production.

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time, the company will continue its programme to support its own producers. But the introduction of the LID hasn’t been without controversy. Cocoa sales have already declined on the back of the West African surcharge, despite big cocoa consumers — including Belgian confectionery company Barry Callebaut, US chocolate giant Mars and Swiss food company Nestlé — all saying they support the LID. Bloomberg last month reported Lindt & Sprüngli CEO Dieter Weisskopf as saying that demand was suffering and that Ghana, as a result, was giving buyers a discount on the differential it charges for the quality of its beans. “That’s not them being accommodating. It’s just that now demand is already suffering a bit,” he said. “They already can’t really demand that premium.” Tedd George, founder of Kleos Advisory, says buyers have been holding back partly because they have enough cocoa for now, and partly because of uncertainty over the LID. This puts the two governments in a weaker position. “There is a huge lack of clarity on the LID,” he explains. Though the impression has been created that the money will go straight to farmers, George says Ivory Coast is putting it into a fund to support a high farm gate price next

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season, which means farmers will get it back in that way. “But there’s no transparency exactly [about] how that system is going to work,” he says. George has advocated the use of technology and data to track beans to their origin and do away with the numerous middlemen involved in the cocoa-selling process locally. Nick Weatherill, executive director of International Cocoa Initiative, a nonprofit funded by major chocolate makers, has warned that the LID should be “accompanied by measures to ensure it does indeed have a positive impact on farmer livelihoods, and [be] accompanied by measures, including supply management, to ensure that any resultant expansion The chocolate of cocoa procompanies have duction doesn’t enough cocoa inadvertently and are coming exacerbate off the back of a risks of child strong main labour or deforcrop, so if the estation”. [coronavirus] The coronadisruption is a virus pandemic few months, could, however, they should be ultimately disable to manage rupt many their stocks efforts to benefit Tedd George West African farmers. Should it drag on for too long, it could block deliveries of cocoa and increase postharvest losses, as few farmers or local aggregators have proper storage facilities, George says. “For now the chocolate companies have enough cocoa and are coming off the back of a strong main crop, so if the disruption is a few months, they should be able to manage their stocks without difficulty,” he says. Should the lockdown still be in effect at the start of the new season in October, and should there be a largescale breakout of the virus in neighbouring countries, it could mean that seasonal labourers from Guinea and Burkina Faso will not be able to travel to cocoa plantations. “This could result in a slump in production,” George says. “It could have a disastrous impact on the 2020/2021 crop, and drive a surge in prices.” x

Finding the sweet spot You don’t have to go far to find a slab of locally manufactured, or bean-to-tree, chocolate in Madagascar — the shelves of supermarket chain Shoprite are heaving with them. Flavours range from white chocolate specked with locally grown vanilla to strongly flavoured 100% cacao (Cacao is the raw bean, in its processed form it’s called cocoa) which shows off the smooth fruitiness Malagasy beans are famous for. Madagascar produces less than 1% of the world’s cocoa, but the island-state is known among connoisseurs for its homegrown chocolate, made from singleorigin cacao. Early colonisers brought criollo cacao beans from Réunion Island in the 1800s. Madagascar’s rain forests, climate and soil contribute to the cacao’s unique taste. Though 85% of the island’s cacao is exported without much processing, the history of local chocolatemaking stretches back 80 years to when Chocolaterie Robert was established by a French-Réunionais family. It’s now owned by the local Ramanandraibe Group, to which it was sold in 1977. The company has been exporting its chocolate, under the 123RF brand name Chocolat Madagascar, to places such as the UK, France, Germany, Japan, Russia and the US since 2004. It has ambitions to turn Madagascar into a “world-leading fine chocolate factory”, says founding director Neil Kelsall. “The aim is to create wealth — instead of [just] exporting cacao, to [also] invest and facilitate chocolate-making and develop export markets through a process called Raisetrade.” Raisetrade's vision is to raise the country’s per capita GDP, which is only about 1% that of the US, by making chocolates at origin and increasing tax revenue in Madagascar, rather than just exporting the commodity at a fair price. Kelsall says Chocolat Madagascar has inspired two more companies —

Chocolaterie Cinagra and Chocolaterie Colbert — to do the same. “Exporting chocolates creates 400% more value than exporting cacao only,” he explains, and it promotes the country for travel and investment. “If cacao is exported, the [chocolate’s] origin is hidden behind a Western country’s brand.” Taste and freshness are also considerations. Chocolat Madagascar’s cacao is grown, fermented, dried, roasted, ground, conched, tempered and made within days — not months or years, as could be the case with mass-produced chocolate. It also doesn’t need chemical processing or large amounts of sugar, Kelsall says. And it’s packaged locally. The quality is good. Chocolat Madagascar has won the Golden Bean Award, one of the most prestigious accolades, and 42 other international awards. It also creates jobs, employing about 3,000 farmers and 150 factory workers. And 50 people work globally in marketing, sales and design. Among the challenges are training local workers in the international requirements for exporting a finished chocolate product. The market buying the product also has to be educated. “The mainstream market of chocolate uses cacao produced at unsustainably low prices from West Africa, and people are used to consuming these brands. The true value of chocolate has been devalued so much that it is not sustainable for the origin producers,” Kelsall says. “The problem with West Africa is cacao is treated as a bulk commodity, and quality is not important. It’s just about the lowest costs, and the prices are determined by cocoa prices in London.” (Cocoa is one of few commodities still traded in pounds and not dollars.) “We in Madagascar determine prices by quality and availability. It’s about management of the cacao value chain. It’s about incentives to grow the best quality and flavour cacao, and then craft this into the best chocolate. It is not about the lowest cost.” x

April 9 - April 15, 2020

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adfocus lockdown

THE WINNOWING BEGINS As Covid-19 hits the economy, companies are already withdrawing planned spending on advertising and marketing campaigns, a signal that the ad industry will be hard hit Jeremy Maggs jmaggs@iafrica.com

ý Covid-19 is starting to hit the local ad industry. Small or boutique agencies are concerned that the three-week lockdown will force them to shut up shop. The FM is aware of at least six small agencies that have already had discussions with staff and clients to that effect. Says one owner: “If our clients are not panicking, they are certainly worried and are asking us to put a hold on jobs.” Another says: “There is no doubt that my business will be affected. While we still have a pipeline of work right now, I expect that to start slowing down in the next fortnight, particularly if the lockdown is extended.” These concerns are reinforced by a new survey from the World Advertising Research Centre (WARC), which says that by the end of June the ad industry is likely to feel the full effects of the looming global recession. However, says the centre, brands in the fastmoving consumer goods (FMCG) sector are better positioned, so locally this would give some comfort to advertising and media agencies that have retailers such as Shoprite and Pick n Pay on their books. The WARC says the 2007/2008 financial crisis removed $60.5bn from the advertising market, with all media apart from online search recording declines in investment. The market took eight years to recover from this shock after accounting for inflation and currency fluctuations. Says James McDonald, managing editor at WARC Data and author of the research: “The current downturn may not hit FMCG as hard as other product sectors, but it is likely to be consequential in terms of changing consumer purchasing behaviour.” According to the WARC, during the last advertising recession in 2009, advertising investment among the food and drink sector fell at a far softer rate than the wider industry. The FMCG ad market was worth $97.2bn in 2019, a 15.6% share of global advertising spend. According to the global Interactive Advertising Bureau, 24% of brands have paused all ad spend for the second quarter. Planned digital ad spend is down 38% and 38

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spend on traditional channels Robert Grace is down 43% in March and April. A recent survey of 2,200 marketers by Marketing Week also revealed that the majority of brands have postponed ad-spending decisions. Robert Grace, head of strategy at M&C Saatchi Abel, warns of a rough ride ahead for all agencies, no matter what size. “Often in a crisis brands cut back marketing spend — unfortunately succumbing to short-termism — something that isn’t new, but will be more pronounced.” Grace says businesses with existing cracks are likely to see them turn into “gaping” holes. “We’re even seeing the big global networks pulling back significantly, with hiring freezes and salary reductions. Ultimately how you get through this will largely come back to the fundamentals of your business: absolute clarity on what value your bring, being an indispensable partner to your clients, building strong teams who are motivated and equipped to deliver, and robust cash flow.” Grace says brands need to rethink the way they communicate. “They need to move from inspirational and sentimental platitudes and match this with action. In other words, give an indication of what they are actually doing to help consumers through the crisis, and most importantly it has to be authentic and not seen as a marketing opportunity.” He adds that this might be a time for some brands to hit the pause button and themselves “go into quarantine”. “By that I don’t mean stop. Take this time to refine or develop new strategies and innovations so that when we’re through this you’re ready to go to market with

impact. That day will come.” Grace says brands and agencies need to think about life beyond the virus and the lockdown. “We think there will three consumer responses. A period of release — having been constrained both physically and mentally, a desperate need to experience things that have been missed; a period of reset and looking at how to pick up the pieces of one’s life across family, social circles and work; and a period of renewal, where people rethink where and what they do with their time and money.” x

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Mbikos

Landman family meet the Tshiguvhos. Mbikos meet the Allens. We are all in this together, despite having never met. From our family to all those staying apart.

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IN GOOD FAITH BY CARMEL RICKARD

A TAXING QUESTION A tax dispute between an Irish Traveller family and the country’s tax authorities has raised questions around fairness

orget the handsome “gypsy rover” of the Clancy Brothers song, whistling in the green woods. The modern Irish Traveller, at least in the case of “JSS” and others against Ireland’s Tax Appeal Commission, is a different person — and a long way from the greensward. The five men — an unnamed father and four sons — are part of an Irish travelling community. Theirs is still the nomadic life of their ancestors — they work abroad for a number of months every year, staying in their cara-

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The judge couldn’t have properly decided the question of residence without having heard evidence 40

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vans as they move around, working mostly as “tarmacadam contractors” — building and resurfacing roads. When they are in Ireland, they reside in Rathkeale, in Limerick county. They are also, it seems, familiar with the minutiae of legal argument on tax issues and fairness. In 2016, Ireland’s Criminal Assets Bureau (CAB) issued tax assessments against the family for April 9 - April 15, 2020

the years 2004 to 2014. They disputed the assessments, claiming that, for the purposes of tax, they were not resident in Ireland at the time. When they wanted to take the issue to the Tax Appeal Commission, the CAB objected: it said the men could launch an appeal only for those years in which tax returns had been delivered; they could not appeal the decision for years in which they did not file returns. After the commission held against the five men, the matter made its way to the high court. There, judge Michael Twomey again found against them. As a result, they asked the court of appeal to reconsider the whole question — and it has now delivered judgment. At the heart of the dispute is whether the men had been obliged to deliver tax returns or make tax payments to the revenue authority themselves. Their lawyers argued that the law provides for a different arrangement in cases such as theirs: because they had been out of the country for at least the required number of months in the previous two years, their tax affairs had to be dealt with by “an agent”. Their central claim was this: if an individual is not obliged to make a return because he or she is nonresident, then that failure cannot be reason to deny an appeal. Twomey, when he heard the men’s appeal against the Tax Appeal Commission, gave an extremely brief response in his judgment. As the court of appeal put it, after hearing extensive argument on why the contentious provisions do not apply to the men, “essentially his response was: ‘They do!’”

That was quite inadequate, said the appeal court. Twomey at no stage addressed, let alone weighed up, the principal arguments of the appellants: that the disputed provisions refer to a “chargeable person” and that this should not apply to them. Indeed, they said, they are not “chargeable persons”, because they were not resident in Ireland during the relevant years. ‘Fairness breached’ On the question of residence, Twomey found against the five without hearing any evidence — even though they had travelled from Europe and were in court, available to testify if he had required it. The appeal court found that Twomey should have decided whether the men’s interpretation of the law was correct, and then decided whether that interpretation applied to their case — but he didn’t. Nor could he have properly decided the question of residence without having heard evidence on this central question. Because no real reasons were given for why the central legal point had been dismissed, the men, as the losing party, had been left in the dark as to why the court found against them. Upholding their appeal, the court wrote: “Their detailed legal submissions were rejected, and they have not been told why. An intrinsic aspect of fairness has thus been breached.” Travelling minority groups like the Roma and Irish Travellers have described the discrimination they face as the last “respectable” form of racism. It’s crucial that the courts ensure their standards of fairness are so high that they aren’t seen as part of this problem. x

money& investing Analysis and coverage of SA's top companies and investments - the guide to where your money should be FAMOUS BRANDS

Fed up with flipping burgers

With the rand at more than R23 to the pound, there’s little money left for the group to throw at its British disaster Gourmet Burger Kitchen: A lousy customer experience

Bruce Whitfield

ý Famous Brands is chucking in the towel on its R2.3bn 2017 UK acquisition of Gourmet Burger Kitchen (GBK) — and it could not have come soon enough for bruised shareholders. They are likely to see a final write-down of the ill-fated business as the board is left to decide its fate. In December 2019, for reasons too complex to go into here, I went shopping in Manchester

at JSE-listed Intu’s Trafford Centre. It was a bit like Cape Town’s Canal Walk, just considerably more vast, with far more retail variety and considerably better deals in the post-Christmas sales than you ever get here. The place was heaving with bargain hunters. Tills were jangling. There wasn’t too much demand in New Look, the Brait-owned clothing retailer bought for R36bn and written down to zero after Brexit. Another SA-owned business wasn’t doing April 9 - April 15, 2020

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Russell Roberts

Shawn Stockigt

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GBK could not have been bought at a strategically worse time, coinciding with the shock of Brexit

server, and the food will be right out. It came. A well-structured, neat beige burger in the middle of an otherwise empty plate. I recalled how, as a Spur waiter decades ago, I had never understood Allen Ambor’s insistence on “the garnish”: a bit of lettuce, a slice of tomato and a squeeze of probably Thousand Island dressing, which no-one ever ate, on each Kevin Hedderwick: Was lauded as plate. the force behind the Now I got it. This plate needed garnish. transformation of the group The chips came in a basket, thwocked down Sunday Times/Jeremy Glyn in the middle of the table. The drinks were there too, all at once; then the people who delivered them vanished. “We need more chips,” said one of the party. Turns out the description on the menu was right: small really is small. “Excuse me, could THE GREATER FLOP we get some more chips?” I asked the per- Famous Brands vs Spur Corporation – weekly son clearing the table Based to 100 150 next to ours, trying not 140 to invade our space. 130 “You need to order 120 and pay at the till.” 110 There was a queue of agement expecta100 three in front of me, as tions had been met 90 the beige “Major Tom” in SA, December 80 burger I had ordered load-shedding had 70 cooled on my plate, and 60 taken its toll. Spur Corporation my R120 Budweiser — By mid-month it 50 the Czech one — lost its 40 warned of a notable Famous Brands 30 fizz and hoppy appeal. slowing across its 20 I got to the front of 2,853-outlet netthe queue. The person at work, but said it was Jul Jul Jul Jul the till rattled off the ramping up its online Source: Infront options including the bit delivery capability about baconnaise. I (in lockdown that ordered. Paid. Found the server. And went back would come to naught). to Major Tom. Then came the announcement that it could The burger was good. A bit on the cold side no longer support GBK, which it bought at by now. And despite its lack of visual appeal, it around R17.50 to the pound. This week the rand had the elements advertised on the menu. collapsed to around R23 to the UK unit. The chips arrived, were demolished. Neil Brown, a fund manager at Electus Fund And we left. Managers, which has long questioned Famous Brands’ decision to invest in the UK, says it is It’s not the sort of place you hang around to good news for shareholders of the group. consider the dessert menu or an overpriced “We do not own any Famous Brands shares coffee. There are lots of other places to go nearfor our clients, though it was one of our most by where you can do that. So you leave and the successful hedge-fund ‘shorts’ over the past table is cleared for the next lot. three years,” he tells the FM. “We forecast that Famous Brands CEO Darren Hele declined to GBK will be fully impaired and is worth zero.” elaborate on last week’s Sens statement. “As we Veteran fund manager Shawn Stockigt, a are trading under a cautionary and in a closed long-time analyst of Famous Brands, says the period with Covid-19 uncertainty on top of it all, company, like many others, had entered into an it would not be appropriate for us to discuss the ill-fated scramble to grow the business offshore. matter publicly.” “GBK could not have been bought at a strateFamous Brands came out with three Sens gically worse time, coinciding with the shock of announcements in March alone. Brexit. The acquisition has not only weighed The first, a trading update, warned of a drop heavily on the business financially but also conin system-wide sales in the UK and while mansumed considerable management time,” he says. 2016

that well either, and after experiencing it, I’m not surprised. GBK was a lousy customer experience. My guests wanted to try Five Guys, on the recommendation of a family member. The US concept was available in the same vast food hall as GBK, and what struck me was just how much competition there was. The Sandton City food court might have about 15 options. Here, there were nearly 50, including a number of competitor burger chains like Burger King, Five Guys, KFC, McDonald’s and Nando’s, as well as a couple of spots with broader menus like TGI Fridays, All Bar One, American concept Coast to Coast and Brewers Fayre. It was burgernomics on steroids. Despite all that choice, I insisted on our going to GBK. The shopfront was reminiscent of New Orleans, but the inside was cramped, featureless and disjointed. We sat on a narrow stoep upstairs, overlooking the neon-lit competition in the food hall. Service was prompt and business-like. The server rattled off a series of “meal deals”, a British concept designed to get you to buy more — include a drink, a starter, chips ... do you want chunky fries, skinny fries or sweet potato fries, with garlic mayo or baconnaise? (Yes, it’s a thing). It was overwhelming. Fill in the order yourself, we were told, take it to the till and pay, hand the receipt to your

LIFE INSURANCE

Sanlam’s Big Green new guy Who better to appoint than your rival’s former top dog? But Sanlam’s new CEO throws the Old Mutual door open, again Stephen Cranston cranstons@fm.co.za

The upside is that cutting financial support to GBK will stem the financial strain it has put on Famous Brands, which has become that much heavier thanks to the rand’s fall. “Unfortunately, the hefty price they paid, which was funded by debt, has left Famous Brands — from a previously conservative balance sheet prior to the purchase — highly geared going into the current period of significant economic stress as a result of Covid-19.” It is a terrible comedown for the company and for previous CEO Kevin Hedderwick, who signed the deal. Until the GBK debacle, he was lauded as the force behind the transformation of the 54-store Steers chain — worth R60m when the Halamandres family appointed him to run it in 2001 — into a R15bn juggernaut, Famous Brands’ value at its peak. The last years of his reign saw an acquisition binge as the company bought concept after concept — from coffee shops to frozen yoghurt outlets to lower-margin sit-down restaurants, a dairy, an events catering company and finally, GBK. The stock peaked at R165 in September 2016, and slumped to a 2020 low of R24 before this week’s recovery to over R32.This gives it a market value of R3.2bn. Famous Brands’ debt, as of its 2019 year-end in February last year, was just over R2bn. In a note to clients, Electus says it values the business at about R3.5bn, but warns that the outlook is clouded significantly by the duration of the lockdown and its impact on growth. With all fast-food chains and restaurants now closed, there will be precious little of that this year. x

ý Ten months after dismissing Peter Moyo, Old Mutual still doesn’t have a CEO. But it took less than three months for the board of its biggest rival, Sanlam, to choose its new head — ironically enough, a former Old Mutual lifer, Paul Hanratty. Hanratty worked at Old Mutual for more than 30 years, but was turned down for the group CEO job in 2015. Not long after his term of restraint ended in 2017 after he had left the company, he joined the Sanlam board. He’s been quick to sing Sanlam’s praises. “Over the past two decades Sanlam has successfully demonstrated that it is able to unlock value for shareholders and the rest of its stakeholders consistently,” he says. It has certainly been far more successful than his old shop since the two life offices demutualised in 1998/1999. Before the current market crisis Sanlam had provided a total return of 2,000%; Old Mutual’s was less than 500%. But Hanratty says significant shifts in the operating environment in SA and elsewhere in its key markets in Africa and Asia will make it tougher for Sanlam to achieve its business objectives. “We’ll be guided by the group’s existing strategy and we’ll consider the necessary shifts where required and relevant,” he says. Kagiso chief investment officer Gavin Wood believes Sanlam’s exposure in the rest of Africa needs to be recalibrated, especially to oil-producing states such as Angola and Nigeria. “But the general trend of the group, away from capitalintensive smoothedbonus and guaran-

teed products, should be continued.” Coronation senior portfolio manager Neville Chester says Hanratty has a rare combination of strategic and operational experience, having run key areas such as product development and distribution. He has also had extensive experience in mergers & acquisitions in the now dismantled multinational Old Mutual Plc. Hanratty became a Fellow of the Institute of Actuaries in 1987. He joined Old Mutual in 1984 on graduating from the University of Cape Town and went on to head Old Mutual SA in 2006. His predecessor, Roddy Sparks, describes him as a “take no prisoners” manager. Within a few months, Hanratty had moved the head office from Pinelands, Cape Town, to Sandton, a move Sparks had resisted. Hanratty also decentralised the monolithic Old Mutual Asset Managers to a range of selfcontained boutiques. He moved to London in 2009 to take over the long-term savings cluster of the greater Old Mutual Group, which was everything in the company except Nedbank and Mutual & Federal. He then became COO, and was widely considered heir apparent to then CEO Julian Roberts. But at the final hurdle when Roberts retired, former Liberty chief Bruce Hemphill was brought in to head the group. Says Wood, who worked for Hanratty as a junior actuary, developing the Old Mutual Investment Frontiers range of investment products in the late 1990s: “Paul is very smart, a good thinker and decisive. But I wouldn’t call him a people pleaser. Bruce, a much more patient and tactful person, was probably the right choice in 2015 for the task of dismantling the dysfunctional Old Mutual group.” Cromwell Mashengete, co-head of equities at Sanlam Investment Management, says he was surprised when Hanratty was not appointed Old Mutual CEO in 2015. “But he is full of energy, and I am sure he is fully immersed in the Sanlam culture already.” Wood adds that Hanratty certainly won’t want to see through his five years or

Paul Hanratty: Has been quick to sing Sanlam’s praises

April 9 - April 15, 2020

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Sanlam HOLD Target price: R83.43 Potential upside: 50% * Based on analysts’ consensus forecast

Old Mutual HOLD Target price: R20.62 Potential upside: 91% * Based on analysts’ consensus forecast

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April 9 - April 15, 2020

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so in the job plodding away, looking for consensus. Current Sanlam group CEO Ian Kirk’s contract ends in December 2020, but he is planning to step down in June. “With Paul’s experience he could take over tomorrow,” says Kirk, “but it would be a bad time to hand over in the middle of the Covid-19 crisis.” He adds, however, that Hanratty needs to be in office before the annual board strategy meeting in August. “And I’ll continue to work on behalf of the industry at Asisa [the Association for Savings & Investment SA] until the end of the year as we navigate the unprecedented times we live in.” Kirk says the life industry needs to stand solidly behind the interests of its clients and ensure that it does all it can to live up to its promises. “Which is not to say we will start to collude. We will still seize any opportunity which comes our way.” Kirk says he inherited a strong business from his predecessor, Johan van Zyl, at the beginning of 2016. “I added to this by setting up the corporate cluster to give focus to our employee benefits and medical aid operations. And I concluded the acquisition of control of [Moroccan-based] insurer Saham, which Johan initiated.” Kirk says he definitely will not take a directorship of a competing financial services company. “I have been with the group for 15 years and don’t want to turn my back on it.” After the cooling-off period he will consider coming back to the Sanlam board. But he doesn’t rule out directorships at noncompeting industrial or mining companies. Ideally, Sanlam would like Patrice Motsepe to accept the role as chair: he is surely by far the most powerful member of the board. But he has turned this down as his disparate business interests come into conflict. Kirk believes that in Elias Masilela the board has made a good choice of chair. “As a regulated entity we need a good relationship with the National Treasury, the Financial Sector Conduct

SANLAM STAYS AHEAD

Liberty Holdings vs Old Mutual vs Sanlam – weekly Based to 100

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Source: Infront

Authority and, of course, our primary regulator, the Prudential Authority.” Masilela is the former CEO of the Public Investment Corp and was a senior executive at the Treasury in its “dream team” days under minister Trevor Manuel and director-general Maria Ramos. He also worked for Sanlam as its primary lobbyist when there were extensive debates about setting up a national pension fund. Masilela is a consummate networker: he was a member of the board of the Reserve Bank, the Government Employees Pension Fund, Airports Company SA, Absa Financial Services and the Eskom Pension & Provident Fund. Until recently he was chair of Economic Research Southern Africa. He was also a key player in several strategic initiatives, such as the financial sector charter and social security retirement and reform. “Elias will be most valuable as our link to the public sector,” says Kirk. “We think we punch below our weight when it comes to our state sector client profile in employee benefits and asset management.” Previous chair Van Zyl stays on as a nonexecutive director. His move from CEO to chair was contrary to the King governance principles, but he remains on the board as one of the representatives of Ubuntu-Botho, Sanlam’s largest shareholder along with Motsepe and Rejoice Simelane. The appointment of African Rainbow Minerals (ARM) finance director (FD) Abigail Mukhuba as the new Sanlam group FD might seem odd. But Kirk says that all three of the previous Sanlam group FDs — Flip Rademeyer, Kobus Möller and Heinie Werth — learnt their trade at the now defunct Gencor mining group. “She will have strong support from the current acting FD, Wikus Olivier [now head of group special projects], and the chief actuary, Anton Gildenhuys, so I am sure she will quickly get up to speed.”

Kirk admits that it counted in Mukhuba’s favour that, as a senior executive of ARM, she is well known to Motsepe, who is, after all, Sanlam’s deputy chair and empowerment partner. Old Mutual Equities fund manager Neelash Hansjee says Mukhuba potentially has a long tenure ahead at Sanlam as she is just 40. Ironically, given Sanlam’s new appointments, all eyes will now be on whom Old Mutual decides to name CEO. First prize would be that a strong executive tipped for the Sanlam top job, such as Santam CEO Lizé Lambrechts, is so disappointed that she jumps ship — though that seems unlikely. Chester says the current Old Mutual interim CEO, Iain Williamson — widely considered the strongest internal candidate — is a technocrat and not a leader, and he believes that Old Mutual has invested a lot of credibility in its promise to choose a black CEO. There is speculation that former empowerment partners such as Gloria Serobe of Wiphold and Fred Robertson of Brimstone could come forward, but they don’t have the hands-on experience to run such a complex group. Before he became deputy governor of the Reserve Bank, Daniel Mminele was approached, but he is surely out of the picture now, so soon after joining Absa. Hansjee says it is unfair to compare the speed with which Sanlam appointed its CEO to the snail-like pace at Old Mutual. “They have been distracted by some court cases, after all.” x Elias Masilela: A consummate networker

ADVERTORIAL

Peter Worthington, Senior Economist, Absa Group As the Covid-19 pandemic escalates both globally and domestically, concerns are mounting at an exponential pace about the ultimate impact on the South African economy. South Africa was already in recession when Covid-19 hit our shores, and Moody’s credit rating downgrade to sub-investment grade was likely even before the lockdown, due to South Africa’s stalled growth momentum, ballooning fiscal deficits and slow progress with essential structural reforms. Notably, Moody’s has retained a negative outlook on its new rating. With the global economy now likely to enter a fierce recession, South Africa looks set for a very cold economic winter. Absa recently forecast that GDP in South Africa would contract in the second quarter by 23.5% quarter on quarter after seasonally adjusting and annualising the data, with particularly hard knocks for mining, manufacturing, and various service industries supporting tourism, which has now come to a dead stop. At this stage, no one knows when the pandemic will be brought under control, nor what the multiplier effects of different negative economic shocks will bring. Covid-19 is a health shock which has mutated into a complicated tangle of a demand shock, a supply shock and a financial shock, all coming together at a time when South Africa was poorly fortified economically to deal with it. We assumed in our recent forecast that some partial growth recovery would be likely in Q3, and that overall, the country would post a GDP contraction of about 3% in 2020. However, as we warned then, the risks were and are still skewed heavily to the downside here, and they have likely mounted in the short time since we published that forecast. If the need for strict social distancing measures, which keep firms shuttered and people sequestered at home, lasts for longer than currently envisaged, the economic hit will be greater than we initially envisaged. With South Africa having reported the first confirmed coronavirus cases in some of its densely populated townships, Italy provides a sobering warning, with the government there now warning that the national lockdown, which was initially supposed to end only on 3 April, will instead be very long and lifted only gradually. Italy whose population is only slightly larger than South Africa’s, is considerably further along the pandemic incidence curve, with nearly 102,000 confirmed cases (compared to South Africa’s 1,326 as of 29 March 2020) and nearly 11,600 deaths. Positively, there is a possibility that South Africa’s relatively early rise to the challenge compared to some hard-hit countries that were caught more unawares will shepherd South Africa through the crisis somewhat relatively lightly. But this is a hope, rather than a strong likelihood. Widespread poverty, and consequent crowding in densely populated townships, high rates of potential co-morbidity factors like HIV and tuberculosis, and

weak public healthcare systems suggest that the crisis could easily escalate sharply and quickly here too. It is unclear how long the draconian social distancing measures, with their attendant costs on the economy, will need to last to bring Covid-19 under control. Moreover, even assuming that the pandemic is brought under control by the end of Q3, the economy is unlikely to reboot immediately. Many parts of the economy will be damaged in the intervening period: firms will close, people will lose their jobs, capital will have fled to safety. This will not be easy to recover from. The SARB has introduced substantial measures to ease financial conditions in South Africa, including 125bp of interest rate cuts since the end of 2019. We think another 50bp of easing are likely in May. Additionally, the SARB has implemented a range of other measures to secure essential liquidity in South Africa’s financial markets, including a watershed decision to buy government bonds as needed to secure orderly financial markets. But at the end of the day, monetary policy measures are unlikely to be enough to lift the economy out of the ICU. Rather, substantial fiscal medicine is needed. Alas, the medicine is exceptionally expensive in South Africa, which had no fiscal buffers to speak of entering the crisis and which pays a high real interest rate for the spending medicine. National Treasury has announced various steps to support the economy, including most notably an expansion of the eligibility criteria for the employment tax incentive to encourage firms to hang on to their workforce during the crisis. The value of this measure is estimated at R10bn, while, the two other two measures – the deferral of PAYE and provisional tax for small and medium-sized enterprises – will cost the fiscus R5bn. The R15bn may seem like a large amount to help South Africa’s economy to get on its feet, but it is not. It amounts to about 0.3% of GDP. Elsewhere, particularly in wealthy developed countries, governments are rapidly ramping up their spend. The US $2 trillion stimulus package amounts to about 10% of GDP, and other countries such as the UK and Germany, are set to spend an even greater share of national income on the crisis. South Africa’s government will also likely have to lift its assistance, to firms and workers (including 2.9 million citizens who were eking out a living in the informal sector as of Q4 19) the question of how this can be financed remains unanswered, especially since BOND yields have shot up amidst investors’ flight to safety. The IMF says it is ready to deploy about $1 trillion lending capacity to allay the effects of the current pandemic – but it also says it has over 80 countries queuing up for assistance and that emerging markets’ financing needs total over $2.5 trillion. So far, its Catastrophe and Containment and Relief Trust assistance is focused on low income countries.

The BRICS bank and the World Bank are oriented towards project lending, but this could shift under the exigencies of Covid-19. For now, however, Finance Minister Mboweni has said he is keeping his options open about approaching international financial institutions for help. It’s not yet clear, however, exactly which sorts of programmes will be both available and palatable to such a unique country as South Africa for such a novel type of crisis. Ultimately, South Africa is going to need not only enhanced spending on health care, but also likely much higher levels of support for hardhit firms and consumers who have lost their jobs. Around the world, the Covid-19 epidemic’s likely long-lasting negative impact on employment has elevated the idea of universal basic income to frontline of debate. As everywhere, the challenge is financing but in South Africa it is all more acute, given the extreme income inequality and narrowness of the tax base. Even at the upper bound poverty line of R1 227 per month, a basic universal income for every South African adult over the age of 19 would amount to nearly R550bn, around 10% of GDP. Of course, this cost could be brought down by means testing the benefit (essentially turning into a guaranteed basic income) or by eliminating the existing old age pension and child support benefits (worth just shy of 3% of GDP) as additional benefits, or, more drastically, by setting the UBI at the lower-bound poverty line of just R561 per month, but even so the numbers in aggregate look unworkable without a deep reordering of OUR fundamental socioeconomic architecture. So Covid-19 leaves the question front and foremost: what is to become of our millions of jobless and working-but-impoverished citizens? As the government scrambles for money in the near-term to deal with the crisis at hand, it would also do well to heed the words of one of President Obama’s advisors to “never let a good crisis go to waste”. Times of severe crisis can generate paradigm shifts, allowing movement where before there was only a log jam. President Ramaphosa’s authoritative handling of the Covid-19 crisis may, ultimately, place him in a stronger position politically to drive a far-reaching structural reform agenda – covering agriculture, mining, energy, telecommunications, transport, finance, state-owned enterprises, and the public service – that could sharply lift South Africa’s growth potential. In the meantime, financing for the immediate needs is essential. If regular bond issuance is seized up, perhaps a tax-free Covid-19 solidary bond, perhaps aimed at retail investors, might be an idea worth considering. But it should also begin exploring options with the international financial institutions.

money&investing DAIRY PRODUCERS

Time to butter me up, baby Food groups Libstar and Sea Harvest are creaming it with their dairy operations, and investors may be missing a trick Marc Hasenfuss hasenfussm@fm.co.za

ý Specialist dairy operations are proving to be valuable cash cows for Libstar and Sea Harvest, two of the smaller food-producing businesses on the JSE. Local investors have never been terribly enamoured of dairy businesses. Short-lived endeavours like Bonnita and Milkworx probably did their bit to sour sentiment. Investor interest in Clover, which recently delisted, ironically seemed to increase when it shifted its product mix away from its traditional dairy offering. Older readers might also recall Tiger Brands hiving off Dairybelle about a dozen years ago.

financialmail.co.za

April 9 - April 15, 2020

It’s been very In fact, none of the earningslarger JSE-listed food accretive for us. companies has any On the valuemeaningful dairy expoadded side the sure — which might sugdairy segment is gest the niche is too in a good space competitive and cyclical. Felix Ratheb When Libstar listed in 2018 there was much more market interest in the group’s thrust into supermarket in-house brands than in the large Lancewood dairy segment. And when seafood producer Sea Harvest bought Ladismith Cheese for R527m in August 2018, most market observers dismissed this as a costly (and desperate) diversification effort. Right now, however, Libstar and Sea Harvest appear to have their bums firmly in the butter. Sea Harvest CEO Felix Ratheb says the market probably did not realise the Ladismith deal had been long in the making. “We’d been looking at the business for a few years,” he says. “There was some scepticism when we announced the deal, but I think we have done better with the business than people thought we would.” Ladismith is best known for its broad range of cheeses, but has now broadened its product range into butter, as well as tea and coffee creamer. Small Talk Daily analyst Anthony Clark says that according to data from the Bureau for Food & Agricultural Policy (BFAP), dairy is the SA food industry’s fastest-growing category. In its latest report the BFAP projected that the two fastest-growing Anthony Clark: Dairy is dairy categories will be the SA food industry’s cheese and butter, which fastest-growing category are expected to grow conHetty Zantman sumer volumes by 44% and 34% respectively over the next 10 years. Clark says Ladismith is unlikely to enter the highly competitive yoghurt and custard markets — but will rather focus on core competences in cheese and butter. He says Ladismith will use the Sea Harvest network to get more point of presence, nationwide: “Sea Harvest has invested in both the retail and wholesale side and plans to add new products to the cheese categories using the expertise Ladismith already has … with feta and mozzarella possible

Sea Harvest BUY Target price: R17.56 Potential upside: 30% * Based on analysts’ consensus forecast

Libstar BUY Target price: R9.22 Potential upside: 54% * Based on analysts’ consensus forecast

new categories.” Ratheb says Ladismith’s integration into the group has been seamless, with a good performance in a very tough local environment — showing volume growth across all categories. In the year to end-December, Ladismith already accounted for a chunky 23% of Sea Harvest’s revenue line. Turnover was R990m, with gross profit and operating profit R193m and R96m respectively. Ratheb says Ladismith was purchased on an eight-times earnings multiple — but that the recent performance by the business would put the original purchase price at a multiple of six. “It’s been very earnings-accretive for us. On the value-added side the dairy segment is in a good space.” Libstar has owned Lancewood since 2008, and in 2017 bolstered the business with the

MOBILE OPERATORS

A good thing, but temporary New spectrum and a surge in data traffic should help SA’s mobile operators better weather the lockdown crunch Mudiwa Gavaza gavazam@businesslive.co.za

Felix Ratheb: Ladismith’s integration into the group has been seamless Hetty Zantman

2020

2019

2018

acquisition of Sonnendal Dairies. yoghurt market share moved from zero in the Lancewood now appears to be the growth third quarter of 2018 to 4%. engine in Libstar’s “perishables” division — Element Investment Managers portfolio which saw a 2.6% increase in revenue to R4.7bn manager Andrew Bishop says Libstar’s dairy turned into a 12.3% gain at normalised earnings successes are driven by its entrepreneurial culbefore interest, tax, depreciation and amortisature. “Lancewood has been marketed more cretion (ebitda) level at R510m for the year to endatively than those of the dairy sector incumDecember. bents — especially in pack sizes,” he says. Libstar’s presentation shows that Lancewood Van Rensburg believes Lancewood will chalk was responsible for up further successes APPETISING over 10% of the ebitda in the financial year AVI vs Libstar vs Sea Harvest – weekly growth from the perahead. Based to 100 ishables division. He says there will Libstar CEO Andries 120 be a positive margin 115 van Rensburg says impact on the cheese 110 Lancewood’s strong side with the Bel 105 performance was driv- 100 cheese production AVI Sea Harvest en by its higher-margin 95 facility coming on Libstar specialised cheeses and 90 stream. 85 the recent foray into Further market80 yoghurt. share yoghurt gains 75 70 The yoghurt thrust are being pencilled in, 65 looks promising at this with Van Rensburg 60 stage. Van Rensburg noting new product 55 50 indicates product launches for con45 launches delivered sumers keen on exceptional growth of sugar-free, low-fat Apr Jul Oct Apr Jul Oct more than 200% and and high-protein Lancewood’s eatingoptions. x Source: Infront

ý It’s taken the Covid-19 crisis for the government to finally free up desperately needed spectrum to SA’s mobile operators, which have experienced a surge in demand for data as the lockdown forces most corporate employees to work from home. Two weeks ago Stella Ndabeni-Abrahams, minister of communications & digital technologies, instructed the Independent Communications Authority of SA (Icasa) to issue new spectrum to allow operators to expand the network during the nationwide lockdown. Spectrum is the radio frequency on which data and information are carried. And for at least a decade operators have been pleading with the state to release more of it. The caveat, though, is that this sudden largesse is only temporary. Ndabeni-Abrahams, in an interview with the FM, said the allocation was strictly for the lockdown period, and would run parallel to a longterm allocation process which was (finally) set in motion at the end of last year. Ndabeni-Abrahams wishes the process was faster, but alas “The one thing about spectrum allocation is that it is a long process. It’s highly regulated,” she says. Even the temporary allocation is cumbersome. Icasa first asked for an indication from the industry as to which spectrum bands to issue, then issued regulations for the process this week, inviting telecoms operators to apply, and only then will assign the bands: 700MHz, 800MHz, 2.6GHz and 3.5GHz. But Ndabeni-Abrahams appears to recognise that spectrum allocation is the key to helping SA’s economy. She admits that the slow pace of digital migration was one of the factors that led to Moody’s Investors Service downgrading SA April 9 - April 15, 2020

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money&investing

Freddy Mavunda

financialmail.co.za

April 9 - April 15, 2020

Sipho Maseko: Telkom has experienced an increase in network demand Sunday Times/Moeletsi Mabe

and Russia. Ofentse Dazela, director of pricing research at information communication technology consulting firm Africa Analysis, says network capacity is the big issue for the operators right now. He singles out MTN, which had already seen rapid growth in network traffic introduced by Cell C through its expanded roaming agreement with its smaller rival. Unum Capital portfolio manager Henk Lindeque says Covid-19 “will no doubt affect economic activity and as a result will have an impact on earnings. However, telecoms typically have relatively stable revenues throughout economic cycles, almost like that of utility companies.” x

HOLDING UP

MTN vs Telkom SA vs Vodacom – daily Based to 100 130 120 110 100 90 80 70 60 50

Vodacom Group Telkom SA MTN Group

40 30 20

Mar

Source: Infront

Jul

Oct

2019

Telkom has differentiated itself by having the most affordable data prices in the market in recent years. And Maseko says the recent price cuts by its larger competitors are still not enough to match Telkom’s value, which is why their Covid-19 efforts have been more focused on zero-rated services like health and education. All four operators have made efforts to support zerorated services. Cell C’s CEO Douglas Craigie Stevenson says such services go a long way to address the challenges faced by people trying to access essential services online and supports the government’s agenda to grow the economy. But the lockdown is hardly ideal. Motsa says Covid-19 is likely to destabilise the economy significantly. While MTN may benefit from more people connecting with each other electronically, he says the danger of people not going to work and businesses shutting down is a real risk for the company. Shares in most of SA’s telecoms players fell, in line with the rest of the market, last month — except for Vodacom, which held steady. Cell C’s largest shareholder, Blue Label Telecoms, dropped 27%. Telkom lost about 23%. MTN slumped as much as 60%, thanks to its extensive exposure to oil-producing countries including Nigeria (its largest market), which have been caught in the crossfire of an oil price war between Saudi Arabia

Stella Ndabeni-Abrahams: Instructed Icasa to issue new spectrum

a means to help South Africans cope with the increased need for data services. Vodacom was the first major operator to reach an agreement with the competition watchdog, reducing its data prices by up to 40% from the start of April. This move will cost the country’s largest operator R2.7bn. But Vodacom’s CEO, Shameel Joosub, tells the FM that it expects to recover this amount through increased volumes of data traffic on its network over time. Telkom CEO Sipho Maseko says it has experienced some increase in network demand and usage as more people work remotely or from home. However, he says much of this is “not new demand” but rather a “rebalancing” as the increase in data usage on home or mobile networks is offset by a decrease in demand from head offices.

2019

to junk status last month. In the meantime, SA’s mobile operators are, if not coining it, certainly benefiting from enforced social distancing. MTN has had a “double digit increase” in data traffic since President Cyril Ramaphosa announced a state of national disaster last month, says Godfrey Motsa, chief executive of its SA unit. But he says the revenue uptick is not as dramatic as it might be because many people are still finishing off previously bought data bundles. MTN plans to cut mobile data prices by up to 50% from mid-April, in response to the Competition Commission’s demand that mobile connectivity prices come down, and as

Apr

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market watch by Marc Hasenfuss

Planet of the clever apes @marchasenfuss

In terms of investments, the Hasenfuss Reverse Indicator, I’m unhappy to report, seems to be functioning perfectly 50

financialmail.co.za

lague diary, week 3: In the past few days it has become increasingly difficult to shake off the cobwebs of morbidity. I fully appreciate the seriousness of Covid-19, but I can’t handle being hemmed in. It was worse when it rained on Sunday, and I could not even trudge around the property, hunched under the burden of the damned medicine ball and chafing from ill-fitting ankle weights. How I long for the simple pleasures of a head-clearing 5km run and — especially — the therapeutic high jinks of my pals at the Fish Hoek Tennis Club. Cunning plans to modify an automatic tennis-ball machine into a missile launcher (by loading it with petrol-soaked balls and taking potshots at the bowling club’s flagpole) provided a welcome distraction on WhatsApp, for a while. Eventually, my “lighten the hell up” effort was helped — not by the reckless sampling of the toadstools growing in the pool filter box, but by receiving the e-statement for my American Express card. This must be the first time ever my Amex statement has reflected a positive balance. I would attribute this to one main factor — the flattening of the Uber curve. With my son passing his driver’s licence in February, the demand for Uber has dropped off a cliff. A win on the balance sheet is always a big victory — though there is a nagging foreboding that I should perhaps be impairing the value of my vinyl stock to take into account that Covid-19 has turned the tables on the local record market. In terms of investments, the Hasenfuss Reverse Indicator (HRI), I’m unhappy to report, appears to be functioning perfectly. After a robust discussion with my wife — who keeps a beady eye on the outstanding bond — I decided to cash out 80% of two global unit trusts to use hard currency to cull some of our softcurrency debt. Perfectly prudent, I’d contend.

April 9 - April 15, 2020

Of course, only hours after tapping out the unit trust funds, the rand stumbled through the R19/$ mark. Never doubt the HRI. In truth, this has not been a terrible period for the portfolio. British American Tobacco keeps smouldering away, and my positions in hedge instruments like NewGold (along with various NewWave currency plays) remain a source of comfort. Pharmaceutical group Adcock Ingram has proved a tonic, while Ascendis even perked up briefly (at least enough to facilitate some profit-taking). Hosken Consolidated Investments also found traction, and its rebound inspired me to flirt with another two investment companies. I thought the much-overlooked Sabvest at less than R30 offered good value, while RECM & Calibre (RAC) looked a worthwhile punt, having slipped to below the level at which it listed in 2010. In terms of RAC, I still believe its large investment in alternative gaming business Goldrush will pay off handsomely over the longer term. What I am praying for is that prevailing circumstances prompt RAC to think twice about mobilising the cash gained from the Astoria takeover to buy into struggling retailer CNA. I can’t see that ending well, and the last thing RAC needs is another dud investment after Distribution & Warehousing Network and Trans Hex. I also fortified, albeit slightly, my rand hedge position with forays into Trencor and property counter Atlantic Leaf. The significant losses this week were again in the veggie patch. At one point

the crops were looking as wholesome as the Oklahoma! soundtrack, but the persistent baboon raids are reducing the yield markedly. The baboons have adopted a divide-and-conquer strategy — one male taunts the Jack Russells from the roof at the front of the property, while the rest of the troop raid the veggie patch at the back before the sentry can draw a bead on them (with the unloaded pellet gun). We probably did well to lose only a few carrots, but the subsequent “sniff out” by the dogs is when the real damage happens. Thereby hangs a tail Dexter, a cross between a Jack Russell and a pit bull, ploughs his way through chicken wire (disappointingly cheered on by my children) like a torpedo through a bed of kelp … emerging, wireclad, like an extra from Mad Max . I probably need to temper my expectations of attracting the now cash-flush agribusiness investor Zeder as an equity partner. Speaking of Zeder, I might be tempted — after the Pioneer Foods special dividend is paid — to have a gander. The business is well capitalised with some interesting listed and unlisted positions that feed into the food security thrust — most notably fruit producer and exporter Capespan and seed business Zaad. I will be particularly fascinated to see the value Zeder accords to Zaad (at last count more than R2bn) in the upcoming final results. For the week ahead, I’m watching the share prices of Libstar, Distell and Spur Corp — hoping that I might have an opportunity to buy in at levels I previously could only fantasise about. x 123RF/siberianart

the G spot by Giulietta Talevi

Where there’s smoke … @GTalevi Giulietta@bdtv.co.za

Were we supposed to hide that capability from the world in this time of crisis? I think not

he news that global tobacco giant British American Tobacco (BAT) is working on a potential Covid-19 vaccine using its biotechnology subsidiary Kentucky BioProcessing (KBP) was met with excitement, swiftly followed by a great deal of scepticism. After all, BAT says it’s hopeful that with the right partners it could be producing a vaccine by June. Yet for other companies, like US group Moderna, whose main business is the creation of vaccines and not tobacco, the length of time to produce a vaccine is still regarded as 12 to 18 months. We asked BAT’s chief marketing officer, Kingsley Wheaton, why the group is so confident of its vaccine potential. KW: It really hinges on the manner in which our vaccine is produced and developed. We put out that press release [about it] because we believe it is important for what we have in terms of technology and capability to be known to the world. Were we supposed to hide that from the world in this time of crisis? I think not. In terms of the timing, our system is a plant-based system. Vaccines are usually developed in chicken eggs and can take from six to nine months to develop, whereas a plantbased system is much quicker. We take a hardy Australian varietal of tobacco and impregnate it with the antigen gene. That plant acts like a little factory and multiplies it within the plant, and then you extract the vaccine and purify it. We are able to manufacture 1-million to 3-million doses, depending on the required vaccine size, by June. Whether our candidates have the right vaccine is an entirely different question. That suggests you would have to partner with the pharmaceutical groups that have been working on vaccines all along? KW: Yes, I take your point. We’re not a pharma company and the reason we own Kentucky BioProcessing goes back

to 2012. We were looking at alternative uses for the tobacco crop as smoking volumes decreased. As an example, it’s a very good generator of protein, which could be used in animal feed. Along that journey it became evident that vaccine development was possible, [but] we need help and partnership in this. Typically you would go through a three-stage New directions: British American Tobacco is working clinical trial, and that on a potential vaccine for Covid-19 through its US might be 12 to 18 months, biotech subsidiary, Kentucky BioProcessing but there are things like emergency-use authorisation from governments in exceptional was a commercial endeavour. We had circumstances to expedite that process. worked on a vaccine for Ebola, and About 90 different vaccine candiactually, the real vaccine programme, far dates are being worked on around the outstripping our efforts on Covid-19, is world. And, in fact, we’re also talking to all about seasonal flu. We are about to the department of health in the UK about get into clinical trials. constraints in capacity. We’re speaking The reason it’s hugely important is to them about help and support, seeing that, as you probably know, there are whether we could establish a KBP facildifferent strains of seasonal flu and the ity in the UK that could be a replica the decision over which strain, or strains, size of the plant in Kentucky. will be used for the vaccine in a given year is generally made around February Can you name the companies you’ve or March. Given the length of time been talking to? I imagine companies chicken egg development takes, that and governments have perked up means you have a vaccine available only since last week’s press release. at the end of the year. With our system KW: I won’t name any companies you can make that decision much closer specifically — it’s still at an early stage — to the seasonal flu period. but the answer is a lot, actually. We’re suffering more from having a lot of Elsewhere in this magazine, your interest and trying to filter our way major shareholder, Reinet’s Johann through those offers of partnership — Rupert, says that life after Covid-19 will from the more pharmaceutical end of bring about a huge economic reset. Is things all the way through to branding, BAT financially able to weather what is packaging and distribution — so we’ve likely to be the world’s worst been quite overwhelmed. recession since the Great Depression? KW: BAT is a very resilient business, and Is it possible that it all could come to at the capital markets day we had naught? And you have said this recently we said we are maintaining our project would not be for profit, but full-year guidance of revenue at 3%-5% clearly it excites shareholders. Should growth. And we think we can be they temper their enthusiasm? resilient, gritty and determined. Our KW: We’ve been very clear: anything we liquidity is in a good position. But at the do on Covid-19 is entirely not-for-profit. same time I’ve got no doubt the world That being said, KBP, prior to Covid-19, will look very different. x April 9 - April 15, 2020

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investor’s notebook by Stephen Cranston

Insurers’ time to shine

U @scranston

Life offices promise to honour every single valid claim — but that may not hold for the fringe players

nit trusts are undoubtedly the noisy, extrovert sibling when it comes to financial services. Every change in daily pricing of funds is potentially newsworthy: who picked the winners? But it is hard to write about life insurance every day. In spite of some of the advertising, it isn’t usually designed to change as your lifestyle changes. It is there as a fallback in extreme circumstances, such as death, disability and critical illness, usually priced on a whole-of-life basis. And before Discovery Life entered the market 20 years ago, life insurance’s main role was as the custodian of the nation’s savings — for example, the only realistic way for the retail investor to invest in hedge funds was through a life-insurance wrapper. The core product of the life assurers was the universal life policy, a complex hybrid of savings and risk cover which never had the transparency or flexibility of unit trusts. These days universal life sales have almost entirely disappeared and it has been replaced by standalone savings and risk products. To this day there is also far looser regulation of offshore funds sold through a life wrapper than on those sold on unit trust platforms. And while closely watched equity unit trusts experienced net

outflows, the same is not true of the life sector. Admittedly, the number of savings policies declined by 3% in 2019 to 6.5million, but risk products offering cover such as life and disability surged 31% to 11.6-million. The number of funeral policies, still the main entry point into the industry for the bulk of the population, increased by 11.6% to 15-million. It is clear that life offices are going back to their roots as providers of protection, especially as Covid-19 is, sadly, bound to increase their mortality claims. Information is not as up to date as it once was as there is no longer a Life Offices Association and, in my view, the Association for Savings & Investments SA (Asisa) Life & Risk Board Committee is a poor substitute. Note that the words “insurance” or “assur-

ance” do not appear in Asisa’s name. But the deputy chair of this committee, Sanlam’s Hennie de Villiers, says that life insurance, with R3-trillion of assets, remains a huge player in the SA financial landscape. It is still about 40% bigger than the unit trust industry. And it has free assets of R373bn — more than double its minimum solvency requirement. He promises that life offices will be able to honour every single valid claim — but though I’m sure that is true of the household names, it may not hold for the fringe players. Where life insurers have the edge over unit trusts is in reach. There are 43.5-million recurring premium policies in force — more than one for each adult South African. And there are 2.9-million single premium policies, usually in more affluent markets. Unit trusts compete almost entirely with the latter. But there are no published breakdowns between debit-order and lump-sum unit trust business. In 2019 life insurers paid out a huge R491bn in claims or benefit payments, such as monthly pensions. Life insurers earn a large part of their income from nonlife businesses such as third-party asset management and pension administration. Most want to increase exposure to such “capital lite” businesses. But protection against unforeseen events, like a global pandemic, remains the core. x

123RF/abscent

FAKE SALES / LUCKIN COFFEE — CHINA’S RIVAL TO STARBUCKS — SLUMPS ON REVELATIONS OF WIDESPREAD FRAUD 52

financialmail.co.za

April 9 - April 15, 2020

economic indicators AFRICA TOP STOCKS (EXCL SA) Company

Maroc Telecom Safaricom Attijariwafa Commercial Intl

ECONOMIC INDICATORS

Price Total Return Ytd

INTEREST RATES

Country

Market Cap ($000s)

Morocco

10,533.73

123.00

-19.61

Inflation (% change y/y)

Kenya

10,367.92

27.50

-12.70

Consumer price index

Feb

4.6

4.5

Morocco

6,947.96

339.85

-31.89

Producer price index

Feb

4.5

4.6

Egypt

5,323.81

57.00

-29.84

Credit Aggregates (% change y/y)

Latest

Month ago

Short-term interest rates (%) Apr 3

Claims on the domestic pvte sector

Feb

5.09

Month ago

Year ago

Prime

8.75

9.75

NCD*

5.75

6.58

10.25 7.23

5.01

Repo

5.25

6.25

6.75

Dangote Cement

Nigeria

5,181.91

117.00

-17.61

Banque Centrale

Morocco

4,098.29

208.00

-25.05

Total loans and advances

Feb

4.54

4.81

Jibar*

5.61

6.51

7.15

Vodafone Egypt

Egypt

2,400.47

157.32

143.23

Total domestic credit extension

Feb

4.17

4.38

Safex†

5.32

6.32

6.73

Eastern Co SAE

Egypt

1,756.64

12.28

-21.18

Ciments du Maroc

Morocco

1,681.97

1,196.00

-27.95

Cosumar

Morocco

1,611.30

175.05

-20.03

Nestlé Nigeria

Nigeria

1,576.04

765.00

-47.96

Guaranty Trust

Nigeria

1,365.42

17.85

-31.69

Kenya

1,214.45

34.20

-36.07

Abou Kir Fert & Ch

Egypt

1,205.00

15.02

-28.17

East African Breweries

Kenya

1,160.82

156.00

-20.20

Morocco

1,142.23

3,350.00

-14.10

Imports

Feb

95.45

103.61

Egypt

1,033.21

9.52

-5.37

Exports

Feb

109.60

100.89

Kenya

1,009.81

35.00

-35.19

Trade balance

Feb

14.15

-2.72

Morocco

724.44

560.00

-21.68

Gold & Forex Reserves ($bn) 6.53

Wafa Assurance Telecom Egypt KCB Group Banque Marocaine

New passenger car sales

Mar

-26.8

7.5

New commercial vehicle sales

Mar

-34.6

-15.9

Retail sales

Jan

1.2

-0.5

Wholesale sales

Jan

1.9

2.5

Manufacturing production

Jan

-2.0

-5.9

Mining production

Jan

7.5

0.1

R186

8.210

8.025

8.740

Mineral sales

Jan

24.2

-5.3

R213

11.630

9.295

9.410

R208

4.760

6.040

7.040

R209

12.005

9.960

9.665

Trade (Rbn)

Stanbic IBTC

Nigeria

653,92

23,95

-37,45

Gold reserves

Mar

6.45

TMG Holding

Egypt

6,34.99

4.84

-40.76

SDR holdings

Mar

2.45

2.46

Morocco

618.31

2243.00

-21.30

Forex reserves

Mar

43.53

45.72

Gross reserves

Mar

52.43

54.71

Net reserves

Mar

44.77

45.36

Societe Des Bois Access Bank Standard Chartered

Nigeria

614.36

6.65

-33.50

Kenya

598.04

184.75

-8.77

COMMODITY PRICES Apr 3

Week ago

Year ago

EXCHANGE RATES

12-mth low 12-mth high

Precious metals ($/oz) Gold

Apr 3

Month ago

Year ago

12-mth low 12-mth high

1,628

1,293

1,271

1,687

US dollar

19.04

15.59

14.16

13.87

19.04

725

745

860

602

1 028

Euro

20.56

17.33

15.92

15.49

20.56

Palladium

2,164

2,265

1,425

1,304

2,774

UK pound

23.35

19.93

18.65

17.22

23.35

Silver

14.39

14.47

15.16

12.00

19.29

Japan yen (100)

17.53

14.44

12.70

12.44

17.53

1,448

1,516

1,872

1,448

1,872

Base Metals ($/t) Aluminium Copper

4,824

4,783

6,484

4,625

6,537

Nickel

11,181

11,298

13,244

10,806

18,153

Lead Tin

1,642

1,694

1,991

1,566

2,286

14,189

14,315

21,315

13,335

21,315

Zinc

1,872

1,868

3,000

1,803

3,031

Iron Ore

79.17

81.97

86.19

76.24

118.96

Energy

Bond yields (%) Apr 3

Month ago

Year ago

INSPIRED THINKING

13.40

11.67

10.64

10.45

13.40

Best Fixed Income and Forex House

Switzerland franc

19.48

16.27

14.20

13.81

19.48

3rd Consecutive Year

Australia dollar

11.41

10.23

10.07

9.70

11.41

Brazil real

0.27

0.28

0.27

0.25

0.30

China yuan

0.37

0.44

0.47

0.37

0.50

India rupee

4.03

4.68

4.84

4.03

5.10

Russia ruble

4.02

4.26

4.60

4.02

4.68

0.23

0.27

0.28

0.23

0.29

24.54

69.17

20.44

73.89

Malaysia ringgit

Coal ($/t)

62.75

78.50

69.75

58.50

91.00

Thailand baht

1.75

2.02

2.24

1.75

2.28

Botswana pula

0.65

0.71

0.75

0.64

0.76

2,849

2,737

2,837

2,457

2019 SPIRE AWARDS

Best Forex House

4th Consecutive Year

Developing Markets — Foreign currency unit per rand

29.86

Agriculture (R/t)

2019 SPIRE AWARDS

Canada dollar

Brent ($/bbl)

White maize

† Overnight rate

Developed Markets — Rand per foreign currency unit

1,621

Platinum

* 3 months

1010508/FMCB

Equity Group Holdings

Industry (% change y/y)

3,981

Yellow maize

2,814

2,717

2,674

2,417

2,982

Wheat

5,565

5,217

4,607

4,347

5,565

Sunflower

6,013

5,825

5,125

4,835

6,013

Economist: Global Markets Research,

Soya

6,978

6,686

4,762

4,479

6,978

Rand Merchant Bank (tel) +27 11 282-1040 or e-mail: Mpho.Tsebe@rmb.co.za

The information in the commodities column is provided by Mpho Tsebe,

RMB. Solutionist Thinking.

CELEBRATING OUR PARTNERSHIP WITH OUR VALUED CLIENTS AT THE 2019 JSE SPIRE AWARDS. Clients are at the heart of our business, which is why we are honoured to have been recognised at the 2019 JSE Spire Awards – the benchmark for the South African Capital Markets. Our Solutionist Thinking is not only what sets us apart, it’s what inspires us to consistently deliver innovative solutions for our valued clients.

Corporate and Investment Banking

Search RMB Awards Rand Merchant Bank is an Authorised Financial Services and Credit Provider.

April 9 - April 15, 2020

financialmail.co.za

jse top stocks COMPANY

CLOSING PRICE (MONDAY) (C)

PROSUS NV ANHEUSER-BUSCH INBEV BHP GROUP PLC BRIT AMER TOBACCO NASPERS LTD-N GLENCORE PLC ANGLO AMER PLC ANGLO AMERICAN PLATINUM VODACOM GROUP FIRSTRAND LTD STANDARD BANK GROUP ANGLOGOLD ASHANTI MONDI PLC SANLAM LTD CAPITEC BANK HOLD SOUTH32 LTD KUMBA IRON ORE MTN GROUP LTD GOLD FIELDS LTD BID CORP LTD SHOPRITE HLDGS ABSA GROUP LTD IMPALA PLATINUM SIBANYE-STILLWATER CLICKS GROUP LTD DISCOVERY LTD OLD MUTUAL LTD QUILTER PLC BIDVEST GROUP NEDBANK GROUP NEPI ROCKCASTLE ASPEN PHARMACARE MEDICLINIC INTL PLC ASSORE LTD MULTICHOICE GROUP NORTHAM PLATINUM EXXARO RESOURCES PEPKOR HOLDINGS SPAR GRP LTD/THE INVESTEC PLC TIGER BRANDS LTD GROWTHPOINT PROP MR PRICE GROUP WOOLWORTHS HLDGS SASOL LTD PICK N PAY STORES LIFE HEALTHCARE HARMONY GOLD MNG AVI LTD AFRICAN RAINBOW MINERALS NETCARE LTD VIVO ENERGY PLC DIS-CHEM PHARMACIES LIBERTY HLDGS TFG FORTRESS REIT LT A FORTRESS REIT LT B RESILIENT REIT REDEFINE PROPERTIES BARLOWORLD LTD TRUWORTHS INTL SAPPI LTD EQUITES PROPERTY TELKOM SA SOC LT RCL FOODS LTD/SO ASTRAL FOODS LTD OCEANA GROUP LTD ROYAL BAFOKENG PLAT MASSMART HLDGS

financialmail.co.za

125,421 84,400 29,590 67,883 261,826 2,937 29,900 87,756 11,972 3,870 10,550 35,760 29,104 5,622 102,300 2,154 31,905 5,170 10,640 22,742 12,767 8,300 8,700 2,543 26,874 8,388 1,080 2,558 14,067 9,158 7,841 9,700 5,900 30,800 9,005 7,600 10,781 1,046 18,289 3,356 17,800 1,112 11,792 2,896 4,665 5,884 1,962 4,323 6,859 10,300 1,533 1,600 2,355 6,240 6,968 996 165 3,132 213 6,031 2,715 1,941 1,660 1,903 980 19,200 5,739 2,690 2,701

Market Cap — Global market capitalisation. YTD — year to date. EPS — Earnings per share. Trailing EPS — EPS at the time of the most recent annual results presentation. Est. forward EPS — EPS as estimated by analysts at the time of the next annual results presentation. * — SA companies quoted in rand, otherwise in reporting currency. Div Yield — Dividend yield as at most recent annual results. Forward Div Yield — Dividend yield as at next annual results. Three-year average RoE — three-year average return on equity. Forward RoE — Return on equity as at next annual results.

MARKET CAP SHARE (Rm) PRICE RET. YTD (%)

2,045,816 1,704,240 1,676,815 1,557,373 1,142,798 391,335 373,977 236,615 219,790 217,087 170,903 149,451 142,150 131,742 118,286 104,389 102,762 97,417 93,987 76,278 75,496 70,363 69,516 68,025 66,826 55,217 50,852 48,010 47,866 45,978 45,936 44,276 43,497 42,999 39,848 38,743 38,672 36,483 35,225 34,397 33,788 33,610 31,896 30,367 29,204 29,035 28,789 23,460 23,035 22,995 22,061 20,257 20,255 17,859 16,497 13,672 13,672 12,532 12,339 12,124 12,026 10,634 9,914 9,727 9,398 8,241 7,485 6,921 5,919

April 9 - April 15, 2020

19 -26.94 -7.11 16.03 14.3 -32.3 -23.2 -30.38 3.83 -36.09 -37.32 13.6 -7.37 -28.93 -29.26 -17.65 -18.76 -32.21 12.04 -30 2.77 -44.41 -38.07 -29.14 6.03 -29.5 -41.38 -9.87 -29.99 -57.27 -34.06 -18.64 -23.55 15.78 -22.7 -38.52 -17.79 -41.4 -7.4 -48.94 -13.76 -45.09 -35.39 -38.91 -84.63 -7.9 -20.41 -15.57 -22.91 -33.52 -18.74 -30.04 -11.13 -39.67 -53.39 -41.83 -70.09 -51.78 -71.83 -43.72 -41.56 -55.55 -17 -45.35 -11.31 -9.79 -6.76 -45.79 -47.37

TRAILING EST. EPS (*) FORWARD EPS (*)

NA 4.54 1.86 2.49 10.93 -0.03 2.76 70.18 9.34 5.5 15.85 -0.03 1.67 3.42 49.84 -0.03 50.49 4.91 0.19 13.48 5.9 17.15 3 0.01 6.72 9.57 2.04 0.08 9.35 24.62 0.71 13.48 0.17 49.38 -1.2 3.63 32.88 0.62 11.19 0.48 24.53 2.08 10.64 -1.48 -10.4 3.03 1.75 -2.64 5.94 22.34 1.75 0.11 0.65 11.14 11.6 1.39 1.39 13.84 0.62 11.47 2.05 0.27 1.9 4.53 -0.18 16.58 4.86 0.05 -4

2.68 3.16 1.68 3.42 7.54 0.12 2.28 101.5 10.07 4.88 17.33 2.01 1.41 5.4 63.24 0.1 40.2 7.02 0.54 14.56 7.31 17.68 29.48 9.07 8.07 8.85 2.33 0.08 14.29 22.7 0.6 14.3 0.29 41.01 8 14.89 23.61 1.1 12.36 0.52 13.59 2.19 10.64 3.07 12.77 3.35 1.65 9.81 5.37 24.59 1.77 0.13 1.01 13.43 11.42 1.61 1.61 6.06 0.96 10.49 5.39 0.29 1.61 4.72 0.9 24.4 6 7.85 -0.57

DIVIDEND FORWARD YIELD (%) DIVIDEND YIELD (%)

NA 3.99 9.09 10.41 NA 12.48 6.83 1.25 6.64 7.7 9.42 0 5.69 5.94 1.83 3.45 14.66 10.64 1.88 2.9 2.5 13.55 0 0 1.66 2.56 11.11 3.12 4.27 15.45 14.41 0 3.12 6.82 NA 0 5.25 NA 4.06 16.69 5.96 19.63 6.24 6.47 37.17 3.99 2.7 0 5.98 9.71 7.24 3.38 1.45 11.41 11.27 15.87 15.87 17.09 47.42 7.99 14.14 0 8.72 19.66 2.55 4.69 6.33 0 0

0.12 4.23 6.76 7.55 0.33 9.46 5.8 5.23 7 7.5 9.65 1.21 5.3 6.34 2.42 4.09 10.96 11.47 2.92 2.92 2.75 12.28 12.48 14.55 2.01 2.82 11.96 4.57 4.43 14.1 15.13 2.45 3.19 5.61 7.04 NA 12.57 3.53 4.73 14.31 4.51 20.1 5.93 5.54 16.62 4.22 5.96 0.87 6.3 10.86 7.72 4.44 1.79 12.29 10.48 16.12 97.29 18.58 41.71 7.51 13.31 1.18 9.69 7.36 3.04 7.05 7.3 4.81 0.19

3-YEAR FORWARD AVERAGE ROE (%) ROE (%)

NA 10.19 12.49 42.37 37.51 6.16 14.99 18.16 21.69 23.76 15.6 -0.86 21.18 16.16 26.59 7.78 37.45 8.29 -2.17 15.66 19.15 13.12 -9.61 -10.74 39.65 15.23 NA NA 17.27 14.38 NA 12.23 -3.84 20.69 NA 0.35 19.5 NA 28.76 10.96 19.03 8.74 38.99 -2.25 4.52 47.79 11.82 -8.62 36.11 15.68 24.39 NA 55.97 12.58 19.74 0.92 0.92 4.16 8.06 12.35 20.35 15.01 12.98 10.18 4.77 29.18 15.3 -1.76 7.76

11.65 8.44 17.34 11.73 10.85 1.99 11.04 39.48 22.04 20.36 16.18 23.24 16.33 15.38 26.34 4.52 33.76 15.16 15.75 13.34 15.75 14.01 31.14 54.01 36.22 10.92 13.92 8.19 19.41 13.33 12 10.18 6.06 11.77 30.34 40.1 16.84 6.9 28.85 11.38 13.42 9.58 26.82 31.91 4.8 46.82 13.92 17.17 34.1 14.74 23.66 18.89 32.93 13.75 16.36 NA 15.64 11.32 9.73 8.83 25.06 6.84 NA 8.69 6.6 24.41 NA 12.33 -3.63

P:E FORWARD P:E

NA 10.23 8.42 11.86 26.09 NA 5.69 12.38 12.7 7.61 5.97 21.17 8.71 16.26 20.51 NA 6.29 11.21 28.66 15.62 18.97 4.74 15.85 NA 39.3 8.75 5.18 NA 10.94 3.52 4.99 5.4 14.83 5.7 NA 20.93 3.56 10.64 16.2 2.99 13.46 4.22 10.55 8.64 3.53 18.73 22.12 10.01 13.62 3.84 8.95 7.43 36.4 0.54 5.77 7.3 7.3 5.24 5.39 6.95 4.8 3.17 10.95 3.78 26.92 11.47 10.54 53.37 NA

25.26 14.4 9.48 8.7 18.7 13.31 7.07 8.65 11.89 7.92 6.09 9.59 10.3 10.41 16.18 11.32 7.94 7.36 10.69 15.62 17.47 4.7 2.95 2.81 33.3 9.48 4.63 14.08 9.84 4.03 6.55 6.78 9.04 7.51 11.25 5.1 4.57 9.51 14.8 2.83 13.1 5.07 11.08 9.44 3.65 17.57 11.9 4.41 12.77 4.19 8.64 6.83 23.31 4.65 6.1 6.2 1.03 5.17 2.21 5.75 5.03 3.66 10.32 4.03 10.93 7.87 9.56 3.43 NA

TOTAL SELL

TOTAL HOLD

TOTAL BUY

0 3 2 1 0 1 1 1 4 2 0 2 1 0 1 0 7 1 0 1 4 0 1 0 4 1 0 1 0 3 0 2 1 2 0 0 0 0 0 0 7 1 4 3 1 3 1 0 2 0 0 0 1 1 0 1 2 0 1 5 2 2 1 1 2 0 0 1 3

1 12 10 5 0 5 11 6 4 6 4 4 4 3 8 8 2 2 7 1 3 3 2 1 4 1 4 1 4 1 0 4 6 2 2 1 1 4 7 1 3 3 4 3 6 4 5 3 3 4 5 0 4 2 4 4 0 3 6 2 4 3 1 7 1 2 1 0 2

13 18 13 17 14 17 11 2 5 5 9 3 11 1 2 13 2 9 3 5 4 9 6 6 1 2 2 8 6 9 5 4 4 1 6 7 9 2 4 3 1 3 2 6 3 4 3 3 5 5 4 9 4 1 6 0 2 3 1 4 4 5 3 4 1 3 4 6 2

jse top stocks COMPANY

CLOSING PRICE (MONDAY) (C)

ECHO POLSKA PROP MOTUS HOLDINGS VUKILE PROPERTY IMPERIAL LOGISTICS SUPER GROUP LTD HYPROP INVESTMENTS RFG HOLDINGS LTD KAP INDUSTRIAL LIBSTAR HOLDINGS EMIRA PROPERTY FUND SA CORPORATE REAL EST THARISA PLC MPACT LTD NAMPAK LTD MERAFE RESOURCES

zar x exchange

648 2,922 574 2,520 1,170 1,560 1,502 143 599 664 112 1,043 761 179 30

P:e — Price:earnings ratio as at recent annual results. Forward P:e — Price:earnings ratio at next annual results. Tot Sell/Hold/Buy — number of buy, hold, and sell recommendations. Sum of sells, holds and buys — number of analysts following company. All information provided by Bloomberg and Bloomberg sources. The FM undertakes to transmit the information as accurately as possible and is confident it is correct, but is not able to warrant its accuracy. Companies not being tracked by analysts will not appear in the above listing, market capitalisation notwithstanding.

MARKET CAP SHARE (Rm) PRICE RET. YTD (%)

5,883 5,604 5,489 5,071 4,347 3,992 3,947 3,728 3,647 3,471 2,834 2,816 1,319 1,235 753

0.07 9.72 1.84 -10.15 3.26 0.65 0.83 0.37 0.47 1.55 0.09 0.04 -4.81 -1.33 -0.54

LAST BID

LAST OFFER

202,040,920

0.88

0.00

47,995,092

10.50

0.00

180,789,308

10.00

12.00

TWK INVESTMENTS LIMITED

35,100,993

0.00

SENWESBEL LIMITED

116,091,853 2,032,833

DALE CAPITAL GROUP LIMITED RUNWAY PROPERTY GROUP LIMITED SENWES LIMITED

TRANSFORMATION INVESTMENT PORTFOLIO LIMITED

ISSUED SHARES

-62.22 -64.24 -70.41 -54.2 -58.86 -72.17 2.39 -65.95 -21.08 -46.19 -63.4 -33.77 -46.1 -73.79 -60.47

TRAILING EST. EPS (*) FORWARD EPS (*)

DIVIDEND FORWARD YIELD (%) DIVIDEND YIELD (%)

0.12 8.65 1.94 5.62 3.1 6.47 1.17 0.39 0.89 1.53 0.39 0.22 2.43 1.27 0.12

PREVIOUS CLOSE

0 NA 32.09 10.95 0 49.09 1.35 NA 4.17 22.98 33.96 4.45 5.52 0 13.33

37.14 13.6 34.17 9.99 NA 39.09 2.6 9.28 4.44 23 34.63 8.92 9.36 15.32 45.04

3-YEAR FORWARD AVERAGE ROE (%) ROE (%)

NA NA 11.69 14.05 12.04 7.38 9.79 11.13 4.65 8.84 6.87 13.48 -2.18 -0.46 0.95

12 13.4 11.02 13.32 9.14 7.81 11.23 9.03 9.01 NA NA 19.46 NA NA 7.78

P:E FORWARD P:E

4.33 2.76 4.1 NA 3.32 6.98 17.88 3.45 10.75 4.7 3.22 11.24 4.1 NA NA

CLOSING PRICE

CHANGE

VOLUME

VALUE

0.88

0.00

177,796

10.00

0.00

479,950

13.00

0.00

2,350,261

28.00

0.00

4.00

4.75

0.00

1.10

1.01

0.00

2.69 3.38 2.96 4.49 3.77 2.41 12.88 3.7 6.72 4.35 2.89 2.55 3.13 1.41 2.46

MARKET CAP (R000)

YEAR HIGH

TOTAL SELL

TOTAL HOLD

TOTAL BUY

0 2 1 0 1 1 0 1 0 1 1 0 0 1 0

1 2 1 2 2 4 3 1 0 1 1 2 1 1 0

3 2 4 6 4 2 4 5 5 3 2 5 3 2 4

YEAR LOW

TRADE DATE

0.90

0.80

06/04/2020

10.00

06/04/2020

13.10

6.50

06/04/2020

982,827

30.90

12.33

06/04/2020

551,436

6.00

3.70

06/04/2020

2,053

1.10

1.00

06/04/2020

VOLUNTEERS HEALTH PROFESSIONALS WESTERN CAPE RECRUITMENT DRIVE IN FULL SWING TO COMBAT THE SPREAD OF COVID-19 The Western Cape Government Health is calling on skilled medical professionals residing in the province to volunteer and assist in the fight to stop the spread of COVID-19. This COVID-19 pandemic along with the pre-existing burden of disease are placing our facilities under tremendous pressure. In line with the country-wide recruitment drive, we require all hands-on deck to ensure that there is enough capacity in the province to deal with the anticipated rise in the number of people testing positive for COVID-19. Volunteer doctors, nurses, pharmacist, pharmacy assistants and emergency medical service personnel who are NOT employees of the Department can help mitigate the additional pressure COVID-19 is putting on our services. We call on all available health professionals to take up this opportunity to make a meaningful contribution and to assist in stopping the spread. Those interested in providing their support can register on the following link: https://www.westerncape.gov.za/ department-of-health/volunteer-recruitment-questionnaire

Let’s stop the spread Help stop the spread of coronavirus COVID-19. If you have symptoms call the provincial hotline on 021 928 4102. Find out more.

139329 www.thecandocompany.co.za

April 9 - April 15, 2020

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life

The newly built Japan National Stadium is the main venue for the 2020 Olympics Gallo Images/AFP/Charly Triballeau

A look at how to spend your downtime — from music, to sport, books, the theatre and the screen

SPORT

HISTORY’S OLYMPIC HURDLES The 2020 Tokyo Olympics has been delayed. But, as Archie Henderson explains, it’s not the first time for the city — nor for other host nations ý For the second time in 82 years, Tokyo has lost an Olympic Games. At least the second loss will not delay the event coming to Japan’s capital for as long as the first, as this year’s Games have been rescheduled to take place in the city next year. Tokyo’s first loss was in 1938, when the International Olympic Committee (IOC) stripped it of the 1940 Olympics. The decision came after worldwide opposition to Japan’s aggressive war in Manchuria, the northern region of China. That war, which had broken out the year before, looked to be going on for much longer than the Japanese military had expected, and is regarded by some historians as the real start to World War 2. Among those disappointed at Tokyo losing the Games must have been Germany, which would become an Axis ally in the world war. The German Messerschmitt company had designed a plane capable of flying 11,000km without refuelling and was scheduled to take the Olympic flame by air for the first time to the next Games venue. No doubt the aircraft was also earmarked to bomb distant cities, such as those in the US. The IOC gave the 1940 games to Helsinki, the Finnish capital, which had come second in the voting. Japan had also lost the Winter Games, scheduled for earlier in 1940. These were given to it again in 1972.

Almost a year after Helsinki won the right to host the Games by default, another war deprived it of the event. Eight months before it was due to begin, and three months after the official outbreak of World War 2, the Soviet Union invaded Finland. It was part of communism’s aggressive westward expansion, which had begun with the occupation of the Baltic states and continued, in cahoots with Nazi Germany, with the dismembering of Poland. Then followed the long half-time break. Helsinki got its Games only after London hosted them in 1948; the British capital had been due to host the 1944 Games. At Helsinki in 1952 SA’s Ester Brand won gold in the women’s high jump and Joan Harrison in the women’s 100m backstroke. It was also when one of SA’s boxing legends, Willie Toweel, first stepped onto the international stage, winning bronze in the flyweight division. Tokyo had to wait 26 years after losing its first Games for its 1964 Olympics. In 1940 it would have cost the city, and the national government, about $1.15m in today’s money; in 1964 it cost $34m ($282m in today’s value) and today the average cost of hosting an Olympic Games is about $5.2bn. How much that will increase by next year is any economist’s guess, what with the effects of Covid-19 on the world economy.

April 9 - April 15, 2020

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One of the reasons the 1940 Tokyo Olympics seemed so cheap was that the Japanese government forbade the construction of any buildings of iron and steel, which were needed to produce tanks, aircraft and battleships, two of them the biggest in the world. Everything for the Tokyo Games would have to be built of wood, as many homes were too. These as a result suffered horrendously during Allied fire-bombing of Japanese cities in World War 2, never mind the atomic bomb attacks on Hiroshima and Nagasaki.

Olympic flame torchbearer Yoshinori Sakai at the 1964 Tokyo Olympics Gallo Images/AFP/The Yomiuri Shimbun

Holland’s Fanny-Blankers-Koen during the women’s 4x100 relay final at the 1948 London Olympics Gallo Images/AFP

The Soviet Union’s Irina Rodnina and Alexei Ulanov during their free programme at the 1972 Sapporo Winter Olympic Games Gallo Images/AFP/EPU

Gallo Images/AFP/Intercontinentale

The US’s Patricia McCormick diving during the 1952 Helsinki Olympics

The 1964 Tokyo Olympics men’s marathon winners podium: from left: Britian’s Basil Heatley, Ethiopia’s Abebe Bikila and Japan’s Kokichi Tsuburaya financialmail.co.za April 9 - April 15, 2020

Gallo Images/AFP/The Yomiuri Shimbun

12 to 18 months for widespread immunity to develop. “You can’t get [ahead] of herd [immunity],” Michael Joyner, a doctor at the Mayo Clinic in the US and one of those working on a treatment, told The New York Times. IOC officials, who were in constant contact with the World Health Organisation, must also have been aware of this. “We are just going to have to wait,” said an official. In the 1960s it took the IOC, and its octogenarian conservative president Avery Brundage, who was also a lifetime opponent Poor performance of professionalism, a long time to realise the The IOC was as slow to respond to changing world did not want apartheid SA to be part of Olympic venues in the near-wartime (aside its party. The SA team, which would for the from China, where war was already raging) as first time have included black athletes but it has been in the face of the coronavirus under a paternal and contrived selection pandemic. The reasons for the delay of the process, was banned from the 1964 Games in 1940 Games are in the realm of history, but we Tokyo, and allowed back only in 1992, when can assume they were similar to those of the country was on course for full democracy. today. The IOC, a group made up of the rich However, SA athletes were allowed to take and the royal, did not balk at awarding the part in the first Paralympic Games in 1964. 1936 Olympics to Berlin when fascism and When the Tokyo Olympics eventually go persecution of Jews were on the rise. More ahead, the city will become one of only five to recently it awarded the Winter Olympics to have staged more than one Olympic Games. Sochi, Russia, in spite of President Vladimir London has done it three times (in 1908, 1948 Putin’s invasion of Ukraine. It works on the and 2012) while Paris, Los Angeles and principle of: “If you don’t like my principles, I Athens have each had two Games. Two of have others.” these are due for their third (Paris in 2024 and With regard to Tokyo 2020, money would Los Angeles in 2028), and Beijing for its have played a big role in the prevarication. second (in the winter of 2022). Sponsorships and TV contracts would have How different will the Olympics of 2021 be been the first of the IOC’s considerations. from the scheduled event of this year? The Harvey Schiller, a former executive member of IOC and the Japan organising committee will the US Olympic committee, said as much in pretend it’s the past; they will still brand the an interview with The New York Times. Games as Tokyo 2020. The broadcasters are Thomas Bach, the president of the IOC, and likely to lose money. The US Olympics TV his colleagues were more eager to listen to rights holder, NBC, said before the companies and organisers that had spent postponement that it had sold 90% of its $12bn on the Tokyo Olympics than to the commercials for the event. That would have pleas of the athletes — among them SA 400m brought it $1.25bn, surpassing the 2016 world record holder and Olympic champion Olympics. There will be demands for Wayde van Niekerk — who were struggling to discounts. qualify for the Games in this year of plague or NBC wouldn’t be the first to worry about to train because of the restrictions imposed by losing money on a sports event. Just over the pandemic. 100 years ago the Marylebone Cricket Club Then, on March 24 — four months before — the esteemed MCC and the IOC of its day the opening of the Tokyo Games on July 24 — — was worried about its investment in a tour Bach and his committee backed down. The by an SA team to England. night before that the US Olympic committee In 1900 it had sent an invitation to the SA had revealed that in its poll of 1,780 potential Cricket Association to send a team to play a Olympic athletes 68% had said that in fairness series of matches in England. There would be to the participants the games should not go no Tests, but games against county sides, ahead as planned. It might have been the first and good money was to be made for both time in history that the athletes had won the parties. The South Africans had to decline; day against an organisation that always seems they were busy with a war against the Boer out of step with the world. republics at the time. The MCC was Science would also have won over understanding, but when a second invitation sentiment. Scientists working on efforts to find was declined the following year less so. The a treatment for Covid-19 had warned that a war was no longer a good-enough excuse. If gathering of millions of people in late July and you don’t send a team, it will wreck our fixture early August would have been a risk to world list, the MCC officials informed the South health. They said not enough people would Africans. And so the team went. Wars don’t have developed a resistance to the disease by always stop sport, but viruses, we now then. Many scientists believe that it could take know, do. x 58

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April 9 - April 15, 2020

life inbox EDUCATION Online courses that broaden your horizons

LEARNING DURING LOCKDOWN ý Why not use the next few weeks to learn a new skill? With so many online learning options, this has never been easier. The FM rounded up a few, including some child-friendly options to keep the younger members of your family out of your hair — for a couple of minutes, at least. MasterClass MasterClass is, as the name suggests, a class taught by an expert — and we really mean expert. This carefully curated and stylish offering invites you to pursue your passion through online lectures, taught by award-winning chefs, writers and performers. The options are staggering: you can take a photography class with Annie Leibovitz, a tennis lesson with Serena Williams or a course on creativity and leadership with Vogue’s head honcho, Anna Wintour. If you fancy yourself a writer, why not dabble in some storytelling with Good Omens co-creator Neil Gaiman? Prices start at about R1,500, but you can buy a year pass for R3,000, which will give you access to over 80 classes.

The Idler Academy Doing less is definitely more if you follow the ways of Tom Hodgkinson, the journalist and founder of British magazine The Idler. He and his team are proponents of the idea that life needs more fun, time out, moments of contemplation and, well, doing nothing. They argue that this is what makes us calmer, more creative and ultimately more productive. You can read the mag they produce but also, to go full tilt, do one of their online courses. The lectures are wideranging and encompass everything from Hodgkinson’s brief introductions to anarchism and calligraphy to learning to make your own sourdough bread and getting your bee-keeping game on. The FM’s personal favourite is the wonderful psychotherapist and expert on the history of philosophy, Mark Vernon, who will clue you up on Romantic philosophy and the likes of Descartes, Bacon, Rousseau and Wordsworth. He’s a calming tonic in times like this.

Udemy This is one of the biggest e-learning sites in the world. It offers more than 100,000 online courses to 30-million students in over 50 different languages. Courses start at about R160 and cover a huge variety of topics. From “MBA in a Box: Business Lessons from a CEO” and “Get Wine Smart” to “The Coloured Pencil Drawing Course” and “Guitar Masterclass”. If you feel you have a skill to share, why not become one of Udemy’s instructors and create an online video course yourself? Mad skills with the ukulele or recorder? Now is your time to shine. udemy.com

GetSmarter This site gives you the option of

learning online with one of the world’s leading universities. The aim is for you to add to your skills set and advance your career with a relevant short course. MIT, Harvard and Cambridge offer courses on the platform, and the enrolment criteria, duration and price vary according to the course you choose. The University of Cape Town offers a number of courses on GetSmarter, including one on digital marketing suitable for business owners who are looking to boost their brand’s online presence. getsmarter.com

Tekkie Uni Trying to keep the kids entertained while schools are shut is quite a task. Tekkie Uni focuses on educating children and getting them prepped for the digital future. This platform believes in the importance of a teacher’s role and the support of a small group, and so the courses aren’t done through online videos but rather in a real-time class setting. The lessons are suitable for eightto 18-year-olds and the themes relate to app development, robotics and — for the future vloggers — a module on how to create artistic and professional YouTube videos. x tekkieuni.com

Jo Buitendach

masterclass.com

April 9 - April 15, 2020

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a moveable feast by Fred Khumalo

NOW FOR A PARANOIA PANDEMIC We’re seeing a reprise of the stigma once associated with HIV/Aids — now it affects those in the townships with Covid-19

@fredkhumalo

Gallo Images/AFP/Phill Magakoe

ast week I expressed fears over the eventuality of someone testing positive in one of our overcrowded neighbourhoods. My major concern was that in the cheek-by-jowl conditions in which the majority of South Africans live, enforcing social distancing is a major challenge. As a result, the virus could spread quickly. The rigorous testing that has taken place in some shacklands has indeed shown how fast the virus is now spreading. Testing is confirming that the virus is more widespread than was initially feared. In overcrowded conditions it might find an ideal breeding ground. The confirmation of Covid-19 cases in poorer neighbourhoods has had an unexpected outcome. The stigma that once attached to HIV/Aids patients has reared its ugly head — this time the victims are people who have tested

The empty streets and abandoned malls that I witnessed last week came to me in unbidden cinematic flashes. I didn’t want to go out 60

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April 9 - April 15, 2020

positive for the coronavirus. In Khayelitsha, Cape Town’s largest township, a woman who tested positive was threatened with violence as rumours proliferated that she’d been paid to spread the virus. The theory is that Covid-19 is a disease of rich white people, which should have remained in the predominantly white areas. When whites realised that impoverished black communities remained largely unscathed by the virus, they paid some blacks to go and spread infection in the townships and shacklands. Crazy, right? It reminds one of those days when Aids was dismissed as an ailment that afflicted only gay people, a theory that led to gay people being attacked or ostracised. Conspiracy theories get deadlier when they sprout in the middle of a crisis. My fear is that the stigma that attaches to Covid-19 will drive people who feel sick underground, making

them unwilling to be tested. They might choose to remain ignorant of their status because the truth would bring them misery. Having said that, I must commend health minister Zweli Mkhize and his team for the sterling work that they have done thus far. Mkhize has been more decisive than the likes of Donald Trump, who dithers even as thousands of Americans succumb to the scourge. After staying indoors for a week, I ventured out on Sunday to replenish some of our essentials. It took me a while to muster the courage to actually leave the house. The empty streets and abandoned malls that I witnessed last week came to me in unbidden cinematic flashes. I didn’t want to go out into Stephen King land. At the last minute, with just two hours before shops closed, I finally got into the car to go to Makro in Woodmead. The queue to get in was intimidating, so I drove to the nearby Woodmead Mall. The queue at Pick n Pay was even longer. I shrugged and stood in line. Apart from Pick n Pay, Dis-Chem and Woolies, the mall was completely shut. I don’t know what I was expecting, but it still shocked me. There was a noticeable police presence. After 30 minutes of standing in line, I finally made it to the front where a security guard gave me a squirt of hand sanitiser. Inside, the store was almost empty, which told me it is taking social distancing seriously. Impressive. I rushed to fill my trolley with things we’d run out of: 10 loaves of bread, four trays of eggs, milk. Last week, many of the shops I went to did not have eggs. Canned food has also become scarce. Thankfully, fresh fruit and veggies are still in abundance. So I piled my trolley with fresh supplies. I couldn’t find a cake for my son who turned 16 on Sunday. So I bought baking ingredients. “Birthday cakes don’t fall under essential services, my boy,” I told him when I got home. He was not impressed, but he understood. x

life memes

Laugh or youâ&#x20AC;&#x2122;ll cry In the face of adversity and, well, the gigantic disaster of Covid-19, people sure get clever. And amusing. Hereâ&#x20AC;&#x2122;s a round-up of the best local and international examples of fighting the devastating flu with the funny WhatsApp jokes, tweets and memes included. Sarah Buitendach

April 9 - April 15, 2020

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crossword Cryptic No 70 ~12`3`4`5`6`~ 7~`~`~`~`~`~8 9``~0```````` `~~~`~`~`~`~` -`=``~q`````` `~`~~~`~`~`~` w```e`~r````` `~`~`~t~~~`~` y``````~u```` `~`~`~`~`~~~` i````````~o`` `~`~`~`~`~`~` ~p``````````~

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1 News of how the squadron is flying (11) 9 He shows the beginnings of indiscipline more puckishly (3) 10 Not specifically what gives character to the reunion (9) 11 Here’s the giant — beat it inside! (5) 13 As stupid as one having one over the eight! (7) 14 Give logical thought to a cause (6) 16 One who corners the fisherman? (6) 18 See 3 Down 19 Change seats to get this advantage (5) 20 Smash into a tree — you need to find your bearings (9) 21 It’s indispensable to any inspiration (3) 22 The kind of right that can’t be transferred to foreigners? (11)

DOWN 2 A downy covering needed for a short sleep (3) 3 & 18 Ac. A worker associated with manuals and footnotes! (5-7) 4 Your humble servant? (6) 5 The strain caused by doing the twist (7) 6 The old file showing fuel-producing areas

SCRIBBLE PAD

ACROSS

April 9 - April 15, 2020

(3-6) 7 Photograph album? (7-4) 8 Electric ones work by an arrangement of pretty wires (11) 12 The passing on of ideas — do it in art for a change (9) 15 This shows the sequence taken from a word in a lexicon (7) 17 20 Ac without a tie is still decorative (6) 19 A rough acre used for betel-nut (5) 21 This is used for boring everybody, we hear (3)

SOLUTION No 69 Across: 1 Adds; 3 Apoplexy; 9 Magneto; 10 Enter; 11 Glass of water; 13 Talent; 15 Casted; 17 Danger signal; 20 China; 21 Tangent; 22 Engraver; 23 Espy.

Down: 1 Almighty; 2 Dogma; 4 Proofs; 5 Preparations; 6 Entreat; 7 Yard; 8 Persona grata; 12 Idolatry; 14 Leaving; 16 Writhe; 18 Needs; 19 Ache.

backstory JONATHAN ROBINSON Founder: Bean There

What’s your one top tip for doing a deal? Make sure it’s fair. What was your first job? My first part-time job was at a pharmacy in Rosebank, where I sold everything from vitamins to feather dusters. My first real job was at IBM — I was hired out of Wits on its graduate programme. How much was your first pay cheque, and how did you spend it? R4,000, and given that I got married at the end of my first year of work, I suspect I saved it towards the deposit on our first house. What is the one thing you wish somebody had told you when you were starting out? Whatever you are planning is going to take longer and cost more than you ever imagined. And the importance of cash flow. One of my favourite quotes is “Turnover is vanity, profit is sanity, and cash flow is reality”. What is your biggest regret? That I didn’t start Bean There earlier. 63

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April 9 - April 15, 2020

How are you coping with Covid-19? We are hustling and praying! Concentrating on the retail aspects of our business, our own online store, and then a massive push through our retailers (Dis-Chem, Pick n Pay, Spar, Takealot, Hirsch’s, Cape Coffee Beans). What’s the most interesting thing about you that people don’t know? I prefer unconventional adventures, from running the 100km Skyrun in the Witteberg mountains, to climbing the Nyiragongo active volcano in the Democratic Republic of Congo. What has been your worst purchase? My wife and I once used “rock, paper, scissors” to decide to buy holiday timeshare. We have since decided not to use that process for big decisions! What is the one investment you wish you had made, or made earlier? I definitely wish I had bought some more forward cover the past few months; the exchange rate is killing me!

What is something you would tell your younger self that would impress him? I got the girl! I married the most exceptional woman, Nicole Robinson. Was there ever a point at which you wanted to trade it all in for a different career? And if so, what would that career be? I have the most incredible job — I get to create meaningful employment in SA. I also have the unique privilege of being able to work with small-scale African farmers, and seeing the impact direct fair trade can make. If you consider how many business relationships, first dates, and friendships have been formed over a cup of coffee … I would certainly not trade! If you were President Cyril Ramaphosa, what would you change, or do, tomorrow? I wouldn’t want to be the president right now, but if I were, I would ensure that the processes to enable cash to flow to the most marginalised in SA are efficient and switched on immediately. April 9 - April 15, 2020

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as if

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investment

www.menar.com @menarsocial

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in sa despite

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