Hostile takeovers are as close to Hollywood-worthy action and drama as M&A gets. They usually involve a bidder seeking control over a listed company without the support of the target’s board, with a recent example being the Netflix-Paramount-Warner Bros. matter. In this article, we consider whether a similar high-stakes transaction could occur in South Africa.
Legally possible, but far from easy
South African law does not prohibit hostile takeovers and they are theoretically possible. However, there are limited viable mechanisms to effect a hostile takeover, particularly one where 100% of the shares are successfully acquired.
A scheme of arrangement (the preferred route in friendly arrangements) may only be proposed to the shareholders by the target board, effectively taking this option off the table for the hostile bidder. A hostile bidder is therefore left with one principal tool: a general offer made directly to shareholders. While this allows the hostile bidder to bypass the target board, success remains heavily dependent on the actions of the board, alongside other uncertainties.
The board’s defences
Once a firm offer is made, the target board has a duty to adopt a passive stance and allow shareholders to consider the offer on its merits. This prevents the board from outright frustrating the offer. However, it is not a case of absolute passivity. The board retains several lawful defensive measures, including: •encouraging opposition of the offer; •soliciting a more welcome, competing offer; •providing critical commentary on the merits of the offer, including price; and •ensuring strict compliance with the letter of the law and all regulatory requirements.
These measures can stifle even the most well-planned of hostile bids.
Timing mismatches
A significant challenge faced by a hostile bidder is the misalignment between the competition law approval process and the takeover timetable.
According to the Takeover Regulations, a hostile bidder must declare an offer unconditional as to acceptances within 45 business days of the offer’s opening date. In other words, it must declare that it has received sufficient acceptances for it to proceed. However, if a general offer does not become wholly unconditional within 65 business days of the opening date, shareholders are entitled to withdraw their acceptances. In contrast, merger approvals under competition law often take far longer than this. The full process, often including frequent extensions, can take months.
This mismatch creates fundamental transaction uncertainty. Because shareholders can withdraw acceptances while awaiting competition approval, a hostile bidder cannot gauge its offer’s success before the deal goes fully unconditional.
In a hostile environment, where the target board may create additional hurdles for the competition process, including being lawfully obstructive in the provision of necessary information, delays and uncertainty persist.
Impediments on garnering support
Another key constraint lies in the strict confidentiality regime governing takeover activity. Before a firm intention announcement is made, negotiations between the bidder and the target board remain confidential. Even thereafter, the bidder’s ability to engage directly with shareholders is limited. While guidelines permit approach to a limited number of major shareholders under controlled conditions, broader engagement is restricted and subject to non-disclosure requirements and market abuse rules.
This creates a practical challenge, as a hostile bidder has limited opportunity to build shareholder support or publicly advocate for the transaction. Institutional investors may be reluctant to engage early, as doing so could restrict their trading in the target’s shares.
Added complexity in share-based offers
A hostile bidder may offer shares in itself as part of the purchase consideration, but such transactions may trigger additional corporate and regulatory requirements, including shareholder approvals, stock exchange disclosures and, in some cases, the preparation of a prospectus. These requirements can introduce further delays and increase execution risk, particularly where the target board limits access to target company information.
A cash offer is accordingly easier in the hostile context, but requires being able to raise sufficient capital, a challenging requirement in current economic conditions.
The challenge of achieving 100%
Often, the ultimate objective of a takeover is acquiring 100% of the shares – a difficult outcome to achieve if a scheme of arrangement is unavailable.
A bidder needs to acquire at least 90% of the voting rights (excluding those it may already hold) to initiate a “squeeze-out” of minority shareholders and acquire full ownership. Larger shareholders often delay accepting an offer without a certain prospect of success, making this threshold objectively challenging in a hostile environment. As mentioned, acceptances may also be withdrawn if the regulatory approval process drags on.
If a bidder falls short of the squeeze-out threshold, it will not achieve its full ownership goal. While it may consider acquiring a lesser number and then trying again, it is tough to achieve a squeeze-out on the second bite. The hostile bidder’s own shares in the target are excluded from the calculation of the squeeze-out threshold, making it difficult to obtain sufficient take up from the remaining shareholders to hit the 90% threshold.
If it does not acquire 100% of the shares, the bidder must deal with having minority co-shareholders, and faces practical difficulties and inconveniences in fully integrating with the target: often an unappealing prospect.
Will we ever see a hostile takeover in South Africa?
It is easy to see why hostile takeovers remain rare and seldomly successful in South Africa. The regulatory framework places significant practical constraints on unsolicited bidders; constraints which become near impossible to overcome with a target board that actively opposes the transaction at every procedural stage. Should the regulatory toil be overcome, the hostile bidder also holds no certainty in achieving the desired outcome of its bid.
While possible, hostile takeovers are far from easy. Any bidder may be better served by saving the hostilities and focusing on getting the target board on board.
Ian Hayes is Practice Head, Yaniv Kleitman, is a Director and Keagan Hyslop is an Associate | Corporate & Commercial at Cliffe Dekker Hofmeyr
This article first appeared in DealMakers, SA’s quarterly M&A publication.
I’ve been meaning to write this for a while. I started a few times and stopped, because I didn’t want to sound needy.
But here goes…
I like you – I always have. Everyone in my world does, really. We talk about you constantly, we dress up our best businesses hoping you’ll notice, we rehearse what we’ll say if you call. You’re clever, you’re patient, and you’ve got the kind of capital that turns a good company into a great one.
So, this isn’t a break-up letter. If anything, it’s the opposite.
After enough years walking founders across the room to you, a girl starts to notice things. The way you say one thing on the buy side and something quite different on the sell. The way you fall for her hardest when somebody else is watching. The way your patience keeps a calendar in its back pocket.
This is less a letter than a diary. The kind you write at midnight about someone you adore but cannot quite figure out. And like all good diary entries, it isn’t meant to be read by anyone. Except, well, here we are. Because lately, some of the things you tell me don’t quite add up:
1. You keep saying you don’t like a crowd “Please,” you tell me, “don’t bring me anything that’s in process.” You want it quiet, off-market, no other suitors in the room. And I get it, nobody wants to feel like one of many.
But here’s the thing: you only really decide you want her once you can see that somebody else does too. You want her to be wanted; you just don’t want to watch it happen. You want the certainty that competitive tension creates and the price discipline it removes, both at once. And when it’s your turn to sell, you’ll run the tightest, most beautifully organised process this market has ever seen – funny, that.
2. There’s this thing about her history “I don’t want anything that’s already been owned by one of the other funds,” you say. You want her fresh, untouched and, ideally, cheap. But we both know that one day, you’ll be the seller, standing there hoping the next fund looks at everything she’s been through – the systems you built, the governance you installed, the earnings you cleaned up – and decides she’s worth more for it, not less.
You want to buy the promise and sell the polish. It’s hard to be a discount buyer of the very thing you plan to charge a premium for.
3. Now I say this gently: you tell two different stories about the same girl When you’re deciding whether to commit, you’re all caution. The market’s uncertain, the timing’s tricky, the multiple has to reflect the risk. Very sensible, but the moment you picture the exit, suddenly she’s remarkable, the market’s deep, everyone can see how special she is, and the multiple expands to match. Same company, same fundamentals, but two entirely different worldviews, and which one you reach for seems to depend on whether you’re the one paying or the one being paid.
4. And there’s a thing about time You tell me you’re a long-term partner. Five years, seven years, a full business cycle. But the moment a portfolio company misses its quarterly EBITDA by a whisker, the calls get shorter, the reporting packs get thicker, and the board meeting has a very different energy. Long-term, yes, but only if the short-term keeps cooperating.
I don’t hold it against you; the LP clock is real. I’m just saying, don’t be surprised when the founder who ran the place for twenty-six years on instinct and relationships finds the quarterly cadence a little… suffocating. They built something real. They just weren’t expecting a new performance review every ninety days.
I’m not writing to catch you out.
None of this makes you wrong to want a good deal, and you’re better at it than almost anyone. I’d just love it if the game were a little more even.
And if I’m being honest with myself, which is the whole point of a diary, I keep setting you up on these introductions because the best version of you is genuinely extraordinary. The fund that comes in with real operational support. That brings the governance without the grief. That gives the founder a seat at the table, not just a cheque and a handshake. I’ve seen it. It’s rare, but I’ve seen it, and that version of you is worth writing letters for.
The people I really care about aren’t the funds, or even the advisers. They’re the founders, the families who spent thirty years building something real and asked me to introduce them to you. They deserve to feel chosen for what they are, not quietly picked up on a slow afternoon and dressed up for someone else later.
They deserve an investor who reads the room, not just the model. Someone who understands that behind the number on page four of the IM is a person who lay awake last night wondering if this was the right decision.
So this is me, still hopeful, asking the same thing I always do. Let’s talk… properly. Same table, cards up, both sides of the bread buttered fairly. I’ve long thought we’d be good together.
Yours (as ever), An adviser who keeps setting you up on dates
Kosie Kritzinger is a Director, Corporate Advisory | Baker Tilly Greenwoods
This article first appeared in Catalyst, DealMakers’ quarterly private equity publication.
CA&S DELIVERS RESILIENT INTERIM RESULTS AS ACQUISITIONS DRIVE EXPANSION ACROSS SOUTHERN AND EAST AFRICA
“This was a resilient set of results in a period where consumer spending remained under pressure and currency movements added complexity, particularly in Botswana. Disciplined execution and a continued focus on operational efficiencies helped us navigate these conditions and continue to execute on behalf of clients and customers.”
Duncan Lewis – Chief Executive
FINANCIAL HIGHLIGHTS
BROADENING THE PLATFORM
As explained by Duncan Lewis, “We also made further progress broadening our platform. The acquisitions concluded during and after the period strengthen our capability in private- and confined-label distribution, e-commerce and digital offering, and position us to deepen route density and grow market share as we move into our stronger trading period.”
Through a series of acquisitions, CA&S acquired a 71.1% interest in South African distributor Sunpac, effective 1 June 2026. Sunpac is a route-to-market partner with specialist capability in the growing private- and confined-label category. CA&S also acquired a controlling stake in Pantry Club, an e-commerce business.
Subsequent to the reporting date, the group increased its existing shareholding in associates Roots Sales and Tradco Group, its East Africa business, to 64% and 55% respectively. It also acquired a minority interest in TDMC, a digital-marketing specialist.
OUTLOOK
“We expect a stronger second half than the first, in line with the group’s normal seasonal trading pattern and supported by the growing contribution of recent acquisitions made during and after the reporting period. The group intends to keep investing through the cycle, positioning the business to emerge stronger as trading conditions recover. In the near term, our priority is to integrate recent investments and realise their value, while deepening route density and growing market share,” concluded Duncan Lewis.
The group will pursue disciplined, client-driven expansion in East Africa and continue to build the digital, data and category capabilities that increasingly set its route-to-market offering apart. Active management of margin, working capital and cash, together with a strong balance sheet, gives the group the capacity to fund future growth from its own resources.
While parts of the group’s footprint remain exposed to currency movements and subdued consumer spending, the breadth of its markets and categories, its long-standing client relationships and its depth of local execution position it well to navigate the balance of the year with confidence and to continue compounding value for shareholders over the longer term.
No interim dividend has been declared for the six months ended 30 June 2026 (H1 2025: nil), in keeping with the company’s policy of declaring dividends once a year, after its financial year-end.
In this piece, I’ll be dealing with the latest results from BHP (JSE: BHG) – the largest mining company in the world with a market cap of R3.7 trillion – and DRDGOLD (JSE: DRD), a gold tailings company with a market cap of just R39 billion. Yes, that’s just over 1% the size of BHP. When we say mining giants, we mean it.
A sector of many different strategies
The mining sector is the bedrock of the South African economy. But as we know, it’s been through some tough times over the years. Famous local mining houses have responded by allocating capital to other countries in search of growth. This has had downstream implications for the country and the “deindustrialisation” trend that everyone is justifiably concerned about.
In some cases, there are mining giants that no longer have any exposure to South African operations at all. They are listed on the JSE purely to access the deep pools of mining capital that provide liquidity in the stock.
Conversely, there are also companies that are focused only on South Africa – and in some cases, only on one commodity as well! This is the riskiest way to play the mining sector, as these companies face the biggest impact from commodity price movements or regional risk changes. These things are often far beyond the control of management.
But is diversification always the answer?
Not necessarily, no. Investors can diversify their own portfolios by owning a basket of mining stocks that deliver exposure to different commodities and geographies, should they so desire.
This is the age-old debate of course: should executives diversify exposure on behalf of shareholders, or should this be left to investors to do?
One of the arguments that is rarely considered is the importance of stakeholder vs. shareholder management. It’s easy enough for shareholders to diversify, but people building their careers in an organisation can’t spend their mornings on copper and their afternoons on gold unless their employer has chosen to go this route.
Issues like attracting and retaining talent sometimes push CEOs in a direction that doesn’t always make sense to shareholders.
Mining sector capital cycles are tough, as mining companies must strike a balance between production increases and near-term returns to shareholders. It often feels like there needs to be a healthy tug-of-war between management teams and shareholders for the excess cash in the business. Usually, it’s best if both sides feel like they are winning.
With that out of the way, let’s dig into the latest numbers.
BHP: where more than half of EBITDA is now from copper
Right here on the JSE, you can invest in the largest mining group in the world without your money needing to be exchanged into a different currency. Assuming you had done so 5 years ago, you would’ve enjoyed a share price return of 65% and a total return of 134%. You must never ignore the dividend yield in these mining companies, as in this case it contributed as much as the capital gain in the share price!
The decision to be involved in BHP would require you to be bullish on copper. The company calls this the “engine that is driving BHP’s growth”, contributing more than half of underlying EBITDA for the first time. It also generated enough free cash flow in the latest period to be self-funding.
The 48% increase in underlying EBITDA from copper was driven by a 35% jump in the average realised price, driven by themes like electrification and data centres. Although expected global demand growth of 2.8% in 2026 is below original expectations due to the global disruption of the Iran conflict, it’s still ahead of the 2.1% growth in 2025. When demand is good, prices tend to go up.
And thanks to that spectacular jump in prices, BHP can mask a 3% decline in copper production. It’s certainly a lot sexier to point to a metric like Return on Capital Employed (ROCE) of 26%, up from 17%.
These returns don’t emerge from the ground on their own. It takes a lot of capital to diversify like this. Copper capex was $4.7 billion in FY26, up from $4.5 billion in FY25 and expected to grow to $5.4 billion in FY27. The capex plans are designed to deliver copper production CAGR of 3% to 4% between FY27 and FY35.
What about the rest of BHP?
BHP’s ongoing ability to grow in copper is made possible by the excellent underlying iron ore business. This has been the anchor of the group, with BHP focused on markets that are very far away from Transnet and all the South African infrastructure headaches faced by the likes of Kumba Iron Ore (JSE: KIO).
They have to beat off some terrifying wildlife on the other side of the pond, but Western Australia Iron Ore (WAIO) is the lowest cost major iron ore producer in the world. This operation is core to BHP’s business, with record production and shipments achieved in FY26.
Admittedly, the new record was achieved with growth of just 1% in production in FY26. Average realised prices climbed 3%, driven by Chinese demand and higher energy costs due to the Middle East conflict. With cost pressures in the mining process, underlying EBITDA was up by just 1%.
ROCE slipped from 43% to 41%, although you’ll notice that this is still miles above copper. It helps to have infrastructure that has been in place for decades.
Still, the cash cow that is iron ore is a cash cow does come with a capex bill. They allocated $3.2 billion in capex in FY26, up from $2.7 billion in FY25 and expected to dip to $3.1 billion in FY27.
And here are two interesting facts about emerging markets from the iron ore section for you. The first is that BHP expects China’s real steel production to plateau for the rest of the decade, with scrap playing an increasingly important role. The second is that India is expected to transition from a net exporter of iron ore to a net importer, as domestic iron ore supply is lagging behind steel capacity growth.
Let’s not talk about South African demand for steel. It’s too depressing.
Shhh… quick, over here… BHP is also still producing coal
BHP downplays coal in the earnings narrative, perhaps because they are scared of getting shouted at by environmentalists who believe that the world should run on sunshine, wind and vibes, even though it can’t.
I’m a big supporter of renewable energy, but I also live in the real world. I recognise that since man invented fire, we’ve stood a better chance of surviving out there. Coal is good at making fires and generating energy, whereas Mother Nature tends to have a mind of her own. In the same way that BHP has diversified its operations, we should have diversified sources of energy.
There’s also another good reason why coal gets minimal attention: it’s only 3% of group EBITDA.
In the latest period, steelmaking coal saw production increase by 3% and average prices by 8%. Energy coal production was up 9%, but average prices fell by 3%. Underlying EBITDA was up 45% in this business, with an EBITDA margin of 15%.
That margin is much lower than you’ll find in copper or iron ore, as evidenced by the group margin sitting 6 percentage points higher at 59% – the highest level in four years! It’s copper growth that took them there, with coal having a negative mix effect on margin.
Coal capex was just $0.4 billion, down from $0.5 billion in FY25 and also lower than the expected $0.4 billion in FY27.
A final note on BHP
With net operating cash flow up by 17% and capex increasing by only 5%, BHP just unlocked free cash flow growth of 83%. It’s a fantastic set of numbers.
The focus on copper and iron ore as the high margin plays is working. And to make sure that the BHP of tomorrow also has a good story to tell, they are allocating capital to new areas like the Jansen Potash project (capex of $1.8 billion in FY26).
BHP has the balance sheet to take these risks, with net debt of $8.7 billion sitting below the target range of between $10 billion and $20 billion. The net debt to underlying EBITDA ratio is just 0.3x.
DRDGOLD: capex focused on existing operations
As you’ve hopefully realised, BHP’s capex drive is about broadening their group. At DRDGOLD, they are focused on making the most of their existing operations, although there’s a one-liner right at the end of the earnings presentation that needs to be considered carefully. I’ll cover that right at the end.
If you have a look at the presentations section of the DRDGOLD website, you’ll find one from mid-July called Vision 2028 Capital Projects Update. This very official-sounding deck was designed for one thing and one thing only: to explain to shareholders where their capital is being invested.
It was a solid presentation, with an honest appraisal of the difficult situation that the company found itself in during 2023. In their words:
“Ergo was running out of tailings capacity and margin. FWGR was running out of room to grow. Vision 2028 fixes both.”
There we have it. Throw money at your problems and they tend to go away. It works better in mining that it does in retail, that much I can tell you.
Practically, this means that a number of projects at DRDGOLD are in progress. Here’s how R10 billion is being allocated:
In the latest results, there’s an update to the numbers. The Withok TSF at Ergo has been increased to a R3 billion spend. The other numbers are all the same. What’s a casual R500 million between friends?
Also, though it may be called Vision 2028, that particular project is only expected to be completed in 2029. Perhaps Vision 2029 didn’t sound quite as appealing.
Jokes aside, as DRDGOLD doesn’t come close to the scale of the mining giants out there, they have to be more cautious with how they allocate their capital.
What do the latest numbers look like?
The year ended June 2026 is highlighted by DRDGOLD as being the 19th consecutive year of dividends. Not dividends growth, mind you – simply the existence of dividends. The financial media loves juicy taglines like these, so DRDGOLD is only too happy to provide them.
I think the far more important point is that revenue has jumped by 42%. That hardly sounds like a business that was at a production crossroads, but a deeper look quickly reveals that the gold price increase of 40% over the past year is the driver here.
Therein lies the real story: tonnage throughput actually fell by 2%, so they processed less ore than in the prior year. Thanks to an increase of 2% in the average yield (the amount of gold extracted from the ore), DRDGOLD increased production by just 0.2%. The company has been reliant on the gold price behaving itself, a factor that is completely outside of their control.
This slide does a good job of showing you why they need to put heavy capex into growing their volumes and subsequent gold production:
As you can see, volumes have been a sideways story, with production dependent on volatile yields.
The difficulties in extracting the gold has led to cash operating costs per kilogram increased by 7%. This shows you how quickly things could’ve gone wrong in the absence of an increase in the gold price. But this also means that in a year where the gold price does really well, DRDGOLD banks the benefit of high operating leverage (the prevalence of fixed costs in the cost structure).
That’s exactly what happened recently, with operating margin jumping from 47.7% in H2’25 to 61.2% in H2’26.
Here’s the real kicker: H2’26 HEPS of 268.7 cents is higher than total FY25 HEPS of 260.8 cents! In six months, they made more than the entire prior year. Life is good when your only commodity in your mining company is experiencing a generational upswing.
DRDGOLD’s outlook: more production, but watch those costs
Guidance for FY27 is for production of between 160,000oz and 170,000oz, which is odd when the rest of the report focuses on kilograms.
This has forced me to learn that one kg of gold is 32.1507 troy ounces. The converted guidance is production of approximately 4,976kg – 5,288kg vs. production of 4,839kg in FY26. That’s a 6% increase at the midpoint.
Before you get too excited at the prospect of all this additional gold, the cash operating cost is expected to climb to R1,099,000/kg. That’s a 13.6% jump from FY26, suggesting that inflationary pressures are coming through thick and fast.
There’s also planned capital investment of R3 billion in FY27, down from R3.5 billion in FY26. Although shareholders will be happy to see a dip in capex, they will also be wary of overruns.
And what about that throwaway comment I referenced earlier? That one-liner in the preso? Well, on the last slide, the final bullet of the outlook section is a note about DRDGOLD “exploring growth opportunities beyond South Africa.”
Hmmm.
HEPS may have just increased by 89% at DRDGOLD, but the company famously has a conservative balance sheet that doesn’t use debt. I hope that they won’t bet the farm on opportunities beyond our borders. South Africa has many challenges, but investors will be nervous of any foreign capital allocation during a period of heightened capex in the existing operations.
The last company that bit off way more than they could chew is Gemfields (JSE: GML). We all know how that ended, with the share price down 83% over 3 years.
Taking risk can be a good thing, but too much of it can kill you.
In this deep dive, I look at the recent results of Absa (JSE: ABG) and Standard Bank (JSE: SBK). There’s much to learn from these financial services giants, but there’s one clear theme that came through for me: while Africa may tell a great story in a slide deck, the South African businesses are still doing the heavy lifting.
Absa’s results presentation uses a map of Africa on the cover page. Standard Bank’s tagline in the report is “Africa is our home, we drive her growth”. Yet both groups generated more earnings in South Africa than on the rest of the continent combined!
Africa is an important source of growth and diversification. It can also be a highly lucrative place to do business, evidenced by Absa’s net interest margin of 735 basis points in Africa Regions vs. 378 basis points in South Africa.
Just don’t underestimate South Africa as the anchor market for these groups. Local is firmly still lekker.
Standard Bank is much bigger than Absa – and generates higher ROE
Absa operates across 17 countries on the continent and has 13.4 million customers. That’s impressive, but Standard Bank is the largest financial services group in Africa, operating across 21 countries and with 20 million active customers.
Scale matters in this game, as it drives efficiency and diversifies risk. Case in point: Standard Bank has now achieved 10 consecutive six-month periods of positive jaws, while Absa is guiding for negative jaws for the full year.
This scale difference can be observed in Return on Equity (ROE), a key valuation metric for a bank. Absa’s ROE improved from 14.8% to 15.0% in its interim period. This 20 basis points improvement looks solid until you compare it to Standard Bank’s increase from 19.1% to 19.8%.
These are structurally different ROEs, which helps explain why Absa and Standard Bank also trade at such different valuations.
Understanding the SA vs. Africa story
Absa’s stated ambition is “to be a leading pan-African bank”, so they think far more broadly than the original acronym would imply. In case you’re wondering, Absa dropped the underlying Amalgamated Banks of South Africa all the way back in 1997. That’s your trivia out of the way for the week!
The problem is that the Africa Regions segment at Absa didn’t grow in the interim period. Revenue fell by 3% and headline earnings was down by a nasty 10%. Conversely, South Africa grew revenue by 8% and headline earnings by 17%.
The South African contribution to Absa’s group headline earnings increased from 66.0% to 71.7%. Kenya and Ghana contributed a combined 11.5%, with the remaining markets contributing 16.8%.
Over at Standard Bank, SBSA (the local business) grew headline earnings by 14%, roughly double the 7% achieved by the Africa Regions. SBSA contributed 51% of group headline earnings vs. 40% in Africa and the remaining 9% in the offshore and ICBCS operations.
Kudos to Standard Bank for this lovely slide showing the pockets of growth in the latest period in Africa:
Unpacking the credit performance
Absa’s revenue increased by just 4% for the period, yet HEPS was up by 8%. This is thanks to a 1% decrease in impairments, with this slide doing a great job of showing how a credit loss ratio tends to go through cycles, with the through-the-cycle target range held steady (thereby doing what it says on the tin):
As you can see, the latest period saw an improvement in this ratio from 100 basis points to 94 basis points.
That may come as a surprise, especially given the macroeconomic backdrop to these numbers. Something else that you may not have seen before is the enormous difference in credit losses between unsecured lending (like personal loans) and secured lending (vehicle finance and home loans). If you’ve ever wondered why personal loans have to be priced so high, here’s your answer:
Over at Standard Bank, group headline earnings grew by 10% despite total income only growing by 5%. In this case, the improvement in impairments was even more extreme: it fell by 12%, giving banking earnings quite the boost.
This was driven by a decrease in the credit loss ratio across the four major lending businesses in the personal banking side of SBSA, driving an improvement in the group credit loss ratio from 93 basis points to 73 basis points:
Both banks are telling a better impairments story than before, but Standard Bank has enjoyed the biggest positive move. The credit loss ratio at Standard Bank is also considerably lower than at Absa.
Business banking: a critical market
There are many different products offered by these banks. They also focus on different things at different times. At Standard Bank for example, there’s been a clear tilt in disbursements away from unsecured loans and towards corporate and business banking activities, as well as home and vehicle asset finance:
But the thing that surprised me most in this deep dive was just how lucrative the business banking operations are at both banks.
At Absa, this segment offers the best ROE in the group (up from 23.1% to 24.6%). It grew earnings by 5%, well ahead of the 1% growth in Corporate and Investment Banking for example.
The Business and Commercial Banking segment at Standard Bank is even stronger, boasting a 36.3% ROE. It’s under pressure though, with ROE down from 37.5% in the prior year due to a decline in headline earnings of 2%.
It’s little wonder that Capitec (JSE: CPI) is aggressively expanding into this space! Any market share lost by the legacy banks to Capitec will hurt their ROE.
Insurance as a driver of returns
The bancassurance model is designed to drive higher ROE through generating insurance profits from banking clients. Standard Bank seems to be doing a much better job of it at the moment.
Absa suffered a 2% decline in headline earnings in the insurance segment of the personal banking business. It barely gets a mention in the earnings presentation.
Conversely, insurance and asset management is a distinct segment at Standard Bank. It’s not a perfect comparison to the Absa numbers, but that’s also the whole point – Standard Bank is giving it far more focus. The blue bank enjoyed headline earnings growth of 15% in this segment!
This was helped along by the short-term underwriting margin coming in at an excellent 17% vs. the target of 10%. Also don’t underestimate the asset management business at Standard Bank, with assets under management and administration up 23% in Africa Regions and 13% in South Africa.
ROE in this segment at Standard Bank was 19.7%, ahead of the personal banking business at 19.2%. It’s also a lot higher than Absa’s group ROE, so this is an area where Absa could look to compete more effectively.
Watch those jaws
The concept of jaws in banking is interesting. It measures the difference in growth rate between income and expenses. Simply put, a negative jaws scenario arises where expense growth is outpacing income growth, leading to a decline in margins.
Absa has guided only low- to mid-single digit revenue growth for the full year. In an inflationary environment, that puts the group at risk of “slightly negative jaws” according to the guidance. Staff costs (up 6%) will need to be closely watched here, as this line contributed 58% of total costs in the interim period. Technology also needs to be carefully managed, with growth of 6%.
Spare a thought for those earning advertising revenue from Absa. Marketing costs fell by 9% to just over R1 billion. Absa can’t just rely on an improving credit loss ratio to keep boosting earnings, so perhaps they need to invest more aggressively in growing the brand and the business?
At Standard Bank, staff costs were 59% of total costs and grew 6% – a remarkably similar performance to Absa. Software, cloud and tech spend increased by 6%, so that’s also well in line with what we are seeing at Absa. The difference is in revenue, with Standard Bank maintaining guidance of mid- to high-single digit revenue growth.
That’s enough for positive jaws for the full year and for ROE to grow vs. 2025 (based on guidance).
It’s also enough for Standard Bank to be outperforming Absa on a year-to-date basis, with the market choosing to back the scale player in Africa:
They may both be legacy banks, but there are many interesting differences once you start to unpack them.
ASP Isotopes’ quarterly results show how early the company is on its journey
HEPS falls sharply at RCL Foods
Another blow for SPAR as the chairman and deputy chair step down
Thungela banked excellent profit growth in H1
ASP Isotopes’ quarterly results show how early the company is on its journey (JSE: ISO)
The numbers need to look very different in the next few quarters
ASP Isotopes is firmly in storytelling mode. The company needs to be, as they need investors to keep believing in the technology being built.
The release of quarterly results provides this table as an elegant summary of the substantial gap between revenue and losses:
Yes, that’s a net loss for the quarter of $34 million vs. revenue of $5 million.
Now, these are early days in the group’s commercial journey. The segments aren’t operating anywhere near their full potential. As a sign of just how much still needs to happen here, one customer represented 10% of the company’s consolidated revenue over six months!
If ASP Isotopes achieves what it has promised investors, then the future will look very different. Investors don’t have to wait long to see whether management can deliver on promises, as ASP Isotopes has set itself at least two major targets for the second half of 2026. They’ve promised initial commercial shipments of enriched isotopes. They’ve also assured investors that production of helium by Renergen is around the corner.
The market isn’t exactly forming an orderly queue to buy the stock in anticipation:
Either management is right, or the market is right. We will find out in the next few months.
HEPS falls sharply at RCL Foods (JSE: RCL)
The sugar and pet food segments have had a tough time
RCL Foods’trading statement for the year ended June 2026 is a continuation of where the difficult interim period left off. It’s unfortunate that HEPS from total operations has dropped by between 30% and 35%.
There’s a nuance here around discontinued operations after the unbundling of the stake in Rainbow Chicken (JSE: RBO) and the disposal of Vector Logistics in the prior year. This adjustment is unlikely to materially change the picture.
It’s worth noting that HEPS from continuing operations (rather than total operations) for the six months to December 2025 was down by 30.6%, so the challenges have already been visible in the numbers.
The note on impairments gives us a clue about one of the pressure points. The Sunshine cash-generating unit was impaired due to difficulties in recovering volumes after the labour disruption at the Durban factory in December 2024. This is why earnings per share (rather than HEPS) is down by between 50% and 55%. Impairments aren’t cash losses, but they do indicate where value has been lost.
But the far bigger worry is the Sugar segment, which has been far from sweet due to deep sea imports assaulting the local industry. With tariffs proving to be ineffective, local industry market volumes fell by 10.3%.
This drove more local production into the lower-priced export market. Local industry exports may have been 48.3% higher, but international raw sugar prices were down by 22.6% – and that’s before we consider the effect of the stronger rand! The export market isn’t where RCL wants to play.
The current tariff is clearly not protecting local industry. But the counterargument is that food inflation must be kept as low as possible to assist marginalised South Africans. Do we prioritise local industry, or the cost of food for consumers?
These are complex matters with many factors that need to be weighed up by policymakers. You can be sure that a food producer is going to lobby for stronger tariffs to protect their business from imports. Government’s job is to find a balance. I will also say that the huge difference between local and international sugar prices means that serious questions need to be asked about the economic sustainability of our sugar industry in a global trade environment.
Moving on, the Pet Food segment was impacted by production issues related to food safety. Volumes fell by 20.5% as supply was constrained. There were also higher stock write-offs.
At least the Culinary and Baking segments provided “good performances” – but clearly not enough to offset these other issues.
Detailed results are due for release on 31 August.
Another blow for SPAR as the chairman and deputy chair step down (JSE: SPP)
I discussed this on the radio yesterday evening
Things are just going from bad to worse for SPAR. The shares have hit a new 52-week low in response to the news that Mike Bosman and Dr Shirley Zinn have resigned as chairman and deputy chair respectively.
The pressure of SPAR’s deteriorating relationship with its franchisees appears to have taken its toll. A lot of unpleasant things have been said publicly about SPAR’s management by franchisees, so I can believe that the behind-closed-doors activity must have felt threatening to these directors. The juice stopped being worth the squeeze for them.
Stephen Grootes invited me to discuss the broader SPAR issues with him on The Money Show on Monday evening. It was the lead segment, with roughly 8 minutes of insight into SPAR and the broader retail sector. Check it out below (it starts within the first minute of this podcast):
Thungela banked excellent profit growth in H1 (JSE: TGA)
But revenue wasn’t the main driver here
Thungela’s results for the six months to June 2026 cover a period in which coal prices finally turned the corner.
Energy security was a feature of this period due to the conflict in the Middle East, with benchmark coal prices responding accordingly. Some of this benefit was blunted by the rand’s appreciation against the US dollar, as shown beautifully in this excerpt from a slide in Thungela’s results presentation:
Although the rand negated much of the coal price move, Thungela did enjoy improved performance at Transnet Freight Rail as a boost for export volumes. Transnet’s annualised run rate has improved by 5.5%. I cannot stress enough how important it is to our resource-heavy economy that Transnet performs.
Despite the overall positivity, revenue only increased by 2%. Foreign exchange and domestic revenue pressure offset much of the benefit of strong export prices and volumes.
Things got a lot more exciting further down the income statement though, particularly with a much lower cost of production at Ensham in Australia due to higher volumes. This drove a 91% increase in group adjusted EBITDA and a 150% increase in HEPS.
Sustaining capital expenditure was flat for the year. Adjusted operating free cash flow jumped by 291%. This easily supported dividend per share growth of 175%.
Thungela is taking a cautious approach with guidance for the full year. Despite such a strong interim period, they’ve maintained their guidance across key metrics.
The market took a somewhat more bullish view, with the share price closing 10% higher on the day! It’s still only 11% up year-to-date though, having come off sharply from the peaks in March/April as conflict intensified in Iran.
Selected Nibbles:
Notable director dealings:
Two directors of Vunani (JSE: VUN) bought shares in off-market deals worth over R5.3 million in aggregate. This comes after recent buying activity by various executives. I’m not sure what’s going on at Vunani, but this level of buying is clearly bullish.
Unsurprisingly, Balwin (JSE: BWN) shareholders gave the Bidco offer a resounding approval. Holders of 98.48% of shares present at the meeting voted in favour of the scheme.
South Ocean Holdings (JSE: SOH) released a trading statement for the year ended June. HEPS has jumped from a loss of 9.31 cents to earnings of 8.02 cents.
In Season 2 of this podcast, The Finance Ghost talks to South African entrepreneurs about the ideas, choices and turning points behind building a business from scratch.
Listento the podcast:
The Finance Ghost sits down with Comic Con Africa show director and Mogul Media founder Carla Massmann to explore the growth of the geek economy in South Africa.
From gaming, comics and collectables to cosplay, anime and pop culture, Comic Con Africa has become far more than an event. It’s a gathering place for people who share the same passions, a celebration of creativity and storytelling and a powerful reminder that everyone has an inner geek waiting to be discovered.
Carla shares her journey from launching Comic Con Africa in 2018, through the devastation of the pandemic, to building a profitable business that now attracts more than 70 000 visitors.
Along the way, she explains why community is at the heart of everything Comic Con does and why the future of the industry looks brighter than ever.
This is a story about entrepreneurship, adaptation and the power of helping people find where they belong.
Episode 4 covers:
The rise of the geek economy and ‘kidulting’
How Comic Con Africa became a runaway success
Building a business through the pandemic
Why community is at the heart of Comic Con
Creating opportunities for artists, authors and small businesses
The surprising economics of collectables and fandoms
How brands can authentically engage with niche communities
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.
Read the transcript:
The Finance Ghost: Welcome to this episode of The Finance Ghost plugged in with Capitec. I’ve got to say, I don’t have favourites in any particular season, but I am really looking forward to this one because we are going to be talking about something so fun today.
It’s the geek economy. It’s “kidulting”. That’s the fact that Lego’s business these days is as focused on adult sets as it is for kids. The world really has changed tremendously, actually, and there are a lot of reasons for it. Key demographic factors around millennials, especially Gen Zs, the way they are basically just living their lives at the moment.
And if there is a sector out there that has really been a net beneficiary of these trends, it would be the geek and nerd sector. I am a very proud participant. I do play Magic: The Gathering, and Warhammer, and I attended Comic Con recently, my first one, which was very cool.
So, what better way to understand more about this market than by speaking to Carla Massmann, who is the show director of Comic Con Africa? That’s both the Cape Town and Joburg shows.
And the founder of Mogul Media!
Very cool, Carla. That’s a fun job, although I have no doubt that it comes with all the same headaches as any other job. But we’ll dig into that, obviously.
Why you are here is that the show has of course been sponsored by Capitec this year. I think they did a fabulous job at the Cape Town one, and I’m sure the Joburg one will be just as awesome, if not bigger and better.
I’ve got to say, that Cape Town one was a proper vibe. You’ll be – just walking around and suddenly a stormtrooper will go past you on the escalator. My little one was blown away by all the Spider-Mans running around. It was brilliant. So, Carla, thank you for bringing the fun to our lives, and welcome to the show.
Carla Massmann: Thank you for having me, Ghost.
The Finance Ghost: So, I think let’s dig straight into what Comic Con just really means to that particular community. From the outside in – and maybe just from the inside in as well, now that I play these games – it’s really just great to see this community come together, just have a bit of fun. Life is very serious and I think a little bit of escapism is pretty important.
So, I’d love to hear it from you to kick us off: what Comic Con means to you. Because you must also be a lifelong geek. I can’t imagine that you’re involved in this unless you are firmly part of it?
Carla Massmann: So, if I have to be completely transparent, I’m actually not a lifelong geek. But I think that when I first started working for Comic Con, I soon very much realised that there’s an inner geek in everyone. I realised that my fascination back then with Batman and growing up to He-Man and Dragon Ball Z and being a longtime gamer, Comic Con made me realise that this passion was really all part of something so much bigger.
The Finance Ghost: Growing up with Dragon Ball Z and a longtime gamer and you start this with, “Well, I’m not sure I was a lifelong geek.”
Listen, I’ve got news for you…
Carla Massmann: I think that everyone finds that inner geek. “Okay, wait a minute. I AM a geek!” I think Comic Con brings that out in people.
I think a lot of people grow up not always being able to have the things they love in their mainstream lives, like school, our workplaces, social circles. That’s not somewhere where those superheroes and those comics and science fiction live.
And I think that that’s what Comic Con does. It becomes the place where those interests really become, that aren’t unusual in that room. They become the common language.
So, yeah, everyone’s got an inner geek in them, so they just don’t know it yet. And I guess that’s the fundamentals of the geek economy.
The Finance Ghost: Yeah, I love that. That’s brilliant.
Carla Massmann: After these years of working with Comic Con, I think that for me it’s really the celebration of creativity. Seeing local artists, writers, authors, all in the same space, celebrating work that’s inspired by the things they love.
And I think Comic Con holds a massive space.
It’s completely self-expressive, so with the cosplay, especially, showing that people can come out and become those characters, or their alter-egos. And in a very non-judgemental space, which is hard in this current day and age. I think that’s the most important part of Comic Con for me personally.
The Finance Ghost: Yeah, I don’t think you can rock up at work dressed as a stormtrooper unless you are working on the set of Star Wars, which must also be a pretty cool job. But we can only dream.
Yeah, it is a wonderful thing. Like you said, it’s creativity, I think that’s the key word here. And the other one that I always think of is just: storytelling. And in this, particularly in this AI era, I think storytelling is just so important. It’s creative storytelling. That’s really what Comic Con is all about.
And I think it’s a gift that you can just pass down. So, I recently got my kids into X-Men ’97, which is the one that I grew up watching. And it’s just so fun to sit and when your daily screen time is like 45 minutes or whatever of the thing that you grew up watching, you’re having as much fun as they are. That’s the truth of it. You’re almost asking for the screen time. It’s great.
Carla Massmann: Bringing families together [laughs].
The Finance Ghost: Yeah, absolutely. And what Comic Con does as an event is bring people together, families and otherwise. And as I understand it, it’s an international event that really got its South African leg a few years before the horrors of COVID (and we’ll talk about that just now).
But maybe in just those initial years, you can just give us a sense of how this thing kicked off; your involvement as well. What was the backstory for you becoming the show director of this thing?
Carla Massmann: RX Global is a global company, and its subsidiary is ReedPop. So ReedPop is one of the companies who runs the likes of New York Comic Con, C2E2, which is the Chicago con, MCM, which is your London con, etc.
So, RX Africa, who’s the South African business unit for RX Global, put a team together to research the viability of hosting a Comic Con in Africa.
With all the research that was done, it was evident that there was a market for it in South Africa. But I don’t think anyone expected how big that market really was.
So, at that stage, I was consulting into RX Global from more of a concept creation and strategy point of view. Probably one of my favourite parts of my whole career was delving into this community and going, “Oh my gosh, there’s this massive world and untouched market out there that no one’s aware of.”
So, in 2018, we launched Comic Con Africa in Johannesburg, expecting 15,000 visitors. To our surprise, we welcomed over 35,000 on the launch weekend. The venue was packed. The show sold out before the doors opened, and we were blown away.
At that point, the market and the target market of it was really unknown. Again, why I’m saying I loved this job element: digging into that market and going, “What makes this audience tick?”
After the first show, they asked me to step in as a show director, and we had to look at changing venues. We had to look at going bigger. Again, seeing numbers increase. We outgrew the next venue with over 50,000 visitors. So, we had to start scouting the next venue and started planning the 2020 show.
At the same time, we started exploring launching a show in Cape Town, but then the pandemic hit.
The Finance Ghost: Yeah, that’s something that even Spider-Man and “pick your favourite superhero” couldn’t do much about, unfortunately.
That must have been a very scary time, because “staying home and staying safe” as the famous quote went, is not the way to attract tens of thousands of people to an event, right?
Carla Massmann: 100%. Early 2020, I think if we all look back, it was still unknown. And I’ll never forget, it was early March. Within one week, we’d flown to Cape Town, we were scouting venues, we were having meetings; whilst cautiously watching these headlines and texting back and forth. And at that point, we were like, “Let’s not stress, this will blow over”.
And within 48 hours, I was getting on my flight back to Johannesburg, and we realised, okay, this isn’t going anywhere. So, we had to shift gears really, really quickly. Again, a really big challenge in my career, but all challenges I’m really grateful for.
And a week later, we came up with the idea of the Online Con. So, we were like, if the fans can’t come to Comic Con, we’re going to bring it to them. We worked crazy hours. We had to work in the lockdown hours. But next thing we knew, we were building a platform, an online platform; a space we hadn’t delved into in the events industry.
We were used to in-person and all of that. And we were kind of going, “How do we take Comic Con, put it online, and still do everything that a Comic Con offers?”
And we did. We had international guests dial in. We had exhibitors buy a page on it where they could still retail and promote their products. And the fans came and it worked and it was fun.
But it definitely wasn’t the same.
So, I think the pandemic continued, and for many in our events and entertainment industry, it was doomsday. It hit hard, and mostly for consumer shows, Comic Con being one of them that was on the hit list.
With a big global company like RX, it was just too risky to continue. We were living in a space where gatherings were up to 50, and then it slowly increased, but no one knew what was coming. So, it was very understandable that it was on the hit list.
And that’s kind of how Mogul was born. The core team that worked on Comic Con decided to start a company, Mogul Media, and take the risk, all of the risk.
We asked if we could continue running Comic Con under a licence agreement, which is super crazy, right? Because who takes on a massive festival in the middle of a pandemic, especially one that has these crazy restrictions on gatherings?
But I think we believed in it. We believed in the fans, we believed in the community. We knew that it was only the start and that there was something great here that we couldn’t let go of. And if we disappeared now, what would that do to the con?
So, in 2021, we found ourselves sitting in a dingy little office going, “Gulp, what now? Oh my gosh, we can’t even host an event.”
And I think the biggest thing for us then was realising again – and you’ll hear the word “community” thread so strongly through everything Comic Con – it was the community. And we were like, “We’ve just got to stay connected with the community and keep engaging with them 365 days of the year”. Especially at a time when everyone was feeling super alone, locked down by yourself.
So, we needed to be that brand that let the community feel connected. So, we threw ourselves into the online world, another challenge that we hadn’t explored. We hosted Twitch streams; we created content for YouTube. We hosted live online quizzes, which was awesome because we got to engage back and forth with the community.
And all of this while in the background, navigating the very grey waters of how to try and plan the next con. For the Cape Town launch, obviously this was all a big challenge. But again, we saw the opportunity – maybe this is a great way to go and test the market?
So, in ’21, we ran little pop-up cons around Cape Town at small venues. We kept the gatherings small, but that was a really nice way of intimately engaging with the community and seeing their interests. And it also gave us the data to know that there’s definitely a market out in Cape Town to launch Comic Con.
In all honesty, the pandemic was dreadful. Our industry got hit hard. It was adapt, or die. But I think we challenged ourselves and we went beyond the norms of planning and marketing a show and finding different revenue streams to keep going.
And then in 2022, we brought back the first In Real Life (IRL) con. And I don’t think we believed it. It was daunting. In all honesty, we couldn’t deal with the capacities, even though we were back in it now in a larger venue. It was insane. We may have underestimated the fact of how desperately people wanted to connect again and come together again.
So now, present day. I can proudly say that in the three years of Mogul running under licence, we’ve made the show profitable from its inception for the first time. We now have grown visitor numbers to over 70,000 for the Joburg show.
We launched Cape Town in 2023, which skyrocketed at the same pace. So, we’ve definitely seen a growth trajectory similar to the Joburg show.
And it took some serious guts to do what we did. We sacrificed a lot, but I think our belief in the show and the community was our biggest driver. And I strongly believe that if our main focus remains on the community and staying engaged with them and listening to them, then Comic Con will just keep growing.
I always say that Comic Con is for the fans, by the fans, because we take a lot of what they want, and every year we go, “Oh, they’re looking for this”. And we challenge ourselves to keep going.
The Finance Ghost: Such a great story. Well done. It’s just an enormous amount of guts. I think that’s the whole point. And people like to look at successful entrepreneurs and people who have built stuff, and it always looks easy when it’s going well. But along the way, there’s guaranteed to have been some or another huge, difficult decision, and usually a lot of them that needed to get made along the way. So well done.
And I guess what would have helped is as much as – and the pandemic was obviously terrible – but the geek industry and the people who are into the space who are, I think, creative by nature generally, they would have also kind of been okay from an income perspective (I would guess) over the pandemic, because everything was going digital, online, cloud. Lots of people who are into tech, design, all those sorts of areas; audio, video, that kind of stuff.
Now I think it’s tougher for them with what’s happening with AI. I think that’s caused a lot of disruption to that industry. But the pandemic period actually was probably quite good for the geek economy, and especially with people picking up hobbies while they were at home, right?
Carla Massmann: Definitely good for the geek economy. And I think a massive driver to the growth of Comic Con. Because if you think of it from a festival organiser or an event organiser, we never explored that online space.
Like you’re saying, when you look at the Comic Con audience, they massively live in that space. That’s where they constantly are. And we never push ourselves to go and engage with them in their kind of bubbles, if that makes sense. And Covid pushed us to do that.
So, I think it was probably. It sounds terrible, but the best thing that happened to us from a Comic Con point of view.
The Finance Ghost: Yeah, my business is a Covid baby. I don’t think I could have built it the way I did without people being at home, super interested in markets when interest rates were zero, and everyone was talking about investing.
At the end of the day, the lesson here is you’ve got to react to the era that you’re in. And sometimes it’s an era that will let you start something, and sometimes it’s not. So well done for adapting to the era you were in.
And let’s maybe then fast forward to 2026. You are winning awards. You’ve got a new and bigger venue coming in the CTICC, which I’m personally excited about. It was a little bit chaotic over the weekend and so full. It’s a sign of success, obviously, but I think more space is a good thing.
As I understand it, in Joburg, you are already at Nasrec, which is as big a venue as you can find!
Short of people building you a new venue, just how big can the show actually get? I mean, what is the future of this thing?
Carla Massmann: I think from a show’s growth point of view, I think it’s evident currently the emotional core isn’t the celebrity panels and the merchandise anymore. It’s the moment when they walk into Comic Con and they realise they’re surrounded by people that share the same enthusiasm without judgment.
I also think that’s a massive element missing in the world at the moment.
So, we can keep growing. We are offering that feeling, we are offering that happy, self-expressive, non-judgemental space. So, I think that’s a very big role and something we’ll focus on pushing out there so that it creates that space.
In that sense, I think Comic Con functions very much less like a convention or show. It’s more like this giant reunion of communities that mostly exist online like I’ve just mentioned, or are geographically scattered. And we see that; we see it yearly. We see them come together.
One of the drivers that push us as well is the emails we receive after the show of fans just going, “Oh my gosh, I finally met the friend I was talking to online all year. And I’d never met them in real life”. “Oh my gosh. I made friends, I met people that were like-minded”. That’s why we do what we do, in all honesty.
We’ve seen even just the person who never thought they were a geek, or just wanted to come and see what Comic Con is about. We’ve seen first-time visitors be converted to returning visitors.
So, it’s going to just snowball, I believe. It’s going to just keep getting bigger and bigger.
And then there’s the kidult, which we all know I think is becoming a big focus at the moment. But I think that element of nostalgia plays a really big role. You’re reconnecting with the stories and characters that matter to you at different stages in your life. And when we get to feel that feeling again and in a space that’s completely normal to feel, why not come to Comic Con?
It’s a no-brainer, really [Laughs].
The Finance Ghost: Yeah absolutely. It’s about helping people find their tribe, right? As the cliché goes. I think that’s very much what it comes down to
That’s why it’s great that Comic Con is so differentiated. Because I think for the people for whom it matters, it matters a lot.
And I can understand then how it just keeps attracting these sort of numbers. It’s going to be interesting to see just how big you can actually get it. You’ll have to get quite creative with either venues or… like you said, pop-ups, digital delivery.
It’s more of a lifestyle than an event, it sounds like?
Carla Massmann: We’re obviously aiming to push to one day be atbe at the numbers New York Comic Con or Chicago gets. New York Comic Con, you’re looking at 200,000 visitors per day over a four-day period. So that’s obviously our aim.
Chicago, we’re pretty close to. In fact, if you look at it from a global perspective, Comic Con Africa is growing faster than some of the global cons. So that’s also a really big sign for Africa and the continent.
They needed this. When I say they, it’s the communities, and they needed that platform.
Yeah, I’m excited to see the future.
The Finance Ghost: And the amount of work that must go into this is incredible. I mean, you’ve got Mogul Media as well, but this is your day job, right? This is what you’re spending most of your time on, I would imagine.
Carla Massmann: The amount of people that go, “But the show’s only in September”, or “The show’s only next year, April. What do you do?”. I don’t think many people understand the intricacies behind putting this together.
And there’s a whole different element. You’ve got to sell floor space for your revenue streams. You’ve got to find sponsorships and partners for revenue streams. There’s the ticket sales element. It’s a year-long plan, and the minute we just finished Cape Town, we go straight into planning for Cape Town ’27. It’s all the time. Yeah. Full-time for sure.
The Finance Ghost: Must feel like you’re just always planning a wedding. It’s that kind of vibe, right? When people are like, “I got married. It was so hectic”. Like that’s your life, but also much bigger and your life depends on it.
Carla Massmann: I look at family functions, and I go, goodness, I plan festivals for 70,000 people, but Christmas is a nightmare for me [Laughs].
The Finance Ghost: That’s fantastic. This plumber’s taps are firmly leaking here. That’s amazing.
Let’s maybe then just talk about some of the small business owners who also depend on Comic Con to reach this niche audience. Because that’s another part of the show, right?
It’s not just creating the space where people can come and feel like they can just be who and what they are. It’s also the artists who then depend on those people. And Artist Alley is a very interesting space that you’ve created. That was my first exposure to it, was this year. A really good friend of ours actually was one of your exhibitors at Artist Alley. So, we went along to support her as well, which was awesome.
How do you make sure that there’s room for these small creators among your bigger brands as well? Because that’s the really interesting thing with Comic Con. There are some really big brands there and you had automotive brands doing displays there with really cool art on the cars and anime. It’s amazing to see. And then all the way down to very small-scale artists.
Carla Massmann: We’ll talk to the bigger brands later. But I think it’s fundamental to know that Comic Con is built around those small businesses. Without them, I don’t think there’d be a Comic Con, just as much as the community. Especially within Artist Alley.
Artist Alley, for example, is the heartbeat of the con, not just locally, but globally. That’s how Comic Con happened. How they kind of just grew, was Artist Alley.
We have insane talent in this country and on the continent. I don’t think many people know that some of our local artists are actually creating work for the likes of DC and Marvel. Seeing that kind of talent come from home, it’s important to put them on a platform.
So, we ensure that we uplift that local talent, but also give the opportunity to any other artists to come and show and sell their work at Comic Con. We make sure the participation fee for Artist Alley is affordable, so that they get that ROI and leave with a profit line.
And besides Artist Alley, we also have a large number of small businesses in the country. Which, as you can imagine, especially in the space, there are not many pop culture brands or the big brands, or big brands within this area, that are based in South Africa. So, you do have the smaller businesses bringing that experience to the fans to life, here, locally.
They really do rely on Comic Con. They don’t have massive marketing budgets or the tools to promote themselves to get out there. So, we become that platform to ensure that their main target audience is directly brought to them. And once that visitor sees their work and has that tangible consumer experience with them, automatically afterwards they’ve got that consumer, and they’re engaging with them post the con.
We have packages like an emerging programme that we launched about two years ago, which was taking the smaller guys and going, let’s put you on the main show floor, instead of this little corner in the back there. You’re going to pay a little bit more, but we want to show you that by investing a bit more, you’re going to get a high return.
We’ve actually seen some of those businesses, over two-year period in that programme go from being on the show floor on the sides to being sent a prime position on the show floor. And their stands get bigger, and they’re investing back more into their business by their participation the following year.
So that’s also awesome to see: the small business slowly growing into a medium business and hopefully something even bigger.
The Finance Ghost: And you’ll find all sorts in Artist Alley. I mean, there are obviously a lot of illustrators, that’s as you would expect.
But there was even someone I saw in Cape Town, a self-published author with a whole range of fantasy novels and I was like, “That’s so cool, that’s so brave”. I mean, I’ve had a front row seat to how hard it is for someone to go and publish a book, get it out there, do the media tour, the whole story.
I think to self-publish fantasy in South Africa: just mad respect. Like really, really cool. We need more of that.
Carla Massmann: And I think that also adds to the element of the growth of the Con; it’s finding these areas. So, we noticed a lot more authors coming through in the Artist Alley section.
So, for example, the Joburg show, we launched a zone called Book Nook where now we have an author pavilion, and we fill that with about 20 local authors or publishers. And it is guys just creating their own books.
And the content stages we have at the show aren’t just to go watch fun and funny things. We’ve got industry experts on that stage. So, whether you’re a guest or whether you’re an exhibitor, you’re engaging with the right industry people to grow your business.
The Finance Ghost: Amazing. And then you’ve got the celebs, right. That’s a whole other angle to it. Do you find that that really is such a big drawcard?
For people who maybe aren’t familiar with Comic Con. when I say celeb, I’m not talking about Black Coffee DJing on the decks here. This is a different world. Maybe just give us an idea of some of the celebs you’ve had in years gone by?
Carla Massmann: We’ve got our pillars in Comic Con, which obviously is comics, tabletop gaming, gaming, etc. And they fill our film and series pillar. So, it’s an opportunity to bring that fan favourite from a series or movie.
I do think for us in South Africa, it’s one of the most challenging elements as a Con. I don’t think many people realise the dollar exchange rate impacts it greatly. And we pay in rands here, so bringing in the Keanu Reeves and that, which the fans keep asking for and get frustrated with us for, I don’t think they understand the bigger technicality behind it.
When it’s dollars, it’s a different ball game; but when we have to convert, it’s financially impossible. So, it is a very expensive festival to bring on, specifically because of the talent.
I think on your question on are they coming for the talent? A small percentage, I see. So, there are fans coming for the talent, but not as big as we expected. But again, a Comic Con is not a Comic Con without that kind of engagement or getting your photo op or getting something signed.
An interesting fact is, at the Cape Town show recently was the first time we brought Christopher Sabat, who is the voiceover artist for Dragon Ball Z. And he has been the most high-performing talent we’ve had at the show, versus someone from Supernatural or that kind of element.
So that was interesting to see, and I think that’s the element of your collector culture. Because, yes, you’re meeting the voiceover actor, but getting that collectible signed by him takes the value of that product up completely. So he did phenomenally.
In the space, we’ve realised that that kind of element, voiceover artists (especially in the anime space) are performing extremely well. And anyone who is going to tie it to something I can get signed. Your autograph, that’s going to kind of increase the value of your collectible. So, we’re relooking at that game a bit.
You do have the few who really do want those A-listers to come through. But at this point, unless we had to relook at models and charge R2,000 a ticket, we can bring an A-lister. But we also want to make sure that Comic Con stays accessible to everyone.
The Finance Ghost: Yeah, absolutely. I think that’s really important, actually. On the topic of how much tickets should cost, one thing about geeks is, on average, they’re pretty smart. And smart people, on average, I think, make more money than less smart people.
So, they’ve got money to go and buy these collectibles. And then if one is more desirable than another, there is a market for that. And it’s actually quite amazing to see just how that plays out.
If they’re not part of that community, they can’t understand. And it’s like, “But why would you pay X or Y for this or that?”
Everyone has their vices, and that happens to be what this community likes, and hence it has real value. If it’s signed, if it’s collectible, if it’s rare, if it’s interesting, it’s got that rarity value. Like anything in life, whether it’s a fancy handbag or a collectible car. Take your pick, right? It’s all the same.
Carla Massmann: I think collector culture is something that brands and the marketplace isn’t looking into in depth. It’s massive. It’s like you’re saying, whether it is a handbag or a sneaker, it’s not even just in the pop culture world. Everyone’s got that collector culture in their mind somehow. From our grannies collecting random cat ceramics [laughs]…
But the Comic Con community, yes, exactly what you’re saying, they’re smart people, they’ve got money. We’ve seen people drop R15k on a Batman statue. They’re doing it for a reason. They know that down the line this is going to be valuable.
And even from a simple Funko Pop – it’s about getting that right Funko Pop.
I say, I wasn’t a geek, but now I’m like, see someone opening the box of a Funko Pop? I’m like, “What are you doing?!” It’s not a toy. You got to package that and keep it safe.
And coming to Comic Con and getting it signed by an international, hey, even better. It’s like an investment cycle happening in front of you at a festival. It’s quite amazing.
The Finance Ghost: Yeah, it is quite something to see. It really is.
So, I think in bringing this podcast home, let’s then deal with how you bring in the big brands at Comic Con, which obviously make a huge difference to the economics.
You’ve referenced that you’ve managed to make the show profitable. And that might sound insane to people, like “How is it not profitable with tens of thousands of people coming?”
But the costs of running an event are obviously insane. I can well imagine.
And so having a sponsor like Capitec, who have made this podcast possible, and are the headline sponsor for Comic Con, it really helps keep it accessible for people.
But obviously it needs to be the right brands, right? They’ve got to integrate with the look and feel and the vibe. It’s important.
So how do you get that right? And not just Capitec, how do you get it right with the automotive brands where they’ve got Dragon Ball Z on the side? And you’re obviously giving these brands some advice on how to make this happen, right?
Carla Massmann: 100%. And you also become very strict. And sometimes it’s hard to turn money away, especially when you need the revenue to run a show. But I think, again, that’s where we win in the space, is that we don’t just take on anyone.
The Capitec partnership has given me the opportunity to push the limits. How do you take a financial institution and integrate it into this world and environment, a pop culture event?
And if I look back now, I think that Capitec was probably the best bank to go on this journey with. Just as we know that they strongly focus on community and fans and experience, that’s how we are.
We found that they’re supporting the creative industries, and their ethos strongly promotes accessibility to everyone. And they’ve taken that and they’re slowly threading that through the Con.
This was their first year, Cape Town, their first Con, which I think was an amazing experience for them and ourselves. So, we can see there’s going to be a beautiful journey moving forward.
But they’re also fan-focused and community-focused, and they want the brand to make the fans’ experience better. And I think that that is what’s so amazing about the partnership.
Look, I work with a lot of brands, so some of which, like I said, I’ve had to tell, “This isn’t going to work for you. You don’t belong in this space”.
Many come to me and want to participate. We have a massive market, we have the 18- to 35-year-old demographic, so that being our highest percentage of the visitors, we have the upcoming Gen Alphas, we’ve got Gen Zs, we’ve got millennials. It’s a market that many brands are trying to engage with.
But my strongest feedback to all of them is they can try come in, but if they don’t integrate into this audience and community in the way that shows that they genuinely understand them, they’re going to fail, and their ROI will be unattainable.
We’re looking for partners that don’t want to put their logo everywhere. They don’t want to just insert themselves. They’re going to have to put the work in and understand the audience, and they’re going to need to be open to stepping out of their comfort zone.
We can have tons of agencies coming, “But this is our strategy.” But if your strategy is not going to align with the Con and the audience, then let’s not take this conversation any further.
And Capitec gets that. They listen, they want to learn and they want to understand. And we really do work with them as a team. They want to be there for the community and the Comic Con fans. They take our guidance; they look at what are the issues at the Con that they can be the brand that steps in and fixes that.
For their first Comic Con Cape Town, for example, they worked with a local artist, which created the comic character, the Captain. And this also showed that they supported local artists, but they also showed up in an organic way.
It wasn’t a case of, smack some characters together. You mentioned earlier, AI is so disruptive – in this community, don’t even play the AI game, because… [Laughs].
The Finance Ghost: No, it’s a swear word, literally.
Carla Massmann: Yeah. So, they showed up organically and they’ve looked at benefits that uplift the visitor experience. We launched the Superfan Pass, which ticks all the boxes for a hardcore fan. So that was already a big step in the space.
And they offered 20% discounts to their clients. Again, making the con more accessible, no matter what your background is. I think I’m truly excited for this.
It’s a three-year partnership. I can see it’s going to grow and I think we’re going to make some magic together.
A big thing for us is it’s a partnership; it’s not a sponsorship. I can’t see it that way. It needs to be, “Let’s work together with your objectives as well as our objectives, and then it’s going to be successful”. And I think they’re the perfect match to be our captain.
The Finance Ghost: Yeah. Like, my own experience working with them certainly lines up. They really do just want to partner with the person, the personality, the platform, wherever it is they’re going, they respect what that thing is, and they don’t want to change it. They just want to be part of it, which is very cool.
Interestingly, that 18-to-35 demographic – I actually hate it, because I’m 38, so it makes me feel old – but I know that 18-to-35 is young, is what it is. Capitec has 54% market share in South Africa of that demographic. It’s remarkable. So, they are a young brand and a good fit for what’s going on, on that side. I really do like that.
Carla Massmann: We’ve something very exciting with them, coming up for the Joburg show that I think is going to blow the fans away, so I’m excited.
The Finance Ghost: Sounds excellent!
Well, Carla, you’ve got a big show to organise, so I’m going to let you go off and do that. Thank you so much for your time today. And to the listeners, go and check it out. What’s the worst that happens? You don’t have fun. Oh well, that can happen to you anytime.
The best that can happen is you go and really surprise yourself, and you actually have an awesome time. And maybe you develop an interest in something, or you find one of those pillars of Comic Con that appeals to you.
Because it is incredibly varied. There’s a huge difference between comics, tabletop gaming (which is what I particularly enjoy), gaming itself. These things are all actually very different worlds, and you’ll find all of them in one place.
Maybe something really appeals. Maybe you find your tribe in the process. So go and check it out.
Carla, thank you for your time. Good luck with the Joburg show. I hope to attend the Joburg one at some point, but I’ll definitely be at your bigger Cape Town show next year.
Carla Massmann: Thank you so much for having me. It was great chatting to you.
Blu Label Unlimited looks forward to reporting easier numbers in future
DRDGOLD beat their production guidance for FY26
Exxaro’s HEPS has dipped significantly
A much better year at KAP as PG Bison ramps up production
NEPI Rockcastle wants some of that sweet Spanish action
Resilient REIT’s performance boosted by more affordable funding
STADIO achieves mid-teens growth
A significant number of director dealings and other Nibbles
In addition to these updates, you can read my more detailed work on Truworths and Rainbow Chicken here. There’s also a deep dive on Weaver Fintech available here. The next planned deep dive is on Standard Bank.
Blu Label Unlimited looks forward to reporting easier numbers in future (JSE: BLU)
But for now, it’s still a messy affair
Blu Label Unlimited’s trading statement for the year ended May 2026 will create more questions than answers. As usual, the group’s accounting is complicated and has led to a major move in earnings. The impact of the listing and restructuring of Cell C (JSE: CCD) continues to skew the numbers.
If you completely exclude Cell C, then Blu Label would’ve had revenue of R9.4 billion and core headline earnings of R681 million, equating to 75.33 cents. “If” is a big word, but at least Cell C has now gone through its restructuring process and is a separately listed company with its own balance sheet. Going forwards, the Blu Label results should be much cleaner and easier to understand.
But for now, without taking Cell C out, HEPS has dropped by between 81% and 83%. Core HEPS is much the same, down by between 80% and 82%.
DRDGOLD beat their production guidance for FY26 (JSE: DRD)
That’s not the same thing as achieving growth in production
DRDGOLD’s trading statement for the year ended June 2026 is a great example of how lucrative the gold sector can be when the gold price is doing well. Despite flat production and only a 1% increase in gold sold, HEPS has jumped by between 85% and 95%. The average gold price received increased by 40% in rand terms, while cash operating costs per kilogram were only up by 7% overall.
Notably, capital expenditure jumped by 57%. DRDGOLD is busy with a significant expansion programme at the moment (called Vision 2028). One of the areas where they’ve been focusing is energy supply, with the investment in solar plants and battery storage systems helping to mitigate some of Eskom’s inflationary pressure on operating costs. Although the group is currently free of debt, they have an undrawn R1 billion revolving credit facility in place to support the capex plan over the coming years.
Although production was flat, it’s also worth highlighting that they came in above their production guidance for the financial year. Always keep in mind that beating guidance and growing year-on-year are completely unrelated concepts.
Exxaro’s HEPS has dipped significantly (JSE: EXX)
There’s a mix of external and internal pressures
Exxaro’s trading statement for the six months to June reflects the impact of lower income from Sishen Iron Ore and Black Mountain Mining. The strengthening of the rand against the US dollar has played a role here, as have inflationary pressures on input costs. Black Mountain Mining can’t only blame external factors though, as there was also a delayed ramp-up of the Gamsberg project.
Despite flat EBITDA vs. the prior period, HEPS has fallen by between 18% and 23%. When full results become available, it will be interesting to see what happened between EBITDA and HEPS. Depreciation and interest costs are the usual suspects where you see this kind of mismatch, although taxes can play a role as well. But generally, if there has been heightened capex or the introduction of more debt, then you’ll find the costs with these decisions coming in below the EBITDA line.
A much better year at KAP as PG Bison ramps up production (JSE: KAP)
But I’m really waiting to read the outlook statement, especially for Safripol
KAP’s updated trading statement for the year ended June 2026 gives shareholders a tighter earnings range to work with. The initial trading statement for the period noted an expected increase of more than 50% in HEPS. We now know that the jump is a lot better than that!
HEPS is up by between 82% and 92%, which means an expected range of between 43.8 cents and 46.2 cents. The share price closed 7.5% higher in response to this update. At R2.86 per share, the mid-point of this rage is a Price/Earnings multiple of 6.4x.
FY25 was a soft base for a number of reasons, so investors will be careful of how they extrapolate these numbers. The ramp-up of the new MDF line in PG Bison is making a significant difference here. A reduction of net debt by more than R1 billion is also the happy outcome of a period in which KAP was strongly cash generative. This debt reduction is literally double their target!
The fact that there are impairments in this period at Sleep Group, Safripol and Optix tells you that there are still divisions that are having a tough time. The company will pay a lot of attention when the company releases its outlook statement as part of the full results on 1 September.
NEPI Rockcastle wants some of that sweet Spanish action (JSE: NRP)
The company is branching out of Eastern Europe
NEPI Rockcastle is synonymous with markets like Poland. This fund showed South African institutional investors what can be achieved when you find success in Eastern Europe. Now, they’ve decided to ride the growth train in Spain, where rivals like Vukile Property Fund (JSE: VKE) and Resilient REIT (JSE: RES) have found success.
NEPI is doing this via the acquisition of MegaPark Barakaldo (a mall located in Bilbao) for €254 million. The net initial acquisition yield is 6.8%, serving as a good reminder that Spain offers a healthy mix of yield and underlying macroeconomic strength. Through a combination of growth in tourism and the lowest unemployment rate since 2008, Spain’s economy is highly supportive of retail landlords at the moment.
With a 97.3% occupancy ratio and a strong catchment area in Spain, NEPI is sticking to its knitting by focusing on high-quality properties. It’s a new country for them, but not a major deviation from how they do things in the property space.
Resilient REIT’s performance boosted by more affordable funding (JSE: RES)
Resilient REIT’s dividend per share growth in the six months to June 2026 was 11.7%. They managed this growth despite renovations taking place at six of the 28 retail centres in the portfolio, so I think that’s a great outcome.
Based on the solid positive reversions in leasing activity (i.e. new leases at a premium to outgoing leases), retailers clearly value Resilient’s space. The portfolio is unusual in that it has no Western Cape exposure at all. Instead, you’ll find significant exposure to a wide range of provinces, including malls in lower income areas that have strong growth prospects.
The fund also has a stake of 27.3% in Lighthouse Properties (JSE: LTE), a company that has found success in Western Europe. Markets like Spain supported strong dividend growth at Lighthouse. Together with a solid performance by the properties in which Resilient has a direct co-investment alongside Lighthouse, the offshore exposure was a boost to performance in this period.
The balance sheet also did a lot of heavy lifting, with interest rates down 70 basis points vs. the prior period. When combined with a refinancing of facilities at better pricing and the underlying performance in the portfolio, Resilient shareholders were spoilt with double-digit growth in the dividend.
STADIO achieves mid-teens growth (JSE: SDO)
The tertiary education model remains in good shape
STADIO’s trading statement for the six months ended June 2026 tells an encouraging story, with the company expecting HEPS to be up by between 12.1% and 19.8%. If you use core HEPS instead, the growth rate is between 14.5% and 22.2%.
I look forward to seeing the Durbanville Campus in the coming weeks. I also have a podcast scheduled with management, so keep an eye out for that!
The 12-month performance vs. rival Advtech (JSE: ADH) is about as close a race as you’ll find anywhere:
Results of previous poll:
Selected Nibbles:
Notable director dealings:
A2 Investment Partners, the vehicle linked to Nampak (JSE: NPK) director André van der Veen, bought shares in that company worth a meaty R63 million. Separately, the CFO of Nampak entered into a collar hedge over shares worth R16 million and also sold around R4 million in shares in an off-market deal. It looks like the recent purchases by A2 included being on the other side of the CFO’s disposal.
A number of Vunani (JSE: VUN) directors bought shares in the company worth nearly R1.1 million in aggregate.
A director of a major software subsidiary of Araxi (JSE: AXX) received shares awards and sold the whole lot for an after-tax amount of R588k. Given that this part of Araxi’s group has been a headache for shareholders, I would treat this as bearish.
A South African entity linked to a director of Canal+ (JSE: CNP) bought shares worth R291k.
A director of Huge Group (JSE: HUG) bought shares worth R45.6k.
A director of Stefanutti Stocks (JSE: SSK) bought shares worth R41k.
The Lead Independent Director of Sirius Real Estate (JSE: SRE) reinvested dividends worth R32.2k in the company. This was part of a broader dividend reinvestment plan offered by the company, in which holders of 0.95% on the UK register and 6.78% on the SA register elected to reinvest their dividends in shares. These are shares purchased in the market, not new shares issued by the company.
The CEO of Salungano Group (JSE: SLG) bought shares worth R29k.
Reinet (JSE: RNI) has announced the next instalment of its share buyback programme. Having already repurchased shares worth €500 million, they are now looking to implement buybacks of €250 million between 18 August and 15 December 2026.
MC Mining (JSE: MCZ) has announced that Kinetic Development Group will provide the company with capital support of up to $16 million. This takes the form of an unsecured bridge loan of $8 million, as well as an eventual subscription for new shares of $16 million. The bridge loan will be set off against the first tranche of the equity subscription. You may recall that Kinetic is already the controlling shareholder of MC Mining, having taken a 51% stake in the company. This stake looks set to increase over time.
Novus (JSE: NVS) has bought another R43.4 million in shares in Mustek (JSE: MST). This increases the Novus stake from 51.91% to 56.86%. They are up to 77.15% if you include the concert parties.
Copper 360 (JSE: CPR) released results for the year ended February 2026. The loss after tax worsened by 14.2% to R366.8 million. This is the messy company that Neal Froneman is trying to become involved in as the new Chairman.
Eastern Platinum (JSE: EPS) released results for the second quarter of 2026. Revenue fell by 25.8% year-on-year. Production was so low that the company reported a negative gross margin of -53%. That’s not something you’ll see every day! This has been going on for a while at the company, with ongoing operating losses and a working capital deficit. Run-of-mine processing at the Crocodile River Mine is running behind targets.
Dipula Property Fund (JSE: DIB) has renewed its bland cautionary. They’ve been trading under cautionary since May. Shareholders are none the wiser as to what the company is busy negotiating.
Design an incentive carelessly and people will follow it perfectly – straight off a cliff. Three centuries of history and a widespread current corporate mistake explain why.
Imagine for a minute that you are a British government employee, stationed in Delhi during the British Raj (that’s somewhere between 1858 and 1947, for those who don’t have their history books handy). You are concerned by the fact that the city is inundated with venomous Indian cobras, but you lack the manpower to tackle that many snakes yourself.
So, you turn to the local populace to help you hunt them down. With the Queen’s blessing, you offer a bounty to be paid for each dead cobra that is presented to you.
For a while, this appears to be going well. Locals bring you dead snakes, and you pay them. Everyone is happy except, possibly, the snakes, whose numbers are starting to decrease.
But after a few months of this, you notice something strange: it’s the same locals who come forward for payment every time, and even though they are presenting larger quantities of dead cobras, the amount of cobras in the city is starting to increase again.
Eventually, you catch on to the scam: the locals have realised that catching wild snakes is hard work (not to mention dangerous). It’s far easier to breed cobras at home and present them as legitimately wild-caught.
You immediately scrap the bounty, causing uproar among the populace of farmers-turned-cobra-breeders who were enjoying their steady income. With nothing to be earned from their stock, the locals release their broods of cobras into the wild.
You have spent a small fortune on paying bounties, and you now have more snakes than you had before. Her Majesty will not be pleased.
There is (unfortunately) no way to prove that this fun little anecdote is a true story. While the foundational narrative may be hard to prove, that didn’t stop economist Horst Siebert from using it as inspiration for a very real phenomenon that he coined “the cobra effect” – which has become shorthand for any situation in which people were unintentionally incentivised to make a problem worse.
The snakes are everywhere
The trouble with the cobra effect is that once you learn to see it, you start to find it everywhere. As Charlie Munger famously said, “Show me the incentive, and I’ll show you the outcome”.
In 2002, British officials tasked with suppressing opium production in Afghanistan offered poppy farmers $700 an acre in return for destroying their crops – a staggering sum in a country torn apart by war. Word of the programme spread fast. But the officials had measured the wrong thing. They were paying for destroyed crops, not for a smaller harvest – and so they got exactly what they paid for.
Farmers planted as many poppies as they possibly could, giving them more crops to destroy and more payments to collect. The craftier ones even managed to harvest and sell the valuable sap before ploughing the plants under, thereby getting paid twice for the same poppies – once by the drug trade, and once by the people trying to stop it. Even the most experienced investment bankers would be impressed by that!
In 2021, theUS Congress passed a law requiring sesame – a common allergen – to be clearly labelled on packaged foods, so that allergy sufferers could shop safely. Seems reasonable enough, but the law put food manufacturers in a bind. To sell a product as sesame-free, they now had to guarantee it. In order to be able to guarantee it, they had to scrub shared production lines and continuously test to keep even trace amounts out. That’s a serious expense.
The cheaper option was to give up and go the other way: dump a little sesame into the recipe on purpose, slap it on the ingredients label, and be done. The result was more products containing the allergen, now often added as flour rather than visible seeds, making it invisible to anyone scanning a bun or a biscuit for something they can spot.
A law designed to make food safer made it a lot more dangerous for the people that the law was trying to protect!
The cobra in the org chart
For the past couple of years, executives have been telling their boardrooms a simple story: workers are expensive; AI is cheap.
The strategy? Cut some of the workers, hand the survivors a set of AI tools to make them more efficient, and enjoy the same output at a fraction of the cost. The maths in the financial model (that was probably built using Claude) is irresistible.
Unfortunately, the workers who remain are not greeting their new AI tools with gratitude. Instead, they greet them with suspicion – and reasonably so, having just watched colleagues replaced by the very software they are now being told to embrace.
A 2026 working paper by Mark Ma and colleagues at the University of Pittsburgh tracked more than 3,200 firms alongside millions of employee reviews. It found that sentiment toward AI turns sharply more negative after a company announces AI-related layoffs, with job-security fears as the single loudest complaint.
That matters a lot, because the same research found that how employees feel about AI is one of the strongest predictors of whether AI actually makes their company more productive. This leads to a company with fewer people and a workforce too wary of AI to get much out of it.
And then comes the bill for the cleanup.
Having discovered that the AI can’t actually carry the load alone, companies are starting to hire the humans back. Staffing firm Robert Half found that nearly a third of companies that cut roles citing AI have already rehired for those same positions. Gartner projects that by 2027, half of the organisations that replaced customer-service staff with AI will do the same.
Add it all up and the ledger is bleak: the company has paid for AI consultants, then for the tech itself, followed by the cost of staff layoffs. Having been through a culture-destroying experience, they’ve then paid to hire them back. The most cynical view is that all these costs end up creating a resentful workforce where the layoffs meant to unlock AI’s value are precisely what buried it.
That is the cobra effect in a modern suit.
You wanted a leaner, faster company. Instead, you taught your own staff to resent the tool that was supposed to save you, crushing years of culture and loyalty along the way.
This doesn’t mean that all AI projects are doomed to fail, of course. It just means that with the wrong incentivisation, you’ll be going from Copilot to cobras faster than you can read the AI-generated restructuring proposal that got you into trouble.
Her Majesty will not be pleased with such a poorly designed reward system. People know exactly how to optimise what you give them. That doesn’t mean that you’ll get the outcome you asked for.
But you will always, always get the one you incentivised.
About the author: Dominique Olivier
Dominique Olivier uses her love of storytelling and ideation to help brands solve problems.
Her first book, Lessons from Loss, has been published by Penguin Random House.
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.
Rainbow Chicken’s earnings are as volatile as ever
Why I don’t have a position in Truworths (JSE: TRU)
The latest results reveal the growth problem
The Truworths share price is down 3.6% this year. If you haven’t been following the sector closely, it may shock you to learn that this is one of the better outcomes in clothing retail!
It comes down to expectations vs. reality. Truworths has been so weak over the years that the market really hasn’t expected much, so the valuation unwind hasn’t been as severe as we’ve seen at previous darlings like The Foschini Group.
Here’s a view on the sector over 12 months:
There are absolutely no winners here. Glancing at this chart is like seeing a bunch of SALE signs at the end of the season.
Even a strong dividend yield (a whopping 9% at Truworths) can’t shield investors from this kind of trauma.
What can we learn from the latest numbers?
In the 52 weeks to 28 June 2026, there’s more disappointment for Truworths shareholders. Even without a demanding valuation, nobody wants to see a 0.9% decline in group retail sales for the period. HEPS is expected to be down by between -2% and -4%.
To make it worse, the momentum during the period is particularly poor. The group managed flat sales in the first half of the financial year, while the second half suffered a decline of 2.1%.
That’s because the second half suffered from the same issue that is plaguing the broader retail sector: the impact of the conflict in Iran on consumer affordability. Our money has been redirected from the malls to the petrol pumps.
When we dig into the segments though, you may be surprised by the shape of the geographical split.
South Africans are a tough bunch
Truworths Africa is where you’ll find an unusual outcome. Despite the petrol price making everyone bleed in uncomfortable places, Truworths Africa had a better H2 (-0.1%) than H1 (-3.6%). This equates to a full-year performance of -2.1%.
Cash sales bore the brunt of the pain, down -5.0% for the year. Account sales fell by -0.9%, with approval rates for account sales dipping from 79% to 77%. They talk about having a more “prudent approach to credit granting”. You can refer to my detailed piece on Weaver Fintech for great insights into the state of lending to South African consumers.
Despite all the inflationary pressures out there, Truworths Africa actually experienced deflation of -0.4% for the period (vs. inflation of +1.2% in the prior period). When growth in volumes isn’t coming through during a period of weak pricing, deflation becomes a huge issue for retailers.
At least online sales moved in the right direction, up 21.5% at Truworths Africa and now contributing 8.1% to retail sales (up from 6.5% a year ago).
Despite all the local challenges, Truworths Africa still increased trading space by 0.8% – an acceleration from the 0.5% growth in 2025.
A nasty slowdown in Office UK
Unlike its peer group, Truworths has been doing relatively well offshore vs. the local business. Admittedly, part of this is because Truworths Africa is just so poor.
This leaves Truworths shareholders vulnerable to a slowdown in Office UK. It seems to be happening, with growth of 6.4% in H1 firmly in the rear-view mirror. Growth was just 2.9% in H2. Full-year growth was 4.9%. These rates are all in local currency (i.e. GBP).
If you translate the numbers to rand, then the reported growth was just 1.3% for the full year. Gone are the days of local companies relying on an ever-depreciating rand to boost the value of offshore earnings.
Online shopping adoption is much higher offshore than locally, evidenced by online sales contributing 44.7% of Office UK sales (down from 44.9%).
Despite the growth narrative being weak in the UK, the Office business has gone on quite the expansion drive. Trading space increased by 17.8%, or 8.1% on a weighted average basis.
Overall, Office UK did a good job of outperforming the market. The problem is that the market will extrapolate the slowdown and feel concerned about where the growth will come from.
My view
I don’t invest for the dividend yield. In fact, I actively avoid slow-growth companies that promise great dividends. Inevitably, the dividends don’t withstand the underlying pressure on earnings.
Pepkor is my chosen player in this sector. I love the fintech / banking upside. I’m stuck in Mr Price in the aftermath of the NKD deal unfortunately, but at least they are also finding ways to grow.
I can’t bring myself to feel excited about Truworths. I also can’t get past the risks that The Foschini Group is facing offshore, so that’s off my list as well.
Rainbow Chicken’s earnings are as volatile as ever (JSE: RBO)
There ain’t no business like the chicken business
Rainbow Chicken released a trading statement for the year ended June 2026. As is often the case in this sector, there are some utterly insane percentage movements at play here.
The poultry business is characterised by low net profit margins and volatile gross margins. In practice, a small change to gross margin can drive a substantial change in net margin.
Let’s do an example
To just use hypothetical margins, let’s assume that your gross margin is 20% and your profit before tax margin is 5%. A 200 basis points deterioration in gross margin can easily happen if you have a spike in input costs, pressure on consumer spending or issues with bird flu.
It may not sound like much (we are talking 200 basis points on 20% here, or a 10% deterioration), but that move in gross margin will drop profit before tax margin from 5% to 3% (all else held equal). Assuming constant sales, that’s a 40% drop in profit before tax!
And believe me, gross margin can move by a lot more than 200 basis points.
Earnings have more than doubled
This is why the year ended June 2026 has seen a jump in HEPS of between 118% and 138%. Earnings more than doubled!
A combination of strong demand for poultry products, lower commodity prices and operational efficiencies delivered the goods here.
I prefer to eat the stuff
The poultry sector is far too terrifying for me. I can’t bring myself to be invested in stocks that oscillate between incredible earnings growth and near-death financial experiences.
I’ll stick to eating chickens rather than investing in them.
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