Tuesday, October 14, 2025
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The Finance Ghost Plugged in with Capitec: Ep 4 (A dose of inspiration with The Local Choice Pharmacy)

Introducing pharmacist and specialist retail entrepreneur Hugh Cunningham:

Hugh Cunningham is as passionate about customer service and product assortment as he is about medicine. As the co-owner of The Local Choice Pharmacy Harmelia, Hugh focuses on business management, while his wife and co-founder Yolandi ensures the dispensary runs smoothly. 

On episode 4 of The Finance Ghost Plugged in with Capitec, Hugh shares excellent insights on specialist retail and how pharmacies really work.

Episode 4 covers:

  • Why separation of duties and having a clear decision-maker is critical
  • The importance of doing proper financial analytics in any business
  • How pharmacies make money and the differences between independent and corporate pharmacy models
  • The benefits of being part of a franchise network
  • The future of the pharmacy industry and how independent pharmacies can stay competitive  

The Finance Ghost plugged in with Capitec is made possible by the support of Capitec Business. All the entrepreneurs featured on this podcast are clients of Capitec. Capitec is an authorised Financial Services Provider, FSP number 46669.

Listen to the podcast here:

Read the transcript:

Intro: From side hustles to success stories, this is The Finance Ghost plugged in with Capitec, where we explore what it really takes to build a business in South Africa. This podcast features specialist retail insights from Hugh Cunningham, co-owner of The Local Choice Harmelia pharmacy.

The Finance Ghost: Welcome to this episode of The Finance Ghost plugged in with Capitec. This is a wonderful podcast series in which I get to speak to some really interesting entrepreneurs. I get to dig into their backstory. I get to understand more about what they’ve built and why they are still build

The Finance Ghost: Welcome to this episode of the Finance Ghost plugged in with Capitec. I’ve been having a great time on this podcast season, talking to some really interesting entrepreneurs. This is episode four, which means there are three other episodes you should go and check out, covering everything from selling brownies at a market through to building a cosmetics business online and then doing property development and really touching every part of the property value chain. That’s episode three, so go and check it out. Huge variety. And we are adding to the variety on episode four here today because I am speaking to Hugh Cunningham. He is the co-owner of The Local Choice Pharmacy Harmelia.

So if you’ve ever wondered how the business of a pharmacy works, then you will find this to be a particularly interesting podcast. Hugh, thank you for coming onto the show and doing this with me. Powered of course, by Capitec and Capitec Business. I’m looking forward to chatting to you.

Hugh Cunningham: Thank you, Ghost. I welcome the opportunity to share some of my experience and insights at The Local Choice Pharmacy.

The Finance Ghost: Yeah, absolutely. So let’s get into it. And I think in line with the conversation I’ve had with others on this podcast series, it’s always good to just understand the backstory, a little bit of what brought you to this point, whether you were always interested in the space, I guess, from a pharmacy perspective. And then I think what is an interesting additional nuance is that The Local Choice Pharmacy Harmelia is actually a family business. It’s you and your wife, which of course brings all kinds of interesting dynamics to that as well.

So let’s, I think, start with just your background, how you got to this point, what got you into the industry, what is the backstory of you, essentially?

Hugh Cunningham: Sure. Thanks, Ghost. My background starts many years ago. In 1983, I qualified as a pharmacist. 1984, I spent a year in hospital pharmacy, then I went into production pharmacy. And while I was in production pharmacy, I opened my first pharmacy in Bedfordview, which I ran from 1985 to 1991. I then got married to my wife in 1991 and sold the pharmacy the same year. I then spent a fair amount of time in the pharmaceutical industry, in production, in regulatory affairs / medical information, then as a rep, then as a product manager, then as a GM.  Moved across to general management in the medical devices industry from where I moved into private equity, both with Anglo American Industrial Corporation and with ABSA Private Bank or ABSA Business Bank.

And then I moved into the recruitment industry, then back into the pharmaceutical industry as a sales director and then joined my wife in the pharmacy about three, three-and-a-half years ago. During all that time I also did an MBA degree in entrepreneurship with an Australian university and I did a postgraduate diploma in financial planning a year-and-a-half ago. Enjoying all of that but all the time – during that time I was also doing a lot of analysis for my wife, coming in the afternoons after work just to do the cash-ups and add value where I could to the business and I’m fortunate enough now to be with my wife and running the business together.

The Finance Ghost: Yeah, that’s fantastic and it’s a nice broad experience set, right, which I think is really valuable when you’re running a business because as many entrepreneurs have learned, either the easy way or the hard way, it almost doesn’t matter what you are selling. There are just key business principles that you need to get right. And I imagine that the prior experience that you’ve brought into this has probably made quite a difference.

Hugh Cunningham: Yeah, Ghost, I think it has made a big difference to the business. I think a lot of retail pharmacists probably don’t analyse their businesses well enough. So I think one of the skills that I’ve brought to the pharmacy is the analysis of sales.  I look at gross profit generally every single day. I make sure that systems are in place to manage the staff. I try and make the staff as happy as possible, but I think we really try and make sure that we’re doing the right things at the right time. And it’s quite nice because we try not to talk about business at home, but we do discuss business while we’re at work.

The Finance Ghost: So, Hugh, you’ve touched on a couple of really interesting points there. One is definitely around – and it’s a point I agree with, by the way, the fact that many especially smaller business owners do not really do the kind of analytics that you would expect to see in larger organizations, and it is to their detriment. I’ve actually worked with clients before, years ago, often they will leave their jobs to start some kind of small retail business and I would help them out on the side – just to help them understand margins, basic stuff like that, where if you haven’t actually studied something finance related, it’s not necessarily a guarantee that you’ll understand the shape of an income statement and the stuff you need to look at and the trends and the product level details and the category margins and all the stuff that makes retail incredibly interesting.

So that’s an important role that you play there with your wife, Yolandi. And I understand from you that she’s a pharmacist and you’ve been married, as I understood in the prep for this podcast, for a few decades now. So congratulations for that. That’s always a great achievement and you want to stay married, no doubt. So that means that you have to manage the business very carefully in terms of your personal life. What do you think has been the trick in actually making it work? I mean, you’ve kind of touched on already there, you know, not bringing work home, that kind of stuff. Would you say that that’s been the core trick to making it work as a husband and wife team, or is there something else that you think might be a valuable insight for anyone else listening to this who’s in a similar position?

Hugh Cunningham: Ghost, I think that the most important aspect of it is we share the pharmacy, but we have separate responsibilities within the pharmacy. We also sit on opposite sides of the pharmacy. I sit on one side and my wife sits in the dispensary and she takes more control of the dispensary side of things and I take care much more of the more business side of things. I do the staff management, the analytics, checking on stock receiving, etc. So yeah, separation of roles.

And because my wife has been in the pharmacy longer than I have, she’s been running the pharmacy since 2009 when we took it over and we became a The Local Choice in 2015. But she’s been running the pharmacy without me. I’ve been assisting until I joined the pharmacy full time and during that time she’s been the boss.  So I really try and allow her to make the decisions. If anyone asks me, I will say, well, she’s the boss ask her.  Being able to literally say, well, you know, it’s her pharmacy in the sense of she makes the decisions – I think that solves a lot of the problems up front. I think the problems would occur where we would try and say, well, it’s my pharmacy, it’s your pharmacy and then there’s a discrepancy. No one knows who’s really “the boss”.

The Finance Ghost: Yeah, I think there’s a good insight there and it’s true for actually all business partners. There are far too many who I think don’t have a proper separation of duties. So that’s the one point that you’ve raised there I think quite correctly. It doesn’t really help if two people go into a business with exactly the same skill set and they basically just fall over each other. That is generally unhelpful. So actually agreeing exactly who’s doing what is really valuable stuff and as you say, just also having someone who is going to make the final call. There’s almost nothing worse than a co-CEO environment where you’re at loggerheads and there’s the ability for a decision to not be made – someone has to have that kind of breaking vote.

So yeah, I think it’s a good dynamic and there’s a lot of reasons why it sounds like it’s worked. It was already operating before you joined. It wasn’t like the two of you sat down one night and said, well, let’s just roll the dice on this business and then we’ll see what happens. We’ll figure out what we each do and everything. That can be quite dangerous. So some really nice advice in there that I think is as applicable to any partners, business partners, etc. as romantic partners, husband and wife, married, take your pick, whatever you want to call it. I think there’s some great advice in there. So thank you.

I think let’s then tap into some of that business knowledge that you bring to it, because that of course is why we’re doing the podcast with you specifically, I think is because you bring that layer of the analytical business side and a lot of that sort of experience to this.  And obviously something that’s really interesting in the pharmacy game is big chains have become part of the landscape in a huge way in the last couple of decades and there are still a lot of independent pharmacies out there. People don’t necessarily realize how many independent pharmacies there are. I’ve done some analytics and work in that space before in a previous life, which was very interesting and I know the pharmacy licenses can play quite a role in that. It’s just interesting to see how these independents survive. The Local Choice is essentially part of the broader Dis-Chem Group. It’s a franchise that is serviced, to my understanding, at least, by Dis-Chem’s wholesaler, etc. and I’m keen to understand that properly from you.

But I guess let’s just start with understanding from you, your view I guess, on how independent pharmacies survive, why you went the route of the local choice. Just some of the business landscape stuff in this space?

Hugh Cunningham: Absolutely Ghost.  I think that for a number of years from 2009 till 2015, we ran essentially as an independent pharmacy with our own branding. We had our own colours, we had our own logo, and we ran and we had a lot of loyalty from our customers and were able to grow the business.  I think that when we got to 2015, we were one of the first The Local Choice pharmacies. I think we were in the second year of The Local Choice franchise starting up and we really gained a lot in terms of the broader franchise route, because The Local Choice pharmacies are a successful brand and people recognise The Local Choice.

In terms of how we work with the Dis-Chem Group, Christopher Williams, who is the owner of CJ Distribution in Delmas, eventually became the main distributor for Dis-Chem as well. So Dis-Chem Distribution is now CJ Distribution as well. So Christopher has managed to expand the wholesale side of it, so some of the smaller wholesalers have all become part of that whole Dis-Chem brand.  The difference between us and a Dis-Chem, is Dis-Chem is a franchise. Most of the businesses have Dis-Chem as a partner. So Dis-Chem has a larger say in the Dis-Chem franchises, whereas The Local Choice pharmacies are essentially privately owned.

How do we as a private pharmacy succeed in a market? I think there are a couple of things that really benefit us. One is we’re not in shopping centres. I think sick patients don’t really want to go to a shopping centre and sit in the shopping centre. They’re not feeling well, for starters, and they then have to go and get their medicine there. So easy access, parking just outside the pharmacy, I think that plays a role.

I think the major role, though, is service – when you come in, one of my absolute aims is to try and have as short a queue as possible in the pharmacy. People do not like queuing.  So if we can make it that there’s no more than one or two people in a queue at any time, that is what we aim for. And then the next is personal service and I must tell you that people come into our pharmacy and say, I want to deal with X or I want to deal with Y and if they want to do that, we’re more than happy to let them ask for that particular person to dispense their medication. I think the group pharmacies, the big corporates, you don’t get that opportunity. You may deal with a different person every single time.

So I think that makes a difference and then very personal service, trying to look after people – as I walk through the pharmacy on a daily basis, I greet – I don’t know – two, three, four people at any time. They all know my name, I know most of their names and certainly the staff that dispense them know them personally. And I think that makes a huge difference.

And then we also try and compete price-wise with Clicks and Dis-Chem. We don’t make huge profits, but my wife particularly will look at prices and she will say, hey, what’s Dis-Chem selling it for? What’s Clicks selling it for? Okay, we’ll sell it for slightly less. And it might not be R100 less, it might be R5 or R10 less. But we try to be price competitive.

So really, private pharmacy is a volume game. You need to get as many people in as you can and you need to provide a really, really, really first-class personal service.

The Finance Ghost: You touched on a lot of great points there. And it is actually something that is fascinating about retail is the location really is everything and as you’ve pointed out there, it’s those open-air malls where you can park right outside versus parking at a big shopping centre. It’s actually just a completely different experience and it lends itself to different kinds of shops. So thank you, that is interesting and you certainly confirmed something that I’ve always understood about retail.

I wanted to ask you one thing before I touch on some of the other points – are you required to procure everything from the Dis-Chem wholesaler or is it more of a SPAR model where you can actually technically buy from whoever you want, but you get preferred terms if you buy from Dis-Chem’s wholesaler?

Hugh Cunningham: Ghost, we can buy from any wholesaler that we would like to, but it’s to our advantage to keep as much as possible within CJ Distribution group.  So we can buy from CJ Delmas or we can buy from the major distribution group which is the one that does most of the distribution to Dis-Chem. But our preferred wholesaler is Delmas.

The Finance Ghost: Okay, fantastic. Thank you. That is very interesting and you’ve also touched on a number of the points I guess I was going to ask you anyway, which is around the service and when you look from the outside in, you kind of think “a pharmacy is a pharmacy” especially if you’re used to going to the big chains. A lot of that sort of faceless, nameless service that you’ve referenced there. I’ve personally not really ever had a sort of little village pharmacy, for want of a better description, where people know who I am and I know who they are. But I can see why that would be appealing from a community perspective.

If I think back to my childhood, we definitely had that. I think my mom used to go to the pharmacy just to honestly chat to them as much as anything else. But the world has changed a bit since then and it’s nice to see that businesses like yours still play a role and do that whole community thing and that you can actually make it work.

It’s obviously very important and like you say, it’s a volumes game. I mean, the one thing that I understand about pharmacy economics is that the dispensary is not where the money is made really. Obviously you can make money there and you have to make money there, but it’s difficult. The margins are not amazing on medication, pharmacists are highly paid people, so the economics of the dispensary itself are not so straightforward and that’s why people always talk about the front shop in the context of pharmacies, which is, as the name suggests, basically everything that isn’t behind the counter.

What has been your strategy around front shop and actually just making that work? I mean, I’ll give the example – Clicks is well-known for their small appliances. That’s because it’s a really nice way for them to juice up the margins of their stores as opposed to relying on dispensary. What has been your experience with that front shop versus dispensary balance?

Hugh Cunningham: Ghost, I think you’re exactly right and I think that corporate pharmacy is such that they’re really not worried about whether they make money in the dispensary or not, because they want the feet in there just so that they can make the margins on the front shop product.  In our case, about 78% of our business is from the dispensary and only about 22% is actually from the front shop. We don’t keep the full range of stuff that a Dis-Chem or a Clicks – the big corporate pharmacies – would keep. We try to keep the stuff that people buy on a regular basis. So our vitamins is a very big area. Then we keep a nice range of soaps and stuff like that. And my wife is excellent at choosing gifts, so we’re a very popular destination to buy gifts, particularly gifts for women, but gifts overall.

And then every now and then, we look at how we can remodel a business or what we can do to renew the business.  We’re now looking at another option that we could go for which would just expand the role. We’re looking at things like wheelchairs, walkers, that sort of thing, which are available in most of the corporate pharmacies but we’re now going to try and compete with them because we can give a personal service and we will also hire those out as opposed to selling them. So I think we try to renew the business on an ongoing basis.

The Finance Ghost: Yeah, that’s really interesting. I think you’ve touched on just how entrepreneurial it actually is to have a pharmacy, because at the end of the day, you’ve got the dispensary to drive footfall, which is the lifeblood of any retailer, and then you can kind of do almost anything you want from there in terms of the front shop. I mean, there’s obviously some categories that are not going to make any sense.

Actually, is there any kind of regulatory ruling or framework around what you absolutely cannot have in the front shop? Is there something that says, I don’t know, you can’t sell food or – well that doesn’t work actually, because Dis-Chem does that all the time, so it can’t be that.

Hugh Cunningham: Ghost, we’re not allowed to sell fireworks, we’re not allowed to sell firearms, we’re not allowed to sell ammunition, we’re not allowed to sell, sho there’s quite a long list of stuff that we’re not allowed to sell. Just trying to think of the others offhand, because we don’t sell them! Cigarettes, any nicotine products, we can give you stuff to try and stop smoking. No vaping equipment, no vapes, nothing like that.

So, yeah, there are very strict regulations about what we cannot keep. We’ve been in business here since 2009 and really we’ve stayed away from all those things. It’s just not worth going down that route at all.

The Finance Ghost: It sounds like a common sense kind of list for a pharmacy. You sometimes wonder about how the regulator sits around and comes up with this stuff, but yeah, that all sounds pretty sensible. And it means that you do then have a lot of flexibility for what you do with the front shop. Like you said, the gifts that Yolandi chooses to stock there and again, it just comes down to understanding the customer, right? Like any business, if you understand your customer, you can do well and if you don’t understand your customer, then you are at risk.

And I think there is risk of disruption to this space and that is something I wanted to ask you about, so I may as well do it now, which is a lot of what I read, especially overseas – I look at the likes of Amazon and what they’re doing. But there is some of it starting to happen here as well, is the concept of ordering your meds online and getting it delivered, basically just completely disintermediating going to a physical pharmacy. Obviously for you, that’s a core business risk, I guess? Is that something that you think about or do you think that actually medication is the kind of thing where people are still going to primarily want it in-store?

Hugh Cunningham: Ghost, I think that’s something that always occupies my mind. I’m thinking a few steps ahead of that even. But let’s look at it in terms of ordering online.  We have our website, we have a WhatsApp telephone dedicated to the dispensary, we have online ordering through email. So we’ve tried to address those options and we have two motorbikes going out and we have one little Suzuki which is fully branded so that anyone in the Edenvale area will see our little Suzuki driving around. Looks very much like the Checkers ones, except that it’s our colours and branding. So we try to advertise in that way. We also have an online advertisement that goes out to all the schools on a regular basis, and we get a lot of exposure that way.

But thinking further down the line, robotic dispensaries are becoming, I wouldn’t say common, but they’re becoming something that is happening. We can receive scripts directly from the doctor if a patient says, I’d like you to send it to XYZ pharmacy, we can dispense it from that point of view. So we’re trying to keep abreast of that.

In terms of the future and this is a concern of mine, is literally a doctor could write a prescription or type of prescription, send it to a robotic machine. The robotic machine could dispense the medication and there could be literally one pharmacist running five, six, seven robotic machines so that if a person needed to talk to the pharmacist, they could press a button and talk to the pharmacist. I don’t think that’s going to come in the next 5, 10 years, but in the next 20, 25 years, AI is going to take a very big chunk of every business, of every profession. And that’s my concern about retail pharmacy.

At the moment, I think people still like the personal relationship that they have with retail pharmacy, privately owned particularly, so I think we score there and we try and really make sure that we do those deliveries.

We also do a lot of blister packaging for retirement villages so that people get compliance with taking their medication on a daily basis. And that is doing very well for us in terms of the retirement villages in our area.

The Finance Ghost:  Again, a lot of really good general business points coming through – stuff like route to market, understanding the customer verticals that you can jump into, things like the schools, the retirement villages, etc. it’s all very clever – and there’s a lot of business experience coming through in your comments about, I think the robotics.

So typically, what people do is they overestimate the rate of change and they underestimate the extent of change. They think stuff will happen quickly and they don’t think about just how much it can change over the long-term. As you’ve described it there, I think is exactly right, which is the other way around, which is to say, well, it might not happen very soon, but long-term all bets are off – we don’t know. And I think that’s a very mature approach to disruption. I think that is typically what ends up happening and it will certainly be interesting to see what happens in this space.

I guess so much of it comes down to just maybe phase of life, what people need the meds for. I’m in my mid-30s  and I have to get medication every month that essentially keeps me alive, which is not great, but that’s what happens when you work too hard and you get a bit of burnout and you end up with something wrong with you that’s not so fantastic. But again, it’s – I know what it is, it happens every month. I get it, it’s done, whatever. There’s not really an advisory piece to it. Whereas I guess for people later in life, do you find that the customers who value the personal service, are they generally older and they’re looking for more advice around the meds they’re taking? It’s not really that they’re coming to buy basic flu medication and then they’re desperate for personal service? Or do you find that it’s not as cut-and-dry as that based on demographics?

Hugh Cunningham: Ghost, I don’t think it’s completely cut-and-dried. I think people really enjoy the personal service and I think what makes you stand out as a privately owned pharmacy, is making sure that people get good advice on their medication, when to take it, what could it interact with, how should I be taking it? We do have a fair proportion of our customers as slightly older people, but I think that that’s a factor that aged people generally are more sick than young people.  So, people in their 30s generally don’t have very strong medical aids. And elder people, they’re on the better options generally, unless they can’t afford them.

The Finance Ghost: Yeah, absolutely. That actually brings me to something I wanted to ask you, which is around medical aids and working capital and the strain this potentially puts on pharmacies. Because I’ve always wondered what happens in the background. Someone gets their meds, it goes through medical aid – I have a sneaky suspicion that the medical aids don’t do an EFT that afternoon into your bank account. So what does that look like in the back-end in terms of working capital strain on a business like yours? It’s obviously something all retailers have to think about, but in your case I suspect you end up with a situation where your customers effectively owe you, they just don’t realise they do because you’re waiting for their medical aid to settle!

Hugh Cunningham: That’s a very interesting question, Ghost. I think that at least there is a rule from the Council of Medical Schemes, that medical schemes have to pay us within 30 days.  They don’t always do it but most of the time we get our money back within 30 days.

Unfortunately, the entire medical industry seems to be run more by the medical schemes than by any other player in the market. There’s constantly a look at retail pharmacy in terms of, yeah, but that’s where most of the money goes – when in fact only about 13% if I remember the facts correctly goes to retail pharmacy. The rest goes to hospital specialists and doctors. So really, retail pharmacy isn’t a huge proportion of the medical budget.

There is of course the substitution of generic medications for originals that we’re compelled to offer to patients. The biggest problem there is that the medical aids are dictating pricing simply across the board.  So if a Discovery or a large medical scheme says, we’ll pay you the SEP (SEP being Single Exit Price) – so we don’t make a markup specifically on medicine.  Up until a value of about R150 we make 36%. Over and above that, we make a maximum depending on the medical aid scheme of R59 per item or R29 if it’s a lower medical scheme. So the margins are really not there in medication anymore because the medical aids dictate and because one large medical aid says this, then all the medical aids say that. We’re entitled to charge a significantly higher professional fee but in reality that really doesn’t happen in the cities because we need to compete with the Dis-Chems and the Clicks and the corporate pharmacies.

The Finance Ghost: Yeah, and hence the importance of that front shop model because it’s not just the additional sales and the additional margins but it’s also from a working capital perspective, someone pays you as they leave the shop, you’re not waiting 30 days to get paid. So these are all the joys of running a retailer. At the end of the day, it’s a tough business and I think retail pharmacy is a particularly tough business. But I guess that’s all part of why you went the franchise route at the end of the day. You mentioned it at the beginning, stuff like brand recognition, it just feels like it’s hard and if you go the franchise route, it takes away some of the difficulties, just one or two of them. The fact that someone says, oh, I’ve seen that brand before is now a trust thing, they at least say, well, I feel like I can trust this pharmacy. So I guess that’s part of it, right? It’s just de-risking the overall business. If you go the franchise route, you’re just taking some of the risk away, right?

Hugh Cunningham: Ghost, Absolutely. I can count on my colleagues within The Local Choice brand, no matter where they are, whether it be in Cape Town or Pofadder or Upington or wherever, to at least be giving a similar kind of level of service to what we give. And I think that’s what makes The Local Choice brand stand out is although we’re privately owned, I think because we’re privately owned, we all try and really give the kind of service that will keep people returning with an expectation of that level of service.

The Finance Ghost: Yep, that makes a lot of sense.  I think as we bring this discussion to a close – and I’ve really enjoyed actually understanding a little bit more about this segment of retail, I luckily do understand a little bit about it, I had some background knowledge coming in – but I remember when I first learned the things I learned about how independent pharmacies are managing to survive and how pharmacy licence access is a big part of that. Or actually, let’s touch on that quickly and then I’ll ask you the last question because we haven’t spoken about that. How hard is it to get a new pharmacy licence? Because my understanding is that a big part of how independents are surviving, is that there is actually a practical limit on how many pharmacy licences are given out to avoid a scenario where there’s destructive competition and pharmacies are failing because there are too many of them for the level of demand.

Hugh Cunningham: Ghost, I think that, yeah, the biggest problem is justifying how many feet or how many people would access that pharmacy in an area and trying to get a feel for that.  I think there’s a major problem in terms of shopping centres having two or even three corporate pharmacies within the shopping centre. That seems to be okay for corporates, but not so okay for private pharmacy.

The process of getting a licence is lengthy. It can take a year or more to actually get a licence approved and you have to submit plans.  They have to be architect-drawn plans to scale of the internals of the pharmacy. If you change the internals of the pharmacy, you have to re-apply, not for a licence, but you have to get the plans approved by Pharmacy Council. So any changes internally, you need to do a fair amount of work.

Fortunately, The Local Choice brand helps us in terms of those plans and submitting them to the Pharmacy Council. And they have a little bit of clout in terms of trying to get things ushered through a little bit quicker than normally would happen.

The Finance Ghost: Yeah, that makes sense. So now I can ask you the last question that I wanted to ask you, now that we’ve ticked that box off, which is just around your – and I ask all of my guests this question, I know it’s very cliche, but something interesting always comes out of it – which is just around your biggest mistake and thus learning along the way of this business.  What would you say that would be?

Hugh Cunningham: Yeah, difficult one. I think the big learning is to make sure that your staff are always happy and that they’re always abiding by the rules of pharmacy. And we have legislation probably second only to the finance industry in terms of what you can and can’t do. You’ve got to keep very strict control of what your staff is doing. You need to know what they’re doing so that they don’t make any mistakes.

And of course, mistakes are always made. It doesn’t matter what business you’re in. The only people who don’t make mistakes are those who don’t do any work! But you do need to try and pick those up as quickly as possible.  And if you do pick them up, address them with the patient as quickly as you can.

The Finance Ghost: Hugh, thanks. I think you’ve given us a lot of really good insights into the business, what it’s like to run essentially community specialist retail, which is a whole animal unto itself, really, and a very fascinating way to actually get up in the morning and run a business.  As a franchise as well, interesting realities of that and just tapping into that brand recognition and support and a network at the end of the day.

So thank you very much for your time on this podcast and hopefully listeners, next time they go to the pharmacy will maybe see their favourite pharmacy through new eyes. Look around you at what’s in the front shop. Think about how the business makes money. The fact that the dispensary is all the way at the back is not a mistake. It’s so that you walk past everything, I think, on your route to the dispensary and back again to the till so that you can hopefully shop in the front shop.

Because it’s a tough business – it’s actually quite a tough business and it’s an absolute necessity that we have pharmacies, so put something in your basket from the front shop of an independent pharmacy, go buy your gifts there, go buy what you can there, because it definitely helps to keep those businesses in your community.

Hugh Cunningham: Ghost, thank you very much for the opportunity. I would like to, just before the end, give a shout out to Capitec Bank, Capitec Business Bank, where we bank. We approached our previous bank for capital to grow. We had had an overdraft since 2009 and we asked for a little bit of an increase in the overdraft to grow and that was about two, three years ago. And they were so slow coming forward.

Capitec Business Bank came to the rescue. We’ve changed our account to Capitec Business Bank and we’ve been able to grow significantly since their contribution. So I’d like to make a shout out to Capitec Bank as well. The personal service there has been incredible. Thanks to you for this opportunity just to share a little bit of the background of retail pharmacy. I appreciate this time with you and you’ve asked some penetrating and interesting questions. Thank you so much.

The Finance Ghost: Thank you, Hugh. And it’s always nice to hear genuinely the Capitec clients just – it comes through so naturally, that you’re very happy with the service. I never have to say: “Oh, please tell us now all the lovely things about Capitec” – it’s actually a very sincere “Hey, these guys have really helped my business”. It came through 100% on the previous podcasts as well and it’s just lovely to see. I think it says a lot about the product that they are offering out there as well.

So well done, Capitec. Well done Hugh, good luck to you with your business journey.

Hugh Cunningham: Thank you so much. Appreciate that.

Real stories and real people. Yours could be next plugged in with Capitec. Capitec is an authorised financial services provider, FSP4 669.

Ghost Bites (Adcock Ingram | MAS | Newpark | SA Corporate Real Estate | Sappi)

Adcock Ingram shareholders give a resounding yes to the Natco Pharma deal (JSE: AIP)

No major surprises here

In July, Adcock Ingram announced that Natco Pharma wants to acquire all the outstanding shares in the company. The circular went out in early September and the shareholder meeting has now taken place. The deal was approved by 98.66% of shareholders in attendance.

I’m genuinely not sure what outcome the small number of dissenting shareholders were hoping for. The Natco Pharma offer of R75 per share is approximately 50% higher than where the share price was trading before the bid came to light, as shown on this chart:

There are still some outstanding conditions for the deal, but getting through the shareholder vote is a major milestone. The company will announce updated dates in due course.


A significant change of approach at MAS (JSE: MSP)

The new board is in no rush to pay dividends – or even to buy more properties!

With the dust having settled at MAS after a battle for control of the company, they’ve released an update to shareholders regarding the capital allocation plans going forwards.

Firstly, there are no guarantees that they will stick to Romanian real estate – or even real estate at all! The company is happy to move beyond the country and possibly even the sector, so that’s going to make it quite difficult for institutional investors to feel good about owning the shares. The individuals running the show at MAS are astute allocators, but that doesn’t mean that investors will be happy about a potential transition from property company to investment holding company. This is something to keep a close eye on, with MAS looking to sell properties that are expected to deliver lower returns than other opportunities.

On the balance sheet, MAS is repaying its 2026 bond ahead of schedule. The Development Joint Venture (DJV) has also redeemed €75.9 million of preferred equity, so cash has moved up the structure, but the DJV retains the right to recall this amount by notice.

Here’s another big change: the strategy is no longer focused on resuming dividend payments. Instead, MAS will look to optimise long-term shareholder value on a per share basis. This means share buybacks are much more likely than dividends.

There must be no shortage of churn on the shareholder register at the moment, as this is a huge change in strategic direction. MAS isn’t a REIT, so they aren’t forced to focus on dividends. They aren’t even forced to remain a property company!


Newpark REIT hit by negative reversions at the JSE building (JSE: NRL)

This is the problem with a highly concentrated portfolio

Most REITs on the market have a reasonable spread of properties in the portfolio, as the appeal for investors is that they can buy diversified property exposure. Newpark offers no such benefit unfortunately, with a portfolio of just four properties. This will soon be down to three properties, with the fund in the process of selling the property in Crown Mines.

This will leave them with two buildings in Sandton (the JSE and adjoining 24 Central) and a property in Linbro Business Park. Those Sandton properties might be iconic, but that doesn’t mean that Newpark has much negotiating power.

When a lease has been running for many years with escalations above market levels, then the expiry of that lease is an opportunity for the tenant to bring things back down to earth. That’s unhappy news for the landlord of course. This is exactly what happened at the JSE building, which is why Newpark’s results for the six months to August look so poor.

Revenue dipped 7.3% and funds from operations per share tanked by 24.5%. The loan-to-value ratio has increased from 43.1% to 44.5%. The good news is that at least the weighted average cost of debt has come down nicely from 9.3% to 8.9%.

The interim dividend of 26 cents per share is 13.3% lower than the prior year.

In terms of the outlook, the company originally expected funds from operations per share to be between 39 and 46 cents for the year ending February 2026. They’ve revised this higher to between 41.50 and 48.50 cents.

There’s just about no liquidity in the shares, so this is most useful as a cautionary tale around concentrated portfolios and the risk of negative reversions.


SA Corporate Real Estate is keen to own more residential property (JSE: SAC)

This is buy-to-let at scale

Residential property isn’t a popular choice among REITs. They far prefer owning shopping centres and industrial properties, while trying to do the best they can with problematic office portfolios. At SA Corporate Real Estate though, they are no strangers to residential property or the resilient underpin that this asset class can provide when you have a large enough portfolio of apartments.

The residential investments are typically made through Adhco Holdings, so SA Corporate has a dedicated structure in place for them. The latest deal is the acquisition of Parks Lifestyle Apartments at Riversands for R1.68 billion. Talk about buy-to-let at scale!

The development is near Steyn City and comprises 1,960 residential units from bachelor to three-bedroom apartments. R31 million of the purchase price is deferred until the final block of 40 units is built, taking the total development to a juicy 2,000 units.

The plan at SA Corporate is usually to buy large portfolios and then drip feed them into the market while earning rentals on the remaining properties. They believe that they can offload these units at yields under 8% and they can sell other residential units within the broader residential portfolio for yields under 8.5%.

Or, put differently, buying residential apartments is a really bad investment when you buy just one apartment, but it’s not bad if you can get your hands on them in bulk and then sell them off slowly.

Even then, the net operating income on this portfolio is expected to be R159.6 million in the year ending December 2026. That’s a forward yield of 9.5%. Once you take off the expected cost of debt, the expected profit before tax is R80.5 million. They are expecting to do the deal on a loan-to-value ratio of 57%, so the equity outlay is R719 million. This means an expected return on equity in 2026 of 11.2% excluding the benefit of selling any of the units.

As you can see, the returns on residential property aren’t amazing even when you can do deals at this scale. The problem is that property prices in Joburg show very little capital growth, so investors are reliant on yields. But with the market happily buying SA Corporate Real Estate shares on a yield of just 7.5%, they can do deals like these to create shareholder value.


Facing a perfect storm for the balance sheet, Sappi is digging for every coin between the couch cushions (JSE: SAP)

You won’t be seeing a dividend this year

Sappi’s share price is down a rather spectacular 56% year-to-date. You know it’s bad when you would’ve been better off buying a new car on 1 January than buying shares in Sappi. At least you can drive the rapidly depreciating car, which is a lot more fun than watching your Sappi position implode.

In a situation that isn’t unfamiliar to regular readers, we have a classic case of a company that ran the balance sheet too hot before the market washed away from them. This often leads to a rights issue to plug a hole in the balance sheet, as we saw recently at the likes of Gemfields (JSE: GML). Although Sappi doesn’t make mention of the words “rights issue” (companies rarely do unless they are out of options), they are certainly doing everything possible to avoid landing up in that situation.

They have a few obvious levers to pull, like suspending the dividend for FY25. They’ve also adjusted their capital expenditure for the next two years, with no expansionary capex planned. That makes sense, as expanding into a weak market doesn’t seem smart.

It’s a good start, but the real key is having the support of the banks. Sappi has access to $800 million through existing cash and revolving credit facilities, but debt covenants are a problem because of the poor operating environment and its effect on earnings. The banks have agreed to increase the leverage covenant levels for the next year, so that’s a temporary solution. Sappi is also looking to extend the revolving credit facilities and to “term-out” a portion of debt with a new 5-year term facility.

The share price closed 5% higher on the day, so the market appreciates the efforts. Still, it takes a brave soul to buy this chart:


Nibbles:

  • Director dealings:
    • Jan Potgieter, the ex-CEO of Italtile (JSE: ITE), sold shares worth R4.6 million. His long journey with the company has come to an end as he is also leaving the board, so I’m not overly surprised to see some share sales from him.
    • The CEO of ADvTECH’s (JSE: ADH) resourcing business sold shares in the group worth R3.4 million.
    • The company secretary of Growthpoint (JSE: GRT) sold shares worth R1.6 million.
    • Des de Beer is back at it with Lighthouse Properties (JSE: LTE), buying shares worth R1.4 million.
  • Harmony Gold’s (JSE: HAR) acquisition of MAC Copper in Australia has become legally effective, which means that Harmony will be the proud owner of the mine with effect from 24 October.
  • Back in February 2025, Merafe (JSE: MRF) announced that its joint venture with Glencore (JSE: GLN) had entered into an enhancement under the legacy agreement with Sibanye-Stillwater (JSE: SSW). The plan was to accelerate the delivery of contracted chrome volumes and for the joint venture to take operational control of the majority of chrome recovery plants at Sibanye’s local PGM operations. The latest update is that the Competition Tribunal has granted unconditional approval to the consolidation of management of various plants that are currently separately owned and operated by the joint venture and Sibanye.
  • Standard Bank (JSE: SBK) confirmed that the SARB’s Prudential Authority has approved the appointment of David Hodnett as the CEO of Standard Bank South Africa. His appointment is therefore effective 10 October 2025 i.e. immediately.
  • The format of disclosure on the Australian Stock Exchange means that it isn’t the easiest thing to follow the details of the current capital raising efforts at Orion Minerals (JSE: ORN). The company has issued A$1.26 million in shares and has secured further commitments for A$4.4 million. But if you go back a couple of announcements, they previously indicated that the raise had been increased to $8.6 million, so I presume that this is still the total planned amount. Just to add an additional announcement into the mix, the company confirmed that Ratel Growth, which currently has an 8.3% stake in the company, acquired additional shares for A$2 million. I can only assume that this is part of the capital raise.
  • Mondi (JSE: MNP) announced the results of the dividend reinvestment plan. Across the UK and South African share registers, holders of a total of 4.26% of shares in Mondi elected to reinvest the dividend. When you consider how severely the share price has dropped, it’s quite amazing that more holders didn’t choose to average down at these levels and reinvest their dividends.

Port Royal: the city that sank for its sins

Before there was Las Vegas, there was Port Royal: a city of pirates, plunder, and peril clinging to the southern edge of Jamaica. The 17th-century hotspot was once the beating, drunken heart of the Caribbean, until one Sunday in 1692, when the earth opened up and swallowed it whole (quite literally). There’s more truth to Disney’s tales of Captain Jack Sparrow than you might realise.

By the late 1600s, Port Royal was considered to be the crown jewel of the Caribbean – although on second thoughts, “crown” may be a bit too generous a description. In reality, Port Royal was probably more like a golden tooth: gleaming, ostentatious, and clearly quite rotten.

Founded by the Spanish in 1494, Port Royal officially became a British outpost after the Brits wrestled Jamaica from Spanish hands. Its location at the mouth of Kingston Harbour, smack in the middle of Spanish-controlled seas, made it the perfect launchpad for privateers.

Privateers were essentially pirates on the British payroll. They were legally allowed to rob Spanish ships on behalf of the British Crown, which made them both criminals and civil servants, depending on the week’s foreign policy. When England and Spain were at war, the privateers were “heroic seamen”. When peace between the two countries returned, they were downgraded back to pirates, or simply thieves with boats.

Still, privateering was a profitable arrangement. Gold and silver from Spanish galleons poured into Port Royal like rain, and soon the place was booming. In its absolute heyday, it had a population of almost 8,000, and that population sure liked to party. In July 1661 alone, 40 licenses were granted to open new taverns. By 1662, Port Royal was recorded as having one tavern for every ten residents.

Sin City by the sea

If you squinted, Port Royal looked a bit like London, with its narrow cobble streets, brick-and-wood houses, busy merchants, and the occasional pickpocket. But the similarities stopped there.

This was the kind of town where morality was the exception, not the norm. Public drunkenness was normal, gambling was a civic pastime, and prostitution wasn’t just tolerated, it was practically part of the tourism industry. Sailors fresh off the high seas filled the taverns, flinging coins and curses in equal measure. There were carpenters and cobblers, shipwrights and blacksmiths, all feeding off the booming pirate economy. Money sloshed through the streets as freely as the rum, and few cared to question where it all came from.

The key to Port Royal’s popularity was its exceptionally deep harbour, which allowed up to 500 ships to dock at once. This meant constant trade and an equally constant influx of trouble. The city was built, quite literally, on sand – a fragile spit of land that jutted out into the Caribbean. Geographically, it was a risky position, but no one seemed to worry about geology when the economy was this good. As the population grew, more land was laid dry to make space for new buildings. The pirates were essentially stealing territory from the sea itself.

To the devout back in England, Port Royal was less a colony and more a cautionary tale; a sun-drenched Babylon in the tropics. Clergymen called it “the wickedest city on earth.” And like any good biblical story, the ending would be apocalyptic.

June 7, 1692

It was a Sunday morning, just before noon. The markets were busy, the taverns already humming, and the church bells likely ringing with irony. Then the ground began to shake.

At first, people thought it was a passing tremor. But within seconds, the shaking turned violent. Brick walls cracked, the church tower crumbled, and the harbour churned like a pot of boiling stew.

Modern geologists estimate it was a magnitude 7.7 earthquake that struck not just Port Royal, but the whole of Jamaica. That’s an enormous force unleashed directly beneath a city built on sand. And that sand was about to betray them.

When earthquakes hit sandy soil, an eerie process called liquefaction happens. The solid ground suddenly behaves like water, and everything sitting on it begins to sink. The ground that Port Royal was built on didn’t crack or heave during the earthquake – it essentially liquified. Two-thirds of the city slid straight down into the sea. Buildings vanished whole. Streets folded in on themselves. People, animals, and homes were all pulled under in a matter of minutes.

For a city long accused of sin, it was the most literal form of damnation imaginable. But the earthquake was just Act One.

Moments after the ground stopped shaking, the sea struck back. The shifting seabed had triggered a tsunami, or more precisely, what scientists call a “seiche wave”. The harbour turned into a giant sloshing bowl, with water surging back and forth, smashing ships against each other and flinging them inland. One British vessel, the HMS Swan, was hurled across the city and deposited inside a house. This impossible image was confirmed by archaeologists centuries later when they found the ship’s hull still lodged in the building’s ruins.

In the space of minutes, Port Royal was unmade through an almost biblical trifecta of earthquake, liquefaction, and tsunami.

A city cursed twice

The survivors, which numbered around 4,000 immediately after the earthquake, stumbled through a landscape that barely resembled the city they knew. Half of Port Royal was at the bottom of the sea, and what was left on land was reduced to rubble.

Wells were contaminated, food quickly ran out, and disease swept through the survivors. Within weeks, another 2,000 had died from injuries, infection, or thirst. To the British back home, the disaster was divine justice. Pamphlets declared the city’s destruction proof of God’s wrath. It was a convenient narrative – sin, punishment, lesson learned – but it ignored the geological explanation. The city had been built in exactly the wrong place, on a sandbar barely holding itself together. And when nature pushed back, there was nothing man, government or pirate could do to stop it.

When money trumps sense

Today, Port Royal is a treasure trove for archaeologists, a kind of Caribbean Atlantis that tells its story brick by perfectly preserved brick.

Modern dives have mapped entire blocks of the old city, revealing homes, shops, and even the remnants of Fort James. Artifacts like coins, pipes, pottery and even sealed bottles of wine can be found in the remnants of eerie underwater buildings. The city that once epitomised greed and excess now lies in perfect silence, inhabited only by fish. Above it, ships still glide into Kingston Harbour, probably unaware that beneath their hulls lies a city once called “the richest and wickedest on earth.”

If there’s a lesson in Port Royal’s story, it’s not the one preached by the moralists of 1692. It’s simpler and far more human. Every civilisation has its Port Royal moment – that point where success turns into overconfidence and growth outpaces good sense. The pirates in this story just happened to build theirs on sand.

Three hundred years later, as coastal cities expand into floodplains and developers pave over wetlands, Port Royal’s story feels less like ancient history and more like a prophecy. As modern skylines rise higher, it’s worth remembering that nature has never needed a sermon to deliver a reckoning.

About the author: Dominique Olivier

Dominique Olivier is the founder of human.writer, where she uses her love of storytelling and ideation to help brands solve problems.

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting. She now also writes a regular column for Daily Maverick.

Dominique can be reached on LinkedIn here.

Ghost Bites (Deneb | Discovery | Equites Property Fund | Hammerson | Pick n Pay)

Deneb is acquiring 80% in Dawning Filters (JSE: DNB)

This is a very good example of the types of deals and pricing you see locally

Deneb is involved in the manufacturing and distribution of industrial products. As is typical for companies in this space, they are open to acquisitions to expand the overall product offering.

As the name suggests, Dawning Filters supplies all kinds of filtration products to customers across multiple industries. The company has distribution offices in Joburg, Durban and Cape Town, with manufacturing done in Durban.

Deneb is paying R80 million for an 80% stake in the company, so you don’t need to get the calculator out to know that the implied value of the entire company is R100 million. Profit after tax for the year ended February 2025 was R15.7 million, so the earnings multiple is 6.4x.

Importantly, there’s a pathway to a 100% stake in the form of a put option that becomes exercisable after four years for a six-month window period. But there’s no call option, so Deneb cannot force the issue to get to 100% – the sale of the final 20% is at the option of the sellers of the business. The maximum consideration that could be payable to the sellers is R120 million, so Deneb has wisely included a cap on the option. The basis of the calculation for the put option price is 6x average annual profit.

This is a category 2 transaction, so Deneb shareholders won’t be voting on it. There are various other conditions though, so it will no doubt take a few months to close the deal.


Discovery’s financial year is off to a good start (JSE: DSY)

The medium-term plan calls for mid-teens growth

Discovery presented at the UBS South Africa Financial Services Conference this week. Hylton Kallner, CEO of Discovery South Africa and Discovery Bank, led the presentation. I think it’s fairly obvious how the succession planning is shaping up at Discovery. You’ll find the presentation here.

The group had a very strong FY25 and took the opportunity to remind attendees that normalised headline earnings increased 30%. That’s always a nice way to set the scene!

There’s a very cheeky slide in which they talk about Discovery being number 1 in every category they play in locally. But the metric changes each time e.g. for Discovery Life they use market share and for Discovery Bank they use “number 1 bank brand” – market share is what counts, in which case they are very far from being number 1 across a couple of verticals. I’m not sure why they dilute such an objectively excellent year with such an obviously skewed way of explaining their market positioning:

There are also some very interesting slides on the data they have on things like sleep duration and how this affects health and overall risk of vehicle accidents etc. This is of course the Vitality data that they’ve been building for years now, with the AI era making it even more powerful (and valuable) than before.

The five-year growth ambition for the group is a CAGR of 15% to 20% in profit from operations. Although the South African business is the most mature part of the group, they expect it to achieve a CAGR of 12.5% to 17.5%. Yes, the ecosystem will need to work very well for this to be achieved, but they are firmly on that path.

The presentation also included an update on trading for the first quarter of the new financial year. They are calling it a strong start, with decent new business growth numbers and favourable claims and persistency experiences vs. embedded value expectations (that’s good for profits).

The share price went through a significant recent sell-off, but seems to have positive momentum once more.


Equites Property Fund remains far more bullish on SA than the UK (JSE: EQU)

That’s just as well, as they’ve taken significant steps to bring capital home

Equites Property Fund released results for the six months to August. The narrative tells a more positive story about South Africa, although they note that a “broad-based recovery has yet to take place” despite the recent optimism. That’s a lot better than the UK, with 10-year gilt yields (government bonds in the UK) at historically high levels and the UK logistics property market stuck in a state of low growth.

Equites has made it clear that they are reallocating capital from the UK to South Africa and they’ve already done some significant transactions to make that happen. The narrative simply confirms that nothing has changed regarding that strategy.

For the interim period, like-for-like portfolio rental growth was 5.1% and valuations were up 4.0%, so that’s a solid combination. The loan-to-value ratio did come in a bit higher at 37.2% (vs. 36.0% in February 2025), but the all-in cost of debt thankfully dropped by more than 50 basis points to 8.3%.

The dividend per share was 3.8% higher, while distribution guidance for the full year has been reaffirmed at growth of between 5% and 7%.

The net asset value (NAV) is R16.93 and shares are currently trading at R16.05. The entire sector has seen a reduction in discount to NAV as prospects have improved.


Hammerson is enjoying decent momentum (JSE: HMN)

A ratings agency upgrade does wonders for debt costs and availability

UK property fund Hammerson had no trouble with a €350 million bond issuance that was 5 times oversubscribed. This issuance is part of the refinancing of the €700 million bonds maturing in 2027. It helps that Fitch upgraded the company’s unsecured debt rating and Moody’s revised the rating to a positive outlook.

Due to the timing of the bond issuance, they now expect full year earnings to be £101 million, ever so slightly down from previous guidance of £102 million.

The announcement also includes a trading update based on the summer months, where UK and French footfall were up by mid-single digits. As one would hope, properties that went through significant redevelopment and repositioning did particularly well. Importantly, they are achieving a significant rent increase in long-term lease agreements.


Pick n Pay’s like-for-like momentum is encouraging, but the group is still making losses (JSE: PIK)

Retail turnarounds are hard

Pick n Pay released a trading statement for the 26 weeks to August 2025. The group is unfortunately still loss-making, so we may as well get that out of the way. The headline loss per share has improved by between 50% and 60%, but it’s still a loss of between -54.31 cents and -67.97 cents. In absolute terms, the headline loss is between -R399 million and -R479 million.

So, there’s a long way to go. The key metric to watch is like-for-like growth in Pick n Pay SA, where they came in at 4.3% for the interim period vs. 3.6% in the 17 weeks to 29 June 2025 (in other words there was a strong acceleration towards the end of the period). In the previous interim period, they only grew 1.1%, so this is a significant improvement.

The franchise supermarkets have been a tough story. They are still lagging, with growth of 1.7% vs. company-owned supermarkets at 4.8%. Franchise also had a really easy base in this period, as the comparable period was a like-for-like decrease of -1.4%!

Clothing standalone stores were up 7.5%, with a soft base effect here as well thanks to growth of just 0.2% in the comparable period.

Total turnover growth for Pick n Pay is below like-for-like growth as they’ve been reducing the store footprint to try and shrink into profitability. This has dire long-term consequences, with key rival Shoprite (JSE: SHP) happily mopping up those sites and increasing their footprint. It’s also clear that Boxer (JSE: BOX) is still by far the best business in the Pick n Pay group.

The Pick n Pay share price remains in the red this year, reflecting how hard a turnaround actually is.


Nibbles:

  • Director dealings:
    • Three directors of Hyprop (JSE: HYP) have sold shares worth a total of R14.6 million. The announcement notes that this is the first sale in several years and that this is to rebalance portfolio exposures. The company also has minimum shareholding requirements in place for executives. Fair enough then.
    • A director of a major subsidiary of AVI (JSE: AVI) received share awards and sold the whole lot to the value of just over R6 million. The company secretary of the listed holding company received awards and also sold all of them, with a total value of nearly R5.8 million.
    • The financial director of Pan African Resources (JSE: PAN) bought shares worth R425k. That’s interesting timing, as the gold price is looking pretty spicy at the moment!
    • Although Impala Platinum (JSE: IMP) announced dealings by many directors in relation to share awards, I don’t think there was enough of a pattern for us to really read anything into it. Thanks to the recent run in the PGM sector, the share awards ended up being worth meaty numbers for the execs!
  • Schroder European Real Estate (JSE: SCD) has had a rough year in its share price and the recent valuation trend won’t do much to improve that. In the quarter ended September, the total portfolio value was up just 0.1% quarter-on-quarter. As you would expect, there are bigger swings at individual property level, mostly driven by the passage of time on existing leases and thus the changes to lease terms.
  • After Silchester International Investors had lots to say in the media about the Barloworld (JSE: BAW) offer and the price they would be willing to accept, it turns out that they’ve now disposed of their entire holding in the company. So much for “at least R130 per share” then.
  • City Lodge (JSE: CLH) announced that Entertainment Holdings and Tsogo Sun Investments – part of Tsogo Sun (JSE: TSG) – sold shares in City Lodge such that they now hold just 3%. Tsogo had a stake of over 10% that was acquired in 2023, so that’s a particularly interesting move.
  • In August, Mahube Infrastructure (JSE: MHB) released a cautionary announcement regarding a potential buyout offer for the company by an existing shareholder. The company has renewed the cautionary announcement, as engagement between the independent board and the potential offeror is continuing. As this stage, there’s no firm intention to make an offer, so caution really is warranted here.
  • Dr Leila Fourie is retiring as CEO of the JSE (JSE: JSE) at the end of March 2026, having been in the role since 2019. Valdene Reddy, currently the Director of Capital Markets at the JSE, has been named as Fourie’s successor.
  • BHP (JSE: BHG) investors didn’t exactly form an orderly queue for the dividend reinvestment plan. Holders of less than 4% of total shares in issue elected to participate, with the rest happy to receive cash.
  • Metrofile (JSE: MFL) announced that there are no longer any put or call option arrangements between Sabvest (JSE: SBP) and an associate of director Phumzile Langeni in relation to the company’s shares. It doesn’t seem like any dealings in shares happened as part of this.
  • Labat (JSE: LAB) renewed the cautionary announcement regarding the potential disposal of certain subsidiaries to All Trading. Negotiations are ongoing.

Who’s doing what this week in the South African M&A space?

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Growthpoint Properties subsidiary, Growthpoint Healthcare Properties (GHPH), which is managed by Growthpoint Investment Partners, is to acquire the properties and operations of Auria Senior Living, a developer, owner and operator of senior living communities in South Africa. The property assets are valued at R2,4 billion and would initially add four Auria senior living communities to the portfolio. Auria will continue to operate under its current leadership team and brand. Auria’s pipeline of developments include Coral Cove in Salt Rock, KZN in addition to brownfield opportunities which GHPH intends to commence. The acquisition will take GHPH’s assets under management to c.R6,2 billion.

Kibo Energy has announced it will potentially acquire Carbon Resilience, a utility-scale industrial decarbonisation and renewable energy company for US$135 million (R2,3 billion) from FA SPC Real Asset Income, part of the institutional asset management platform of the ARIA Commodities’ group. Following the completion of a due diligence process, the company will be required to undertake a fundraising in connection with the transaction. Kibo will issue c.966 million ordinary shares at an issue price of 10.4 pence per share and will seek shareholder approval for a 1,600:1 share consolidation. The transaction will result in a reverse takeover of the company.

SA Corporate Real Estate (SAC) through its wholly-owned subsidiary SA Retail Properties, has entered into an agreement with Tinos Consulting and Advisory to dispose of Bluff Towers Shopping Centre in Durban for a cash consideration of R544,65 million. The disposal aligns with SAC’s strategy of reducing its retail exposure to KZN.

Vunani’s 78% held subsidiary Vunani Fund Manager has acquired the remaining shares in Sentio Capital Management – a black-owned and managed fund manager. Prior to the merger, Investment Managers Group (IMG) held a 30.05% stake in Sentio. Due to the dilution of its stake as a result of the merger, IMG opted to exit its stake as part of concluding the merger. Sentio will be merged with VFM to form Vunani Sentio Fund Managers. VFM will issue 44,754 shares to Sentio’s shareholders and a cash consideration.

Deneb Investments will acquire 80% of issued share capital of Dawning Filters from vendors MG Dain and the Dibb Family Trust. The R80 million purchase consideration will be paid in cash to the sellers in a 50:50 ratio. The deal is a category 2 transaction and as such does not require shareholder approval.

On 1 October 2025, the parties to the Barloworld transaction agreed to waive the Standby Offer Condition relating to the receipt of competition regulatory approval by COMESA. As at 6 October 2025, NewCo had received valid acceptances of the Standby Offer in respect of 108,25 million shares equating to c.58% of shares in issue. This combined with the Consortium’s and Barloworld Foundation shares equates to 81.8% of the shares in issue. Shareholders who still wish to accept the Standby Offer have until Friday, 7 November 2025 to do so. Results will be announced on 10 November 2025.

36ONE Asset Management has concluded a BEE transaction with a consortium led by MI Capital and including 36ONE staff members and youth communities represented through the Invincible Empowerment Trust. The consortium will acquire a 22% stake in the company. Financial details were not disclosed.

Dibber International Preschools has acquired the South African LittleHill Montessori group of schools, which include five campuses in Kikuyu, The Polofields, Fynbos, Thaba-Eco, and The Huntsman. The five schools will now operate under the Dibber Montessori name, continuing their strong Montessori focus while incorporating Dibber’s Nordic pedagogy, which emphasises play-based learning and holistic child development. Financial details undisclosed.

EduLife, a South African network of private schools, has acquired Arrow Academy, marking the scaling of it footprint into Gauteng. The expansion was supported by Sanari Capital’s 3S Growth Fund, under which EduLife is a portfolio company. Financial details were undisclosed.

Weekly corporate finance activity by SA exchange-listed companies

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Optasia, a fintech company in which Ethos Capital holds an indirect interest, has announced plans to list on the JSE, raising up to R6,3 billion by selling a combination of new and existing shares. Optasia’s AI-driven platform makes credit-vetting decisions by analysing various unstructured data sets. It works closely with mobile network operators, mobile wallet operators and financial institutions thereby unlocking financial opportunities for the underbanked across emerging markets. Optasia has c. 121 million monthly active users, processing over 32 million loan transactions per day with access to over 860 million mobile subscribers though its distribution partners and financial institutions.

Orion Minerals has again increased the size of its capital raise this time to A$8,6 million (R99 million) – initially the company announced a A$5 million capital raising exercise but increased this to A$7,7 million due to level of demand. The private placement now comprises the issue of c. 574 million shares at an issue price of 1,5 cents (R0.17) per share.

Visual International has launched an equity raise of up to R2 million though the issue of new ordinary shares implemented through an accelerated bookbuild process. Funds will be used to assist with the company’s working capital requirements.

Marshall Monteagle plc will launch the renounceable Rights Offer to raise up to US$10,7 million from shareholders in terms of which a total of 8,964,377 Rights Offer shares will be offered at an issue price or $1.20 per share in the ratio of one Rights Offer share for every four Marshall shares. The maximum number of shares that can be issued in terms of the Warrants is 4,482,188 and the maximum amount raised $5,3 million.

BHP has purchased 3,997,199 shares, valued at c. R11,86 billion, in terms of its Dividend Reinvestment Plan for those shareholders electing to have shares allocated to them in lieu of the final 2025 cash dividend.

Remgro has received South African Reserve Bank approval for the payment of a gross special dividend to shareholders of 200c per ordinary share.

Last week, the JSE informed Labat Africa shareholders that the company had failed to submit its annual report timeously and its shares were under threat of suspension. Labat has advised that new accountants have been appointed and that it will publish the annual financial statements for the year ended May 2025 by 15 October 2025.

This week the following companies announced the repurchase of shares:

Old Mutual is the latest company to implement a share repurchase programme. It will repurchase c.220 million ordinary shares for a total consideration of R3 billion. The repurchase will take place on the JSE only and the shares will be cancelled reverting to authorised but unissued ordinary share capital.

Over the period 30 September to 3 October 2025, eMedia repurchased 15,327,677 N ordinary shares representing 3.44% of the companies issued share capital. The shares were repurchased for an aggregate R27,77 million using cash resources.

City Lodge Hotels repurchased 42,729,300 shares over the period 10 March 2025 to 3 October 2025. The shares, which have been delisted and cancelled, were acquired at an average price of R3.99 per share for an aggregate value of R170,29 million. The general repurchase was funded from available cash resources and debt facilities.

South32 continued with its US$200 million repurchase programme announced in August 2024. The shares will be repurchased over the period 12 September 2025 to 11 September 2026. This week 784,611 shares were repurchased for an aggregate cost of A$2,23 million.

On March 6, 2025, Ninety One plc announced that it would undertake a repurchase programme of up to £30 million. The shares will be purchased on the open market and cancelled to reduce the Company’s ordinary share capital. This week the company repurchased a further 31,526 ordinary shares at an average price 204 pence for an aggregate £64,398.

The purpose of Bytes Technology’s share repurchase programme, of up to a maximum aggregate consideration of £25 million, is to reduce Bytes’ share capital. This week 489,711 shares were repurchased at an average price per share of £3.98 for an aggregate £1,95 million.

Glencore plc’s current share buy-back programme plans to acquire shares of an aggregate value of up to US$1 billion. The shares will be repurchased on the LSE, BATS, Chi-X and Aquis exchanges and is expected to be completed in February 2026. This week 7,200,000 shares were repurchased at an average price of £3.44 per share for an aggregate £24,79 million.

In May 2025, British American Tobacco plc extended its share buyback programme by a further £200 million, taking the total amount to be repurchased by 31 December 2025 to £1,1 billion. The extended programme is being funded using the net proceeds of the block trade of shares in ITC to institutional investors. This week the company repurchased a further 912,826 shares at an average price of £38.34 per share for an aggregate £35 million.

During the period 29 September to 3 October 2025, Prosus repurchased a further 1,479,279 Prosus shares for an aggregate €89,55 million and Naspers, a further 247,516 Naspers shares for a total consideration of R319,78 million.

Two companies issued profit warnings this week: Newpark REIT and Pick n Pay.

During the week five companies issued or withdrew a cautionary notice: MTN Zakhele Futhi, Vunani, Conduit Capital, Mahube Infrastructure and Labat Africa.

Who’s doing what in the African M&A and debt financing space?

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Gabonese startup, POZI, has closed a €650,000 fundraising round led by Saviu Ventures, with participation by Emsy Capital and Chazai Wamba. POZI specialises in telematics and fleet management. Using data and artificial intelligence, the platform provides managers, insurers, and institutions with predictive analytics to anticipate breakdowns and incidents, real-time performance indicators to manage their operations, and risk management solutions tailored to African realities.

Barrick Gold, a Canadian-based global mining company, has announced the sale of its interests in the Tongon gold mine and certain of its exploration properties in Côte d’lvoire to the Atlantic Group for total consideration of up to US$305 million. Owned by an Ivorian entrepreneur, Atlantic is a leading privately held multisectoral Pan-African Group with diversified interests in financial services, agriculture, and industry, and a strong footprint across 15 countries in Africa.

Inspired Evolution’s Evolution III Fund, a fund dedicated to next-generation energy transition, has committed US$20 million to Cold Solutions East Africa Holdings (CSEAHL), a temperature-controlled warehousing and logistics platform operating across Kenya, Uganda, Rwanda, and Tanzania. The investment will support the development and construction of modern cold-chain infrastructure throughout East Africa, helping to reduce post-harvest losses, strengthen food systems, enhance food security, and drive energy and resource-efficient growth in the region.

To help improve access to clean and affordable water in Sierra Leone, Zvilo Africa, a working capital lender, has partnered with So Pure to support the scale of treatment and distribution of safe drinking water across the West African country. So Pure targets low-income and middle-class households across Sierra Leone with clean water, handling every step of the supply chain: purifying the water, packaging it into half-litre sachets or large dispenser 20-litre bottles, and then distributing it to mom-and-pop kiosk shops across the Freetown region. Since 2019, the company has focused on water purification and filling up sachets sourced from a range of local packaging suppliers. An expansion phase aims to distribute 10-12 million litres of purified drinking water monthly by year-end, helping provide clean, safe and affordable drinking water to over 500,000 people.

French long-term infrastructure and impact investor, STOA, has made a US$27 million equity investment into Atlas Tower Kenya (ATK). Backed by Kalahari Capital, Atlas Tower Kenya owns and operates more than 450 telecom towers nationwide, providing critical digital infrastructure that enables mobile network operators to deliver reliable and ubiquitous connectivity. ATK has been operating in Kenya since 2019 with a blended mix of sites in urban, rural, and underserved communities.

Zambian integrated poultry producer, Hybrid, has received a debt investment from specialist impact investors, AgDevCo. The investment, a US$10 million senior debt loan, will enable Hybrid to increase its processing capacity by building a modern abattoir which will create 270 jobs and support the company’s growth.

Tagaddod, an Egyptian tech-powered renewable feedstocks platform, has closed a US$26,3 million Series A led by The Arab Energy Fund, with support from existing investors FMO, Verod-Kepple Africa Ventures and A15 Ventures. Tagaddod has developed a proprietary, tech-powered platform that collects, aggregates, and traces renewable waste-based feedstocks from thousands of suppliers, including households, restaurants, food manufacturers, and collectors across its operating markets.

Ellah Lakes an integrated agro-industrial company in Nigeria,has announced that it has entered into an agreement for the acquisition of 100% of Agro-Allied Resources & Processing from ARPN PTE, Singapore. ARPN PTE. is equally owned by Tolaram Africa PTE Ltd and Valuestar Holdings PTE. The acquired assets comprise 11,783 hectares of cultivated land (planting over 6,280 hectares of oil palm plantations and associated infrastructure), 2,093 hectares of cassava plantations land and an additional 10,393 hectares of uncultivated land. Financial terms were not disclosed.

The impact of AI on M&A transactions

Artificial intelligence (AI) is rapidly transforming our everyday lives, including merger and acquisition (M&A) transactions.

Currently, 77% of businesses use AI or plan to implement it.1 Most of these businesses believe that AI will increase their productivity, leading to higher revenue.

This trend has increased the number of businesses undergoing M&A processes that either use or have developed AI tools across various business areas. The growing use of AI necessitates bespoke considerations for M&A transactions, both in evaluating the business and conducting due diligence investigations.

When undertaking a due diligence, first consider whether and to what extent the business utilises AI, and how this AI is deployed. A strategic assessment must be undertaken to determine whether AI usage adds value to the business, and whether it will continue after the M&A transaction. Some general aspects for consideration include:

  • AI development and maintenance in businesses
  • Strict restraint of trade, confidentiality and intellectual property provisions in employment contracts for AI development and maintenance
  • Ownership of intellectual property rights in relation to strategic AI inputs and outputs
  • Costs of in-house AI updates and maintenance
  • Consideration of off-the-shelf AI solutions for cost-effectiveness over bespoke solutions
  • Quality of training data which affects the AI system’s value
  • The difficulty with assessing the value of the AI system during M&A transactions

Almost every AI model processes personal information, requiring compliance with data protection laws during M&A processes. These laws prescribe strict conditions for processing personal information, and often limit automated processing. AI models’ lack of transparency makes it nearly impossible to comply with data subject requests for deletion or correction of processed personal information. M&A transactions may identify this as a risk, potentially decreasing business value or resulting in warranties and/or indemnities against potential sanctions from data protection non-compliance.

As demonstrated above, AI can add immense value to businesses, but it also introduces risks – many unknown – associated with its use. Businesses must balance AI’s added value against these risks. This balance makes it extremely difficult to accurately value businesses that have developed bespoke AI, or which rely heavily on AI systems.

Standardised risk-based approach
Foreign jurisdictions have developed AI risk management frameworks to manage AI-associated risks. For example, the US Department of Commerce classifies generative AI risks into the following categories: technical/model risks (risks of malfunction), human misuse (malicious use), and ecosystem/societal risks (systemic risks).2 Additionally, the European Union’s high-level expert group on AI has developed assessment tools, including ethics guidelines for trustworthy AI, policy and investment recommendations, assessment lists, and sectoral considerations.3 This development raises questions about whether due diligence investigations should apply a standardised approach when assessing AI systems. Evaluations aligned with these frameworks could provide in-depth and uniform AI system assessments. However, these remain recommendations, and many businesses are likely to avoid applying these frameworks due to their onerous obligations.

Contractual risks
Most contracts reviewed during a M&A due diligence predate widespread AI adoption and, therefore, inadequately address AI-related considerations. This gap becomes particularly critical when examining agreements with key business partners, including suppliers and customers, where AI usage creates unforeseen legal and commercial implications. Since AI systems generate novel outputs and creative works, contracts must clearly delineate intellectual property ownership rights in any content, data or innovations produced by the AI systems.

Cybersecurity risks
Integrating AI technologies into business operations introduces substantial cybersecurity vulnerabilities requiring careful evaluation during M&A processes. These elevated security risks necessitate comprehensive incident management frameworks and robust response protocols to address potential cybersecurity incidents. AI systems significantly alter a target company’s risk profile, often compelling buyers to seek additional contractual protections through specialised indemnities and/or warranties designed to mitigate emerging technological threats. This creates challenges for sellers, as businesses now face exponentially higher probabilities of cyber incidents. The prevalence of cyber incidents makes sellers reluctant to accept expansive liability provisions that could materially impact M&A transactions.

Businesses can use AI at nearly every stage of the M&A transaction, including:

  • Target identification and screening
  • Due diligence investigations
  • Report editing
  • Transaction document drafting
  • Post-merger integration monitoring

AI’s ability to process large volumes of data quickly makes it ideal for due diligence processes. Legal-specific AI can review multiple documents simultaneously and provide outputs in user-defined categories.

But while AI expedites due diligence processes, it can also hallucinate outputs. AI hallucination refers to the phenomenon where AI systems, particularly large language models, generate outputs that are incorrect, nonsensical, or lack factual basis, while presenting them as accurate.

The consequences of hallucinations in due diligence processes, where AI fails to identify risks in M&A transactions, could prove ruinous. Thus, dedicated human oversight must ensure factually accurate AI outputs. To mitigate this risk, practitioners can adopt a sampling approach, manually reviewing a sample of AI-reviewed agreements and comparing results to AI outputs. These samples should come from different document categories of varying complexities and importance.

M&A practitioners must also consider potential confidentiality breaches resulting from AI tool use. When uploading confidential M&A transaction documents to AI tools, this information generally becomes available to AI service providers, who may store it on their servers or use it to train their models. This creates significant risks, as sensitive commercial information, financial data, strategic plans, and proprietary business details could be inadvertently disclosed to third parties or accessed by unauthorised persons. M&A transactions require strict information security protocols due to their confidential nature, yet AI systems’ ability to process large data volumes quickly makes them attractive despite these confidentiality risks. Organisations must carefully evaluate AI providers’ data handling practices, security measures and privacy policies before uploading sensitive M&A documentation to AI systems.

AI integration into business operations fundamentally transforms the M&A landscape in two critical ways. First, the proliferation of AI-enabled businesses creates new complexities in transaction evaluation and execution that require specialised expertise and risk assessment frameworks. Second, AI tools revolutionise how businesses conduct M&A processes, offering unprecedented efficiency gains while introducing novel risks requiring careful management.

Moving forward, successful M&A practitioners must master both the evaluation of AI as a business asset, and the strategic deployment of AI as a transaction tool. This dual competency, combined with robust risk management frameworks and stakeholder transparency, will prove essential for navigating the AI-transformed M&A environment.

1 AI in Business Statistics 2025 [Worldwide Data] by T Benson accessed at https://aistatistics.ai/business/ (on 8 July 2025).
2 National Institute of Standards Technology, Artificial Intelligence Risk Management Framework: Generative Artificial Intelligence Profile accessed at https://nvlpubs.nist.gov/nistpubs/ai/NIST.AI.600-1.pdf on 8 July 2025.
3 European Union accessed at https://digital-strategy.ec.europa.eu/en/policies/expert-group-ai on 8 July 2025.

Tayyibah Suliman is a Director and Izabella Balkovic an Associate in Corporate and Commercial | Cliffe Dekker Hofmeyr

This article first appeared in DealMakers, SA’s quarterly M&A publication.

African private capital investment in renewable energy and infrastructure projects

Private capital investors in Africa are successfully navigating a turbulent investment environment – shaped by global economic challenges and rapidly evolving regulations – and in the process, seizing exciting opportunities in the continent’s energy and infrastructure space.

According to a recent AVCA report, Understanding the Context – Africa’s Infrastructure Financing Gap (Report), Africa receives only 5% of global infrastructure investment, despite hosting 18% of the world’s population.

The report notes that between 2012 and 2023, private capital investors demonstrated a growing confidence in African infrastructure, deploying US$47,3 billion across 847 reported deals, and establishing new models for sustainable development across the continent.

The sector leading the way is Energy, which has attracted significant private sector investment to date, particularly in South Africa, with open access energy regimes evolving across the continent. The aim of such regimes is to open up private investment opportunities, increase grid reliability, and offer energy consumers greater value and more choice.

Other sectors necessary for economic growth, and in which there has historically been underinvestment, such as transport and logistics, and water infrastructure, are also beginning to attract private sector solutions to encourage the pace of development.

South Africa stands out for the rapid growth in private sector involvement in the energy space since the introduction of the Renewable Energy Independent Power Producer Programme in 2012. Growing investor confidence, market deregulation and a demand that exceeds available supply have led to the emergence of a competitive private power and trading market which has reshaped the way investors and heavy industry users participate in these sectors.

The South African government’s commitment to private sector participation and the liberalisation of the energy market has unlocked substantial foreign direct investment in the renewable energy sector. The UN Conference on Trade and Development noted in 2024 that South Africa’s renewable energy sector attracted US$16 billion in investments between 2020 and 2023 alone.

Over and above the rapidly growing bilateral power market – which was unlocked in recent years through the changes in licensing legislation – the Draft Market Code (Code), issued by the National Transmission Company South Africa (a subsidiary of Eskom) in April 2024, will assist in establishing a transparent, non-discriminatory trading platform based on a multi-market structure under the Electricity Regulation Amendment Act, which became effective in January 2025. The target commencement date of the Code is April 2026, with an open and competitive electricity market expected to be operational by 2031.

The increasing integration of renewable energy into the grid has led to substantial constraints, creating further opportunities for private sector involvement in electricity transmission. The recently announced invitation by the South African government – seeking private sector investment in electricity infrastructure – is expected to result in further private sector participation at the same time as reforms are being introduced.

Across Africa, governments are following suit and launching initiatives to harness private sector participation in the energy sector. This has resulted in private sector-driven, business-to-business power solutions that assist businesses to meet their decarbonisation goals and ensure a stable energy supply.

In Kenya, the country’s National Energy Policy 2025-2034, published in February 2025, focuses on developing the country’s ability to produce sustainable energy, and on improving energy access, affordability and security. A big part of this plan is the implementation of an open energy regime.

The Energy (Electricity Market, Bulk Supply and Open Access) Regulations 2024 were published last year to facilitate the opening of the electricity market, and to enable private sector investors to participate in the generation, transmission and distribution of electricity.

The emergence of private transmission opportunities has resulted in the first transaction of its kind on the continent, a public-private partnership involving the development of two power transmission lines: the 400 kV Loosuk-Lessos line and the 220 kV Kisumu-Musaga line.

Zambia also recently adopted an open access regime, which enables IPPs and large power consumers to engage in electricity trading by connecting to and utilising the electricity transmission and distribution networks, irrespective of the network’s ownership or operation. This new regime is anchored by the Electricity Act of 2019 and the Electricity (Open Access) Regulations 2024.

Historic underinvestment in the maintenance of South Africa’s ports and rail has led to increased use of road transport for bulk logistics, which in turn has led to increased transportation costs and roads that are buckling under the strain. According to reports, as of 2024, these challenges are estimated to cost the South African economy approximately R1 billion per day in lost economic activity.

The South African government is turning to the private sector to fund the infrastructure development, which is desperately needed.

For example, South Africa’s state-owned freight logistics company, Transnet’s PSP programme represents a significant opportunity for private participation in the country’s rail, port and logistics sectors. Opportunities for investment include those in port modernisation and efficiency. For example, the Durban Port Master Plan aims to attract R100 billion in private investments over the next ten years. Further opportunities exist in the rail network and rolling stock, large container development, and supply chain management.

Private sector participation is also being sought for the development of logistics corridors to enhance regional connectivity across Africa.

In both Kenya and Zambia, private participation in the public sectors is being pursued through legislative frameworks such as the Public

Private Partnerships (PPP) Act 2021, in Kenya and the Public-Private Partnership Act, 2023 in Zambia, to progress and develop complex infrastructure projects by addressing the enforcement of legal compliance and swifter project implementation.

There are growing numbers of infrastructure funds that are playing a significant role in driving the growth and development of infrastructure across Africa. These funds include African Infrastructure Investment Managers (AIIM), Helios Investment Partners, and Afri Fund Capital.

In South Africa, government-procured water projects, as well as private sector solutions to water infrastructure needs, are emerging. At the forefront are new bulk water projects, including the construction of infrastructure such as pipelines, and privately procured water treatment facilities. The potential for private investment in this space is significant, offering investors the chance to contribute to the development and management of critical infrastructure.

Across Africa, governments are implementing measures to facilitate private investment in the water sector through the PPPs model. For example, Kenya recently introduced the Water (Amendment) Bill, 2023, and Zambia published the National Water Policy in 2024, with both outlining plans to harness private investment to finance water sector projects.

Amid challenging market conditions, private investors are stepping up to bridge critical funding gaps, channelling much-needed capital into initiatives that fuel growth and deliver significant social and economic benefits for the continent.

Angela Simpson and Alexandra Clüver are Partners | Bowmans

This article first appeared in Catalyst, DealMakers’ quarterly private equity publication.

Ghost Bites (Alphamin | Anglo American | Ethos Capital – Optasia | FirstRand)

A much better quarter at Alphamin (JSE: APH)

Key metrics are up and so is guidance for the full year

Alphamin has released numbers for the third quarter of 2025, reflecting contained tin production that was 26% higher than the previous quarter. Best of all, guidance for the full year is up from 17,500 tonnes to between 18,000 and 18,500 tonnes.

Contained tin sales came in 12% higher than the prior period. The average tin price achieved was up 4% and all-in sustaining costs (AISC) per tonne was 3% lower. When you consider all these metrics, it won’t surprise you that EBITDA was up by a juicy 28% vs. the preceding quarter.

These are quarter-on-quarter numbers, not year-on-year. Before you get too excited though, the important context is that there were security issues early in the preceding quarter that made it a soft base for comparison. The security risks are never zero when you’re operating in regions like the DRC. The company has noted a recent increase in security events on a key border line that is about 200kms away from the mine. At this stage there are no disruptions to operations, but the risk is clearly there.

On the exploration side, the company has continued with drilling at Mpama North and Mpama South to increase the resource base and life of mine. They also plan to discover the next tin deposit near the Bisie mine, as well as any remote tin deposits on the land package. Those are long-term plans, with the focus right now on the drilling results at Mpama North and Mpama South.


Anglo American’s Teck Resources era isn’t off to a great start (JSE: AGL)

Teck has cut production guidance at two of its copper assets

The trouble with large corporate deals is that when you assure the market that a particular mega-merger is a great idea (despite a zillion historical examples of dicey shareholder value outcomes in these types of deals), you really can’t afford for any bad news to come through. Anglo American’s reputation for deal timing just won’t leave them alone, with now-demerged Valterra Platinum (JSE: VAL) rallying like crazy and future dance partner Teck Resources releasing a tough announcement.

If you would like to read the detailed Teck announcement, you’ll find it here. The TL;DR is that due to project challenges at Quebrada Blanca, they now have an expectation of increased downtime in both 2025 and 2026. Mining projects are incredibly complicated and dangerous things, so it’s critical to do them properly and make the tough decisions when required. But this doesn’t mean that shareholders are happy to see this stuff, particularly Anglo American shareholders who need to believe that the Teck merger is the right decision for the group.

Guidance for 2025 copper production at Teck has been cut by over 11% if you use the midpoint of guidance. That’s particularly frustrating for the company at a time when copper prices are strong. Teck’s guidance for zinc is unchanged at least.

Unfortunately, as is always the case when production comes in lower than expected, the unit cost of the commodity has increased significantly. They expect a 20% increase in the net cash costs per pound at problematic Quebrada Blanca for 2025.

Of course, if this is just a temporary wobbly, then it isn’t the end of the world. The problem is that if you read Teck’s 2026 – 2028 outlook, the issues just get worse as time goes on. The mid-point of copper production guidance at Quebrada Blanca for 2027 and 2028 has dropped by approximately 13% and 17% respectively. At Highland Valley Copper, they expect some pressure on 2026 production and then a significant improvement in 2027 ahead of prior guidance. At Red Dog zinc, guidance for 2027 and 2028 is below previous guidance.

You get the idea. These numbers are fluid and will be updated as time goes on, but the theme is clearly one of a disappointing production outlook vs. previous guidance. Anglo American’s response is that their independent due diligence led to an expectation that is “broadly consistent” with Teck’s latest numbers. This suggests that Anglo did a better job of understanding these assets through the due diligence process than Teck management did by living with them every day. You’ll forgive my skepticism here.

Investors tend to be nervous of large deals as a default setting. Deals that involve a deterioration in expectations at the target asset are even scarier.


Exciting news for Ethos Capital and the market: Optasia intends to float (JSE: EPE)

New listings are always fun

When a company announces an intention to float, this has nothing to do with their December holiday plans. Instead, it means that they will be coming to market through a listing process, with Optasia (a name you’ll recognise as being the most important investment in the Ethos Capital stable) looking to do exactly that on the JSE.

New listings are the lifeblood of the market, so they always lead to excitement, particularly when it’s a proper listing with a company that has put in the work. Check out the Optasia IPO website and you’ll see what I mean.

What does Optasia do? Well, you have to look through a lot of buzzwords (including AI) to arrive at the understanding that this fintech focuses on providing access to credit and airtime in underbanked markets. In other words, this is a classic African fintech story, although they have a presence in Asia, the Middle East and even some parts of Europe!

Optasia has been around since 2012 and has 350 employees across 15 offices, so they are a scale player. There are 121 million monthly active customers. Revenue for the first half of 2025 was up more than 90% year-on-year, so this is a beautiful example of the J-curve in action. They are very profitable at adjusted EBITDA level with a margin of 46%, although the adjustments always need to be treated with caution. The company is certainly profitable though, with a substantial jump in net profit from $7.6 million to $23.3 million in the six months to June 2025.

The width of the moat comes from the extent to which Optasia has managed to build an ecosystem with multiple touchpoints. It’s a complex marketplace, with financial institutions on one side and distribution partners in the middle, all before reaching consumers on the other side who become more familiar with the offering over time. That’s a very hard thing to build, especially across multiple geographies.

As for the listing, they are looking to raise R1.3 billion, so this is decently sized raise in the local market. It looks like it will be done through institutional investors only (rather than an offer to the public). Certain existing shareholders are also going to sell R5 billion in shares to institutional investors.

As for Ethos Capital, they haven’t specifically said whether they are one of the selling shareholders. Given their stated approach of returning value to investors, it seems like that they intend to either fully or at least partially exit the Optasia stake.


FirstRand’s battle in the UK motor finance industry isn’t over (JSE: FSR)

The company is unhappy with the proposed redress scheme

FirstRand (along with other financial services companies operating in the UK vehicle finance market) is dealing with a difficult regulatory situation related to commission practices around vehicle finance. It looked as though the worst of the uncertainty was behind them after the UK Supreme Court ruling that gave legal clarity to the situation, but that joy was short-lived.

The UK’s Financial Conduct Authority (FCA) has proposed a redress scheme that FirstRand describes as being “beyond expectations of what can be considered proportionate or reasonable” – and that’s not good for FirstRand shareholders. They haven’t indicated what the amounts would be at this stage, but FirstRand wouldn’t have released an announcement with that wording if they felt that their existing provision was adequate to cover it.

As part of pushing back against this, they’ve flagged their disagreement with the lack of application of the recent UK Supreme Court ruling to the redress scheme.

There will now be a period of six weeks of consultation with the UK FCA. FirstRand has undertaken to keep the market informed of any developments that might happen before the end of that period as they consult with the regulator.


Nibbles:

  • Director dealings:
    • A director of Woolworths (JSE: WHL) sold shares worth R23.2 million and a director of a major subsidiary sold shares worth R7.2 million. With the share price down 16% year-to-date, that’s not exactly a bullish signal about the chances of a near-term recovery.
    • A non-executive director of Mondi (JSE: MNP) bought around R508k worth of shares. The price was R203.30, so the purchase must have been after the initial drop in response to earnings. The price has subsequently kept sliding, now at R195.
  • City Lodge Hotels (JSE: CLH) announced that they’ve repurchased R170 million worth of shares since March 2025 at an average price of below R4.00. The share price is currently R4.20. This represents 7.14% of shares that were in issue as at the date of the AGM last year, so this should be a very helpful boost to HEPS going forwards.
  • Wesizwe Platinum (JSE: WEZ) announced that the ramp-up of underground operations is ahead of schedule. They are negotiating key development contracts and will keep investors informed of further milestones.
  • Kibo Energy (JSE: KBO) is suddenly back on our screens, with news of a potential acquisition of a decarbonisation and renewable energy company called Carbon Resilience. I’ve gotta tell you, carbon resilience is the kind of resilience that investors needed to get to this point, as Kibo has been a story of one corporate disappointment after the next. Perhaps the new chapter will be different, with Kibo looking to acquire the asset for $135 million, settled through the issuance of shares after a planned 1600:1 share consolidation. Just to add to the dilution of value of current shareholders, the company has also issued a convertible note to an institutional investors to provide funding of up to £150k. As part of lifting the suspension of the listing on AIM, the company needs to get the accounts for the year ended December 2024 out the door.
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