Finweek - September 10, 2015

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10 September 2015
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Inside
P18
Massmart needs to
get it together
Feedback Letters from our readers
In Brief News nuggets
Letter from Nigeria Nigeria should stay grounded, for

now
10 Cover The global economic super cycle is over

15 Investment opportunities lie outside SA equities
16 5 opportunities for inclusive growth
17 In The News Health sectors R24bn bill for irregular
spending
18 Massmart needs to get it together
ough times: Growthpoint worries over dividend yield
20 T
22 Spotlight Home renovators boost Italtile profit
24 Insight Green buildings start paying off
26 Renewables: Saving SA billions
28 House View Metrofile, Datatec
29 Fund in Focus An option for those seeking exposure to
the US economy
30 Invest DIY Lessons learnt from the Black Monday panic
31 Killer Trade Are things looking up for Murray & Roberts?
32 Simons Stock Tips Aspen Pharmacare,
P42
Battle for the cloud
P10
Pan African, Massmart, Woolworths, construction

companies
33 Pro Pick Torre still expanding in a difficult environment
34 Money What to do now that the bear has reared its head
35 Commodity stocks can generate big profits
etirement reforms to cultivate a culture of saving
36 R
ntrepreneur Identify a gap in the market and grab it
38 E
P22
Home renovators
boost Italtile profit
ife After burnout, Rafiq Phillips reboots

40 L
echnology Battle for the cloud
42 T
44 Directors & Dividends Dealings and payouts
THE GLOBAL
ECONOMIC SUPER
CYCLE IS OVER
Cover story: Ciaran Ryan, Liesl
Peyper and Buhle Ndweni
Cover layout: Beku Mbotoli
Cover story layout: Zandri van Zyl
45 Life Quiz, Crossword

46 Piker Funny business
EDITORIAL EDITOR JANA MARAIS DEPUTY

EDITOR ANNELI GROENEWALD MANAGING
EDITOR RUWAYDAH HARRIS JOURNALISTS
AND CONTRIBUTORS SIMON BROWN, STEINMAN
DE BRUYN, LUCAS DE LANGE, MANDY DE WAAL,
MOXIMA GAMA, GUGU LOURIE, SCHALK LOUW,
SHOKS MZOLO, BUHLE NDWENI, LIESL PEYPER,
CIARAN RYAN, JACO VISSER, GLENDA WILLIAMS
SUB-EDITORS STEFANIE MULLER, JANA JACOBS
OFFICE MANAGER THATO MAROLEN LAYOUT
ARTISTS BEKU MBOTOLI, TSHEBETSO DITABO,
ZANDRI VAN ZYL PUBLISHER SANDRA LADAS
GENERAL MANAGER DEV NAIDOO ADVERTISING
MELINDA ABRAHAMS 011-217-3032 / MELINDA.
[email protected], MONICE KRUGER
011-877-6153 / MONICE.KRUGER@FINWEEK.
CO.ZA CIRCULATION MANAGER ARMAND
KASSELMAN 021-443-9975
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WRAPPER FUNDS
GAGU MATSEBULA WRITES VIA EMAIL:
I have been doing a bit of research

into offshore exchange-traded funds
(ETFs), and a couple of Vanguard
products have caught my eye.
My conundrum now is how
to actually purchase them, and I
happened to stumble upon the concept
of offshore wrappers. Are there any
particular reputable companies one
can approach? What should the
fees reasonably be? Do they fare
better when compared with offshore
brokerage accounts?
SIMON BROWN RESPONDS:
Most of the local long-term insurers

and investment houses offer offshore
Double take
4 FINWEEK 10 SEPTEMBER 2015
wrapper funds. Costs are very

important as one is adding an extra
layer of fees on top of the product and
platform fees (and maybe even adviser
fees). Ideally I would suggest the
wrapper should charge less than 1%
of the value being invested every year,
lower of course is better.
You can also go the local route
via the db X-trackers ETFs (from
Deutsche Bank). The DBXUS that
tracks the MSCI 600 (essentially the
same as the S&P 500 index) trades on
the JSE or via any of the platforms that
offer ETFs. It is fully offshore in that
your rands are converted to US dollars
before buying the index, so you get
exposure to both the US stocks and
the currency.
TAX-FREE INVESTMENTS
WILLIAM THOM WRITES VIA EMAIL:
A few months ago, Simon Brown covered

options of utilising tax-free investments. I have
unfortunately misplaced the specific Finweek
edition that covered this. I can recall that Simon
split his initial (first year) investment of R30000
up into two or three different investments and
shared that he would adapt the weighting
strategy in later years.
JANA MARAIS, FINWEEK EDITOR, RESPONDS:
In our 2 April edition Simon advised to open a taxfree savings brokerage account and invest in three
ETFs: BBET40, DBXWD and PTXTEN. His
first purchase was R15 000 of the first two. He
aims to add PTXTEN next year, buying the
three in equal tranches of R10000 each.
IN BRIEF
CASHBUILD BOOMS
+35%
Building material
retailer Cashbuild
has boosted its total
dividend for the year
to end June by 35%
to R7.12, after growing
revenue 13%, and
improving its profit
margin. Cashbuild,
which opened nine
new stores in the year
and remains debtfree, warned that
trading conditions will
remain challenging
in 2016. It will stick
to its growth plan of
opening 10 to 15 new
stores a year.
In
Brief
SAVING STEEL
The number of final

binding offers received
from bidders keen to
buy the loss-making
Evraz Highveld Steel
& Vanadium, which
entered business rescue
proceedings in April. The
steelmaker said in July it
planned to retrench up
to 1 089 employees. A
business rescue plan will
be published by midSeptember, missing an
original deadline of 31
August, the company said.
R231.8M
BETTING ON BURGERS
Justin Sullivan/Getty Images
The amount invested in the expansion of Burger

King in SA by Grand Parade Investments (GPI),
bringing its total investment in the fast-food
franchise to R411.8m. The operations suffered a
loss of R55.1m in the year to end June. The loss was
38% more than the previous year, but in line with
expectations. GPI currently operates 47 Burger
Kings around the country. Other assets include
stakes in Spur and SunWest (GrandWest Casino and
The Table Bay Hotel).
AUSTRALIAN GROWTH SLOWS
+0.2%
Australias economy grew by a mere 0.2% in the June quarter,

half the rate expected by economists, guardian.com reported.
Annual growth has slowed to 2%, substantially below its longterm average of 3% to 3.25%. Growth was affected by a decline
in commodity prices and a drop in commodity exports because
of port closures forced by bad weather, Australias treasurer
Joe Hockey said, adding that other commodity-based countries
around the world are faring much worse.
SAMSUNG STRUGGLES
$4.8M
The loss in market value (R593.6bn) suffered by Samsung

Electronics since April, equal to the market value of
General Motors, according to Bloomberg. Samsung, the
worlds biggest smartphone vendor, has been struggling as
sales of its newest Galaxy smartphones disappoint.
Its profit has fallen for five successive quarters, Bloomberg
reported, and its global smartphone market share fell more
than three percentage points in the second quarter.
IN BRIEF
BIDVEST WARNS ON SA
+9.2%
Industrial conglomerate Bidvest managed to grow its

revenue in SA by 9.2% to R87.4bn in the year to end
June, but warned that trading conditions are likely to
remain tough in a low-growth environment. Plummeting
commodity markets created challenges for freight while
other operations faced low business and consumer
confidence, with sectors such as mining, manufacturing and
construction under particular pressure, it said.
THE GOOD
Durban will host the 2022 Commonwealth Games, the first

time in the events 85-year history that it will be hosted in
Africa. While Canadian city Edmonton, a previous host,
withdrew from the race citing cost concerns, backers of
Durbans bid said 90% of the facilities were already in place,
and that the event would boost tourism and jobs. The
games could boost GDP by R11bn, according to government
estimates. Lets hope government learnt valuable lessons
when the country hosted the 2010 Soccer World Cup.
THE BAD
Gallo Images/iStock
CEO confidence in South Africa has hit its lowest level

since inception in the first quarter of 2009, with concerns
over electricity supply and the true state of the power
system contributing to their pessimistic view, according
to the latest Merchantec CEO confidence index. The
Index suveys more than 1 000 CEOs from top South
African companies, and found a drop in confidence in all
sectors basic resources, industrials, financial, consumer
goods, consumer services and ICT.
OIL COLLAPSE
$25?
Hedge fund manager Pierre Andurand, who predicted the

2008 oil spike and subsequent crash, told the Financial Times
(FT) that the oil market will remain oversupplied in 2016 and
2017 and that oil can drop as low as $25 a barrel. While oil
companies were slashing capital expenditure, the long lead
times on most projects meant the impact would not be felt
on supplies until around 2019, he told the FT. West Texas
Intermediate (WTI), the US benchmark, is expected to trade
between $25 and $50 over the next two years, he said.
With the ongoing power crisis and no

solution in the foreseeable future, CEOs are
losing confidence in their ability to secure
debt or equity capital. Many CEOs believe
the general public are not getting the full story behind
the national power crisis and the true state of the power
stations and their level of deterioration. The lack of
information, transparency and government planning,
together with the irregularity of power outages has
made it increasingly difficult for CEOs to plan for the
long term. Merchantec Capital CEO Confidence
Index, released on 2 September.
THE UGLY
Its hard to keep track of energy
minister Tina Joemat-Petterssons
spinning on the size, cost and
affordability for the countrys
planned nuclear build. Now Tina is
playing the climate change card to
justify spending on nuclear, even
after governments own 2013
integrated resource plan (IRP)
downscaled its contribution citing
costs concerns. What is certain is
that the nuclear programme will
offer rich pickings to those
with the right connections,
and this is only the start
of the shenanigans.
Tina JoematPettersson
Minister of energy
FINWEEK 10 SEPTEMBER 2015 7
IN BRIEF
Sowetan wine
market on the up
BY BUHLE NDWENI
The Soweto Wine & Lifestyle Festival has become an annual event that many people in Gauteng look
forward to attending. This weekend from 4 to 6 September, about 10 000 festival goers are expected to
descend on Walter Sisulu Square, in Kliptown, Soweto, where the 11th annual wine festival will be held.
Co-founders
of the Soweto
Wine & Lifestyle
Festival, Mnikelo
Mangciphu (left)
owner/manager
of the only wine
shop in Soweto,
Morara Wine &
Spirit Emporium,
and Marilyn
Cooper (right), a
Cape Wine Master
and former CEO
of the Cape Wine
Academy
THE MARKET HAS BECOME MORE SOPHISTICATED

OVER THE PAST 10 YEARS AND SERVES AS GREAT
EXPOSURE FOR SMALL PRODUCERS.
Through this, the festival seeks to expose

local entrepreneurs to the audiences in the
middle to upper middle class that attend
the festival.
Half of [the festival goers] are from
Soweto, but the other half do not live in
Soweto, says Cooper.
Popular entry-level wine brand, Four
Cousins, will be at the festival to exhibit
to wine lovers in Soweto, which is their
biggest market, says Cooper.
While the likes of Distell and JC le
Roux will not be present at this years
festival, Cooper says this provides smaller
wineries with a platform to showcase their
wines.
We have a lot of small wine producers
this year and a lot of new people that
havent exhibited before, says Cooper.
Whats nice to see is that our
wine producers are in line with our
entrepreneurs; they are small boutique

wineries. Cooper explains that the market
has become more sophisticated over the
past 10 years and serves as great exposure
for small producers. [Wine lovers]
actually want to find those little gems in
the industry.
According to Cooper, the past 10 years
have revealed a trend. Initially, festival
goers will start with sweet white wine, but
as their tastes become more refined, they
move to dry white wine and eventually
acquire a taste for red.
Half of our audience still drink the
sweet and the bubbly, but the other half
has really moved on from that. They
are playing with white wine blends and
merlot, which is a huge seller now because
its the first red wine they drink; its soft
and juicy and the first step to the more
tannic styles of red wine, she explains.
In general, black consumers share
of the wine market has been growing
substantially. This populations share
of bottled wine consumption increased
from 61% in 2009, to 69% in 2013
(representing roughly 5% of the total
black population), according to the South
African Country report on Geo-demographic
Trends among Alcoholic Beverages
Categories released in November 2013.
Over the same period black consumers
share of box or jug wine increased from
69% to 76%.
[email protected]
Image supplied by Hot Salsa Media
hen the Soweto Wine

& Lifestyle Festival
launched in 2004, it
attracted 1 500 visitors
over the three days. This year, organisers
hope to attract 10000 visitors. Organisers
of the festival say that this relatively new
wine drinking market has become
sophisticated. And, they say, its not just
about educating the masses about wine,
but exposing new consumers to small
boutique wineries across the country.
After reaching maximum capacity
of about 8500 at the University of
Johannesburg Soweto Campus last year,
the festival has now been moved to the
historic Walter Sisulu Square.
The festival is expected to include
between 30 and 40 wine exhibitors, says
Marilyn Cooper, co-founder of the festival
and Cape Wine Master.
Cooper enthuses that a new element
at this years event is the inclusion of
about 15 local entrepreneurs who will be
showcasing products ranging from fashion
and art to food. Its not just about wine,
but opening our market to local Soweto
producers, she says.
TER FROM
G E RI A.
ET
NI
GE RI A.
TER FRO
Nigeria should stay

grounded, for now
ET
NI
IN BRIEF
Gallo Images/iStock
igeria should have its own

airline. Anyone who has
seen the size and stature of
the Nigerian economy
knows it. It did have a national carrier,
Nigeria Airways, but it collapsed in
2003, mired in debt and brought low by
corruption and mismanagement (on a
pessimistic day, Id tell you that you
could pick a sector in Nigeria and youd
find a story similar to this).
In August, president Muhammadu
Buhari ordered the ministry of aviation
to begin work on the establishment of
a new airline, expressing his concern
at Nigerias lack of a national carrier.
It is, in his view, an important step for
airline seems odd. Firstly, getting a
national pride but also for job creation,
profitable airline going seems like a
which is suffering due to the sharp drop
difficult business in Nigeria despite the
in crude oil prices, the main driver of the
disbursal of a 300bn (around R20bn)
Nigerian economy.
intervention fund, most of the countrys
The move has been welcomed
private airlines are heavily indebted to
by some quarters: its true that the
regulatory agencies under the aviation
continents largest economy should
ministry.
boast an airline and
AN
AIRLINE
IS
A
Secondly, an airline
that there are certainly
is
an
expensive project
passengers looking for NICE IDEA AND WILL
at
a
time
when Nigerias
an alternative to much- EVENTUALLY AND
not
f
lush
with cash,
der ided A r i k A i r,
HOPEFULLY BECOME
partly
because
of the oil
whose services were
A
REALITY,
BUT
ITS
AN
price
crash
and
partly
severely compromised
because
of
large-scale
during Nigerias recent IDEA THAT SHOULD
fuel crisis and where STAY AT THE BOTTOM misappropriation of
funds under previous
in my recent experience
OF THE TO-DO LIST.
administrations.
your plane is far more
Say
youve
booked
a plane ticket to fly to
likely to be delayed than not. Nigeria
Abuja
from
Lagos.
Youll wake up how
wouldnt have to do much to offer a
many
hours
before
to
beat the traffic and
service that was an improvement on
negotiate
the
roads,
the
traffic and the
some of my trips; even the word Arik
area
boys?
Youll
walk
past
how many
prompts rolled eyes and sighs from
beggars
on
your
way
into
the
airport?
disgruntled customers keen for better
Youll
queue
for
ages
only
to
discover
services.
the plane isnt running that day because
For others, Buharis focus on an
of operational difficulties, which usually

means insufficient jet fuel supply. You
may eventually get on the plane only
to find the landing delayed in Abuja
because of private jet traffic into the
airport or because of repairs being done
to the runway.
From this hypothetical trip alone,
you can see that Nigerias priorities need
for now to be far more fundamental
than airlines. Fix inequality, fix basic
infrastructure, fix the reliance of the
economy on imported oil products when
it produces its own crude oil. Find jobs
fast for those who need them now, rather
than building a project and then finding
people to fit. Ensure that when youve
built your airline, history wont repeat
itself; so that means fixing corruption.
An airline is a nice idea and will
eventually and hopefully become a
reality, but its an idea that should stay
at the bottom of the to-do list until far
more fundamental building blocks are
in place.
[email protected]
Gallo Images/iStock
COVER
THE GLOBAL
ECONOMIC
SUPER
CYCLE
IS OVER
BY CIARAN RYAN
The global super cycle that powered the world economy over the last two decades and sent
stocks, commodities and property to historic highs, has run its course. As Chinas economic
miracle starts to unravel, its time to prepare for a long, cold winter.
easoned market watchers

knew something was amiss
when Chinas stock market
cracked in July. There was
panic in the sell-off, despite
reassurance from some analysts
that this was just a blip on the
screen and normal services would soon
be resumed.
The Shanghai Composite Index
has lost nearly 40% of its value since

June, wiping out billions of dollars
in wealth. The Chinese government
dropped interest rates for the fifth time
in nine months and devalued the yuan
to keep money f lowing into what is
now starting to look like a dangerously
distended bubble economy.
The currency markets went wild as
investors ran for cover of the US dollar,
and the much-anticipated hike in US

interest rates due to start in September
may now be put on hold. Suddenly,
the one certainty that carried the global
economy out of the 2008 financial
bust that of Chinas emergence as an
economic force of nature appeared to
rest on shaky foundations.
The other certainty to emerge in
recent weeks is that the decades-long
COVER
commodity super cycle is over. With

that comes slower economic growth,
or worse outright recession. The SA
economy contracted 1.3% in the second
quarter of this year, which makes
National Treasurys modest 2% growth
target for the year look optimistic.
Nomura downgraded its growth
forecast for the year to 1.6% from
1.9%, with growth of 2.1% expected
in 2016 and 2.6% in 2017. SA has been
through down cycles before, but what is
different this time is that the causes are
structural rather than cyclical: Eskom
outages, rigid labour laws, unsustainable
government spending, outsized trade
and fiscal deficits, the Jacob Zuma
factor and a rand, which has hit the wall.
Last week it breached R14 to the US
dollar, its lowest level ever, albeit in a
single trade, and has now lost more than
half its value since 2005.
Whats worrying is the lack of
appreciation in government of the
severity of the crisis. This is the end
of the emerging market era, says
David Shapiro, deputy chairman at
Sasf in Securities. We benef itted
from the commodity super cycle, but
this created a certain arrogance, and
economic reforms that should have been
introduced were dropped.
A recent World Economic Outlook
report from the International Monetary
Fund spells out the reforms that are
needed to prod the economy out of
its stupor: remove power bottlenecks,
improve government service delivery
and reform labour, education and
product markets.
None of the required reforms are
being attacked with any real sense of
urgency, according to Shapiro. Stephen
Meintjes, head of research at Imara SP
Reid, believes central banks have learnt
to be more accommodating, but this
does not avoid the need for structural
reforms. Whereas the eurozone has
bludgeoned its wayward members
into enacting reforms, there are many
emerging market electorates and
governments that continue to ignore the

need for them. Ultimately, markets may
force them to.
FNB household and property sector
strategist John Loos believes SA is now
on the downward slope of a super cycle
that may take 25 years to bottom. My
reasoning is based on previous super
cycles, such as the one that lasted from
the late 1970s to the early 1990s. This
was a period of stagnant economic
growth and capital f light. There is
no doubt that this contributed to the
demise of apartheid. What is clear is
that periods of weak or declining activity
are accompanied by social change, often
dramatic change.
SA emerged from the last super
cycle in the late 1990s as it harvested
the dividends of democratic change,
resulting in capital inflows and rising
commodity prices. This carried it
through to 2007, when economic
growth breached 5% a year for a period.
David Shapiro
Deputy chairman
at Sasfin Securities
SUDDENLY, THE ONE
CERTAINTY
THAT CARRIED THE
GLOBAL ECONOMY OUT
OF THE 2008 FINANCIAL
BUST THAT OF CHINAS
EMERGENCE AS AN
ECONOMIC FORCE OF
NATURE APPEARED
TO REST ON SHAKY
FOUNDATIONS.
Loos says there are parallels between SA

in the 1980s and now. Firstly, economic
growth has stagnated. And like the
post-boom period of the early 1980s,
social tensions have risen, witnessed in
heightened service delivery protests and
strike action since 2008.
This time around the environment
is a little different in that there is little
chance of economic boycotts and
sanctions which came as a result of the
global rejection of the apartheid system.
Now it is simply about policies not
geared to achieving significant growth
and employment, thus not creating
an investor-friendly climate. But the
result can be similar albeit perhaps less
extreme, i.e. ratings downgrades and
rising investor concerns, says Loos in a
recent FNB Property Barometer.
Loos says there is a risk that house
prices will struggle to keep up with
inflation as the Reserve Bank continues
to hike interest rates over the next few
years, with the prime lending rate
expected to reach 10.5% by 2017.
While falling Chinese demand is
widely blamed for the general softening
in commodity prices, other factors are
at play. The sharp drop in oil prices
was aggravated by massive investment
in the US shale industry and Opecs
decision to maintain high levels of
COVER
HOW TO
output. Similarly, iron ore producers
kept their smelters going in the face
of falling demand, which contributed
to over-stocking and weaker prices.
Commodity prices have also fallen
victim to financial speculation. Several
of these extraneous forces are likely to
work their way out of the system in the
months ahead, leading to more stable
commodity prices.
LESSONS FROM THE

GREAT CRASH OF 1929
The global debt explosion of the

last seven yea rs represents an
unprecedented f inancial gamble
engineered to prop up asset prices
and cushion economies from shock.
This policy prescription is a nod to
the lessons of the Great Depression
of the 1930s, but many believe it now
dangerously overdone.
Economists of the so-called
Austrian school have been warning
of economic calamity since 2008 on
John Loos
Household and
property sector
strategist at FNB
PROTECT
YOURSELF AGAINST
A DOWNTURN
ne certainty in times of economic

turmoil is that money flows to safe
havens, in which case the US dollar for
all its perceived weaknesses stands
out as a beacon of safety. And since
many of the JSE Top40 companies now
earn more than half their profits abroad,
they will provide a cushion against rand
weakness. They may not, however,
provide a cushion against weak markets
and falling profits.
A sudden crash in the market of 10%
to 15% such as happened across the
world in the last few weeks prompts
knee-jerk reactions from retail
investors looking to liquidate in a
falling market. That can be a huge
mistake. Investors tend to look at the
rands weakness as a trigger to move
funds offshore, which is another
potential mistake.
The knee-jerk reaction is to
disinvest from the SA investment
landscape and to take money
offshore, says Andrew Dittberner,
senior investment manager at Cannon
Asset Managers. I would argue that is
probably the most dangerous thing
one could do right now. If we look back
to 2001 and 2002 when the rand found
itself in similar territory, it has taken
investors who took money offshore at
those prices the better part of 12 years
to recoup their losses.
Should the rand recover, which
many analysts believe is a possibility in
the next three to five years, those who
ship money abroad at these levels
could end up in the same position as
those who took rands out at R12 to the
US dollar in 2002, only to see the
currency double in value against the
dollar by 2005.
The best protection against
uncertainty is a well-diversified
portfolio of stocks that are reasonably
priced and that are not reliant on
foreign money to prop up valuations.
You will need patience and the
stomach to ride out the volatility, says
Dittberner.
Holding a sizable cash float is also
advised in times of uncertainty. And for
insurance purposes, gold and hard
assets protect against adversity and
inflation.
the grounds that loose monetary policy

always creates asset price bubbles. As
one pops another one appears. The
US Federal Reserve has operated a
zero interest rate policy for seven years
and has printed $3.7tr (R49tr) to boost
markets and GDP growth, according
to Chris Becker, lead economist and
strategist at African Alliance. To put that
in perspective, thats roughly 10 times
SAs annual GDP. Other countries have
followed suit with varying degrees of
vigour. Chinas corporate and household
debt has nearly doubled to 207% since
2008, and that has kept money flowing
into its stock and property markets. The
ratio for Japan is 230%. SAs public debt
as a percentage of GDP has risen to
nearly 70% from 26% in 2009, according
to the latest Budget figures.
Central banks addiction to money
printing is blamed for creating massive
distortions in prices from stocks and
bonds to property and commodities.
Nor is much of this new money finding
its way to the street. It has ended up
on the balance sheets of banks, large
corporations and investors, creating asset
price inflation. Consumer inflation, for
the moment, remains under control.
The stock market collapse of 1929 was
the result of a prolonged period of easy
money and low interest rates, resulting
in massive speculation in stocks, property
and other assets. The Fed responded to
the stock market crash by throttling
money supply the exact opposite of
what central banks are doing today.
By 1933, four years after the crash, US
money supply had shrunk by a third.
Unemployment reached 25%, there was
a run on banks, 5 000 of which went bust
in the US and tens of thousands of people
were left homeless.
The job of central banks everywhere
is to always goose trouble-prone
economies with printing press money
so that households and business will
spend more, the GDP will rise more
and the stock bourses will be worth
more, according to market commentator
and former US congressman David
COVER
Stockman, in a recent article to

investors. He argues that another
devastating crash is imminent.
A study of boom and bust cycles
over 214 years by John LaForge of Ned
Davis Research shows historical bull
markets lasted an average 16 years, and
bear markets 20 years, though cyclical
downturns have been shortening since
1971.
Becker, in a study entitled Africa
consumer hits a cyclical slowdown,
highlights the vulnerabilities of the
continents economies as the economic
slowdown bites. Africas consumer
and GDP boom was built on a weak

foundation which is now crumbling.
Rising borrowing from abroad, the
sale of local assets to foreigners, income
growth from the commodity super
cycle, a dishoarding of low domestic
savings and capital, and some marginal
domestic productivity gains have been,
in rough order of importance, the main
drivers of the Africa consumer boom
in the past decade, says Becker. These
growth drivers are now evaporating.
Nor can Africa rely on a surging
middle class consumer boom to rescue
it from the slowdown. The consumer
boom of the past decade was driven

by growth in primary sectors (mining
and agriculture) on the one hand and
retail and distribution on the other.
Missing was the hollow middle of
manufacturing, says Becker. Without
increased output and productivity gains,
Africas future growth cannot be taken
for granted.
Becker points out that no subSaharan African country is putting up
its hand to become the next Philippines
or Vietnam. For a start, the savings
rates are too low, and its economies are
smothered by dead capital in the form
POLICY CHANGES NEEDED TO FIX SA INC.
or a quick shot in the arm, government needs to

produce the infrastructure spend that has been
promised but not delivered, says Andrew Dittberner,
senior investment manager at Cannon Asset Managers.
The infrastructure would lift growth in the short term
and improve business competitiveness in the long term.
Thats probably the easiest part. The more difficult choices
involve reforming labour and other laws that squat in the
path of growth and hinder job creation. The newly tightened
visa rules that have slashed visitor numbers from China,
Russia, Brazil and India could also be removed with ease.
Stephen Meintjies of Imara SP Reid argues for a radical
switch away from taxing the fruits of labour and capital to
the collection instead of economic rent by way of rentals
on community created land values. This is the only way to
tackle the growing land crisis at its roots and will not only
ensure efficient use of all land, but, in doing so, make it
more freely available. By removing the heavy burden of
direct and indirect taxes on marginal land, which includes
most of SAs rural areas, economic activity there can be
resumed, he says. In principle, business would be highly
incentivised to maximise production in the absence of
taxation and its replacement by site value rentals. In other
words, business would only have to pay the state for
benefits received as reflected in land value. As regards the
mining industry, South Africa has a long-standing proxy
for collection of rent in the shape of the gold mining
formula tax, which should be rolled out to the rest of the
mining industry as soon as possible.
Dittberner says another policy fix that could boost
growth is closer integration with our neighbours. South
Africa is unbelievably well positioned in one of the fastest
growing regions in the world, yet we appear to be averse
to contributing to the development of the region.

Dittberner adds that a third fix that will have to be
addressed sooner or later is the size of the public sector,
which has grown by a third over the last decade. The level
of service delivered relative to the cost of this massive
transfer from the wealth producing to the wealth consuming
sector of the economy cannot be sustained.
Special economic zones and a one-stop investment
shop, as proposed by the government will help, but will
not have the desired effect without reforming labour laws.
It is simply too costly and bureaucratic to do business in
SA. Large corporations are laying off staff, and only smalland medium-sized businesses are hiring, so they should
be helped.
Dittberner says Mexico provides a great case study
presenting evidence regarding what can happen in a
relatively short space of time, when a middle-income
emerging country, not dissimilar to SA, that is teetering
along at around 2% economic growth undertakes a
number of structural reforms. When Enrique Pea Nieto
won the presidential election in 2012, he was determined
to push through a number of reforms that he was adamant
would alter Mexicos long-term growth performance.
As part of the North American Free Trade Agreement,
Mexicos exports rapidly grew to more than 60% of GDP,
energy markets were privatised and the labour market
reformed.
Locally, SAA and Eskom are dysfunctional and long
overdue for privatisation. The sale proceeds could be
directed to the development of SAs soft infrastructure,
notably health and education. The returns here can take
a generation to be realised, but are vital to the long-term
growth of the economy.
COVER
of land and other assets, but without

title, that could be used as collateral to
unlock credit.
Gross national savings in Ghana,
Zambia, Kenya, Nigeria and SA
averaged 14% between 1980 and
2000, less than half that of East
Asian countries during the same
per iod. In ot her words, a key
prerequisite for an African recovery
is absent, says Becker. Contrast
this with China, where savings
exceed 50% of GDP, or Indias 30%.
and the Chinese themselves recognise

they have to make a structural change
from reliance on manufactured exports
to internal consumption. There is no
technological revolution on the horizon
such as the internet or cellphones. And
SA has squandered the opportunity
to introduce structural reforms that
would help it ride out the downturn.
It may be that a revolution in energy
production is the next great economic
stimulus, but I dont see it just yet.
Another prerequisite for African

growth is Chinese demand. That,
too, is on the wane. Chinas vice
finance minister Zhu Guangyao was
quick to reassure investors that 7% to
8% annual growth as opposed to the
double digit growth of the recent past
was the new normal.
Not everyone is convinced. My
biggest worry is where the growth will
come from in the future, says Shapiro.
Nothing jumps out at me. The days of
double-digit growth in China are over,
An end to the commodity super cycle,

for now at least
700
[email protected]
Metals Index
210
200
180
160
600
140
500
120
Chinese-driven
super cycle
400
Slowing Chinese
demand
100
300
80
200
100
60
55
1960
1970
1980
1990
2000
2010
50
2000
2003
Thomson Reuters Equal Weight

Continuous Commodity Index
Large-cap companies with over

50% offshore revenue
COMPANIES
How commodity bulls end
95
90
85
80
Historical
composite
averages peaks
from:
1814
1864
1920
1951
1980
NDR Commodity
Composite around bull
market ends*
75
2015
70
Secular bull market end
65
60
55
50
45
40
Gallo Images/iStock
35
30
-16 -13 -10 -7
-4
Years before bull market end
BEYOND
*NDR Commodity Composite constructed

using prices by George F. Warren & Frank
A. Pearson, Bureau of Labor Statistics,
Commodity Research Bureau
(www.crbtrader.com)
0 2
11
14
Years after bull market end
SOURCE: John LaForge,

Ned Davis Research
2012
SOURCE: Sasfin
Commodity
bear market for
another 16 years?
105
2009
The Economist Metals Index (USD)
SOURCE: Thomson Reuters

Datastream, African
Alliance
100
2006
17 20
MARKET CAP
BHP Billiton
R489bn
Glencore
R553bn
BAT
R1.47bn
intu Properties
R87bn
Mediclinic
R95bn
MTN
376bn
Brait
R76bn
Richemont
R561bn
Aspen
R166bn
Steinhoff
R282bn
SABMiller
R1.11bn
Mondi
R110bn
Bidvest
R102bn
Naspers
R747bn
South32
R86bn
2015
COVER
INVESTMENT
OPPORTUNITIES LIE
OUTSIDE SA EQUITIES
SA equities will struggle to outperform global ones in the foreseeable future. For this
reason, Old Mutual Investments currently prefers global assets in its portfolio, according to
portfolio manager John Orford.
BY LIESL PEYPER
outh Africa is now suffering

from inflationary pressures,
low growth, high
unemployment figures and
current account deficits,
John Orford, portfolio
manager at Old Mut ua l
MacroSolutions, said at an
investment insight conference hosted
by Old Mutual Investments at the end
of August. SAs so-called tailwinds
experienced since the early 2000s
such as steep growth in China, and
the commodities boom have now
become headwinds, he said, adding
that a number of these woes were
home-grown.
Nonetheless, they all conspire to a
very low growth environment.
Since 2009, he said, the world has
seen a global Goldilocks situation
where things were neither too hot nor
too cold. Policymakers have put their
foot on the pedal and we have seen
very low interest rates in a deflationary
environment, Orford said.
But that is about to change as the
US Federal Reserve is starting to
debate rate hikes as their economy is
improving.
Against this background, Orford
believes that global equities still look
attractive and youll get better returns
[than locally] just from the dividends.
Old Mutuals investment team also
views SA bonds in a very positive light.
Bonds benefit from a weak growth
THE BIGGER
PICTURE
ne of South Africas biggest

shortcomings is not having
enough entrepreneurs, which in
turn can be ascribed to a lack of
a skilled workforce, according to
Elias Masilela, director of DNA
Economic s and a par t-time
commissioner of the National
Planning Commission.
If you compare South Africa
to the region north of Limpopo,
the people who trade on the side
of the road are also the producers
of the goods they sell, Masilela
said at the conference. But its
not the case in South Africa. Why
not? Its because of a lack of
skills.
Skills are important for labour
market flexibility, Masilela said.
We need a trainable workforce.
All the problems in the mining
sector; the miner is trained for
mining alone and nothing else. If
we had a solid base of education,
it would have been trivial to
move from one sec tor to
another.
Meanwhile Masilela said the
private sector needed to up its
involvement in the National
D eve l o p m e n t P l a n , a s t h e
socioeconomic problems SA
fa ces will in evit a bly af fec t
companies bottom lines. Gone
are the days when leadership
and policy decisions can only be
left to the government.
environment, said Orford. Yes, theyre

lower than in the 1980s and 1990s, but
inflation is currently much lower. One
can expect a 3%+ real return from bonds
currently.
A FEW HOMEGROWN GEMS
There were, however, still amazing

businesses locally, said Peter Linley,
head of Old Mutual Equities.
Weve had access to top quality
businesses through SA B, BAT,
Steinhoff, Remgro and Naspers* that
are still drawing lots of earnings from
outside the domestic economy.
According to Linley, Old Mutual
has abided by its investment philosophy:
buying low price-earnings (P/E) stocks,
which provides a margin of safety.
But a low P/E isnt always good
enough. If you get the earnings wrong,
youll get investment wrong, he said.
The valuation of a stock, he said, is
only part of the picture and part of his
investment strategy is to also take into
account what a stocks relative earnings
would look like compared to the rest of
the market.
Linley explained that dividend yields
are important to companies, as they serve
as an indication of performance. If a
company doesnt pay a dividend it raises
a big, red flag.
[email protected]
*Finweek is a publication of Media24, a

subsidiary of Naspers.
COVER
5
S
OPPORTUNITIES FOR
INCLUSIVE GROWTH
COMPILED BY BUHLE NDWENI
outh Africa has the potential to create more than 3.4m jobs and add over R1tr to annual GDP by 2030
if government and business prioritise five key opportunities to unlock growth, according to a new
report by the McKinsey Global Institute. Success will depend on two critical enablers: dramatically
expanding vocational training in SA, and forging a true development partnership between government
and business, it said.
THE FIVE OPPORTUNITIES ARE:
1) ADVANCED MANUFACTURING
POTENTIAL GDP BOOST: R540BN
POTENTIAL JOBS: 1.5M
The relative contribution of SAs manufacturing to GDP has

almost halved since 1990, leading to pessimism about the
sectors future. Currently manufacturing directly contributes
only 13% to GDP, compared with 20% of GDP in comparable
economies. McKinseys analysis suggests that by 2030, exports
of advanced manufactured products could grow to more
than R700bn, from R190bn in 2013. The opportunity exists
in the automotive, industrial machinery and equipment, and
chemicals sectors, and would require manufacturers to pursue
new markets and improve innovation and productivity.
2) INFRASTRUCTURE PRODUCTIVITY
POTENTIAL JOBS: 660 000
While SAs investment in infrastructure as a percentage of

GDP, at 4.9%, is among the highest in the world, there are still
major gaps in electricity supply and access to clean water and
sanitation, according to McKinsey. It has earmarked R2.2tr to
be invested in infrastructure over the next decade. The impact
of smarter infrastructure delivery in SA would be tremendous,
it said, saving the country up to R1.4tr over the next decade. A
more effective approach to domestic infrastructure delivery
would also build the capabilities needed to support expanded
exports of construction services to the rest of Africa.
3) NATURAL GAS
Natural gas provides an opportunity for SA to meet its power

generation needs. A shortfall is expected again by 2025,
despite the building of Medupi and Kusile, Eskoms mega coalfired power stations, as old power plants get decommissioned,
McKinsey said. At the right price, gas could also provide an
opportunity in chemical manufacturing. The first step would be
to secure sufficient supply, for example by importing liquefied
natural gas (LNG). Although SAs own shale gas resources are
yet to be proven, they could potentially create an additional
40000 to 102000 jobs and would require investment of
between R600bn and R1tr, according to McKinsey.
4) SERVICE EXPORTS
Globally, services constitute 70% of GDP while they make up

62% in SA. The country has highly developed service industries,
yet McKinsey estimates that it currently captures only 2% of the
rest of sub-Saharan Africas (SSA) market for service imports,
which was worth an estimated R536bn in 2012, growing at
an average of 7.1% from 2002 to 2012. In contrast, Brazil
which accounts for a comparable share of GDP in its region
commands a 26% market share in providing service imports
to Latin America, according to the report. Service exports from
SA to SSA could grow from R10bn in 2012 to R120bn by 2030,
the report said.
5) AGRICULTURAL TRANSFORMATION
SA has productive, internationally competitive agriculture and

agro-processing sectors, and should use this comparative
advantage to capture burgeoning demand of its agricultural
products in Africa, Europe, Asia-Pacific, and the Middle East.
McKinsey estimates there is scope to triple SAs agricultural
exports to R212bn by 2030, which will boost rural growth and
benefit the nearly one in 10 South Africans who depend on
subsistence or smallholder farming.
A number of SAs existing agricultural export markets,
notably SSA and Asia, are growing rapidly as large
populations join the consuming class, according to McKinsey.
The opportunity lies primarily in fruits, beverages, animal
products and cereals, it said, and SA needs to improve its
competitiveness in areas such as poultry.
[email protected]
IN THE NEWS
Health sectors R24bn bill

for irregular spending
Gallo Images/iStock
orruption in the local health- years hit R5.4bn, recently axed 18

care sector compromises employees for crimes ranging from the
patient care and lowers the theft of R10 000, stealing medicines, and
morale of employees in the the unauthorised use and possession of
sector. This is according to a recent study, state vehicles (including an ambulance).
Exploring corruption in the South African
The study, covering a nine-year
health sector, by Wits Universitys Prof. period, looked at findings from the
Sharon Fonn, Prof. Laetitia Rispel and Auditor-Genera l, which show a
Dr Pieter de Jager.
worsening trend in audit outcomes, and
The study noted that in SA, where the reports in print media. Over the period,
total private and public health budget is the majority (63%) of corruption-related
pegged at R400bn, a total of R8bn reports concerned the public sector, said
combined provincial health expenditures the authors.
was unauthorised and another R24.1bn
We would like government health
irregular in the last four years.
departments to engage with the issues
According to the study, fruitless that we raise, debate them, and try to
and wasteful expenditure hit R1.3bn implement practical solutions to prevent
for the three-year period
corruption, as it tends to
to end 2013.
hurt communities, and the
ALL SOUTH
For Corruption Watch AFRICANS NEED
poor, they said.
director David Lewis, the
On a more positive note,
real cost is the ever-falling TO NOTICE AND
the Wits researchers noted
standards in the ailing MEASURE GRAFT an improvement in irregular
public healthcare sector.
expenditure in Gauteng
AND BE VOCAL
Ironically, more than
from 11% of its health
ABOUT IT.
enough laws are in place to
expenditure in 2010/11 to
prevent corruption but implementation 5% a year later. It still hovers around 5%.
remains a problem, according to
In contrast, KwaZulu-Natals has
researchers and the authors of the report. trebled to 10%. The Northern Cape has,
Reasons for increased levels of for the past three years, ranged between
corruption, according to the report, 32% and 42%, compared with 5% in
include the blurred lines between 2009/10.
political power and business interests;
The [National Development Plan]
lack of mechanisms to detect graft (as also notes that poor accountability in
whistle-blowers tend to be muzzled, the health sector reduces health system
deterring others from repor ting effectiveness, said the study, adding
wrongdoing); conflicts of interest; and that the plan conceded high levels of
failure to sanction transgressors.
corruption in both private and public
Earlier research by Econex linked sectors.
the demise of the sector regarding
The problem is also illustrated by
mismanagement and corruption, with the National Treasurys 2013 budget
just 20% of state facilities presenting allocation of R71.4m [...] to the South
clean or unqualified audit reports.
African Public Service Commission
Gauteng, whose health-related to combat corruption and address
irregular spending over the past four grievances.
BY SHOKS MZOLO
Instead of investing funds in such

exercises, amid persistent conf licted
interests as in the case of an unnamed
hospital CEO being a director of nine
firms researchers ask for commitment
at all levels of the health system to deal
with corruption we need systematic
intolerance of wrong doing. All South
Africans need to notice and measure
graft and be vocal about it, they say.
The louder the noise, the more we
can change this society so that it serves
its citizens well, write De Jager, Fonn
and Rispel.
We would like government to
pay more attention to improving
management, comply with existing laws,
ensure that civil servants with the right
skills are employed, and communicate a
message that corruption is not acceptable
in our democracy.
According to the same study, the
US loses an estimated $60bn (equalling
R800bn or 3% of its annual health
spending) to graft a year.
[email protected]
IN THE NEWS
Massmart needs
to get it together
BY SHOKS MZOLO
Nearly four years after US retailer Walmart bought a 51% stake in discount
retailer Massmart, the group is struggling to improve the profitability of its local
operations and make inroads on the rest of the continent. Recently released results
are not convincing of the companys ability to better its performance, but the
company is acutely aware of its shortcomings and is working hard on improving,
says CEO Guy Hayward.
assmart, which released

underwhelming interim
results for the 26 weeks
ended 28 June, has seen its
share price decline nearly 20% since the
start of the year, underperforming
competitors like Shoprite (down 4.3%),
Pick n Pay (up 22.5%) and Woolworths
(up 29.1%). The Massmart share price is
down 45% from its May 2013 peak of
R205.04, and the share is now trading
at 2010 levels (also see page 32).
At the time of the 2011 deal, which
saw the global titan pay R17bn to take
a 51% stake in the local retail group,
pundits spoke of the Walmart effect.
CEO Guy Hayward half-jests that the

fact that the Walmart magic is not yet
apparent should put a stop to criticism
that arose when the deal was first struck,
when it was claimed that the NYSElisted titan would flood SA with cheap
goods, hurting local industry and jobs.
Long-term benefits, he says, will derive
by way of critical mass and innovation
from IT to distribution centres and
other critical competitive factors.
In the meantime, the retailer is
struggling to keep up with competitors.
In the June period, Massmarts headline
earnings dropped 26% to R269.3m,
partly due to foreign exchange losses.
A similar fall in percentage terms was

recorded last year. At R306.6m now,
net profits have softened by well over a
third since the first half of 2013 despite
revenue increasing by 9% to R39bn over
the period.
Woolworths, in contrast, posted a
19.4% jump in headline earnings to
R3.3bn and a 4.3% rise in net profit to
R3.1bn for the year to June. Revenue
increased 45.4% to R58.1bn thanks
to the inclusion of David Jones, an
Australian business that the Cape
Town-based retailer splurged R23bn
on last year. Its performance was partly
buffered by its focus on high LSMs,
IN THE NEWS
Massmart Holdings
Limited
Cents
18 000
16 000
14 000
12 000
2011
52-week range:
2015
R106.69 - R175
Price/earnings ratio:
24.4
1-year total return:

Market capitalisation:
Earnings per share:
-11%
R24.7bn
R4.66
Dividend yield:
3.7%
Average volume
over 30 days:
551 102
Getty Images/ Bloomberg/ Dean Hutton
SOURCE: Bloomberg.com
which protected it somewhat from the

impact of weak consumer confidence,
which is at 14-year lows.
We believe that economic conditions
in South Africa [and] Australia will
remain constrained, especially in the
lower and middle-income segments of
the market. The upper-income segments
in which we operate continue to show
some resilience, Woolworths said in a
statement.
Compared with Woolworths, the
Walmart unit looks lost. Its not all
doom and gloom, however. For one, its
star performer, Massbuild, a division
that includes Builders Warehouse,
surged 31% in trading profit on the back
of a 16.3% jump in total sales.
Another piece of good news is that
Massmart has, after years of attempts
(including an offer to buy a majority
stake in Naivas Supermarkets that failed
last year), set up operations in Kenya
adding the east African powerhouse
to its footprint after opening a Game
in Nairobi during the year, expanding
Massmarts footprint to 14 countries.
Going forward, the plan is to keep
growing presence outside SA where 85%
of its 400 stores are still concentrated.
Were certainly pursuing new growth,
Woolworths Holdings
Limited
Cents
8 000
6 000
4 000
2 000
2011
52-week range:
Earnings per share:
2015
R64.94 - R103.92
26.8
+30.3%
R94.7bn
R3.70
Dividend yield:
2.5%
Average volume
over 30 days:
3 602 890
Hayward says, noting that recentlyopened stores, including Game branches

in Nairobi and Zambias Kitwe, are
doing well. Massmart plans to open
eight new stores in Nigeria, Ghana and
Zambia in the next two years.
Tota Tsotsotso, managing director
of Bataung Capital, says Massmarts
interim numbers were decent ,
given the ever-shifting economic and

competitive landscapes. The challenge
with its Africa strategy will be sourcing
and logistics, Tsotsotso says.
Builders Warehouse has been
successful in Mozambique, and rival
Cashbuild has demonstrated that a
concentrated product approach to each
town or region within each country is
the better strategy. Local sourcing is a
big challenge.
But, much as Massmart prof its
continue to decelerate, it remains a
great business with a good management
team, Tsotsotso explains. Its prospects
are still decent, albeit we are likely to
see a lot of pressure in the short term.
Medium-term commodity inf lation
will help a lot. Long-term African
urbanisation is still a dominant theme.
I do think that the market will likely be
cautious of Massmart as an opportunity
at the moment, until the picture gets less
murky.
Looking ahead, Hay ward, who
joined Massmart in 2000 and took over
as CEO last year, said cost-cutting and
efficiencies continue to be priorities.
Hes also openly unhappy with whats
happening on the prof it front and
concedes the firms blunders. Were
turning a corner, he says. This is
something we think about every day.
[Profitability] is not where it should
be; were acutely aware of this and are
working towards improving it.
Still, a price-to-earnings ratio of
around 24, compared with Woolies
26, doesnt necessarily make this stock
a screaming buy.
Returns are still attractive, but far
lower than their historical averages have
been. I wouldnt write the business off
just yet. Walmart, being the parent
company, is an exceptional business
with exceptionally deep pockets, says
Tsotsotso. Some of the concerns that
shareholders have are that there isnt a lot
of free cash flow, and there are possibly
easier ways to gain access to the African
consumer I think it will take a while
for management to convince investors
that their opportunity is the best.
[email protected]
IN THE NEWS
Tough times: Growthpoint

worries over dividend yield
outh A frica is in a
tough space , say s
Norbert Sasse, CEO
of Grow thpoint
Properties Limited. Yet, against the
backdrop of a diff icult operating
environment, SAs largest real estate
investment tr ust (R EIT) posted
healthy dividend growth of 7.5% for
the financial year to end June.
But the countrys macros, negative
gearing, rising vacancies, refinancing of
Acucap Properties Limited and Sycom
Property Fund debt, and increasing
withholding tax are key reasons for the
company expecting dividend growth to
be down around two percentage points
for the upcoming year. The outlook of
5% to 6% positive distribution growth
is expected to come primarily from
redevelopment of existing properties
rather than acquisitions.
This years growth, however, was
driven largely by acquisitions. For
the first time, Growthpoints annual
distributions to shareholders exceeded
R4bn for the year, which included
an early R1bn payment as part of the
R18.6bn acquisition deal of the Acucap
Properties Limited and Sycom Property
Fund portfolios. But for the early
payment, distribution growth would have
been an even higher 8.4%, says Sasse.
Notably, the company has grown
its assets to over R100bn, boasting 525
properties 53 of them offshore with
net income up by 21.4%. Growthpoint
has also grown market cap to R71.7bn
and increased staff numbers by over
55% in the past two years. Offshore
investment also grew with the addition of
R607m during the year into Growthpoint
Properties Australia (GOZ).
Significant growth in its Australian
subsidiary means the company has
BY GLENDA WILLIAMS
literally doubled the size of its investment

since 2010 with 15.5% of distributable
income coming from Australia. The
bulk of its distributable income 75.8%
comes from the South African portfolio,
with a further 8.7% coming from the
V& A Waterfront through its 50%
interest in the properties.
But the tough operating environment
is already impacting vacancies, which
have risen from 4.9% to 5.7% overall.
The company has an acquisition and
development pipeline of R4.2bn, but
commenting on further acquisitions
Sasse says: The SA market is not
conducive for us right now. Weve got
significant scale in the domestic market
and there arent that many quality
opportunities left. And whats left is
frightfully expensive. Add to this
negative gearing; borrowing at 9.5% to
get a 7.5% return.
That doesnt mean the company
will shy away from a viable quality
acquisition opportunity, but looking
forward Sasse says their strategy will
be one of consolidating and optimising
the properties they have. We see better
value in developing new product on the
back of pre-commitments and where
we can get better yields of around 8.5%
to 10%. Much of that redevelopment
will be down in the Western Cape with
emphasis on the Gateway precinct of
the V&A.
Like almost every other property
fund, Sasse says they are exploring
alternative markets. There is nothing
right now which is hard and fast or in
final negotiation but we have our eyes
and ears open for opportunities outside
of SA that include Africa and Europe.
The key driver for us is diversifying into
hard currency markets, adds Sasse.
[email protected]
HIGHLIGHTS:
Distribution growth: 7.5%
Total return to investors: 14%
Total return on Growthpoint Properties
Australia (GOZ): 31.9%
Total asset value: R100.4bn
No. of properties in SA: 471
Value of SA properties: R71.6bn
No. of properties in Australia
through GOZ investment: 53
Value of Australian properties:
R22bn
Value of 50% in V&A Waterfront: R6.8bn

Revenue growth: 20.7%
Annual distributable income: R4.2bn
GROWTHPOINTS JOURNEY

2010 2015
Property assets
R35bn
Market cap
R24bn R72bn
Distribution
per share
121.2 cents
Share price
R15.52 R26.46
NTAV* per share
R13.65
Properties**
456 525
Staff
452 700
GOZ market cap
AUD283m AUD1.8bn
GOZ properties
25 53
R100bn
173.4 cents
R23.28
*Net tangible asset value

**Including 100% of Growthpoint Properties
Australia (GOZ) and 50% of V&A Waterfront
SOURCE: Growthpoint Properties Ltd
SPOTLIGHT
Going forward, Italtile

hopes to open between
five and 10 new TopT
stores annually.
Home renovators
boost Italtile profit
BY JACO VISSER
During a tough economic climate, companies usually

have to tighten their belts. But Italtile Ltd is seeing
growth opportunities as local consumers opt to
renovate their homes, rather than buying new ones,
Italtile CEO Nick Booth told Finweek.
ndebted South African

consumers, who are still reeling
from the bubble in unsecured
lending and the subsequent
collapse of African Bank, formerly the
largest lender of its sort, are still shy of
buying new property. And banks are
shy to forward credit.
This boasts a potential chance for
Italtile Ltd to capitalise on the homeimprovement market, according to its
CEO Nick Booth.
Rather than selling their homes
and buying new ones, owners are
renovating, Booth, who took over
as CEO in July 2014, told Finweek,
following the announcement of the
groups annual results at the end of
August.
Ita lt i le Ltd, t he ow ners a nd
franchisor of retailers such as Italtile,
CTM and TopT, that sell local and
imported home-finishing products
posted a 37% jump in prof it and
increased its total dividend by almost
a third.The companys system-wide
revenue rose 17% to more than R5.2bn
for the 12 months ending 30 June.
Same-store sales rose 16% compared
with the previous f inancial year.
Italtile Ltd forfeited margins in a bid
to keep its market share in a struggling
consumer market.
We saw resilience in the lower
LSMs as consumers in those bands
dont worr y too much about the
exchange rate and big picture economy.

They just want to improve their homes,
said Booth.
While the groups top-end retail
brand, Italtile, took the brunt of the
rands depreciation over the period as it
relied on imported products the most,
its TopT brand was rolled out faster
than the company anticipated.
With its store sizes of between
500m 2 and 600m 2 , the company is
able to expand into outlying and rural
areas where it is underrepresented and
where higher-value offerings of homeimprovement products, such as Tivoli
taps and imported tiles, are not readily
accessible, Booth said.
ITALTILE LTD POSTED A

37% JUMP IN PROFIT AND
INCREASED ITS TOTAL
DIVIDEND BY ALMOST A
THIRD.
What TopT in rural areas offers
consumers now is a one-stop shop
where they can buy all their homeimprovement products, according to
Booth. This is especially important in
light of high travelling costs in these
areas.
Wealthier consumers were more
reticent in their spending as the
SPOTLIGHT
economic environment had the biggest

impact on them, Booth said.
We dont hedge ou r foreig n
currency exposure, he said. We cost
our products as they arrive in the store.
Retail brand Italtile saw price
inflation of about 10% compared with
lower-income targeted TopTs average
price inflation of between 3% and 4%.
In a bid to boost eff iciency and
profitability, Italtile Ltd owns a number
of suppliers, including International
Tap Distributors, which manufactures
the Tivoli and Amalfi brands of taps.
Italtile acquired 80% of International
Tap Distributors in 2005.
T he g roup a lso ow ns 20 % of
Ceramic Industries, where Booth hails
from, which is the primary supplier
of tiles, sanitaryware and bathroom
products to the companys three retail
brands. In addition, Italtile Ltd holds
46% of Ezeetile, a manufacturer of tile
adhesive and grout.
Ceramic contributed R 55m to
the groups profit whereas Ezeetile
contributed R7m, according to the
companys f inancial results. The
groups total profit was R731m for the
12 months ending 30 June.
Italtile, which contributes about
15% to group turnover, was boosted
by a resilient commercial property
development market, according to a
press release announcing the companys
results. These developments included,
among others, office blocks, shopping
centres, warehouses and health centres.
Booth said the company would
probably not feel a big impact if
interest rates are raised in the coming
months. The Reserve Bank has started
its monetary tightening cycle at the
beginning of last year and has hiked its
benchmark repurchase rate thrice by a
cumulative one percentage point to 6%
in July.
South African consumers are also
in the stranglehold of job cuts in the
mining sector as demand for the
countrys resources flounders due to a
cool down in the Chinese economy, the
largest export destination for minerals.
Iron ore, gold and platinum prices are
at multiyear lows and large numbers of

mineworkers are being laid off.
Ironically, Italtile Ltd hasnt seen a
marked decline in sales in traditional
mining towns such as Kathu and
Rustenburg, Booth said. The only shop
where a slump in sales was recorded,
is Welkom, he said. We did, however
feel the impact of the strike in the
platinum sector last year, he said.
Not w it hsta nd ing tough loca l
economic conditions, the company still
sees the potential for expansion in its
TopT brand in SA over the next four
to five years, according to Booth. The
plan is to open between five and 10
TopT stores annually.
EYEING EAST AFRICA
In a bid to diversify its footprint away

from the BLNS (Botswana, Lesotho,
Namibia and Swaziland) countries,
which rely heavily on SAs economic
performance, Italtile Ltd is looking to
East Africa for expansion.
In terms of the CTM brand, in

addition to further stores in South
Africa, we see an opportunit y in
Kenya, Booth said.
We have two stores in Kenya with
one in Mombasa and one in Nairobi.
We have plans in place to roll out
another four stores in Nairobi over
the next five years. There is also the
potential to put a small distribution
centre up in Mombasa.
If the group can succeed in getting
its business model working in Kenya,
it will look at expanding into other
countries too, Booth said. The links
in terms of logistics between SA and
Kenya are good and that is one of the
reasons why Italtile Ltd is looking
to use the East African nation as
a springboard into the rest of the
continent, according to him.
About 15% of the hits on CTMs
online web store come from Kenya,
Booth said.
[email protected]
GETTING TO KNOW
NICK BOOTH
Q: What are you currently reading?
A: Im reading a book called The
Wal-Mart Effect by Charles Fishman. I
asked an analyst about a year ago to
recommend a book about retail as Im
from a manufacturing background.
Q: What do you do to relax?

A: I have a lot of fun running the
business. I have a regular four-ball
(golf) on a Sunday morning early so
Im home in time to be with the family. I
also read a bit.
Q: What sport do you watch and which
teams do you support?
A: I love football and Im a Manchester
City supporter of note. I was actually
born in Manchester and my whole
family supports City; Im not one of
those guys who started supporting
them because they started winning
stuff. I have managed to make a couple
of rugby World Cup finals in my life.
Im going to this final as well. For the
record Im a Lions supporter.
Nick Booth
CEO of Italtile Ltd
INSIGHT
Green buildings
start paying off
BY GLENDA WILLIAMS
The current energy crisis, on the radar since load-shedding began impacting
the country in 2008, has contributed to a change in thinking about the built
environment. Add to this the attraction of lower operating costs and less
dependability on the grid and its little wonder that the move towards sustainable,
efficient, eco-friendly buildings is gaining significant traction.
uildings are responsible for

around 40% of the worlds
end-use energy consumption
and are among the main
contributors to climate change. Energy
efficiency and financial rewards aside,
awareness and perceptions around
environmental issues have changed and
the once inefficient built environment is
following rapidly as more buildings are
becoming green.
Advantages of green buildings include
energy and resource efficiency, a reduced
carbon footprint and the ability to provide
sustainable solutions for energy, water
and waste. Over and above being the
environmentally responsible choice, they
also offer significant monthly cost savings.
HOW GREEN ARE SAS

BUILDINGS?
Aside from two international properties,
the Green Building Council of South
Africa (GBCSA), which promotes and
facilitates environmentally sustainable
building practices, has awarded Green
Star certification to 121 buildings in
the country, 25 of those in the last three
months alone (see graph below). Its a far
cry from the single certification in 2009.
At 63%, 4-star certifications are by
far the largest. 4-star, rated as South
Africa Best Practice, is by no means
an entry-level rating. Its extremely
good and a tough mountain to climb,
explains Brian Wilkinson, CEO of
the GBCSA. Just over 8% of green
Number of projects
NUMBER OF GREEN STAR

CERTIFICATIONS BY YEAR
120
80
40
2009
2010
2011
2012
2013
2014
2015
(Jan - Aug)
SOURCE: GBCSA
buildings have been awarded GBCSAs

highest rating, a 6-star certification.
This world-class certification ranks
alongside a LEED Platinum (US Green
Building Councils highest certification
for sustainable building) or any other
rating systems top buildings.
USA, Canada and China hold the
top three spots on the green building
rankings while Sweden is 10th, with
around 2.54m green square metres, just
ahead of South Africas 2m green square
metres, Wilkinson tells Finweek.
COMMERCIAL PROPERTY
The commercial sector has responded
to energy challenges by demonstrating
its commitment to sustainability and
resource efficiency, with the bulk of the
countrys green buildings belonging to
this sector.
Boasting the largest portfolio of
green buildings of any company in South
Africa is Growthpoint Properties, the
countrys largest real estate investment
trust (REIT).
Growthpoint is not only acting as a
responsible steward by embracing green
building principles, but is doing well
because these buildings are worth more,
tenants are happy in them and they have
lower operating costs.
INSIGHT
Far left: South Africas first residential

Green Star certification, Amdec
Investments 40 on Oak, 4-star
residential apartment building located in
Melrose Arch, Johannesburg.
Left: Growthpoint and V&A Waterfronts
6-star No 1 Silo office building.
DISTRIBUTION OF GREEN STAR

CERTIFIED BUILDINGS BY LOCATION
EASTERN CAPE: 2%
INTERNATIONAL: 1%
LIMPOPO: 1%
KWAZULU-NATAL: 10%
GAUTENG: 54%
This is the beauty of green. It is the

opportunity to simultaneously do
good [environmentally] and do well
f inancially, says Wilkinson. That
interconnection between environmental
responsibility and financial reward is
driving the green building movement
in the commercial space. In addition to
being able to command higher rentals,
Emira Property Fund expects savings
of up to 50% in water and electricity
and operating costs by redeveloping its
Knightsbridge property in Bryanston
from an inefficient 1980s non-certified
building into a state-of-the-art green
P-Grade 4-star Green Star building.
THE RESIDENTIAL SECTOR
The pace of creating environmentally
sustainable buildings within the
residential space has been slow.
We have awarded a green building
rating to three residential projects, and
they were all apartment buildings,
confirms Wilkinson.
Private homeowners, already dealing
SOURCE: GBCSA
WESTERN CAPE: 32%
with shrinking budgets and less likely

than the commercial sector to take a
long-term view, are often put off by
initial investment costs of greening a
home. But an ineffectual electricity
grid, spiking energy prices, increased
municipal costs, rising interest rates and
stagnating salaries are likely to be key
drivers in going green.
Come early November, GBCSA
is launching EDGE (Excellence in
Design for Greater Efficiency) a green
building ratings system specifically
designed for residential properties.
Given that this light green building
rating system is very easy to implement
and requires no extensive training,
Wilkinson expects 5 000 homes to
be certified through EDGE by end
2016. We expect EDGE to form
as much as 50% of our organisation,
certainly as big as commercial, if not
bigger, says Wilkinson. GBCSAs My
THE SAVINGS FROM 100* GREEN STAR BUILDINGS

176m kg of carbon emissions
(equivalent to removing
44 096 cars off the roads or
5 000 fully-laden Boeing
747 flights travelling from
Johannesburg to Cape Town
from the air)
R88m on
energy
R1.48m on
water
131m kWh of electricity

(equivalent to powering 9 130
households for a year)
171m litres of water (enough

to provide 68.3m people
with drinking water for a day)
1.8m square metres of

certified green space,
equivalent to 263 rugby fields
SOURCE: GBCSA
Green Home project demonstrates that

behavioural change in a typical middleclass home can achieve an energy
consumption saving of 29% at no cost
to the homeowner. Upping the ante
to include investment into renewable
energy can mean the average family,
spending between R1000 to R2000 a
month on electricity, could save around
50% on monthly electricity costs.
Energy and water saving features
add saleability to a property, according
to Dr Andrew Golding, chief executive
of the Pam Golding Property group,
which has partnered with GBCSA
in the My Green Home project.
Properties offering green or energyand water-saving features as well as
emergency or back-up power solutions
are at a competitive advantage in the
marketplace. These properties are
becoming more sought after by buyers,
in preference to properties that dont
offer such features, says Dr Golding.
It seems that choosing a sustainable
lifestyle not only positively contributes
to the environment, but also makes
good business sense.
Ou r a im is to mea n ing f u l ly
inf luence the green agenda in the
domestic space not only because it will
increasingly impact how our clients
perceive value in property, but because
our economic and social development
depends on it. Homeowners and
homebuyers are becoming more aware
of the need to reduce rising energy and
water costs as well as to help conserve
the countrys natural resources, adds Dr
Golding.
[email protected]
INSIGHT
Renewables:
Saving SA billions
BY FINWEEK STAFF
As power-hungry South Africa waits for the endlessly delayed thousands of

megawatts from Eskoms new Medupi and Kusile coal-fired plants, cheap renewable
energy is quietly piling on capacity.
FALLING COSTS
The cost of power production from

renewable sources has plummeted since
the department of energy opened the
competitive bidding process in 2009.
In the first-round bids six years ago,
wind power was snapped up at 115c/
kWh, but by round two, bids came in at
100c/kWh. Round three saw companies
bid their power at 74c/kWh, and by the
time round four was reached in August
2014, the bid price had dropped to 62c/
kWh.
The cost of solar power dropped from
275c/kWh in round one to 79c/kWh in
round four.
In contrast, the expected cost of coalfired power generation from Medupi is in
the region of 128c/kWh. The final costs
of nuclear power are forecast to be more
expensive than coal.
The Council for Scientif ic and
Industrial Research (CSIR) reported last
month that renewable energy provided
around R4bn in benefits to South Africa
in just the first half of this year. The
numbers were quantified by calculating
how much the country would have lost

or would have been forced to spend
without access to these power sources.
In the report, the CSIR said the
2TWh (terawatt hours) produced by
mostly wind and solar energy had
replaced the electricity that would have
otherwise been generated from the opencycle diesel-fired turbines and coal-fired
power stations. The research body
calculated this to have been a saving of
around R3.6bn.
WITH 3% OF REVENUE
FROM THE PLANTS
REQUIRED GO TO SOCIAL
UPLIFTMENT, COMMUNITIES
WITHIN A 50KM RADIUS
CAN EXPECT R70BN IN THE
NEXT 20 YEARS.
In addition, power from the countrys
solar and wind projects had saved the
economy R4.6bn by negating the need
for intensive power users to shut down
operations.
The research body worked out that
203 hours of curtailment also called
unserved energy had been avoided
particularly in January when the supply
was desperately tight. Between January
and June renewable energy had helped
delay load-shedding, enabled lower
stages of load-shedding, or enabled
Eskom to avoid implementing loadshedding at all.
According to Johan van den Berg,
CEO of the South African Wind Energy

Association, the cost to the economy
of load-shedding stands at around
R75/kWh. The benefits of renewable
energy comes at a cost, however: tariff
payments to IPPs amounted to R4.3bn
from January to June this year. And
because of Eskoms empty coffers, at
least one functioning renewable power
station cant be connected because
the utility cant afford to put up the
required transmission lines. This
situation costing Eskom about R2m
a month began in October 2014, but
the infrastructure is expected to be
functioning by next month.
A CLOSER LOOK AT THE

PERCEIVED NEGATIVES
And while renewable energy might be

cheap and clean, the downside is that
it isnt always reliable. The sun doesnt
always shine, the wind doesnt always
blow as hard as it is required to, and
in periods of low rainfall, hydro power
becomes increasingly unavailable.
Critics say that for every megawatt
of power renewables produce, another
megawatt needs to be made available
from traditional sources like coal, gas
and diesel as insurance against the
vagaries of the weather.
However, Van den Berg said this
criticism isnt entirely accurate. Around
two years of continuous assessment of
wind availability and speed is carried
out before a decision is taken to put
up a plant. Van den Berg said that a
range of wind harnessing technologies
are now available. The choice of wind-
Getty Images/Gallo Images/Nardus Engelbrecht
skoms desperate drive over the

past seven years to bolster
energy availability has seen a
slew of mostly independently
funded wind and solar projects being
launched, many of which are already
feeding the countrys grid. By June
1 800MW of renewable power had been
added, while the department of energy
has allocated another 7 000MW for
procurement from independent power
producers (IPPs).
INSIGHT
harnessing technology depends on the

norms established over the assessment
period, and the success has been such
that private sector funding has financed
much of the second round of projects.
Evan Rice, CEO of GreenCape, a
non-profit organisation that supports
green businesses in the Western Cape,
admitted that the drawback to solar
power is that principally it works only
when the sun shines. He said this
issue can be circumvented by including
a storage system, but this doubles
the upfront costs. Rice rationalised
the energy limitation by saying the
electricity system is comprised of
various technologies designed to operate
for a certain percentage of the time.
He said in any case, more capacity
than is needed is always required to be
installed.
OTHER ADVANTAGES OF
GREEN ENERGY
Renewable sources of energy also have

significant secondary benefits. Eskoms
acting CEO Brian Molefe announced in
April that the Sere wind farm, the first
Eskom-funded large-scale renewable
energy project to come on line, would
reduce the countrys carbon footprint
by around 6m tons of greenhouse
gas over its 20-year life span. This
reduction increases exponentially with
each 100MW renewable plant that is
established. Seres average annual energy
production of 298 000MWh is enough
to supply about 124 000 standard
homes, Molefe said.
Billions of rand in social benefits also
flow from the renewable energy plants
to local (and often deeply impoverished)
communities.
The Northern and Eastern Cape

regions, where there is an abundance
of sunlight and wind, are some of the
poorest in the country, and it is this
possibility of change that Van den Berg
said is the most exciting.
With 3% of revenue from the plants
required to go to social upliftment,
communities within a 50km radius
can expect R70bn in the next 20 years.
In a show of confidence in solar
power operations, in March, the Public
Investment Corporation (PIC) spent
R22bn for 20% stakes in the Ilanga and
Xina solar power stations respectively.
The power stations, which are located
in the Northern Cape, are expected
to add 200MW of power to the grid.
The PIC also lent R600m to the Ilanga
project.
[email protected]
Turbines at the Dassiesklip Wind Energy Facility

Project outside Caledon in the Western Cape on
9 February 2014. The wind farm is built on 350ha,
with nine 3MW turbines.
HOUSE VIEW
METROFILE
The winner every time

BY SIMON BROWN
EVERY TIME this company releases

results I write a house view on the stock
and the conclusion is always the same:
buy it. I havent been taking my own
advice, but as soon as this issue hits the
stands, I will be a buyer.
M etrof ile is a boring docume nt
storage company (both paper and
digital), but boring is often good and in
this case it really is. Companies have to
comply with legislation that requires
cer tain business documents to be
stored , so Metrofile has a built-in
business model. Furthermore,
co m pa nies d on t e asily trust just

anyone to store sensitive and important
documentation; as market leader,
Metrofile wont easily lose market share
to others.
The company is very cash generative
and what sweetens the deal even more
for shareholders is a dividend yield of
almost 4%. You get paid well to hold
the share. The dividend jumped 40%
this year as Metrofile reduced the
dividend cover from 2 times to 1. 5
times, meaning it paid out a larger
chunk of profits as dividends.
Simon Brown
Last trade
ideas
TOPSBT
Mondi
Kumba Iron Ore

Vanguard ETF
DATATEC
ICT leader looking good

BY MOXIMA GAMA
DATAT E C E N D E D a d e c a d e - l o n g
consolidation when it traded through
the R44.95/share level in July 2012.
Now it s trading on the ascending
phase of a pattern that could see it
complete a 100% retracement to its
R146/share all-time high in the long
term (one to five years). An aggressive
long is recommended at any level
above R74.45/share, as Datatec would
h ave e s c a p e d a n e a r-te r m
consolidation, which should prompt an
advance to R90/share in one to three
months. A decent 8% stop loss must be
implemented at first, and trailed along.
Its share price is up by 33% so far this
year.
Datatec is an international information
and communication technology (ICT)
firm. Looking ahead, ICT solutions and
consulting services will provide the
group with multiple points of entry
globally, and will also act as a good

defensive hedge against the decline of
any vendor, geography or technology in
this fast-consolidating and dynamic
market. Datatec, with operations in over
50 countries, reported a 13.3% increase
in group revenue to $6.4bn in the year
to end February, with earnings before
interest, tax, debt and amortisation
increasing 17.7% to $206.4m.
Recent acquisitions include
Advanced Technology Integration
Group (ATIG) which provides system
integration and professional services to
enterprise and commercial customers
across the Midwest region of the United
States and UK business intelligence
consultancy, Trovus, as part of its
strategic goal to grow annuity revenue
streams and provide a broader range
of ICT services.
[email protected]
Moxima Gama
Last trade
ideas
Aspen
Pharmacare
Naspers Limited
Telkom SA
Imperial Holdings
FUND IN FOCUS
An option for those seeking

exposure to the US economy
BY JACO VISSER
PRUDENTIAL GLOBAL HIGH YIELD BOND FUND OF FUNDS
his fund is primarily invested in investmentgrade debt instruments. Its biggest holding
is in Prudential-affiliated Eastspring Investments
US Investment Grade Bond Fund. The underlying
instruments in this fund are mainly focused on US

industrial stocks, but the majority of the top 10
holdings are American banks. Eastsprings fund
is run from Chicago and primarily sold in Asia.
FUND INFORMATION
Benchmark:
Barclays Capital Global Aggregate

Bond Index
Fund managers:
David Knee and Michael Moyle
Total Expense Ratio (TER):
1.78%
Fund size:
R234m
Minimum investment amount:
R2 000 lump sum or R500/month
Contact information:
[email protected] or
021 670 5100
PERFORMANCE (ANNUALISED) AS AT 31 JULY 2015:

1 year
3 years
5 years
Since inception*
Prudential Global High Yield FoF 7.6% 15.6% 13.9%

Benchmark
10.5%
13.9%
13.2%
9.2%
TOP FIVE HOLDINGS

(AS AT 30 JUNE 2015,
UPDATED QUARTERLY)
1. E
astspring Investments US
Investment Grade Bond Fund
37.1%
2. M
&G European Corporate
Bond Fund
26.1%
3. Japanese Yen
14.8%
4. M
&G Strategic Corporate
Bond Fund
10.9%
5. P
owerShares Senior Loan
Portfolio ETF
3.8%
9.2%
*Since inception in November 2000
Fund manager insights

The mandate for the fund is investment-grade bonds, according to
David Knee, one of the funds managers. The credit quality of the fund is
on average A, he said. A ranking of A- and higher by a credit rating agency
such as Moodys Investor Service shows that there is a high probability that
the issuer of the bond would be able to repay its obligations, including the
capital and interest.
In the medium term we think these assets will perform well, Knee said.
Corporate bonds tend to perform poorly in an environment where interest
rates are increased and a recessionary cycle kicks off, according to him. He
didnt foresee that happening at the moment despite the global economy
enduring headwinds such as the slowdown in the Chinese economy and
lacklustre growth in Europe.
In recent years investors have allocated a lot to corporate bond
assets in the search for higher yield, Knee said. After the financial crisis
and subsequent global recession in 2008 and 2009, central banks across
the world lowered interest rates to historical low levels in a bid to boost
economic growth. Investors flocked to high-return assets such as equity in
emerging markets and corporate bonds.
WHY
FINWEEK
WOULD CONSIDER
ADDING IT
The US economy, to which the fund is skewed,

is creating jobs and wealth at a pace last seen
before the financial crisis. As the countrys
export-orientated manufacturing companies
regain market share lost to China in decades
past, both industrial and financial issuers of debt
are in a stronger position to service and repay
these borrowings. In addition the fund is a rand
hedge, which goes a long way in protecting
local wealth in a devaluatory environment.
[email protected]
INVEST DIY
Lessons learnt from the

Black Monday panic
lack Monday. Market crash.

The end of the world. These
are just some of the comments
that were being tossed around
on 24 August as global markets went into
sell mode. At a stage, the Dow Jones was
some 10% down over two trading days
while even the local Top40 Index was off
almost 8% over the Friday/Monday selloff period.
While all this was happening, the rand
traded at its worst level ever as it briefly
went through R14/USD, breaching the
R13.61/USD worst level from December
2001.
But was it really all that bad and, more
importantly, what can we learn from the
frenzy?
The first lesson is to be sceptical;
just because Twitter is screaming about
a Black Monday doesnt mean it is a
Black Monday. Black Monday refers to
that day in October 1987 when the Dow
Jones lost 22.61% in a single day. That
was a Black Monday. A day that saw
3% losses locally and some 3.5% down
in the USA doesnt compare. At most,
it was overcast with no chance of rain.
In fact, the sell-off weve seen during

August has only taken our market back to
levels we were at in late 2014; compared
to 1987 or the more recent 2008/09
market sell-off, its nothing.
The real issue here is what we can
learn from the panic that spread across
the internet in general, and social media
in particular. Here I ask you a simple
question. How did you feel when you
heard the hype and saw all the red on
your portfolio? Fear? Indifference? Greed?
If you felt fear, then there is a problem
and that problem is simple: you have too
much risk. Any position in the stock
market has risk in that you can lose
money, what you have to do is make sure
you manage that risk to a level where
you can sleep well at night (we call this
a SWAN portfolio). Even the simplest
of exchange-traded funds (ETFs) carry
risk, but that risk needs to be reasonable.
What we tend to do is take on too
much risk in an attempt to get rich
quickly. In some cases this will include
derivatives but will also include a lot of
stocks that are struggling to make profits,
which we hope will turn around and
BY SIMON BROWN
zoom higher, making us a pile of cash in

double-quick time.
Nice in theory, but the reality is that
markets go up and down and we need
to be prepared for both events. If were
heading down, hows your portfolio
doing? Red is fine, everybody was red on
the 24th. How much red and how you felt
is what matters.
Have a long hard look at your portfolio
and see where the fear came from and
start to fix it. Sell those dogs that you
hope will recover but, if youre honest,
likely never will. Have an equally long
hard look at the second tier of good,
but not great stocks (I mean good as in
business model, not price moves) and
revisit why you bought them and decide
whether you should really still be holding
them. Then act on this and spring-clean
your portfolio.
A last comment: where to next? Do
we continue lower, or do we rally to new
heights? The honest answer is I have no
idea; in fact nobody has any idea. Sure,
everybody has an opinion, but trust me,
nobody can see into the future.
[email protected]
Scott Olson/Getty Images
Traders signal offers in the Standard & Poors 500 stock index options pit at the Chicago Board Options Exchange
(CBOE) on 24 August. Uncertainty among traders after big losses in the Asian markets caused a sharp drop in the
S&P at the open.
KILLER TRADE
Are things looking up

for Murray & Roberts?
he idea of investing in any

construction stock at this stage
may seem reckless, as the
fundamentals of the industry
are still look ing dire. The JSEs
Construction and Materials Index is
down 46% over the past year, and the
countrys major construction companies
continue to struggle due to low demand.
Many also faced hefty fines related to
tender-rigging and price-fixing following
investigations by the competition
authorities.
Aveng, the biggest group based on
revenue, warned in August that further
restructuring may be required it cut
6 000 jobs last year unless it secures
more contracts before year-end. Basil
Read, which also had to restructure
operations after reporting a loss of
R821m in the 2014 financial year,
reported improved earnings for the
six months to end June, but said it is
consulting a private lender to provide
working capital.
For Murray & Roberts (M&R),
the story hasnt been much different.
It reported a decline in revenue and

earnings for the year to end June, and
warned that the 2016 financial year will
be even more challenging as the expected
growth in underground mining will
not be sufficient to offset the expected
decline in the contribution from its oil
and gas business.
The declining order book over the
past two years ref lects the reality of
a subdued global economy and weak
demand for commodities, coupled with
low investment in fixed capital formation
in South Africa, M&R said.
Due to the lack lustre demand
locally, the group is transforming from
being predominantly a South African
engineering and construction company
to an international group focused on
the natural resources market sectors.
The group operates four segments:
Infrastructure & Building, Energy &
Industrial, Underground Mining, and Oil
& Gas. The group operates in Southern,
Central, and Western Africa; the Middle
East; Southeast Asia; Australasia;
and Nor th and South A merica.
MURRAY & ROBERTS
CATCH
MOXIMA GAMA
ON FINWEEK:
MONEY MATTERS
ON CNBC AFRICA
EVERY FRIDAY
AT 1PM.
BY MOXIMA GAMA
D e s pite t he comp a ny s w e a k er
performance, CEO Henry Laas tried
to assure investors that the group did
well to maintain earnings broadly in line
with the previous financial year it also
maintained its dividend and that M&R
continues to adjust its cost structures
according to market requirements.
Though M&Rs share price is down
41.6% since the start of 2015, it is likely
to retain key support that will possibly
trigger a reversal, given its extremely
undervalued nature (according to its
monthly relative strength index, or RSI).
POSSIBLE SCENARIO: A bullish
base could be in the making between
R15/share and R11.70/share. Upside
above R15/share would kick-start the
ascending phase towards the R22/share
resistance level of a potential bottomingup pattern in six to 12 months.
With the RSI trading in a symmetrical
triangle, trade may be volatile in the near
term. But if the lower slope of the RSI
triangle holds, with support retained at
R11.70/share a positive breakout above
R15/share would be imminent. Investors
could nibble at R15/share and increase
long positions at every resistance level
breakout thereafter. Also keep an eye on
the price of Brent crude oil, which is set
to recover from its lowest levels.
ALTERNATIVE SCENARIO: Refrain
from going long if the R11.70/share key
support level is breached, as downside
to the R9.40/share or even R6.05/share
prior lows could ensue.
[email protected]
52-week range:
R11.67 - R25.52
-52.64%
Current P/E ratio:
6.06
Earnings per share:
Dividend yield:
Average volume
over 30 days:
R5.71bn
R2.12
3.89%
1 526 151
SIMON SAYS
Simons stock tips

ASPEN UPDATE DISAPPOINTS
Aspen snuck through a trading
update just before 6pm on
Friday, 28 August, and it
was a downer the company
expects headline earnings
per share (HEPS) to be only
10% to 15% higher. With
its mid-year HEPS up 28%,
it means a seriously weak second
half of almost no HEPS growth.
In percentage terms, the companys
HEPS growth is typically in the mid
to high twenties, and that justifies the
high price-to-earnings ratio (P/E) of
30 times. This time, its performance
did not live up to expectations. That
said, this could either be a one-off
or it could be an indication that the
MASSMARTS EXCUSES
CONCERNING
Massmart returned results that were all
right, but full of excuses, and if I were a
shareholder I would be concerned about
those. Sure, it is tough out there, but a
list of excuses is not what one wants from
management. (Also see page 18.)
Stephen Saad
Group CEO of Aspen
company is maturing as
it gets larger, it is harder
for it to continue growing
at that level. The results will
tell us more, but those whove
always been Aspen fans shouldnt
give up its still a great company in
a great space. Even if there is lower
growth going forward, Aspen is likely
to be a great investment it just wont
double in value every year or so as its
done recently. My only concern is how
management treats shareholders this
is not the first time shareholders have
had it rough.
PAN AFRICAN RESOURCES

KEEPS COMMUNICATION
CHANNELS OPEN
A Sens from Pan African Resources
shows exactly how management should
be keeping shareholders informed. A
company called International Ferro
Metals (SA) has gone into business
rescue and Pan African has its Phoenix
Platinum plant on its property. It
also sources power, water and some
feedstock from International Ferro
Metals. So there is a potential risk
to Phoenix Platinum. Pan African
detailed everything in a Sens including
the fact that Phoenix contributed
about 7% to after-tax profits in the last
reporting period. This really is about
keeping shareholders informed and is
exactly how it should be done.
WOOLIES DAVID JONES ACQUISITION

SERVING IT WELL
As a shareholder in Woolworths* the David Jones
deal looked great to me, but I was concerned as
these large deals always take longer to bed down
than management suggests. While Woolies was
saying it would take three years, I was worried
that it may take longer. I gave the retailer the
benefit of the doubt by taking up my rights when
it issued shares to find the transaction, but havent
been buying more. Yet management returned
great results from both the local operation and
from David Jones, indicating that it really is
serious about making this work smoothly. The
shares remain expensive, but if they come down to
my entry level, I will be a buyer, having removed
my non-buying status on concerns of the deal.
CONSTRUCTION: WHAT DO SHRINKING ORDER BOOKS MEAN?

With a number of construction work done are never disclosed. Further,
companies having released results, shrinking order books suggest two
one thing has struck me: order books things. The obvious one is less work.
are shrinking. This is not a bad thing However, we hope that they also
at all; in fact one could say that order indicate that the companies are being
books stats are largely useless and really more selective about what work they
just about vanity. The biggest issue take on, in other words work with
with an order book is that margins on better margins and less risk of loss32 FINWEEK 10 SEPTEMBER 2015
BY SIMON BROWN
making contracts. Time will tell if the

smaller order books are healthier, but
regardless, I continue to stay away from
the sector as it remains tough no matter
what space or geography the companies
operate in.
[email protected]
*The writer owns shares in Woolworths.
PRO PICK
Torre still expanding in a

difficult environment
BY STEINMAN DE BRUYN
Director at Capilis Asset Managers
orre Industries, a relatively

small and unknown listed
company w ith a ma rket
capitalisation of R2.4bn, is an
i ndu s t r i a l g roup t h at prov ide s
equipment, parts, f inancing and
s u p p o r t s e r v ic e s t o c u s t o m e r s
throughout Africa.
The company replaced the listing
of SA French, led from the start by
its current CEO, Charles Pettit, in
November 2012. SA French still
operates as a subsidiary under Torre,
and is the leading distributor of tower
cranes and lifting solutions in subequatorial Africa.
From there on it embarked on an
acquisitive spree, where it acquired
numerous companies as part of its
business strateg y to diversif y its
Torre Industries
Limited
Cents
450
400
350
300
Oct 14
52-week range:
Aug 15
R2.65 - R5.49
38.84%
+66.45%
R2.38bn
Earnings per share:

Dividend yield:
Average volume
over 30 days:
R0.12
0.74%
38 360
operations and eventually operate a

defensive business model.
One of its most recent deals was
f inalised in April 2014, when it
acquired Control Instruments Group
(now known as Torre Automotive), a
company that owns and sells exclusive
p r e m iu m br a n d e d a f t e r m a rk e t
automotive parts including Gabriel, the
leading ride control system in Africa.
Although Torre has been very actively
acquiring new companies, it has a
continued focus on organic growth,
which seems to be working very well
for the company, and the shareholders.
T he g roup sa id in a t rad ing
statement on 28 August that it expects
headline earnings per share (HEPS) for
the year to end June to be between 29c
and 30.4c a share, up between 140%
and 150% from the previous year. It has
been able to create tremendous revenue
and profit growth in an increasingly
difficult economic environment, with
the share price up more than 300%
since its listing three years ago.
Another interesting note is that
Stellar Capital Partners, a company
bil lionaire businessman
Christo Wiese is involved
in, has acqu i red a
strategic 26.25% stake
in Torre, with talks
underway to acquire a
further 8.33%. We wait
to hear more details on the
strategic nature of the deal, but are sure
it will be to the long-term benefit of the
shareholders.
The share has been trading sideways
for a while now, but we believe that
investors are still wary of the state of
the economy, especially considering
Charles Pettit
CEO of Torre Industries
t he i ndu s t r y t he
company operates
in, and waited to see
if Torre can deliver
another impressive set
of results. We believe that the
share price should move up to at least
R6 (from R4.75 at the time of writing),
which would give it a historical priceto-earnings ratio (P/E) of around 20.
With management indicating a
minimum HEPS figure of 42c/share
for the 2016 financial year, the share is
trading at a one-year forward P/E that
is too low for a share showing such
continued high growth. Although we
are not the biggest fans of the sectors
the company operates in, we believe
it still has a long way to go before its
earnings start to mature. We have been
accumulating Torre at current levels,
and still recommend it as a buy.
[email protected]
MONEY
What to do now that the

bear has reared its head
fter the local stock markets

historical price-to-earnings
ratio (P/E) had reached
levels just short of 19.5 in
April this year and most experts felt
that the FTSE/JSE All Share Index
(Alsi) still had more than enough room
for improvement the markets decided
that this month was the time to bring the
share prices in line with the actual
earnings of the underlying shares (see my
analogy in Focus on the earnings, not the
share prices, 9 April edition). At the time
of writing, the market is down by 8% so
far this August and down 13% since its
all-time high in April, making it safe to
say that we now officially find ourselves
in a correction.
One of the strongest technical
indicators, the Death Cross (50-day
moving average breaking the 200-day
moving average and closing below it), has
since come about. In technical terms, this
means that we have turned from a bull
market to a bear market, which isnt seen
as a positive sign for technical analysts
and their followers. The big question,
however, is whether this is merely an
overreaction, or perhaps an indication of
greater troubles to come.
I still feel that the market isnt
cheap and that it remains overvalued
by approximately 15%. Following the
occurrence of the Death Cross, the
moving average of the weekly close over
200 weeks may be tested, which would
correspond with the fair value levels (in
terms of earnings per share) of between
42 750 and 43 300 on the Alsi. Although
the data and results concerning emerging
markets do not look very promising, I
dont think its bad enough to be seen as
a repeat of the 2008 correction. I think
it can be seen as more of a healthy
correction, rather than a total collapse.
BY SCHALK LOUW
Portfolio manager at PSG Wealth
FTSE/JSE All Share

Index and Fair Value
FTSE/JSE All Share Index with

200-day and 50-day moving average
50 000
60 000
40 000
30 000
50 000
20 000
45 000
15 000
40 000
10 000
35 000
7 500
30 000
5 000
11
96
00
04
08
12
15
12
13
14
15
FTSE/JSE All Share Inde
EPS Model Fair Value
50-day moving average
FTSE/JSE Top40 Index
200-day moving average
SOURCE: PSG Old Oak, INET BFA
SOURCE: PSG Old Oak, INET BFA
SO WHAT CAN WE DO IN THE EVENT OF THIS BEING A HEALTHY CORRECTION,

WITH THE POSSIBILITY OF HITTING EVEN LOWER LEVELS?
YOULL NEED THREE Ds:

1.DEEP BREATHS
Keep your emotions out
of your investments.
If you bought shares
within your particular
risk profile based on an
appreciation process
that indicated that these
shares should provide
you with the appropriate
growth and earnings
over the long term,
you will just have to lie
back, be patient and
breathe deeply.
2. DIVERSIFICATION
One of the best ways
to safeguard your
investments against
excessive volatility is
by means of proper
diversification not
only across different
companies and sectors,
but also across different
asset classes. Warren
Buffett mentioned that
investors shouldnt shy
away from hiding in cash
every now and then.
I personally feel that
negative markets present
you with the perfect
opportunity to ensure
that your portfolio
diversification is still in
line with your risk profile.
3. DEFENCE
Even though the market
isnt cheap, there are
already a number
of companies that
are starting to offer

good value. Look for
companies that do not
have excessively high
ratings, that pay high
dividends (which have
been well maintained
over the long term)
and do not have high
debt levels.
There probably isnt
such a thing as a good
correction, but the fact
remains that a correction
is as much a part of the
stock market as butter
goes with bread. As such,
use this correction to get
your portfolio back in
line and to ensure that it
remains healthy.
[email protected]
MONEY
Commodity stocks
can generate big profits
the secret is patience until the shake-out is over
BY LUCAS DE LANGE
bear market will eventually

run its course and attempts
made by the authorities to
prevent this will at best
only temporarily relieve the pain for
investors. This is apparent from a study
by an international market analyst,
Harry D Schultz, of a period that covers
a century. He uncovered certain truths
that he believes will always apply.
One of them is that a bull market
reaches its true end in the midst of
wild speculation during which novices
play the market, often with borrowed
money. They do indeed make quick
profits without having any idea of the
underlying value of the companies
concerned.
This has been called a fools market
a new fool buys from an existing fool,
while the price keeps on rising, until the
last fool has bought. Then the market
implodes until the shares concerned
again offer good value, which attracts
the well-informed investor.
In the West, including on the JSE,
wild speculation has not been evident.
A drop of about 1 000 points in
the Dow Jones Industrial Index has,
however, attracted everyones attention.
From articles that have appeared
since the Chinese share market took
a major dive after a period of wild
speculation, it would appear that no one
is expecting the bull market to resume,
no matter what steps the authorities take.
According to Shanghais Composite
Index, the market dropped by about 47%
before the authorities actions helped it
to recover by some 10%.
Is the market, which is being watched
by the whole world because the Chinese
giant plays such an important economic
Enthusiasm
(Wild speculation)
Greed:
Conviction
of new era
Indifference
Dismissal
Confidence
Caution
Doubt and
suspicion
Denial
THE INVESTORS
PSYCHOLOGICAL
CYCLE
Contempt
role, going to follow the path that

Schultz claimed was inevitable? What
is different in Chinas case compared to
the West, is the tough measures taken
by the Chinese government.
THESE INCLUDE:
Large investors have been forbidden
to sell their shares for a period of six
months.
An enormous amount of money (the
so-called bazooka) has been made
available for loans to people who want
to buy shares.
Traders who have been trying to sell
shares short as they are expecting a
further drop, which means they can
buy in at a lower price, have been
threatened with arrest.
Schultz found that bear markets are

essential so that values can recover. Short
sales accelerate this shake-out process,
after which calm seems to descend
before a new bull market carefully
recommences. How can this happen if
the above-mentioned measures are in
place? Or is it simply going to lead to
an extended bear market amid great
volatility? The London Stock Exchange
Concern
Fear
Panic
Despair
Capitulation
and contempt
is on the cusp of a bear market, measured

in terms of its FT100 Index, because
commodity companies play an important
role in its composition. The index has
weakened by about 19%, while 20% is
regarded as a bear market. At the same
time, the FT100s 200-day exponential
moving average has turned downwards.
As the shake-out process often releases
great value, exceptional profits can be
made by those who have the courage
to buy amid doom and gloom. And
exceptional value is currently increasingly
being offered by commodity shares.
On the JSE, large commodit y
groups are experiencing a severe bear
market with companies like Assore and
Kumba tumbling by between 80% and
90% from their historic highs. Lonmin
shows a loss of close to 99%, although
the group has valuable assets as the
worlds third-largest platinum producer.
The secret of making money from
a turnaround in a bear market is to be
patient. Only buy quality shares that
form sound bottom formations in their
graphs such as an inverted head and
shoulders, double bottoms and saucer
formations.
[email protected]
MONEY
Retirement reforms to
cultivate a culture of saving
BY BUHLE NDWENI
Failure to adequately save for retirement puts strain on governments budget as more pensioners become
reliant on state pension and social grants. In order to encourage employees not only to save, but to ensure
they have enough for a comfortable retirement, the government introduced retirement reforms in July.
DEFAULT OPTIONS
The drafted default regulation proposes
retirement fund defaults, which members
IT DOESNT SERVE TO TRY

AND HELP PEOPLE SAVE
AND ACCUMULATE DURING
THEIR WORKING LIVES
ONLY FOR THEM TO HAVE
A LUMP SUM AT THE END,
SPEND IT QUICKLY AND BE
IMPOVERISHED LATER.
Gallo Images/iStock
he National Treasury recently

took the first steps towards
implementing policy proposals
that would lower charges of
saving towards retirement while improving
industry conduct to serve the best interest
of retirement fund members.
These reforms will ensure that
employers provide good value-for-money
retirement savings plans in employee
contracts, and that employees belonging
to a retirement fund are treated fairly
and their money is managed well by the
retirement funds board of trustees.
Spea k ing at t he A nnua l 10X
Retirement Fund Conference in
Johannesburg in July, Olano Makhubela,
chief director of financial investments and
savings at the National Treasury, said the
draft default regulations aim to encourage
savings and ensure people are not
vulnerable to poverty while working and
in retirement. This encourages employees
to preserve their savings when they change
jobs, while giving them the right to opt
out, said Makhubela. It doesnt serve to
try and help people save and accumulate
during their working lives only for them
to have a lump sum at the end, spend it
quickly and be impoverished later. The
idea is to see how best we can encourage
people to annuatise, rather than take their
entire benefits through cash lump sums.
Annuatised investments refer to
income payments made to a beneficiary
periodically. Such investments, depending
on the annuity policy, are not completely
paid out to the beneficiary.
automatically fall into, and provide value

for money for their investments leading to
retirement. But fund members can opt out
of the default.
Fund boards, according to the
default draft regulation, must be
able to demonstrate to the registrar
that, among other things, the default
investment portfolios are appropriate for
members who are automatically enrolled.
Furthermore, the objective composition
and performance of these portfolios must
be adequately communicated to members;
must be good value for money; all fees and
charges and their impact on members
benefits must be disclosed accurately and
regularly; performance fees are not to be
allowed, and members arent to be locked
into the default investment strategy.
Makhubela said designing good default
products and systems is likely to yield
positive outcomes. Individuals tend to
stick with the default rather than exiting,
although that right will always be available
to them.
We think this will take us a long
way in starting to establish a system
with products that are simple, effective,
transparent and enables retirees to
understand and be in touch with their
retirements during accumulation and up
to retirement, he said.
According to director of retirement
funds at the Treasury, Alvinah Thela, the
default regulations aim to encourage the
industry to act in the best interest of the
customers, and not only to profit.
Currently, when people exit jobs, they
receive a cash lump sum without being
advised regarding their options. If a
member leaves the fund, they should have
the option of being a deferred pensioner
or a paid-up member. Options are to
withdraw, leave it there or take it into a
preservation fund or move it with them to
a prospective employers fund, said Thela.
There should be a drive in the industry
to advise members or customers that
should they withdraw, taxation will
significantly reduce the fund amount
reflecting on their statement, she said.
When transferring funds into a
preservation fund, the person needs to
be advised that they will only have one
withdrawal in the lifetime of that benefit,
according to Thela. Also, if they move it
into a retirement annuity fund, they will
not be able to withdraw it.
The Treasury hopes the Taxation
Law Amendment Act legislation will be
effective as of 1 March 2016. It is currently
in the consultation phase of the default
draft regulation and submissions can be
directed to Thela at retirement.reform@
treasury.gov.za by 30 September.
[email protected]
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BUSINESS
SERIES
BY JACO VISSER
Starting your own business can be daunting. Success requires dedication and stress
can weigh heavily on you. However, seeing your idea become a business reality is very
rewarding. Follow Finweeks series on starting your own business, aimed at unpacking
the entrepreneurial adventure.
Lelani Maree
Lecturer in
entrepreneurship
and innovation
management at
Stellenbosch
University
tarting your own business

begins with selling your first
product or service to someone
with a need for it. Its as easy
as that. Identifying a need in a market
requires fine observational skills and
the ability to keep your ear to the
ground.
The core purpose of any business
is to generate a profit the effort of
starting or investing in the enterprise
must be worthwhile for the owners.
Businesses arent started to employ
people or pay ta xes; these a re
consequences of running an enterprise.
People start a business for different
reasons, according to Lelani Maree,
a lecturer in entrepreneurship and
innovation management at Stellenbosch
University. They take the leap to doing
their own thing depending on their
situation.
In South Africa, you get people
who must make a living, she says. We
call this survival entrepreneurship and
these entrepreneurs usually start out
very small by identifying a need for a
product or service in the market.
Andr Fourie, founding executive
chairman of Poynting Antennas, a
company that identified the gap for
WHEN SOMEONE HAS

FOUND THEIR PASSION,
IT IS POSSIBLE THAT
THEY COULD BECOME
AN ENTREPRENEUR.
ENTREPRENEUR
wireless antennas in the early 2000s,

agrees that most entrepreneurs in SA
start up due to financial need.
Another type of entrepreneurship
is corporate sector workers who start
up a business using the skills they have
garnered. Their experience in a certain
field of products or services often affords
these potential entrepreneurs the chance
to supply a more advanced product or
service to the market than those already
available, says Maree.
When someone has found their
passion, it is possible that they could
become an entrepreneur, according to
Maree.
It is very important to be happy in
what youre doing, she says. Whether
or not people are born entrepreneurs is
too difficult to answer; too many factors
play a role in setting up the entrepreneur,
she says. These include a persons life
experience, resilience and interests.
Starting up a new business venture,
whether youre a corporate worker or
a survivalist, isnt easy. Maree says it
takes a lot of research to determine
whether there is a need for a product
or service in the market. In essence, the
potential entrepreneur needs to identify
whether there are a lot of people
already supplying the market with the
TIPS
BEFORE YOU START

Lelani Maree, lecturer in
entrepreneurship and innovation
management at Stellenbosch
University advises:
Identify an opportunity. Without an
opportunity to supply a product or
service in the market, you wont be
able to start.
Be certain that there is a market.
Do thorough research to determine
the size of the customer base and the
number of competitors.
Be sure you are able to deliver the
product or service, especially if you
plan to manufacture a product. Ask
yourself whether you have the skills
to do it.
You should be able to think on your
feet and make plans in an instant.
You must have perseverance;
success and profitability take time
to arrive.
You need to have the ability to
manage resources, including money
and people.
You should work in your business
yourself and be involved in all aspects
of it.
product or service and whether they

could offer something different for
which customers or clients are willing
to pay.
Fouries Poynting Antennas, which
was formally started in 2000 after nearly
five years of research and development,
identified a new so-called disruptive
entrant to the information technology
environment namely wireless internet.
Today, its hard to imagine that as
recently as 15 years ago this technology
was in its infancy.
It was a niche market, Fourie says
of the radio technology market on which
wireless internet is based. We realised
that wireless internet would enter the
consumer market. And it happened.
As the cost of the radio technology
equipment fell, the cost of antennas
became a larger portion.
The company listed on the JSE in
2008 and Fourie is in the process of
buying out his original antenna business
in which he still sees growth potential.
Fourie says that someone who
becomes an entrepreneur to get rich
quickly is doing it for the wrong reason.
You need to decide what you would
like to achieve, above making money. Do
you want to revolutionise an industry?
[email protected]
THE IMPORTANCE OF PEOPLE
One of the lessons that Andr Fourie, founding executive chairman of

Poynting Antennas, learnt is that a newly-started business should employ
a chartered accountant (CA) much sooner than its founders realise. This
is especially true if they dont have a strong financial background and are
more focused on sales and the development of products and services,
instead of finances. Entrepreneurs should learn from their financial
managers so that they have a sound idea of what is happening in their
business in terms of profits and costs.
Definitely appoint a CA as soon as possible as well as people skilled in
areas that the core finders might not be experts in, such as sales, marketing
and production, he says.
He also advises that founders of new businesses should find someone
to bounce ideas and problems off. Find a mentor very fast. It should be
someone you can trust, Fourie says. I only got someone three years after I
started the business.
LIFE
BY MANDY DE WAAL
Overwork and prolonged

stress is a serious health
hazard, as digital marketing
consultant and social
entrepreneur, Rafiq Phillips,
discovered last year.
After spending six weeks
in hospital, and taking
some time to recover
from burnout, Phillips has
radically rebooted his life.
afiq Phillips was at the top of

his game. Hed worked for
multinationals as a
technology research and
development specialist, and had garnered
an enviable reputation for being brilliant
at search. In a world where Google is
king, search is a big deal for companies
wanting to expand their virtual footprint.
After working with a global digital
agency until 2008, and at a top global
media company for five years after that,
Phillips decided to go into business
for himself. He had the opportunity
to grow a marketing agency with
a partner. Phillips joined as SEO
operations director and quickly turned
the marketing business around. But the
former digital dream kid stopped having
fun pretty quickly.
In his early thirties, Phillipss life
quick ly turned into an obsession
with work.
I partnered with someone in a digital
agency and everything was going well,
until greed got in the way, he says.
My business partner wanted more
and more money. But making more
money meant that I needed to do more
and more work. Yes, we were making
money and the business was doing well,
Rafiq Phillips is sharing his experience so that others may learn to try and
create a better work/life balance for themselves before it is too late.
but I was literally working from sunrise

to sunset and beyond.
Phillips reckons that burnout is
very common in the technology and
digital industries. A lot of people in the
industry have been through something
similar. There is a fair amount of burnout
in this sector people just dont readily
talk about it, he says.
It got too much for me, he confesses.
But it wasnt just the work that was
causing him to suffer. My morals and
ethics were completely different from
those of my business partner. This
created an enormous amount of stress
for me. The result was that I burned out.
Although the ethical clash added stress,
Phillips attributes the main cause of the
burnout to him overworking.
For most of 2014 Phillips felt
exhausted. Eventually I was on the
edge of a nervous breakdown. I couldnt
handle it anymore, and I resigned. After
that I had to be admitted to hospital. My
body just crashed, he says.
On the day I was admitted I was
extremely anxious and paranoid. I live
in the middle of the city and even the
noise of the traffic was getting to me. To

me, this was a huge sign that something
was wrong. The sounds of the city the
sounds that I had loved were getting to
me. The things I enjoyed became things
I started to fear. Thats when I knew I
had to step out of my life. Or at least do
something to change it, he says.
Phillips, with the support of his
family, admitted himself to hospital
where he was diagnosed with bipolar
mood disorder. I spent weeks and weeks
in hospital, but when I came out I realised
that there is more to life than merely
working for money. My relationship with
money has changed. Now what I need is
enough for me to put a roof over my head
and to prosper, but money is no longer
the be-all and end-all of my existence. It
is no longer the main motivator for what
I do or who I am.
Phillips says he doesnt consider
himself an entrepreneur, but rather
thinks of himself as someone who likes
trying things out. I would say that I
am a social entrepreneur. I like doing
things that have a bigger impact than just
making money, Phillips says pensively.
Image by Jon Pienaar
After burnout,
Rafiq Phillips reboots
LIFE
WHAT IS BURNOUT?
Experts say that burnout isnt exclusively

caused by overwork, but chronic multiple
stress is a major fac tor in c ausing
the exhaustion and unhappiness that
characterise burnout.
Cary Cooper, distinguished professor
of organisational psychology and health
at Lancaster University, tells The Guardian
that the signs of burnout can include
behavioural changes. You used to have
a good sense of humour, and that goes.
You used to be a good listener, and you
lose that ability. It can lead to physical
health problems; you might have
trouble sleeping, have gastric problems
Still a search marketing consultant,

Phillips is also focusing on building a
project called iDRIVE.co.za. iDRIVE.
co.za helps people who are learning to
drive by linking them up with credible
driving instructors across South Africa.
It has been a side project of mine for
10 years, but I have decided to take it
from being a hobby to being a full-time
business, he says.
There are so many people in SA
who need to learn how to drive, so
the market is massive. We reach about
150000 people a year, Phillips says.
The revenue is generated from the
driving schools that pay for all the leads
they receive. Basically this is a freemium
business with a cost per acquisition,
or cost per lead, which is paid by the
driving school.
When not working on turning his
hobby into a mainstream business,
Phillips has been keeping a lower profile
on social media and engaging in healthy
pursuits. I have bumped my head too
many times to waste my time being
arrogant. I am confident; I believe in
myself and the businesses I am building,
but I no longer feel the need to show off.
I am a lot more subdued than I used to be
and I have changed my entire approach
to how I do things in the technology
space. Ive now decided that I am rather
going to do more and talk less.
The six weeks that Phillips spent
in hospital were life-changing. It has
been an amazing journey and some of
or begin eating too much or losing your

appetite. It can lead to clinical depression.
D r Almuth M cDowall , lec turer in
organisational psychology at Birkbeck,
University of London, says that people
often allow problems to drag on for years.
People often become emotionally and
physically exhausted, there is a sense of
listlessness. They often start to retreat
into their own shells, and treating people
like objects because they cant relate to
others. Then there is the feeling that they
cant do their jobs well anymore, she tells
The Guardian.
COMMON
BURNOUT
SYMPTOMS
CAN INCLUDE:
EXHAUSTION
LISTLESSNESS
COGNITIVE PROBLEMS
NEGATIVE EMOTIONS
DETACHMENT OR
EMOTIONAL BLUNTNESS
Burnout can seriously affect
ones health, psychology and
relationships, which is why
getting help is critical.
the people I met in hospital were very

interesting. It also helped me see other
people getting their own lives back on
track and made me realise that I have so
much to be thankful for. I do feel that the
journey back to wellness is a long one,
he says.
Phillips openly admits that he still
spends too much time on the internet,
particularly watching videos and
documentaries. But nowadays I also
get exercise. I have been running and
recently completed the Impi Challenge.
A trail run set in the Cape, the Impi
Challenge is an obstacle course that tries
peoples athleticism, while testing their
mental and emotional capabilities.
Finally theres one thing that Phillips
has learnt thats made a big difference to
keeping his work/life balance sane. I say
no a lot more than I used to. I always
used to say yes in the past, no matter
HOW TO AVOID BURNOUT:

Nathaniel Lambert, assistant
professor in the School of Family
Life at Brigham Young University
and associate editor at the Journal
of Positive Psychology, says there
are ways to prevent burnout:
1. Take care of your physical health.

Eat well and ensure you dont skip
meals or substitute meals with junk
food. Exercise routinely, if not daily.
Make time to get outdoors and to
play, or spend time with your family,
children or animals.
2. Make sure youre getting enough
sleep and maintain good sleep
hygiene, which means not using
cellphones, tablets or computers just
before going to bed. The best way to
establish a good night-time routine is
to retire with a book. Make sure you
get enough sleep every night.
3. Try and engage in a hobby that
takes your mind off work, and that
enables you to relax and play.
4. Be social. Spend time with friends
playing games or sports, having fun,
or being in nature.
what my schedule looked like, because

I had a really big problem turning work
away. Now I consider my schedule and
the amount of work I have in hand very
carefully before committing to any new
work. I realise now that there is only so
much that I can fit into one day. It has
been a big learning curve, but I have
learnt to say no.
[email protected]
TECHNOLOGY
Battle for the cloud
BY GUGU LOURIE
Cloud is modernising and streamlining the way in which repeatable solutions and services are
delivered to clients. South African telcos operating in Africa are catching on and big industry
players are marching to the virtual battleground in an effort to diversify revenues streams.
e l k o m s a c q u i s i t i o n o f
technology f irm Business
Connexion (BCX), a big move
towards cloud services, will
help t he pa rastata l add ress t he
information technolog y and
communication (ICT) needs of local
businesses. It also provides Telkom with
a ready-baked Africa strategy, covering
more than seven African countries.
Global online retailer Amazon
has joined the fray, announcing in
August that it would set up an office in
Johannesburg for its cloud computing
business Amazon Web Services (AWS)
South Africa with plans to hire as many
as 250 people in the country.
At the same time, Vodacom is quietly
expanding its enterprise business which
offers various services such as cloud across
Africa eyeing opportunistic growth in
Nigeria, Morocco and Zambia.
All large operators in SA, as well
as smaller operators Internet Solutions
and Vox Telecom, are trying to position
themselves as cloud players, says Dobek
Pater, MD of Africa Analysis, which
specialises in the analysis of telecoms in
emerging markets.
But which of the local telcos is bestpositioned in the space for cloud services?
Some ana lysts seem to think
Vodacom. However, Telkom and BCX
might rattle the cage, warns Farai
Mapfinya, portfolio manager and head
of equities at JM Busha Asset Managers.
BCX has been in the cloud space
for a while and owns one of the data
centres in Midrand, which has a Tier IV
certification; we think Telkom is likely
to pose a greater threat going forward,
says Mapfinya.
Charles Lalieu, managing executive
for cloud strategy at BCX, explains:
What sets us apart is that we seamlessly

officer at MTN SA. He believes MTN
help [clients] transition to the cloud of
is well-positioned in the data space due
[their] choice on [their] terms.
to its global multiprotocol label switching
Lalieu adds: Notwithstanding this,
(MPLS) mechanism that connects
BCX has the only two commercial
customers to over 23 points of presence.
Tier IV carrier-neutral data centres
We are in the unique position of having
on the continent, which means we are
experience and expertise gleaned from
probably best positioned to make use
operating across diverse markets.
of and sell cloud services locally, or
Vodacom Business, which has a
integrate into independent software
global MPLS that has points of presence
vendor or customers data centres; weve
in 27 countries, argues that developing
already been doing this for some of our
cloud-based service capabilities is not
enterprise customers.
only about additional revenue streams
As we move to a more automated
but is also about remaining relevant in
offering it definitely creates a new way
a fast digitising African economy.
of providing IT services. Is this a new
Vodacom and MTN have been
battleground? Possibly, says Lalieu.
investing in their MPLS, which provides
The consumption of these solutions
flexibility to transport and routes various
rel ies on IT ser v ices and
types of traffic efficiently and quickly.
consulting [] which are
This will likely help operators, as lack
all traditional, just evolving
of fibre networks may be a barrier
to meet the new business
for the full deployment of cloud
models.
services.
Mapf inya agrees that
Telcos are particularly welldeclining revenues in the
positioned to succeed in
traditional lines for the telcos
the market for cloud
make cloud and data
services given their
the next battleground.
network capability,
But MTN Business says it
says Vuyani Jarana,
is not gearing itself for a
Vodacom Business
battle in the cloud space.
chief officer.
Our purpose is not to fight
Vodacom
for revenue, but to enable
invests more than
and inspire growth of our
R 8bn a nnua l ly
customers. What we have
in its net work
Alpheus Mangale
Chief business
built is key to driving
infrastructure,
enterprise officer
down our customers ICT
says
Jarana, but
at MTN SA
costs, ensuring that they
he believes that
are flexible and can take
telcos will need to
their services to market
collaborate and create
quickly, making them
a l liances to address
more competitive, says
Africas cloud services
A lpheus Ma nga le,
needs.
[email protected]
chief business enterprise
DIRECTORS & DIVIDENDS
Directors Dealings
Company
ACSION
AFRIMAT
ANSYS
ANSYS
ANSYS
AVENG
BLUETEL
BLUETEL
BLUETEL
BLUETEL
BLUETEL
BLUETEL
BLUETEL
BLUETEL
BLUETEL
BSI STEEL
BSI STEEL
BSI STEEL
BSI STEEL
CAPITEC
DAWN
GOODERSON
GOODERSON
GOODERSON
GOODERSON
INVICTA
INVPROP
LODESTONE
LODESTONE
LODESTONE
LODESTONE
LODESTONE
LODESTONE
OMNIA
OMNIA
PERGRIN
PURPLE
SENTULA
TRNPACO
TRNPACO
TRNPACO
VODACOM
WOOLIES
WOOLIES
Director
Transaction Date
Transaction Type
Volume
Price (c)
Value (R)
Date Modified
P Scholtz
HJE Van Wyk
R Grobbelaar
R Grobbelaar
R Grobbelaar
MJ Kilbride
S Diamond
S Kaplan
MS Levy
MS Levy
MS Levy
JS Mthimunye
A Rantao
DA Suntup
W van Reenen
WL Battershill
WL Battershill
WL Battershill
WL Battershill
R Stassen
LM Alberts
CM de Klerk
AW Gooderson
AW Gooderson
R Nannoolal
CH Wiese
SR Leon
JS Cooper
JS Cooper
G Trope
G Trope
G Trope
G Trope
25 August
27 August
31 August
31 August
31 August
20 August
31 August
31 August
31 August
31 August
31 August
21 August
31 August
31 August
31 August
28 August
24 August
25 August
21 August
24 August
24 August
26 August
26 August
26 August
26 August
25 August
25 August
21 August
21 August
19 August
20 August
21 August
21 August
Sell
Sell
Purchase
Purchase
Purchase
Purchase
Sell
Sell
Sell
Sell
Sell
Purchase
Sell
Sell
Sell
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Exercise Options
Exercise Options
Exercise Options
Exercise Options
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
96
30,000
23,913
1,392
69,695
10,000
132,284
113,020
334,474
334,474
281,982
5,000
16,363
145,829
57,937
949,000
250,000
405,000
345,000
2,500
223,000
183,000
131,000
145,200
66,000
26,102
300,000
33,043
22,200
6,375
2,800
1,000
500
1027
2000
80
81
82
500
1015
1015
1015
1015
1015
936
1015
1029
1015
47
47
47
47
43700
600
60
60
60
60
9000
1585
695
700
685
700
700
715
985
600,000
19,130
1,127
57,149
50,000
1,342,682
1,147,153
3,394,911
3,394,911
2,862,117
46,800
166,084
1,500,580
588,060
446,030
117,500
190,350
162,150
1,092,500
1,338,000
109,800
78,600
87,120
39,600
2,349,180
4,755,000
229,648
155,400
43,668
19,600
7,000
3,575
28 August
28 August
31 August
31 August
31 August
26 August
31 August
31 August
31 August
31 August
31 August
26 August
31 August
31 August
31 August
31 August
28 August
28 August
25 August
26 August
26 August
28 August
28 August
28 August
28 August
27 August
26 August
26 August
26 August
26 August
26 August
26 August
26 August
WT Marais
WT Marais
P Goetch
GS Van Dyk
DR Zihlangu
L Weinberg
L Weinberg
L Weinberg
MS Aziz-Joosub
AT Higginson
SAR Rose
27 August
27 August
25 August
26 August
24 August
25 August
25 August
25 August
25 August
27 August
27 August
Sell
Sell
Sell
Exercise Options
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
5,000
5,000
200,000
1,968,500
2,000,000
10,000
10,000
10,000
57,094
1,992
2,216
16000
16000
2942
27
20
2000
2000
2000
13948
9900
9900
800,000
800,000
5,884,000
531,495
400,000
200,000
200,000
200,000
7,963,471
197,208
219,384
31 August
31 August
27 August
31 August
28 August
27 August
27 August
27 August
27 August
28 August
28 August
SHARE
Dividend ranking
FORECAST DPS (c)
FORECAST DY (%)
PAN AFRICAN
15
9.8
REBOSIS 109 9.7
EQSTRA 24 8.5
LEWIS 528 8.4
EMIRA 146 8.3
SHARE
FORECAST DPS (c)
FORECAST DY (%)
ACCPROP 54 8.2
VUKILE 148 8.1
OCTODEC 192 7.9
MTN GROUP
1350
7.6
GLENCORE 233 7.6
LIFE
TEST YOUR KNOWLEDGE

Its time to get those neurons firing with this weeks quiz! This week, weve got a copy of Gareth van
Onselens Holy Cows The Ambiguities of being South African up for grabs for one lucky reader.
For a chance to win, complete the online version of the quiz on Finweek.com. Good luck!
Name the capital of Northern Ireland.
True or false?
Port Elizabeth has been named host city for the 2022
Commonwealth Games.
True or false?
Henry Laas is the CEO of Murray & Roberts.
Name the Asian city that was forced to scrap its

Olympics 2020 logo amidst plagiarism allegations.
Which cereal manufacturer wants to

block a merger between rivals Pioneer
Foods and FutureLife Health Products?
Sungrain
Bokomo
K
elloggs SA unit
Sudanese President Omar Al-Bashir

recently travelled overseas for a four-day
state visit. Which country did he visit?
Venezuela
China
Egypt
In which US city did the rap group NWA originate?
True or false?
Amazon has announced it wants to open an office in
Johannesburg.
CRYPTIC CROSSWORD
10
Who directed the 1996 film Scream?
True or false?
Aaron Motsoaledi is the South African minister of
energy.
NO 598 JD
ACROSS
DOWN
1 Go-slow action at the

pump? (11)
9 Not quite last $5 (3)
10 Host in private preserve
(9)
11 Support partners in
future, perhaps (5)
13 Two-time con in
operation (5,2)
14 George III takes ages to
shake the cocktail (6)
16 Alternative is to bargain
for trouble (6)
18 Floating a street paper
(7)
19 Might tenor join in
anthem? (5)
20 Fish that may be let out
to a usurer? (4,5)
21 Slip up halfway through
the task (3)
22 Permit Royal
involvement for now (11)
2 Was responsible for Persia

outside the capital (3)
3 Press campaign (5)
4 About a hundred coins are
circles (6)
5 Omissions excepted, erred
badly about animal (3,4)
6 Sudden claim to be
hospitalised (9)
7 Sliding door out of order?
(3,3,5)
8 They put outside
broadcasts in plain English
(11)
12 Dark horse on trial (10)
15 Reveals a generous supply
(5,2)
17 Its a blow theres no court
in Irish ruin (6)
19 The dried grass variety
of this may impair ones
vision (5)
21 Wing measurement (3)
Compiled by Jack Dunwoody ([email protected])
Solution to Crossword NO 597 JD
ACROSS: 1 Jack; 3 Ephemera; 9 Lyrical; 10 Hurst;

11 Parlour house; 13 Nestle; 15 Argali; 17 Hate campaign;
20 Truro; 21 Clerics; 22 Belittle; 23 Amid
DOWN: 1 Jalapeno; 2 Carer; 4 Paltry; 5 Ethnographer;
6 Eurasia; 7 Ante; 8 School report; 12 Lionised;
14 Seagull; 16 Cancel; 18 Idiom; 19 Stab
PIKER
ON MARGIN
DONALD SAYS THE
DARNDEST THINGS
Whenever Piker gets a bit depressed
about the state of South Africa, it helps
to know that at least Donald Trump can
never be our president. Here are some
of his pearls of wisdom, shared on the
campaign trial and elsewhere:
I will be the greatest jobs president
that God ever created.
I think the only difference between
me and the other candidates is that Im
more honest and my women are more
beautiful.
The concept of global warming
was created by and for the Chinese in
order to make US manufacturing noncompetitive.
One of the key problems today is that
politics is such a disgrace. Good people
dont go into government.
All of the women on The Apprentice
flirted with me consciously or
unconsciously. Thats to be expected.
In life you have to rely on the past,
and thats called history.
The beauty of me is that Im very rich.
VERBATIM
Im intelligent. Some people would

say Im very, very, very intelligent.
THE RABBI AND THE PRIEST

A priest and a rabbi were eating together
when the priest started to tease the rabbi.
Wow, this ham is really good! he said,
licking his lips. I know its against your
religion, but when are you going to break
down and finally have some?
After a moments thought, the rabbi
responded with a smile: At your wedding!
Karin Richards @Richards_Karin

Astute tech analysis on China market
by @DLin71:
STAR EMPLOYEES
Since my last report, this employee has

reached rock bottom and has started
to dig.
He would be out of his depth in a parking
lot puddle.
This employee should go far, and the
sooner he starts, the better.
When his IQ reaches 50, he should sell.
If you see two people talking and one
looks bored, hes the other one.
If you gave him a penny for his thoughts,
youd get change.
Daniel Lin @DLin71

How Chinas govt is like a teenager:
Very secretive
Smokes too much
Hides mess when guests visit
Brags about stuff thats made up
Tom Eaton @TomEatonSA
Apparently Mumford & Sons are coming to
SA. Mumford shouldnt have a problem but
I hope hes got original birth certificates for
the sons.
Commissar Andrew @mathebulaandrew
To save some costs for the commonwealth
games Pres. Zumas home in Nkandla can be
used as an athletes village, it has a fire pool
#DURBAN2022
Keith McLachlan @keithmclachlan
I think some of the South African miners
would make more (and more consistent)
money if they just rented out their mine shafts
for storage.
Market Wisdom @Market_Quotes
All I ask is a chance to prove that money cant
make me happy. Anonymous
. . . and best of all, if the shareholder meeting gets ugly, I always

have my personal escape hatch.
Whats the use of happiness? It cant buy you

money.
Henny Youngman, British-born American
comedian and violinist (1906-1998)
CHARLIE BRAVO #445-15
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Feedback Letters from our readers

In Brief News nuggets

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10 Cover The global economic super cycle is over

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boost Italtile profit

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EDITORIAL EDITOR JANA MARAIS DEPUTY

Published on behalf of Media24 by

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GAGU MATSEBULA WRITES VIA EMAIL:

I have been doing a bit of research

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4 FINWEEK 10 SEPTEMBER 2015

wrapper funds. Costs are very

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The loss in market value (R593.6bn) suffered by Samsung

Industrial conglomerate Bidvest managed to grow its

Durban will host the 2022 Commonwealth Games, the first

CEO confidence in South Africa has hit its lowest level

Hedge fund manager Pierre Andurand, who predicted the

With the ongoing power crisis and no

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THE MARKET HAS BECOME MORE SOPHISTICATED

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entrepreneurs; they are small boutique

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hen the Soweto Wine

Nigeria should stay

igeria should have its own

of operational difficulties, which usually

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easoned market watchers

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has lost nearly 40% of its value since

and the much-anticipated hike in US

commodity super cycle is over. With

governments that continue to ignore the

SUDDENLY, THE ONE

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LESSONS FROM THE

The global debt explosion of the

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ne certainty in times of economic

the grounds that loose monetary policy

Feedback Letters from our readers

In Brief News nuggets

Letter from Nigeria Nigeria should stay grounded, for

10 Cover The global economic super cycle is over

ife After burnout, Rafiq Phillips reboots

45 Life Quiz, Crossword