EXCLUSIVE: how SA Why populism Endgame nears for Best of 2018: books,

firms dodge R8bn in tax P26 caught fire in SA P30 Congo’s Kabila P34 series, podcasts P55

www.financialmail.co.za
December 20 - December 26 2018
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SA’s TOP NEWSMAKERS 2018

Conquest V.H.P.
financialmail.co.za
December 20 - December 26, 2018 contents
9 26 39 55
fox features money&investing life

‘Apolitical’ tax Shifting profits Wrecking ball Memorable

boss wanted offshore hits home reads of 2018

cover story

REG
Pic ULHere
credit ARS 16 Gimme 41 Global Markets
20
4 Editorials 17 Profile 42 Alexander Forbes
5 Editor’s Note 18 Numbers 43 Coal
Public
en00
6 At Home & Abroad 44 Peregrine Holdings
8
18
Between the Chains
Boardroom Tails
FEATURES
20 Newsmaker of the Year
45
48
Abagold
Shop Talk
emy
38 In Good Faith 26 Tax Avoidance 48 Checkout Counter
62 Backstory 28 Zuma’s Legal Fees 49 Investor’s Notebook EXCLUSIVE: how SA
firms dodge R8bn in tax P26
Why populism
caught fire in SA P30
Endgame nears for
Congo’s Kabila P34
Best of 2018: books,
series, podcasts P55

30 Populism 50 Analyse This

www.financialmail.co.za

FM FOX 32 Start-ups 51 Economic Indicators

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9 Sars After Moyane 34 DRC Elections 52 JSE Top Stocks

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11 Dinner Party Intel MEDIA & ADVERTISING
12 Diamonds & Dogs 36 AdFocus Awards FM LIFE
facebook.com/
12 Hot Property 55 Books financialmail
14 AI and Data Protection MONEY & INVESTING 57 Inbox
SA’s TOP NEWSMAKERS 2018
15 Pattern Recognition 39 Construction 58 Outbox
16 Naspers 41 Market Watch 60 A Moveable Feast @financialmail Cover: Shaun Uthum

December 20 - December 26, 2018 . financialmail.co.za 3

 editorials

DIRE TIMES FOR SA’S

LARGEST RETAILER

A
few weeks ago, the FM report -
ed that Edcon, an iconic SA
held more than 50% of the sector.
Disturbingly, there aren’t too man y specifics
THE
retail brand that began life in
1929, was facing an imminent
on the turnaround plan. T here are promises to
close some stores and im prove trading densities POSER
cash crunch. This weekend,
news emerged that Edcon had
written to its landlords, asking for a two-year
(sales per metre), get more stock through its tills,
expand its financial servi ces side (credit and
insurance, primarily) and reduce IT costs.
FOR 2019
“rent ho liday” of 41% for all its 1,350 stores. There’s nothing ingenious in that, though. And

I
The reality may be less dramati c than the it’s one thing to put those g oals on a PowerPoint t has been a qui et December at the
“Edcon crashes” he a d l i nesuggested,
s partly presentation, another to make it happen. Union Buildings. No finance minis-
because its stores are still open and trading. B ut Still, the letter to landlords c ontains some ters have been fired, no more credit
there’s no denying that these are dire times f or interesting revelations. downgrades have assailed the c ountry.
SA’s largest clothing retailer. First, it says that since March, advisory firm You’d almost think things are g oing in the
That’s not surprising. Last month, CE O Grant Rothschild & Co has been trying to sell E dcon, but right direction.
Pattison admitted to the FM that ne w funding was has found no takers. It adds that unless there is a The good news is that if all the di ce fall
needed. “The current process we’re under is further “i nt e r v e nt”,ioliquidation
n is “highly likely”. on the right numbers, then SA is actually
looking for shareholders, new and old, to inject Fortunately, Pattison seems to have a plan, likely in a prime spot f or a revival. The only
new capital into the business,” he s aid. to be announced in the next few days, to prevent thing is, the c onsensus is that global
Now, a letter dated D ecember 11 and sent to that. Which is just as well, c onsidering the growth will slow slightly next year.
Edcon’s landlords spells out details of how this 40,000 employees who would be aff ected. Then, it’s about where those di ce land.
new “restructuring plan” will work. Of course, Pattison Should Eskom’s situation deteriorate, or
What is apparently on the table is that the hasn’t helped himself by SA fail to keep a tight rein on the land
r et a i le rexisting
’s funders would convert R9bn of repeatedly bungling the issue, or Moody’s junk SA’s sovereign
their debt into equity, while injecting another communications around rating, the economy will take a hit. B ut if
R700m. Then, the Public Investment Corp will Edco n . that doesn’t happen, and President C yril
inject another R1.2bn into Edcon. He denounces the Ramaphosa gets a solid el ection victory
123RF/Beata Kraus

For this to happen, the lenders ha ve stipulated reports as “misleading ”, for the ANC and can im plement sweeping
that Edcon’s 31 key landlords (like Hyprop and without saying exactly changes to his cabinet and ac celerate pol-
Growthpoint) must agree to the two- year “rent what was wrong. At the icy reform, investors will believe they can
holiday”. This would equate to R1.2bn worth of same time, he admits that bank on SA again.
support, for which Edcon plans to give the land- when asked to comment Either way, expect economic activity
lords a 5% stake. by the Sunday Times, he declined. in SA to remain m uted for at least the
It’s a tough call f or the landlords, especially There has been a c onsistent pattern of refusing next six months, based purel y on domes-
since Edcon plans to sh ut a number of stores to comment, then blaming the media f or pub- tic factors. Then we’ll have to see what
until 2022. But if they reject this deal, E dcon lishing what happened, when greater introspec - happens in an external environment.
could end up defaulting on leases an yway. tion might have been the wiser approach. If the US Fed increases interest rates
The bigger issue is whether bailing out E dcon Unfortunately, it goes hand in hand with by more than expected, the rand c ould
will create a stronger retailer able to c ompete, or Edcon’s years of displaying a profound lack of take a hit, SA interest rates c ould rise and
whether it will be akin to an S AA bailout — where respect for customers and, it seems, staff. the economy could tip into a rec ession.
the money vanishes up a chimne y, with no value Hopefully, a much stronger Edcon will emerge But, fortunately, the probability of an
created. It’s a tough call, sinc e Edcon has been from the ashes, one that can restore the prin - imminent US or SA recession is low.
shrinking every year. Since 2012, it has lost 22% ciples and market position it once held, selling Which means SA could have a lot more
of its clothing and footwear market share; it onc e things that people actually want to buy. x to smile about in 2019. x

Editorial Subeditors: Dave Landau (Chief), Editorial tel: Johannesburg (011) General number: (011)
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4 financialmail.co.za . December 20 - December 26, 2018

 editor’s note by Rob Rose
123RF/Thongchai Muelae
TELKOM’S
SHORT STRAW
For reasons yet to be properly
explained, Telkom froze payments to
a small Pretoria supplier — and the
owner sold his home to stay afloat
@robrose_za
roser@fm.co.za
I
f 2018 has b rought home one b rutal truth, it’s
that the behavioural gap between the pri vate
sector and public sector isn’t as vast as peo -
ple used to think. C orruption? Sure, you can
find that in Nkandla, but you can just as eas -
ily find it in S teinhoff’s accounts. Lying liars?
Again, you can pi ck Malusi Gigaba or Bathabile Dlamini,
or you could look at the KPM G accountants who “audit -
ed” VBS Mutual Bank.
Another charge is routinely levelled at the govern-
ment: refusing to pay what it owes, and stom ping on
small businesses in the proc ess.
Again, it isn’t just the g overnment doing this. Take
Telkom, which, court papers allege, folded its arms and
refused to pay the final ch unk of a R41.2m c ontract it
struck with Pretoria business owner N ico Oosthuizen.
Telkom apparently still owes more than R6m.
Oosthuizen has been around the block, ha ving begun
his career 48 years ag o as a techni cal support engineer
at Control Data Corp. But his fortunes took a turn f or the
worse in July 2016, when his c ompany NetXcom ICT
Solutions did a deal with T elkom to provide h ardware
It’s not as if and software to manage bandwidth use. The SA Police
Telkom did Service (SAPS) needed the tech, so it ask ed Telkom,
anything — it which subcontracted to NetXcom.
subcontracted For a while, all went well. N etXcom provided the ser -
the actual vice, and Telkom paid up. Then the cheques dri ed up.
work and Oo sthu izen’s lawyers wrote to Telkom, asking what had
added h a p p e neBut,
d . they say, Telkom ignored them.
on a 37% The failure to pay in full was a blow to O osthuizen,
mark-up whose business took a di ve. “I had to sell m y house, as
well as a property I owned at the V aal Dam, to keep the
company afloat. When you get a big opportunity like this,
it affects you badly when they don’t pay.”
Noma Faku, Telkom’s spokesperson, says that as a
matter of principle the company “does not withhold pa y-
ment to its vendors” and even has preferential payment
terms for small suppliers. But Faku says last year Telkom
conducted a “supplier review”, which led to “c ertain
a c tio n s i”ncluding “the withholding of payments where
vendors were suspected to be in b reach of contractual or
legal provisions”.
Quite what Telkom is saying, she didn’t clarify. Asked
about the NetXcom case, Faku said she “is not in a posi -
tion to respond” given the legal action.
But there is another curi ous dimension to this story.
Within months of O osthuizen’s company being appointed,
Telkom hired another c ompany called AppCentrix to pro-
vide similar services. As Daily Maverick put it a f ew
weeks ago, the R497m c ontract awarded to AppCentrix
was “opaque and apparently convoluted” and, rather
alarmingly, “did not go out to tender” as it should have.
Bloomberg reported that this meant T elkom was billing
the police “for two contracts that cover virtually the
same work”.
AppCentrix CEO Graeme Allcock denies this: “I find it
quite funny. What we do is not related in an y form or
fashion to what the other subcontractors do.”
And he says that when it c omes to AppCentrix’s con-
tract with Telkom, everything was above board.
Either way, the Hawks are now investigating a whole
range of Telkom projects, including the A ppCentrix deal.
Allcock welcomes this probe: “We’re very excited to have
this investigation happen, because we’re a small c ompany
and we’ve been dragged through the m ud on this.”
So did Telkom, alerted to anomali es, freeze up and cut
payments to all suppliers, damn the co nsequence s?
Perhaps. But what infuriates Oosthuizen most is that
Telkom has been paid f or the work by the police, yet has
not paid this money over to the subc ontractors. “It’s not
as if Telkom did anything anyway. It subcontracted the
actual work, invoiced the SAPS every month and added
on a 37% mark-up,” he says.
The courts haven’t been much help either. O osthuizen
launched his legal action against Telkom in January, but
now it is only due to be heard in the high c ourt in Pretoria
in January 2020.
You could argue that it’s understandab le that Telkom,
as a clunky former state-owned monopoly, is prone to
bureaucratic tendencies. It is still 40.5% owned by the
government, after all. But under CEO Sipho Maseko it has
shown a desire to c ompete in the real c ommercial world.
If so, it needs to do m uch, much better.
Not many small companies can afford to absorb the
losses when a blundering c orporation decides it won’t
pay. For Oosthuizen, it’s also a matter of principle. “S ome-
body else would have thrown in the towel a l ong time
ago, but I’m not willing to. I f I have to live on the beach to
make this case happen, I’ll li ve on the beach. Telkom has
to pay for this,” he says. x
December 20 - December 26, 2018 . financialmail.co.za 5
 at home & abroad by Justice Malala
LET US COUNT THE WAYS
Even with all the hard stuff SA is now a better place. The rest,
from Brexit Britain to Trump’s America, may yet follow suit
@justicemalala
Y
ou couldn’t make 2018
up. We started the year
with Jacob Zuma look-
ing and sounding like
he was going mad. And
we are ending it with
the man who moonligh ts as the pres -
ident of the US — when he takes a
break from playing golf and tweeting
— seemingly going cuckoo thanks to
his legal troubles.
In January Zuma’s “radical eco-
nomic transformation” (RET) candi-
date, Nkosazana Dlamini-Zuma, had
just been handed a h umiliating defeat
at the ANC’s Nasrec conference in
De ce m b e r .
Everything changed for Zuma, the
erstwhile strongman of the party.
The Cyril Ramaphosa brigade was
baying for his blood. The most vocal of
the RET advocates were hiding under
their beds.
Even Bathabile Dlamini, who mas-
querades as a “le ader” of the ANC
Women’s L eague a nd R ET, w as q uiet
as a mouse. Zuma — alone and defeat-
We end the ed — seemed to be on the verg e of a
year with br e a do
k wn.
Trump Remember that phantasmagoric
reflecting interview with the SABC on Valen-
on the tine’s Day? He claimed the AN C
possibility leadership had not provided him with
that he reasons why he should resign as the
could be president of the c ountry.
facing jail “I need to be furnished [ with rea-
time sons] on what I ha ve done. Unfortu-
6 financialmail.co.za . December 20 - December 26, 2018
123RF/ Tomas Griger
nately, no-one has been able to pro -
vide what it is that I ha ve done,” he
fulminated in response to the last of
several visits he had rec eived from his
comrades in the AN C asking him to
pack up and leave the creature c om-
forts of the Union Buildings.
South Africans were aghast. He
didn’t know what he had done ?
Let us count the ways, many said,
donning their Elizabeth Barrett
Browning caps.
There is the b it about sleeping with
and impregnating your fri ends’ daugh-
ters. There is the b it about enriching
your family and friends through gov-
ernment contracts. There is the b it
about the country being run by the
Gupta family. There is the b it about
unemployment, low growth, growing
government debt and of c ourse the
institutions (the SA Revenue Service,
and so on) that have been brought to
their knees. There was the b it about
the nuclear deal that would bankrupt
the country.
“Where should we start when
counting your misdemeanours?” c rie d
the Twitterati.
On the evening of February 14 this
year Zuma finally, finally vacated the
presidency. A sigh of reli ef went up
across the country.
Those who had never felt any han-
kering for organised religion suddenly
found themselves wanting to mouth a
prayer – or two.
SA has many, many problems.
Economic growth is still rubb ish.
Inequality is widening. Poverty is
endemic. All that said, S A is a m uch
better, far more hopeful plac e than it
was under Zuma, any day. The only
regret is that we, and the AN C, took so
long to get rid of a man that some of
us were warning the c ountry about
way back in the earl y 2000s. Better
late than never, I guess.
We end the year with D onald
Trump — a man who has spent the
past two years bullying, ranting, flip-
flopping, alienating, dividing,
mansplaining and offending virtually
everyone sensible in the world —
reflecting on the very real possib ility
that he could be facing f ormal, well,
jail time.
Tr ump ’s lawyer Michael Cohen
is going to jail — in part for making a
hush-money payment of $130,000
to porn star Stormy Daniels, with
whom the US president alleg edly had
an affair. Trump is now alleged to
have been in the room when the
payments to Daniels and another
woman were made.
Trump won’t go to jail while he is
president, of course. The US j ustice
department has a long-standing policy
that a sitting president cannot be
c h a r ge d .
However, the minute that Trump
leaves the White House the very same
justice department can, and most lik e-
ly will, charge him.
Trump’s current term ends in 2021.
The only way he can put off that date
with destiny is to win the presidential
election in 2020.
Otherwise he is toast.
What a year, hey? Even with all the
hard stuff, though, SA is a better plac e.
The world — from Theresa May’s
Brexit Britain to Trump’s America —
may yet follow and write a positi ve
chapter. We must hope.
Merry Christmas. x
 between the chains by Sikonathi Mantshantsha

THE VOTING CONUNDRUM

I
n about 25 weeks, all citizens will ha ve to make
a choice about who should g overn the affairs of
our nation for the next five years. This is a ritual
in which I have participated with religious reg-
@SikonathiM ularity since I came of voting ag e. It has always
mantshantshas@fm.co.za been easy to make a decision about who to vote
for. In that time, I ha ve voted for three political parties.
But choosing who to vote f or has never been as diffi cult
as it is today. While all sorts of parti es are punting them -
selves as the best choi ce, finding leaders and poli cies worthy
of my vote has never been this tough.
Let’s start with what would seem to be the natural home
of my vote — the ANC. This party has, on paper, the best
policies to advance SA. The National Development Plan is a
good but imperfect start. Many of the government policies
that have been developed over the past 25 years ha ve had a
positive net effect on the lives of the overwhelming majority.
The most important of these is the social security network
that takes care of the basi c needs of soci ety’s weakest.
Having grown up in a poor household in the years pre -
ceding democracy and the AN C’s social security interven -
tions, the difference is unmistakable. Just one example: this
column is being typed in the homestead of m y youth, on a
cellphone under a b right electrical light instead of the paraf -
fin lamps (called uf inyafuthi) my grandmother and I reli ed
on back then. These handmade instruments, fashioned out
of an old tin and pi ece of twine, emitted more smok e than
light. My children don’t even know what f inyafuthilo o k s
like. Neither are the children of m y unemployed neighbours
I revolt at the as hungry as we were.
thought that a At the professional level, government intervention has
vote for the forced the private sector to open opportuniti es to black peo -
ANC would be ple, which has expanded the black middle class. T he econ-
a vote for omy has broadened enormously over the past 24 years of
Gigaba, Zwane democracy and the tax base has widened, yi elding more
and those who money to spend on ed ucation and other social g oods.
looted Eskom Taking these positive strides into c onsideration, overall
and SAA the ANC would be the most deserving of m y vote, par-
ticularly under Cyril Ramaphosa. But my whole being rebels
at the thought that it would be a vote f or Bathabile Dlamini,
Nomvula Mokonyane, Malusi Gigaba, Mosebenzi Zwane and
the people who looted PetroSA, Eskom and SAA.
Next candidate for my vote is the D A, whose electoral
fortunes have been boosted by the ANC’s inefficiency and
corruption under Jacob Zuma. But the DA seems hellbent on
destroying itself. The combination of its m uddy stance on
key policies, such as B EE and land reform, together with its
treatment of black leaders like Lindiwe Mazibuko and Patri-
cia de Lille, makes one wonder if it can e ver truly be a
vehicle to advance the aspirations of the patri otic black mid-
dle class. Coupled with the naked ambition of people like
Natasha Mazzone, and the hollow but preachy leadership of
Mmusi Maimane, the party is no l onger worthy of my vote.
Not the gumboots, please
I have not for a second contemplated giving my vote to t he
thugs who wear gumboots and overalls in parliament. They
have reduced a key institution of our democracy to a sourc e
of embarrassment. The corruption of the AN C under Zuma
would be like a practice for the real deal — just much bigger,
more crass and more b razen. Ask the Limpopo munici-
palities that did business with O n-Point Engineering.
Who else? The less said about C ope the better, and the
IFP serves no purpose in parliament other than earning
salaries for the cantankerous chief and his shrinking impi.
Bantu Holomisa is a good man, and has served the peo -
ple with honour and dedi cation. Ideally you should a lways
have him on your side. B ut there is no diff erence between
Holomisa and the UDM, and without Holomisa there is no
UDM. The UDM lacks both plan and strateg y.
Enter Hlaudi Motsoeneng and his Content party. Thieves
and narcissists would feel at home here. M otsoeneng’s party
and the EFF should merg e — they could call it The Grand
Coalition for The Advancement of The Lootists. Gigaba could
be asked to lead the c oalition while Motsoeneng is under-
going a psychiatric evaluation. A loota! x

good week bad week

In a jittery world in which nobody wants to commit to anything more long
term than lunch, Naspers CEO Bob van Dijk has splashed out $540m
(R7.7bn), alongside Canada’s state pension fund,
in Indian education start-up Byju’s. In a nutshell,
Byju’s offers tools for schoolchildren in the
country. Van Dijk has long been an advocate of
investing in India which, at last count, sported a
7.1% GDP growth rate. It’s also a good alternative
punt to China, where Naspers still owns 31% of
tech company Tencent.
So, not the best Christmas gift for much-loved TV host-turned-media boss
Khanyi Dhlomo. She has announced that her business, Ndalo Media, will
close in January 2019. This comes after Ndalo’s
loss of the SAA inflight magazine contract, gigantic
outstanding printing bills and late staff payment. It
also means the end of magazine titles Destiny,
Destiny Man, Elle and Elle Decoration. It’s a
particularly difficult moment for the many staff
members who are now out of work. The digital
dark lord claims another victim. x

8 financialmail.co.za . December 20 - December 26, 2018

 Digging up unusual, interesting tidbits in and around the business scene
SARS AFTER MOYANE
ý The SA Revenue Service (Sars)
commission of inquiry has rec om-
‘Apolitical’ tax mended a host of measures to
ensure that the tax ag ency is never
again “seized” by a leader who
“lacked integrity”, like axed com-
boss wanted missioner Tom Moyane.
The commission, chaired by
retired judge Robert Nugent, sub-
Four people are said to be frontrunners, but mitted its final report to President
an official denies this, insisting Nugent’s Cyril Ramaphosa last week.
guidelines will be followed strictly It recommends far-reaching
legislative and governance changes
— and these proposals are to f orm
Natasha Marrian marriann@businesslive.co.za the basis of the proc ess that has
now started to appoint a suc cessor
to Moyane.
Judge Robert Nugent: The post of c ommissioner was
Submitted his final report to advertised over the weekend and
President Cyril Ramaphosa
contenders will be shortlisted in
last week
Sunday Times/Simphiwe Nkwali January. Nu ge nt ’s recommenda-
tions aim to ensure a transparent
process for the appointment of the
new commissioner who, he says,
should be “a p o l it ic a l ”.
The FM understands that the
names of at l east four individuals to
replace Moyane have been raised:
former auditor-general Terence
Nombembe; former Sars senior
executive Nathaniel Mabetwa; for-
mer Sars COO and former Alex-
ander Forbes CEO Edward
Kieswetter; and former Sars
deputy commissioner Ivan Pillay.
But a senior government official
says the stringent guidelines sug-
gested by Nugent for the appoint-
ment leave the race wide open.
What Nugent proposes is the
professionalisation of the appoint -
ment process, to ensure that the
new Sars boss is insulated from
political influence.
“It has become perfectly clear in
the course of this inquiry that
Sars is still plagued b y factional
politicisation and intrigue that
entered Sars with Mr Moyane’s
appointment and it is set still to
plague Sars. Without that politici-
sation being rooted out of S ars,
December 20 - December 26, 2018
there is no prospect of its credi -
bility being restored,” he says in
his r ep o r t .
He adds that S ars under Moy-
ane was a “c at a s t r o ”pbecause
he of
“massive failures of governance”,
coupled with pervasive breaches of
i nt e g r it y ”.
Nugent recommends that the
new commissioner should have
“unblemished integrity”, have the
ability to manage large organisa-
tions — Sars employs 14,000 peo-
ple — and should “not be aligned to
any constituency”.
Two new posts might be cre-
ated to tighten oversight of the
agency: an inspector-general and a
deputy commissioner, to be
appointed by the president.
Nugent also recommends that
the reporting lines of the c ommis-
sioner to the minister of financ e be
strengthened, though he steers
clear of returning responsibility f or
the appointment of the c ommis-
sioner to the National Treasury.
The appointment should instead be
made by the president in c onsul-
tation with the finance minister.
Ramaphosa has a huge task in
making this appointment, as the
new tax commissioner has to
restore the agency to the efficient
unit it once was, before Moyane
brought it to its knees, culminating
in a R100bn hole in revenue col-
le c t io n .
It is unlikely to be an appoint-
ment made lightly, particularly as
the Moyane faction inside and out-
side Sars continues its fightback.
Ra maphos a’s pick will need
steely resolve to withstand an
o n s l au tgfrom
h delinquent taxpay-
ers, organised criminals and pla y-
ers in the illi cit economy, particu-
larly in the tobac co trade, which
benefited from the weakening of
the tax agency.
Sars was among the first insti -
tutions captured through a c on-
. financialmail.co.za 9
certed attack on a number of
fronts, which included state secu -
rity and the tobac co industry in
ANOTHER WEEK
cahoots with powerful politicians.
The fallout of the capture of S ars
continues to claim vi ctims. Bain &
Co, the consultancy at the heart of
the Sars restructuring which neu-
tralised its capacity, “parted wa ys”
with its head of SA operations, Vit-
torio Massone, in November. Bain
has paid back the mone y it earned
from the illegal c ontract it won
from Sars, amounting to R 217m.
Nugent has recommended that
fraud charges be brought against
Bain over the dodg y contract.
IT consultancy Ga rtner was not
spared either.
The commis-
sion found that The post was
Sars paid over advertised
R200m to the over the
firm for work weekend and
which its own contenders
r ep r e s e ntv at
e si will be

AFP/Oli Scarff
described as shortlisted in
“w o r t h le s s ”. January
The Gartner
mess just about crippled S ars’s OUT Manchester United manager José Mourinho was sacked by the club on Tuesday, after Sunday’s
infotech infrastructure, with the defeat at Liverpool. United finally lost patience with a manager who was not adhering to the club’s core
eFiling system at risk of c ollapse in attacking values and who had overseen their worst start to a season for 28 years.
two years if there is no c oncerted
i nt e r v e nt io n .

CHRISTMAS
Moyane’s abrupt halting of the
BY THE NUMBERS

Global population by religion in 2015

decade-long Sars modernisation Billion
p r o g r a m meshortly after he took Christians 2.38
over set the tax ag ency back; Muslims 1.8
senior officials say it will t ake Unafliated 1.2
about R1bn to get it on track again.
Hindus 1.1
Buddhists 0.5
This will be a pri ority for the new 1843 10-million Folk religions 0.4
co m m i s s io ne r . the first commercial Turkeys are cooked in the Other religions 0.1
Nu ge nt’s report also contains Christmas cards, UK every Christmas Jews 0.01
commissioned by civil
far-reaching recommendations servant Henry Cole in
on improving governance and London. One sold for SA retail trade sales
operations at Sars in the medi um
term, including restoring key
£8,469 in 2014
1038 All retailers, monthly (Rbn)
100
units such as the larg e business
centre and the compliance unit,
194,672 the year the Old English
phrase Cristesmæsse
80
The most lights on a
“Christ’s mass”, was
and for Sars to re-establish its Christmas tree, in
first recorded 60
Malmedy, Belgium,
capacity to investigate the illicit 2010 40
economy, especially the illicit
£7m
Dec Dec Dec Dec Dec Dec
tobacco trade. Its capacity to 2010 2011 2012 2013 2014 2015
do so was diminished d uring The most expensively
Mo yane’s tenure. dressed Christmas tree, 37.8-million 50-million copies
Source: FM Research and Stats SA

displayed by the Emirates Natural Christmas trees

Politics poisoned Sars. To
secure government finances, it is
critical that political agendas be
extricated from the agency’s DNA
by appointing a neutral c ommis-
sioner and cleaning out the rem -
nants of Moyane’s project. x
Palace in Abu Dhabi in 2010 sold in the UK each year The bestselling Christmas single ever, Bing
Crosby’s White Christmas, since 1942
1847 4 2
Bohemian Rhapsody by Queen is the only
The christmas cracker, invented by London The most Christmas No 1 hit
sweet shop owner Tom Smith. By 1900, he singles (1963, 1964, 1965 and record to reach the UK Christmas singles
was selling 13-million a year 1967) by The Beatles chart number one twice - in 1975 and 1991

10 financialmail.co.za . December 20 - December 26, 2018


“No-one is in a position to dictate to the Chinese
people what should or should not be done.”
China’s president Xi Jinping, in a speech marking the 40th anniversary of the
opening up of the Chinese economy. “We must ... reform what should and can be
changed [and] not reform what shouldn’t and can’t be changed,” he added.
TRENDING
A basket of worries
SA seems set to once
again miss out on the good
times, only to take the full
hit of the bad times
Tim Cohen
cohent@businesslive.co.za
ý It’s been a rotten year on
global stock markets, and
without Father Christmas
leaving a present under the
tree, they seem likely to end
down for the year. That would
be a particularly bad result f or
SA, which has seen this movi e
for five years now, and 2018
was a particular shocker.
The JSE all share inde x is
heading for a 15% decline f or
the year, and it’s hard to
believe, in the c ontext of
respectable global economic
growth, that this result is actu -
ally around the middl e of the
range globally.
Year to date, markets all
over Europe, including Ger-
many, Italy and France, have
declined by that degree, while
the outliers were the Chinese
indices in Hong Kong and
Shanghai — both got thumped
by more than 20%.
The broadest market indi-
cator in the US, the R ussell
2000 index, is down m uch
more than the S&P and the
Dow, suggesting that smaller,
more US-focused companies
are on the back f oot.
The broadest reason has
123RF/maxicam
been sentiment concerns, but
this picture is punctuated by a
whole basket of worries about
specific issues.
These include US President
Donald Trump’s trade war
with China and the likelihood
of increasing interest rates in
the US, which worries equity
investors about the im pact on
the economy. It also tends to
increase the move towards
bonds, and accelerates the
move away from emerging
m a r kets .
The shockers just kept
coming this year, including the
Brexit mess, the arrest of
Nissan chair Carlos Ghosn and
Goldman Sachs getting caught
up in a h uge Malaysian cor-
ruption scandal, to name a
few. Most recently, it was
reported that Johnson & John-
son knew for years that its
baby powders sometimes
contained asbestos.
Rising interest rates are
supposed to help banks, but
instead, in many countries,
they are hurting. The fear of a
global slowdown is proving
more powerful than the
notional benefits of lower
commodity prices.
The stand-out markets over
the year have been the Brazil-
ian Bovespa and the Indian
Se nsex .Here, the promise of
the new dawn failed to mate-
rialise, and SA seems set to
once again miss out on the
good times, only to take the
full hit of the bad times. x
December 20 - December 26, 2018
DINNER
PARTY INTEL...
The topics you have to be able
to discuss this week
1. Pompeii
evacuation plan
In a move that might have
been useful 2,000-odd years
ago, authorities in Pompeii are
putting in place an evacuation plan in
case Mount Vesuvius erupts again. More than
2,000 people were killed and the city buried
under volcanic ash in the 79BCE eruption. And
while there is thought to be no imminent threat
from the volcano, a recent increase in seismic
activity in the region has raised warning flags,
according to a report in The Guardian. Under
the plan, residents will be evacuated to
Sardinia by boat.
2. Chicken ad in bad taste
SA’s Advertising Regulatory Board has upheld
a complaint against a Chicken Licken ad, the
Legend of Big John, which shows an African
explorer conquering Europe in the 17th century.
The board said colonialism was traumatic for
Africans and was “not open for humorous
exploitation”. The company said the ad, which
shows a young African, Big Mjohnana, leaving
his village in 1650 to conquer his hunger for
adventure, was “tongue in cheek” and intended
to create “pride” among South Africans.
Few on Twitter seemed to take offence.
3. Japan to spend on arms
In a break from the pacifism enshrined in its
US-designed post-World War 2 constitution,
Japan is to ramp up spending on defence,
though this will still be less than 0.9% of its
GDP. The cabinet approved new spending
guidelines this week, said the BBC, in terms of
which Japan will acquire its first aircraft carrier
as well as long-range
cruise missiles. The move
comes in the context of
increasing threats
from North Korea’s
nuclear arsenal and
China’s plan to
dominate the South
China Sea.
. financialmail.co.za 11
DIAMONDS & DOGS BY JAMIE CARR
Anglo American
Trebles all
round
The festive season
seems well and truly
DIAMOND to have arrived over
at Carlton House Ter-
race, with Mark Cutifani’s investor
briefing stopping just short of putting
on the red suit and white beard.
It’s clearly mince pies and trebles
all round for investors who were
brave enough to pile in at the bottom
of the cycle back in J anuary 2016,
when the share pri ce appeared to be
tumbling towards the deck at a ver -
tiginous rate and the onl y question
was just how l ow could it go.
A five-year view paints a rather
different picture, with the pri ce now
back to approximately where it was
before it went into free fall. Y et Cuti-
fani picks five years as the time frame
in which he states they have com-
pletely transformed the quality of the
asset portfolio and the c ompany’s per-
formance as a whol e. This is now a
highly competitive business, with
margins among the best in the ind us-
try, and Cutifani is aiming to add
$3bn-$4bn of incremental annual
earnings before interest, tax, depreci -
ation and amortisation by 2022.
The balance sheet is looking a lot
healthier, with net debt red uced over
the past three years b y $9bn, and
some $2bn of dividends having been
paid to shareholders over the past 18
months. The company is expecting the
next step change in its perf ormance to
be driven by the deployment of its
This is now a FutureSmart Mining technologies and
highly digitalisation, which will transform the
competitive way it mines, proc esses and markets
business, its products.
with margins This is a far cry from the wailing
among the and gnashing of teeth that was heard
best in the three years ago, and it’s been a
industry remarkably strong recovery. x
12 financialmail.co.za . December 20 - December 26, 2018
HOUSE
Cryptocurrencies
A case of balls
to the wall
It was late in 2017
when investors of a
DOG certain age began to
suffer the symptoms
of cryptoglaze. This involved a general
shutdown of the synapses oc casioned
by a lecture from a true beli ever about
why crypto was going to take over the
world, why blockchain was the most
important invention since the wheel
and why fiat currencies were about as
much use as F iat cars from the mid-
1970s. Cryptoglaze was useful
because it allowed the suff erer to bear
the brunt of the lecture while off ering
no more than the oc casional grunt in
return, but while the price of bitcoin
and its more esoteri c compadres con-
tinued to fly, the true beli evers were in
the ascendant.
Until, of course, it crashed, whi ch it
has been doing with remarkable
vigour all year. This is not just the sort
of low-speed fender-bender that you
might see in the more mild-mannered
suburban car park, it’s a balls to the
wall, high-octane Formula One explo-
sion from the era bef ore anybody had
even thought of safety regulations. Bit-
coin has plummeted from not far sh y
of $20,000 to just over $3, 000, and
there’s no sign of an ybody stepping in
to stop the rout.
Commentators such as Nouriel
Roubini have been having a field day,
describing crypto as “the mother and
father of all scams and bubb les”, and
blockchain as “the most over-h yped
and least useful technolog y in human
history”, while predicting that bitcoin
should drop to zero, if not sligh tly
lower, due to the negative environ-
mental effect of mining the c oins.
Whatever else you migh t say about
crypto, it certainly delivers in the
white-knuckle department. x
HOT PROPERTY
THE
WOW
WHERE: Waterfall Country Estate,
Midrand
PRICE: R11.5m
This generously proportioned home in
exclusive Waterfall Country Estate north
of Johannesburg comprises spacious
living areas, four bedrooms, three
bathrooms, a state-of-the-art kitchen,
large pantry, separate scullery, fitted
study and a private guest suite that
opens out onto the patio and pool. It
includes underfloor heating, irrigation,
piped gas and fibre, four garages and
staff quarters.
● Agent: Jawitz Properties
WHERE: Kenilworth Upper, Cape
Town
PRICE: R16.35m
Somerset House, which dates back to
the 18th century and was once home to
Lord Charles Somerset, the first
governor of the Cape, has plenty of
French charm. It has five bedrooms,
two bathrooms and four living areas.
Special features include ornate Victorian
broekie-lace ironwork, a borehole and
water filtration system, a complete
irrigation system and fibre.
● Agent: Greeff Properties
 The Breitling Cinema Squad
Charlize Theron
Brad Pitt
Adam Driver

AIR
NAVITIMER 8

LAND

SEA #SQUADONAMISSION
 AI AND DATA PROTECTION
123RF/phive2015

Integrity by
design
A recent Microsoft event showcased the
wonder of virtually fitting clothes for size and
Claudi Mailovich mailovichc@businesslive.co.za raised broader questions of data safety

ý Imagine trying on your clothes
virtually via a mob ile app before
making the purchase.
Artificial intelligence (AI) will
doubtless soon make this a reality,
allowing you to skip the queues
and cut out the hassl e of returning
stuff, which has become synony-
mous with online shopping.
Matthew Drinkwater, director of
the London College of Fashion’s
Innovation Agency, told a Microsoft
conference in Paris recently that
the agency had conducted a trial
with a luxury scarf designer in
2016 in which clients were able to
try on the scarves virtuall y.
“Are consumers ready to virtu-
ally try products on? In this case it
d id n ’thappen that much,” he
admitted. But what they did do was
try on the scarf virtuall y and then
go out to the retailer to buy one.
“At the moment we can very
accurately scan the fac e, and with-
in the next six to 12 months we
will be able to do that f or the body.
What will this mean f or fashion?”
he asks.
And what will it mean f or per-
sonal data security? What are the
pitfalls of this development and
what is being done to protect c on-
sumers from the misuse of AI?
Enter “ethics and AI” , which
was a theme explored on the same
day that Drinkwater and multiple
industry experts took to the stag e
of the conference at Station F in
Paris, the world’s b iggest business
incubator campus for start-ups.
The amount of data c ollected
through technology is no small
matter, as the c ontroversies over
privacy and the misuse of personal
data by social media giants such as
Facebook has shown.
In Europe the issue is chi efly
governed by the EU G eneral Data
Protection Regulation (GDPR),
which aims to protect EU citizens
from data breaches. The GDPR
crucially extends its powers to
companies processing the data of
any person living in Europe.
In SA, data protection is gov-
erned by the Protection of Personal
Information Act, 2013. Popi, as it is
known, was signed into la w by
then president Jacob Zuma on
November 19 2013, but has yet to
come into force. Most of its pro -
visions will come into effect only
when the information regulator is
fully operational. The draft regula-
tions were published for public
comment in the sec ond half of
2017. The final regulations are yet
to be promulgated.
In terms of data protecti on in an
age of rapid technological growth,
the aim is to ha ve “integrity by
de s ig n ”.
Kavitha Babu, director and
regional attorney for Microsoft in
Europe, says the question should
not be what c omputers can do, but
rather what they should do. The
industry needs to carefully consid-
er the societal issues raised by
sophisticated technology and AI.
“We cannot afford to look at it
with uncritical eyes,” she says,
adding that every ethical issue that
humanity has faced is a potential
ethical issue for a computer.
She outlines six values that AI
has to respect as it augments
human ingenuity — fairness, relia-
bility and safety, privacy and secu-
rity, inclusiveness, transparency
and accountability.

14 financialmail.co.za . December 20 - December 26, 2018

 Navigating the ethical pitfalls
raised by AI will require a “shared
understanding” of the guiding prin -
ciples and developing a common
framework to guide researchers
and developers of next-generation
technologies. Babu says the com-
plexity of AI technologies has
fuelled fears that they might create
unintended outcomes.
In terms of major pri vacy
breaches, Facebook has had an
extremely turbulent year as it fac ed
a huge backlash, especially after
the Cambridge Analytica data
scandal over the misuse of milli ons
of Facebook users’ personal data
for political purposes. At the week-
end the Irish Data Protection Com-
mission announced a probe into
the social media giant f or failing to
report a security b reach to the reg -
ulator within 72 hours, as required
by the GDPR.
Babu says privacy has to be a
business imperative, and that it is a
key pillar of building trust in an y AI
initiative. AI systems had to tak e
into consideration how personal
data engages with the system
“while it is being built”.
“Computers need to remain
accountable to people, so that the
people who actually develop the
technology continue to remain
accountable to users,” she says.
Murray Hunter of the
Right2Know Campaign says that
though SA law addresses the issue,
it requires the watchdog (in the
form of the inf ormation regulator)
to be fully operational.
He says Popi is exactly what SA
needs, as everything would then be
in place for effective regulation.
Until it is, c onsumer protection
laws and the Cybercrimes Bill
afford only limited protection.
Less than six months bef ore
SA’s next election it is also crucial
that the information regulator be
given teeth before voters cast their
ballots, says Hunter, because there
is a growing body of case studi es
of elections having been influenced
by misusing d at a .
In her address at the P aris con-
ference, Babu aptly used the c liché:
with great power c omes great
responsibility. x
The writer’s trip to Paris was sponsored by
Microsoft
PATTERN RECOGNITION BY TOBY SHAPSHAK
Life with or
without screens
Smartphones and social media are closer to ‘crack cocaine
@shapshak than to candy’, but they are the way people communicate now
A
part from the im plo-
sion of our trust in
social media, 2018
will go down as the
year we discovered
just how bad smart -
phones are for us. Even though they
have become an integral part of our
lives, there is a global pushback
against their damaging effects — not
surprisingly, from Silicon Valley itself.
“It’s the height of irony,” former US
secretary of state Hillary Clinton said
at the Discovery leadership summit
last month. “If you go to Silicon Valley,
parents are doing everything they can
to keep their own children off screen
devices because they understand how
addictive these devices are and how
the content on the device becomes an
alternative reality.”
She was talking about a N ew York
Times article in October that high-
lighted this trend: “The people who
are closest to a thing are often the
most wary of it. Technologists know
how phones really work, and many
have decided they don’t want their
own children anywhere near them.”
Two ex-Facebook executives have
decried, respectively, how they helped
create the “bright dings of pseudo-
p leas ure” and how these “do p a m i ne -
driven feedback loops we’ve created
are destroying how society works”.
How do I Clinton and the remorseful e xec-
allow my utives are preaching to the c onverted
child’s with me. Last year I removed F ace-
computer book and Messenger, which are the
skills to grow worst offenders for me. I’ve survived
without him without Facebook on my phone and
becoming my life hasn’t suffered — in fact I have
addicted? spent more time with m y family.
December 20 - December 26, 2018
Perhaps one of the most telling
admissions of the dangers of screens
and the addictive nature of social
media in the New York Times article
came from Athena Chavarria, a former
executive assistant at Facebook and
now at Mark Zuckerberg’s philan-
thropic arm, the Chan Z uckerberg Ini-
tiative. She said: “I am c onvinced the
devil lives in our phones and is
wreaking havoc on our children.” The
former editor of Wired magazine,
Chris Anderson, told the paper: “O n
the scale between candy and crack
cocaine, it’s closer to crack c ocaine.”
Several studies have bemoaned
how bad social media is f or young
p e o p ’slemental health, including one
by the Royal Society for Public Health,
which said it’s “more addictive than
cigarettes and alcohol”. Last December
Facebook conceded people “r ep o r t
feeling worse afterward”. Nobody calls
it “dep r e s s iobut
n ” that is what these
dopamine-fuelled hits are producing.
But smartphones and social media
aren’t going away. In a while I will
have to tackle how my 18-month-old
son is exposed to screens.
Gaming is the new way kids and
teenagers spend their leisure time and
i nterac twith their peers. I believe
computer-gaming skills will define the
next generation of interfaces, especial-
ly in virtual reality.
How do I all ow my son’s computer
skills to develop without him bec om-
ing addicted? I’m not the onl y parent
facing this dilemma. Any suggestions
are welcome but, meanwhile, we’re
totally avoiding screen time. x
Shapshak is editor-in-chief and publisher of
Stuff magazine (stuff.co.za)
. financialmail.co.za 15
NASPERS
Taking a positive step
A2X listing welcomed
but market still awaits
more detail on how
the tech giant plans
to reduce its
valuation
discount
Nick Hedley
hedleyn@bdfm.co.za
ý It’s not quite the b ig structural rem-
edy that many investors are hoping
for, but it’s still g ood news that
Naspers shares will find a sec ond
home on SA’s alternative
stock exchange, A2X Mar-
kets, before the end of
2018. The internet
behemoth said on
Tuesday that its shares
would start trading
Kevin Brady: Exchange has
now reached ‘critical mass’
on A2X on December 27. The com-
pany will keep its primary listing on
the JSE. Analysts (and Naspers) say
this move will do littl e to drive down
the group’s hefty valuation discount
relative to Tencent.
But it could improve liquidity
and, overall, it’s a win f or SA’s capital
m a r kets .
A2X CEO Kevin Brady says his
exchange has now reached “c r it ic a l
mass” as 15 companies, including
some heavyweights, have listed.
Successfully courting Standard
Bank and then Naspers — Africa’s
largest public company, with a market
capitalisation of R1.3-trillion — is a big
deal for A2X.
For the time being, sa ys Brady, for-
eign investors are still “more rec ep-
tive” to secondary exchanges because
they’re familiar with the c oncept.
Naspers CEO Bob van Dijk says
A2X and other similar peers are using
technology to reduce trading costs and
lift market transparency.
“As one of the world’s l eading
technology investors we understand
the value of technolog y and are
pleased to support these eff orts by
also listing on A 2X … we believe our
shareholders will appreciate the
added choice of trading venues,” Van
Dijk says.
And there’s nothing to lose.
Naspers won’t have to fork out any
cash for its secondary listing and
there’s no additional regulatory com-
pliance required.
However, the market is still waiting
for more details about the larg er
“structural options” Naspers is work-
ing on to red uce its valuation discount.
Some have pressed the group to
seek a secondary listing abroad, while
others want it to unbundl e its main
asset, Tencent.
One structural measure in the
pipeline is the unbundling of
MultiChoice Group, the pay-TV
operator that funded Naspers’s Ten-
cent investment and its newer
e-commerce ventures. That should
happen in the first half of 2019 .
A Naspers spokesperson says the
secondary listing on A 2X is just anoth -
er “shareholder-friendly step that we
have taken which is likely to be
viewed positively”. x

GIMME Aaptiv workout app Cool factor ★★★/5 Usability ★★★★/5 Value for money ★★★/5

Fitness trainer on tap
ý Get a jump-start on those work -
out resolutions before the new year
hits with Aaptiv fitness app. It’s
audio based, and available for iOS
and Android users.
The app is well established in
the US, where it launched in 2016,
and was last month made a vailable
to 20 more c ountries, including the
UK, Australia, Singapore and SA.
The offering is simple but smart:
audio-guided workouts you can do
at home, while travelling, or in the
gym. Some of the workouts require
access to equipment such as a
treadmill, elliptical trainer or
ergometer (rowing machine), but
many don’t, and there are over
2,500 workouts to choose from.
They cover a variety of activity
categories, such as running, sta -
tionary/indoor cycling, yoga and
strength training, and Aaptiv
promises to add fresh c ontent
w e e k ly .
On opening the app you will be
asked to state a g oal for yourself
and provide some basi c informa-
tion, including ranking your le vel
(from beginner to advanced).
The app then suggests sessions
or courses for you (a course is a
series of sessions presented by one
trainer, often working towards a
specific goal, such as running 5km ).
The trainer will guide you through
each session, even telling you
when to pick up the pac e or
change position. There is a layer of
background music too, to give you
that extra oomph or exercise-class
fe e l ign.
These are real trainers with their own
distinct presentation and motivation
s t y le sit ;is not an automated voice-
prompt feature. This means that it f eels
personal and directed, even though you
know you’re listening to a pre-rec ord-
ed session.
The only downside is that when
you’re following along with something
mat-based, like yoga or floor stretch -
ing, you’ve got no visual means of
reference against which to compare
your form.
The app has an attracti ve, clear
interface that is uncluttered and
easy to navigate. During a guided
workout, you’ll also see a clear
countdown timer and progress bar.
The app itself is free to down -
load, but after a se ven-day trial
you’ll have to subscribe. The cost
starts at R199 a month. x
Kate Ferreira

16 financialmail.co.za . December 20 - December 26, 2018

PROFILE
Darren Roos
CEO of software company IFS
Introduced to the software
industry through Dimension
Data in SA, Roos realised he
wouldn’t reach the position of
CEO of a global firm if he
remained in the country
Quickly through
the ranks
Nick Hedley hedleyn@bdfm.co.za
ý Darren Ro o ss’ appointment as
CEO of Swedish software company
IFS adds credence to the theory
that SA punches above its weigh t
in the global tech arena.
“I think that in most of the
developed world — Europe and the
US particularly — there is a very
robust social welfare system and
because of this, if you do n’t get a
job and make a success of it after
leaving school, you don’t usuall y
end up on the streets,” says Roos,
who took the helm of IFS — which
specialises in enterprise resource
planning software — in April.
“As South Africans we grow up
knowing that our fate is in our
hands, and we are ac countable for
that. As a result, we de velop a very
good work ethic early on and have
a strong sense of accountability.
Those two things are great ingre -
dients for a successful career.”
Roos says he tends to hire a lot
of South Africans from IFS’s com-
petitors. This is not by design, he
adds, but rather because S A tends
to breed strong candidates.
His company, headquartered in
Linköping, a small city in southern
Sweden, has close to 4, 000
employees worldwide. In the three
months to September, IFS gener-
ated net revenues of about R 2.1bn,
an improvement of 28% from a
year before.
“Running this business is not an
individual effort, so having great
people around me is definitel y v ital
to success,” Roos says by phone
from London, where his family is
based and where he spends the
occasional weekend.
Before joining IFS, Roos was
president of SAP’s global enterprise
resource planning cloud business.
He’s also held other leadership
roles at the R1.9-trillion German
software behemoth, including as
GM for Northern Europe and as
COO for Europe, the Middle East
and Africa. Before SAP, he was a
senior executive at Ge rman com-
pany Software. Not a bad track
record for someone who gre w up
far from the world’s major tech
hubs (as did Tesla’s Elon Musk and
Mi mecast’s Peter Bauer, who were
both born in S A).
Born in Cape Town, Roos
attended boarding school in the
town of Ladysmith before going on
to Durban for his high school
years. After matriculating, he
moved to Joburg to do odd jobs so
that he could fund his studi es
through Unisa.
He then worked for four years
for a marketing company in Israel,
Spain and the UK before r et u r n i ng years “to be probab ly 5% of our
to SA in 1999 to join his first soft - global revenue”.
ware-related business.
“It was a start-up called R ed
Flag that ran an electronic Yellow
Pages-style operation. The idea
was that people would call in and
say ‘I’m looking for a plumber’, and
then a software engine would help
match them to suppli ers who had
signed up. I ran the sales side of
the business,” Roos says.
But after the 9 /11 attacks in the
US in 2001, funding dried up, the
business went under and Roos
entered the corporate world for the
first time, joining Dimension Data.
“It was a great f our years. That is
where I got my introduction to the
software industry.”
In 2005, Roos set his sigh ts
December 20 - December 26, 2018
on the international market and
joined Software in SA in a sales
position. He spent nine years at the
company.
“I moved very quickly through
the ranks at S oftware. I started as a
sales guy and after seven years
was on the gl obal board of the
company, living in Europe and
responsible for all sales operati ons
outside North America — w hic h
was about 70% of the business.
“I remain a h uge fan of SA. I
love the country, I still have family
there, but I moved because I
recognised that I wasn’t g oing to
get to be the CE O of a global soft -
ware business if I sta yed in the
country – that was the reality.”
His knowledge of and affiliati on
to the SA market means Roos nat-
urally sees an opportunity f or IFS
here. “SA is a small business f or us,
only a couple of percent of our
global revenue, but I feel there is a
lot of potential.”
He recently appointed a new
country manager for IFS’s SA busi-
ness, and has moved the local unit
into bigger, more prominent offices
in the centre of Sandton. “And
we’re in the proc ess of recruiting
to grow that business now,” he
says. “So I see a b ig opportunity for
us to capitalise on a mark et where
solutions that are qui cker to deploy
and easier to use would ha ve a
great attraction.”
Roos says he’s confident that
the company can grow the SA
business over the next couple of
At present IFS’s customers in
SA include defence company Saab
Grintek and hotel and gaming
group Sun International.
At group level, Roos says his
priority is to standardise IFS’s
operating model across all mar -
kets. “I took over a parti cularly
good business, but it wasn’t real-
ising its full potential.
“The main reason for that was
that we had eigh t regions — eight
bu s i ne s s —e sthat were all run
autonomously. There was no c om-
monality between t he m” .
This deterred some major global
customers. It’s a simple fix, says
Roos, but one that c ould transform
the operation. x
. financialmail.co.za 17
 BOARDROOM TAILS BY ANN CROTTY
Compared to whom?
Should protesters be comforted by the long-term picture of development?
W
hat would
e-mail: crottya@bdfm.co.za Fa c t f u l n e s s
author Hans
Rosling h av e
made of the
comments of
one of the French protesters that after
paying for rent, food and petrol she
could not afford to take an annual hol -
iday? Rosling — who died last year
shortly after finishing his book about
how the world is actuall y considerably
better than most of us beli eve — might
have been tempted to remind her of
just how well off she and all her gilets
jaunes colleagues are now.
Rosling’s book provides a useful
account of the progress that has been
made by mankind over the c enturies
and reminds us of how m uch better
off we are now than bef ore.
Just 10% of the gl obal population is
living in severe poverty, compared
with 85% as rec ently as 200 years
ago; life expectancy has been extend-
ed significantly; fewer countries are
being run by oppressive patriarchies;
and, despite the headlines, far f ewer
people are being killed in wars.
Perhaps French president
Emmanuel Macron, and our own
President Cyril Ramaphosa, s hould
consider distributing copies of the
book to citizens whene ver they take to
the streets to protest against their grim
lot in life. By Rosling’s definition even
the vast majority of S A’s township
dwellers exist a few rungs above
Democratic “severe poverty” and, with access to
capitalism electricity, education and health ser -
is all about vices, are considerably better off than
encouraging they might have been 20, 50 or 100
consumers years ago.
to need And the French protester’s com-
more and plaint about not being able to aff ord a
voters to holiday – even a car journey to a
expect nearby caravan park – marks her and
more her hundreds of thousands of yell ow
18 financialmail.co.za . December 20 - December 26, 2018
BY THE
NUMBERS
The largest companies
on each continent by
market cap and the
world’s largest
economies
vest colleagues as being among
Rosling’s top 50% wealthy in the
w o r ld .
Rosling contends the tendency to
$785bn
North America
believe we exist in a world that is g et-
ting steadily worse for all but a l ucky
handful is a human instinct designed
with self-preservation in mind. Jour-
nalists, according to Rosling, have $221bn
Europe
aggravated the tendency, presumably
because, for example, instead of writ -
ing about the tens of thousands of
planes that land safely every day, we $367bn
Asia
only tell you about the f ew that don’t.
And we never tell you about the wars
and famines that aren’t happening.
As an aside, in the earl y 1990s the $127bn
Australia & Oceania
editor of The Star tried to push back
against readers’ fixation on bad news. $98bn
His commitment to giving exposure to Middle East
some of the many good things going
on back then had to be abandoned
after a month or so, d ue to lack of $86bn
Africa
reader interest.
But should the gilets jaunes, or SA’s $82bn
service delivery protesters, be com- South America
forted by Rosling’s long-term picture
of development when their own li ves Largest economies
are patently not what the democrati c $19.39-trillion
1
capitalist system has encouraged them US
to expect? Rosling’s data is impres - $12.24-trillion
2
sive, but the reality is that the all- China
important growth needed by the cap- 3 $4.87-trillion
italist system relies on people never Japan
feeling comforted and instead beli ev- 4 $3.67-trillion
ing that more is needed. S imilarly, Germay
democracy involves politicians stoking 5 $2.62-trillion
UK
the discomfort of voters with talk of
inequality and promises of sol utions. 6 $2.60-trillion
India
Democratic capitalism is all about
encouraging consumers to need more 7 $2.58-trillion
France
and voters to expect more.
It has so far proved unab le to 8 $2.05-trillion
Brazil
address the inevitable, growing dis-
parities that make protestors look not 9 $1.93-trillion
Italy
to millennia of development, but to
10 $1.65-trillion
those who’ve extracted so much more Canada
from the system. x Source: howmuch.net
F E AT U R E S
An in-depth look at the hot button subjects of the day in SA and around the world

20 26 28 30

P U BLCI SHIFTING PROFIT A RUN FOR WORDS OF

ENEMY
It was a conspiracy that dated
back more than a decade,
making fools of some of SA’s
smartest businessmen. Markus
Jooste is SA’s newsmaker of 2018
OF F S HOR E
Some of the multinational firms
that are coining it in SA appear to
be transferring a substantial
portion of their gains to their
parent companies in tax havens
THE MONEY
With an estimated R26m in legal
costs hanging over his head and
a court ruling blocking further
state funding for his defence,
Zuma is on the ropes
WA R N I NG
The populist rhetoric of 2018 is
likely to gather steam ahead of
next year’s elections. It should
taper off after that — but the
damage may be done by then

December 20 - December 26, 2018 . financialmail.co.za 19

 cover story / P U BL IC
newsmaker of the year

ENEMY company alive is the best long -term solution for all.

I
Warren Thompson thompsonw@businesslive.co.za
5,600 n the end, it was no c ontest. Markus
Jo oste’s Shakespearean fall from grace
— from the top echelons of S tellenbosch
royalty during his stint as CE O of Stein-
5,200 hoff, to pariah in the c oastal town of
Hermanus — made him a shoo-in f or
the FM’s newsmaker of the year.
4,800 It was no small f eat: in 2018 the headlines were
dominated by the ousting of S A’s president, Jacob
Zuma, and by US leader D onald Trump sparking a
global trade war.
4,400 But it is the fall out from Jooste’s overnight “res -
ignation with immediate effect” on December 5
It was a conspiracy 2017, and Steinhoff’s simultaneous admission of
that dated back more “accounting irregularities”, that will haunt S A for
4,000
years to come. This year, there have been almost
than a decade, making weekly revelations of how Jooste m a s t e r m i nde d
fools of some of SA’s secret “related-party deals” that enriched him, as
3,600 well as revelations of how Steinhoff’s own books
smartest businessmen. were cooked. It has sparked widespread outrage.
Steinhoff is SA’s In one of the last intervi ews he gave before quit-
ting in 2017, Jooste famously dismissed the G erman
3,200 newsmaker of 2018 investigation into him and S teinhoff’s accounting.
“The authorities worldwide are looking for more tax
... you must remember, it’s a game f or money,” he
said. It was a propheti c choice of words.
2,800
What it means: A year later, and the game is up. I t’s a steep fall:
Someone must for so long the gilded king of the local retail sc ene,
pay for the huge Jooste embarked on a debt-fuelled acquisiti on spree
2,400 loss of value to drive Steinhoff to the pinnacle of the global fur -
niture industry. It became the sec ond-largest fur-
niture retailer in E urope, behind Ikea.
But in the two decades that f ollowed the com-
2,000 pany’s 1998 listing on the JSE, J ooste’s greed
became a cancer that brought the company to its
knees, and may yet fell it entirely.
DOWN AND OUT
In a multiplicity of deals that ha ve since come to
1,600 Steinhoff International light, it turns out he had tak en secret stakes in enti-
share price (c) – daily ties that were benefiting from S teinhoff’s dealmak-
ing. Finally, the risk-taking became so daring that it
1,200 could no longer be explained away to the c ompany’s
au d it o Deloitte,
r, and to nonexecutive directors.
That Steinhoff has survived until now, without
entering into formal bankruptcy proceedings, is an
800 a c hiev e me ntSteinhoff’s
. reconfigured board, led by
chair Heather Sonn and the executive team, initially
led by Danie van der Merwe, have managed to con-
400 vince creditors and legal claimants that k eeping the
On December 14, Steinhoff concluded a lock-up
agreement with the company’s creditors which, it
hopes, will bring “a new period of financial stab ility
for the group and enable manag ement to focus on
maximising the potential of [ its] various businesses”.
The trick now for Sonn’s board is to figure out
what to do with its crown je wels: Steinhoff’s direct
stake in Pepkor Europe (which it owns outrigh t), and
the 71% of the P epkor group, which listed last year
on the JSE as S teinhoff Africa Retail (Star).
The FM has been led to beli eve the sale of P ep-
kor Europe could fetch anything between R50bn
and R60bn. One option touted in c orporate finance
circles would unite the two P epkors under Pepkor
Holdings. Here, the largely ungeared balance sheet
of Pepkor Europe could be used to financ e its acqui-
sition by Pepkor Holdings.
Steinhoff still has other global retailers under its
u mbr e l l.aThese i nc lu deFrench chain Conforama,
US company Mattress Firm (which recently
emerged from bankruptcy), Poundland in the UK
and Freedom in Australia. It remains to be seen
which ones will stay inside the group.
But the real questi on for those who demand
accountability for the R200bn lost in market value
is: what will happen to J ooste?
Given the complete evisceration of the National
Prosecuting Authority under Zuma, there seems lit -
tle confidence that he will be held ac countable for
his sins in SA. Perhaps the German prosecutors will
prove more adept. But even the Germans have been
investigating Jooste for more than three years, and
h av e nt ’brought charges.
Many people have been waiting f or PwC’s
forensic report to emerge to see where b lame
should be placed. But though it was initiall y expect-
ed this month, S teinhoff now says the probe is
only “expected to be c omplete by the end of
February 2019”.
Even then, there’s no guarantee the full f orensic
investigation will be rel eased — an alarming about-
turn on its earli er undertaking. Should it fail to do so,
shareholders will certainly fight that in c ourt.
That doesn’t mean justice will come quickly for
the thousands who have suffered from the h uge lo ss
of value. As it was, 948 of S A’s 1,651 pension funds
had exposure to Steinhoff, and were cruelly exposed
as the share pri ce fell from R96.94 in A pril 2016 to
just R1.74 at the time of g oing to print. It would be a
travesty if no-one is held to ac count for that. x

0 Source: Iress
Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2017 2018

20 financialmail.co.za . December 20 - December 26, 2018

runners-up: agents of anti-state capture
It ain’t over
yet, Cyril
If you think President Cyril Ramaphosa had
a tough 2018, ousting J acob Zuma and Tom
Moyane, you ain’t seen an ything yet.
The billionairre faces a gruelling 2019,
which will kick off in the first week in J an-
uary with a fracti ous national executive
committee meeting in whi ch the ANC is set
to finalise its lists of candidates f or posts in
the legislatures. So far, the list proc ess has
been marred by factional fights, with the
group aligned to Zuma using it in a bid to
claw back power. I nsiders in the AN C who
support Ramaphosa say the Zuma grouping
is trying to pack the lists with its own can -
didates in a b id to direct the g overnment’s
actions from within the vari ous legislatures.
In January, Ramaphosa will deliver the
ANC’s anniversary statement in Durban —
Zuma’s home base and the onl y province in
which he still enjoys plenty of support. T here
are fears that Ramaphosa may face a hostile
reception, but the party’s provincial e xecu-
tive committee has been working hard to
ensure that doesn’t happen.
While it’s true that Ramaphosa has
already made a number of vital appoint -
ments (such as Shamila Batohi as prosecu -
tions boss), he will fac e the ultimate test in
2019, when he announces a reconfigured
cabinet, after the elections in May.
Ramaphosa will be the fac e of the AN C’s
election campaign. Indications are that his
presence has vastly improved the party’s
prospects: the ANC has even made inroads
into the D A’s power base in the W estern
Cape, winning two councils from the party
in recent by-elections.
But Ramaphosa will have to fight an elec-
tion while battling to turn a sliding ec onomy
around, with a power utility that c ould
prompt all three ratings ag encies to down-
grade SA to junk status. A t the same time,
he’ll have to appoint a ne w SA Revenue Ser-
vice commissioner (the deadline for hopefuls
to submit their CVs is on January 18), while
also fixing crises at the H awks and p olice.
If all goes well for him, in 2019
Ramaphosa will win a strong mandate from
the electorate. It would strengthen his hand
as he presides over a fracti ous ANC har-
bouring leaders who want to move against
him at the party’s ne xt national general
council. x Natasha Marrian
Zondo
shows how
The long-awaited state capture commission, led
by deputy chief justice Raymond Zondo, got
under way in August and has heard e xplosive
testimony about the influence the Guptas had
over former president Jacob Zuma.
Within the first few weeks, the ANC was
moved to claim it “wasn’t on trial”, but it was
soon clear that the party was indeed in the dock.
The inquiry has plac ed Zuma and the AN C at
the heart of state capture, in part because of
what Zuma did and in part because of the par -
ty’s inability to stand up to him and his c ohorts.
For a start, the c ommission heard that when
the ANC raised concerns about the Guptas’
influence, Zuma said they were his “f riends” and
the only people who were willing to help his
sons Duduzane and Edward when he was per -
sona non grata.
Zondo himself has handl ed the process
meticulously. His questioning was on point as
former and current cabinet ministers rec ounted
their experiences.
It places Zondo firmly in line to asc end to the
position of chief justice when incumbent Mogo-
eng Mogoeng moves on.
The chief justice holds office for a maximum
of 10 years or until retiring. M ogoeng was
appointed by Zuma in 2011, whi ch means his
term will come to an end in 2021.
The state capture c ommission will continue
with its public hearings in 2019 and is e xpected
to start dealing with issues around the interf er-
ence in state-owned enterprises ( SOEs), such as
Transnet and Eskom, when it rec onvenes. Fire-
works are likely: the appointment of boards of
SOEs was central to state capture.
President Cyril Ramaphosa is expected to
testify on behalf of the AN C and will hopefully
give the inquiry more insigh t into the party’s role
and why it was diffi cult to stand up to the man
who was leading it.
Witnesses such as former deputy finance
minister Mcebisi Jonas and former ANC
MP Vytjie Mentor are expected to be cross-
ex a m iend .
Zondo has on numerous occasions urged
more people who have evidence to come for-
ward and give testimony to the c ommission.
Zuma himself has said he will not do so,
though the deputy chi ef justice has asked him to
r e co n s ide r .
Zondo might just be f orced to start issuing
subpoenas to those who are either too scared or
too implicated to give their side of the story. x
Genevieve Quintal
December 20 - December 26, 2018
Bogeyman of
the corrupt
Public enterprises minister Pravin Gordhan
has had a busy year of fixing b roken cor-
porate governance in the large state-owned
entities. But his most demanding challeng es
lie ahead.
His biggest headaches are what to do
about the huge debt hanging over Eskom
and how to keep a bankrupt SAA a i r b o r ne ,
as the airline is lik ely to report a loss of more
than R5.7bn.
For SAA to survive, Gordhan must con-
vince his more hawkish colleagues in the
government to bail it out with another R17b n
over the next three months.
The airline cannot claim to ha ve the same
status of strategic importance as electricity
monopoly Eskom, without which SA has no
source of power. But SAA is an unnec essary
drain on public finances as its mandate can
effectively be fulfilled by dozens of other air -
line bu s i ne s s e s .
SAA employs nearly 11,000 people (mainly
Cosatu-affiliated workers) and has turned a
profit in only three of the past 11 years. I n that
time, its losses amounted to R 18.1bn. If it is to
remain in the ski es, Gordhan will have to
convince finance minister Tito Mboweni that
another dollop of cash would turn S AA into a
viable entity this time. I t won’t be easy:
Mboweni has twice made public his desire to
close it down. The last time he did this, in
New York in October, it sparked panic in
government circles. Gordhan had to visit
SAA’s head office to calm the jitters. B ut he
did say: “The SA public is losing patienc e with
SAA and doesn’t think i t is viable.”
In a speech laden with disclaimers, G ord-
han said he belie ves the airline can survive “if
SAA did the righ t things”. Those “right things”
are for the airline to eliminate c orruption and
waste and become more efficient. The prob-
lem is that nothing the airline has done in the
past 23 years (in which it g ot more than
R24bn in bailouts) shows it can be a g ood
bu s i ne s s .
Go r d h asndefining
’ moment will come in
March, when R9.2bn of SAA’s maturing
bonds must be settled. The airline has
already burnt through its latest R5b n bailout
and is unable to pay salaries without external
assistance. x Sikonathi Mantshantsha
. financialmail.co.za 21
 cover story /
global newsmaker
AXIS OF
EG OM A N ICAS
The common thread uniting the three global
newsmakers — Donald Trump, Theresa May and Elon
Musk — is that the trio of formerly mighty personalities
were all felled by their own unjustified hubris
Tim Cohen cohent@businesslive.co.za
W
e have the Darwin Awards
for people who top them -
selves in such an idi otic way
that they are effectively
improving the global gene pool. But what
about the Ozymandias Awards?
Ozymandias was the sub ject of a poem
by Percy Bysshe Shelley in which a traveller
encounters the broken statue of a leg endary
king of ancient times, lying forgotten in the
desert, with these words carved on its base:
“My name is O zymandias, king of kings:
Look on my works, ye migh ty, and despair!”
The poem wonderfully illustrates hubris,
human frailty and fleeting prowess. I f there
were such an award the global winners of
the Oz Awards this year would ha ve to be
US President Donald Trump, Tesla boss Elon
Musk and UK Prime M inister Theresa May.
Once they were mighty; now they are snip-
ing and growling at e veryone and every-
thing. Yet some of their prowess surprisingl y
remains, like the mighty trunk of Ozyman-
dias’s statue, a reminder of better times.
Trump suffered two major setbacks in
2018: the loss of the H ouse of Representa-
tives to the D emocrats in the midterm
elections; and the expanding scope of the
Mueller investigation and related legal
a c t io n s .
Trump’s biggest existing legal setback
was the conviction of his f ormer lawyer and
sex-fixer Michael Cohen. Cohen paid off
adult-film star Stormy Daniels and former
Playboy model Karen McDougal shortly
before the November 2016 presidential elec -
tion, after both had e xtramarital affairs with
the president-to-be. Cohen was sentenced to
three years in prison and more than $1m in
fines. The conviction opens the possibility of
an indictment of Trump for criminal viola-
tions of the federal electoral financing laws.
Potentially more damaging, however, is
the investigation by former FBI head Robert
22 financialmail.co.za . December 20 - December 26, 2018
Mueller, the special counsel investigating
Russian interference in the 2016 electi on
campaign. Previous special counsels typical-
ly secured few convictions, but Mueller has
been racking them up with terrifying c on-
sistency. He has filed c onspiracy charges
against two lobbyists, reached a plea deal
with former national security adviser
Michael Flynn and indicted 13 Russians for
trying to trick Americans into consuming
Russian propaganda targeting Democratic
nominee Hillary Clinton. The walls are cl os-
ing in and while Trump calls the inquiry “t he
w o r ld most
’s expensive witch-hunt”, the
convictions suggest exactly the opposite.
Trump’s already dire approval rating
remains impervious to major improvement.
He is now less popular in e very state than
when he was elected. It’s not unusual for a
p re s ide ntapproval
’s rating to fall, but Trump
is less popular at this point in his term than
any other US president in li ving memory.
Trump was once a trend; he is now an
a no m ay l.
Only one other politician around the
world has suffered such an ignomini ous
drubbing: May.
May was dealt a terrible hand: the neg o-
tiation of the UK’s e xit from the E U. Even so,
the deal she delivered, in the words of
Financial Times columnist Martin Wolf,
“united the UK in horror”. H e wrote: “For
Remainers, it is evident that this quasi-per -
manent halfway house, which will keep the
UK inside the EU’s customs area and di vide
Northern Ireland from the rest of the UK
indefinitely, would be far worse than c on-
tinued EU membership. For Leavers, it is
equally evident that this very same halfwa y
house would be far worse than a cl ean
br e a ”k .
As a result, she had to fac e a challenge to
her leadership. Though she won, a third of
Tory MPs voted against her. S he then went
to plead with the EU f or some kind of c on-
cession that would help the deal g et approval
from the sceptical MPs, but the EU’s mem-
bers stuck fast.
In retrospect, the pro-deal Tories failed to
appreciate that the EU states all had inc en-
tives to ensure that the UK is gi ven the worst
deal possible, mainly to discourage the
growing anti-EU parties in their midst. T hey
also didn’t realise that the EU states held all
the cards: while 45% of B ritish exports go to
the EU, only two EU c ountries (Ireland and
Cyprus) send more than 10% of their e xports
to the UK. As M ark Rutte, prime minister of
the Netherlands, who is figh ting right-wing
populist Geert Wilders, put it: “I f anyone in
the Netherlands thinks Brexit is a good idea,
look at England and see the h uge damage it’s
do ne”.
Before 2018 the me r c u r iMusk a l could
do no wrong — then the chickens came
home to roost. In 2017, Musk promised to
build 5,000 Tesla Model 3 electric cars by
December, and 10,000 a week in 2018. T esla
finally hit 5,000 a week in J une this year.
Then the gloves came off with in vestors.
Musk refused to answer “boring, bonehead
q ue s ot in s f”rom analysts, and smoked a
doobie during an interview. Then he tweeted
that he intended to tak e Tesla private, which
turned out to be a pork y pie aimed at
shaking off the short sellers.
It’s been a poor year f or the Oz Award
winners, yet they are still standing. Trump
successfully renegotiated the North Ameri-
can Free Trade Agreement; May could run
down the clock on the EU deal and f orce it
through parliament; and Musk’s Model 3 is
outselling Nissan’s Leaf 10 to one in the US
despite being much more expensive. Tesla’s
share price is very close to a rec ord high.
That’s the thing about the O z Awards: you
can’t bounce back after winning a D arwin,
but the Oz Award is not terminal. S adly, in
many cases, some migh t say. x
burst bubble of the year
BITCOIN
US$
15,000
10,000
5,000
0
2017 2018
Source: Bloomberg
ETHEREUM
1,000
US$
800
600
400
200
0
2018
Source: Bloomberg
The great bitcoin implosion
Around this time last year there was hardl y a braai in SA at which a
conversation about bitcoin wasn’t taking place. It was an understandable
frenzy. After all, the cryptocurrency had jum ped 17-fold in 2017 to just over
$ 1 9,0 0 0.
But, as most investors know, when every man and his dog are talking
about something (on the southernmost tip of Afri ca no less!) it’s a pretty
good sign that a bubb le is about to burst.
And in 2018 b itcoin went the way of the D utch tulip.
The price of a singl e bitcoin hit an all-time high of just over $19 ,000 in
December 2017 and then began plunging. And it k ept plunging — by about
80%, to $3,400 a year later.
Wounded bitcoin evangelists will argue that the principl e behind bitcoin
is solid. It’s a universal world currency that can in theory be used b y anyone
and moved anywhere, says Wayne McCurrie of FNB Wealth & Investments.
“But people weren’t buying it to use it, they were buying it purely for spec-
ulation. Nothing only ever goes up. They lost a lot of mone y.”
Shaun Murison, a senior market analyst at IG SA, says there are indi -
cations that bitcoin’s price dive was tied to its launch on vari ous global
futures exchanges, which allowed institutional players to participate on a
larger scale. They could take short positions, which meant “they can hedge
underlying portfolios or basically bet on the decline of b itcoin”, he says
Ran Neu-Ner, host of CNBC Afri ca’s Crypto Trader, says the buzz around
bitcoin was originally about the underlying blockchain technology.
Blockchain, a digital ac counting ledger, is still promising, especiall y as a
disruptor of the financial services industry.
“People piled into this technolog y, as if it would chang e in one year’s
time,” Neu-Ner says. “Then the reality set in that it would tak e a lot longer.”
While bitcoin took a dive, other cryptocurrencies, like ethereum, have
done even worse. Some cryptocurrencies are down 95% from their all-time
highs. “Unfortunately the majority of in vestors got in at the end of 2017 or
beginning of 2018,” Neu-Ner says.
The bitcoin bull market happened at a time when the tech was in its
infancy, but “the amount of de velopment in the last 12 months is mind-
blowing”, Neu-Ner says. “Last year people were willing to pa y a lot of mon -
ey for nothing and now the y are not prepared to pa y for a lot of stuff that’s
already been built.”
Murison says that while blockchain technology looks like it’s here to sta y
(in various forms), the fate of cryptocurrenci es remains u ncertain.
But McCurrie reckons bitcoin will survive. “I think there is a demand f or
it. But whenever you get a price collapse like that, it will tak e a hell of a l ong
time for the speculators to c ome back.” x Lisa Steyn
scandal of the year
A most
unsophisticated
bank heist
There has always been corruption in SA. But in 2018 it reached
an Olympic standard as an ind ustrial-scale looting exercise
resulted in a whole bank being stolen in f our years. VBS Mutual
Bank, based in Thohoyandou, Limpopo, collapsed this year after
being fleeced by the very peopl e entrusted with l ooking after
depositors’ money. Almost R2bn was stolen by the bank’s direc -
tors, senior executives and well-connected politicians.
VBS has taken SA’s corporate corruption gig to a ne w level.
Most alarmingly, the auditors em ployed by KPMG are believed
to have participated in the f eeding frenzy, helping the thi eves
cover up the crime. I t’s not as if the embattl ed auditing firm
needed any more negative publicity, so the revelations by the
Reserve Bank investigators that KPMG’s senior partner on the
audit, Sipho Malaba, received more than R34m in gratuitous
payments from VBS, were a bod y blow. Those payments were
not disclosed to KPMG. When confronted, Malaba resigned,
together with another VBS auditor, D umi Tshuma.
Reclaiming the stolen cash hasn’t been easy. T he estates of
six of the top b rass of the 36-year-old bank were s equestrated
in the high c ourt. About R700m of the cash was used to fuel an
acquisition spree by the bank’s largest shareholder, Vele Invest-
ments, which is also being sequestrated.
It is a scandal that has re verberated across the northern
provinces. This month the AN C fired 14 mayors in municipalities
across Limpopo and the North West for allegedly instructing
officials to deposit m unicipal funds with the bank (illegall y).
Some municipalities lost as much as R234m as VBS ran out of
cash and went into business rescue in M arch. In Gauteng, the
ANC is said to be pressuring two ma yors to resign, as it is ill egal
to deposit municipal funds with a m utual bank. The ANC has
also had to admit it benefited to the tune of more than R 2m in
sponsorships by Vele and VBS, whi ch hired buses to f erry
members to its D ecember 2017 elective conference.
But it is the EFF that is hurting most from the scandal. T he
brother of EFF deputy president F loyd Shivambu and a c ousin of
EFF leader Julius Malema allegedly received about R20m of the
funds looted, according to the report on VBS written f or the
Reserve Bank by advocate Terry Motau, and reports in the D aily
Mav e rci k .
The municipal officials are said to ha ve received personal
inducements, averaging about 2% of the deposits, to place funds
with VBS. In the process, municipalities lost more than R 1.6bn in
funds deposited with the bank. T his cash was used to pay
bribes, fuel Vele’s acquisition spree, for personal vanity projects,
or to buy flashy supercars and m ultimillion-rand properties.
The looting scheme worked like this: Vele Investments first
sought the help of VBS chi ef technology officer Philip Truter,
who allegedly created fictitious deposits in the bank’s IT sys-
tem, which were then converted to equity in the bank. It
allowed Vele to become VBS’s largest shareholder, with 26% of
the stock. Vele’s nominees were then appoin ted to the VBS
board, including chair Tshifhiwa Matodzi and CEO Andile
Ramavhunga. Then the game really picked up: more fictitious
deposits were created in VBS ac counts, while real money was
transferred from the pool of actual deposi ts to beneficiaries at
other banks. Motau called it one of the most unsophisti cated
bank heists seen in SA. It’s no understatement. x
Sikonathi Mantshantsha
December 20 - December 26, 2018 . financialmail.co.za 23
 cover story
departure of the year
— mark lamberti
A distinguished
record, all in vain
No-one struggled with Mark Lamberti being f orced to bow out
of corporate SA quite as m uch as he did. D espite a long and
illustrious career, in 2018 Lamberti went from c orporate hero to
persona non grata in the spac e of three words — “f emale
employment equity”.
Lamberti spent the better part of his career building M ass-
mart into a m ultibillion-rand retail empire, and in 2014 the
entrepreneurial veteran was brought in as CE O of industrial
company Imperial Holdings.
But it all went south when Lamberti described A dila Chowan
as a “female employment equity” candidate when explaining to
her that she would not be promoted to CFO within the I mperial
Group as promised.
Chowan wrote to then I mperial chair Thulani Gcabashe and
an investigation was launched; the c omplaint was found to be
“devoid of substance” and Chowan was dismissed f or abuse of
the grievance process. She took the matter to c ourt, which
found in April that her claim f or damage to her dignity was
proven on both a sub jective and objective basis.
In the landmark ruling on rac e and gender discrimination,
Judge Piet Meyer noted that “as blatant and patent as discrim -
ination was in the da ys of apartheid, so subtle and latent does it
also manifest itself today”.
Lamberti resigned from Imperial as well as from his direc -
torships on the boards of Esk om and Business Leadership SA. In
a resignation letter, Lamberti said the matter has been de v-
astating to him and his famil y. “A lifetime of clear c onscience
and a distinguished rec ord of business leadership appear to
have been in vain,” he lamented.
Mbuyiselo Botha, commissioner at the Commission for Gen-
der Equality, sees Lamberti’s fall from grac e as just what the
doctor ordered for business in SA. “Twenty-four years into our
democracy, how can you ha ve an executive who does not see
the importance of promoting gender, race and class equity in
SA? I think it was a wak e-up call to c orporate SA that trans-
formation is not about ti cking a box or a ‘ni ce to have’. It’s at the
heart of ensuring this ec onomy grows.”
Karl Gevers of Benguela Global Fund Managers says the case
highlights a significant change in society as well as the power of
social media, which effectively forced Lamberti to resign in the
interests of Imperial. “In the past one c ould probably have man-
aged through a situati on like this, but not toda y, and rightly so.
Like Warren Buffett said: ‘It takes 20 years to build a reputati on,
but it takes a five minutes to ruin it.’”
Lamberti’s dramatic departure tops the list, but a close sec -
ond is Alexander Forbes’ firing of Andrew Darfoor as CEO over
a “loss of confidence and trust”. Another worth y mention is
Investec’s Stephen Koseff, who retired after 40 years at the
helm of the financial instituti on. x Lisa Steyn
24 financialmail.co.za . December 20 - December 26, 2018
deal of the year
The war for your wallet
Since 1999, no new banks have launched in SA. The big four —
Standard, FNB, Nedbank and Absa — have operated as a c osy
cartel. Even the one entrant to grow to larg e-bank status in t hat
time, Capitec, has adopted a traditional branch-based distribu -
tion model. Only Investec has operated without b ranches — but
to a slim spectrum of high net worth cli ents.
Yet in 2018, three banks launched, all on a b ranchless model
but aiming at the uni versal target market of the large banks.
They are TymeBank, Bank Zero and — the most eagerly antic-
ipated of all — Discovery Bank.
TymeBank started as a subsidiary of the C ommonwealth
Bank of Australia (CBA), which has a larger market cap than the
entire SA banking sector. Even before registering as a bank, it
offered money-transfer services through Pick n Pay. Though it
doesn’t have any branches, TymeBank will have 750 points of
sale through the Pi ck n Pay and Boxer stores. Most transactions
are free if they are carried out at Pi ck n Pay, and only R2 if done
elsewhere. For depositors, the bank off ers up to 10% on positi ve
balances. CEO Sandile Shabalala says the bank will start off ering
loans in 2019. It will be able to off er even keener prices since,
like Capitec, it will be able to cross-subsidise its transacti on and
deposit books from loan-based inc ome. Patrice Motsepe’s
African Rainbow Capital has taken full control of the bank, as
CBA pulled out suddenly.
This pits Motsepe against Michael Jordaan, the former FNB
CEO who is the chair of Bank Zero. The CEO, Yatin Narsai, was
head of FNB Retail and even more deeply entrenched in IT
processes than Jordaan. As a mutual bank, B ank Zero will be
confined to deposits and transacti onal banking and will not be
allowed to offer loans — though Narsai promises a “c reative”
solution for clients who might go modestly into the red. B ut he
also hopes to nurture a sa vings culture by offering attractive
r et u r n s .
Discovery Bank’s model, typically, is the opposite of sim ple.
The launch included a 70-pag e “thought leadership” document
with chapters on shared val ue, behaviour change and people-
centric design. CEO Barry Hore promises that the app will be
simple to use, once people get used to it. U nlike the other two
banks, Discovery is already a household brand. It has a good
chance of capturing most of its credit card cli ents and a sizeable
minority of its insurance and medical aid clients. Its Vitality pro-
gramme has cult status among some, and if you beli eve its
reports, physically fit people are less lik ely to be financially irre-
sponsible. x Stephen Cranston
SA DOES NOT PLAN FOR RETIREMENT
86%
46% 40%
of South Africans either have
noplan or are not confident
14%
in their plan for retirement
No retirement plan Not confident in their
retirement plan
Confident in retirement plan
Source: Financial Services Board; Financial Literacy in SA; 2016
chickens come home to roost award
A Grand Parade of activists
Finally, after many false starts, shareholder
activism on the JSE ma y have come of age in
2018. While activism is commonplace in other
markets — especially the US — the JSE has f or
the past few years had only sporadic bouts of
corporate confrontation led by individuals like
Theo Botha, Chris Logan and more rec ently the
disarmingly astute Albie Cilliers.
But companies often shrug this off, especiall y
if the activist cannot get the support of at least
some major investors.
That was probably initially the case at G rand
Parade Investments (GPI), an e mp o w e r me nt
company that holds the local franchises f or
Burger King, Dunkin’ (Donuts) and Baskin-Rob-
bins, as well as 17 .5% of steakhouse chain S pur.
GPI has been trading at a woeful disc ount to its
intrinsic value, and looked at risk of losing its
dividend appeal because of ong oing losses in its
food division.
After several individual shareholders tried,
and failed, to trigger the urgent response needed
to restore the market’s faith, a c onsortium of
entities rallied at the GPI board to spark chang e.
These shareholders — Kagiso Asset Manage-
ment, Denker Capital, Excelsia Capital,
Westbrooke Alternative Asset Management
and Rozendal Partners — represented just
12.5% of GPI.
GPI’s response was to label the acti vist
grouping as “asset strippers” that were not act -
ing in the best interests of the group’s com-
munity shareholders. It was not exactly the high
point of Hassen Adams’s f a r -f r o m w -f lel as s
tenure as executive chair. Even more disgrace-
fully, there were attempts to paint the acti vists
as agents of white monopoly capital.
But the vacuous rhetori c wasn’t enough to
snuff out overriding shareholder c oncerns about
wasting value.
Ultimately, the activists’ w e l l- acr ut il at e d
grievances concerning governance, capital allo-
cation and lack of qui ck-service-restaurant
skills resonated with shareholders. I n the end,
the activists gathered enough support to vote
two directors — former SABMiller executive
Mark Bowman and former Spur CFO Ronel van
Dijk — onto GPI’s board as none xecutive direc-
tors. This also paved the way for the emergence
of turnaround specialists Value Capital Partners
as a shareholder with a 16% stak e.
As a result, shareholder value has started to
creep back, rising 30% in the month to mid-
December. Of course, much more has to be
done to unlock value — but arguably the bigger
reward for all investors on the JSE is that the
successful stab at GPI ma y inspire others to
pick up the assegai of acti vism. x Marc Hasenfuss
The bitter Taste
of Domino’s
Th ere’s no disguising the fact that in 2018
Taste Holdings fell headlong into real trouble.
The company should be going great guns — it
owns the SA franchises for Domino’s Pizza and
caffeine merchant Starbucks.
And yet it incurred an R87.3m operating loss
in its latest results f or the six months to A ugust,
and it is burning though cash faster than a Gup-
ta deployee on the Transnet board.
In fact, the fast f ood and jewellery retailer
would have likely already gone under if the
Sean Riskowitz-backed Riskowitz Value Fund
(RVF) hadn’t underwritten a R398m righ ts
issue, which Taste used to pay off its R 270m
de bt last year.
The group’s CEO, Tyrone Moodley, who took
over only in February, doesn’t expect the com-
pany to make a profit in the current financial
year. Worse, even after the righ ts issue, he
reckons it will need some ne w kind of refi -
nancing at some point in the future.
Of course, it’s true that Risk owitz’s RVF pro-
vided it with a R 200m loan facility — but this
money wasn’t cheap: RVF charged a pricey 16%
interest rate on it.
All of which means Moodley doesn’t have
the cash to expand. To preserve cash, Taste
even decided to hold off on rolling out ne w
Starbucks and Domino’s r e s t au r a nt s .
This underlines how much trouble it is in.
Starbucks and Domino’s are premium US
brands that were expected to power its growth,
but this doesn’t look imminent.
Minority shareholders are now on a hiding
to nothing. Consider the wealth destruction:
over the past few years, Taste’s share price has
collapsed from a high of R4. 47 in July 2015 to an
almost insignificant 18c, while they have also
been asked to underwrite several rights offers
by R1bn.
Perhaps the only upside for shareholders is
that analysts believe RVF (which already owns
66%) could buy them out. C onsidering the trou-
ble Taste is in, this is starting to look more and
more likely.
Until RVF decides what to do with the group,
turning it around will depend on the eff orts of
the 32-year-old Moodley (who is, it m ust be
said, the youngest CEO of a JSE listed c om-
pany). Moodley’s only experience in retailing
before this came from being a none xecutive on
Taste’s board. In other words, fasten your
seatbelts. x Larry Claasen
December 20 - December 26, 2018
How Nigeria
hung up
on MTN
Just when it seemed as though the worst was
over for MTN, the group’s most im portant mar-
ket came back to b ite it. After months of trauma,
the mobile operator was finally recovering from
a 2016 fine in N igeria for not disconnecting SIM
cards, and had just doused regulatory fires in
some of its smaller mark ets, when the Central
Bank of Nigeria came knocking.
In late August, the bank told the c ompany
that no less than $8.1bn worth of dividends that
MTN had moved from N igeria between 2007
and 2015 had to be returned. T he next day,
August 30, the stock lost a fifth of its value.
Shortly after, and just f or good measure,
Nigeria’s attorney-general demanded that the
company pay $2bn in back taxes.
Since then MTN’s shares ha ve been capped
at levels last seen a decade ag o, around R85, far
below the R246 of August 2014. Over the past
five years, MTN’s share pri ce has fallen 55%.
CEO Rob Shuter has spent much of his time
flying to and from Lag os in an eff ort to broker a
deal, but it hasn’t yet made a diff erence to the
share price.
There’s much at stake. The claims from
Nigeria, while laughable to some mark et com-
mentators, are worth nearly the entire val ue of
the company itself.
But if MTN manages to prove its innoc ence
and convince authorities to drop their demands,
or meaningfully reduce them, the operator
could be set f or a recovery in 2019. If it doesn’t,
expect more pain ahead.
JPMorgan says that if the c entral bank’s
claim is withdrawn, and no restri ctions or
penalties are imposed on the operator, the share
would quickly climb towards R100. But the US
brokerage reckons the most likely scenario is a
$500m settlement for both claims — by no
means an inconsequential sum.
Still, some analysts still say MTN is a “bu y”,
which is a positive sign that there is some c on-
f ide nce .
Nigeria, which will hold el ections in Febru-
ary, is trying to squeeze funds from other c om-
panies too. In mid-December, the government
said it would sue S hell and Eni f or $1.1bn as part
of a case that dates back to 2011.
It has created a degree of trepidati on that
isn’t great for the West African nation. To many
analysts (and MTN) the apparent hostility
towards big foreign investors could deter
o t he r s .
As it is, SA companies, including Woolworths
and Tiger Brands, have already been burnt in
Nigeria, so MTN’s woes in that mark et will
hardly resuscitate confidence. x Nick Hedley
. financialmail.co.za 25
 feature / tax avoidance
Claire Bisseker bissekerc@fm.co.za
T
wo groundbreaking research papers
on corporate tax avoidance in SA have
found that the authoriti es have grossly
underestimated the scale of unla wful
profit shifting out of the c ountry.
It conservatively amounts to R8b n a year in
foregone taxes, and some of the larg est multi-
nationals are the b iggest culprits.
The working papers, both authored b y Lud-
vig Wier, a doctoral fellow at the University of
Copenhagen, are among the first to emerg e
from a new research programme, SA-Tied. It is
a tie-up of the National Treasury and other ec o-
nomic cluster ministries with several interna-
tional research institutions, including the UN
University World Institute for Development Eco-
nomics Research.
The crux of the outc ome has been the cre -
ation of a high-quality, anon ymised tax infor-
mation database on c ompanies and individuals
operating in SA that is enabling the authoriti es
to gain fresh insigh ts into the workings of the
economy — and the way to close tax loopholes.
The two studies are the first to e xploit actual
tax returns to estimate profit shifting in a de vel-
oping country. Until now only Germany, Den-
mark, Norway, Sweden and the US have
granted researchers access to multinationals’
tax returns.
The issue of profit shifting — when multi-
nationals lower their global tax bill by shifting
their earnings from affiliates in high-tax c oun-
tries to those in l ow-tax countries — is partic-
ularly relevant for SA, given its fiscal squeeze,
reliance on corporate tax receipts and growing
exposure to foreign-owned firms.
Since 1994, there has been an e xplosion of
foreign activity in SA. As a share of GD P, the
earnings of foreign-owned corporations have
doubled in the past 25 years.
A clear incentive exists for these firms to shift
profits out of SA, where the c orporate tax rate
has been 28% sinc e 2008 — four percentage
points above the world a verage and 13 perc ent-
age points above nearby tax haven Mau ritius.
Even though there are onl y about 2,000 for-
eign-owned firms out of a total of 1.2 -million
businesses in SA, these are large compared w ith
domestic operations, accounting for more than
30% of the sales of all firms operating in the
country. Roughly one-fifth of these f oreign-
owned companies are owned directly through
tax havens.
In the first tax paper, “B ig and Unprofitable”,
Wier and the Tr easury’s Hayley Reynolds esti-
mate that on average haven-owned businesses
avoid taxation on as m uch as 80% of their true
income by understating it in S A (see graphs).
The assessment was made b y comparing the
wage, asset and turnover data of local firms
with that of f oreign-owned companies.
Where the study breaks new ground is in
26 financialmail.co.za . December 20 - December 26, 2018
finding that this aggregate tax loss c onceals
large differences across firms in ac cordance
with their size. Most firms shift little or no
income to tax havens, while a few large
firms shift a l ot.
In SA’s case, the authors estimate that a
combination of high profits and more
aggressive profit shifting results in the top
10% of foreign-owned firms accounting for
98% of the total estimated tax l oss.
Wier says he was “very surprised” to
detect this stark difference among firms.
The implications are globally significant.
What it means is that all c ountries, including
SA, that have relied on existing global
research to estimate the extent of profit
shifting affecting their economies — such as
the OECD’s 2015 “Base Erosion and Profit
Shifting” (Beps) report — have underestimat -
ed the scourge by up to 80%.
In SA’s case, Wier estimates that the S A
Revenue Service (Sars) is being short-
changed by about R7bn a year due to profit
shifting. This is equal to about 4% of total
current corporate income tax receipts, but it
appears to be in line with that e xperienced in
other countries.
However, this is a c onservative estimate,
given that the data does not allow the
researchers to study profit shifting to sister
firms rather than the parent, or from SA par -
ents to foreign subsidiaries.
The study finds that the worst off enders
are mining companies, accounting for almost
30% of profit shifting, f ollowed by financial
services firms, accounting for 19%. Wier con-
siders this “alarming ”, given that resource
extraction constitutes a large share of ec o-
nomic activity in developing countries.
Switzerland is ostensibly the main des -
tination for siphoned-off profits, as S wiss-
owned firms account for roughly half of the
profit gap between haven-owned and non-
haven-owned firms. Other havens that host
the parents of firms that report near zero or
What it means:
The largest R
multinationals avoid
80% of tax
R
negative profits in SA, despite having large
wage bills, include Bermuda, Liechtenstein,
the Cayman Islands, Mauritius, Singapore
and Cyprus.
Wier’s second paper is on transf er mis-
pricing — a form of profit shifting that oc curs
when firms apply a high pri ce to items flow -
ing from affiliates in low-tax c ountries (like
Switzerland) to affiliates in high-tax c oun-
tries (like SA) and vice versa. This erodes the
profits in the high-tax affiliate, whi ch is pay-
ing the high pri ce, but equally increases the
profits in the low-tax affiliate, whi ch is
receiving the high pri ce.
Legally, firms are supposed to use arm ’s-
length pricing when transacting internally.
That is, they should set pri ces internally as if
they were trading with an e xternal party.
The disaggregated customs data set that
Wier used covers all imported goods to SA
from 2011 to 2015, allowing him to estimate
precisely what the arm ’s-length price of each
transaction should be. When comparing unit
prices on intra-firm transacti ons to these
arm’s-length prices, Wier found that imports
from low-tax countries into SA are over-
priced by at least 8%. T his provides strong
evidence to suggest that firms are engaging
in tax-motivated transfer mispricing.
He estimates that SA is losing R1b n every
year in this way alone — equivalent to 2% of
foreign-owned firms’ tax payments.
SA’s legislation on transfer mispricing
was amended in 2012 in line with the inter -
national standards laid out in the O ECD’s
Beps programme. Though there is evidence
R
R
 Some of the biggest multinational firms that are coining it in SA appear to be transferring a substantial
portion of their gains to their parent companies in tax havens. But there are ways to combat this
that transfer mispricing decreased after the
amendments, by 2015 it was back up to f ormer
levels. Wier argues that this is because the ne w
legislation was not matched b y greater enforce-
ment, so as soon as firms realised the y were
not being audited they went back to their old
w ay s .
Fortunately, there is a c ost-effective way to
curb transfer mispricing. All the tax authoriti es
need to do is appl y the econometric method
used in Wier’s paper to act as an automated
digital flagging system. It took him just two
weeks to set up the data in S A to flag c om-
panies with systematic deviations from estimat-
ed arm’s-length pricing automatically.
To his knowledge, no other c ountry has set
up a similar system. A t a minimum, the tax
authorities could send flagged firms an e-mail
cautioning them that they have been flagged and
to desist from such beha viour. “This seems to be
a very low-hanging fruit for tax authorities
globally to pursue,” says Wier. “In many cases
the data is already there, stored in a ra w format
on a server and used in the calculati on of
import statistics.” The cost of this monitoring
would be in the thousands of rands, whil e the
potential tax gain runs into the b illions.
According to Wier, three things are needed
to curb profit shifting. F irst, countries should
implement all the OECD’s Beps recommenda-
tions, as Sars is already doing. Second, they
should invest in their tax authoriti es in terms of
headcount, skills and technology, including the
application of his algorithm. Third, there should
be a push f or global reform of the c orporate tax
system to prevent firms from shifting inc ome.
R
R
S H I F T I NG
PROF I T S
R
OF F S HOR E
R
The EU is c onsidering a new STRONG EVIDENCE OF PROFIT SHIFTING OUT OF SA
system called “formula apportion- Average turnover by size and origin of foreign-owned
ment”. It would require an inter - multinationals operating in SA
national firm to allocate profits to
its SA operation based on the pro- Rm
3,000
portion of activity carried out in the
country. So, if 10% of a m ultina-
2,500
t io n al ’ssales, assets and employees
are in SA, Sars should tax 10% of 2,000
Parent not in tax haven
its global profits. Parent in tax haven
Chris Axelson, chief director of 1,500
economic tax analysis at the Trea-
sury, says it takes Beps “very seri- 1,000
o usly ”.The Treasury, with Sars, has
500
adopted many of the rec ommen-
dations emanating from the
0
OECD’s Beps project, including
0% 6% 12% 18% 24% 30% 36% 42% 48% 54% 60% 66% 72% 78% 84% 90% 96%
making tax administration data
firm deciles by size
available for research.
SA has also im plemented the
Average taxable profits by size and origin of foreign-owned
Beps minimum standards, in terms multinationals operating in SA
of which large multinationals are
Rm
now required to report inf ormation
1,150
about their global sales, assets and
workforce to Sars. 950
Axelson declined to be dra wn
on how much of the R7b n in fore- Parent not in tax haven
750
gone tax the Treasury might be Parent in tax haven
able to rake back through better 550
enforcement, saying only that S A-
Tied is likely to undertake more 350
s t u d ieands that “the minimum
150
standards that have been imple-
mented, along with measures 0
implemented in future, will bear
0% 6% 12% 18% 24% 30% 36% 42% 48% 54% 60% 66% 72% 78% 84% 90% 96%
f r u it x”.
firm deciles by size
Note: Firm size deciles are based on the size of a firm’s wage bill
Deciles 0 - 2% = the smallest 2% of firms; deciles 98%-100% = the largest 2% of firms Source: SA-Tied
R
R
December 20 - December 26, 2018 . financialmail.co.za 27
 feature / zuma’s legal fees
A RUN FOR THE MONEY
Karyn Maughan
F
ormer president Jacob Zuma stands
on the brink of financial devastation
as he faces his last c ourt battle to stop
his corruption prosecution. There is
an estimated R26m in legal costs hanging over
his head and a court ruling blocking any fur-
ther state funding of his def ence.
Where Zuma’s attempts to appeal rulings
that went against him — as president or as t he
a cc u s e—d were once criticised as cynical
efforts to delay the inevitable, his challenges to
two devastating costs rulings are now matters
of survival.
Zuma cannot afford not to appeal. H is strat-
egy of legal Stalingrad has become his prison.
And without the intervention of a ridi culously
wealthy and generous benefactor, he cannot
venture outside it .
Just days before the high c ourt cut off state
funding for his de fence, Zuma had petitioned
the Supreme Court of Appeal for the right to
challenge the other damaging c osts-related
order made against him — one linked to his
“r ec kles s l”itigation in the state capture saga.
Zuma wants the righ t to fight a ruling that
he personally pay the R6m-R10m legal bill
attached to his fruitless legal challeng es to for-
mer public protector Thuli Madonsela’s “State
of Capture” r ep o r t .
In court papers, Zuma argues that the high
court’s finding that he acted “recklessl y and
u n r e a s o ny a”by
bl persisting with his legal
challenge to the report, “because it amounted
to a reckless disregard of the seri ous allega-
tions of corruption involving the p re s ide nt ”,
28 financialmail.co.za . December 20 - December 26, 2018
was “me r it le s s ”.
The court found Madonsela had acted
lawfully when she ordered chi ef justice
Mogoeng Mogoeng to appoint a judg e to
head the state capture i nq u i rbecause
y Zuma
was implicated in state capture and theref ore
conflicted. It effectively found that Zuma’s
attempt to challenge this remedial acti on
was designed to frustrate the i nv estigatio n.
Zuma vehemently denies this, saying he
was trying to establish whether the i nquiry
ordered by Madonsela could withstand con-
stitutional scrutiny.
“Furthermore, it could never be reckless
and unreasonable for the president to seek
to establish whether the chi ef justice could
participate in the proc ess of establishing a
commission of inquiry in terms of secti on 91
of the co n s t it u t ”io n .
He also seems to take a swipe at Pres -
ident Cyril Ramaphosa for not appealing the
personal costs order granted against him.
“The principle that I should be held per -
sonally liable for costs orders for executive
decisions that I took whil e I was president of
the Republic of SA should have concerned
President Ramaphosa because it has very
concerning constitutional implications for the
exercise of constitutional duties by the he ad
of the national ex ecutiv e”, he argues.
The appeal court needs to decide if it will
even hear Zuma’s arguments, after the high
court refused his appli cation for leave to
appeal. If it and the C onstitutional Court find
he has no reasonable chanc e of success on
appeal, Zuma faces the very real prospect
that the opposition parties that won a per -
sonal costs order against him will attach his
assets to recover these costs.
At the same time, Z uma faces a crucial
court battle in his figh t to avoid prosecution
for corruption.
Last month, he filed an appli cation for a
permanent stay of prosecution, drafted by
four experienced — and very expensive —
senior counsel. That application, in which
Zuma argues that the 16- year-old corruption
case against him has been defined b y pros-
ecutorial impropriety, undue delay and polit-
ical interference, is his last chanc e to stop his
trial on charges of racketeering, fraud, cor-
ruption and tax evasion.
If he fails to persuade the K waZulu-Natal
high court that he has a c ompelling case for
the charges to be dropped, he is looking at
spending at least a year in the dock. I f con-
victed of racketeering, he faces 25 years
behind bars.
Now, more than ever, Zuma needs a
well-resourced and forensically adept
defence team to figh t his case. But if last
week’s high court ruling stands, he won’t get
any of that funding from the state.
Three judges ruled that Zuma had never
been legally entitled to the millions of r ands
that taxpayers spent on his m ultiple chal -
lenges to his c orruption prosecution, and
ordered that the state attorne y use all means
necessary to recover the money already
 With an estimated R26m in legal costs
hanging over his head and a court ruling
blocking further state funding for his
defence, Zuma is on the ropes. But he’s
not giving up just yet

spent on this futile litigati on.
“It is in the publi c interest that charges relating
to the abuse of publi c office — corruption and fraud
— are prosecuted to ensure publi c accountability,
the promotion of good governance, the protection
of the rule of la w and the protecti on and advance-
ment of the righ ts enshrined in the b ill of rights,”
the judges ruled in a unanimous decisi on.
“If the state is burdened with the high legal
costs of those publi c office bearers who are
charged with such crimes, the taxpa yer bears that
burden and poor c ommunities continue to be
denied access to essential services, as the state’s
resources are being diverted.”
In the minutes before that ruling was handed
down, Zuma’s attorney Daniel Mantsha told jour-
nalists that he wasn’t optimisti c about his cli ent’s
prospects of success. “But we will appeal if we
lo s e” ,he said.
Mantsha had argued in c ourt documents that
Zuma was entitled to ha ve his defence funded —
with the proviso that these legal e xpenses would
be reimbursed if Zuma was convicted — because
the crimes he stood ac cused of were all egedly
committed in the sc ope of his offi cial duties.
Zuma’s corruption charges have their genesis in
events dating back to 1997, when French arms
company Thomson-CSF, now known as T hales,
scored a R2.6bn contract to provide four navy
frigates to SA as part of the wider R60b n
arms deal.
The state alleges that as claims of c orruption
linked to the arms deal gre w, Thales agreed in
2002 to pay R500,000 to Zuma, then SA’s deputy
president, for his “political protection” in the event
of an investigation — a deal allegedly bro-
kered by his former financial adviser,
Schabir Shaik.
It’s further the state ’s case that Shaik and
his Nkobi Holdings made 783 payments to
Zuma, totalling more than R4m, in the 10
years between October 1995 and J uly 2005.
In return, the state claims, Z uma abused his
position as MEC and deputy president to do
unlawful favours for
Shaik, who was jailed There is a
for his role in the mat - danger that
ter, and Nkobi Holdings. crippling Zuma
Mantsha has vehe- financially may
mently denied claims give him
by the DA that the case ammunition to
against the former argue that he is
president “has nothing being unfairly
to do with his rol e as a targeted and
public official”. victimised
He said: “One just
has to have a casual read of the charg es
against him [Zuma] to notice that the [ DA’s]
contention is false and self -serving.”
He added that it is “s e l f- evdei nt ”that the
case against Zuma “centred around his offi -
cial powers and d uties”, given that the
alleged bribes were supposed to induc e him
to use his publi c office to further outside
interests. “Logically, outside government, Mr
Zuma would have no such power.”
But the high c ourt in Pretoria, following
from the reasoning contained in two recent
judgments in the Western Cape, was uncon-
vinced. “The specific conduct on which the
prosecution relies — that Mr Zuma allegedly
received 783 payments or gratifications out-
side his official remuneration — is not con-
duct that could in any way be connected to
his official functions.”
The court added: “Allegations or charges
of corruption and fraud against a publi c
office bearer, in the words of f ormer pres -
ident Thabo Mbeki, raise ‘questions of con-
duct that would be inc onsistent with expec-
tations that attend to those who hold pub lic
office’. And, as was said b y President
Ramaphosa, it is a ‘fundamental principle
that public money should not be used to
cover the legal expenses of individuals on
strictly personal matters’.”
Zuma’s lawyers will no doub t dispute this
logic. But in a country in the midst of an
economic, social and politi cal reckoning that
is largely the result of Z uma’s leadership,
it is likely to find support among frustrated
t a x p ay e r s .
There is a risk, though, that c r ippl i ng
Zuma financially may give him ammunition
to argue, as he has so man y times, that he is
being unfairly targeted and victimised by
opposition parties, the courts and a president
unwilling to stand up f or him.
Zuma is unlikely to win his l egal struggles
over the state funding his fees. All he can do
is use appeal proc esses to buy some b reath-
ing room — and see whether a onc e dense
forest of political and financial benefactors
still believes he has the power to justify
such largesse. x

December 20 - 20
December December 26, 2018
- December . .
26, 2018financialmail.co.za
financialmail.co.za29 29
 feature / populism
T
he year 2018 can be remembered as
the one in whi ch the global fire of pop -
ulism set politics alight in SA. Given
that it is the year before h ig h - s teask
national elections, it has not been une xpected.
Policy-wise it was the year in whi ch par-
liament resolved to amend the c onstitution to
explicitly allow for land expropriation without
compensation — an ideal championed by the
ANC and the E FF.
However, South Africans saw parliament
ignore thousands of written sub missions on the
matter as it finalised its report, essentiall y shut-
ting out the voi ces of those opposed to the
amendment. The distinct racial tone the debate
took on even moved former president Thabo
Mbeki to write a discussi on paper in whi ch he
said the ANC was abandoning its histori cal non-
racial values.
It was also a year in whi ch the DA marched
in the Cape Flats, calling for the army to be
deployed to deal with the gangsterism t hat
plagues the area. D uring the march, the party’s
supporters carried posters bearing the words
“All South Africans first”, reminiscent of US
President Donald Trump’s “Make America great
again” campaign slogan. The tagline drew
extensive criticism, and failed to make the cut
for the DA’s election campaign. The final slogan
it decided on is a far cry from this rall y for SA
ex cep tio nalism; the party has opted for an
i ncul svi e message of “One SA for all”.
But the DA did not abandon its dog -whistle
call to xenophobic voters: one of its election pil-
lars focuses on tighter border control and taking
a hard line on immigrati on — another of
Trump’s favourite campaign me s s aegs .
These actions exemplify what political ana-
lyst Ebrahim Fakir describes as popular issues
The populist rhetoric of 2018 is likely to gather steam ahead of next year’s elections. It should taper off
once the votes have been counted — but the damage may be done by then
Get
ty Im
age
s/Al
Dra
go
30 financialmail.co.za . December 20 - December 26, 2018
being dealt with by populist means.
He believes issues such as land, immi -
gration, jobs and crime are not populist
issues by nature — but when they are dis-
cussed in an unmediated, uncriti cal and
unthoughtful way, with no basis in evidence,
they tend to inspire populist publi c discus-
sion and populist poli cies.
The land question is a case in point.
“Once you take popular issues and dis -
cuss them in populist ways without subject-
ing them to the frame work of mediation,
critical thought, evidence and problem-solv-
ing orientation, you end up opening the
floodgates of discussing every popular issue
in a populist way,” Fakir says.
Once you’ve set a prec edent in the way
that a debate over land, f or example, is han-
dled, “what’s next? Arbitrary deprivation of
private property? Why not?”
Fakir says every party in SA is guilty of
this escalation. The ANC flirts dangerously
with the question of race, drawing “perilous-
ly” close to the edge before it pulls back.
“The EFF just goes,” he says, “and masks it in
the crudest racial terms. S o does the B LF
[Black First Land First movement].”
The DA is also not above stepping into the
populist realm, says Fakir, referring among
others to comments by DA leader Mmusi
Maimane about doubling social grants, as
well as the party’s stanc e on immigration.
In contrast, Fakir points to the d i s c u s s io n is suffering at the moment, as it doesn’t
about the national minimum wage as an
example of a popular issue that was not
dealt with in a populist wa y. The problem, he
says, can in some instanc es be traced to fail-
ing governance systems.
WORDS OF
WA R N I NG
Claudi Mailovich mailovichc@businesslive.co.za
December 20 - December 26, 2018
“Once you exhaust all the popular issues
and more and more issues are addressed in a
populist way, the next step to that is … self-
organisation on the basis of ethni c, or narrow,
or other interests.”
From there, it’s a The politics of
natural progression to pragmatism —
vigilantism and self- of realism — is
organised networks of suffering at the
patronage and protec- moment, as it
tion — something Fa kir doesn’t promise
believes is already instant results
h a p p e n i ng . Somadoda Fikeni
The issue is b road-
er than just SA. Somadoda Fikeni, a professor
and political analyst at Unisa, says populism
in SA has to be seen in the global c ontext.
“Globally, we are undergoing a historical
phase of populism in politi cs in general. We
are in the era of populism in E urope, in Latin
America, in the US and so on. And it seems to
have worked,” Fikeni says.
He attributes the hold of populist rhetori c
in SA to the c ountry’s failure to resolve its
socioeconomic woes. There’s also the “post-
honeymoon phase” of the democratic dispen-
sation: populist policies find fertile ground
when people become cynical.
But knowledge of facts and the sci entific
examination of events are also often sec -
ondary to the psychological stimulation of
fear or hope.
“The politics of pragmatism — of realism —
promise instant results,” Fikeni says.
He expects the heated political climate to
cool — for a while, at least. But then, of c ourse,
the 2021 local government elections will be
right around the c orner. x
. financialmail.co.za 30
 011 911 1200 / RADO.COM
MASTER OF MATERIALS

RADO TRUE OPEN HEART

PLASMA HIGH-TECH CERAMIC. METALLIC LOOK. MODERN ALCHEMY.
 feature / start-ups
STA RT-U P
K IC K
- Business development
STA RT
Mudiwa Gavaza gavazam@sundaytimes.co.za
D
on’t be egotistical about owning 100%
of your business,” says Candice
Thurston, CEO and founder of Candi
& Co. It was through a partnership
with beauty franchise Sorbet — not discounting
her experience in marketing and branding at
companies such as MTN and U nilever — that she
was able to give life to her visi on of running an
ethnic hair and beauty salon. F our years on, C an-
di & Co operates seven stores in Gauteng and
has served thousands of customers.
Digital payments company SnapScan p res ent s
a similar picture of the payoff that can c ome
from solid corporate backing. When mobile pay-
ments firm Firepay launched SnapScan in 2013,
Standard Bank provided support, proc essing
payments for the platform.
The partnership gave the start-up m uch-
needed visibility, as well as ac cess to Standard
Bank’s substantial client base. It proved so suc -
cessful that the bank bough t a controlling stake
in Firepay in 2016, and S napScan now operates
as an in-house Standard Bank product.
For years, the government has sought solu-
tions to the issue of how to grow SMEs. I t’s
something that seems to ha ve been passed on to
the private sector in recent years, with B EE leg-
islation mandating large corporate entities to
support small businesses.
Partly as a result, business de velopment sup-
port (BDS) — interventions to help start-ups
structure, scale and fund their operati ons — has
become a R20bn industry, says Sifiso Ndwand-
we, executive director of Catalyst for Growth
(C4G), a nonprofit organisation conceptualised by
JPMorgan and advisory firm Dalberg that has
developed an analytics platform for BDS
providers serving SMEs. Even so, the money
spent on BDS reaches just 5% of local start-ups,
C4G’s research has found, leaving the vast
majority unsupported.
The business case for corporates investing in
SMEs would seem sim ple: start-ups offer inno-
vation, leading to opportunities for market dis-
ruption or increased market share. They also
32 financialmail.co.za . December 20 - December 26, 2018
create jobs, which corporates are not able to
do fast enough in the fac e of SA’s unem-
ployment crisis.
“Small-business owners want to gain
access to markets and networks, and
integrate into value chains,” says Bulelani
Ba l a b a lfounder
a, of the Township Entre-
preneurs Alliance (TEA), an initiative aimed
at developing township entrepreneurs.
An effective BDS programme strikes a
balance between these needs, ensuring
enterprise development, where businesses
are built from the ground up, and creating
opportunities for SMEs to ac cess markets.
And the value they offer can be substantial in
terms of material inputs and business guid-
ance. Thurston, for example, says Sorbet
CEO Ian Fuhr told her that she would not fail
with Candi & Co, as Sorbet had already done
the “failing” for her.
Ba l a b a sl a’
printing business found similar
success through BDS. It was incubated
through Raizcorp from 2011 to 2013, whi ch
“really did help me to g et my business
to the next level and think out of the box”,
he says. As a result, his business gre w from
being a broker of printing servi ces to
running its own machines and off ering an
in-house service.
But BDS doesn’t necessarily work in
ev e r y oe’s
n favour.
“Some entrepreneurs move from one
BDS or incubation programme to another,”
says Selebogo “Dr Life sGu d”Molefe, founder
of The Hookup Dinner, a networking com-
munity of entrepreneurs that hosts monthl y
business events.
He believes entrepreneurs need to man -
age their expectations about BDS pro-
grammes, as these are often treated as a
tick-box exercise for corporate social invest-
ment spend in large organisations.
“The problem is that BDS is a c ost centre
item and not a profit centre item, ” says
support is supposed
to help entrepreneurs
get their enterprises
off the ground. It’s had
mixed success
Molefe. To be successful, companies need to
rethink their approach to SME support: if
they go into their SME in vestment not
expecting to make a return, they will not
work to ensure that the supported business
thrives, he says.
Balabala shares Molefe’s scepticism
about BDS. He says there are operators in
the BDS market that should not be all owed
to assist SMEs, as the y don’t know what
they are doing and often don’t have the
interests of the SMEs the y are supposed to
support at heart.
Matsi Modise, a
small business The problem is
development and that business
policy expert, and development
vice-chair of entre- support is a cost
preneur association centre item and
SiMODiSA, says the not a profit
same problems that centre item
plagued the govern- Selebogo Molefe
ment in the SME
sector have carried forward into private sec-
tor support. She believes a significant num-
ber of corporate executives and public sector
administrators providing development ser-
vices have never started their own business -
es. This makes it hard to relate to and under -
stand the needs of SMEs, whi ch can lead to
ineffective interventions.
While many of the plans in plac e for BDS
programmes tend to be sound, M odise says
the sector “faces a problem of im plemen-
tation”, something best solved through col-
laboration between start-ups and c orporates.
Through the TEA, Balabala is doing just
that, working with a number of B DS
providers to create more robust and incl u-
sive programmes for SMEs.
For Thurston, it was such c ollaboration
that ensured success. She credits her
partnership with Sorbet for Candi & Co’s
growth. “I could not have done it any other
w ay ”, she says. x
 feature / drc elections
COUNTRY AT A
C RO S S RO
ADS
Joseph Kabila has picked an awkward candidate as his preferred
successor. The opposition is divided and undermined by ego. But
whatever the outcome of the presidential poll next week, it’s clear the
DRC is finally on a new path
Mélanie Gouby
J
oseph Kabila has never given so
many interviews or had such a b road
smile. As the Congolese president met
with the press in Kinshasa on
December 9, two weeks ahead of histori c
elections, it was as if he was enjoying the
media’s attention for the first time in his 17
years in the presidency. T he role of patriarch
of the nation about to step down and dis -
pense his wise counsel to his successor
seemed to suit him well.
But Kabila’s hint at a possible return in
2023 will not please the majority of C on-
golese, nor reassure them that the polls the y
are about to take part in will be free and fair.
“Well, I am not g oing to rule out an ything
in life,” Kabila told journalists.
“As long as you are ali ve and you have
ideas as strong as you ha ve — a vision — you
should never rule out anything.”
The Democratic Republic of Congo (DRC)
is at an unprec edented crossroads in its his -
tory. It is hoped that elections scheduled for
December 23 will determine its first peac eful
and democratic transfer of power. After the
terror of colonisation, the murder of Patrice
Lumumba, the 30-year dictatorship under
Mobutu Sese Seko, and the suc cessive wars
that brought the Kabilas — father Laurent and
son Joseph — to power, the Congolese peo-
ple will for the first time choose a man (there
are no women running) to lead them for five
years. Or so one hopes.
But as Kabila steps down — against all
odds and expectations, and after delaying the
elections for two years — his shadow looms
large over the vote. H is throwaway com-
ment about a c omeback in five years has
only fuelled fears that polls will not be free
and fair. They’ve also raised c oncerns that
Emmanuel Ramazani Shadary, his designat-
ed da u p h i(an royal heir in the F rench
monarchy), is in fact the D mitry Medvedev to
Kabila’s Vladimir Putin, holding a guaranteed
34 financialmail.co.za . December 20 - December 26, 2018
ticket to the presidency.
It does not help that the electoral c om-
m is soi n has been accused of being sub-
servient to the ruling party, nor that it is
set on using electronic voting machines,
despite the opposition calling them
“defrauding machines”.
The South Korean devices require sus-
tained power and only permit about one
minute per person for voting, a co nstraint
due to the restri cted budget allocated to the
e le c tio n sthat did not allow more machines
to be bought. In Kindu, the only voting
machine for 300 voters rec ently broke
down, and local candidates to the parliamen -
tary elections from all p artei s have requested
that the machine not be used — to no avail.
The broader logistical challenges to
organising elections in a c ountry the size of
the DRC have led in the past to the state
relying on foreign help, through either
donors or Monusco, the UN peac ekeeping
mission in the D RC. This time, offers of sup-
port were flippantly rejected by the govern-
ment on the grounds that the y would come
with an unacceptable degree of foreign inter-
fe r e cne .
Observers from the EU and the C arter
Center have been denied accreditation to
monitor the elections. However, the AU and
Southern African Development Community
will be allowed to send observers. T heir
responsibility is hard to overstate. “A t stake
is not the integrity of an e xercise, but the
longer-term trajectory of the D RC and the
wider Great Lakes region,” says Stephanie
Wolters at the Institute for Security Studies.
It is in this c ontext that three main c on-
tenders will face each other. First, there’s
Shadary, the candidate of the ruling People’s
Party for Reconstruction & Democracy
(PPR D) and Kabila’s hand-picked he i rHis . r ep u tati
designation as candidate was not without
controversy, as none of the seni or members
of the party was in volved in his sel ection.
The announcement was made at the last
minute before the end of the enrolment peri -
od for presidential candidates. Pictures taken
on the day show Shadary looking as sur-
prised as everyone else.
A staunch Kabila loyalist, the p e r m a ne nt
secretary of the PPRD was also the minister
of the interior during the wave of demon-
strations in 2016 in which tens of thousands
of Congolese took to the streets to demand
Kabila step down at the end of his mandate
in December that year.
The extreme violence meted out by t he
security forces led to EU sancti ons against
Shadary and 13 key members of the K abila
regime. Last Monday, the EU declined to lift
them, despite pressure from the D RC, saying
it would “review the restrictive measures in
the light of and f ollowing the elections in the
DRC and [it] stands ready to adjust them
a cco r d i ng
y ”.l
If the ruling party is presenting an a wk-
ward candidate with preci ous little popular-
ity, the opposition has also worked tirelessly
to undermine itself. After months of promis -
ing a unique candidate, and a solemn meet -
ing in Geneva — an odd location that only
underlines p o l itc i a n sdistance
’ from the peo-
ple they claim to serve — the opposition pre-
sented Martin Fayulu as its champion. Then
the pact fell apart in a grandi ose display of
ego. Félix Tshisekedi, the son of Éti enne
Ts hisekedi, the historical opponent to Mobu-
tu, and Vital Kamerhe, a shrewd politician
from the east who used to be alli ed with
Kabila, broke ranks and decided to run
together under their own banner, c omically
named Fatshivit.
Fayulu, a former Exxon executive and
less well-known outside Kinshasa than
either Tshisekedi or Kamerhe, is still backed
by two heavyweights: Jean-Pierre Bemba,
the former warlord recently released after 11
years in jail in T he Hague, who still retains
much popularity but was not l egally allowed
to run; and Moïse Katumbi, the former gov-
ernor of Katanga and the strongest con-
tender, who is in e xile after being c onvicted
of illegal property selling and sentenc ed to
three years in prison in absentia (he deni es
any wrongdoing). Widely appreciated among
the political class in Kinshasa, Fayulu has
remained upright and determined in the past
few years, participating in demonstrations
with the population and retaining a cl ear
political line.
Not as much can be said of K amerhe,
nicknamed “the Kamerleon”, who has a
on for switching sides. He b et ryae d
the consensus against the political dialogue
imposed by Kabila in 2016 by not only par-
ticipating in the dial ogue, but moderating the
d i s c u s s io n .
Tshisekedi, meanwhile, relies mostly on
the aura of his e xtremely popular father
(who died in 2017), and has no politi cal
career of his own. As the leader of the his -
torical opposition party, the Union for
Democracy & Social Progress, he had the
most support of the three candidates in
terms of voting intentions in a poll carried
out before the Geneva debacle.
But during a recent Fatshivit rally at Camp
Luka, one of the poorer neighbourhoods of
Kinshasa, it was Fayulu’s name the crowd
was chanting.
If the ruling party
is presenting an
awkward
candidate with
precious little
popularity, the
opposition has
also worked
tirelessly to
undermine itself
The fiasco of the unique oppositi on can-
didate carries two important consequences
for the December vote.
First, given the o ppo s ito in ’sinability to
present a unified front — at the elections and
for the past three years — it is unclear
whether the candidates aspiring to replac e
Kabila will be any better at running the
country, or be any more capable of putting
their personal interests aside.
Second, a split vote will sim ply make
it harder for the opposition to allege election
fraud, if it c omes to that: Shadary, backed
by the PPRD cam paigning power and
esources, does have a real shot at the
p r e s ide ncy .
What it means:
A Shadary win is likely,
the opposition will
claim vote-rigging, and
demonstrations will
most certainly follow
123RF/ppbig
So what might happen? We can expect,
in any scenario, that controversy and some
form of violence will follow the results.
If the opposition wins, several key players
loyal to Kabila, especially in the security
forces, could refuse to ac cept the outcome
and use the means a vailable to them to c on-
test it.
In the more likely event of a Shadary win,
the opposition will almost c ertainly claim the
vote was rigged, triggering demonstrations in
the urban areas.
Over the past f ew years, as Kabila’s pow-
er became increasingly contested and ille-
gitimate in the eyes of many, armed groups
proliferated in the east of the c ountry. And
while a popular uprising that began in the
western Kasai province — where the Tshi-
sekedis come from — was ruthlessly crushed
by the army, it demonstrated that the pop -
ulation is capable of organising itself.
The tragedy of the electi ons is that it is
assumed, for good reason, that they will be
rigged. So unless the opposition wins, no
outcome will satisfy the populati on. The
Putin-Medvedev game plan hinted at b y
Kabila also does not bode well f or the sta-
bility of the c ountry.
But there is a silver lining: any change,
however small, is a chang e. Whether Kabila’s
intentions are to use S hadary as a puppet or
not, by stepping down he has set the c ountry
on a new path that he will not be entirel y
able to control. After all, much like Putin was
meant to be a B oris Yeltsin puppet, and Kabi-
la himself became head of state to satisfy the
plans of his father’s fri ends, his successor
will be the president.
For better or worse, the DRC is writing a
new page of its history — one that is the start
of an entirely new chapter. x
December 20 - December 26, 2018 . financialmail.co.za 35
media & advertising adfocus awards

All the winners at

the 2018 FM AdFocus
Awards

CREAM OF THE CROP

Luminaries from the local advertising industry came out in their numbers at
the end of November for the FM’s annual AdFocus Awards, which recognise
agency performance. Agency of the year was Ogilvy Johannesburg.
Medium-sized agency was won by the King James Group and small agency Lifetime Achievement

of the year was Collective ID. Grid Worldwide was named specialist agency Award: Ludi Koekemoer

of the year and Vizeum won network agency of the year

Agency of the Year Award: African Impact Award: Dentsu Aegis Network Creative Challenge
Ogilvy Johannesburg Award: M&C Saatchi
Abel and Takealot

36 financialmail.co.za . December 20 - December 26, 2018

 Network Agency of the Year: Vizeum

Large Advertising
Agency of the Year:
Ogilvy Johannesburg

Specialist Agency of the Year: Grid Worldwide

Student of the
Year Award:
Thamsanqa Gwafa,
Felicity Davies and
Faith Shields

Medium Advertising
Agency of the Year: Small Advertising Agency
King James Group of the Year: Collective ID

Independent Media Agency Partnership of the Year: FCB Joburg and Toyota
of the Year: TMI Media

December 20 - December 26, 2018 . financialmail.co.za 37

 IN GOOD FAITH BY CARMEL RICKARD
ON THE CASE
The new commercial court in Gauteng, if it works as planned, could change
the way corporate disputes are managed — to the benefit of all parties
T
he next big litigation
trend in 2019?
The r e’s no doubt the
answer lies with the
new commercial
court in Gauteng.
The court’s official existence and
@carmelrickard
applicable practice directives were
announced in October by Dunstan
Mlambo, the judge president of the
Gauteng division of the high c ourt.
And some cases are alread y in the
pipeline, making their way to
s et t le ment
or a hearing.
The court is envisaged as a
dynamic operation, with dis-
putes case-managed by the
judge or judges likely to hear
the matter when it g ets to
court. Case management,
already delivering good
results in jurisdictions like
Namibia, allows for the res-
olution of particular matters
before trial, making the
actual court hearing quicker
and more focused. During
meetings with the parti es,
the judge helps clarify a
timetable, witness state-
ments and exchange of
documents, with agreed
deadlines to keep the pretrial
process moving efficiently
towards the hearing.
Ml ambo’s vision is of a court
offering efficient and faster resolu -
tion of commercial matters.
Certainly, there is a need f or
this. As attorney Jac Marais, part-
ner at Adams & Adams, puts it, it is
not good enough to tell the CE O of
Mlambo’s vision an international company that it
is of a court will take four or five years for a
offering final decision on whether the c om-
efficient and pany is entitled to certain money.
faster resolution “Because the courts have been
of commercial perceived as s low, many parties
matters have chosen arbitration instead,”
38 financialmail.co.za . December 20 - December 26, 2018
Marais says. “If the commercial
court project takes off — and there
is every indication that this is
already starting to happen — then
this becomes a viable alternative.”
From Mlambo’s a n no u nce me nt , Litigants also tend to pref er it
it seems the c ommercial court will
tend to go broad in deciding what
cases to a ccep t.
Cases should “have their foun-
dation in a c ommercial transaction
or relationship” and might include
import or export of goods; carriage
of goods by land, sea, air or pipe -
line; insurance and reinsurance;
123RF/Maike Hildebrandt
banking and financial services;
medical scheme matters; and c om- certain aspects of arbitrati on could
mercial issues arising out of busi -
ness rescue and insolvency cases.
It also seems qui te easy for a
case to be transf erred to the c om-
mercial court, simply requiring a
letter to the judge president or
deputy judge president ex plaining
why the case is, or should be c on-
s ide r e da ,commercial matter of the option for dispute resolution. It
sort that would warrant transf er.
The trend for some years has
been for difficult cases, or matters
for which time delays are partic-
ularly intolerable, to go to arbitra-
tion. This is seen as g enerally
cheaper because the parti es are
committed to getting a quick result.
because they have input on who
will preside and th us enjoy confi-
dence in the arb itrator.
A win-win solution
But that trend has created its own
d i f f ic u lt ie
Assmajor
. commercial
matters disappear from the c ourts,
so the pool of judg es with expe-
rience to handle such issues
grows smaller.
And because arbitration
awards are generally confi-
dential, precedents are not
being created.
Generally, commercial
law precedents are “stuck in
the 1980s”, says Marais.
“Many commercial matters
are going to arbitration and
the resulting judgments
remain confidential.”
The new court could turn
these problems around, cre -
ating a bigger pool of expe-
rienced judges and a new
body of precedent-setting
judgments. And when that
starts to happen and c onfi-
dence grows in the ne w system,
start to lose their appeal.
If parties are certain that cases
will be heard qui ckly in court,
without unexpected and expensive
delays — and that they will be
heard by experienced judges famil-
iar with a shared set of prec edents
— this might become the preferred
could end up being less e xpensive
to litigate in c ourt than to pay arbi-
t rat ors’fees and hire a venue. x
 money&
investing Analysis and coverage of SA's top companies and investments - the guide to where your money should be

CONSTRUCTION

Wrecking ball
hits home
Group Five’s malaise is a symptom of bigger
problems in the building industry, which has
struggled to adapt to change

Siseko Njobeni njobenis@businesslive.co.za

ý Shareholders who coughed up money for

Group Five shares at the beginning of 2018 ha ve
virtually nothing to show f or it.
The construction conglomerate has continued
its slide because of pressure on
Group Five’s margins, lower revenue and a
rating will lower order book.
improve only if Its market cap has shrunk
the firm returns from R4.9bn in September
to sustainable 2013 to R25.8m.
cash Those who saw value in
profitability Group Five — which operates
in SA, some African countries
and Eastern Europe — and pinned their hopes on
its restructuring and rati onalisation interventions
have had their investments badly damaged: the
share price has fallen more than 98% sinc e
January. That makes it an even worse
performer than Steinhoff International,
which has fallen 81%.
What went wrong?
For a start: not enough in vestment by the pri-
vate sector and the g overnment, which affected
Group Five and its peers.
Esor Construction has filed for business res-
cue; its rescue plan is set to be finalised in
123RF/06photo

February, according to its rescue practiti oners.

December 20 - December 26, 2018 . financialmail.co.za 39

money&investing
Basil Read and Aveng, former titans of the c on- EMBATTLED Group Five’s rating will im prove only if the
struction sector, are also struggling. Aveng Group share price (R) – weekly firm returns to sustainable cash profitab ility on
Construction companies have been unable to the back of a profitab le order book, an extensive
26
adjust since the infrastructure boom bef ore the 24 restructuring of operations and rigour of risk
2010 Fifa World Cup was followed by the global 22 management protocols, says GCR.
recession and lower domestic infrastructure 20 Adding to its woes is the fact that G roup
investment, in particular capital expenditure by 18 Five’s client in Ghana, Cenpower, has filed an
16
the public sector. 14 additional claim of $60.5m for its failure to
When the global ec onomic crisis hit 10 years 12 complete the Kpone project on time.
ago, Group Five lost contracts worth R4bn in 10 This claim followed a previous claim to
Dubai. It hasn’t recovered from such setbacks. 8 Group Five’s bank guarantee providers in
6
Other than the macroec onomic environment, November for $62.7m to be paid f or contract
4
Group Five is also a vi ctim of its own missteps. 2 delay damages at Kpone.
Stephen Meintjes, head of research at 0 Ron Klipin, portfolio manager at Cratos
Momentum Securities, points to the pursuit of 2014 2015 2016 2017 2018 Wealth, says there is no end in sigh t to Group
growth outside SA. Source: Iress Five’s woes. Klipin expects the company’s cur-
rent financial year, which ends in June 2019, to
He says taking on be disappointing.
large projects in the ADVERSE CONDITIONS “The building and
rest of Africa comes Group Five share price (R) – weekly construction industry
with risks. “How many 45 is still experiencing
42
SA companies have 39 low levels of activity.
Themba Mosai: paid school fees in the 36 This will result in
Group Five’s CEO rest of the c ontinent? 33 shrinking order books
has seen his 30
Tiger Brands and 27 [and] operating mar-
company’s share
price fall 98% Shoprite got burnt 24 gin pressures, until
21
this year b a d ly” . 18
after the elections
Freddy Mavunda One factor looming 15 when, hopefully,
large over Group Five’s 12 confidence should
9
performance in 2018 6 r et u r”nhe, says.
has been the Kpone 3 Still, Group Five’s
independent oil and 0 share price doubled
gas-fired plant in 2014 2015 2016 2017 2018 last Thursday to 48c
Gh a n a . Source: Iress Dividend from Wednesday’s
The engineer- closing price of 24c
ing, procurement and construction con- after it announced that it had attracted interest
tract, which Group Five won in 2014, from numerous suitors.
contributed the bulk of the group’s “Shareholders are advised that Group Five
R1.3bn net loss for the year to end- has received expressions of interest from a
Ju ne . number of parties for various parts of the
group’s business,” the company said.
In November, ratings agency Despite the dispute over its G hana project
Global Credit Rating (GCR) down - and low levels of public infrastructure spending,
graded the company’s long- and perhaps there could be hope yet f or the belea-
short-term ratings. In its rationale guered Group Five. x
for the decision, GCR cited the
cumulative attributable loss to Group Five
shareholders of R2.2bn in the two
years to June 2018.
SELL
GCR has put G roup Five, headed by Target price: R1.85
Themba Mosai, on a negative outlook, say- Potential upside: 704.3%
ing there are signifi cant downside risks, * Based on analysts’ consensus forecast
“particularly liquidity and reputati onal
challenges facing the group … Further
losses/erratic profitability due to Aveng
[among others] weak contract execu-
tion, project disruptions, failure to
HOLD
secure contract awards timeously Target price: R8.50
and/or failure to meet liquidity tar - Potential upside: 70%
gets would further weaken credit * Based on analysts’ consensus forecast
protection factors”.

40 financialmail.co.za . December 20 - December 26, 2018

market watch by Marc Hasenfuss
How to win at roulette
T
he emergence of Value
Capital Partners (VCP) as
an influential shareholder
at Grand Parade Invest-
@marchasenfuss ments (GPI) is not surpris -
ing. In the past f ew weeks
it has snapped up most a vailable GPI
scrip to build a useful 16. 6% stake.
It’s not like VCP is unfamiliar with
key assets in GPI’s portf olio. Earlier this
year it underwrote Sun International’s
R1.5bn rights issue. While much of the
focus at GPI is on its eff orts to find a
profit recipe for Burger King, its mo st
tangible store of value is its minority
holdings in GrandWest Casino in Cape
Town, Golden Valley Casino in Worces-
ter and highly profitable limited-payout-
machine company SunSlots. All three of
these are controlled by Sun Internation-
al. So far VCP has not shown its hand at
GPI. I wonder if, perhaps al ong with
other activist shareholders, it might be
keen to push a restructuring at GPI that
would separate the gaming in vestments
from the food segment. The gaming
investments represent a compelling
bundle for investors keen on regular
dividends, and for assets highly lever-
aged to an ec onomic recovery.
The food segment would be more
difficult — without the dividend flows
from the gaming assets, funding f or
rollouts of Burger King outlets could be
a problem. Then again, if a ne w and
deep-pocketed strategic partner —
perhaps Burger King Europe — could be
brought in as a major equity partner,
GPI shareholders might be satisfied
with holding a smaller stak e in a
better-managed and profitable fast-food
e nt e r p r i s e .
I note VCP secured board represen -
VCP might tation at Sun International not long after
be keen to underwriting the rights offer. Let’s see if
push a the same happens at GPI, where, sig -
restructuring nificantly, VCP’s participation has
at GPI that already been welcomed by an executive
would director.
separate the
gaming Hook, line and sinker
investments My story on Abagold (in this editi on)
from the food might make commentary in fishing
segment giant Oceana’s annual report more
GLOBAL MARKETS
Apple to make
$1bn Texas bid
relevant. Oceana argues that the
expected increase in demand f or fish Apple will invest $1bn to build a
and the largely static wild-capture rates second campus in North Austin,
point to substantial growth in gl obal Texas, and another $10bn on new
aquaculture. The group notes rec ent data centres over the next five
projections forecast production growth years, as it aims to create 20,000
of 37% by 2030 over 2016 le vels. jobs in the US.
This should be a boon f or Oceana’s US President Donald Trump has
existing fishmeal and fish oil businesses. warned of slapping tariffs on iPhones
But it also reaffirms a willingness to and other Apple products imported
drop lines for “carefully targeted acqui- from China, a major consumer
sition in the aquaculture sector”. market for the California-based
company. Reuters
Clear dividend signal
The share price of TeleMasters is up
around 130% so far this year to 115c.
That should cause ringing in the ears f or
punters who have continued to prefer
its more illustrious telecoms sector
countermates. Over the past three
years the company’s share has on
Bloomberg/Jeenah Moon
occasion plunged precipitously —
touching levels below 30c.
The concern has mostly been
whether TeleMasters would continue its
policy of paying out quarterly dividends.
New faith in TeleMasters seems to stem
from a stronger financial position with PLANTING IN THEIR
net cash flows from operati ons a more BACKYARD Apple’s
reassuring R17m (around 40c a share) announcement follows a promise
for the year to end- June. The company in January to invest $30bn in the
also holds cash on hand of R11m (26c a US and comes as companies with
share). I confirmed with founder Mario manufacturing operations outside
Pretorius that since listing in 2007, America have been facing
TeleMasters has returned R35m in di v- political pressure to ramp up
idends. That is equivalent to around 78c investments at home
a share — not a shabby return over 10
years for original investors who took
scrip at 50c a share. I t’s still easy to ECB to stop its
dismiss TeleMasters as unadventurous printing presses
… at least in comparison with the strate -
gic stretches made by larger rivals like The European Central Bank (ECB) is
Blue Label and Huge. Then again, it’s all but certain to end its lavish bond
worth remembering that some of the purchase scheme, but will take an
most enduring businesses from the increasingly dim view on growth,
late-1980s listing boom — CMH, Spur, raising the odds that its next step in
Bowler Metcalf and Nu-World — held a removing stimulus will be delayed.
singular operational focus, shied away The long-flagged end of bond
from corporate activity and guarded buys must be irreversible for the sake
very conservative balance sheets. of credibility, but with France and
Tightly held TeleMasters could easily Italy in political turmoil, Brexit in flux
ring up more gains in 2019 if the half - and growth slowing, ECB chief Mario
year to end-December results show Draghi will be keen to emphasise
sustainable profit signals. x other forms of support. Reuters
December 20 - December 26, 2018 . financialmail.co.za 41
money&investing
market share in retirement administrati on and THE BIG FIX
consulting, it has been losing staff. H e is con-
ALEXANDER FORBES cerned that head offi ce costs ballooned by 30% Alexander Forbes Group Holdings
to R102m — excluding the R52m terminati on fee share price (c) – weekly

Taking a for the IT project.

The high cost at the c entre reflects Darfoor’s
taste for nonproductive strategic initiatives,
780
750
720
690
sometimes called “thought leadership”. He also
big hit in a increased the costs of top management by giv-
ing positions primarily to European expatriates
on large salaries.
660
630
690

tough year
570
De Villiers says: “There are too many 540
peculiarities in the SA market and my prefer- 510
ence would be f or executives who understand 480
the market well.” 450
It was known that there would be De Villiers is also taking a sec ond look at 2016 2017 2018
write-offs, but for a R4.5bn market cap Darfoor’s project to open up the F orbes product Source: Iress Dividend
company, the numbers were huge
suite to independent finan -
Stephen Cranston cranstons@fm.co.za cial advisers.
“We are an advice-led
ý We will probably never know the precise business, so the pri ority
circumstances around Andrew Darfoor’s dis- Dawie de Villiers: should be on getting our
missal as Alexander Forbes CEO in September. Took over as CEO financial planning business
in November
But the results for the six months to S eptem- right. Why does it have a
Freddy Mavunda
ber gave some hints. It was widely known that smaller footprint than our
there would be write-offs, as the board had institutional business?
decided to discontinue the R1bn IT project in “I am not sure that there
which Sapiens was the lead c ontractor. would be the righ t align-
But for a R4.5bn market cap company, the ment between ourselves
numbers were huge. There was a R52m can - and an independent.”
cellation fee paid out in cash to S apiens, which
was taken through the inc ome statement, as De Villiers says he do e s
well as a R 287m software impairment on the not intend to set up an
balance sheet. agency force in the S anlam
Wallie van der Walt, a portfolio manager at mould, but it has sc ope to
Abax Investments, questions the quality of d ue offer more retail prod ucts to
diligence carried out before Forbes embarked its 1.2-million members. Its
on the project, especially as it doesn’t ha ve the Income Solution i n -f u nd
resources to spend on IT in the quantiti es that preservation fund and living
the large banks do. annuity has gathered R1.4bn
David Talpert, an analyst at Avior Capital since its launch in February.
Markets, says his contacts at Alexander Forbes Talpert calls the operat -
now say that the existing systems are more ing result “de cent”: up 9%
than adequate after all, especiall y in the c ore before nontrading items and
institutional business. head office costs. Alexander
Dawie de Villiers, former head of Sanlam Forbes Investments, the old
Employee Benefits, took over as CE O in Investment Solutions, con-
No vember. On Tuesday he announced the res- tinued to be the best per -
ignation of three members of the co mmittee: former, with operating profit
CEO of Alexander Forbes Investments Leon up 17% to R 217m, even
Greyling; chief risk officer Vishnu Naicker; and though assets under man -
head of human resources Christian Schaub. agement were up just 3% to
More heads are expected to roll. R315bn. Its main fund, Per-
De Villiers is committed to simplifying the former, is still a popular
group and leveraging its core strengths. He says option, growing 15% to
the health-care consulting, for example, which R118bn. The unit has been
increased income by 8%, is much strong er than able to cut c osts and waste
its counterpart at Sanlam. less management time by
Louis Chetty, financials analyst at Stanlib, subcontracting its interna-
says that in spite of its strong b rand and high tional asset management to

42 financialmail.co.za . December 20 - December 26, 2018

 123RF/adam88x

Mercer, Forbes’s largest shareholder, with

a 34% stake.
De Villiers says he will review the current COAL
system in which asset consultants work for
Alexander Forbes Investments, acting in many Minergy says industrial
ways like its sales force. users across the border
“The asset consultants need to work more in SA will get
closely with benefit c onsultants to understand ‘consistent quality and
the needs of the cli ent, but of c ourse they still guaranteed supply’
need to be up on mark et trends, as trustees
want feedback on that.” Lisa Steyn steynl@businesslive.co.za
Talpert says that the Forbes balance sheet is
inefficient. It has a regulatory surplus of R1.1b n.
De Villiers says it is time to rati onalise the
insurance licences in the group, as there is
an investment-only life licence at Alexander
Forbes Investments, a retail life licence in
Alexander Forbes Life & Risk, whi ch is now
closed to new business, and a li cence to do
group risk business — death and disability cover
for pension funds.
In the long run Forbes will need to c onsider
whether it should stay in the volatil e and cap-
ital-intensive group risk market — at any rate it
might make more sense to operate sim ply as a
broker. In the half-year there was a R3m loss
from group risk as disab ility claims spiralled.
De Villiers says the short-term insurance
underwriter might seem an odd fit in the group,
but it makes a strong c ontribution, with profit
Botswana ready
up 50% to R90m, with loss rati os on the motor
book coming down.
It doesn’t look as though Forbes is in expan-
sionary mode. If anything, it will be selling busi -
to light fires
nesses, including its closed lif e book.
It would have a ready buyer for its subscale
offices in Nigeria, Uganda and Zambia in ý It’s been known since the 1960s that Digging through the archives, Astrup hap-
Mercer, which offers Botswana has vast amounts of c oal reserves, pened upon detailed drilling reports f or the site.
multinationals a global says explorer and geologist John Astrup. “So we knew we were on some g ood coal
It doesn’t look benefits programme Under the welcome shade of a tree in the he r e” ,says Astrup.
as though known as Arrive. summer heat, he casts an e ye out over the flat, “That old information helped us a lot in terms
Forbes is in Talpert says Alex a nde r sandy Kalahari landscape near the M inergy of where we l ooked.”
expansionary Forbes is ridiculously opencast coal mine, just 50km north of the Minergy, a micro-exploration company run
mode. If cheap at R5, but e ven capital, Gaborone. by Astrup and his partner Claude de B ruin, was
anything, it will though it can add re v- Better known for its diamond ind ustry, the the early start for the company. Now the
be selling enue through new prod- backbone of its economy, Botswana is estimat - Botswana-listed group is mere metres a way
businesses ucts there is little growth ed to have 212-billion tons of coal. (SA, by com- from hitting coal in its Masama opencast pro-
in its core consulting parison, has an estimated 66. 7-billion tons in ject, outside the village of Medie. It’s on track to
business, and the investment side is leveraged recoverable coal, about 7% of the world’s total.) produce coal by February.
to weak financial markets. “So [Botswana has] massive amounts of c oal, The resource is estimated to ha ve
A game-changer could be the growth in its but only one coal mine,” says Astrup. That’s 100 years of life and the aim is to prod uce
umbrella fund book. It is the No 2 player after Morupule, which feeds Botswana’s only power 2.4Mt of coal a year.
Old Mutual, but Forbes’s more independent, plant, which caters for the entire c ountry’s “Many people proved there was a l ot of coal
open architecture approach should help it win energy needs. in Botswana but they never really started a c oal
new clients. In the 1970s and 1980s, the b ig oil companies m i ne” ,Astrup says.
The umbrella fund’s assets increased b y 9% — Shell, Total, BP and others — were drilling all “The coal being there is onl y half the story.
to R80bn. over the country. You need a market.”
And at least Forbes has maintained the inter - “In fact, our project here was drill ed by Shell And for Minergy, that market is just across
im dividend at 18c a share as it remains cash in the 1980s,” he says. Shell had wanted to the border — in SA.
positive, with cash generated by operations up export coal to Europe, but pri orities changed Coal producers will tell you that it’s ultimate -
5% to R492m. x when the oil pri ce began to boom. ly a logistics game. Despite being in another

December 20 - December 26, 2018 . financialmail.co.za 43

money&investing
country, Minergy says it has an ad vantage over
SA coal producers in its ab ility to supply indus-
trial users in the northern parts of the c ountry.
CEO Andre Bojé says Minergy’s coal will not
aim to plug the holes f or Eskom, which is facing
a supply crunch. But its customers, industrial
users such as c ement makers, are going to get
“consistent quality and guaranteed suppl y at
similar pricing”.
Critically, cement makers and the like can
take the finer c oal — the duff — while the larger
pieces (“peas” and “nuts”) could be sent further
into SA at competitive prices.
Astrup says that while it seems M inergy
will be the first B otswana coal producer to mar-
ket, it doesn’t want to be the onl y one. At this
rate, it’s not likely it will be.
Maatla Energy is pursuing a li cence to mine
its Mmamabula project in B otswana. And
Shumba Energy’s
Mabesekwa mine is
Many people reportedly at an
proved there advanced stage and
was a lot of coal due to be c ommissioned
in Botswana but by 2021.
… coal being African Energy
there is only half Resources also has a
the story. You project in the works and
need a market Morupule, spurred on by
John Astrup high global coal prices, is
ramping up production
aimed for export.
“There are so many synergies when you
have a coal industry — better infrastructure,
more wagons, more capacity on the rail way
lines, which brings your tariffs down,” says
Astrup. “So we don’t want to be a mine on our
own. Everyone will have to find their little pi ece
of the market.”
44 financialmail.co.za . December 20 - December 26, 2018
The Minergy opencast coal mine, north of Gaborone
Once in production, Minergy plans to list on
the London Stock Exchange’s Alternative
Investment Market.
The company expects a warm welc ome.
“They like mining, they like Africa and they
specifically like Botswana,” Bojé says.
Pieter du Preez, senior economist at NKC
African Economics, agrees that Botswana
is a premier investment destination in
Southern Africa.
It has strong macroec onomic fundamentals,
solid economic and fiscal poli cies, and remark-
ably low public debt levels. It is perceived as
one of the l east corrupt countries in Africa.
“Botswana also has the most fa vourable
sovereign credit ratings on the Afri can conti-
nent, well above the junk -status grade. On the
political front, Botswana will continue to be one
of the continent’s model democracies,” he says.
Still, the country has numerous challenges to
overcome, he says.
Mainly, it remains over-reliant on the volatil e
diamond mining industry despite “s ig nfici a nt
e ffo rts”to diversify the economy.
Efforts have been complicated by a shortage
of skilled labour coupled with relatively high
labour costs. Recurring droughts have con-
tributed to a weak perf ormance by the
agricultural sector.
Though the fledgling junior coal-mining
industry has potential, for now, the b iggest chal-
lenge for Botswana remains diversification
away from diamonds, D u Preez says. x
PEREGRINE HOLDINGS
Securities
business
on way out
Group says it now wants to focus on
capital-light, high-annuity businesses
with limited key-man risk
Stephen Cranston cranstons@fm.co.za
ý Previous Peregrine CEOs considered its
broking and structuring business to be the glue
that kept the group together.
After all, the Peregrine Capital hedge fund
manager was an im portant client and it was a
supplier to other group businesses such as
wealth manager Citadel and its UK -based family
office Stenham.
Now, subject to Competition Commission
approval, Peregrine will dispose of its securiti es
business altogether. CFO Claire Coward says
Peregrine Securities no longer fits into the
current group model, which is to f ocus on
capital-light, high-annuity businesses with
limited key-man risk. Peregrine Securities had
numerous calls for capital.
“The market is starting to see that we ha ve
been evolving into a wealth manag er with some
strong asset-management skills,” says Coward.
For Peregrine, 56% of its earnings in the six
months to September are in dollars and pounds,
up from 38% in the c omparable period.
It even acquired a toehold in the institutional
market through its 30% holding in in vestment
boutique Electus.
Pe regrine’s results are messy, as the R65m
return from proprietary assets, which were
unbundled into Sandown Capital, were not
repeated. And Peregrine Securities is treated
as a discontinued operation, ironically hav-
ing a great swansong, with earnings up 54%
to R77m. Normalised headline earnings for
the group were up 4% to R 283m.
The proceeds from the Peregrine Secu-
rities sale will be R1b n, which Jacques
Plaut of Allan Gray (the group’s largest
institutional shareholder) considers to be
a low multiple.
Group CEO Rob Katz says some of this
will come back to shareholders, through
share buybacks rather than a special di vidend.
There are bills to settle first, such as R72m in
tax, R250m for the debt incurred to fund the
securities business last year, R 28m to pay back
other loans, and R100m to em powerment part-
ner Nala as a dividend from the SA business.
There will be R550m left over, but C oward
says about R200m has been earmarked for
Citadel to take over another financial planning
practice. It has bought two large players, Wealth
Corp and Consolidated Financial Planning.
Citadel’s overall profit increased b y 21% to
R114m and more than 95% is from fixed f ees,
though the 25%-30% of foreign currency rev-
enues benefits from a weaker rand.
The client retention at Citadel is 97%, in line
with the “s tic kines s e” xperienced by competi-
tors such as I nvestec Wealth. And unlike insti-
tutional managers, Citadel still has net infl ows,
with R2.2bn of new money against R1.2bn of
outflows such as pension payouts and R700m
(out of R51bn) in client mandate terminations.
Peregrine Capital has suffered from with-
drawals along with the rest of the hedg e fund
industry, notably from Sygnia, which closed its
funds of hedge funds. Katz
argues that the funds ha ve a
highly marketable history:
the High Growth Fund has
a 26.4% annualised
return over 20 years.
Katz says co mp etitors
such as Laurium, Tanta-
lum and Fairtree have
started running conven-
tional unit trusts to
supple -
Rob Katz: Some of the
proceeds from the
Peregrine Securities
sale will come back to
shareholders
Freddy Mavunda
ment their incomes. “We think it is vital that
Peregrine Capital focuses on what it does well.
It can’t be all things to all peopl e.”
But Peregrine Capital is hardly indicative of
the “steady Eddy” group Peregrine Holdings
wants to become, as earnings were down more
than two-thirds to R13.3m. I t also appears to
have key-man risk with old-timers such as
Dave Fraser remaining the face of the business.
But Coward says there is a deep bench, and
the first generation isn’t necessarily that
involved in the day-to-day operations.
The business with clear k ey-man risk is Java
Capital, which advises listed companies, mainly
in the property sector — the top management
owns the key relationships. With such a dis -
astrous year for property it is no surprise that
Java’s earnings were down 40% to R11m.
Coward says Java Capital is no l onger con-
sidered core, and would never have fitted in
with the current management’s philosophy.
“We are happy to hold on but would willingl y
accept a well-priced offer to buy our holding.”
Coward says Peregrine will change from a
highly decentralised business into a more c o-
ordinated group. Until recently, Citadel took little
notice of its sister business in the UK, asset
manager Stenham.
“But where it makes sense for Stenham to do
international investment management or
administration for Citadel, it m ust do so. And we
will be consolidating our trust activities on the
Channel Islands,” says Coward.
Stenham doubled its earnings in the six
months to September to R95.3m.
Citadel is reluctant to c ompromise its per-
ceived independence by pushing Stenham
products too hard. But Stenham has a wide
menu to offer, including a global macro fund,
long-only equities and even a global health-care
fund. Citadel should c onsider putting some of its
own staff into Stenham.
Peregrine has been an undervalued share f or
some time, and is on a p:e of barel y seven.
The unbundling of Sandown Capital and the
sale of Peregrine Securities should unlock value
by creating a capital-ligh t, more focused group.
In recent reports Sanlam valued the share at
R29.30 and Avior Capital at about R 27 — it cur-
rently trades at R 19. Avior’s David Talpert says
Peregrine is cheap given the prospect of share
buybacks, a 9% f orward dividend yield and its
large rand-hedge income.
Allan Gray’s Plaut argues that Peregrine is
trading on 12 times c ontinuing operations from
operating businesses, which excludes the
Peresec earnings and the one-off perf ormance-
fee income from the now sold S tenham prop-
erty business.
Peregrine already has good assets. Now it
has to sweat them more. x
December 20 - December 26, 2018
ABAGOLD
Many more
fish to fry
in future
Severe damage caused by red tide last
year affected what appears to be a well-
run and promising business
Marc Hasenfuss hasenfussm@tisoblackstar.co.za
ý The latest annual report b y unlisted abalone
farming venture Abagold might find interest
outside its small pool of pub lic shareholders.
Abalone farming, and aquaculture in g eneral,
has drawn attention at JSE-listed fishing enter-
prises this year. Afri can Equity & Empower-
ment Investments-controlled Premier Fishing &
Brands is in the throes of a major e xpansion of
its Gansbaai abalone farm, while B rimstone-
controlled Sea Harvest snagged a major share of
Viking Fishing’s diversified aquaculture offering.
The JSE’s big fish, Oceana Group, has also sig -
nalled its intention to trawl for aquaculture
opportunities, and there has been m uch pon-
dering around the future of A VI-controlled I&J’s
sizeable abalone enterprise.
Increased interest in Abagold is probably fol-
lowing the company’s determined attempts to
rebuild its production pipeline after a de vastat-
ing red tide incident at its H ermanus farm in
early 2017.
The immediate response to this e vent was to
introduce “adverse water quality” plants, which
chair Hennie van der Merwe says significantly
reduces the potential im pact of another red tide
event. But looking at the l onger term, Abagold
stresses that the lessons from the incident made
it clear that further di versification, geographical-
ly and in prod uct offering, is critical to sustain-
able success.
The company now has an updated manif esto.
It reads: “Abagold, the integrated and sustainable
agribusiness with core competency in and focus
on aquaculture and a di versified global footprint,
de lvi e r i ng
premium-quality products through
innovation, branding and partnerships.”
The manifesto appears deliberately open-
ended, leaving plenty of scope for Abagold’s
diversification thrust — possibly even to
. financialmail.co.za 45
 money&investing
beyond seafood.
Diversification to date has
resulted in Abagold pressing on
with its joint venture to de velop the
abalone farm in Oman, and in plans to
develop a sea bass fish farm in M auritius.
Investments by the company in Specialised
Aquatic Feeds (in which Sea Harvest-aligned
Viking Aquaculture is a signifi cant minority
shareholder) and Port Nolloth Sea Farms
Ranching, also look to off er promising aquacul-
ture niches.
At the core, Abagold’s key thrust is on secur -
ing production at the Hermanus farm.
Van der Merwe says the knowledge that
the business could potentially be hit by a red
tide event again focused a “t r e me ndo u s
effort and financial c ommitment” on
designing, developing and installing
a multifaceted defence mechanism
to protect the farms and future
o p e r at io n s .
He says the decision by manage-
ment to anticipate the benefit of
incremental spat production
through significant early investment
in the hatchery expansion was
correct, and enabled increased spat
production in the fiscal year.
The annual report shows the
hatchery produced 9.53-million spat
that were transferred to the farm to
speed up repopulation of the farming
o p e r at io n s .
Van der Merwe says this focus
allowed the business to achi eve signif-
icantly higher growth than originall y
planned. “It will provide us … with more
options to redesign and shape the pipelines
123RF/Larisa Vasileva
for future market requirements.”
The key question is whether other fishing
companies — especially those with sizeable bal -
ance sheets and available funding — would dan-
gle bait for Abagold while it is still pushing f or
operational diversity and re-establishing its pro -
duction pipeline in Hermanus.
Van der Merwe concedes the financial
resources of the business were tested in the
past financial year on the back of a decisi on
to harvest only 75% of growth in order to
repopulate the production pipeline as qui ckly
as possible.
He says the decision about harvesting
meant the market received less than 50%
of the volume of product sent in 2017.
Van der Merwe says this contribut-
ed to Abagold dipping into the
cash pile that had been
retained in 2017 to fund
this restocking and
46 financialmail.co.za . December 20 - December 26, 2018
system, which is set f or
completion in the financial
year ahead.
While Abagold seems to be
determined to rebuild and rep o s ito in ,
these efforts will hinge on a c ontinued
recovery in profitability and c onvincing
cash flow generation.
In this regard it is heartening that V an der
recovery effort. Merwe reports that the hatchery di vision per-
He believes the financial reserves created in formed excellently in 2018 with a ne w “stretch”
prior years will allow the business to sustain target of 1.6-million spat per month. “T he expan-
itself over the next 18 months whil e the recov- sion of the facility meant that the hatchery
ery of the pipeline volumes c ontinues. reached more than double its original capacity
Obviously, Abagold’s cash generated from by December 2017.”
operations was lessened by the reduction in He stresses that the c onsistent production of
sales. Van der Merwe says the management increased volumes of high-quality spat to
team continued to work diligently during Abagold’s farms is the essential basis f or the
2018 to maintain the health of the business’s recovery of the prod uction pipeline.
working capital. Van der Merwe adds that expansion on other
“Initiatives such as abalone farms also led to a high demand f or
The manifesto managing stock of fin -
appears spat in the next 12 months.
ished goods, reducing “This division remains the platform for the
deliberately de bt o r days
s ’ to below
open-ended, rest of the operati on to achieve growth targets,
30 days, as well as better competitive feed conversion rates and c ost effi-
leaving plenty of payment terms negotiat-
scope for c ie ncei s”, he says.
ed with suppliers, were The bottom line is that A bagold appears to be
Abagold’s all continued in the cur -
diversification a well-run and promising business rendered
rent year.” vulnerable by circumstances beyond its control.
thrust Still, the cash flow Gut feeling is that the larg e listed seafood
statement showed an counters on the JSE will closel y monitor devel-
outflow of R32m c ompared with an infl ow of opments here — perhaps hoping that A bagold, at
almost R100m in the 2017 financial year. some point, might feel more buoyant with a
This was compounded by a decision to carry deep-pocketed strategic shareholder on board. x
forward 42t of stock ( worth around R16m) in a
bid to realise better value in c oming months
from the added growth.
At the end of J une Abagold’s net debt
increased to R55m from a pre viously ungeared
position, with the R37m insuranc e proceeds
(stemming from the red tide e vent) mobilised
for the adverse water quality protection
shop talk by Zeenat Moorad
@zeenatmoorad
e: mooradz@bdlive.co.za
Public goes
private
I
n SA, penny-pinching shop-
pers looking to economise
have always had a tendency
to rely on the reputati onal
strength and goodwill of a
branded product — with pri-
vate labels inspiring less trust.
Private labels, also known as house
or store brands, account for about a
quarter of the f ood that is sold through
modern food retail worldwide. But
locally they’ve often been perceived as
being a generic no-frills or inferior-
quality option.
This is changing.
Nielsen says sales of private-label
products in SA now equate to R49 .3bn
annually and the sector c ommands a
healthy 21.1% share of the S A r etail
sector, up from 20% in 2017 , and (this
is the important bit) ahead of b randed
product growth in the c ountry.
“Private label” is defined as prod -
ucts that are sold e xclusively by a spe-
cific retailer or chain of stores and
includes store brands, which feature a
r et a i le rown
’s branding.
All SA’s grocers have their own
v e r s io n s .
They’re a boon f or retailers as they
generate higher average price margins
because they require minimal adver-
tising expenditure, lower research and
development costs and, usually,
reduced packaging costs.
Locally, we tend to rel y on the
good-better-best architecture for pri-
vate label: a val ue or cheaper alter -
native, a standard-priced alternative
and a premium or more expensive
private label.
48 financialmail.co.za . December 20 - December 26, 2018
The 2018 Nielsen Shopper Trends
report found that 77% of local shop -
pers claim to c ompare the prices of
store brands with leading manufactur -
er brands and most c onsumers say
they buy private-label products
because they are cheaper.
The value-for-money proposition
of private label is also now seen to be
a major factor in its popularity. O ver-
all, the quality of prod ucts is seen to
be improving and there is an increase
in the number of people rec ommend-
ing them.
Just out of interest, the top pri vate-
label category remains long-life milk,
with fresh chicken in second place.
One of the b iggest movers has
been prepared foods, which has
jumped from No 12 to third in line
with a big trend in SA towards con-
venience options and the desire to
reduce food prep times.
Sugar has also moved up from
eighth to fifth positi on, while butter
has moved from 10th to f ourth on the
top category ranking. Given the
increase in prices in sugar and butter
alike, private label seems to be a more
viable option for consumers in these
c at eog r ie s .
It must be said that in SA, pene-
tration levels of private-label or own-
label products — as they’re also
known — are still relatively low com-
pared with Europe or other developed
markets. The sector is worth £56.8b n
in the UK, where groc ers have all but
made an art of selling g ood-quality
private-label goods at attractive prices.
‘I don’t like labels’
Something that was also notable in
Nielsen’s study was that when it came
to the demographic profile of SA con-
sumers choosing to buy p rvi at e -l a b e l
goods, 55% of sales currentl y come
from LSM 7-10, but the growth dri ver
in 2018 has been the middl e LSMs,
which have contributed approximately
30% of sales.
Gareth Paterson, Nielsen SA retail
lead, says lower LSMs have also
shown that they are now willing to try
private label within c ertain staple cat-
egories like maize, compared w ith
years gone by, when trusted b rands
were preferred and making the switch
was not an opti on. x
CHECKOUT COUNTER
1.
Activist fund buys 2.5%
stake in Pernod
Elliott Management has built up a stake
in French drinks company Pernod
Ricard and called on the family-backed
group to boost profit margins and
improve returns for investors. Elliott’s
stake in Pernod Ricard is just over
2.5%, its first holding in a French blue-
chip, worth around €930m. The fund
has met Pernod chair and CEO
Alexandre Ricard to discuss the
way forward.
2.
Tencent Music raises
almost $1.1bn in IPO
Tencent Music Entertainment Group
raised close to $1.1bn in its US
IPO after pricing its shares at the
bottom of its targeted range. The
music arm of gaming and social
network giant Tencent Holdings
priced its American depositary
receipts at $13 a share, at the low
end of its indicated $13-$15 a share
range, it said in a filing with the Hong
Kong stock exchange. The IPO
values Tencent Music at $21.3bn.
3.
A miss for Inditex
Zara owner Inditex reported third-
quarter profit below analysts’
expectations due to currency effects,
but the global retailer maintained sales
and margin guidance for the rest of the
year. Inditex, which also owns
upmarket label Massimo Dutti and teen
brand Bershka, launched online sales
for Zara in 106 new markets last month.
4.
Shoprite opens in Kenya
Shoprite, which is seeking a foothold in
Kenya’s retail industry, opened its first
store in Nairobi this week. The market
has a formal retail penetration of 33%,
meaning roughly a third of shopping is
done in stores rather than
marketplaces.
investor’s notebook by Stephen Cranston
Don’t set the bar too low
H
aving spent the first
years of my work-
ing life in an envi-
ronment where
20% inflation was
quite normal. I tend
to look at a return on in vestment of 13%
a year as medi ocre. It isn’t, of c ourse. At
today’s inflation rate it is a real return of
@scranston about 8%. This is close to the long -run
real return from balanc ed funds over
the past 30 years. B ut over the past fi ve
years, investors have been lucky to
even match inflation.
A study by the multinational asset
manager Schroders shows that most S A
investors also considered 13% to be a
respectable return. Yet in the past fi ve
years the best large manager’s balanced
fund, Investec, gave just 9.2% a year, and
the weakest, Stanlib, 5.9%.
The simplest way to avoid disap-
pointment is to have low expectations,
but we can’t set the bar too low. T here
will be years of negati ve returns, and
plenty with subinflation returns, but we
should resist the tem ptation of moving
out of risky assets such as equiti es and
property for the false security of cash.
Claire Walsh, personal finance direc-
tor of Schroders, looked at 30 c ountries
to see the difference between actual and
expected returns. SA’s investors look
wildly optimistic, having expected 12.8%
returns, 8.4% ahead of the mark et over
five years. And this was in a surve y of
22,000 wealthy people around the
world. But this gap was e xactly the
same in Chile, Portugal, Indonesia and
even the financially sophisticated United
Arab Emirates. The Russians were the
most optimistic, with expectations
13.4% ahead of the mark et
Returns can r et u r n .
be achieved Walsh says the MSCI
just by world index has given a
sitting in SA 12.2% return over
sovereign five years. But
long bonds the JSE has
LVMH / THE LUXURY GROUP WILL BUY BELMOND, OWNER OF HIGH-END RESORTS AROUND THE WORLD, FOR $2.6BN
delivered dismal returns of 6%, onl y just
above inflation.
Some countries will be deligh ted to
have seen returns well ahead of e xpec-
tations. With very little return from cash
or bonds, until very rec ently, US
investors considered an 8.5% return to
be satisfactory, yet the return of 13.1%
has been the best in an y of the 30 mar -
kets that are measured. T he only market
that comes close is India, with a 12.9%
123RF/Oleksandr Yuhlichek
December 20 - December 26, 2018
return, but its investors, used to the
emerging-market risk premium,
expected a 13.7% return. The highest
expectations were all in emerging
markets such as Thailand and Brazil.
China, with an expectation of a
13.1% return, was greedier than its
neighbours in Taiwan, with an 11.6%
ex p e c t iao n .
It is hard to c ompare SA, which still
has an inflationary problem, with
countries that have flirted with defla -
tion, such as B elgium and Switzerland.
Rand depreciation
We would be c onfining ourselves to
low long-term returns if we e xpected
our fund managers to give a 7% return
as the Belgians do, or the 7 .4% that is
acceptable to the Swiss.
Schroders believes a 5.6% return
from a multi-asset or balanced strat-
egy over the next 10 years is realisti c.
With rand depreciation, let’s call that
about 8%-10%.
It is not surprising that man y pru-
dent asset managers are bringing
money back to SA. This return can be
achieved just by sitting in SA
sovereign long bonds, with littl e need
for taking the risks of a traditional
6 5%-75% in equities.
Walsh says forecasts should not be
relied on for financial planning — but
then in my view only a minority of
financial planners can be reli ed on for
effective planning anyway.
I wonder whether millennials, who
have no experience of double-digit
inflation, have a different perspective.
Maybe the 6%-9% returns from the
Large Manager Watch are adequate to
them, as they don’t anchor
expectations in the 13%-
15% range. But
even they won’t
find an inflation-
tracking return
acceptable. x
. financialmail.co.za 49
money&investing
ANALYSE THIS...
Lesiba Mothata
Executive chief economist, Alexander Forbes Investments
If someone came to you tomorrow with
R100m to invest in just one company,
which would it be?
Danaher Corp, a US firm based in Washington,
DC. In the past 30 years, its share price has
increased 100-fold in value. It outperformed the
market and its peers even during the 2008
global financial crisis. Its management has a
unique strategy of turning businesses around
and adding value in a diversified fashion.
50 financialmail.co.za . December 20 - December 26, 2018
What was your first job?
As a vacation student, I worked for an asset
management firm called Prodigy, based at the
Waterfront, Cape Town.
If you could fix one thing in SA today, what
would it be?
The preoccupation with macroeconomics in
finding economic solutions for SA is misplaced.
Economic growth ought to be sought in the
micro aspects of cities peripheral to the
metropolitan areas.
What’s the best investment you’ve
ever made?
As a youngster, shortly after completing my
degree, in my first year of work, I purchased a
house in the eastern suburbs — Kempton Park.
I sold the property for 2½ times the initial value
within five years, during the real estate boom in
the early 2000s.
What’s your favourite song?
Dear Mama by Tupac Shakur. My favourite of
all time.
On what occasion do you lie?
Never, really.
What is your greatest extravagance?
I have discovered wine. I tend to look for
opportunities to make a collection of
different ones.
What travel experience is on your
bucket list?
Brazil. The soul and culture of cities like Rio de
Janeiro are experiences to look forward to.
What’s the worst investment you’ve
ever made?
Acquiring bonsai trees. They needed special
attention and died shortly after purchase.
How much was your first pay cheque and
what did you do with it?
It was R10,000. I gave 60% of it to my mother
to install a new kitchen.
What was your last purchase?
A tailored suit. I need to increase my
accumulation in this department.
Do you own bitcoin or any other
cryptocurrencies? And why?
No. I tend to be more conservative when it
comes to money matters. I do not like to jump
on bandwagons or fads. I do, however, find the
technology behind cryptocurrencies,
blockchain, very useful and it will certainly
define a lot of what gets done in the future. As
for cryptocurrencies, I will leave it to the
enthusiasts.
If you could turn back time, what would
you change in your life?
Nothing really. I have grown to appreciate that
all things work out for the good. Wisdom is
found even in the deepest regrets and most
painful moments. x
economic indicators
AFRICA TOP STOCKS (EXCL SA) ECONOMIC INDICATORS INTEREST RATES
Company Country Market Cap Price Total Return Latest Month
($000s) Ytd ago Short-term interest rates (%)

Maroc Telecom Morocco 12,973.34 141.00 10.04 Dec 14 Month ago Year ago
Inflation (% change y/y)
Attijariwafa Morocco 9,436.76 443.00 -6.04 Consumer price index Nov 5.2 5.1 Prime 10.25 10.00 10.25
Safaricom Kenya 8,994.68 23.00 -10.61 Producer price index Nov 6.8 6.9 NCD* 7.30 7.20 7.20
Dangote Cement Nigeria 8,672.61 185.00 -16.18 Credit Aggregates (% change y/y)
Repo 6.75 6.50 6.75
Banque Centrale Morocco 5,245.75 275.00 -4.31 Claims on the domestic pvte sector Oct 5.8 6.3
Jibar* 7.15 7.02 7.14
Commercial Intl Egypt 4,820.90 74.00 -3.26 Total loans and advances Oct 4.6 5.2
Safex† 6.73 6.46 6.73
Delta Corp Zimbabwe 3,612.66 2.85 86.09 Total domestic credit extension Oct 6.3 6.5
Industry (% change y/y)
Banque Marocaine Morocco 3,542.53 188.60 -9.74
New passenger car sales Nov -5.4 -0.7 * 3 months † Overnight rate
Nestlé Nigeria Nigeria 3,161.90 1,450.00 -3.90
New commercial vehicle sales Nov -3.0 7.0
Guaranty Trust Nigeria 2,752.85 34.00 -11.19
Retail sales Oct 2.2 0.6
Ciments du Maroc Morocco 2,372.11 1,570.00 -1.46 Bond yields (%)
Wholesale sales Oct 3.7 6.2
Zenith Bank Nigeria 1,969.30 22.80 -1.78 Dec 14 Month ago Year ago
Manufacturing production Oct 3.0 -0.1
Abou Kir Fert & Ch Egypt 1,761.34 25.00 20.79
R186 9.190 9.160 9.230
Mining production Oct 0.5 -2.0
Nigerian Breweries Nigeria 1,746.78 79.40 -39.23
R204 6.250 6.155 7.590
Mineral sales Oct 3.9 -3.2
Cosumar Morocco 1,695.99 171.50 -9.64
Trade (Rbn) R207 6.190 6.410 8.050
Imports Oct 127.87 116.62 R208 7.260 7.545 8.295
Exports Oct 122.32 112.79 R209 10.025 9.845 9.920

DIVIDENDS & DISTRIBUTIONS Trade balance Oct -5.55 -3.83

I Interim F Final p Pence

Gold & Forex Reserves (US$bn)

Gold reserves Nov 4.93 4.90

Company Amount (c) Trade by Payable
SDR holdings Nov 2.48 2.47

Alexander Forbes Group I 18.00 Jan 8 Jan 14 Forex reserves Nov 43.27 42.79

British American Tobacco F 48.80p Dec 21 Feb 7 Gross reserves Nov 50.67 50.17

Telemasters Holdings I 1.50 Dec 31 Jan 7 Net reserves Nov 42.58 42.19

COMMODITY PRICES EXCHANGE RATES

Dec 14 Week ago Year ago 12-mth low 12-mth high Dec 14 Month ago Year ago 12-mth low 12-mth high

Precious metals ($/oz) Developed Markets — Rand per foreign currency unit
Gold 1,238 1,248 1,253 1,174 1,358 US dollar 14.39 14.40 13.47 11.55 15.40
Platinum 788 793 882 768 1,016 Euro 16.28 16.26 15.88 14.21 17.90
Palladium 1,244 1,226 1,035 844 1,266 UK pound 18.12 18.64 18.10 16.14 19.88
Silver 14.57 14.62 15.89 14.00 17.55 Japan yen (100) 12.69 12.67 11.99 10.79 13.84
Base Metals ($/t)
Canada dollar 10.75 10.87 10.54 9.04 11.67
Aluminium 1,908 1,951 2,033 1,908 2,541
Switzerland franc 14.42 14.29 13.62 12.22 15.85
Copper 6,128 6,149 6,761 5,759 7,331
Australia dollar 10.33 10.39 10.34 8.96 11.07
Nickel 11,010 10,846 11,100 10,697 15,688
Emerging Markets — Foreign currency unit per rand
Lead 1,941 1,983 2,492 1,885 2,704
Brazil real 0.27 0.26 0.24 0.24 0.30
Tin 19,369 19,016 18,962 18,234 22,104
China yuan 0.48 0.48 0.49 0.44 0.54
Zinc 2,569 2,681 3,187 2,284 3,606
India rupee 4.99 5.01 4.76 4.64 5.60
Iron Ore 68.93 64.71 67.37 57.85 76.88
Energy Russia ruble 4.64 4.66 4.36 4.36 5.25

Brent ($/bbl) 59.32 60.27 64.04 57.67 86.09 Malaysia ringgit 0.29 0.29 0.30 0.27 0.33

Coal ($/t) 95.25 94.20 97.70 83.20 109.00 Thailand baht 2.28 2.29 2.41 2.12 2.71
Agriculture (R/t) Botswana pula 0.79 0.79 0.76 0.76 0.82
White maize 2,741 2,610 1,877 1,772 3,050

Yellow maize 2,658 2,517 1,960 1,874 2,800

Wheat 4,342 4,251 3,964 3,525 4,563 The information in the commodities column is provided by Mpho Tsebe,
Sunflower 5,600 5,253 4,525 4,325 5,800 Economist: Global Markets Research,

Soya 4,957 4,785 4,895 4,145 4,962 Rand Merchant Bank (tel) +27 11 282-1040 or e-mail: Mpho.Tsebe@rmb.co.za

SHAREHOLDER MEETINGS
Company Date Type Place
Texton Property Fund Dec 28 GM Johannesburg

December 20 - December 26, 2018 . financialmail.co.za 51

jse top stocks
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.

COMPANY CLOSING MARKET CAP SHARE TRAILING EST. DIVIDEND FORWARD 3-YEAR FORWARD P:E FORWARD TOTAL TOTAL TOTAL
PRICE (Rm) PRICE RET. EPS (*) FORWARD YIELD (%) DIVIDEND AVERAGE ROE (%) P:E SELL HOLD BUY
(FRIDAY) (C) YTD (%) EPS (*) YIELD (%) ROE (%)

ANHEUSER-BUSCH INBEV 101,869 2,056,982 -22.85 4 4.77 5.7 3.1 9.45 12.64 16.99 14.82 2 5 27
BHP GROUP PLC 29,312 1,662,429 24 0.69 1.75 3.01 7.59 2.13 17.09 16.81 11.66 3 19 8
NASPERS LTD-N 281,827 1,238,808 -18.16 31.53 9.81 NA 0.34 30.39 14.81 47.07 19.94 0 0 14
BRIT AMER TOBACCO 48,115 1,103,647 -39.68 16.93 3.12 12.71 7.88 80.31 11.23 1.55 8.51 2 6 16
GLENCORE PLC 5,237 734,662 -14.99 0.42 0.46 5.41 6.17 4 13.31 8.73 7.83 0 7 21
ANGLO AMER PLC 30,756 397,553 26.12 2.36 2.44 4.78 4.74 5.53 13.07 8.93 8.74 3 6 19
FIRSTRAND LTD 6,450 361,812 0.05 4.73 5.43 4.26 4.85 23.44 22.84 13.65 11.87 2 8 3
STANDARD BANK GROUP 17,362 281,006 -6.84 16.44 18.33 5.41 6.06 15.85 17.33 10.34 9.47 1 7 5
SASOL LTD 42,863 267,702 2.74 14.21 54.12 3.01 4.65 6.79 13.99 15.62 7.92 2 3 9
VODACOM GROUP 12,430 228,198 -9.03 8.76 10.27 6.56 6.76 29.43 25.1 14.4 12.1 0 9 6
SOUTH32 LTD 3,429 174,235 6.27 0.25 0.25 4.37 5.46 3.15 12.08 9.27 9.48 2 9 9
SANLAM LTD 7,600 169,631 -9.38 5.43 5.41 NA 4.42 19.21 16.14 13.85 14.03 1 2 4
MTN GROUP LTD 8,601 162,066 -33.57 1.96 7.5 7.27 5.12 4.57 13.32 48.87 11.47 3 6 5
MONDI PLC 29,384 143,921 -1.08 1.39 1.87 3.39 4.27 20.57 23.18 12.68 9.64 1 2 14
MONDI LTD 30,009 143,921 1.07 1.39 1.87 3.49 4.03 20.57 23.18 11.65 9.84 1 1 4
ANGLO AMERICAN PLATINUM 53,000 142,903 52.74 20.18 29.79 0 1.75 -6.28 16.75 21.38 17.78 3 4 5
ABSA GROUP LTD 15,833 134,224 -7.13 16.53 20.77 6.85 7.62 14.85 16.21 9.33 7.62 1 4 8
NEDBANK GROUP 26,537 132,749 9.03 26.52 29.31 5.16 5.74 14.4 16.2 9.68 9.05 2 5 6
CAPITEC BANK HOLD 107,314 124,084 -0.54 41.9 55.19 1.47 1.94 26.3 27.32 25.45 19.43 2 1 6
SHOPRITE HLDGS 19,026 112,508 -12.08 9.33 10.5 2.54 2.73 21.76 20.44 19.62 18.12 2 5 5
OLD MUTUAL LTD 2,203 108,873 NA NA 2.64 NA 8.7 NA 13.93 NA 8.35 0 1 7
REMGRO LTD 18,989 107,235 -17.49 15.67 18.15 2.8 3.31 8.76 8.16 12.55 10.46 0 1 3
DISCOVERY LTD 15,080 99,270 -17.91 8.76 10.19 1.43 1.67 14.63 15.72 17.21 14.8 3 1 3
BID CORP LTD 26,102 87,547 -11.55 10.62 15.25 2.15 2.51 NA 17.44 20.29 17.11 0 4 5
KUMBA IRON ORE 26,884 86,590 -21.73 33.23 24.51 10.98 8.86 24.79 23.45 10.6 10.97 9 2 0
INVESTEC PLC 7,776 78,411 -9.06 0.52 0.56 5.71 6.33 10.86 13 8.09 7.67 0 2 4
ANGLOGOLD ASHANTI 17,082 70,767 33.69 0.04 0.8 0 0.8 -0.48 10.55 24.72 14.87 2 5 7
PEPKOR HOLDINGS 2,040 70,380 27.9 0.83 1.27 NA 2.93 NA 7.93 12.01 16.01 2 3 1
BIDVEST GROUP 20,522 69,254 -3.3 11.32 14.28 2.71 3.07 NA 18.29 16.66 14.37 3 5 4
GROWTHPOINT PROP 2,320 68,927 -9.22 2.3 2.3 8.99 9.71 9.2 8.75 14.51 10.07 1 4 2
MR PRICE GROUP 23,083 62,414 -2.76 10.9 12.74 3.14 3.62 43.26 38.83 20.05 18.11 2 10 0
NEPI ROCKCASTLE 10,800 62,402 -46.02 NA 0.62 NA 8.86 NA 9.08 NA 10.79 0 1 4
ASPEN PHARMACARE 12,950 59,110 -52.45 13.12 17.17 2.43 2.7 12.01 13.54 8.82 7.54 2 4 5
WOOLWORTHS HLDGS 5,362 56,216 -14.29 -3.71 4.01 4.46 5.1 10.48 25.73 15.48 13.35 4 5 3
REDEFINE PROPERTIES 962 55,467 -1.33 1.23 1.02 10.09 10.47 9.3 9 13.97 9.41 2 4 0
TIGER BRANDS LTD 27,000 51,251 -39.65 14.52 19.18 4 4.13 18.62 17.39 17.02 14.07 2 4 4
EXXARO RESOURCES 13,858 49,710 0.22 18.58 25.63 6.71 7.25 12.48 16 14.57 5.41 0 0 8
CLICKS GROUP LTD 18,099 45,962 1.75 5.78 6.67 2.1 2.46 43.86 38.36 29.56 27.11 1 6 2
MEDICLINIC INTL PLC 5,959 43,932 -42.99 -0.83 0.28 2.53 2.46 NA 6.16 NA 11.62 2 8 4
SAPPI LTD 7,825 43,601 -10.66 0.58 0.69 0 4.02 21.93 17.18 9.21 7.9 1 3 5
ASSORE LTD 28,613 39,946 -15.22 49.63 46.62 7.69 7.46 NA 18.63 5.77 6.14 2 3 1
QUILTER PLC 2,080 39,567 NA 0.22 0.1 0 4.37 NA 11.69 527.73 11.08 0 4 5
TFG 16,366 38,748 -13.33 10.9 12.93 4.58 5.24 20.81 20.22 7.24 12.65 2 3 7
NETCARE LTD 2,582 37,981 6.63 3.54 1.83 4.03 4.72 21.53 23.17 52.37 14.08 2 8 3
SPAR GRP LTD/THE 19,714 37,970 0.65 9.42 11.55 3.7 4.12 32.32 29 20.41 17.07 1 10 1
GOLD FIELDS LTD 4,613 37,897 -13.34 -0.54 0.18 2.36 1.84 -5.15 8.97 12.82 18.12 2 5 6
TRUWORTHS INTL 8,476 37,514 -6.11 6.12 6.81 4.96 5.46 30.91 25.05 13.77 12.45 4 4 4
LIFE HEALTHCARE 2,541 37,285 -3.66 1.08 1.56 1.97 4.23 16.43 13.86 23.35 16.28 0 7 5
FORTRESS REIT LT B 1,395 36,050 -62.89 -2.16 1.85 8.1 13.57 -7.14 4.49 NA 7.55 0 2 2
FORTRESS REIT LT A 1,750 36,050 2.6 -2.16 1.52 8.1 8.72 -7.14 4.78 NA 11.48 1 2 1
SANTAM LTD 31,100 35,806 20.01 18.28 18.87 3.15 3.57 24.22 30.53 16.85 16.48 2 2 0
AVI LTD 9,805 34,578 -5.12 5.1 6.02 4.44 4.91 33.96 38.73 18.05 16.28 2 7 1
PICK N PAY STORES 6,985 34,468 3 3.1 3.67 2.78 3.54 36.58 36.91 22.28 19.05 5 4 3
TELKOM SA SOC LT 6,065 31,001 34.85 5.5 6.11 7.81 5.99 12.28 11.08 10.67 9.93 2 8 2
LIBERTY HLDGS 10,660 30,509 -9.32 11.15 13.41 6.48 6.89 13.61 14.04 9.29 7.94 1 5 1
AFRICAN RAINBOW 13,626 30,174 10.26 23.24 24.69 5.5 8.52 7.33 17.74 5.39 5.52 0 2 8
IMPALA PLATINUM 3,588 26,364 10.6 -14.86 1.95 0 0.53 -13.85 4.1 NA 18.36 1 7 5
VIVO ENERGY PLC 2,190 26,319 NA NA 0.14 NA 2.63 NA 27.56 NA 11.19 0 1 4
MMI HOLDINGS LTD 1,697 25,412 -19.19 0.87 1.99 0 4.57 7.13 13.52 19.24 8.52 1 3 1
TSOGO SUN HOLDINGS 2,197 25,214 -1.14 1.64 2.02 9.19 6.69 20.83 17.98 11.06 10.88 1 0 3
BARLOWORLD LTD 11,727 24,942 -24.47 18.14 12.42 3.5 4.41 12.1 11.65 9.84 9.44 1 3 8
DIS-CHEM PHARMACIES 2,886 24,822 -20 0.84 1.09 NA 1.64 67.75 45.54 34.52 26.44 5 1 2
RESILIENT REIT 5,792 24,613 -53.19 -16.78 NA 9.76 10.23 3.17 7.03 NA NA 1 2 2
SIBANYE GOLD LTD 1,029 23,320 -32.35 0.18 1.5 5.61 0.78 -0.27 8.32 7.69 6.86 2 4 7
KAP INDUSTRIAL 820 22,127 6.35 0.57 0.73 NA 3.36 13.63 14.77 13.83 11.21 0 1 7
NORTHAM PLATINUM 4,181 21,314 -20.01 -2.01 1.86 0 0.08 -7.45 5.11 NA 22.43 3 1 8
MASSMART HLDGS 9,805 21,294 -28.12 6.3 6.84 3.46 3.54 23.88 21.02 15.32 14.33 0 7 2
HYPROP INVESTMENTS 8,300 21,239 -23.72 10.11 8.31 9.11 10.06 11.27 8.28 10.93 9.99 1 6 0
PIONEER FOOD GROUP 8,560 19,961 -35.7 5.46 6.43 4.26 4.43 15 14.4 16.28 13.31 1 5 4

52 financialmail.co.za . December 20 - December 26, 2018

jse top stocks
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.

COMPANY CLOSING MARKET CAP SHARE TRAILING EST. DIVIDEND FORWARD 3-YEAR FORWARD P:E FORWARD TOTAL TOTAL TOTAL
PRICE (Rm) PRICE RET. EPS (*) FORWARD YIELD (%) DIVIDEND AVERAGE ROE (%) P:E SELL HOLD BUY
(FRIDAY) (C) YTD (%) EPS (*) YIELD (%) ROE (%)

VUKILE PROPERTY 1,991 17,884 0.76 2.84 1.8 8.75 9.75 13.3 8.59 11.54 11.06 0 2 3
MOTUS HOLDINGS 8,285 16,733 NA NA 11.15 NA 6.29 NA 18.36 NA 7.43 0 1 4
JSE LTD 16,724 14,529 12.37 11.34 12.34 NA 4.38 30.78 23.88 14.39 13.55 0 3 1
SUPER GROUP LTD 3,519 13,073 -14.9 3.2 3.88 0 NA 13.57 13.41 10.59 9.08 1 1 7
IMPERIAL LOGISTICS 6,410 12,946 -31.72 16.34 14.21 11.08 8.07 14.37 13.19 11.8 4.51 0 4 8
HARMONY GOLD MNG 2,281 12,141 0.53 -9.94 4.28 0 1.21 -3.88 7.73 13.34 5.33 4 2 4
NAMPAK LTD 1,460 10,071 -9.99 0.76 1.8 0 1.76 8.48 9.87 9.64 8.11 3 2 4
OCEANA GROUP LTD 7,296 9,888 -12.92 6.75 6.75 4.17 5.65 19.29 16.23 10.03 10.81 2 0 4
PPC LTD 580 9,240 -16.79 0.11 0.55 0 1.83 NA 9.61 34.12 10.53 0 3 2
SA CORPORATE REAL EST 362 9,161 -16.76 0.57 0.44 12.22 12.14 17.44 8.74 8.43 8.2 2 2 0
SUN INTERNATIONAL 6,299 8,817 7.44 -0.74 5.34 0 0.72 NA 40.63 111.46 11.78 0 1 3
WILSON BAYLY HOLMES 13,613 8,153 -9.69 15.34 18.58 3.49 4.58 14.22 15.19 9.62 7.32 0 2 3
TONGAAT HULETT 5,960 8,053 -47.15 -1.03 7.62 1.01 2.85 4.92 5.56 NA 7.81 0 0 4
EMIRA PROPERTY FUND 1,492 7,798 21.71 1.66 1.57 9.84 10.56 8.26 9.15 5.71 9.5 1 3 0
ASTRAL FOODS LTD 17,000 7,291 -31.93 36.88 27.31 12.06 9.43 28.79 26.18 4.58 6.23 0 2 3
ROYAL BAFOKENG PLAT 2,500 5,262 -10.71 -3.87 1.13 0 NA -9.71 1.63 38.05 22.02 1 1 8
THARISA PLC 1,980 5,247 11.72 0.18 0.22 3.63 3.8 14.42 13.37 7.24 6.25 0 2 6
GRINDROD LTD 670 5,109 -31.87 2.49 0.9 0 3.18 -3.54 7.34 5.11 7.42 0 1 3
BLUE LABEL TELECOMS 536 4,897 -64.08 1.27 1.13 7.46 7.52 15.69 12.36 4.64 4.76 0 1 3
RHODES FOOD GROUP 1,820 4,782 -17.64 0.59 1.03 1.71 1.82 15.35 10.54 29.93 17.67 0 4 1
MPACT LTD 2,140 3,709 -10.49 1.57 2.2 2.57 3.23 9.9 8.53 13.28 9.71 1 2 4
MERAFE RESOURCES 146 3,666 9.07 0.34 0.28 9.56 14.88 17.3 12.75 4.31 5.29 0 0 5
RAUBEX GROUP LTD 1,841 3,346 -5.68 1.35 2.02 2.44 3.39 9.67 9.17 13.82 9.08 1 1 3
PAN AFRICAN RESOURCES 149 3,330 -37.92 -0.05 0.02 NA 7.09 -9.76 16.36 13.72 5.47 1 2 6
LONMIN PLC 896 2,534 -36.36 0.15 0.1 0 NA -33.18 4.08 4.1 6.49 7 4 1
GROUP FIVE LTD 21 24 -98.37 -13.35 0.61 0 58.18 -30.05 15.35 NA 0.34 4 0 0

zar x exchange ISSUED

SHARES
LAST
BID
LAST
OFFER
PREVIOUS
CLOSE
CLOSING
PRICE
CHANGE VOLUME VALUE MARKET
CAP (Rm)
YEAR
HIGH
YEAR
LOW
TRADE
DATE

SENWES LIMITED 180,789,308 6.30 7.00 6.75 6.50 (0.25) 30,483 198,264 1,175,130 13.00 6.50 14/12/2018
TWK INVESTMENTS LIMITED 35,100,993 18.85 0.00 18.60 18.60 0.00 0 0 652,878 18.60 12.33 14/12/2018
SENWESBEL LIMITED 114,609,307 0.00 3.95 3.95 3.95 0.00 0 0 452,706 6.00 3.80 14/12/2018
TRANSFORMATION INVESTMENT 50,000,000 0.00 0.00 1.00 1.00 0.00 0 0 50,000 1.00 1.00 14/12/2018
PORTFOLIO LIMITED

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December 20 - December 26, 2018 . financialmail.co.za 53

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

BOOKS

YEAR OF MEMORABLE READS

There is still a week and a bit to How to Change Your Mind — Michael Pollan
catch up on all the great books Pollan is back, this time taking a personal deep dive
into the world of the mind, mental health and scientific
you didn’t get to in 2018 and medical developments around psychedelic drugs.

Sarah Buitendach Bad Blood: Secrets and Lies in

a Silicon Valley Startup — John
Carreyrou
NONFICTION OF NOTE A mesmerising tale of corporate
fraud, Silicon Valley-style, and the
Becoming — Michelle Obama biggest of its kind since Enron.
Former US first lady Michelle Obama’s autobiography has This is one of the FM team’s top
sold over 3-million copies so far. It’s a fascinating, candid reads of the year.
read and delves into her relationships, her career and her
years in the White House. Everyone is Present: Essays on
Photography, Memory and
Ma’am Darling: 99 Glimpses of Princess Margaret — Family — Terry Kurgan
Craig Brown Joburg artist Kurgan has woven a
The UK’s Princess Margaret – not a popular gal. Mean fascinating tapestry of stories in
and entitled, or just misunderstood? Either way, a text and visuals that is a commen-
fantastic, unusual biography. tary on history and seeing and on
how we interpret both.
Brief Answers to the Big Questions — Stephen
Hawking The Last Hurrah — Graham
The late guru and cosmologist delves into some deep Viney
issues: Is time travel possible? Is there a God? Will we A smart and sexy snoop into
survive on Earth? the British royal family’s famous
tour of SA in 1947 and the politics,
The Resurrection of Winnie Mandela — Sisonke people and culture of the country
Msimang at the time.
Award-winning writer Msimang casts a smart, fresh
perspective on Mandela in a short, sharp book. Fear: Trump in the White House
— Bob Woodward
The Man Who Founded the ANC: A Biography of Yes, the Woodward of Watergate-
Pixley Ka Isaka Seme — Bongani Ngqulunga reporting fame. In this book, he
This won the Sunday Times Alan Paton Award for draws from many, many interviews
2018. It’s a fascinating look at the at times tragic life with sources and documents to
of the man who, in a whirlwind of overachievement paint a picture of the US president.
and in record time, founded the ANC. The result isn’t pretty.

December 20 - December 26, 2018 . financialmail.co.za 55

life books
RECIPE BOOKS TO SAVOUR
Simple — Ottolenghi
It might seem like an oxymoron, but
it’s true: cult British chef Yotam
Ottolenghi can do simple. He shows
you how here, with fresh, easy and
wildly successful recipes.
FICTION
Warlight — Michael Ondaatje
Certainly not as lyrical or magical as
The English Patient (which won the
Golden Man Booker Prize, the
Booker of all Bookers, this year), but
still an entrancing and smart read.
Milkman — Anna Burns
The 2018 Man Booker Prize winner is
set during the Troubles in Northern
Ireland. The style is unusual, but get
into it and you’ll be richly rewarded.
Less — Andrew Sean Greer
A failed novelist escaping his life by
travelling around the world — that’s
the set-up of this warm, witty story of
self-discovery. It won the 2018
Pulitzer Prize for fiction.
Transcription — Kate Atkinson
Atkinson is back with a story about a
girl who gets caught up in the dark
realm of World War 2 espionage.
56 financialmail.co.za . - December26,
December 20 -December 26,2018
How to Eat a Peach: Menus, Stories
and Places — Diana Henry
Wonderful food writing and
beautiful recipes for meals to share
and celebrate over.
No wonder this was the Sunday
Times food book of the year in
the UK.
Atkinson, a Costa Award winner, is a
master storyteller and this new work
will not disappoint.
Washington Black — Esi Edugyan
A central character of a slave who
becomes a free man, adventures that
span the globe, marvellous flying
machines — what doesn’t Edugyan’s
hit book offer? No wonder it’s been
raking in the gongs.
Love is Blind — William Boyd
The story of a man’s life that sweeps
across Europe at the end of the 19th
century. It’s got all you want in a
gripping read: human frailty,
romance, drama, beautiful writing …
and music.
Normal People — Sally Rooney
She’s the beloved writer of the cool
set, the “voice of a generation”, but
we were still deeply sceptical of
Rooney’s first book, Conversations
2018
Basics to
Brilliance Kids —
Donna Hay
The Australian food favourite strikes
back with another gleamingly
styled homage to lovely eats, this
time for the littlies and their try-hard
parents.
with Friends. This makes up for it. It’s
“zeitgeisty” and clever.
Circe — Madeline Miller
Miller does retellings of ancient
myths with aplomb. Her The Song of
Achilles won the Orange Prize, and
this, a potent account of Circe, has
also received big praise.
A Keeper — Graham Norton
Somehow in between hosting his
much-loved TV show, Norton wrote
this, his second novel. He sure
knows how to spin a yarn. With
undertones of the gothic, it is a tale
of family, loss and relationships.
Lethal White — Robert Galbraith
The fourth in the Cormoran Strike
detective series, this is a proper
page-turner. Crime, intrigue, a “will
they, won’t they” relationship, and
Galbraith/JK Rowling’s trademark ace
writing.
Melmoth — Sarah Perry
Perry hit gothic gold with her second
book, The Essex Serpent. This takes
the dark, foreboding thing up a
notch in a reinterpretation of an
1820s classic that involves some
soul-for-time bartering with the devil.
SHORT STORIES
Friday Black — Nana Kwame
Adjei-Brenyah
This debut collection of stories was a
huge success. The main theme?
What it’s like to be black in the US.
We predict more good stuff from
Adjei-Brenyah in future.
Florida — Lauren Groff
Fates and Furies author Groff takes
on the southern US state in this
compilation of tales, which all have it
at its epicentre. The New Yorker
described it as “gorgeously weird
and limber”. Give it a whirl.
life inbox
ENTERTAINMENT Slow Burn
We love an
FM’s pick of great series and podcasts investigative podcast
and we adored the
first smashing season
LOOK AND LISTEN of this because it
looked into Watergate
— during the days of
SERIES the Mueller
Now is the time to commit to some serious series- investigation. Slow
watching. Here are our three favourites to binge- Burn now tackles a story that fits squarely into the
watch, as they have new seasons airing in 2019. prickly domain of power and censorship in
Catch up while you can. American politics and the #MeToo movement: the
Clinton impeachment scandal. The podcast
attempts to conjure up the world as it was at the
Game of Thrones we really like is the masterfully complex time, through the lens of current, erm, affairs, and
Aunt Daenerys and Jon Snow. Enough said. relationship DCI Luther has with his “sidekick” it couldn’t have come at a better time.
Alice Morgan (Ruth Wilson). They share chemistry,
complications, brilliant caper-solving, and the little The Teacher’s Pet
matter of her being a supposed psychopath. x If you hate an Aussie accent this one isn’t for you.
Sarah Buitendach That said, The Australian newspaper’s
investigation into the disappearance of Lyn
Dawson shook Down Under for a reason. You
PODCASTS would imagine that if a dedicated mother of two
Ideal for long car drives or a bit of lying on the small children
couch and listening, here are the podcasts that vanished one week
really broke the internet this year. and her husband’s
16-year-old mistress,
Veep Alice Isn’t Dead Joanne Curtis, moved
We defy you to name a more unpleasant and yet If Stephen King and into the family home,
beguiling TV character than US senator turned Thelma and Louise the next, that it would
vice-president Selina Meyer. Six seasons in, and came together to take be enough to warrant
the character played by Julia Louis-Dreyfus is as down a rogue some form of
bizarre, calculating and funny as ever. Her team in monster army in the investigation. (Chris
the White House stumble from one faux pas to the heyday of radio Dawson was a high
next; they’re conniving and dirty and hilarious. stories, Alice would school teacher; Joanne was one of his pupils,
This is fast, smart comedy at its best. The final be it. The tale of a and the family babysitter.) In the wake of the
episodes will air in the second quarter of next year. truck driver looking podcast investigation by journalist Hedley Thomas,
for her wife has expanded over the past three Dawson (now 70) was this month charged with his
years and came to a heady, emotional conclusion wife’s disappearance and murder. He is out on
this year. It cemented itself as one of the most A$1.5m bail.
human narratives in recent days, in spite of the
supernatural undertones. Serial
This is the podcast
Personal Best that launched a
A good one for the couple of million
new year’s resolution listenerships. After a
selection process. cracker of a first
Seen as a “self- season, which
improvement show changed the game
for people who don’t for the podcast
like self- medium as a whole,
improvement”, Serial is back with
Personal Best follows probably the most astounding narrative to date.
Luther ordinary people’s After spending a year in Cleveland’s criminal
Idris Elba is the damaged, brilliant and very human often hilarious attempts to try to change justice system, host Sarah Koenig’s team weave a
detective Luther. What’s not to like, really? Add in in negligible ways. Though the idea of listening tapestry of many small incidents that come
a sharp plot and some seriously macabre crimes to someone trying to wake up earlier may together to show just how far people are willing to
(don’t watch this alone, in the dark) and it’s no sound strange, the journey almost always go to game an already broken system, and win, no
wonder the first four series of this crime drama ends in a realisation that says something about matter the human cost. x
were a sensational success. Of course, the thing humanity itself. Sylvia McKeown

December 20 - December 26, 2018 . financialmail.co.za 57

life outbox
FOOD FAVOURITE JOURNO HANGOUT: BLIND
TIGER CAFÉ, Parkview, Joburg
Gongs to the great and the tasty Got a scoop? A pitch? You know where to find us.
FAVOURITE DEADLINE TIPPLE: Kamiki
FOOD AWARDS 2018: It got us through the best of times and the worst
of times. Our mismatched cups and mugs ran over
TRIED-AND-TESTED with this sterling Japanese whisky.
You have to drive far for it, but this excellent and
unpretentious fare is worth the effort.
FAVOURITE FOR ECOLOGICAL VIBES:
James Diack
Diack brings his farm to several tables and
can be applauded for every well-loved and truly
sustainable ingredient. More of this, please.

STARS FAVOURITE COFFEE: FATHER COFFEE, FAVOURITE BLOW-THE-BUDGET DINNER

Braamfontein, Joburg RESTAURANT: MOSAIC, Elandsfontein,
It’s a contentious decision. Fight us. Pretoria
ý After going to hundreds of food-and-booze Best you book a Byzantine-like room and stay
events this year, the FM and Business Day’s FAVOURITE WINE YOU’VE NEVER HEARD OF: the night. Between the magical food bonanza
Wanted magazine rounded up their epicurean Silwervis, Smiley Chenin Blanc and the never-ending cellar, you won’t make it to
highlights for 2018. We’ve dished out the kudos It tastes like the sea, there’s a sheep’s head on the anywhere else.
where they’re due, and hopefully helped you make label, and the winemaker wears a kilt. What more
your dining and drinking choices (fancy or not) do you need? FAVOURITE CAPE TOWN
incredibly simple. The pleasure was all ours. RESTAURANT:
FAVOURITE BUBBLES: Paul René MCC Brut LA TÊTE, city bowl,
FAVOURITE BAKED GOODS: TONKA BEAN Rosé Cape Town
BAKERY, Fourways, Joburg In terms of homegrown bubbles, you can’t do Chef Giles Edwards
The almond croissants here are clearly made from better than Paul René. Fruity, dry and wonderful. excels with his chicken
fairy-dust dreams and butter — lots of butter. hearts, devilled
FAVOURITE SOCIAL MEDIA FOOD PORN: kidneys and brains
FAVOURITE ICE CREAM: UNFRAMED, @Veldandsea on toast. x
Gardens, Cape Town Every photo is a moment of lush wonder Sylvia McKeown
If we have to scream for ice cream, then we’re beckoning you to the sea.
hollering at this Cape Town hipster stronghold. Its
ever-expanding selection of largely vegan options FAVOURITE WINE BAR: PUBLIK, Gardens,
is a revelation. Cape Town
Because it sells the aforementioned sheep’s head
FAVOURITE BREAKFAST WITH A VIEW: EAST chenin and other delightful small-batch wines. And
HEAD CAFÉ, Knysna its spot off Kloof Nek Road is a Cape Town
It has one of the best views on the Garden Route decompression chamber.
and offers delightful breakfasts in every form and
calorie count. Oh, and its service is morning BEST-LOOKING CHEF: Ryan Cole
brightening. Let’s just say, you do not have to go to Salsify for
the ridiculously good food only.
FAVOURITE HANGOVER FOOD: CLARKE’S
BAR & DINING ROOM, city bowl, Cape Town FAVOURITE DURBS VIBES: AL FIRENZE,
The fried-chicken burger situation is manna from Umhlanga
heaven when everything else feels like hell. Don’t forget about KZN. This is proper home-style
Italian deliciousness.
BEST-KEPT SECRET: BANCHAN, Parkmore,
Sandton FAVOURITE NEW KID ON THE
Nothing warms the heart like a bowl of Korean BLOCK: SAINT, Sandton, Joburg
noodles from this tiny, authentic spot. It puts the Art on the ceiling, art on the
pseudo-Asian places to shame. plate — who knew pizza
could be this fancy?
FAVOURITE TAKEOUT: THE LEOPARD,
Milpark, Joburg FAVOURITE SEAT IN
The little buzz bike that delivers pata plate wraps TOWN: ON THE PASS
and vigour bowls is a godsend that not even EFF AT THE TEST KITCHEN,
protesters can keep away. Woodstock, Cape Town
We know the right people
FAVOURITE JOBURG RESTAURANT: FARRO, — what can we say?
Illovo, Joburg
This glittering new star of the SA food scene FAVOURITE
has shaken things up with its oft-changing casual INNOVATION: WOLFGAT,
fine dining. Paternoster

58 financialmail.co.za . - December26,
December 20 -December 26,2018
2018
a moveable feast by Fred Khumalo

HOW TO BEAT THE HEAT

The best way to the cope with a heatwave is to drink iced water and eat
ice cream, right? Wrong. You need to fight fire with fire

T
o remove a
thorn, you need
@fredkhumalo a thorn. I’ve
never doubted
the wisdom of
this old Zulu expression,
which was handed down by
my grandmother. At the
height of Durban’s ferocious
summer, she would put on
a jersey and make herself a
pot of tea that she would
sweeten with condensed
milk and share with me.
We would sit with the
steaming cups under my
father’s peach tree and tell
stories, sweating. With the tea finished,
and the sweat beginning to evaporate, I
would feel light and refreshed.
Dazed by the heat of Joburg this past
Sunday and not knowing how to deal
with it, I found myself thinking of
grandma’s strategy. I decided to try it I sweated profusely. Then I began
out, or at least try a new twist on it. I to cool down. Iva likhishwa ngelinye
thought I should find a meal that would iva.
be an antidote to the heat. Unlike my grandma who insisted
So I told my son Fred jnr we were could have that starter over and over on hot tea, I washed my meal down with
eating out. I knew exactly where. We again, it’s so spicily addictive. a rather bland sauvignon blanc.
took the 1km walk to the local mall in I shared my prawns with Junior. I shouldn’t have ordered ice cream
sweltering heat. Though he waxed lyrical about his fancy for dessert. It was a cheap variety that
Funny thing is, though we’ve been drumsticks — which I felt were run of undermined the whole superb dining
living in this neighbourhood for the past the mill — I could sense he felt I had a experience. Junior took one spoonful of
20 years, we’d never been to this better deal. My eyes were still smarting, his dessert and pushed the thing
particular restaurant. It’s called my nose twitchy from the pepper, when towards me saying: “You grew up in
Pappadums. We were the only diners. I the main course arrived. Durban, maybe this will make sense to
remembered why I’d never tried the Lamb rogan josh. You can’t go wrong you.” The gulab jamun was so sweet it
place: it’s always empty. I don’t like with this if you’re at a proper Indian was inedible.
eating in an empty restaurant. The restaurant. Rogan means fat and josh All round, Pappadums is an under-
emptiness doesn’t recommend it. The means heat. What you’re doing is rated restaurant which should always be
atmosphere inside a restaurant — the cooking meat on the bone, slow- teeming with excited customers. x
music and the hubbub of voices — is cooking it in its own fat. But you use lots
what I pay for. I suspect I’m not the of spices: chilli powder, cardamom, Pappadums ★★★★
only one. Kashmir shallots, cinnamon or bay 56 Morning Glen Shopping Centre,
With the tea At any rate, the service was swift. For leaves. The chef nailed it. I’d ordered hot Kelvin Drive & Bowling Avenue,
finished, and starters Junior ordered chicken lollipops and I wasn’t disappointed. Gallo Manor, Sandton
the sweat — a fancy word for tiny chicken My son had chicken korma. I allowed Tel: 011-656-1460
beginning to drumsticks dyed a fiery red so they look Junior to dip into my rogan josh and I ★★★★★ Kimi Makwetu
evaporate, I like popsicles. I ordered prawn pepper invaded the korma on his plate. I found ★★★★ Raymond Zondo
would feel fry. Fried in an onion-based paste, the it rather sweet, and contrary to the spirit ★★★ Cyril Ramaphosa
light and prawns were well-spiced, hot and divine. of getting as hot as possible. So I stuck ★★ Bathabile Dlamini
refreshed It was a refreshing approach to prawns. I to my rogan josh. ★ Steinhoff

60 financialmail.co.za . December 20 - December 26, 2018

 backstory
CHINEZI CHIJIOKE
Co-founder, CEO Nova-Pioneer Education Group

Tell us about a hidden gem in Joburg. What is your biggest indulgence? Which historical figure do you
A small coffee shop on Commissioner Shows like Idols and X-Factor. I love most identify with?
Street had the best carrot cake I have amateur talent taking a risk and blowing Horace Mann.
ever tasted, and I’m a pretty enthusiastic us away. And carrot cake.
taster of carrot cakes. That was a gem. What’s the worst airport you’ve
Unfortunately, the coffee shop shut Who is your favourite hero of fiction? been in?
down about three years ago. For a There are many. A fun one is Precious In general I don’t mind airports,
healthy, and operating, hidden gem, Ramotswe from Alexander McCall and I appreciate the opportunity
Fruits & Roots at the Hobart Shopping Smith’s The No 1 Ladies’ Detective they often offer for me to
Centre in Bryanston has a range of Agency series. I think his stereotype- catch my breath, pick up a new
vegetarian groceries, a delicious challenging choice, to make his book, have a conversation,
vegetarian lunch buffet and an always “Sherlock Holmes” the intuitive, or catch up on work. However,
friendly team. common-sensical and brave Mma the 1999 version of
Ramotswe, was inspired. Murtala Muhammed Airport
What’s your one top tip for doing a deal? in Lagos, Nigeria, probably
Keep it simple. Each new layer of How do you deal with stress? What are tops the list of my worst
complexity sprouts tendrils to untangle your top tips in handling stress? airport experiences.
and weeks, if not months, of additional I try to take a step back to get Checking into my flight took hours
terms to work through … I often fail to perspective on the source of my stress, of stamina, elbowing, arguing,
follow my own advice on this. recover my poise, and then jump into negotiating, cajoling, and even
tackling it. More routinely, however, I try pleading. It built character, you
Which phrase or word do you overuse? to build a life routine that includes might say. I’m happy to say that 2018
“Interesting.” My teammates tell me activities which give me energy: sports, Murtala Muhammed Airport is a
that’s Chinezi-speak for “I don’t agree concentrated time with family or friends, completely different and more
but I’m listening”. and some solo time to reflect. pleasant experience.

62 financialmail.co.za . December 20 - December 26, 2018