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Made to break? The fight for the right to repair

Dominique Olivier
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Made to break? The fight for the right to repair

The future is fixable – at least, that’s what consumers would like to see. Big businesses are still digging in their heels when it comes to open repairs, but new legislation may be increasing pressure soon.

For as long as people have been making things, they’ve also been finding ways to sell us the next version of those things. Take Apple, for example. In the 17 years since the first iPhone launched in 2007, the company has released 29 versions of their flagship smartphone. In late 2017, iPhone users discovered that older models were slowing down after iOS updates, sparking accusations that Apple was deliberately throttling performance to drive sales of new phones.

Apple denied this (of course), explaining that the feature was designed to prevent unexpected shutdowns by managing the strain on degraded lithium-ion batteries. To address the backlash, they introduced an iOS update allowing users to disable the throttling feature (though they advised against it) and launched a battery replacement programme, reducing the service cost from $79 to $29 for six months. The catch? Batteries could still only be bought and installed at Apple stores, ensuring that Apple retained its monopoly over every phase of the iPhone consumer’s journey.

From a business perspective, this seems like a great strategy – especially if your business makes expensive goods that could last a long time before needing to be replaced. But how long will cash-strapped, conscious consumers continue to put up with planned obsolescence? And will the growing repair economy (and increasing right to repair legislation) force businesses to rethink their ways? 

Made to replace

Though there is no evidence that he was the first to come up with this idea, one of the most influential players in the quick-replacement game was Alfred P. Sloan, an executive at General Motors way back in the 1920s. Alfred didn’t just embrace obsolescence: he turned it into a finely tuned business strategy. Under Sloan’s leadership, GM decided that the best way to keep customers coming back wasn’t just making reliable cars but by making them feel outdated within a year or two. By introducing annual updates to car models, with tweaks to style, features, or performance, GM created a perpetual cycle of desire. Consumers weren’t just buying transportation; they were an antidote to the fear of falling behind.

By constantly dangling the “next big thing” in front of consumers, GM not only drove up sales but reshaped the American car market entirely. Competitor Ford, which had built its empire on the rock-solid dependability and affordability of the Model T, suddenly found itself playing catch-up. Consumers who had once been content with a car that “just worked” were now being wooed by sleeker designs, brighter colors, and features they didn’t even know they needed. GM’s strategy proved so effective that by the 1930s, it had overtaken Ford as the largest automaker in the United States, cementing planned obsolescence as not just a marketing tactic but a cornerstone of modern capitalism.

Ford may have been in the backseat when it came to releasing new models, but they owned the after-sales journey. Back in the 1910s, Ford created a network of certified dealerships and service centers, encouraging customers to use genuine Ford parts rather than turning to independent mechanics or aftermarket suppliers. To tighten control further, Ford pushed for standardised pricing, enforcing flat fees for repairs across their network. It was a win for Ford, but a major headache for small repair shops, which struggled to keep up with constantly changing parts, most of which were exclusively provided to Ford service and repair centres.

In 1947, one enterprising business owner had the bright idea of refurbishing old spark plugs and reselling them. The problem was that he was selling them under a trademarked brand name, which landed him in legal hot water. This case, Champion Spark Plug Co. v. Sanders, would go on to shape the rules for how repaired or refurbished goods could be sold. While the business owner was rapped on the knuckles for copyright infringement, the court’s decision upheld the right to resell repaired or refurbished items, as long as they were clearly labeled to avoid misleading consumers. This ruling laid the groundwork for modern Federal Trade Commission guidelines on resale practices. 

Let the people repair 

In the early 2000s, the automotive industry successfully shut down the first attempt to pass a right-to-repair bill tailored to its sector. It was a decisive win for car manufacturers, who had little interest in making repairs easier for anyone outside their authorised networks. They pointed to the National Automotive Service Task Force (NASTF), an industry-backed organisation that launched an online directory to provide access to manufacturer information and tools. Progress, right? Not so fast. A study by the Terrance Group revealed that, despite the NASTF, nearly 59% of independent repair shops were still struggling to get hold of diagnostic tools and parts. In short, the directory was more PR than practical help.

Meanwhile, cars themselves were becoming harder to fix. As technology continued to evolve, the share of electronic components in cars skyrocketed, from just 5% in the 1970s to over 22% by 2000. Hybrid cars, while revolutionary, made things even trickier. They required specialised tools and software that manufacturers shared only with their authorised repair services. Independent mechanics were increasingly boxed out, left grappling with limited resources while trying to stay relevant in an industry moving faster than they could catch up.

Despite these challenges, the push for a right to repair didn’t fade. Initially driven by automotive consumer protection agencies and after-sales service providers, the movement soon crossed over into other industries. As gadgets like smartphones and computers became ubiquitous, the demand for repairability gained even more momentum. Even farmers joined the fray, fighting for the ability to fix their increasingly tech-heavy equipment without paying steep fees to manufacturers. Climate change activists weren’t far behind, arguing that repairing products rather than replacing them could help curb the growing e-waste crisis.

What started as a niche debate in the auto industry became a global movement, challenging the idea that manufacturers should hold a monopoly on repair. But the fight was (and still is) far from over.

A long way to go – but some progress on the way

In the United States, 20 states are currently considering legislation aimed at giving consumers more power to fix their stuff. The scope varies – some bills focus on everyday gadgets, while others target farm equipment and cars. Unsurprisingly, the pushback from big players like Apple, Microsoft, and Dyson has been fierce, with lawsuits keeping much of this legislation tied up in courts for years.

Across the Atlantic, the European Union has taken a more decisive approach. A new EU directive now mandates manufacturers to design products with sustainability in mind. Think less waste, lower energy consumption, and easier repairs. Crucially, they’re also required to guarantee spare parts for up to 10 years for products like white goods and lighting. It’s all part of the EU’s broader mission to create a sustainable, circular economy where products are reused, not just tossed away. Down in Australia, the Bower Reuse & Repair Centre is leading the charge for similar reforms. They argue that a truly sustainable future hinges on embracing a circular economy, and at the heart of that is the right to repair. 

South Africa may be playing catch-up with the EU when it comes to repairing consumer electronics, but the motoring industry has seen meaningful progress on the right-to-repair front. Thanks to persistent advocacy by the local chapter of the Right to Repair Campaign, the Competition Commission introduced new guidelines in July 2021. These rules are designed to shake up the vehicle repair industry and give consumers more options. Whether you want to take your car to an independent mechanic or roll up your sleeves and handle the repairs yourself, these guidelines aim to make it easier (and fairer) for you to do just that.

With mounting support from consumers, independent repairers, and environmental advocates, the repair economy is poised to reshape how we think about ownership and consumption. The question now is whether industries will adapt willingly or continue to resist as the demand for repairable, sustainable products becomes impossible to ignore.

About the author: Dominique Olivier

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

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.

Dominique can be reached on LinkedIn here.

GHOST BITES (Accelerate | AECI | Bell Equipment | Cilo Cybin | Gemfields | Prosus – Naspers | Thungela)

The Finance Ghost
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GHOST BITES (Accelerate | AECI | Bell Equipment | Cilo Cybin | Gemfields | Prosus – Naspers | Thungela)

The losses at Accelerate have accelerated (JSE: APF)

At least interest costs have come down thanks to capital raising efforts

Accelerate Property Fund is in a bad space. They’ve had to dispose of assets and raise R200 million through a rights issue to give some support to the balance sheet, yet the loan-to-value ratio has improved by just 100 basis points to 46.7%.

For the six months to September 2024, the headline loss per share worsened substantially from 2 cents to 6.32 cents. This is despite a reduction in finance costs based on the capital raising activities and resultant decrease in debt.

At the moment, lenders are still refinancing the debt – mainly because they believe that they can keep squeezing juicy amounts of interest out of this thing. At least the banks are getting something, as equity holders can’t expect much when you see underlying metrics like a huge vacancy rate of 17.9% at Fourways Mall. Accelerate is working with Flanagan and Gerard as well as the Moolman Group to try and improve things there, but there have been difficulties in getting a contract implemented.

Notably, the BMW Fourways building suffered a negative reversion of 25% after the renewal of a ten-year lease, showing exactly what has happened in the Joburg property market (and the automotive sector) in the past decade. This contributed to the total negative reversion of 7% for the fund.

As should be obvious by now, there is no dividend for shareholders. The share price is down 29% year-to-date.

Dezemba weirdness at AECI (JSE: AFE)

The CFO is on her way out, practically immediately

‘Tis the season for weird SENS announcements and AECI hasn’t disappointed, with news that CFO Rochelle Gabriels is stepping down on “mutually agreed terms” with effect from 31 December 2024.

Ian Kramer has been appointed as acting CFO. He is currently Senior Finance Advisor to the group – a rather odd title that makes it sound like he only has one foot in the door there.

No further details are available at this point. This is the kind of stuff that sets off alarm bells for investors.

Bell’s earnings are falling through the floor (JSE: BEL)

That rejected offer of R53 per share must be a cause of regret by now

When the Bell offer was made and a few activist investors fought hard for it to be higher, I feared at the time that people might live to regret not taking the R53 offer. The share price is currently at around R38 and an updated trading statement for the year ended December doesn’t give us much reason to believe that it will be heading higher from here.

The initial trading statement suggested that HEPS would be at least 25% lower for the year. Now, the company has guided that HEPS will be at least 40% down on last year. This implies HEPS of a maximum of 478 cents and possibly lower.

The take-private offer would’ve ended up being a forward multiple of at least 11.1x for a cyclical group with heavy exposure to the mining industry. Hindsight may be perfect, but there’s also that old story about how the pigs get slaughtered.

This isn’t a chart that I would like to own:

Cilo Cybin: one of the highest valuation multiples you’ll ever see (JSE: CCC)

You might want to be sitting down for this one

Cilo Cybin is a special purpose acquisition company (SPAC) that was set up to facilitate the acquisition of Cilo Cybin Pharmaceutical, a private company that was started in 2018 to focus on the medical cannabis industry. Despite a lot of very impressive paragraphs about their facilities, the net asset value was -R18.7 million as at March 2024 and the loss after tax was R5.9 million.

No matter, because in cannabis startup land, this doesn’t stop the business from being sold to the SPAC for R845 million. And no, there isn’t a missing decimal there. You’ll need to give me something a lot stronger than medical cannabis before I feel comfortable about that valuation.

For the six months to September 2024, things improved to a profit after tax of R13.6 million and a net asset value of R1.3 million. Clearly, the trajectory is strong and the valuation is based on immense growth and a hope that the multiple unwinds quickly. Many startups tend to forget the impact of competition and a slower growth curve as a business matures.

We will have to wait and see what happens here. Forgive me, but paying a 650x price/book multiple is somewhat outside of my comfort zone.

Gemfields takes drastic steps to navigate a difficult market (JSE: GML)

Mining is risky and the mining of pretty things is even riskier

As I wrote some months ago, the back-end of 2024 was absolutely critical for Gemfields. They have been on quite the capex spree, with more planned for 2025. At the same time, prices for emeralds and rubies haven’t really been playing ball, especially in the case of the green stones.

Things have now come to a head, with ongoing problems of oversupply in the emerald market leading to Gemfields taking the decision to suspend production for up to 6 months at Kagem Mining. They will focus on processing ore stockpiles at Kagem while the emerald market hopefully comes right. The problem is that if the Zambian competitor can somehow keep selling emeralds at a discount, then this could get very painful indeed.

The rubies aren’t free of issues either, with fewer premium rubies coming out of the ground in Mozambique recently and worries around civil unrest. Still, construction of the second ruby processing plant is a critical project and it remains on time and on budget, with planned completion by the end of H1 2025. The civil unrest is taking its toll though, with all non-essential capex in northern Mozambique suspended.

That’s not all, folks. They are “assessing strategic options” in respect of Fabergé, a luxury jewelery business that they frankly should’ve sold ages ago. They are also very keen to sell the gold project Nairoto Resources Limitada, going so far as to put contact details in the SENS in case anyone is interested!

Perhaps they should try Facebook Marketplace as well?

Somehow, despite this, the share price closed 10% up for the day. It’s down 44% year-to-date.

Prosus and Naspers deepens exposure to Latin America with the acquisition of Despegar (JSE: PRX | JSE: NPN)

The new CEO knows how the region works and I think it creates a great opportunity

We don’t see enough deals in Latin America by JSE-listed companies. Historically, local executives liked to create emigration opportunities by making acquisitions in places like the UK and Australia. These days, we at least see more of a tilt towards higher-growth markets in the developed world. Yet, for some reason, our execs are scared of other emerging markets despite navigating all the challenges that South Africa throws at them.

Aside from rare examples like Pepkor acquiring Avenida in Brazil a while ago, South Africans tend to limit their exposure to Latin America to watching football games.

Fabricio Bloisi is the man in charge these days at Prosus / Naspers and he knows the region intimately, having been born in Brazil and having built iFood there. So, when the group announces a deal in Latin America, you can be sure that there’s proper on-the-ground experience being applied.

Prosus is acquiring Despegar, Latin America’s leading online travel agency, for $1.7 billion. Now, this may sound like a business model from last century, but they understand platform businesses over in that part of the world, as evidenced by how developed a competitor like Mercado Libre has become. Prosus can find ways to cross-pollinate the various platforms in the group with different service offerings, with access to over 100 million customers in the region.

Despegar generated revenue of $706 million and EBITDA of $116 million in 2023. The deal has therefore been priced at a revenue multiple of just over 2.4x, representing a 34% premium to Despegar’s 90-day VWAP. In my view, that’s really not a bad price for a quality platform business.

Thungela invests further in Australia (JSE: TGA)

They will now have an effective 77.475% in Ensham

Thungela acquired an effective 62.475% in Ensham back in September 2023 in an effort to diversify exposure away from South Africa (and mainly Transnet, if we are honest). I can understand the appeal of a country with working infrastructure.

Although there were critics at the time, mainly because everyone just wanted Thungela to be a cash cow, the board was more interested in creating a group with reasonable risk exposures. Ensham has been a solid performer and is now contributing 35% of the group’s EBIT.

Thungela is now increasing its stake to an effective 77.475%, so that profit contribution can be expected to increase if the good times continue at Ensham and if things don’t materially improve in South Africa.

The structure is that Thungela holds 73.5% in Australian subsidiary Sungela Holdings, which in turn originally acquired 85% in Enham. The other 15% holder in Ensham will now sell to a different subsidiary (Thungela Resources Australia) which is 100% held by Thungela. In other words, the minority holder in Sungela Holdings isn’t getting any exposure to this additional 15%.

One of the benefits of this deal is that Thungela will look to deepen synergies with Ensham, particularly with the external direct shareholder in Ensham out of the way. This includes a desire to open up markets in Japan and Malaysia.

The deal is too small to be categorisable under JSE rules, so there are no further disclosures at the moment.

Nibbles:

  • Director dealings:
    • A non-executive director of Supermarket Income REIT (JSE: SRI) bought shares worth £33k.
    • A director of Visual International (JSE: VIS) bought shares worth R160k.
    • The CEO of Argent Industrial (JSE: ART) sold shares worth R97k.
    • The PBT Group (JSE: PBG) scrip dividend received a reasonable amount of support in the end, allowing the group to retain more than half of the dividend in cash. The end result was a cash dividend payout of R13.1 million and an issuance of shares to the value of R14.9 million. I’ve included this note in this section as a number of directors elected the scrip dividend alternative and received shares instead of cash.
  • MAS plc (JSE: MSP) has renewed the cautionary announcement regarding negotiations with Prime Kapital to acquire the 60% interest in PKM Development Limited. The company reckons that contracts should be concluded by the time that results for the six months to December 2024 are released.
  • Labat Africa (JSE: LAB) is still catching up on its financials, rather hilariously releasing a trading statement for the six months to November 2023 (not a typo) and then the results for that period on the same day. At least they made an operating profit in that period, although the numbers are so old that I’m not sure they are very useful.
  • Here’s another one catching up on financials: Kibo Energy (JSE: KBO) has released results for the year ended December 2023. Again, not a typo. The company is currently a cash shell, so these results are literally pointless as they relate to assets that aren’t even owned anymore!
  • Tongaat Hulett (JSE: TON) continues to make progress with the business rescue plan, with the latest update being the sale of the Zimbabwe business to the Vision consortium.

GHOST BITES (Aspen | Metair | Rex Trueform | Sanlam | Sasfin)

The Finance Ghost
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GHOST BITES (Aspen | Metair | Rex Trueform | Sanlam | Sasfin)

Aspen is bringing Eli Lilly’s Ozempic competitor to the local market (JSE: APN)

Will it prove to be as popular?

Unless you’ve been living under a rock, you’ll know that Ozempic took the world by storm. People want to lose weight and they want to do it in the quickest and most efficient way, usually without making lifestyle changes. Danish pharmaceutical group Novo Nordisk made an absolute fortune from Ozempic, but competitors are catching up.

Eli Lilly is one such competitor, with the Mounjaro drug (officially for diabetes, but let’s not pretend how this stuff really gets used in practice) becoming available in South Africa this month thanks to the distribution and promotion agreement with local pharmaceuticals group Aspen.

That deal was finalised in August 2023, so it hasn’t taken them long to bring in a big-hitter. It will be interesting to see what kind of impact this has on Aspen’s numbers.

Metair’s disposal of Mutlu in Turkey was brought forward (JSE: MTA)

And now they are getting even less than people thought

Based on Metair’s recent announcement of how little they are getting out of the Turkish business disposal after adjustments for recent losses, things on that side are clearly desperate. We now have further evidence of this reality, as the closing date for the deal was brought forward so that Mutlu has the best possible chance under new ownership.

This required a new financing agreement with a syndicate of Turkish banks to be concluded, so everyone had to move quickly here.

The sad news is that the selling price after adjustments is even lower, with Metair getting just $1 million out of the deal, with the potential for that to go up to $2 million depending on how the first 60 days go.

When businesses go wrong, they can go to zero far quicker than people like to admit.

Rex Trueform is acquiring 30% in Byte Orbit (JSE: RTO)

Just don’t rely on the SENS announcement to tell you what Byte Orbit actually does

It sounds a bit like a fancy toothbrush company, doesn’t it? Luckily, that’s not what Byte Orbit focuses on, although you would have a tough time deciphering anything useful from the wording of the SENS announcement:

“Established in 2003, Byte Orbit brings two decades of expertise in digital innovation, offering high-quality solutions through a full product lifecycle approach. Byte Orbit prioritises user-centric designs, leveraging deep insights into audiences, technologies, and markets. Through its investment in Byte Orbit, Rex Trueform aims to assist in leveraging future growth opportunities, exploring emerging markets, and integrating advanced technologies while enhancing Byte Orbit’s market presence through strategic partnerships.”

What in the ChatGPT is even going on there?

Thankfully, the Byte Orbit website is a lot clearer. The TL;DR is that this is a software company, so that makes it a more interesting deal than some of the property-focused stuff we’ve been seeing at Rex Trueform. They are particularly strong in financial services, with a number of top names as clients. For example, it looks like they did the Shyft app for Standard Bank.

Rex Trueform is acquiring 30.02% in the group for a total investment of R30 million. This takes the form of a subscription for 20.47% in shares for R18 million, as well as the acquisition of 9.55% from a majority shareholders for R12 million.

What protection does Rex Trueform have here? Well, there’s a profit warranty that if Byte Orbit achieves less than R40 million in profit after tax in aggregate for 2026 – 2028 (i.e. the total over three years), then Byte Orbit will issue a further 10% shareholding to Rex Trueform for nominal value.

Still, Rex Trueform is paying a massive valuation here. The net asset value of Byte Orbit is R16.4 million and profit after tax was R3.6 million. Rex Trueform has effectively paid R30 million for 30% of those profits (R1.08 million) and 30% of the net asset value after the share subscription (30% of R34.4 million i.e. R10.32 million).

That’s not far off the P/E multiple at which you can invest in the world’s leading technology companies on the Nasdaq. They are clearly expecting massive growth based on current profits vs. the profit warranty for 2026 – 2028, but Rex Trueform (and parent company African and Overseas Enterprises Limited) could still end up getting really hurt here unless there is a much more certain future for this business than they are letting on.

Sanlam will unlock R4.5 billion through the Allianz joint venture (JSE: SLM)

Allianz is executing its step-up option

Back in 2022, Sanlam first alerted the market to the happy news that a joint venture would be put in place with Allianz. The idea was to combine efforts in the rest of Africa, with each party contributing their existing operations to the joint venture.

In order to get the size right and ensure alignment in the end result, Allianz was given an option to increase its shareholding in the joint venture to 49% through a cash transaction. The step-up transaction is now taking place, with Sanlam Emerging Markets selling 8.59% of its interest in SanlamAllianz to Allianz BV for a cash consideration of R4.5 billion before adjustments.

This takes Sanlam down to 51% and Allianz up to 49%.

Sasfin will delist at the end of December (JSE: SFN)

Good luck to the new investors – I think they will need it

If my recent experience with Sasfin’s business banking division is anything to go by, then I hope that the new investors in Sasfin put very little (if any) value on the transactional banking side of things.

Either way, things will play out in the private space rather than in the public eye, as the delisting of Sasfin is imminent. The listing will be terminated on 30th December. As part of this, Sasfin Wealth has repurchased 8.92% of shares in issue using the funds put in by investors like WIPHOLD. I wish them luck, as Sasfin doesn’t exactly come with a gleaming track record of success.

Nibbles:

  • Director dealings:
    • Christo Wiese is back at it with Brait (JSE: BTI), buying R3.5 million worth of exchangeable bonds through Titan Fincap Solutions and R220k worth of ordinary shares through Titan Premier Investments.
    • An associate of the investment advisor to Supermarket Income REIT (JSE: SRI) bought shares worth £75k.
    • A director of a major subsidiary of African Rainbow Minerals (JSE: ARI) sold shares worth R1.1 million.
    • Various directors of Anglo American (JSE: AGL) accepted shares in the company as a “shares in lieu of fees” scheme. The total across three directors was £31k.
    • A director of Southern Palladium (JSE: SDL) sold approximately $21k worth of shares.
    • An associate of a director of Mantengu Mining (JSE: MTU) bought shares worth R77k.
    • A director of a major subsidiary of PBT Group (JSE: PBG) bought shares worth R37k.
    • The son of a family member of a director of Nampak (JSE: NPK) bought shares worth R5k. Start ’em young!
  • MC Mining (JSE: MCZ) has given notice that the meeting to vote on the investment by Kinetic Development Group in the company will take place on 23rd January. If the deal gets approved, it completely changes the company’s future.
  • As South32 (JSE: S32) recently indicated would happen, the Ministerial Statement related to the environmental approval by Australian authorities for the Worsley Mine Development Project has now been released. The environmental assessment, consultation and review process started all the way back in 2019! South32 had to go through quite a process to appeal the initial conditions of the approval, which were found to be too onerous.
  • As evidenced by the latest announcement regarding changes to major shareholders, DRA Global’s (JSE: DRA) shareholder register has changed substantially as the company moves into the unlisted space. Perhaps it will one day return to public markets!
  • Following the specific issue of shares for cash that Visual International (JSE: VIS) undertook to fix the balance sheet, there’s been a substantial increase in the percentage of shares held by insiders. One really has to wonder if there’s a delisting coming down the line for this obscure group with its tiny market cap.
  • AYO Technology (JSE: AYO) is late with its audited financial statements. The report for the year ended August was supposed to be released on 20 December. This has now been kicked out to 16 January 2025.
  • AngloGold Ashanti (JSE: ANG) announced that Alan Ferguson will replace Rhidwaan Gasant as Lead Independent Director, as Gasant has decided not to stand for re-election.

GHOST BITES (enX | Grindrod | MAS | NEPI Rockcastle | Sibanye-Stillwater | South32)

The Finance Ghost
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GHOST BITES (enX | Grindrod | MAS | NEPI Rockcastle | Sibanye-Stillwater | South32)

enX acquires a property in Alberton (JSE: ENX)

I’m not sure this is the capital allocation that the market wants to see

Shareholders in enX are very much in the mode of wanting the company to sell assets and return capital to shareholders. It therefore stuck out to me on SENS that enX is doing something completely different (at least with a portion of its capital), by buying a property in Alberton that is currently used as a manufacturing facility by two of its subsidiaries.

Of course, buying a strategic site as a manufacturing facility isn’t the weirdest capital allocation decision in history. It just stands out for being so different to the flavour of recent announcements from the company.

The purchase price is R95 million, which is above the market value of R90.3 million as prepared by an independent property valuation expert. They must really want the property. The property owner has unlocked this price by keeping enX on a short leash as the tenant, with a six-month notice period in the lease that would cause huge disruption to the subsidiaries if it was triggered.

enX will pay for the deal in cash and will look to refinance the property down the line.

EBITDA margins are significantly lower at Grindrod (JSE: GND)

At least profits from the Port of Maputo are growing quickly

Grindrod has provided a pre-close trading update to the market. Having cleaned out a bunch of non-core assets in recent times, the focus is on bulk handling, container handling, logistics capability as well as rail and transport.

The lack of Chinese economic growth has put the commodity market under pressure, which in turn creates a negative environment for Grindrod’s export drybulk commodities business. Stimulus announcements in China haven’t had the desired impact on iron ore and steel demand, so there’s no real improvement there just yet.

The protests in Mozambique have also played a negative role, impacting volume flows into the Port of Maputo. Ships were delayed and in some cases cancelled. Despite this, Grindrod notes 37% growth in its share of earnings from the Port of Maputo, driven primarily by chrome volumes it seems. The broader Mozambique business was hit by protests and the coal market, with volumes down sharply.

We can only hope that the positive momentum in the South African business continues, with volumes at Richards Bay and Durban up a combined 28%. Sentiment is improving around Transnet as well.

Despite the particularly strong performance at the Port of Maputo, Grindrod’s EBITDA margin fell in both segments. The Port and Terminals segment is down from 42% to 35% and Logistics fell from 30% to 22%.

Group gross debt increased from R2.9 billion as at June 2024 to R3.1 billion by the end of November. Net debt remains low though, dipping from R0.5 billion to R0.4 billion.

Results for the year ending December 2024 are expected to be released on 6th March 2025.

MAS has given the balance sheet more breathing room with the disposal of malls in Romania (JSE: MSP)

The deal is worth €49 million

If you’ve been following the MAS story, you’ll know that this property fund has been trying to prepare for a world that isn’t so friendly to sub-investment grade property funds. With major debt refinancings on the horizon, MAS went on the front foot to try and protect shareholders from a potentially damaging outcome. Although local shareholders didn’t appreciate the cancellation of the dividend at the time, the share price has now made a full recovery. Those who played the recovery have done really well, up 34% in 2024!

The latest good news from the company is that the strip malls in Romania are being sold for €49 million. These are mature centres, so MAS won’t get outsized returns from the properties going forwards. Instead, they can unlock the capital to help with debt maturation in 2026 and give themselves room to focus on properties where better returns are available.

The price is 3.1% above the fair value of the properties based on an independent valuation, so they got it away for a good price as well! Net cash proceeds after adjustments are expected to be €43.5 million.

For reference, net operating income from the properties was €3.6 million for the year ended June. This implies a yield of 7.3% for the selling price.

Thanks to this deal, the required additional funds for the funding commitments to June 2026 have dropped from €116 million to €64 million. They are almost there!

Much excitement at NEPI Rockcastle, but modest per-share growth (JSE: NRP)

This is what happens when shareholders get diluted

NEPI Rockcastle is a great property fund. It’s comfortably one of the best on our local market, as evidenced by a recent flurry of deals that saw the group easily raise €800 million in new funding. This was needed for property acquisitions worth €778 million in October and December.

The balance sheet remains in great shape, with a loan-to-value ratio below 35%. The pre-close update released by the company confirms that net operating income should be up 13% for the year, with the acquisitions making only a marginal contribution to that growth. So, the portfolio is doing extremely well.

And yet, the guidance for distribution per share growth is just 5.5% for the year. How did such an exciting story turn into growth that offers little more than inflation?

The answer lies in dilution, or the sheer number of new shares in issue. The scrip dividend alternative (in which shareholders accept shares in lieu of cash) had a 39% take-up rate. NEPI also raised equity on the market to assist with the acquisitions. Although this is necessary for growth over time, it does impact the per-share growth for shareholders in the near term.

A 10.8% year-to-date share price return is still very decent though, particularly once you add on the juicy dividends to get to the total return!

Sibanye-Stillwater unlocks $500 million through a streaming deal (JSE: SSW)

This mainly relates to gold as the by-product of the PGM operations

With its share price down over 32% this year and still languishing close to 52-week lows, Sibanye continues to face the challenges of a difficult PGM market. At least the gold market is holding up, allowing Sibanye to raise $500 million through a streaming deal focused mainly on gold from its PGM operations, with the inclusion of a small amount of platinum. This is because gold is part of the basket of metals mined by the PGM operations.

The trick here is that Sibanye can lean on the gold stream as a source of finance, while retaining upside to PGMs through the inclusion of only a modest amount of platinum in the streaming deal. Clearly, this strategy only works well if things recover at some point in the PGM sector, but Sibanye simply has to work on that assumption as their long-term existence largely depends on it.

The purchaser of the stream is Franco-Nevada Corporation and they will pay Sibanye $500 million upfront. Sibanye will receive a production payment of between 5% and 10% of the spot price per ounce, depending on whether you’re looking at the gold or platinum side of the deal.

Separately, Sibanye announced the BDO will take over as the new auditors, replacing EY for “commercial reasons” – are the Big Four firms simply becoming too expensive even for listed companies to justify?

The situation is Mozambique is improving for South32 (JSE: S32)

But the country isn’t out of the woods just yet

Politically-driven unrest is a feature of doing business in Africa and Mozambique is no different. Recent elections sparked protests and road blockages, which made things very difficult for South32’s Mozal Aluminium business.

Thankfully, there have been no security incidents at Mozal Aluminium itself. The other good news is that road blockages have largely cleared, so they are in the process of rebuilding alumina stocks at the smelter.

With the announcement of election results expected on 23 December, anything can still happen. For now at least, mitigating actions are working and Mozal Aluminium has continued to export aluminium to customers.

Nibbles:

  • Director dealings:
    • In order to fund investments in hotels, Koos Bekker’s family trust sold a huge number of shares in Prosus (JSE: PRX). The total value is around €157 million. This represents 20% of the trust’s stake in Prosus. In case you’re wondering, they have retained all their Naspers (JSE: NPN) shares.
    • The CEO of Datatec (JSE: DTC) has entered into a new hedge structure over R14.9 million worth of shares. The put strike price is R44.70 and the call strike price is R59.75. The current price is R43.77 and the options expire in 2026.
    • Carl Neethling has bought another R11.7 million worth of shares in Ascendis Health (JSE: ASC) in an off-market transaction.
    • Directors of Octodec (JSE: OCT) acquired R7.64 million worth of Octodec shares in an off-market trade.
    • The CEO of Argent Industrial (JSE: ART) sold shares worth R502k.
    • The outgoing CFO of AfroCentric (JSE: ACT) sold shares worth R81.7k.
    • The CEO of Sirius Real Estate (JSE: SRE) bought shares in the company worth nearly £4k.
  • Although one must be careful to read too much into regulatory reporting at banks, the latest quarterly report from Capitec (JSE: CPI) suggests that things are still going well there. Common Equity Tier 1 is up from R42 billion to R44 billion over just three months, which is most likely because of profits landing on the balance sheet as equity.
  • BHP (JSE: BHG) has been hit with a class action lawsuit in Australia “on behalf of all women who worked at BHP’s Australian workplaces at any time during the period 12 November 2003 to 11 March 2024 who were impacted by the alleged conduct” – those are very specific dates and no further information has been given about the conduct, other than references to sexual harassment and sex discrimination. The amount of damages sought is unspecified. Lawyers inevitably go for settlements in these situations, so keep an eye on this.
  • We have yet another cybersecurity incident at a listed company, this time at Tharisa (JSE: THA). It seems that systems have been taken offline, yet operations are unaffected at the moment. They will keep the market updated.
  • Dilution for shareholders at Mantengu Mining (JSE: MTU) continues. The company has issued another 4.78 million shares as part of a previous agreement to make certain shareholders whole. With around 175 million shares in issue in total, this dilution can add up.
  • Deutsche Konsum (JSE: DKR) has absolutely no liquidity in its stock, so results for FY24 get only a passing mention here. They also aren’t doing terribly well at the moment, with rental income down 2.9% and funds from operations down from EUR 33.1 million to EUR 28 million due to the added pressure of debt costs. At least the net loan-to-value has dipped from 61.6% to 57.2%, though it remains very high.
  • Rex Trueform (JSE: RTO) has appointed Karly White as Financial Director. This is an internal appointment, as White was previously the Financial Director of subsidiary Queenspark.

GHOST BITES (London Finance & Investment Group | Powerfleet | Schroder European Real Estate)

The Finance Ghost
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GHOST BITES (London Finance & Investment Group | Powerfleet | Schroder European Real Estate)

London Finance & Investment Group will wind up its business and delist (JSE: LNF)

Will anyone actually notice?

There are a bunch of companies listed on the local market that you would easily be forgiven for never having heard of. This is one of them, despite London Finance & Investment Group having a market cap of R484 million.

Sadly, daily average trading volume is 193 shares, or less than R3k a day. This isn’t just illiquid; it’s practically the Sahara Desert.

It’s a waste of time for this company to be listed and the board has recognised this, with a decision to rather dispose of the investments on the balance sheet and return around 70p per share to shareholders, which is the estimated net asset value (NAV) net of closure costs. They will also delist from the JSE and the London Stock Exchange.

At the current exchange rate, this works out to a return of cash of around R16 per share. The current share price is R15.50, so there’s no real opportunity here unless you got in closer to the 52-week low of R7.60! Even then, based on the illiquidity, you wouldn’t have been able to build a large position.

Powerfleet gives updated disclosure on its post-transaction numbers (JSE: PWR)

This takes into account the MiX Telematics and Fleet Complete deals

Powerfleet has released a useful update that helps shareholders understand what the combined group looks like from a financial perspective. It’s been a busy year, with the MiX Telematics deal happening in April this year and the Fleet Complete deal being far more recent, with that deal being completed in October.

This means that the shape of the group has changed completely, as has the balance sheet due to the acquisitions. The group has released pro-forma numbers to illustrate what the combined financials would’ve been for the six months to September 2024, had all the businesses already been in the group. It’s still not a perfect indication, as Fleet Complete is based on numbers for the six months to June.

Still, it shows that the combined group generated interim revenue of $214 million and a loss from operations of $17.9 million. Once you take interest expenses into account, the net loss attributable to shareholders is $35 million. Remember, this is only for six months!

With total liabilities on the balance sheet of over $460 million, this is a highly leveraged platform business that needs to scale into profitability.

Schroder European Real Estate is fighting with the French tax authorities (JSE: SCD)

The exposure is €14.2 million

Tax is a complicated thing, which is why it’s not uncommon to see large companies dealing with disputes with tax authorities. There are big numbers on the table when you’re talking about groups the size of Schroder European Real Estate.

The French tax structure is currently being audited by the French tax authorities and Schroder has received a “Proposal for Adjustment” – a love letter from the authorities stating that they believe that Schroder owes them €14.2 million.

Schroder’s initial guidance based on the audit was that they expected a range of potential outcomes from nil to €12.6 million, excluding penalties. Although the €14.2 million is higher than the guided range, it includes interest and penalties.

Based on professional advice, Schroder believes that there will be no outflow here, so they will continue to argue against this assessment. If South African matters are anything to go by, this can be a long and painful process in court.

Nibbles:

  • Director dealings:
    • Although not a trade at this stage, the chair of Primary Health Properties (JSE: PHP) has pledged shares as security for a £2.5 million loan. If things go wrong with the loan, then this can lead to forced selling down the line.
    • A director of a subsidiary of Growthpoint (JSE: GRT) sold shares worth R5.5 million.
    • A director of Afrimat (JSE: AFT) sold shares in the company to the value of R2.15 million.
    • A director of a major subsidiary of Vodacom (JSE: VOD) sold shares in the company worth R834k.
    • An executive director of Momentum Group (JSE: MTM) bought shares worth R149k.
  • AECI (JSE: AFE) has announced a couple of big-hitter appointments to the board. Although I usually don’t cover non-executive director appointments, the importance of the mining sector to AECI’s business means I can’t ignore these ones. July Ndlovu (current CEO of Thungela) must have some free time in his diary, as he’s now a non-exec director at AECI as well. Billy Mawasha also joins, bringing with him a wealth of experience at major mining groups including a stint as country head of Rio Tinto South Africa.
  • Even though Trustco (JSE: TTO) plans to put together a Nasdaq listing and step into an incredibly regulated environment, they are late in the release of their annual financial statements. One of the reasons is that the auditors couldn’t get Namibian visas in time! They are going to need to get it together if they plan to make a success of the Nasdaq listing, as that type of story isn’t going to fly in the US.
  • Ahead of its delisting, DRA Global (JSE: DRA) announced that Apex Partner Holdings now has a 30.9% stake in the company, up from 25.01%. This was in all likelihood driven by the recent share repurchases from minority shareholders.
  • Pepkor (JSE: PPH) announced that Moody’s affirmed its credit rating with a stable outlook. Although this is for the benefit of debt holders rather than equity holders, it does indicate that the business is in good health.

GHOST BITES (African Rainbow Capital | Jubilee Metals | Metair | Orion | Sirius | Transaction Capital)

The Finance Ghost
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GHOST BITES (African Rainbow Capital | Jubilee Metals | Metair | Orion | Sirius | Transaction Capital)

Tyme Group lands a strong Series D raise – and that’s great news for African Rainbow Capital (JSE: AIL)

The total valuation for Tyme is now $1.5 billion

Tyme Group has been a lovely success story, as evidenced by a Series D raise that injects another $250 million into the group at a valuation of $1.5 billion. In startup land, that’s a really big deal and it sets the group up for an IPO in the next four years or so. The fact that the raise was oversubscribed is also extremely encouraging.

Nubank (a global digital banking group) led the round, investing $150 million. The M&G Catalyst Fund put in $50 million and the remaining $50 million was from existing shareholders, including African Rainbow Capital.

Tyme Group really isn’t messing around, with an ambition to become a top three retail bank in South Africa within the next three years. Just consider the competitive threat they are therefore posing to the established banks who already received a hiding from Capitec over the past couple of decades.

This is proving to be an incredible investment for African Rainbow Capital and I just hope that ARC will stay listed long enough for existing shareholders to get the full benefit of this journey to Tyme’s intended listing by 2028. As a sign of how important this asset is to the group, African Rainbow Capital’s share price closed 9% higher on the day.

Jubilee reminds the market that it isn’t immune to African electricity challenges (JSE: JBL)

It should be clear why securing private power supply has been such a priority

Jubilee Metals is struggling with lost production hours at the Roan facilities in Zambia due to infrastructure issues. This has led to a nasty drop of over 14% in the share price, adding to recent downward momentum. Mining is no joke at the best of times and especially in Africa.

The problem is that unplanned blackouts on the national power grid have led to outages at Roan, which doesn’t benefit from the private power supply that Jubilee manages to secure for other operations like Sable, Munkoyo and Project G. The impact is that there is uncertainty around whether production volumes will be met for the second quarter.

It really is a case of Bring Your Own Infrastructure when doing business in Africa, especially in power-hungry sectors like mining.

In happier news, Jubilee is still busy with its due diligence to acquire the Large Waste Project. The commercial terms have also improved, with the purchase price down to $18 million payable over 12 months, of which $11.5 million would still need to be paid. They expect to conclude the due diligence by January 2025.

A disappointing exit in the end for Metair from the Turkish operations (JSE: ORN)

Ongoing losses have led to a major downward adjustment to the disposal price

Metair seems to have gotten out of Turkey just in time, admittedly with very little to show for it. After initially announcing a sale of Mutlu Group for a disposal consideration of $110 million that was subject to net debt and working capital adjustments, Metair will get just $5 million in net proceeds. This is because debt has ballooned as Mutlu has continued to struggle with hyper-inflation and high interest rates.

Still, they needed to get out of the thing desperately. The old adage of “your first loss is your best loss” applies here. It takes a lot of pressure off the balance sheet, allowing Metair to move ahead with deals like the acquisition of AutoZone in South Africa. The final amount for that deal was R278.5 million, with a nominal amount for the equity and the rest needed by AutoZone to settle debtors (R203.5 million) and fund its working capital requirements (R75 million).

All they can do is move forward from here. If ever there was a company that is due a change in luck, it’s Metair. They really have had a tough time. A big part of the way forward is a balance sheet restructure, with Standard Bank agreeing to extend the existing bridge facility. Metair plans to present a final capital structure plan to its board and funders by March 2025.

Before that, an operational update is scheduled for release in February 2025. With the share price having lost around 40% of its value this year, the market will watch that closely.

Orion aims to release its Bankable Feasibility Study in January 2025 (JSE: ORN)

The latest drilling results will be incorporated in the BFS

Orion Minerals has received a set of drilling results from Flat Mine South. I certainly don’t pretend to understand any of the geological metrics, but the management commentary around the results sounds bullish

In fact, the results are strong enough that the company has made the decision to redesign certain elements of the Flat Mine South mining strategy. The Bankable Feasibility Study (BFS) is due for release in January 2025, a huge milestone for any junior mining group.

Sirius acquires a development site in Germany (JSE: SRE)

This is the final piece in the puzzle for this development opportunity

Sirius Real Estate is known for being a strong buyer and developer of properties, ranging from ground-up development through to value-add activities designed to fix underperforming properties. This has proven to be a solid strategy in Western Europe and the UK, regions that have claimed many scalps in property.

The latest such deal is an acquisition of a development site in Munich for €13.3 million. This is adjacent to the Munich-Neuaubing business park, with Sirius referring to it as the “final corner” of the estate. This gives Sirius lots of options regarding future development, so they seem to have completed a jigsaw puzzle here.

The acquired site comes with a rent roll of €740k per annum, so there’s some cashflow in the meantime that can also be enhanced by changes to the tenant base.

Transaction Capital’s Road Cover disposal is unconditional (JSE: TCP)

This is another important milestone in the group restructure

Transaction Capital has been taking various steps towards being focused on the Nutun business, although recent results have shown us that even Nutun is facing a number of challenges. At least a potential source of management distraction has been taken off the table, with the Road Cover disposal being finalised after the commitment agreement was signed.

This makes SA Taxi Holdings the owner of Road Cover, with the purchase price left on loan account. This is part of the support that Transaction Capital is giving to the Mobalyz business (the old SA Taxi) in an effort to see that business survive.

Nibbles:

  • Director dealings:
    • A director of Sabvest (JSE: SBP) acquired shares worth R2.1 million.
    • A director of a subsidiary of Oceana (JSE: OCE) sold shares worth R276k.
    • A non-executive director of Mondi (JSE: MNP) bought shares worth €7.45k.
    • A director of a subsidiary of PBT Group (JSE: PBG) bought shares worth R41.8k. There’s also been a reshuffling of a small part of the B-BBEE stake held by Spalding, with roughly 1.0% in PBT Group being sold to TheIntrepid Projects, known as TIP. This takes TIP to 2% in PBT Group and Spalding down to 25.4%. Various directors have direct and indirect exposure to that transaction.
  • Telkom (JSE: TKG) is another step closer to finalising the disposal of the masts and towers business to Actis. Having already received shareholder and Competition Commission approval, the latest approval to add to the collection is from ICASA. That’s another big one out of the way, with some conditions still to be met before the deal can close.
  • Shareholders in property funds continue to give strong support to dividend reinvestment alternatives. The funds love this mechanism as it helps them retain cash through issuing new shares in lieu of a cash dividend. Vukile Property Fund (JSE: VKE) is a recent example, with holders of 39.43% of shares in the fund electing to receive shares in lieu of a cash dividend. This helps Vukile retain R264.5 million in equity, which is a lot! Sadly, it also means that those who chose the cash have been diluted and this impact will come through in distribution per share growth, which is impacted by having more shares in issue.
  • Nigerian energy group Oando (JSE: OAO) has very little liquidity in its stock, so I’ll just give the results a mention down here. Revenue grew 36% in the nine months to September, but profit after tax fell 31%. As is the case for so many Nigerian companies, foreign exchange losses on debts were a major cause of the drop in profit.
  • Marshall Monteagle (JSE: MMP) is in the same boat, with very little activity on the share register. For the six months to September, revenue from continuing operations fell 15%, yet profit before tax was up 325%! HEPS from continuing operations jumped from 1.7 US cents to 7.0 US cents. Despite this, the interim dividend only moved slightly up from 1.9 US cents to 2.0 US cents.
  • Although it seems that there’s no real value left for shareholders in Tongaat Hulett (JSE: TON), it’s still worth mentioning that the business rescue practitioners have moved ahead with the sale of the South African assets to Vision Sugar. Sale agreements for the non-South African assets are still being finalised.

One weird year for Haliey Welch

Dominique Olivier
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One weird year for Haliey Welch

A moment of internet fame can catapult almost anyone from anonymity to a household name. But is there a way to transform all that newfound fame into cold, hard cash? Follow me as I track Haliey Welch’s one-year journey from obscurity to internet sensation to potential crypto villain.

It’s that time of the year again: a time when we find ourselves taking stock of the preceding 11 months and assessing the highs and lows of 2024. And while I don’t know much about you or the year that you’ve had, I’m guessing that few of us lived the rollercoaster ride that was 2024 for Haliey Welch.

Let’s start at the beginning

If the name is unfamiliar to you (and yes, that is the correct spelling), then you might recognise her better by her online moniker, “Hawk Tuah Girl”, which she earned thanks to her appearance in a viral street interview.

On the 11th of June this year, Tim Dickerson and DeArius Marlow were in Nashville’s Broadway district, filming vox pop interviews for their YouTube channel, Tim & Dee TV. Welch and a friend noticed the duo filming and approached them, asking to participate in the interviews. What started as a fairly tame Q&A session – think questions like “What makes you wifey material?” – soon took a turn as Welch encouraged Marlow to spice up the questions. Marlow delivered, asking, “What’s one move in bed that makes a man go crazy every time?” Welch didn’t hesitate, and in her thick Southern accent answered: “You gotta give ’em that ‘hawk tuah’ and spit on that thang.”

Due to the fact that my mother reads this column every week (hi, mom), I won’t be going into any more detail about what that means, but in case you didn’t quite get it and want to hear it from the horse’s mouth, you can view the original video clip here.

The meaning of the phrase is not as important as its wildfire effect. On the 12th of June, Marlow uploaded the now-infamous video clip to TikTok, and social media did what social media does best: took it and ran. Reposts of the video, often scrubbed clean of the “Tim & Dee TV” watermark, started popping up everywhere. Dickerson and Marlow later revealed they had to file at least fifty copyright claims in the chaotic aftermath.

Meanwhile, the original video exploded, racking up millions of views across TikTok, Instagram, and YouTube. It didn’t stop there – remixes, memes, and remakes of the audio flooded timelines, cementing Haliey Welch as the internet’s latest folk hero: “Hawk Tuah Girl”. The clip and her now-iconic phrase had officially gone viral, birthing a meme empire in record time.

Onward to fame and fortune

Welch’s life took a sharp turn after her viral moment, rocketing her from a minimum-wage factory worker to a full-fledged internet personality and entrepreneur practically overnight. Riding the wave of her newfound fame, Welch created an Instagram account that quickly amassed a significant following, attracting both media attention and brand opportunities.

Not content to let her 15 minutes fade, Welch went all in. She founded her own company, trademarked several phrases (yes, including that one), and signed with an agent to help manage her growing career. Soon, she was selling merchandise themed around her iconic line and making paid appearances.

On the 15th of August, she stepped onto the field at a New York Mets game to throw the ceremonial first pitch. On the 3rd of September, she launched a podcast called Talk Tuah in partnership with Betr, the media company co-founded by Jake Paul. The podcast had thirteen episodes in its first season and featured a variety of guests, including comedian Whitney Cummings, dancer Jojo Siwa, boxer Jake Paul and businessman Mark Cuban.

It wasn’t long before an app followed (of course). On the 14th of November, Welch debuted an AI-driven dating advice app called Pookie Tools. To bring her vision to life, she teamed up with Ben Ganz, the founder of Ultimate AI Studio, an AI automation platform. The app promised to combine Welch’s signature charm and real-talk advice with cutting-edge tech, helping users to “navigate the wild world of modern dating”. At the time of writing this article, Pookie Tools had an average of 3.5 out of 5 stars across 49 reviews on the Apple Store.

And then, of course, there was the meme coin.

Meme coin? Please explain.

A meme coin is a type of cryptocurrency that prioritises fun and hype over functionality. Instead of focusing on real-world applications, meme coins are designed to attract attention – and investors – through their quirky branding, viral appeal, and an enthusiastic online community. As the name suggests, they’re frequently tied to animated characters or popular meme images. Meme stocks are also a thing, where stocks like Robinhood went ballistic during the pandemic. At least there’s an actual company underneath that hype though! The same can’t be said for these coins.

Like other cryptocurrencies, meme coins are built on blockchain technology. Each token is essentially a hexadecimal number stored on a blockchain, with private keys to confirm ownership. While some meme coins achieve market value and can technically be used for transactions, many lack practical utility, such as rewarding blockchain participants for their efforts.

So what’s the point then? Many argue that meme coins offer an approachable way for people to learn about cryptocurrency and blockchain technology. They are generally more affordable than well-established cryptocurrencies, making them an accessible entry point for beginners. Additionally, they provide an opportunity to join active and enthusiastic trading and investing communities, which can be appealing for those who enjoy social engagement around their financial activities.

On the downside, meme coins come with extremely high risks and are notoriously volatile, making them a less stable investment option. They are often heavily hyped by their developers or communities, which can inflate expectations and lead to disappointment. Furthermore, many meme coins have little to no practical utility beyond being speculative tokens, limiting their functionality compared to other cryptocurrencies.

Enter the $HAWK

At their best, celebrity-backed meme coins are naive forays into the crypto world, where stars attempt to capitalise on an unfamiliar moneymaking trend. At their worst, they’re thinly veiled cash grabs designed to exploit fans through schemes like “pump-and-dumps” or “rug pulls.” Caitlyn Jenner, for example, is currently facing a lawsuit alleging she misled investors in her JENNER coin through one such scheme.

Haliey Welch, defending her own decision to launch a meme coin, told Fortune just hours before $HAWK hit the market that it wasn’t “just a cash grab.” However, the coin’s launch told a different story. Its value skyrocketed all the way to $500 million initially, only to plummet by over 95% within hours, landing at $25 million – a textbook sign of a “rug pull.” In such schemes, creators hype a coin’s launch to inflate its value, sell off their holdings at the peak, and leave unsuspecting investors holding worthless assets.

The fallout was swift. Internet sleuths, led by YouTuber and crypto investigator Stephen Findeisen (better known as Coffeezilla), quickly uncovered signs of misconduct. Findeisen compiled evidence after attending an X Spaces event where Welch and her team hosted a Q&A to address investor concerns. Instead of offering clarity, the session devolved into defensive posturing, with a man identified as Doc Hollywood deflecting blame and asserting the team’s innocence.

“This is one of the most miserable, horrible launches I’ve ever seen in my life,” Findeisen remarked when given the floor. He pressed the team about who benefited from the exorbitant transaction fees associated with the coin, only to receive evasive answers like, “Do you know how much it costs for lawyer fees to create a foundation in the Cayman Islands?”. Findeisen also highlighted findings from blockchain analyst Bubblemaps, which revealed that 96% of $HAWK’s supply was controlled by a single cluster of interconnected wallets; a hallmark of a coordinated “pump-and-dump”.

The call ended abruptly when Welch declared she was going to bed, leaving unanswered questions and rising skepticism in her wake. Since the event, Welch has largely remained silent, apart from statements issued by her lawyer to Coffeezilla. Whether she’s following legal advice to lay low or simply avoiding the public eye is unclear. One of the top online comments at the time advised Welch to Tawk Tuah lawyer – welcome to internet humour!

While being the public face of a failed cryptocurrency might not land Welch in prison, the situation could escalate if evidence shows she actively orchestrated the project. In that case, she could face serious fraud charges. For now, however, the most pressing question remains: was Welch just a pawn in a bigger game, or did she knowingly play her part in duping investors? Time will tell – but in the meantime, we can all agree that going from someone’s neighbour to a household name in the space of six months (all thanks to a 5-second soundbite going viral) makes Haliey the winner of the who-had-the-craziest-year award.

We can also agree that there isn’t much sympathy out there for people losing their life savings in meme coins. Be smarter than that this festive season.

About the author: Dominique Olivier

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

She is a weekly columnist in Ghost Mail and collaborates with The Finance Ghost on Ghost Mail Weekender, a Sunday publication designed to help you be more interesting.

Dominique can be reached on LinkedIn here.

GHOST BITES (enX | Labat | SA Corporate Real Estate | Sabvest | South32 | Supermarket Income REIT)

The Finance Ghost
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GHOST BITES (enX | Labat | SA Corporate Real Estate | Sabvest | South32 | Supermarket Income REIT)

enX sells the lubricants division – and the market celebrates (JSE: ENX)

The share price closed 18% higher on the news

enX announced on Friday that it will dispose of its 66% interest in Centlube, its 100% interest (and loan claim) in Ingwe Lubricants and its 37% interest in Zestcor, all as part of one indivisible transaction. It’s so rare to see a company sell off effectively an entire segment in one go, particularly when there are different underlying companies and the stakes are all different sizes! It’s little wonder that enX jumped at this deal, with a disposal consideration of R276 million.

The purchaser is the Dunn family, who are not related parties to enX. They aren’t strangers to the group either, as the family already manages the Zestcor business and they have a key supply agreement with Centlube. This explains why they are happy to buy this range of assets in one deal.

For enX shareholders, the happy news is that the debt of Centlube and Ingwe will remain with those assets and surplus cash from the disposal will be paid to enX shareholders via a return of capital. Even though a portion of the selling price needs to be held in escrow, the board of enX is planning a return of capital of R281 million – yes, slightly more than the selling price! This works out to R1.54 per share.

There are a bunch of conditions precedent for the deal of course, so shareholders will need to be patient for the return of capital. The good news is that this is only a Category 2 deal, so no circular and shareholder approval is required.

One and Dunn just took on new meaning for me with this elegant deal, sending the share price 18% higher on the day to R5.90.

Yes, Labat Africa did indeed lose more money in 2024 (JSE: LAB)

But at least the losses are lower than in 2024

Labat Africa has finally released results for the year to May 2024. There isn’t much to hang your hat on here. From continuing operations, revenue was pretty flat at R48.5 million and they suffered a loss of R17.8 million at EBITDA level. By the time you reach the headline loss, it balloons to R25.6 million. That’s a pretty incredible loss off that revenue base!

In the prior year, the headline loss was R86.7 million. This means that over two years, they’ve lost a spectacular R112 million! The management commentary around the prospects for the integrated cannabis strategy is bullish. What really counts though is the numbers, with this balance sheet going up in smoke at the moment.

If you read the going concern report from the auditors, you’ll find a very important comment that the group is planning a rights issue of R80.3 million once the suspension from trading is lifted. The current market cap is R46.8 million and I suspect it will crash further once the shares can trade again.

It is very likely that a rights issue of that side will dilute existing shareholders down to almost nothing unless they follow their rights.

SA Corporate Real Estate’s pre-close presentation shows that retail isn’t a slam-dunk (JSE: SAC)

There is plenty of pressure on operating expenses

SA Corporate Real Estate has released a pre-close update. Despite the name, they actually have a bunch of different types of properties in the portfolio, including residential! That’s something that you won’t find in most REITs, with SA Corporate pushing harder into this space through the creation of an unlisted residential fund that has already raised R1.25 billion from a cornerstone investor.

The full-year forecast is for overall portfolio growth of 6.0% in net property income on a like-for-like basis. That’s a decent outcome. Within that guidance, we find the Afhco residential portfolio as the shining star, up 7.4% thanks to rental increases and cost efficiencies due to investment in off-grid solutions for both electricity and water. The industrial portfolio also did well, with 6.9% growth and almost full occupancy.

Something had to be a drag on performance in order for the total to come out at 6.0%. The retail portfolio is the culprit, growing just 4.4% at net income level despite 6.8% revenue growth. This was because of 9.7% growth in operating expenses, with security costs as a major issue and huge municipal expenses inflation of 13.5% as well. Our country certainly isn’t out of the woods just yet from a governance perspective, especially at municipal level.

The retail portfolio could only manage slightly positive reversions overall, so that makes it difficult to offset this level of inflationary pressure. Long-term leases with high escalations were renewed at negative reversions to make up for the escalations. Those tenants simply enjoy better negotiating power as well, as anchor tenants have far greater ability to fight for great leases than smaller line shops.

The retail portfolio is a bit scrappy at SA Corporate, with lots of work needed on issues like redeveloping Ster-Kinekor space and replacing Pick n Pay as a tenant in some cases. I decided that this table from the update was worth including here to show you just how quickly Shoprite group is eating up Pick n Pay space (and space in general):

The forecast loan-to-value ratio for December 2024 is 42.6%. They expect this to drop substantially to 33.7% based on the unlisted residential fund.

Distribution guidance for 2024 is for growth of at least 5%. For 2025, they are guiding for growth above inflation.

Sabvest has reduced its interest in Apex Partners Holdings (JSE: SBP)

The proceeds are being used to reduce debt in Sabvest subsidiaries

Sabvest has unlocked R140.5 million by reducing its economic and voting interest in Apex. It now has a 40.6% economic interest, down from 46.4%. The voting interest is also 40.6%, down from 49.8%.

Apart from aligning economic and voting interests, this deal also increased the shareholding of Apex management and thus created more alignment in the business itself.

The proceeds will be used to reduce term debt in Sabvest subsidiaries. This debt was R600 million as at December 2023 and is now down to R160 million after various inflows.

South32 gets a regulatory win in Australia (JSE: S32)

Environmental conditions have been amended

South32 is working towards a mine life extension project at Worsley Alumina. The Western Australian Environmental Protection Authority has recommended that the project be approved, but the associated environmental conditions were onerous and went beyond reasonable measures – at least in South32’s opinion!

The good news for South32 is that the Western Australian Minister for Environment seems to agree, with a decision to approve the project with conditions that aren’t as onerous as the original proposal. A formal approval through a Ministerial Statement is expected later this month and federal approval is expected early in 2025.

Supermarket Income REIT quietly joins the local market (JSE: SUPR)

Apparently, omni-channel is something worth highlighting in the UK

The JSE is trying to convince international companies to have a secondary listing on the JSE. The benefit to local investors is that it makes it far easier to invest in these companies when they are available on your local brokerage account, as you don’t need to first fund an offshore brokerage account and suffer the forex spread along the way.

The listing of Supermarket Income REIT plc on the JSE certainly isn’t the first time that an offshore property fund has come to the JSE. We have a few of them, some of which have practically zero liquidity and end up being somewhat pointless listings.

I’m hoping that won’t be the case here, with the London-listed property company needing to convince investors that there is something special about the “omnichannel” model at its tenants. These are supermarkets that provide in-store shopping and online fulfilment. I have no idea whatsoever why this is considered interesting or different, as basically every grocery store in South Africa fits this description these days. The UK market is far more developed than South Africa when it comes to online shopping, so it seems even stranger that this would be a characteristic worth shouting about.

Nibbles:

  • Director dealings:
    • There’s yet more forced selling by Barry Swartzberg of his Discovery (JSE: DSY) shares, based on the share price being higher than the strike price on call options as part of hedge transactions entered into a couple of years ago. The latest sales are worth nearly R120 million!
    • Acting through Titan Premier Investments, Dr. Christo Wiese bought a big chunk of Brait (JSE: BAT) ordinary shares to the value of R47 million! He’s been buying up plenty of ordinary shares recently as well as exchangeable bonds in the company, with a purchase of R64k worth of those bonds in Titan Fincap Solutions to add to the tally.
    • A director of AngloGold Ashanti (JSE: ANG) received share awards and sold the whole lot to the value of R16.1 million.
    • It’s a mixed bag at RFG Foods (JSE: RFG) in terms of directors and their approach to share awards. Directors at the group holding company seem to retain their share awards (which are much larger in size of course), while directors of a major subsidiary all sold their share awards worth a total of R22 million.
    • A prescribed officer of Capitec (JSE: CPI) bought shares worth R1.1 million.
    • A director of a subsidiary of Oceana (JSE: OCE) sold shares worth R620k.
    • A director of Momentum (JSE: MTN) bought shares worth R186k.
  • Shareholders of Clientèle (JSE: CLI) have approved the acquisition of Emerald Life, as well as the creation of the preference shares that will be issued to fund the deal. I still feel like they’ve paid a full price here, but hopefully it works out well!
  • DRA Global (JSE: DRA) has announced the results of the buyback as part of the delisting of the company. The maximum number of shares eligible to be bought back was 11,088,080 shares and they didn’t hit the cap, with only 10,621,863 shares being bought back at A$2.08 per share. This is only 19.14% of shares in issue, so most of the current shareholder register will now move into unlisted territory.
  • In perhaps a sign of where the advisory relationship has shifted and what future deals could look like, Pick n Pay (JSE: PIK) changed its JSE sponsor from Investec Bank to RMB. The sponsor helps the company with applying the JSE Listings Requirements. It is often, but not always, the company’s corporate advisor as well.
  • I am not even slightly surprised to see that Global Credit Ratings changed the outlook on Sasfin’s (JSE: SFN) credit rating from Rating Watch Evolving to Rating Watch Negative. In other words, the current credit ratings (which already aren’t great) are at risk of getting worse.
  • In case you are somehow a shareholder in totally illiquid property counter Deutsche Konsum (JSE: DKR), then be aware that they’ve received EUR 7.4 million in a repayment on a loan that they had previously raised a loss provision against. Not only does this help them reduce overall debt, but it allows them to recognise income based on the reversal of the provision.

GHOST STORIES #52: Beating Money Dysmorphia

The Finance Ghost
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GHOST STORIES #52: Beating Money Dysmorphia

Listen to the show using this podcast player:

To close out the year, René Basson of Satrix* made her debut on Ghost Stories for a fascinating conversation on the topic of money dysmorphia. This is a mismatch between financial behaviour and financial means – and yes, it can work in both directions i.e. whether you have plenty of money or not enough!

In addition to some great personal finance hacks to help you combat these feelings, René shared some helpful statistics from the SatrixNOW platform and talked about some of the observable trends in investing across genders. We also closed out the discussion with some important tips for the festive season around cybersecurity, so there really is a lot here to sink your teeth into.

Satrix Investments Pty Limited and Satrix Managers RF Pty Limited are authorised financial services providers. Nothing you have heard in this podcast should be construed as advice. Please do your own research and visit the Satrix website for more information on all their ETF products. This podcast was published on the Satrix website here.

*Satrix is a division of Sanlam Investment Management

Full transcript:

Introduction: This episode of Ghost Stories is brought to you by Satrix, the leading provider of index tracking solutions in South Africa and a proud partner of Ghost Mail. With no minimums and easy, low-cost access to local and global products via the SatrixNow online investment platform, everyone can own the market. Visit satrix.co.za for more information.

The Finance Ghost: Welcome to this episode of the Ghost Stories podcast. I’m pretty sure it’s the last one for 2024. Hopefully I’m right, quite honestly, because I think we could all do with a bit of a break. But the good news is that we are ending off with a really interesting show!

It’s December now. It’s the end of a very busy year. We’ve had elections at home and abroad. We’ve had this magical disappearance of load shedding that no one really understands. We learned that a GNU is a political thing, not just a wildebeest. We’ve seen some big moves in global markets. We’ve been reminded once more that if you’re not invested in the market, you’re not going to get those gains. But we’ve also been reminded that diversification is your friend.

And now, after that whole whirlwind situation this year, we’ve landed in that part of the year that is hardest to manage your personal finances. Because it is indeed Dezemba, boss. And that means that reckless abandon is here and your credit card is here, and it may well be time to live your life. Somewhere in the middle is probably the right approach, but we’ll talk a little bit about that on this show.

We’re also going to talk about some really cool statistics from Satrix. I think what’s really great is that we have a new voice on the podcast from Satrix. Now, I’ve been working with René Basson, who is the Head of Brand at Satrix for a good couple of years now, but she has never ventured in front of the camera – not that we use the video, but she’s never ventured in front of the microphone to do a podcast with me. So this is very exciting. René, welcome to the show and thanks for bravely stepping up and finishing the year off with me on this podcast.

René Basson: Thank you, Ghost. Thanks for having me. I appreciate it. You know what it’s like. Marketers always are the ones behind the scenes, not in the scenes.

The Finance Ghost: Yeah, there we go. The team has basically forced you to say, listen, we’ve done enough of these things. It’s your turn. It’s time to stop directing from the back.

René Basson: Exactly.

The Finance Ghost: We’re going to do a really good show around this concept of what’s called money dysmorphia, which I’d never heard of actually before reading the article you wrote. I’m excited to get into that. But before we do, we are going to spend a little bit of time on the SatrixNOW platform. Before we get into some of the stats, which I think are going to be particularly interesting, let’s maybe just set the scene of where this data is coming from. What is SatrixNOW? How long has it been around and what does it actually do?

René Basson: SatrixNOW is our Satrix online investment platform and we launched it probably towards the end of 2015 in partnership with EasyEquities. It’s been around for quite a while. The app itself launched in 2020. It’s your DIY platform. You can sign up, open an account and it’s self-directed.

The Finance Ghost: Good timing in 2020! You literally caught that Covid upswing of people suddenly investing from home. Was that by accident? Or was it already in the works and you just happened to have amazing timing? Was it in response to Covid?

René Basson: I think it was already in the works. It was before I joined, so I think it was already planned and it just happened that the timing worked out quite well for us.

The Finance Ghost: Yeah, sometimes life works out. You’ve got to be in the market to get lucky. That’s the point, including in business, so there’s a lesson in there. There’s obviously some really great data that comes through from this then, and I think it gives direct insights into the behaviour of retail investors in particular, which is really helpful. Obviously the South African savings culture is something that we all know about. What you do at Satrix and what I do at The Finance Ghost is all to try and address this and make it better and get people empowered to invest.

I’m personally very keen to see what nuggets you have in that Christmas stocking of yours from SatrixNOW  – hit us with some stats! Let’s see what’s in there.

René Basson: Yes, I can share some stats. There are two things that we look at – we look at registrations, so individuals who’ve signed up and gone through a FICA process, and then the second piece that we look at is funded clients or invested clients. From a registration perspective, I’m looking at 2023 versus 2024 and the 2024 numbers are to about mid-November. We’re looking at a 9% increase year-on-year in registrations. Then from a funded client perspective, an 8% increase year-on-year, which is really positive considering what the markets have been up to and the economy.

The Finance Ghost: Yeah, that’s really good. I mean, there are not 8% more humans in South Africa, population growth is way lower than that. That suggests that the percentage of people who are coming into the platform and coming into the market is growing over time, which is very happy news.

René Basson: Definitely. Then I can share some nice demographics details with you, some age stats, those are pretty interesting. If you look at the registrations, the average age of someone who’s registered is 32. Then from an invested client perspective, the average age is 41. If we look at it since inception, so since launch in 2015, that average invested age is about 38, so a little bit lower. And then from a gender perspective, registrations are predominantly male, so 55% are male. But if you look at invested clients, it’s 52% female. We’ve seen a 1% increase year-on-year of female investors, which is really encouraging as well.

Then let’s look at location. I don’t know if you have a sense of where you think most of our investors are from, Ghost?

The Finance Ghost: I want to guess Western Cape, but I’m biased. But maybe it’s not that straightforward. Where is it, Gauteng? Probably, if it’s just the number of investors.

René Basson: Yeah, it’s Gauteng, that’s predominantly where the majority of the investors are. We’ve seen a bit of an increase of registrations from Gauteng, the Western Cape, and then followed by KZN, Limpopo and Eastern Cape.

The Finance Ghost: Interesting. So that would reflect the level of wealth in the country overall, not necessarily the trajectory, but just the number of people, which is kind of what you would expect to see.

Also, really interesting age stats actually. I guess it’s that phase of life as people have gone through their roaring twenties where they are paying back student loans and trying to travel a little bit and doing a whole bunch of different jobs and just figuring out what on earth they’re going to do with their lives. And in some cases getting married, not always, maybe having kids – early 30s, obviously this is all very much averages.

Then it seems to be at that point in time they then hit the platform and say, okay, at some point we need to start investing for retirement. I think the nuance here is people always need to remember that a retail investor signing up to invest in exchange traded funds through the SatrixNOW platform is doing this in addition to forced pension savings at work. This is someone who’s actually said and acknowledged and learned that what they’re forced to invest in from a retirement fund perspective through their salary – and it’s usually the case that there’s something, especially if you work for a larger corporate – is not going to get them there. They need to do more, which is absolutely right, then they land in the platform. Very interesting stats.

René Basson: Yeah. That actually gives me a good segue into the average investment amounts of this retail investors.

The Finance Ghost: Now that’s the juicy stuff. I was wondering if you were going to share some numbers. Let’s see.

René Basson: Well, I’ll give you a percentage. Obviously, I don’t want to share numbers specifically, but I think from an average investment amount, 2023 versus 2024, it’s a 61% increase, which is pretty impressive.

The Finance Ghost: I think that’s huge.

René Basson: It’s huge. Yeah.

The Finance Ghost: Is that on the per-month debit order type amount or is that the total account value?

René Basson: Total account value.

The Finance Ghost: Okay. So some of that is the market’s going up, right? It’s still really impressive.

René Basson: Yeah, it is really impressive. And then I’m sure you’d like to know the top funds or the most popular funds?

The Finance Ghost: Yes, definitely.

René Basson: The top five and 2023 versus 2024 are very similar. It’s a very small change. Satrix Top 40, our flagship fund and the oldest ETF in South Africa, is the most popular, both in 2023 and 2024. Then in 2023, it was followed by the Satrix Divi, then Satrix INDI, Satrix MSCI World S&P 500 and then the Satrix Nasdaq 100. I gave you six for 2024. The only difference was Satrix MSCI World ETF was number two, but very, very similar.

The Finance Ghost: That is super interesting. And is that measured by new funds flowing in? Or would that be measured based on the total value of those funds?

René Basson: It’s the total value of the funds and also how much new money is coming in. So how popular the funds are for new investors.

The Finance Ghost: I would have actually expected that the offshore stuff would be higher than that, because that’s where you can go and invest in Apple and Microsoft and all the fun stuff. It seems like lots of people are still piling into local funds, which is quite interesting. I don’t know, some clear familiarity bias maybe?

René Basson: Possibly. I really am not qualified to comment on that, to be honest. But I think the local stuff is still very popular, as we can see on the platform.

The Finance Ghost: No, it is definitely. Look, I can tell you from Ghost Mail and my own insight into this is that even though I beat the drum very often that offshore exposure is really important and that’s where you are genuinely buying the world’s best companies and everything else, I personally think it’s familiarity bias because I can see if I put out an article on local news versus something really important on international news, the local news will just get way more hits. It just will. I think there is an element of wanting to read about stuff that’s close to home. Maybe people think that’s where they have an edge, I’m not sure? Maybe the offshore stuff is just quite scary? Whatever the reason is, that seems to come through in your stats as well. So that makes sense.

René Basson: Yeah, it is interesting to see the MSCI World ETF move up into second place from 2023 to 2024. I think Satrix 40 might be familiar, people know it, it’s been around the longest. It’s probably why it’s so popular. Then MSCI World number two now, so there is a little bit of a shift we’re starting to see.

The Finance Ghost: Yeah, the Satrix 40 was the first share that I ever bought on the market. I remember it clearly when I opened my own – it wasn’t a brokerage account at the time – I would have done it, I’m sure I would have done it directly through Satrix. This were before the days of EasyEquities when it was a lot easier to do this. It would have been directly through Satrix. It probably would have been, I want to say, 10 or 11, maybe even 12 years. Somewhere there. Anyway, it shows how long this has been around, actually. Satrix 40 has been around forever.

René Basson: Yeah, definitely. Then I wanted to give one last random stat just in terms of our app downloads. We’ve actually had about 5,000 app downloads in the last year and surprisingly the majority are iOS downloads versus Android.

The Finance Ghost: No surprise there. Based on my podcast stats, I can tell you there’s definitely an over-indexing of Apple. I think Apple phones are just more expensive and so people who have spare income tend to have Apple devices. I personally have an extremely broken Xiaomi. It really is a complete basket case of a cellphone. I’m becoming my dad where I just want something that “makes phone calls” – it’s mildly embarrassing. I cannot bring myself to spend money on what Apple wants for a new iPhone. So here I am with my very broken Android. I guess I’m somewhat the exception because I also see that trend towards iOS in all the podcast stats. I’m not surprised that your app is giving you the same sort of information there.

I think let’s move on then from the SatrixNOW stats, which really have been pretty interesting, into this concept of money dysmorphia, which I think is a really important topic at this time of year. You wrote a pretty interesting article on this recently. It’s not a term that I’d really heard before. I think it’s quite clever how it sort of all comes together. Let’s start right at the beginning, which is in simple terms, what is money dysmorphia?

René Basson: It’s not a clinical term, it’s an internet term. It’s used to describe a warped or rocky relationship or perception of your finances. I’ll give you an example. You, no matter how much money you make, might feel financially insecure. You might have a lot of money in the bank, but you still feel like you don’t. Or, if you are really cash strapped and on a tight budget, you’re still impulse buying, so you’re not really believing the reality of your finances. I would say that some stress around money and finances is obviously quite normal, but this is worse than the standard concerns around cost of living. It’s more like obsessive or distorted, I’d say.

The Finance Ghost: Interesting. So that sounds like a very unhealthy habit and I would imagine that social media probably doesn’t help with this, especially among younger generations and the good old Instagram feed of people living their very best lives or talking about – I mean, I’m going to be honest, I think some of the FIRE-type content that I see is just as bad. I know it’s actually an unpopular view that I have, but I also don’t think that making people feel terrible about buying anything nice is healthy either. I really don’t. It’s as bad as living beyond your means.

Just aim for something in the middle. I really don’t understand this whole “I’m going to live like I’m poor for the best years of my life so that I can retire with lots of money when I’m too old to do anything with it anyway” – I will never understand that for as long as I live.

René Basson: No, I agree. I have the same kind of outlook as well. Social media is definitely aggravating these feelings of inadequacy, I suppose that’s what you could call it. And also, as a society, we tend to keep finances and money worries or stresses very private. That’s just what we do, right? We don’t talk about it very often.

I think we also developed this idea of wealth and what success looks like. You see all of this stuff online and I want to say you scroll on social media and you see everyone living their best lives, to quote the social media terms. You might actually be doing fine financially, but it’s trying to keep up with people, at least the perception that you’re trying to keep up with people.

If you look at Black Friday and Cyber Monday, you’re getting bombarded with online ads on social media. It’s ridiculous. I definitely think social media aggravates this and makes us feel pretty bad about things.

The Finance Ghost: Yeah. The more common one is the “keeping up with the Joneses” point, living beyond their means. It’s all that kind of stuff. I can understand why people do that. It’s a very easy trap to fall into. Obviously, we all want nice things and it’s frustrating when you can’t have them. It takes a lot of discipline to say I actually don’t need this thing, or I can’t really afford this thing, especially when you have the money.

There’s a very big difference between “I have R100” and “I can afford to spend R100 on this thing” – those two things are not the same thing. Just because you have the money in your pocket doesn’t mean you can afford the thing you’re looking at. Not understanding that difference is what gets people into all kinds of trouble.

The other thing you referenced there, which is in some ways even more interesting, is this mindset of: “I still can’t afford this” – I think it’s often when people haven’t really grown up with much and then they get to a point where they actually have money in their lives and then they still struggle to actually spend it, they go the other way, where they live beneath their means, but almost to a level where it’s unhealthy, right?

René Basson: Definitely. I think childhood definitely affects how we socialise. How we’re brought up and the relationship with money is definitely affected by that. I think, if you grew up in an environment where, say, money was a source of tension or it was scarce, and parents might have said money doesn’t grow on trees, we’ve all heard that, you’re probably internalising that and you develop an anxiety around money.

Even if you are doing pretty well, you might find it quite hard to spoil yourself or spend your money on something that you would enjoy. Then conversely to that, maybe you grew up in an environment where money wasn’t a problem and it was quite freely available, then you would probably adopt a more carefree attitude to money as an adult.

There’s a culture aspect to this too. Some cultures see being spendthrift and frugal as a virtue, whereas others see kind of consumption as normal. I guess it’s around trying to recognise these patterns and trying to break them. The first step is to reflect on your behaviours and your patterns and how that’s affecting your financial decision-making and then understanding, educating yourself, setting some goals, getting support if you need as well.

I think it’s a very complex area of human nature, that would be the way I would describe it.

The Finance Ghost: Yeah, it is. We all have our own tricks to deal with it. My journey has been one of not growing up with any spare money at all. There was a ton of pressure to get bursaries if I wanted to study what I wanted to study. There was just never anything spare. Then if life goes to plan and you get to your adult life and you have some spare money, it actually takes you a while to believe it! Then you have to be careful not to go, oh, you know, abundance!  That also doesn’t work.

I find my personal journey has been a pendulum. At times, you feel like you start too far one way and then you swing much too far the other way, and then you go, okay, I’ve got to rein it in now. Maybe that’s what most people have to go through. They almost have to taste the full spectrum to then find the middle, because it’s quite difficult unless you’ve done that. Where is the middle? If you don’t know where the ends are, how on earth do you know where the middle is?

René Basson: It’s really difficult, honestly. I remember for me, when I first started earning money. My first job, it was like, wow, I’ve got all this cash. And like you fall into the traps of spending money very easily.

The Finance Ghost: Yep. No, you absolutely can. Look, I think it helps if you are very disciplined around, okay, this is the amount I need to save and invest every month. Then if this is what works for you, you can literally treat the rest as fun money. Then it almost doesn’t matter what you spend it on.

That doesn’t work for me because I still treat everything in isolation. I actually learned that in my corporate advisory days because I was working with clients who were literally billionaires. Then you would, I don’t know, finish a meeting with them and then there’d be a place just outside and then you’d need to buy lunch or coffee or something. A lot of these people, especially really hard-working, self-made, built-it-up-from-nothing, took-risks-in-businesses people, you try sell that person a coffee for twice what it should cost and they won’t buy it. They could buy that whole coffee shop 30 times over, but don’t rip them off on that one coffee!

I think that was such a cool lesson and my approach in life is treat everything as a separate thing. I know what a coffee should cost and so if it doesn’t cost that, it’s annoying and I’m probably not going to buy it even though I can afford it. Similarly, I don’t beat myself up about an overseas holiday because that thing costs a lot of money whether you like it or not. It’s wonderful and it’s great to be able to do it even though you can buy a gazillion coffees for the same price as your overseas holiday.

That’s been my personal method, just compartmentalise everything I look at and ask: is this thing worth it? In isolation – regardless of how much money I do or don’t have. That’s something that has worked very well for me.

René Basson: That’s a great approach, actually. It’s definitely something you’ve got to keep reminding yourself of because you don’t want to – as you said earlier, you want to enjoy your life. Actually when you do have the ability to buy a gazillion coffees, even though you probably wouldn’t, knowing the value of something is also very important because it helps you enjoy it. It’s better than it would be if we’re just spending frivolously.

The Finance Ghost: Absolutely. It really keeps you out of trouble, so it’s quite important. I also saw in your article that you actually referenced gender stereotypes, which is also quite interesting and they might play a role here. I think everyone can fall into this trap – you and I have just proven it on this podcast! But it’s still nuanced for each gender because there are still these societal norms that filter through. There’s still all the societal messaging that filters through. It’s gotten a helluva lot better in the last couple of decades maybe, but it’s still there. In your opinion, how does that affect the gender stereotypes at play here?

René Basson: Gender stereotyping is a huge topic. You could spend hours talking about this. I guess from my perspective, I would say it depends on how you socialised as a child, because that influences how you think about money. It’s. It could be cultural, could be your family environment, could be your community.

I can give you an example. Think of two young kids, a 10-year-old boy and a 10-year-old girl. A young boy might be asked to go mow the lawn and gets paid R20 and he learns that he can do a task and he gets paid for it. He’d probably go to the neighbour and demand R30 and make money that way. A young girl, for example, might be asked to look after her younger sibling because it’s the done thing. She probably won’t get paid for it. She doesn’t learn anything except that she has to work for free. I’m not saying that happens everywhere. I mean that’s just a very general example.

I think women and men prioritise spending differently. Women focus on education, health care, looking after the home, making sure that there’s food on the table, doing the grocery shopping. Men tend to focus on investments and when they do focus on investments, they focus on higher risks. Women tend to focus on lower-risk opportunities and therefore less return. I think also from a financial confidence perspective, women tend to have less confidence when it comes to finances. My example, as you socialise as a child, it’s also an influence.

So yeah, it’s a very complicated and in-depth topic. From a Satrix perspective, we’re also trying to focus a lot on encouraging women investors purely for this reason. I think we’re making small steps and small strides, so all positive.

The Finance Ghost: Yeah, it makes sense. Look, it’s so easy to offend half of earth when talking about anything that is remotely a gender stereotype, but I think a lot of what you’ve raised there is right. I think there’s this world of equal opportunity now – we’re certainly working towards that – and that’s fantastic. It’s maybe not there yet, but it should be and it will be, I hope soon. But I do also think that the genders do apply a slightly different lens when they look at things on average.

Obviously, there are exceptions, but the reason I now believe that is because I’ve had small children and I have friends with small children and you can absolutely see a difference between little boys and little girls. It just is what it is, never mind the academic textbooks or anyone else who may want to shout at me, it’s a fact. Spend time around enough toddlers who are boys and girls and you will see on average there are just certain realities around risk-taking and everything else.

As people become adults, they learn to manage this and it changes, but it is there. So I can understand how that thing comes through on average in how people react to managing their money, etc. It’s important to understand the bias that you might come with depending on what gender you are and where you are on that full spectrum of being affected by this bias.

If you are a very strong risk-taking person, then you need to think about that. Also, if you’re someone who’s very scared of this kind of thing, you’ve got to almost overcome that to learn that actually you’re doing yourself a great disservice. As with most things in life, extremities are not good. Somewhere in the middle is good. If you can understand which extreme you’re at and where your bias lies, then you have a better chance of getting past that and managing yourself better – either being less risk-taking or more risk-taking and finding that appropriate point on the spectrum for your own personality, right?

That’s how you overcome this money dysmorphia, although I know you’ve got a lot of other really practical, great advice on that. Let’s move to that. The article that you wrote had a very cool framework on how to manage some of this money dysmorphia. I’m going to open the floor to you now to take us through that.

René Basson: Thanks, Ghost. Yeah, I agree with your previous statements on understanding your biases and where you are on the spectrum. It does help you.

In terms of dealing with money dysmorphia, I think there are a couple of things you can do practically. First one is to take a step back and really understand your financial situation and where you’re at. When you’re doing that, analyse the patterns, your spending patterns. Why are you impulse spending if you are an impulse spender? Do you do it when you’re stressed or you’re emotional? Consider whether you are worried about values – are you buying or spending money in terms that align with your value? For example, if you’re trying to build wealth for your future generations, or you are wanting to be a philanthropist and work with your community and donate money to charity, find whatever is important to you. Once you’ve been able to do that introspection and understand where the behaviours are, you can work towards building healthier habits.

One of those things is once you’ve done that introspection, set up financial goals. Understand where you want to be short-, medium- and long-term. Are you saving for your retirement? Are you saving for a house, for example, whatever that might be? Because those kind of things are very positive incentives to initiate action.

Then I would suggest speaking to somebody. Get an IFA or a financial advisor to help you if you need to. If you’re in debt, consider a debt counsellor or a credit coach. There are a lot of very talented and qualified people out there that can help give you advice. A trusted intermediary would be a good thing.

Then I would be remiss to not say: keep investing. The SatrixNOW platform allows you to invest with R10. Put it aside, pay yourself first. If you can put aside R10 to R50 a month, then start doing that because you’ll thank yourself in the long term.

The Finance Ghost: Yeah, I completely agree with all of that. I think let’s close off then with just recognising where we are in the year. It is the season for all kinds of stuff. And sadly, one of those things is credit card scams and fraud and getting taken for a ride and your holiday getting ruined by the fact that someone’s now spent a gazillion rand on “Facebook ads” and all the other things that I see online all the time.

Part of personal finance is just managing your own risk, not just around what’s in your portfolio and your own biases and where you are in your journey as a family and all that other stuff. It’s also about being just eternally careful of fraud and scams. I think you’ve probably got some festive tips around some of that stuff to bring this year to a close?

René Basson: Definitely. It’s rife across all brands and all financial institutions. We’re all struggling with the same thing. I think to your point, always be vigilant and be very careful and trust your intuition. From a very practical point of view, if you’re traveling and you’re in the airport with free Wi-Fi, don’t do any financial transactions using free Wi-Fi and stay off your banking apps and your investment apps. Enable your two-factor authentication and make sure your passwords are strong. Then just from an investment point of view, I’d say never be pressurised into investing. If it doesn’t feel right, don’t go for it. If it’s too good to be true, it probably is. I would say those are the key things to keep in mind.

The Finance Ghost: Common sense, right? That’s the way to do it. Like you say, silly things like just using a little bit of data on your phone, rather hotspot it than use the airport Wi-Fi. If you’re going offshore, it’s even more severe, just think about that. I’ve gotten to a point in my life where I just roam. It’s really not that expensive. Then you’re not sitting there struggling with free airport Wi-Fi somewhere exotic – it’s just not worth it. It’s really not. That can very quickly ruin your holiday completely.

You’ve got to be vigilant back home as well. You really do have to just be careful all the time. Keep an eye on your statements. This festive season, you might see your own bad spending habits, but at least you bought something for yourself! It’s a lot worse if someone bought something for their partner instead of you buying for yourself. If a TV went off on your credit card, you better make sure it’s a TV that you bought. Seriously, just stay safe out there.

My last point is just to say thank-you to those who have listened to Ghost Stories this year and the Satrix podcasts. We’re going to do more of them next year. It’s all very exciting. There’s so much to learn – all about the products, all about the behavioural side.

The fact that you’re listening to this and putting in the effort already suggests that you are firmly on the right track. Don’t stop learning, don’t stop sharing these podcasts with your friends and your family who you think would benefit from them. I think don’t be shy to have the conversations about money with people. For some reason, it’s still this taboo topic. People will talk about the most outrageous things, but they will not talk about money. It’s just incredible for me. Make that the topic and actually help people out. Share your insights with them, share content with them that you think is great – from anyone, obviously, not just from me. There’s a lot of really good stuff out there.

Also just reward yourself for getting this far in the year. I think that this is the time to have that extra ice-cream, hang out with your family, go away for the night, just have fun. Watching every cent in December is also not fun. If you go in with a decent plan of how much you can spend, then you can actually spend it with enjoyment as opposed to having regret in January.

To the listeners of the show, have a fantastic festive season. Thank you so much for joining us this year. And René, I think we’re going to have to get you back on here. I’m not sure this can be your only podcast, or are we just going to break you out once a year, like the elf that entertains my son so much at this time of year once a day. Are you going to be our Christmas elf for December shows each year?

René Basson: Maybe. Maybe you can convince me to come back. I don’t know. We’ll see.

The Finance Ghost: There we go. We’ll see how it goes. René, thank you so much. And to the listeners, thank you. Ciao.

GHOST BITES (Bidvest | Gemfields | KAP | Pan African Resources | Transaction Capital)

The Finance Ghost
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GHOST BITES (Bidvest | Gemfields | KAP | Pan African Resources | Transaction Capital)

Bidvest to sell Bidvest Bank and some other financial services businesses (JSE: BVT)

This is part of a substantial restructuring of the financial services division

The Bidvest management team understands how to allocate capital. They also know which setors they are particularly good at. The reduction of exposure to the financial services sector simplifies the group for investors and unlocks substantial capital.

The major disposal on the table is 100% of Bidvest Bank Holdings to Access Bank, a substantial player with operations in 23 countries. Access Bank acquired Grobank in 2021 as its market entry in South Africa and is now taking a major further step with this R2.8 billion acquisition of Bidvest Bank. For context, Bidvest Bank’s operating income was R377 million in the latest financial year.

Bidvest will apply these proceeds towards the reduction of debt, dropping its net debt / EBITDA from 1.7x to 1.6x.

In other deals, Bidvest has agreed to sell 100% of FinGlobal to Momentum Group and is in the process of assessing binding offers from life insurers for Bidvest Life. No numbers have been given for either of those deals.

Finally, some positive news for Gemfields (JSE: GML)

With the share price down 45% year-to-date, they need it

Gemfields has been having a tough time of it lately. The market for precious stones has been under pressure, especially for emeralds where a large producer seems to be happy to sell at much lower prices than Gemfields would like, causing a downward shift in the entire market. This comes at a time when Gemfields has a substantial capex programme underway and they cannot afford to have major dislocations or negative surprises in the market for these stones.

At least the results of a mixed-quality ruby auction are promising. They sold 95% of the lots offered for sale and achieved record average prices per carat for a mixed-quality ruby auction. I would be careful with putting too much faith in the “record pricing” narrative, as mixed-quality auctions mean that the mix itself can have an impact on pricing.

The other problem for the share price is the volatile situation in Mozambique. The rubies come from Montepuez Ruby Mining Limitada, which is 75% owned by Gemfields and 25% by Mozambican partner Mwiriti Limited. I’m speculating here, but I suspect that the local ownership is the reason why mining operations have been unaffected by the civil unrest in the aftermath of the election.

It can’t all be good news, of course. Mining in Africa is never dull, with the announcement also noting that Kagem Mining (the Zambian emeralds business) has had a legal claim filed against it by a competitor in Zambia. This relates to alleged unlawful occupation of a certain area. This claim follows a separate claim filed by Kagem against the same counterparty just one month earlier, so there’s clearly no love lost there. It’s probably little more than a painful distraction, but it’s still not helpful right now.

Will KAP finally enjoy a meaningful upswing? (JSE: KAP)

There are promising signs in the pre-close update

KAP has given an update for the five months to November 2024, which is essentially a pre-close update for the interim period. Although one would expect the benefits of improved sentiment in South Africa to have flowed through to the business, it doesn’t sound like that is happening yet.

Still, revenue was up for the period, so KAP’s sobering view on trading conditions should be read in that context. Whether or not profitability will be up is a different matter, as there have been various drags on performance. These include ramp-up costs at PG Bison’s new MDF line, higher finance costs for the group as a whole and lower vehicle production at local OEMs, impacting the Feltex business where operating profit has “notably declined” – ouch.

Safripol is the really important division to watch, with KAP suggesting an increase in revenue and operating profit. They talk about improved volumes based on production constraints in the prior period at Sasolburg that seem to have abated, so that’s an encouraging read-through for Sasol. Polymer raw material margins have been stable, albeit not exciting based on global industry overcapacity.

Over at Unitrans, operating profit moved higher despite a smaller fleet size, so that tells a great story for efficiencies. At Restonic, revenue and operating profit increased as they won market share in the bedding market. At Optix, they achieved higher revenue and lower operating profit, which is typical of a start-up in scale phase.

It sounds like the second half of the year might be better than the first half, especially based on the increased capacity at PG Bison’s MDF line. The restructuring activities at Unitrans are paying off and even Safripol sounds like it might be getting better. They also expect net debt to decrease from the second half of the year, which will be a useful underpin to earnings along with hopefully decreasing interest rates.

Interim results are due on 27 February. It doesn’t sound like they will be strong, but perhaps things will look better for full-year earnings.

Pan African Resources gives the market strong guidance (JSE: PAN)

Will gold prices stay high enough to make this really lucrative?

Mining houses can’t do anything to control the price of the commodity that they produce. All they can do is focus on maximising production and minimising costs, giving themselves the best possible chance to get lucky.

It looks as though Pan African Resources is doing a solid job of that, with strong guidance for gold production. Thanks to recent investment in production, they expect the six months to December 2024 (1H’25) to be in line with 2H’24. They expect full year 2025 production to be 16% higher year-on-year. Looking ahead to FY26, the expectation is a further jump of 12.7% at the midpoint.

This excludes the acquisition of Tennant Consolidated Mining Group (TCMG), so that shows the value of the investment made by Pan African in its other operations, especially the Mogale Tailings Retreatment operation. It also sent a strong message to the market that Pan African came in below budget and ahead of schedule at Mogale, the holy grail for any construction project.

By February 2025, Pan African expects its gold hedges to have unwound, so they will be fully exposed to the spot price. That’s good news based on current prices. If the prices continue, debt at Pan African will be a thing of the past in the next 12 to 18 months.

It’s not all smooth sailing of course, especially in mining. The Evander Mining production ramp-up has delivered some headaches along the way, although those issues have now been resolved.

The share price is up a whopping 110% year-to-date, which is what happens when production comes on stream at the same time as strong gold prices.

Transaction Capital needs new brooms to sweep clean at Nutun (JSE: TCP)

Even the core business had a disappointing year

Transaction Capital has released results for the year ended September. It was an historic year for the group, albeit not for happy reasons. They separately listed WeBuyCars and raised R1 billion in the process. They had to sort out holding company net debt and contingent liabilities, while making extensive reductions to head office costs. Various non-core subsidiaries of Nutun were also on the chopping block, along with the sale of a controlling interest in Mobalyz to a management consortium.

It’s like taking a block of mouldy cheese and cutting away as much as possible to see if there’s any good stuff left. The latest results suggest that even Nutun wasn’t safe from the mould.

Core continuing headline earnings for Nutun fell by a nasty 85% to R54 million. The South African business suffered from group funding constraints for new book acquisitions, along with problematic payment behaviour by consumers that made the books less lucrative. Interest costs also moved sharply higher. At Nutun International, it sounds like the issues were more once-off in nature, although time will tell.

If you include the legacy head office costs, then Transaction Capital’s core headline loss from continuing operations was R92 million. Remember, this doesn’t even include the problems at Mobalyz!

Clearly, there’s a lot of work to be done here. Much of the focus has been on the balance sheet, which will benefit from the disposal of parts of Nutun as well as new commitments from main funders. There’s new management in place as well, with a strategy to focus on BPO services. They are now pushing the BPO narrative hard, which means they want to be seen as more than just a debt collection business.

Importantly, there are also further reductions in head office costs, such that it will now be collapsed into Nutun for reporting going forward. This is because there’s actually nothing else left in Transaction Capital that they are actively managing, so there’s no point in a reporting structure that makes them look like capital allocators. They are now operators of a single division, with other investments that will hopefully produce long-term benefits.

Nutun is targeting a medium-to-long term return on equity of between 20% and 25%. Let’s see what happens.

Nibbles:

  • Director dealings:
    • Carl Neethling has bought shares in Ascendis (JSE: ASC) worth R12.3 million in an off-market transactions. Also in off-market transactions, Calibre Investment Holdings bought a net R37.6 million worth of shares. Further important disclosure is that International Finance Corporation no longer holds any shares in the company, while Calibre now has a 27.43% stake.
    • A director of Motus (JSE: MTH) has sold shares worth R2.5 million.
    • Two directors of a major subsidiary of RFG Holdings (JSE: RFG) received share awards and sold the entire lot worth R480k.
  • Conduit Capital (JSE: CND) has released its quarterly update, something that companies that are suspended from trading are forced to do. One source of upside is the R50 million arbitration award in favour of Conduit Capital against Trustco Properties. They are taking steps to enforce the award. As for the R55 million sale of CRIH and CLL to TMM, the parties are hoping for a positive response from the Prudential Authority after a successful application to the Financial Services Tribunal to overturn the initial decision. The sale of property agency Century 21 for R7.3 million is only contingent upon the approval by the international master franchise agency, following which cash should flow. Finally, they have a lot of catching up to do on financial reporting – all the way back to the six months to December 2022!
  • Murray & Roberts (JSE: MUR) has withdrawn its cautionary announcement. Before you get excited, this is purely a technicality. The shares are suspended from trading due to business rescue proceedings, so you don’t need to trade with caution if you aren’t able to trade anyway!
  • Shareholders of Visual Holdings (JSE: VIS) voted strongly in favour of the issue of shares to related parties to improve the group balance sheet.
  • Combined Motor Holdings (JSE: CMH) is moving its listing to the General Segment of the Main Board of the JSE, following in the footsteps of several other smaller listed groups.
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