Deneb is acquiring 80% in Dawning Filters (JSE: DNB)
This is a very good example of the types of deals and pricing you see locally
Deneb is involved in the manufacturing and distribution of industrial products. As is typical for companies in this space, they are open to acquisitions to expand the overall product offering.
As the name suggests, Dawning Filters supplies all kinds of filtration products to customers across multiple industries. The company has distribution offices in Joburg, Durban and Cape Town, with manufacturing done in Durban.
Deneb is paying R80 million for an 80% stake in the company, so you don’t need to get the calculator out to know that the implied value of the entire company is R100 million. Profit after tax for the year ended February 2025 was R15.7 million, so the earnings multiple is 6.4x.
Importantly, there’s a pathway to a 100% stake in the form of a put option that becomes exercisable after four years for a six-month window period. But there’s no call option, so Deneb cannot force the issue to get to 100% – the sale of the final 20% is at the option of the sellers of the business. The maximum consideration that could be payable to the sellers is R120 million, so Deneb has wisely included a cap on the option. The basis of the calculation for the put option price is 6x average annual profit.
This is a category 2 transaction, so Deneb shareholders won’t be voting on it. There are various other conditions though, so it will no doubt take a few months to close the deal.
Discovery’s financial year is off to a good start (JSE: DSY)
The medium-term plan calls for mid-teens growth
Discovery presented at the UBS South Africa Financial Services Conference this week. Hylton Kallner, CEO of Discovery South Africa and Discovery Bank, led the presentation. I think it’s fairly obvious how the succession planning is shaping up at Discovery. You’ll find the presentation here.
The group had a very strong FY25 and took the opportunity to remind attendees that normalised headline earnings increased 30%. That’s always a nice way to set the scene!
There’s a very cheeky slide in which they talk about Discovery being number 1 in every category they play in locally. But the metric changes each time e.g. for Discovery Life they use market share and for Discovery Bank they use “number 1 bank brand” – market share is what counts, in which case they are very far from being number 1 across a couple of verticals. I’m not sure why they dilute such an objectively excellent year with such an obviously skewed way of explaining their market positioning:
There are also some very interesting slides on the data they have on things like sleep duration and how this affects health and overall risk of vehicle accidents etc. This is of course the Vitality data that they’ve been building for years now, with the AI era making it even more powerful (and valuable) than before.
The five-year growth ambition for the group is a CAGR of 15% to 20% in profit from operations. Although the South African business is the most mature part of the group, they expect it to achieve a CAGR of 12.5% to 17.5%. Yes, the ecosystem will need to work very well for this to be achieved, but they are firmly on that path.
The presentation also included an update on trading for the first quarter of the new financial year. They are calling it a strong start, with decent new business growth numbers and favourable claims and persistency experiences vs. embedded value expectations (that’s good for profits).
The share price went through a significant recent sell-off, but seems to have positive momentum once more.
Equites Property Fund remains far more bullish on SA than the UK (JSE: EQU)
That’s just as well, as they’ve taken significant steps to bring capital home
Equites Property Fund released results for the six months to August. The narrative tells a more positive story about South Africa, although they note that a “broad-based recovery has yet to take place” despite the recent optimism. That’s a lot better than the UK, with 10-year gilt yields (government bonds in the UK) at historically high levels and the UK logistics property market stuck in a state of low growth.
Equites has made it clear that they are reallocating capital from the UK to South Africa and they’ve already done some significant transactions to make that happen. The narrative simply confirms that nothing has changed regarding that strategy.
For the interim period, like-for-like portfolio rental growth was 5.1% and valuations were up 4.0%, so that’s a solid combination. The loan-to-value ratio did come in a bit higher at 37.2% (vs. 36.0% in February 2025), but the all-in cost of debt thankfully dropped by more than 50 basis points to 8.3%.
The dividend per share was 3.8% higher, while distribution guidance for the full year has been reaffirmed at growth of between 5% and 7%.
The net asset value (NAV) is R16.93 and shares are currently trading at R16.05. The entire sector has seen a reduction in discount to NAV as prospects have improved.
Hammerson is enjoying decent momentum (JSE: HMN)
A ratings agency upgrade does wonders for debt costs and availability
UK property fund Hammerson had no trouble with a €350 million bond issuance that was 5 times oversubscribed. This issuance is part of the refinancing of the €700 million bonds maturing in 2027. It helps that Fitch upgraded the company’s unsecured debt rating and Moody’s revised the rating to a positive outlook.
Due to the timing of the bond issuance, they now expect full year earnings to be £101 million, ever so slightly down from previous guidance of £102 million.
The announcement also includes a trading update based on the summer months, where UK and French footfall were up by mid-single digits. As one would hope, properties that went through significant redevelopment and repositioning did particularly well. Importantly, they are achieving a significant rent increase in long-term lease agreements.
Pick n Pay’s like-for-like momentum is encouraging, but the group is still making losses (JSE: PIK)
Retail turnarounds are hard
Pick n Pay released a trading statement for the 26 weeks to August 2025. The group is unfortunately still loss-making, so we may as well get that out of the way. The headline loss per share has improved by between 50% and 60%, but it’s still a loss of between -54.31 cents and -67.97 cents. In absolute terms, the headline loss is between -R399 million and -R479 million.
So, there’s a long way to go. The key metric to watch is like-for-like growth in Pick n Pay SA, where they came in at 4.3% for the interim period vs. 3.6% in the 17 weeks to 29 June 2025 (in other words there was a strong acceleration towards the end of the period). In the previous interim period, they only grew 1.1%, so this is a significant improvement.
The franchise supermarkets have been a tough story. They are still lagging, with growth of 1.7% vs. company-owned supermarkets at 4.8%. Franchise also had a really easy base in this period, as the comparable period was a like-for-like decrease of -1.4%!
Clothing standalone stores were up 7.5%, with a soft base effect here as well thanks to growth of just 0.2% in the comparable period.
Total turnover growth for Pick n Pay is below like-for-like growth as they’ve been reducing the store footprint to try and shrink into profitability. This has dire long-term consequences, with key rival Shoprite (JSE: SHP) happily mopping up those sites and increasing their footprint. It’s also clear that Boxer (JSE: BOX) is still by far the best business in the Pick n Pay group.
The Pick n Pay share price remains in the red this year, reflecting how hard a turnaround actually is.
Nibbles:
Director dealings:
Three directors of Hyprop (JSE: HYP) have sold shares worth a total of R14.6 million. The announcement notes that this is the first sale in several years and that this is to rebalance portfolio exposures. The company also has minimum shareholding requirements in place for executives. Fair enough then.
A director of a major subsidiary of AVI (JSE: AVI) received share awards and sold the whole lot to the value of just over R6 million. The company secretary of the listed holding company received awards and also sold all of them, with a total value of nearly R5.8 million.
The financial director of Pan African Resources (JSE: PAN) bought shares worth R425k. That’s interesting timing, as the gold price is looking pretty spicy at the moment!
Although Impala Platinum (JSE: IMP) announced dealings by many directors in relation to share awards, I don’t think there was enough of a pattern for us to really read anything into it. Thanks to the recent run in the PGM sector, the share awards ended up being worth meaty numbers for the execs!
Schroder European Real Estate (JSE: SCD) has had a rough year in its share price and the recent valuation trend won’t do much to improve that. In the quarter ended September, the total portfolio value was up just 0.1% quarter-on-quarter. As you would expect, there are bigger swings at individual property level, mostly driven by the passage of time on existing leases and thus the changes to lease terms.
After Silchester International Investors had lots to say in the media about the Barloworld (JSE: BAW) offer and the price they would be willing to accept, it turns out that they’ve now disposed of their entire holding in the company. So much for “at least R130 per share” then.
City Lodge (JSE: CLH) announced that Entertainment Holdings and Tsogo Sun Investments – part of Tsogo Sun (JSE: TSG) – sold shares in City Lodge such that they now hold just 3%. Tsogo had a stake of over 10% that was acquired in 2023, so that’s a particularly interesting move.
In August, Mahube Infrastructure (JSE: MHB) released a cautionary announcement regarding a potential buyout offer for the company by an existing shareholder. The company has renewed the cautionary announcement, as engagement between the independent board and the potential offeror is continuing. As this stage, there’s no firm intention to make an offer, so caution really is warranted here.
Dr Leila Fourie is retiring as CEO of the JSE (JSE: JSE) at the end of March 2026, having been in the role since 2019. Valdene Reddy, currently the Director of Capital Markets at the JSE, has been named as Fourie’s successor.
BHP (JSE: BHG) investors didn’t exactly form an orderly queue for the dividend reinvestment plan. Holders of less than 4% of total shares in issue elected to participate, with the rest happy to receive cash.
Metrofile (JSE: MFL) announced that there are no longer any put or call option arrangements between Sabvest (JSE: SBP) and an associate of director Phumzile Langeni in relation to the company’s shares. It doesn’t seem like any dealings in shares happened as part of this.
Labat (JSE: LAB) renewed the cautionary announcement regarding the potential disposal of certain subsidiaries to All Trading. Negotiations are ongoing.
Growthpoint Properties subsidiary, Growthpoint Healthcare Properties (GHPH), which is managed by Growthpoint Investment Partners, is to acquire the properties and operations of Auria Senior Living, a developer, owner and operator of senior living communities in South Africa. The property assets are valued at R2,4 billion and would initially add four Auria senior living communities to the portfolio. Auria will continue to operate under its current leadership team and brand. Auria’s pipeline of developments include Coral Cove in Salt Rock, KZN in addition to brownfield opportunities which GHPH intends to commence. The acquisition will take GHPH’s assets under management to c.R6,2 billion.
Kibo Energy has announced it will potentially acquire Carbon Resilience, a utility-scale industrial decarbonisation and renewable energy company for US$135 million (R2,3 billion) from FA SPC Real Asset Income, part of the institutional asset management platform of the ARIA Commodities’ group. Following the completion of a due diligence process, the company will be required to undertake a fundraising in connection with the transaction. Kibo will issue c.966 million ordinary shares at an issue price of 10.4 pence per share and will seek shareholder approval for a 1,600:1 share consolidation. The transaction will result in a reverse takeover of the company.
SA Corporate Real Estate (SAC) through its wholly-owned subsidiary SA Retail Properties, has entered into an agreement with Tinos Consulting and Advisory to dispose of Bluff Towers Shopping Centre in Durban for a cash consideration of R544,65 million. The disposal aligns with SAC’s strategy of reducing its retail exposure to KZN.
Vunani’s 78% held subsidiary Vunani Fund Manager has acquired the remaining shares in Sentio Capital Management – a black-owned and managed fund manager. Prior to the merger, Investment Managers Group (IMG) held a 30.05% stake in Sentio. Due to the dilution of its stake as a result of the merger, IMG opted to exit its stake as part of concluding the merger. Sentio will be merged with VFM to form Vunani Sentio Fund Managers. VFM will issue 44,754 shares to Sentio’s shareholders and a cash consideration.
Deneb Investments will acquire 80% of issued share capital of Dawning Filters from vendors MG Dain and the Dibb Family Trust. The R80 million purchase consideration will be paid in cash to the sellers in a 50:50 ratio. The deal is a category 2 transaction and as such does not require shareholder approval.
On 1 October 2025, the parties to the Barloworld transaction agreed to waive the Standby Offer Condition relating to the receipt of competition regulatory approval by COMESA. As at 6 October 2025, NewCo had received valid acceptances of the Standby Offer in respect of 108,25 million shares equating to c.58% of shares in issue. This combined with the Consortium’s and Barloworld Foundation shares equates to 81.8% of the shares in issue. Shareholders who still wish to accept the Standby Offer have until Friday, 7 November 2025 to do so. Results will be announced on 10 November 2025.
Unlisted Companies
36ONE Asset Management has concluded a BEE transaction with a consortium led by MI Capital and including 36ONE staff members and youth communities represented through the Invincible Empowerment Trust. The consortium will acquire a 22% stake in the company. Financial details were not disclosed.
Dibber International Preschools has acquired the South African LittleHill Montessori group of schools, which include five campuses in Kikuyu, The Polofields, Fynbos, Thaba-Eco, and The Huntsman. The five schools will now operate under the Dibber Montessori name, continuing their strong Montessori focus while incorporating Dibber’s Nordic pedagogy, which emphasises play-based learning and holistic child development. Financial details undisclosed.
EduLife, a South African network of private schools, has acquired Arrow Academy, marking the scaling of it footprint into Gauteng. The expansion was supported by Sanari Capital’s 3S Growth Fund, under which EduLife is a portfolio company. Financial details were undisclosed.
Optasia, a fintech company in which Ethos Capital holds an indirect interest, has announced plans to list on the JSE, raising up to R6,3 billion by selling a combination of new and existing shares. Optasia’s AI-driven platform makes credit-vetting decisions by analysing various unstructured data sets. It works closely with mobile network operators, mobile wallet operators and financial institutions thereby unlocking financial opportunities for the underbanked across emerging markets. Optasia has c. 121 million monthly active users, processing over 32 million loan transactions per day with access to over 860 million mobile subscribers though its distribution partners and financial institutions.
Orion Minerals has again increased the size of its capital raise this time to A$8,6 million (R99 million) – initially the company announced a A$5 million capital raising exercise but increased this to A$7,7 million due to level of demand. The private placement now comprises the issue of c. 574 million shares at an issue price of 1,5 cents (R0.17) per share.
Visual International has launched an equity raise of up to R2 million though the issue of new ordinary shares implemented through an accelerated bookbuild process. Funds will be used to assist with the company’s working capital requirements.
Marshall Monteagle plc will launch the renounceable Rights Offer to raise up to US$10,7 million from shareholders in terms of which a total of 8,964,377 Rights Offer shares will be offered at an issue price or $1.20 per share in the ratio of one Rights Offer share for every four Marshall shares. The maximum number of shares that can be issued in terms of the Warrants is 4,482,188 and the maximum amount raised $5,3 million.
BHP has purchased 3,997,199 shares, valued at c. R11,86 billion, in terms of its Dividend Reinvestment Plan for those shareholders electing to have shares allocated to them in lieu of the final 2025 cash dividend.
Remgro has received South African Reserve Bank approval for the payment of a gross special dividend to shareholders of 200c per ordinary share.
Last week, the JSE informed Labat Africa shareholders that the company had failed to submit its annual report timeously and its shares were under threat of suspension. Labat has advised that new accountants have been appointed and that it will publish the annual financial statements for the year ended May 2025 by 15 October 2025.
This week the following companies announced the repurchase of shares:
Old Mutual is the latest company to implement a share repurchase programme. It will repurchase c.220 million ordinary shares for a total consideration of R3 billion. The repurchase will take place on the JSE only and the shares will be cancelled reverting to authorised but unissued ordinary share capital.
Over the period 30 September to 3 October 2025, eMedia repurchased 15,327,677 N ordinary shares representing 3.44% of the companies issued share capital. The shares were repurchased for an aggregate R27,77 million using cash resources.
City Lodge Hotels repurchased 42,729,300 shares over the period 10 March 2025 to 3 October 2025. The shares, which have been delisted and cancelled, were acquired at an average price of R3.99 per share for an aggregate value of R170,29 million. The general repurchase was funded from available cash resources and debt facilities.
South32 continued with its US$200 million repurchase programme announced in August 2024. The shares will be repurchased over the period 12 September 2025 to 11 September 2026. This week 784,611 shares were repurchased for an aggregate cost of A$2,23 million.
On March 6, 2025, Ninety One plc announced that it would undertake a repurchase programme of up to £30 million. The shares will be purchased on the open market and cancelled to reduce the Company’s ordinary share capital. This week the company repurchased a further 31,526 ordinary shares at an average price 204 pence for an aggregate £64,398.
The purpose of Bytes Technology’s share repurchase programme, of up to a maximum aggregate consideration of £25 million, is to reduce Bytes’ share capital. This week 489,711 shares were repurchased at an average price per share of £3.98 for an aggregate £1,95 million.
Glencore plc’s current share buy-back programme plans to acquire shares of an aggregate value of up to US$1 billion. The shares will be repurchased on the LSE, BATS, Chi-X and Aquis exchanges and is expected to be completed in February 2026. This week 7,200,000 shares were repurchased at an average price of £3.44 per share for an aggregate £24,79 million.
In May 2025, British American Tobacco plc extended its share buyback programme by a further £200 million, taking the total amount to be repurchased by 31 December 2025 to £1,1 billion. The extended programme is being funded using the net proceeds of the block trade of shares in ITC to institutional investors. This week the company repurchased a further 912,826 shares at an average price of £38.34 per share for an aggregate £35 million.
During the period 29 September to 3 October 2025, Prosus repurchased a further 1,479,279 Prosus shares for an aggregate €89,55 million and Naspers, a further 247,516 Naspers shares for a total consideration of R319,78 million.
Two companies issued profit warnings this week: Newpark REIT and Pick n Pay.
During the week five companies issued or withdrew a cautionary notice: MTN Zakhele Futhi, Vunani, Conduit Capital, Mahube Infrastructure and Labat Africa.
DealMakers is SA’s M&A publication. www.dealmakerssouthafrica.com
Gabonese startup, POZI, has closed a €650,000 fundraising round led by Saviu Ventures, with participation by Emsy Capital and Chazai Wamba. POZI specialises in telematics and fleet management. Using data and artificial intelligence, the platform provides managers, insurers, and institutions with predictive analytics to anticipate breakdowns and incidents, real-time performance indicators to manage their operations, and risk management solutions tailored to African realities.
Barrick Gold, a Canadian-based global mining company, has announced the sale of its interests in the Tongon gold mine and certain of its exploration properties in Côte d’lvoire to the Atlantic Group for total consideration of up to US$305 million. Owned by an Ivorian entrepreneur, Atlantic is a leading privately held multisectoral Pan-African Group with diversified interests in financial services, agriculture, and industry, and a strong footprint across 15 countries in Africa.
Inspired Evolution’s Evolution III Fund, a fund dedicated to next-generation energy transition, has committed US$20 million to Cold Solutions East Africa Holdings (CSEAHL), a temperature-controlled warehousing and logistics platform operating across Kenya, Uganda, Rwanda, and Tanzania. The investment will support the development and construction of modern cold-chain infrastructure throughout East Africa, helping to reduce post-harvest losses, strengthen food systems, enhance food security, and drive energy and resource-efficient growth in the region.
To help improve access to clean and affordable water in Sierra Leone, Zvilo Africa, a working capital lender, has partnered with So Pure to support the scale of treatment and distribution of safe drinking water across the West African country. So Pure targets low-income and middle-class households across Sierra Leone with clean water, handling every step of the supply chain: purifying the water, packaging it into half-litre sachets or large dispenser 20-litre bottles, and then distributing it to mom-and-pop kiosk shops across the Freetown region. Since 2019, the company has focused on water purification and filling up sachets sourced from a range of local packaging suppliers. An expansion phase aims to distribute 10-12 million litres of purified drinking water monthly by year-end, helping provide clean, safe and affordable drinking water to over 500,000 people.
French long-term infrastructure and impact investor, STOA, has made a US$27 million equity investment into Atlas Tower Kenya (ATK). Backed by Kalahari Capital, Atlas Tower Kenya owns and operates more than 450 telecom towers nationwide, providing critical digital infrastructure that enables mobile network operators to deliver reliable and ubiquitous connectivity. ATK has been operating in Kenya since 2019 with a blended mix of sites in urban, rural, and underserved communities.
Zambian integrated poultry producer, Hybrid, has received a debt investment from specialist impact investors, AgDevCo. The investment, a US$10 million senior debt loan, will enable Hybrid to increase its processing capacity by building a modern abattoir which will create 270 jobs and support the company’s growth.
Tagaddod, an Egyptian tech-powered renewable feedstocks platform, has closed a US$26,3 million Series A led by The Arab Energy Fund, with support from existing investors FMO, Verod-Kepple Africa Ventures and A15 Ventures. Tagaddod has developed a proprietary, tech-powered platform that collects, aggregates, and traces renewable waste-based feedstocks from thousands of suppliers, including households, restaurants, food manufacturers, and collectors across its operating markets.
Ellah Lakes an integrated agro-industrial company in Nigeria,has announced that it has entered into an agreement for the acquisition of 100% of Agro-Allied Resources & Processing from ARPN PTE, Singapore. ARPN PTE. is equally owned by Tolaram Africa PTE Ltd and Valuestar Holdings PTE. The acquired assets comprise 11,783 hectares of cultivated land (planting over 6,280 hectares of oil palm plantations and associated infrastructure), 2,093 hectares of cassava plantations land and an additional 10,393 hectares of uncultivated land. Financial terms were not disclosed.
Artificial intelligence (AI) is rapidly transforming our everyday lives, including merger and acquisition (M&A) transactions.
Currently, 77% of businesses use AI or plan to implement it.1 Most of these businesses believe that AI will increase their productivity, leading to higher revenue.
This trend has increased the number of businesses undergoing M&A processes that either use or have developed AI tools across various business areas. The growing use of AI necessitates bespoke considerations for M&A transactions, both in evaluating the business and conducting due diligence investigations.
Considerations for M&A transactions
When undertaking a due diligence, first consider whether and to what extent the business utilises AI, and how this AI is deployed. A strategic assessment must be undertaken to determine whether AI usage adds value to the business, and whether it will continue after the M&A transaction. Some general aspects for consideration include:
AI development and maintenance in businesses
Strict restraint of trade, confidentiality and intellectual property provisions in employment contracts for AI development and maintenance
Ownership of intellectual property rights in relation to strategic AI inputs and outputs
Costs of in-house AI updates and maintenance
Consideration of off-the-shelf AI solutions for cost-effectiveness over bespoke solutions
Quality of training data which affects the AI system’s value
The difficulty with assessing the value of the AI system during M&A transactions
Almost every AI model processes personal information, requiring compliance with data protection laws during M&A processes. These laws prescribe strict conditions for processing personal information, and often limit automated processing. AI models’ lack of transparency makes it nearly impossible to comply with data subject requests for deletion or correction of processed personal information. M&A transactions may identify this as a risk, potentially decreasing business value or resulting in warranties and/or indemnities against potential sanctions from data protection non-compliance.
Risk assessments
As demonstrated above, AI can add immense value to businesses, but it also introduces risks – many unknown – associated with its use. Businesses must balance AI’s added value against these risks. This balance makes it extremely difficult to accurately value businesses that have developed bespoke AI, or which rely heavily on AI systems.
Standardised risk-based approach Foreign jurisdictions have developed AI risk management frameworks to manage AI-associated risks. For example, the US Department of Commerce classifies generative AI risks into the following categories: technical/model risks (risks of malfunction), human misuse (malicious use), and ecosystem/societal risks (systemic risks).2 Additionally, the European Union’s high-level expert group on AI has developed assessment tools, including ethics guidelines for trustworthy AI, policy and investment recommendations, assessment lists, and sectoral considerations.3 This development raises questions about whether due diligence investigations should apply a standardised approach when assessing AI systems. Evaluations aligned with these frameworks could provide in-depth and uniform AI system assessments. However, these remain recommendations, and many businesses are likely to avoid applying these frameworks due to their onerous obligations.
Contractual risks Most contracts reviewed during a M&A due diligence predate widespread AI adoption and, therefore, inadequately address AI-related considerations. This gap becomes particularly critical when examining agreements with key business partners, including suppliers and customers, where AI usage creates unforeseen legal and commercial implications. Since AI systems generate novel outputs and creative works, contracts must clearly delineate intellectual property ownership rights in any content, data or innovations produced by the AI systems.
Cybersecurity risks Integrating AI technologies into business operations introduces substantial cybersecurity vulnerabilities requiring careful evaluation during M&A processes. These elevated security risks necessitate comprehensive incident management frameworks and robust response protocols to address potential cybersecurity incidents. AI systems significantly alter a target company’s risk profile, often compelling buyers to seek additional contractual protections through specialised indemnities and/or warranties designed to mitigate emerging technological threats. This creates challenges for sellers, as businesses now face exponentially higher probabilities of cyber incidents. The prevalence of cyber incidents makes sellers reluctant to accept expansive liability provisions that could materially impact M&A transactions.
AI in the M&A process
Businesses can use AI at nearly every stage of the M&A transaction, including:
Target identification and screening
Due diligence investigations
Report editing
Transaction document drafting
Post-merger integration monitoring
AI’s ability to process large volumes of data quickly makes it ideal for due diligence processes. Legal-specific AI can review multiple documents simultaneously and provide outputs in user-defined categories.
But while AI expedites due diligence processes, it can also hallucinate outputs. AI hallucination refers to the phenomenon where AI systems, particularly large language models, generate outputs that are incorrect, nonsensical, or lack factual basis, while presenting them as accurate.
The consequences of hallucinations in due diligence processes, where AI fails to identify risks in M&A transactions, could prove ruinous. Thus, dedicated human oversight must ensure factually accurate AI outputs. To mitigate this risk, practitioners can adopt a sampling approach, manually reviewing a sample of AI-reviewed agreements and comparing results to AI outputs. These samples should come from different document categories of varying complexities and importance.
M&A practitioners must also consider potential confidentiality breaches resulting from AI tool use. When uploading confidential M&A transaction documents to AI tools, this information generally becomes available to AI service providers, who may store it on their servers or use it to train their models. This creates significant risks, as sensitive commercial information, financial data, strategic plans, and proprietary business details could be inadvertently disclosed to third parties or accessed by unauthorised persons. M&A transactions require strict information security protocols due to their confidential nature, yet AI systems’ ability to process large data volumes quickly makes them attractive despite these confidentiality risks. Organisations must carefully evaluate AI providers’ data handling practices, security measures and privacy policies before uploading sensitive M&A documentation to AI systems.
In summary
AI integration into business operations fundamentally transforms the M&A landscape in two critical ways. First, the proliferation of AI-enabled businesses creates new complexities in transaction evaluation and execution that require specialised expertise and risk assessment frameworks. Second, AI tools revolutionise how businesses conduct M&A processes, offering unprecedented efficiency gains while introducing novel risks requiring careful management.
Moving forward, successful M&A practitioners must master both the evaluation of AI as a business asset, and the strategic deployment of AI as a transaction tool. This dual competency, combined with robust risk management frameworks and stakeholder transparency, will prove essential for navigating the AI-transformed M&A environment.
1 AI in Business Statistics 2025 [Worldwide Data] by T Benson accessed at https://aistatistics.ai/business/ (on 8 July 2025). 2 National Institute of Standards Technology, Artificial Intelligence Risk Management Framework: Generative Artificial Intelligence Profile accessed at https://nvlpubs.nist.gov/nistpubs/ai/NIST.AI.600-1.pdf on 8 July 2025. 3 European Union accessed at https://digital-strategy.ec.europa.eu/en/policies/expert-group-ai on 8 July 2025.
Tayyibah Suliman is a Director and Izabella Balkovic an Associate in Corporate and Commercial | Cliffe Dekker Hofmeyr
This article first appeared in DealMakers, SA’s quarterly M&A publication.
Private capital investors in Africa are successfully navigating a turbulent investment environment – shaped by global economic challenges and rapidly evolving regulations – and in the process, seizing exciting opportunities in the continent’s energy and infrastructure space.
According to a recent AVCA report, Understanding the Context – Africa’s Infrastructure Financing Gap (Report), Africa receives only 5% of global infrastructure investment, despite hosting 18% of the world’s population.
The report notes that between 2012 and 2023, private capital investors demonstrated a growing confidence in African infrastructure, deploying US$47,3 billion across 847 reported deals, and establishing new models for sustainable development across the continent.
The sector leading the way is Energy, which has attracted significant private sector investment to date, particularly in South Africa, with open access energy regimes evolving across the continent. The aim of such regimes is to open up private investment opportunities, increase grid reliability, and offer energy consumers greater value and more choice.
Other sectors necessary for economic growth, and in which there has historically been underinvestment, such as transport and logistics, and water infrastructure, are also beginning to attract private sector solutions to encourage the pace of development.
Energy
South Africa stands out for the rapid growth in private sector involvement in the energy space since the introduction of the Renewable Energy Independent Power Producer Programme in 2012. Growing investor confidence, market deregulation and a demand that exceeds available supply have led to the emergence of a competitive private power and trading market which has reshaped the way investors and heavy industry users participate in these sectors.
The South African government’s commitment to private sector participation and the liberalisation of the energy market has unlocked substantial foreign direct investment in the renewable energy sector. The UN Conference on Trade and Development noted in 2024 that South Africa’s renewable energy sector attracted US$16 billion in investments between 2020 and 2023 alone.
Over and above the rapidly growing bilateral power market – which was unlocked in recent years through the changes in licensing legislation – the Draft Market Code (Code), issued by the National Transmission Company South Africa (a subsidiary of Eskom) in April 2024, will assist in establishing a transparent, non-discriminatory trading platform based on a multi-market structure under the Electricity Regulation Amendment Act, which became effective in January 2025. The target commencement date of the Code is April 2026, with an open and competitive electricity market expected to be operational by 2031.
The increasing integration of renewable energy into the grid has led to substantial constraints, creating further opportunities for private sector involvement in electricity transmission. The recently announced invitation by the South African government – seeking private sector investment in electricity infrastructure – is expected to result in further private sector participation at the same time as reforms are being introduced.
Across Africa, governments are following suit and launching initiatives to harness private sector participation in the energy sector. This has resulted in private sector-driven, business-to-business power solutions that assist businesses to meet their decarbonisation goals and ensure a stable energy supply.
In Kenya, the country’s National Energy Policy 2025-2034, published in February 2025, focuses on developing the country’s ability to produce sustainable energy, and on improving energy access, affordability and security. A big part of this plan is the implementation of an open energy regime.
The Energy (Electricity Market, Bulk Supply and Open Access) Regulations 2024 were published last year to facilitate the opening of the electricity market, and to enable private sector investors to participate in the generation, transmission and distribution of electricity.
The emergence of private transmission opportunities has resulted in the first transaction of its kind on the continent, a public-private partnership involving the development of two power transmission lines: the 400 kV Loosuk-Lessos line and the 220 kV Kisumu-Musaga line.
Zambia also recently adopted an open access regime, which enables IPPs and large power consumers to engage in electricity trading by connecting to and utilising the electricity transmission and distribution networks, irrespective of the network’s ownership or operation. This new regime is anchored by the Electricity Act of 2019 and the Electricity (Open Access) Regulations 2024.
Transport and logistics infrastructure
Historic underinvestment in the maintenance of South Africa’s ports and rail has led to increased use of road transport for bulk logistics, which in turn has led to increased transportation costs and roads that are buckling under the strain. According to reports, as of 2024, these challenges are estimated to cost the South African economy approximately R1 billion per day in lost economic activity.
The South African government is turning to the private sector to fund the infrastructure development, which is desperately needed.
For example, South Africa’s state-owned freight logistics company, Transnet’s PSP programme represents a significant opportunity for private participation in the country’s rail, port and logistics sectors. Opportunities for investment include those in port modernisation and efficiency. For example, the Durban Port Master Plan aims to attract R100 billion in private investments over the next ten years. Further opportunities exist in the rail network and rolling stock, large container development, and supply chain management.
Private sector participation is also being sought for the development of logistics corridors to enhance regional connectivity across Africa.
In both Kenya and Zambia, private participation in the public sectors is being pursued through legislative frameworks such as the Public
Private Partnerships (PPP) Act 2021, in Kenya and the Public-Private Partnership Act, 2023 in Zambia, to progress and develop complex infrastructure projects by addressing the enforcement of legal compliance and swifter project implementation.
There are growing numbers of infrastructure funds that are playing a significant role in driving the growth and development of infrastructure across Africa. These funds include African Infrastructure Investment Managers (AIIM), Helios Investment Partners, and Afri Fund Capital.
Water infrastructure
In South Africa, government-procured water projects, as well as private sector solutions to water infrastructure needs, are emerging. At the forefront are new bulk water projects, including the construction of infrastructure such as pipelines, and privately procured water treatment facilities. The potential for private investment in this space is significant, offering investors the chance to contribute to the development and management of critical infrastructure.
Across Africa, governments are implementing measures to facilitate private investment in the water sector through the PPPs model. For example, Kenya recently introduced the Water (Amendment) Bill, 2023, and Zambia published the National Water Policy in 2024, with both outlining plans to harness private investment to finance water sector projects.
Bridging the gap
Amid challenging market conditions, private investors are stepping up to bridge critical funding gaps, channelling much-needed capital into initiatives that fuel growth and deliver significant social and economic benefits for the continent.
Angela Simpson and Alexandra Clüver are Partners | Bowmans
This article first appeared in Catalyst, DealMakers’ quarterly private equity publication.
Key metrics are up and so is guidance for the full year
Alphamin has released numbers for the third quarter of 2025, reflecting contained tin production that was 26% higher than the previous quarter. Best of all, guidance for the full year is up from 17,500 tonnes to between 18,000 and 18,500 tonnes.
Contained tin sales came in 12% higher than the prior period. The average tin price achieved was up 4% and all-in sustaining costs (AISC) per tonne was 3% lower. When you consider all these metrics, it won’t surprise you that EBITDA was up by a juicy 28% vs. the preceding quarter.
These are quarter-on-quarter numbers, not year-on-year. Before you get too excited though, the important context is that there were security issues early in the preceding quarter that made it a soft base for comparison. The security risks are never zero when you’re operating in regions like the DRC. The company has noted a recent increase in security events on a key border line that is about 200kms away from the mine. At this stage there are no disruptions to operations, but the risk is clearly there.
On the exploration side, the company has continued with drilling at Mpama North and Mpama South to increase the resource base and life of mine. They also plan to discover the next tin deposit near the Bisie mine, as well as any remote tin deposits on the land package. Those are long-term plans, with the focus right now on the drilling results at Mpama North and Mpama South.
Anglo American’s Teck Resources era isn’t off to a great start (JSE: AGL)
Teck has cut production guidance at two of its copper assets
The trouble with large corporate deals is that when you assure the market that a particular mega-merger is a great idea (despite a zillion historical examples of dicey shareholder value outcomes in these types of deals), you really can’t afford for any bad news to come through. Anglo American’s reputation for deal timing just won’t leave them alone, with now-demerged Valterra Platinum (JSE: VAL) rallying like crazy and future dance partner Teck Resources releasing a tough announcement.
If you would like to read the detailed Teck announcement, you’ll find it here. The TL;DR is that due to project challenges at Quebrada Blanca, they now have an expectation of increased downtime in both 2025 and 2026. Mining projects are incredibly complicated and dangerous things, so it’s critical to do them properly and make the tough decisions when required. But this doesn’t mean that shareholders are happy to see this stuff, particularly Anglo American shareholders who need to believe that the Teck merger is the right decision for the group.
Guidance for 2025 copper production at Teck has been cut by over 11% if you use the midpoint of guidance. That’s particularly frustrating for the company at a time when copper prices are strong. Teck’s guidance for zinc is unchanged at least.
Unfortunately, as is always the case when production comes in lower than expected, the unit cost of the commodity has increased significantly. They expect a 20% increase in the net cash costs per pound at problematic Quebrada Blanca for 2025.
Of course, if this is just a temporary wobbly, then it isn’t the end of the world. The problem is that if you read Teck’s 2026 – 2028 outlook, the issues just get worse as time goes on. The mid-point of copper production guidance at Quebrada Blanca for 2027 and 2028 has dropped by approximately 13% and 17% respectively. At Highland Valley Copper, they expect some pressure on 2026 production and then a significant improvement in 2027 ahead of prior guidance. At Red Dog zinc, guidance for 2027 and 2028 is below previous guidance.
You get the idea. These numbers are fluid and will be updated as time goes on, but the theme is clearly one of a disappointing production outlook vs. previous guidance. Anglo American’s response is that their independent due diligence led to an expectation that is “broadly consistent” with Teck’s latest numbers. This suggests that Anglo did a better job of understanding these assets through the due diligence process than Teck management did by living with them every day. You’ll forgive my skepticism here.
Investors tend to be nervous of large deals as a default setting. Deals that involve a deterioration in expectations at the target asset are even scarier.
Exciting news for Ethos Capital and the market: Optasia intends to float (JSE: EPE)
New listingsare always fun
When a company announces an intention to float, this has nothing to do with their December holiday plans. Instead, it means that they will be coming to market through a listing process, with Optasia (a name you’ll recognise as being the most important investment in the Ethos Capital stable) looking to do exactly that on the JSE.
New listings are the lifeblood of the market, so they always lead to excitement, particularly when it’s a proper listing with a company that has put in the work. Check out the Optasia IPO website and you’ll see what I mean.
What does Optasia do? Well, you have to look through a lot of buzzwords (including AI) to arrive at the understanding that this fintech focuses on providing access to credit and airtime in underbanked markets. In other words, this is a classic African fintech story, although they have a presence in Asia, the Middle East and even some parts of Europe!
Optasia has been around since 2012 and has 350 employees across 15 offices, so they are a scale player. There are 121 million monthly active customers. Revenue for the first half of 2025 was up more than 90% year-on-year, so this is a beautiful example of the J-curve in action. They are very profitable at adjusted EBITDA level with a margin of 46%, although the adjustments always need to be treated with caution. The company is certainly profitable though, with a substantial jump in net profit from $7.6 million to $23.3 million in the six months to June 2025.
The width of the moat comes from the extent to which Optasia has managed to build an ecosystem with multiple touchpoints. It’s a complex marketplace, with financial institutions on one side and distribution partners in the middle, all before reaching consumers on the other side who become more familiar with the offering over time. That’s a very hard thing to build, especially across multiple geographies.
As for the listing, they are looking to raise R1.3 billion, so this is decently sized raise in the local market. It looks like it will be done through institutional investors only (rather than an offer to the public). Certain existing shareholders are also going to sell R5 billion in shares to institutional investors.
As for Ethos Capital, they haven’t specifically said whether they are one of the selling shareholders. Given their stated approach of returning value to investors, it seems like that they intend to either fully or at least partially exit the Optasia stake.
FirstRand’s battle in the UK motor finance industry isn’t over (JSE: FSR)
The company is unhappy with the proposed redress scheme
FirstRand (along with other financial services companies operating in the UK vehicle finance market) is dealing with a difficult regulatory situation related to commission practices around vehicle finance. It looked as though the worst of the uncertainty was behind them after the UK Supreme Court ruling that gave legal clarity to the situation, but that joy was short-lived.
The UK’s Financial Conduct Authority (FCA) has proposed a redress scheme that FirstRand describes as being “beyond expectations of what can be considered proportionate or reasonable” – and that’s not good for FirstRand shareholders. They haven’t indicated what the amounts would be at this stage, but FirstRand wouldn’t have released an announcement with that wording if they felt that their existing provision was adequate to cover it.
As part of pushing back against this, they’ve flagged their disagreement with the lack of application of the recent UK Supreme Court ruling to the redress scheme.
There will now be a period of six weeks of consultation with the UK FCA. FirstRand has undertaken to keep the market informed of any developments that might happen before the end of that period as they consult with the regulator.
Nibbles:
Director dealings:
A director of Woolworths (JSE: WHL) sold shares worth R23.2 million and a director of a major subsidiary sold shares worth R7.2 million. With the share price down 16% year-to-date, that’s not exactly a bullish signal about the chances of a near-term recovery.
A non-executive director of Mondi (JSE: MNP) bought around R508k worth of shares. The price was R203.30, so the purchase must have been after the initial drop in response to earnings. The price has subsequently kept sliding, now at R195.
City Lodge Hotels (JSE: CLH) announced that they’ve repurchased R170 million worth of shares since March 2025 at an average price of below R4.00. The share price is currently R4.20. This represents 7.14% of shares that were in issue as at the date of the AGM last year, so this should be a very helpful boost to HEPS going forwards.
Wesizwe Platinum (JSE: WEZ) announced that the ramp-up of underground operations is ahead of schedule. They are negotiating key development contracts and will keep investors informed of further milestones.
Kibo Energy (JSE: KBO) is suddenly back on our screens, with news of a potential acquisition of a decarbonisation and renewable energy company called Carbon Resilience. I’ve gotta tell you, carbon resilience is the kind of resilience that investors needed to get to this point, as Kibo has been a story of one corporate disappointment after the next. Perhaps the new chapter will be different, with Kibo looking to acquire the asset for $135 million, settled through the issuance of shares after a planned 1600:1 share consolidation. Just to add to the dilution of value of current shareholders, the company has also issued a convertible note to an institutional investors to provide funding of up to £150k. As part of lifting the suspension of the listing on AIM, the company needs to get the accounts for the year ended December 2024 out the door.
Accelerate Property Fund has finally released the Portside disposal circular (JSE: APF)
Turning the Portside stake into cold, hard cash is crucial for the fund
If you’re familiar with the Cape Town CBD skyline, then you already know the Portside building. It’s the gigantic glass building in town that towers above everything else. When Accelerate originally bought it from Old Mutual Life Insurance Company in 2016, they paid R755 million for it. That was then and this is now, with the latest valuation being R610 million and Accelerate achieving a selling price of R580 million.
Before you get out the torches and pitchforks, I must tell you that many property deals done around 2014 – 2016 in South Africa were concluded at ridiculously high prices. Property certainly isn’t immune to bubble risks, with the level of equity capital raising activity among listed property funds as a great indication of whether things are overcooked or not. During those years, the pot was boiling over with capital being thrown at every property company in the market.
The relevance of this deal isn’t the return (or lack thereof) over the past decade, but rather the critical importance of this disposal to the recovery of Accelerate. With a bruised and broken balance sheet (and share price), Accelerate simply cannot afford any further missteps. They are dealing with very tough related party risks, as well as the difficulty in transforming Fourways Mall from a white elephant into a cash cow. There are also other assets that need to be disposed of, including several that aren’t nearly as impressive as the Portside silhouette.
This disposal reduces Accelerate’s total debt from R3.85 billion to R3.27 billion. The total asset value after the disposal will be just over R7 billion. The net asset value (NAV) of the company is barely impacted vs. the March 2025 level, as they’ve sold the property at the carrying value as at that date. In other words, one type of asset is being turned into another. That’s not the point though – you see, when a share is trading at a vast discount to NAV, it creates a lot of value for investors (punters?) if that NAV evolves from illiquid fixed assets to liquid cash.
The net asset value per share as at March 2025 was R2.03. The dilutive rights offer took that down to R1.83. The pro forma number after this deal is R1.82. And the share price? Just R0.39 per share, reflecting a discount to NAV of 79%!
This is why existing shareholders should feel very good about every single example of Accelerate turning an asset into cash at or near the carrying value.
Accelerate shareholders will vote on this deal on 6th November. The other remaining condition for the disposal is a Competition Commission approval without any onerous conditions attached to it. I can’t see why that would be a problem in a property deal like this.
Is Afrimat primed for a big positive swing? (JSE: AFT)
The latest update shows a remarkable turnaround in the business
Afrimat has released a trading statement for the six months to August. With the share price having lost well over 40% of its value year-to-date, they desperately needed to show some positive momentum in the group.
The good news is that they’ve done exactly that, with an expectation for HEPS of between 100.7 cents and 103.4 cents. That’s an increase of between 90% and 95% vs. the comparable period! When you see moves like these, it’s very useful to go back a bit further and example the multi-year performance. In the six months to August 2023, HEPS was 263.4 cents. In fact, if you go back to the results presentation for the six months to August 2024, you’ll find this excellent chart:
The key point here is that HEPS was incredibly depressed in 2024, so the year-on-year move of between 90% and 95% doesn’t mean much. The guided range is still way off the pandemic levels and even the pre-pandemic levels.
It therefore makes sense that the share price is also still miles off those levels:
Of course, the real question is whether this will be enough to stop the slide and perhaps drive a rally back up to the R50 level. Afrimat closed 10.7% higher in response to this announcement, so that’s a sharp improvement in momentum.
The fundamental drivers of the improved performance in this period look good overall, although there’s still a long way to go.
In Construction Materials for example, there was a slow start to the first quarter and then a much better second quarter. The fly ash business had its best ever month in July in terms of volumes. But the cement business remains loss-making overall for the first half, showing just how difficult it is to make that business work.
The Bulk Commodities business enjoyed a massive increase in iron ore sales, with local volumes more than doubling vs. the comparable period. International volumes posted a more modest increase of 13.5%. Don’t get too excited though, as planned maintenance shutdowns of the Saldanha export line during the second half should lead to a situation where full year volumes are flat vs. the prior year. Another concern is the anthracite mining operation, which is suffering with decreased demand from ferrochrome smelters that have been forced to temporarily shut down in South Africa due to harsh economic realities in that sector. Afrimat is exporting anthracite via Mozambique to try and mitigate this lack of demand.
The Industrial Minerals business is a small part of the group, but had a weak half due to delayed demand from the agricultural sector based on the timing of rainfall.
The Future Materials and Minerals business is an early-stage business, with the economics expected to be three years away. Thankfully, no additional capital investment is expected to get them there. The Glenover project is selling phosphate material and is decreasing its operating losses.
Detailed interim results are expected to be released on 23 October.
Datatec has taken some inspiration from how global tech companies report numbers (JSE: DTC)
The goodnews is that they are firmly in the green either way
Datatec has released a trading statement for the six months ended 31 August 2025. The underlying story is great, with Westcon achieving stronger margins and both Logicalis International and Logicalis Latin America achieving much better numbers than before.
This has driven a juicy increase in HEPS of more than 100%, with expected earnings of between 21 and 23 US cents for the period.
Datatec has decided to present underlying earnings excluding share-based payments (and with various other adjustments). This will sound familiar to anyone who regularly reads the reports of global technology companies. I’m not a fan of this approach, as US companies use it as a great excuse to ramp up share-based payments and then conveniently adjust earnings accordingly. I’m hoping that Datatec won’t behave in that way and that they are rather doing this to improve comparability of their earnings to global peers.
On this adjusted basis, underlying earnings will be between 18 and 20 US cents, or between 33.3% and 48.1% higher than the prior year. This seems to be a decent indication of the year-on-year growth that the company achieved.
Either way, it’s excellent.
Finbond is back in the green (JSE: FGL)
The share price has been strong this year
Finbond is one of those companies that always seems to be bubbling under the surface. They have some interesting elements to their business model, yet it rarely seems to all come together for them in a way that rewards investors. But in the latest period, they’ve at least swung back into profitability.
A trading statement for the six months to August 2025 suggests HEPS of between 0.88 cents and 1.28 cents, which is much better than a loss of 2 cents in the comparable period. But it’s also nowhere near high enough to justify the current price of R1.05 per share, so the market is clearly pricing in much more upside in earnings. The share price is up more than 65% year-to-date.
Newpark REIT has released updated earnings guidance (JSE: NRL)
The large negative reversion at the JSE has hurt the year-on-year performance
Newpark is a particularly unusual property fund on the JSE. They have a very focused portfolio with literally only a handful of buildings. This means that any negative changes to the leases have a significant impact on the numbers.
Exhibit A: the large negative reversion in the lease for the JSE building. Much as I’m sure the JSE really wants to be where they are, the truth will always be that it’s easier to move a business than a building. In a market with oversupply, like in Sandton offices, this creates a recipe for negative reversions i.e. the renewed lease being at a lower rate than the old lease.
This is why Newpark guided for a nasty year-on-year decrease in earnings this year of between 38.1% and 47.1%. This is actually updated guidance that is slightly better than before, with Newpark trying to mitigate the negative impact through strategies like decreasing the operating costs at the properties. They also have escalations at the other properties to offset some of the impact of the JSE building.
For the six months to August, they expect funds from operations per share to decrease by 24.5%. The dividend for the period is expected to be 13.3% lower. It looks like they are front-loading the interim dividend when you compare it to the guidance for the full year.
SA Corporate Real Estate to sell Bluff Towers (JSE: SAC)
The fund is reducing its retail exposure to KZN
SA Corporate Real Estate announced the disposal of Bluff Towers Shopping Centre for R544.6 million. The price is very similar to the June 2025 independent valuation of R545.1 million. With net property income of R44.7 million for the year ended December 2024, that’s a trailing yield of 8.2%. The recent income would hopefully be higher due to the benefit of inflation, but it gives you an idea of the yields at which large retail properties are changing hands.
SA Corporate Real Estate has disclosed that the net asset value attributable to the property was R358 million as at the end of December 2024. I assume that this is net of debt, as that’s way below both the recent valuation and the selling price.
This deal is effectively a disposal of an asset that has been redeveloped to maturity, something that is reflected in the attractive price that SA Corporate Real Estate has achieved here. The fund will probably look to reallocate the capital to opportunities with higher potential returns. This is a Category 2 transaction, so shareholders won’t be asked to vote on the deal.
Nibbles:
Director dealings:
The CEO of Fortress Real Estate (JSE: FFB) increased the number of shares pledged for a loan facility, as the facility limit has increased from R26 million to R34 million. This is nothing unusual in the property sector, with many executives entering into leveraged trades to acquire shares in the funds that they run.
MAS (JSE: MSP) recently announced a tender offer to reduce its debt in the market. That’s a big deal if you’ve followed the fund over the past few years, as full focus has been on trying to prepare the balance sheet for debt redemptions. The tender offer was made to holders of €300 million in notes due 2026. Almost €120 million was tendered under the offer, with holders of the remaining notes clearly keen to keep them until expiration.
Barloworld (JSE: BAW) announced that the standby offer closing date has been extended from 15 October to 7 November. They are obviously trying to get as many acceptances as possible.
Salungano Group (JSE: SLG) is catching up on its financial reporting. They’ve now released financials for the year ended March 2024, with the auditors flagging a material uncertainty about the group as a going concern. The headline loss per share increased from 58.65 cents to 111.91 cents. It’s a mess.
Southern Palladium (JSE: SDL) has lodged the environment guarantee in relation to the Bengwenyama PGM project, which is an important milestone related to the mining right application with the Department of Mineral and Petroleum Resources. The mine development plan for the Definitive Feasibility Study is on schedule. In junior mining, it’s all about ticking the milestones off the list.
The Saltzman family continues to reduce their influence on the group that they founded, with Saul Saltzman (son of the founders) resigning as an executive director of Dis-Chem (JSE: DCP). He will stay on the board as a non-independent, non-executive director. Dis-Chem has been an incredible example of founders creating a legacy business and then trusting professional managers with it.
The digital generation has access to more information and tools than ever before. But the more things change, the more they stay the same: one of the most powerful tools of all remains the benefit of starting young and entrenching the right money habits from as early as possible in your life.
And yes, this includes investing on behalf of your children!
In this episode of Ghost Stories, Lauren Jacobs (Senior Portfolio Manager at Satrix) joined me for a candid discussion about her approach to entrenching the right financial behaviours from early in her career and the journey of investing for her family.
We also talked about the value of learning by doing, which means testing out the market and banking the hard lessons sooner rather than later!
The concept of “time in the market” is one of the most powerful wealth creation strategies of them all. If you are looking for the inspiration to just start, or a refresher on why those tough-to-form habits are so worthwhile, then you’ll love this discussion.
Disclaimer: Satrix Investments (Pty) Ltd & Satrix Managers (RF) (Pty) Ltd is an authorised financial services provider. The information does not constitute advice as contemplated in FAIS. Use or rely on this information at your own risk. While every effort has been made to ensure the reasonableness and accuracy of the information contained in this document (“the information”), the FSP’s, its shareholders, subsidiaries, clients, agents, officers and employees do not make any representations or warranties regarding the accuracy or suitability of the information and shall not be held responsible and disclaims all liability for any loss, liability and damage whatsoever suffered as a result of or which may be attributable, directly or indirectly, to any use of or reliance upon the information. Consult your financial advisor before making an investment decision. Tax Free Savings Accounts: Annual limit of R36000, lifetime limit of R500 000, 40% tax penalty applicable for contributions above the limit, per individual.
Full Transcript:
The Finance Ghost: Welcome to this episode of the Ghost Stories podcast featuring the team from Satrix and this time around I get to speak with Lauren Jacobs again. She is a Senior Portfolio Manager at Satrix.
Lauren and I had a fantastic discussion earlier this year where we really got to understand so much about the nuts and bolts of Exchange Traded Funds or ETFs. I think the TL;DR of that conversation was that it might be a nice passive buy-and-hold investment for investors, but there’s nothing passive about what happens in the back-end for Lauren and her team – there is a lot to do all the time.
Fresh from another index balancing, Lauren, thank you for making time for doing this podcast. I know it’s been a busy time for you.
Lauren Jacobs: It’s good to be back again, Ghost. Thanks for having me. Yeah, we did have quite a hectic week last week, but we’re back in action on all the other things. So yeah, happy to be here.
The Finance Ghost: Yeah, fantastic. Another one under your belt there. Today we’re going to be talking about a couple of things, but the overarching principle of this podcast is around the importance of digital tools, not just for younger investors, but also for any investor, really. It’s just obviously younger generations of investors tend to be a little bit more familiar with some of the digital tools that are out there.
We’ll also just be talking about the importance of an early start and some of that as well.
And I think, Lauren, what’s going to make it extra fun is we’ll kind of be asking each other a few questions because I think you’re probably going to ask me a few about some of the tools that I use as well. So I’m looking forward to a nice dynamic conversation.
I think let’s jump straight into it and start with really the key principle here, which is that old story of: is it ever too early to start or is it always good to just start as early as possible in the market and why?
Lauren Jacobs: Yeah, Ghost, I think it’s really important to just start and whenever that is, whether it’s as a parent for your kids or as a young person, if you have a job but you earn some money and want to put some money away, it really is important to start early. And the really powerful concept here that we want to keep in mind is compound interest. Because when you invest, your money earns returns and then those returns earn returns and those returns earn returns, and it just snowballs. And obviously the longer you have to earn those returns, the larger your investment could be over time. It’s not just about the numbers – it’s also the fact that when you are young, you can take more risks, you have more time to recover from market dips and also you learn from an early point in your life, whether that’s age or just in terms of point in your life, you really learn to build financial discipline, which is important for anybody to learn.
The Finance Ghost: Yeah, absolutely. I mean, the benefit of doing this younger is that a market crash – maybe that sounds a bit harsh – but a market dip, whatever the case may be, almost becomes an opportunity rather than something else. You only have to look historically, long-term returns on the big market indices, the big equity indices specifically, it recovers every time, it takes time – not at individual stock level – but at market level.
And that’s the benefit of ETFs, right?
Lauren Jacobs: So when you’re young, you have this major advantage of time. And time allows you to take on more financial risk because you have these years, even decades, to recover from those market downturns. And markets go up and down, like you said, I mean, it’s normal. One day it’s up, one day it’s down. Maybe it’s down for a significant number of months.
But if you start investing early, you can ride out those dips. You don’t need to panic when the market drops 10%, 20% because you’re not planning to take your cash out next year. You’re investing for the long-term.
In that regard, what does risk really mean? It’s not gambling or chasing the hype or whatever that you think, oh, risks, it’s dangerous. But it really means that it gives you the opportunity first of all to have a higher equity exposure in your portfolio because you’ve got this long-term view. You can invest more in growth focused, maybe ETFs or things like emerging markets or thematic funds, because you just have time to feel out the market and to really ride out all those dips and also to ride out all the gains. So just thinking around, “I can take more risk,” which as you and I know because we’ve been in the game for a long time, also talks to higher return.
Time in the market is what is the most important thing when it comes to investing and investing from an early age.
The Finance Ghost: And I think there’s risk in not taking risk. That’s something that people don’t always realise, is if you’re sitting in an economy with high inflation and you think you’re playing a smart game and you’re just keeping your money locked up in the bank and you’re earning a couple of percent, the reality is that actually you’re hurting yourself, specifically if you’re young. I always personally get frustrated when I see stuff like someone who’s young doing their tax-free savings allocation into a bank interest-paying account. Number one, a big portion of your interest every year is already not taxed, let’s just start there. You’ve got to have quite a lot invested before it gets taxed. Number two, the tax-free savings account benefit is that your gains are not taxed – so my approach is to go and invest in stuff that has the maximum possible gain so that I get the maximum possible tax benefit from my tax-free savings account.
So it all dovetails, right? This stuff all works together at the end of the day.
Lauren Jacobs: It does. I think, exactly what you said – what’s the point in putting it in money market if in the money market you’re already getting your interest tax-free, basically. I talk a lot to young adults, university students and so on, and we talk about taking the risk. If you get a SatrixNOW voucher, for example, you know it’s a R100 voucher, go buy 10 different ETFs, because you can invest R10 in each of those ETFs.
Just see what the market is like, see what risk really means and see how when things go up, they can also go down. When things go down, they then go up. And it’s just really learning and interacting with the market. So that also builds your financial education over time.
And risks are there not only to improve your return over time, but you also need to manage your risks. In the future, maybe when you’re older, then you can understand, okay, I took all this risk when I was young, but now I’m in a period of curtailing that risk, planning for marriage, weddings, children, whatever it is, but you learn over time how these things move. And it’s a great exercise in just educating yourself. Because if you start early, you are also taking the time to educate yourself around what do markets do? What is investment? What is the difference between investing and just saving in a bank account?
Just taking that “just start” stance and investing the money and keeping it in the market, so spending that time in the market, all of those things talk to – whether you start early or start a bit later – as long as you just start. That’s the important part.
The Finance Ghost: I think you’ve raised such an important point there around the value of learning as young as you can. Because then you can make mistakes with relatively small amounts of money versus your long-term wealth, hopefully, obviously assuming everything goes well.
Because there will be mistakes, there will be the temptations to go and do things in the market that maybe aren’t necessarily great. You’re going to do that thing where you panic-sell a dip and then watch it merrily come back without you. It’s a lot cheaper to panic-sell that dip and lose R500 than it is to lose R5,000 or R50,000 or more, depending on how much money you make one day.
And also buying right at the top, buying into the hype, that’s the other big mistake that people make. Again, rather make that mistake with a few hundred bucks. Start young, start slowly, build up the confidence. Especially I think when you’re doing single stocks, which is obviously outside of the ambit of Satrix, which is an ETF house, and such a useful way to just build that broad market exposure – but the start young lessons are equally applicable. A Satrix Top 40 ETF was the first thing I ever bought in the market all those years ago, I remember, and it really just felt very cool to be like, hang on, I actually have this basket of stocks. It’s the JSE Top 40. It’s in one investment. It was such a great thing to learn about at the time. It’s still such a good memory.
Lauren Jacobs: And I think what you just spoke about, riding out those waves and not selling at the low because you’re scared, it really talks to financial discipline. Because when you start young, you learn how the market moves and knowing that you don’t have to sell when the market is in a dip. You’re training yourself to delay gratification, to learn long-term thinking and also you’re learning to pay yourself first because you’re really paying your future self when you invest, when you start investing young and also when you invest consistently.
And these habits, they spill over into other areas of your financial life. As you learn and grow, you become more intentional with your spending, you’re more aware of what your financial goals are and what the risks are. And you know, risk is a double-edged sword. It’s your risk tolerance but also your risk capacity. So if you have R500 and you need to spend R400 on something specific but you have R100, that’s your capacity of what risk can I take off what income I have.
And also it makes you more confident in your money-making decisions in the future. I think it’s not just about the money you invest, but it’s also the mindset that you develop over time. That’s quite important when you start investing young.
The Finance Ghost: Absolutely. And you can easily get to a dangerous space where you say to yourself, well, I can only invest R500 a month, what’s the point of that long-term, I’ll catch up one day when I earn more. The reality is that is very dangerous thinking because your overheads go up as you get older, on average, for a lot of people. If you don’t learn how to save what you can save when you start doing that, then those bad habits are going to follow you forever. It’s going to always be oh well, I’ll catch up, I’ll catch up, I’ll catch up. And actually, if you wait too long, you can’t catch up, because now you are on the wrong side of compound returns versus someone who actually started young and was consistent and allowed their money to just keep on growing. That’s the point – it’s building balance sheet over time, using your income to build a balance sheet.
It’s like treating yourself like a little company. You have your own income statement, you have a salary and expenses, you build your balance sheet with the profit and if you spend everything, there is no profit and you are not going to build your balance sheet – you’re living hand-to-mouth for the rest of your life. That is not particularly where you want to be.
Lauren Jacobs: And I think what we tend to see where you’ve started investing young, you see that people then tend to save more over their lifetime because they know – like you talk about your income statement, balance sheet – I pay myself first and then I pay all the other things that I want or need and so on. So they tend to save more over their lifetime.
They also, I think, tend to avoid higher interest rate debt because they have this concept of saving. So if you’re paying away more, I think there’s an education thing there around “Actually I want to save more, so why would I take on more debt?” These kind of things could manifest from investing young and also thinking about lifestyle choices. Like you said that bank balance sheet, income statement, how do they manage their financial life around investing and debt and future aspirations and really just staying calm during market volatility.
That discipline of “Even if the market is down, I’m still going to invest my money because I know over time, the market does rebound.” And you think about it like going to the gym, right? You start early, and then the stronger your financial muscles become, it’s just like physical fitness. As long as you’re consistent in your fitness, you know that that consistency is really key.
So even if you start with, like you say, R500, R100, on SatrixNOW it’s R50, you’re just building that habit that can really shape your financial future.
The Finance Ghost: It’s actually such a good analogy because your financial journey is so much like your health. If you drop the ball badly enough and you let it go too far, you may never get it back to where it started or where it could have been. You kind of fall off a certain trajectory and you cannot get back on it.
So that’s actually a great analogy. It really works very well. So, yeah, I like that, I must say.
Lauren Jacobs: And the other thing that I learned specifically when I started investing, it was also around your annual increase. If you are investing R100 a month or whatever that number is, next year, maybe you work in a corporate, you get an increase and it’s 5% more than what you were earning last year, you need to increase that R100 a month by 5% as well.
Because again, it’s in that balance sheet and income statement – you need to do it consistently across everything, from your investing to whatever else you’re planning to do with your finances, you just need to be consistent. Instead of spending that extra 5% on something that doesn’t have future value, spend it on yourself, spend it on your future, your future self.
The Finance Ghost: Yeah. And I think one of the most damaging behaviours that people do when they’re in a corporate environment, specifically two things, actually. One, they assume their salary will be there forever. You only need to have been exposed once to some kind of retrenchment program, whether it affected you or not, but it affects your peers around you. And you see people who just assumed their salary would be there forever and they didn’t need to save anything excess, and they could just kind of bring their overheads up every time their salary went up. And then you get this rug-pull, and now you’ve got to go and potentially find a new job in a country where it’s not easy, etc. etc. – and that can be really bad.
So what that drives is that salary sometimes drives bad behaviour around just this overarching assumption that it will always be there. So, interestingly enough, entrepreneurs often manage their money better because we know that it’s not guaranteed. You’ve kind of got this business where you have to work so hard for everything that comes in, and your income varies so much, that you end up living your lifestyle to one of your lower income months, or that’s what you should do, at least. When you have the high months, it’s like, thank you very much, that goes into the balance sheet. That’s the little nest egg! And so that’s one of the dangers of having a salary is it can actually become this quite dangerous thing that you rely on.
And the other thing that I’ve seen people do is they also spend basically their whole salary and they save their bonus, in theory, which assumes of course, they will get a bonus. And, you know, the word tells you everything – a bonus is discretionary! Like, there’s no guarantee. Have a bad year…
Lauren Jacobs: …do not lay all your eggs on that bonus being paid.
The Finance Ghost: No.
Lauren Jacobs: It’s discretionary.
The Finance Ghost: And look, obviously it sounds very preachy and it’s not meant to because I equally understand, particularly when it’s like school fees, etc. there’s that crunch time in your life where you’ve now started a family and you’re trying to pay off a bond, potentially, if you bought a house, it’s the expensive part of your bond, it’s the worst part of it before your salary increases over many years go up and make your bond so much more affordable, it’s the school fees. It’s that absolute crunch time and for so many of us at an age then where parents sometimes need help as well, there’s a whole generational vibe going on there. So it’s difficult.
There are eras of your life where you are probably not going to save as much as you want to. And then it goes back to the point of this whole podcast, which is if you didn’t start young, when you could save, if you kind of just YOLO’d absolutely all your money, in your 20’s, in the hope that you’ll catch up in your 30’s, I’ve got some really bad news for you about what life looks like in your 30’s, then you’re in your 40’s, and now you’re 20 years out of retirement and you’ve got nothing saved.
That is an ugly trajectory. All the fun you had in your 20’s is going to hurt you later on.
Lauren Jacobs: It’s scary. And I think again, when you talk about “Maybe this month, I can’t put R500 away,” but what a platform like SatrixNOW or EasyEquities or any of those platforms where you can invest as little as whatever the number is – yes, you want to do a debit order, that’s always going to be your first port of call, but the point is that you have the opportunity to invest today, you can invest tomorrow, but you can skip next week and you can skip the week after that but then, when you have another R500, you say, “Okay, wait, I can quickly put this one away.”
So it just gives you that flexibility – as long as you remain consistent, I think that is really the key about building that confidence and that consistency in putting away money that will really set you up for the future. And like you say, investing in your 20’s is almost maybe going to help you in your 30’s because you have that little bit of a cushion to say, okay, I can maybe send my kid to a more expensive school because I have this little bit extra from my 20’s saved up. It affords you also opportunities to enhance your lifestyle in the future.
The Finance Ghost: Yeah, and your money then sits and compounds in the background. Even if you – I mean I’ve seen some of these calcs before where people show the value of saving really hard in your 20’s and like early 30’s and then saving nothing, at all, just letting it compound versus someone who started really late. And the numbers are really scary.
Having said all of that, of course, and this is definitely an important point because I sometimes see you get these, I’m trying to remember what it stands for – it’s FIRE, it’s “something, something, retire early” – basically the principle is save everything and just retire as early as possible.
I also think that’s really crummy advice because you’re also only young once and also – what are you going to do with all your time? In reality your best source of financial wellbeing is having an income and then making sure that you invest a piece of it as well as you can. So you’ve got to make sure you’re looking after yourself. You’re not burning out, you’re living your life, you’re having fun, you’re staying motivated. All of that is absolutely key, but just try and avoid the overly damaging financial choices, especially when you’re young.
I cringe when I see someone doing stuff like financing an R800,000 or R1 million car in your 20’s. I’m like, do the maths on where this ends for you. It’s just horrible and people still do it. They still do it. And this is maybe where the digital tools are so valuable. It’s all out there. You have access to a zillion articles and podcasts that will talk you through why this is or isn’t a good idea. You’ve got access to all of the interest calculators online to go and show what the true cost of this debt actually is. You can go and do all the research on almost anything you can think of and you’ve got access to the budgeting tools to make it as easy as humanly possible to track your spending and see how much you can save at the end of the month. There’s all this stuff that can read your bank statements, read your credit card statements. Generations before us never had this stuff, so use it. It’s there.
Lauren Jacobs: You have no excuse, you really have no excuse to say, “Oh, I didn’t save in my 20’s, or I don’t know how to save,” because the plethora of information and tools that are available online is just incredible. We didn’t have that opportunity when we were younger, so we had to figure it out.
And maybe just to step back into just one more thing on the savings before we talk a little bit about the tools and that – the other thing, obviously, as you get a little bit older, you start thinking about retirement. And one of the big things that impacted me when I started working, few years into work, and the person that I worked for at the time, she said to me, “What you actually need to do when you are not earning an extravagant salary, is start putting away the most that you can for your retirement.” So that’s the 27.5%, right? Because as your salary increases, it becomes more and more difficult to now put away 27.5%. But if you’ve been doing that consistently from the time you start working, it doesn’t affect you because your income after tax is not affected when you now change from 20% to 27.5%. So that’s just something that really stuck with me.
And I talk a lot to new people coming into the business or younger people coming into the business just around considering putting away the most for your retirement from the beginning. So it continues, as your salary grows, so does that 27.5% and you don’t, at some point, need to switch from like a 21% to a 27.5%. And you don’t want that also to be when you’re 45, 50, because it’s not going to be enough at that point. So that’s just something around retirement that was important for me and my financial goals.
The Finance Ghost: Yeah, absolutely. So maybe something just personal about me from that. Obviously I run my own business, so income is variable. But I’ve learned a lot where it ends up and how to get there and everything else. So I generally run my life in such a way that I take a salary based on the lowest amount the business earns and then I save – it is about 20% actually of that salary now that I think about it – and then obviously in a month that’s better, that’s just gravy that goes to the nest egg, literally because you just never know. You never know when you run your own business and I wish more people who earn salaries would also take a “you never know” approach because they don’t actually know. They just like to think that they will have this lovely salary forever and ever and AI won’t take their jobs and they’ll never be retrenched and nothing will ever go wrong. Unfortunately, life is not – adulting is not called adulting for nothing.
Lauren Jacobs: Not for the faint hearted.
The Finance Ghost: No, it’s not for the faint hearted at all. I guess before “adulting” there’s obviously “kidding” which is particularly lovely for the little ones. And maybe that’s something to chat about now as well.
Is it is actually possible to invest when you’re a kid? But it needs to be, I would imagine your parents opening an account on your behalf and I guess there are pros and cons to that. So what’s the story with that?
Lauren Jacobs: As a parent I’ve tried to be consistent to save for my kids and to show them what it means to save and how instead of just using all your money, you can use it to enhance or to create value from that money. And I think it’s important that not only as a parent, but maybe as an aunt, an uncle or seeing your other friends’ kids, it’s important to also bestow that on them. So with SatrixNOW you can invest for your minor child. You have to be the legal parent or guardian in order to open that account. You, as a parent, have to have a registered account with SatrixNOW before you can then add your minor child to the account. For the minor account, obviously they would then have to verify the minor as well with a birth certificate and then a clarification through you as a parent, on the birth certificate is your name.
But generally it’s quite easy as long as you are a registered account holder. If you go onto SatrixNOW, where your account information is at the bottom there is a little tab that says add minor account. And then there they will ask you for all the information they require and the team will come back to you.
Once the account is opened, your child will have their own username and then you would create a password and then from there you can obviously use the tax-free savings account as well. It just means that you have more time to save and you have that tax relief over time. Again talking about taking more risk in the portfolio, it is quite easy actually to do that.
Then if someone else wanted to invest on behalf of your child, we have options in SatrixNOW of vouchers. You can have a debit order where someone else is doing a debit order into your child’s account as well. There are obviously a few forms that you just have to get signed off by that account holder. But there are very many options to then allow your child to get money from other people. You can also give them the account details of the SatrixNOW account, so for birthdays you maybe ask instead of gifts, they can pay into the SatrixNOW account.
So it’s pretty easy and it also then helps you to show your child. One of the things that I did with my child, he had a school trip coming up and I showed him, well, you’ve got a little bit of money, let’s put some of that into your SatrixNOW account and you can see how it grows over time. You have 3, 6 months to save a little bit of extra spending money for your trip. So over time, until it was time for him to leave, we actually said these were the number of units he bought with his money and this is how it moved over time.
And we could see in that time, it grew a little bit, which was great for him to also experience because sometimes we’re investing on behalf of our kids, they don’t really know what’s happening or where the money’s going. They only see later on in life when we give it to them as a gift or if we need to use it for something. But yeah, I think that was quite a great experience to show your child specifically how this number has grown over time or if it went down at a certain time you could also see that. So that was quite interesting from a minor’s perspective.
The Finance Ghost: Yeah, that is super interesting. I guess the con – and I guess it really does come down to the kid and I mean there’s a broader discussion here around parenting – the con is that when your kid turns 18, that child would then have access to that money, right? So if you’ve actually maxed out their tax-free savings account, technically speaking, on their 18th birthday, they could hold the keys to half a million rand, which – even the best 18-year-olds are probably not going to make amazing financial decisions like that.
But yeah, what are your thoughts on that? That’s probably something you’ve considered for your own kids.
Lauren Jacobs: So that is the situation that I sit with now because my kid turned 18 last year. So we’ve had to have very serious conversations like this, it is a large sum of money you need to actually be very conscious of. This is not here to do whatever you want with it. It’s for big financial decisions and we’ve asked that any of those decisions are talked about. We are considered in those decisions that we can then discuss it and see whether those financial decisions are the right ones for that amount of money.
The other discussion also that I think a lot of people should have beforehand is, “Am I actually saving this for your education?” Because education is expensive, tertiary education is expensive. If you are using that, also, maybe just you say: “Why are we saving this money?” We’re saying when you want to go and study, or you want to go and work overseas, or whatever that is, this is there as your nest egg for that. So it’s really a conversation that you have to have as your child gets older. When they become 18, just around what is this really for? It’s not just some fun gift. It’s really a big deal.
The Finance Ghost: Yeah, I think that’s probably the best way to do it because if you then also cover all of the studying fees and everything else, it starts to become, it’s almost just – even if you’re in a position to do so, it’s a lot of money to have responsibility over at a super young age. It really is. So very interesting stuff – it’s such an emotive thing, right? Because any parent knows this – it’s your child and you always want the best for your child and you always have that little fear in your heart as well of: what is the best? Is the best to just give stuff? Is the best to teach them? Obviously it’s to teach them the value of it and to make sure that they can make good decisions.
It’s all very interesting, and I think anyone who goes through the emotional pain almost of thinking through it is already doing the right thing, you’re already a good parent. If it’s hard, you’re doing the right thing. That’s always what I seem to remind myself. It makes me feel better sometimes as a parent.
Maybe let’s chat through some of these digital tools as well. I mean, we’ve had such a cool conversation about just the benefits of starting young, obviously thinking about doing it for your kids, pros and cons, etc. Let’s talk about some of the digital tools, maybe for just a few minutes.
In your world specifically actually, I’m curious about what’s happening there. Obviously, the nuts and bolts of ETFs, a lot of that is very operational processes, etc. Your world, just to be clear to listeners who maybe haven’t listened to the first podcast we did earlier this year, you’re not picking stocks, you’re not doing the asset management of these things. You are making sure that these ETFs do what they say on the tin, which is track the indices that they promised to track. And I would imagine that in your world there’s been quite a few digital tools coming through. So to the extent you can talk through one or two of them or just give any insight, just how rapidly are things changing for you?
Lauren Jacobs: Yeah. So just to put it in context for anyone who didn’t listen before, I’ve been at Satrix for 11 years, and when I started at Satrix, there were spreadsheets. Basically, we had to source data, put it into a spreadsheet, use that data in a spreadsheet.
The Finance Ghost: Good old Excel.
Lauren Jacobs: Good old Excel!
The Finance Ghost: Leading to that lifelong dating advice: don’t hook up where you Vlookup! This was an excellent piece of corporate advice given to us all in our 20’s. Anyway.
Lauren Jacobs: Oh, gosh, yeah. And I’ve seen such a huge change since I’ve started to where we are now because, as you can imagine, the volume of trades that we do on a rebalance on a daily basis is quite intense. It’s lines and lines and lines of trades, and it’s also the number of indices we track.
So we track almost 50 different indices, which means there’s two sets of data in index tracking. One is your index data and one is your portfolio data. And that’s your main sources of how you’re tracking an index or how you’re managing your portfolio. So when it comes to index data, you’ve got this constant – you have to know what is in the index at a point in time, you have to know what the price is, you have to know what corporate actions are upcoming, index reviews are upcoming, and that is all data.
When we look at how do we best execute to reduce tracking error, it’s about using the data as efficiently as we can. And over time, we’ve worked quite closely with a number of index providers where we get the data through FTP sites and then we have internal systems that then route that data into a user-friendly front-end. So we are no longer copying and pasting data from an email into Excel. We’re using all of these options around FTP sites and using scripts internally and certain systems that have been developed specifically for Satrix. So we’ve got a lot of proprietary systems that we use where we then can use all that data from the index providers and then we get all of our data from our portfolios, from our administrators – and how do we match it? We then have a specific system, a proprietary system that we use that’s really developed over time and is constantly developing because it’s changing all the time – the indices change, the types of portfolios that clients want also change.
So it’s a constant enhancement of these internal systems, and it’s just a marrying of your index data and your portfolio data. I’m making it quite simple, but it’s a lot of data. So we’ve got this big data issue that we try and streamline through different systems so that when I open my portfolio, I can see my portfolio, my index, and it’s quite clear what needs to be done. But we’ve just used technology to enhance that big data and how we use it internally. So that’s been the biggest stride for us in terms of using technology internally.
The Finance Ghost: It’s super interesting. I mean what it talks to as well – and again it goes back to that importance of just starting to invest young, etc. – is the world is changing, careers are rapidly changing. You either need to make sure that you are someone who gets to the level of being an expert with what the technology can do for you. So in other words, you’re the person who is using the end product, is driving the need for it, is actually understanding the real world application properly, or the person who’s creating the technology. Those are kind of your two choices right now in the world actually from a career perspective, outside of the obvious stuff that doesn’t apply there.
But I’m talking particularly in a professional services environment, those are your choices right now. And it’s an interesting time to be a young person. The world is rapidly changing. The technology is really coming through hard. You got to try and find some space to save. You’ve got to obviously try and think, well, what direction is my career going? It’s not easy and it’s not made easier by putting yourself under financial strain as well. So I think it just all ties together at the end of the day into the stuff you need to be thinking about relatively early in your life, right?
Lauren Jacobs: Yeah. And the thing is with technology and with these different apps and tools, it makes it more transparent. You’re not wondering, “Should I be saving this or should I be doing this?” There’s all these tools and these YouTube channels and these podcasts like this, where people talk about how you should think about your finances and pay yourself and start. Young people nowadays have such, just compared to when we were young, they have such a huge opportunity to really learn and invest and be consistent over time. Whereas for us, it was a little bit of a black box. We didn’t really know and for our parents, it was very different. There really is an opportunity because of the wealth of information that’s available to them. And it’s not only apps like SatrixNOW. Even on your normal banking app, most banks have a money market or other sort of investments that you can also invest in. There’s just an opportunity there to invest. Even if it’s just doing like a little bit every month, just your banks even have those opportunities for you to put something away.
The Finance Ghost: Yeah, it’s like layers of a cake, right? There’s a money market layer, there’s the ETF layer, there’s if you want to do a little bit of stock picking, there’s all of these different layers in the cake and it’s a nice way to think about it.
Lauren Jacobs: So, Ghost, I mean, I’ve talked quite a bit about index tracking and how easy it is to – well, how easy everybody thinks it is for us to match an index. But I’m sure in your line of work, you have to use some sort of tools or how do you look at different stocks and through research, have you found any applications or online tools to help you with specifically stock picking?
The Finance Ghost: Yeah, absolutely. So there’s a lot out there. There’s a lot of free stuff and the free thing is called reading, which means go and find as many of the investor presentations and earnings transcripts that you can, all of which is available on this wonderful thing called the internet, and then read them! You will be amazed how much you learn from that.
If you are someone who wants to take your stock picking more seriously and maybe you’ve got a bit more money that you are investing in the market that makes it worthwhile, you can then consider some of the platforms that are aimed at retail investors, like TIKR is the one that I use. It’s like a Bloomberg- or Capital IQ-lite, very lite, but good enough so you can do stuff like chart over multiple years what the valuation multiples of a company have done and that lets you very quickly visually see, okay, is this thing relatively expensive or relatively cheap to where it has been? Without something like that, it’s actually quite difficult to really make a success of stock picking specifically.
There are other ways to do it. I haven’t looked in a while, but I remember at one point on Yahoo Finance, you could actually export quite a lot of data into Excel, your old platform there Lauren, do the spreadsheets, do the hard yards, go and build out the stuff. But that is a slog. If you’re someone who really wants to get quite serious about your stock picking, then I think some of those platforms are a very worthwhile investment.
And there are others – there are share trading platforms that allow access to some of this stuff. There are data platforms that allow you to get your hands on this stuff as well.
And then in terms of AI, which I think is obviously on everyone’s lips at the moment, I’m getting very mixed results using something like Copilot, for example. Google AI I do not trust – Google AI is about as reliable as my 3-year-old when it comes to telling stories. Incredible amounts of confidence, low levels of credibility has been my experience with that. Copilot has been a little bit better, but still it’s very limited. I find it’s better for narrative-type stuff. If you actually ask it for “give me a bull case for XYZ stock, give me a bear case” – it’ll give you some generic rubbish every time, but it’ll also probably give you some quite good stuff. It’s got a lot of thinking in the back-end around in the bear case, it will go and see if there’s any major legislative risks or that kind of thing. Again, it works a little bit better on international stuff, but it is something to keep in mind.
So there’s an example of a digital tool that does help, but certainly just reading as much as you can and going and looking at charts. I think people who pick stocks are sometimes – they believe too much that it’s not what they pay for the stock, it’s just whether or not it’s a good company. Unfortunately, that’s not how investing works. You can buy the best company in the world, if you overpay for it, you’re going to have a bad time. Ironically, or conversely, you can also buy a really bad company, but if you pay a really amazing price, you can end up with much better returns than your friend who bought the market leader and can’t understand why they’re 10% in the red.
So those are some of the digital tools, as I say, for those who want to take it a bit more seriously, or quite a bit more seriously, you can look at something like TIKR, you can look at some of the trading platforms out there, see what they can offer you. And I really do believe the key is to be able to draw charts of multiples over time, how the valuation has moved over time, so you can see those averages, you can see the trend. That’s the key piece that you’re not going to get by reading annual reports, reading earnings transcripts. You need a system that’s doing the maths for you.
So, yeah, that’s the world of stock picking. Not quite the big data, data matching – it’s two very different worlds, right? I mean, that’s the beauty of the markets is we both have such different lives, actually, but both in the markets!
Lauren Jacobs: And talking about charting. Maybe just to chat a little bit about charting, even on SatrixNOW, if you go into SatrixNOW, if you’ve made an investment or if you just tap into one of the ETFs, there are charts in there. So it’s quite great that you can see how the market has done over that time.
The Finance Ghost: Absolutely.
Lauren Jacobs: In an ETF, you’re buying the market. So you can go to a Satrix 40 and you can get, since inception, a chart, or you can get for the past three years, a chart. So that’s also quite cool on SatrixNOW that you can then look at what your stock’s doing, look at what the market’s doing, and measure it that way.
The Finance Ghost: And you can learn a lot from fact sheets as well. So the last Satrix podcast that I did was with Siya and we talked a lot about “ETFs like a box of biscuits” and the fact sheet will tell you what’s inside.
And again, it’s very true – I think the overarching point here is just the younger you can expose yourself and your money to the markets, the better. The earlier you can teach yourself good financial habits. The stuff sounds so obvious, but people hear it and it’s almost in one ear and straight out the other again because then they see a brochure for a nice shiny car with a 40% balloon payment and prime less 4%, which is literally financial suicide. But there’s only one way some people learn this, and that’s by going and doing it and then crying the whole way through their 30’s as they recover from that. It is what it is. I’m almost tired of talking about what a bad idea it is because some people just don’t want to hear it.
But anyway, yeah, use the digital tools that are out there. I think if you can turn investing into something you are passionate about, then it will make a gigantic difference because not only are you then doing the right thing for yourself, you’re also enjoying it, which is just a fantastic Venn diagram. That’s the key to success.
So, Lauren, I think we can probably leave it there. Thank you so much for your time. Again it’s been so lovely to chat to you once again. And I would say for listeners who have enjoyed this chat, if you’d like to maybe hear more from Lauren, and if you’d like to learn more about how ETFs actually work in the back-end, go and find the previous Ghost Stories podcast with Lauren. There is only one other one so you can’t get it wrong, and that talks all about the nuts and bolts of ETFs and how they actually work in the background, how they do the index tracking. It’s super fascinating. It was a very popular podcast, so if you haven’t listened to it, go and check it out. Otherwise, Lauren, all the best for the rest of this year. I don’t think we have another one scheduled this year, but hopefully we’ll get you back on in 2026. And yeah, just all the best for the end of 2025.
Lauren Jacobs: Thanks so much for having me Ghost. It’s been lovely chatting to you. Have a good rest of the year to you too.
Traders might find the share price chart rather interesting
Altron has been in turnaround mode for a while now, with the share price more than doubling over the past three years. Recent trade has been choppy though. I’m no technical expert, but there’s been quite the double top this year in this share price, a pattern made more obvious by drawing a 5-year chart:
With that kind of volatility, traders may want to take a closer look at the chart. For investors with a longer-term lens, the latest update reflects an expected increase in HEPS from continuing operations of between 16% and 24%. If you look at total group operations instead, the expected move is 12% to 19%. The difference between the two is Altron Nexus, which seems to make a difference of roughly 10 cents per share in the latest period vs. 5 cents per share in the comparable period.
Full details will be released with the interim results on 3 November.
Blu Label gives a summary of Cell C’s financial outlook (JSE: BLU)
Margin expansion is key to the story
Blu Label Unlimited (the new name for Blue Label Telecoms) has released an updated financial outlook for Cell C ahead of the planned listing of that asset.
For net revenue growth, they expect the typical mid-single digits outcome that we see in many companies in South Africa. This feels like an achievable target, as top-line growth above these levels is hard to find in our country.
EBITDA margin is expected to expand thanks to a change in mix and ongoing efficiencies, increasing from the low twenties to the mid twenties in coming years. Targets like these are often deliberately vague. The same direction of travel can be found in the EBIT margin.
Free cash flow is boosted by a decreasing capex requirement, with the capex-light operating model as a key feature of the business. The group has guided for dividend payouts of 30% to 50% of free cash flow. That isn’t quite the cash cow that you might have expected, with Cell C needing to run at a sustainable level of leverage.
These are decent targets, but are by no means earth-shattering or quite as exciting as one might expect to see based on all the bullishness in the market around this name. Having had an incredible run in price this year, the share price recently corrected and is now trying to consolidate:
Gemfields just cannot catch a break (JSE: GML)
Illegal miners are now impacting the Mozambican operations and even the latest auction wasn’t great
Earlier this year, Gemfields was at serious risk of being a corporate failure. They had run the balance sheet too hot for too long, with a vast capital investment programme and dividends to shareholders at a time when the core business was facing almost existential risks. Luckily, major investors were happy to support a rights offer and give the management team another chance to run a more conservative financial strategy.
The problem is that Gemfields still faces significant risks throughout the business, ranging from the realities of operating in difficult African countries through to the impact of fluid supply and demand dynamics in the gemstones market. Both of these issues are on full display in the latest announcement.
Let’s start with the really bad news, which is that the all-important second processing plant at MRM in Mozambique has been significantly impacted by illegal mining activity in the past week. Plant supply infrastructure is being sabotaged and illegally mined rubies are being removed from the area. Although final commissioning of the plant is expected in October, Gemfields has had to defer the November / December ruby auction to January / February next year. This is a very good example of the kind of thing that investors do not want to see.
We now move on to the mixed news, being the latest auction results that achieved revenue of $11 million. Only 62% of the carats on offer were sold at a realised price of $59.43 per carat. The pricing itself doesn’t tell us much unfortunately, as the grade of rubies varies at every auction. It seems as though the smallest and lowest grade material didn’t sell, with Gemfields taking a gamble here on what they actually brought to market. They will “leverage the market feedback received to refine future offerings” – in other words, the gamble didn’t really work.
I was quite surprised that the share price fell by only 6% on the day!
Jubilee Metals is getting closer to being a focused Zambian copper business (JSE: JBL)
The disposal of South African operations is expected to be completed this year
Over at Jubilee Metals, their sights are set on one thing and one thing only: copper in Zambia. To give themselves as much flexibility on the balance sheet as possible, they are selling off the South African chrome and PGM operations. The first tranche of the sale of $15 million has been received and they are busy with remaining conditions for the deal, including Competition Commission approval. They reckon that the deal can be completed by the end of 2026.
It’s important for Jubilee to keep the market informed about the plans for Zambia, where they have three distinct business units.
The Roan Concentrator is a tailings business that purchases and processes run-of-mine material. Production was in line with guidance in the first quarter, with the upcoming rainy season making it more difficult to forecast how production in the next quarter might be affected. They have experience with the seasonality of course, so perhaps their predictions won’t be far off.
The Sable Refinery is currently being expanded to allow for increased production from nearby mines and near-surface assets, with the expansion expected to be completed in the third quarter this year. They need another $5.5 million in capital at Sable, which they expect to fund from existing cash resources and the proceeds from the sale of South African assets. Importantly, the Molefe Mine (previously called Munkoyo) is delivering run-of-mine to Sable, with improving copper grades. They are busy negotiating with potential joint venture partners regarding this business, including for further mine development.
Finally, there’s the Large Waste Project, which is much earlier in its journey. Final designs for the project are expected by the end of the third quarter and they are in talks with a potential funding partner.
As these assets are all located in Zambia, they aren’t entirely independent of each other in terms of future plans. There are various integration opportunities that the company can look at.
The market has been less than thrilled with the timing of the PGM and chrome disposal though, as that sector is rallying like crazy at the moment. While the big PGM names are registering huge positive share price moves, Jubilee is down 18% year-to-date.
Ugly momentum at Mondi – and not just in the share price (JSE: MNP)
The share price is back where it was 10 years ago
There are certain sectors that I simply don’t invest in. Anything related to paper is one of them, even if there’s a packaging business to try and smooth things out. Cyclical industries scare me on a good day. This chart of Mondi shows you exactly why:
If you have great memories from 2014 that you want to keep alive, then owning Mondi shares will help you think of that year whenever you look at your portfolio. Who needs music and photos when you can just own stocks in the paper industry?
The reason for the 16.5% price drop in response to the latest quarterly update is that Mondi’s numbers are heading firmly in the wrong direction. Underlying EBITDA was €223 million in Q3, down sharply from €274 million in Q2 and €290 million in Q1.
Volumes were impacted by weak demand and paper selling prices declined in the quarter, so that’s a nasty combination. It’s never good when the best thing a company can do is focus on maintenance shuts during a subdued market.
It seems to be getting worse before it gets better, with oversupply in key markets and current selling prices that are even worse than what we just saw in the third quarter!
The only silver lining is that the group has completed its current investment cycle. In other words, they’ve spent a fortune on capital expenditure and they now have to suffer through a poor market for the improved assets. This is exactly why I tend to avoid cyclicals, as the chances of the investment cycle working out beautifully with the market cycle are slim.
This is deep inside the “too hard” bucket for me.
Sirius reports on a seasonally slower period, with ongoing growth in the rent roll (JSE: SRE)
The focus is now on bedding down the recent acquisitions
Sirius Real Estate has released a trading update for the six months to September 2025. Although the rent roll is up 15.2%, around two-thirds of this is thanks to the recent acquisition activity. Sirius has been raising capital and deploying it into assets in Germany and the UK, a strategy that Sirius investors are highly familiar with.
On a like-for-like basis, the rent roll increased by 5.2%. Germany and the UK produced very similar growth rates in this regard. This growth is based on lease escalations and renewal rates, as the asset management focus is on the newly acquired buildings that are excluded from this number.
There are some interesting growth drivers within the group, including in verticals like self storage and defence. The latter is a particularly strong opportunity in Europe, with Sirius appointing a retired Major General and now specialist supply chain consultant to help them optimise the opportunity.
They expect to announce further acquisitions in the next quarter, primarily in Germany. This will add to the almost €300 million in acquisitions across Germany and the UK this year. They have recently raised a significant amount of debt in the form of a revolving credit facility and a bond tap issue, so there’s no shortage of cash available for further deals.
Results for the six months will be released on 17 November.
Tharisa wins against SARS (JSE: THA)
It looks like a significant positive adjustment to earnings is coming
Tharisa has achieved a favourable ruling in the Tax Court against SARS. This relates to mining royalties and the approach that SARS took for the 2015 and 2017 years of assessment, although it has a much bigger impact on the approach that SARS is able to take towards mining companies.
I’m certainly no expert in this space and this is very technical stuff. It sounds like SARS had a difference of opinion to Tharisa regarding the application of an average PGM grade and the incremental cash costs to beneficiate the PGMs to the required standard. This approach effectively assumes a certain income level for a particular grade of mined materials, which is prejudicial to miners with lower-grade ore bodies.
Tharisa previously raised a provision of $56.8 million for this matter and will now recalculate it based on the ruling, with a “materially favourable” impact on earnings per share expected. They will announce more details once the calculation is finalised.
Vunani Fund Managers to merge with Sentio Capital Management (JSE: VUN)
This is why Vunani has been trading under cautionary
Vunani has announced the creation of Vunani Sentio Fund Managers, a merger of businesses that will lead to a combined R60 billion in funds in management. Consolidation of these Black-Owned fund managers makes sense, as scale is key to success in this particular industry.
The deal is structured as an acquisition of Sentio by Vunani. The end result will be that Vunani holds 63% in the merged entity, while current management of Vunani Fund Managers will have 15% and current management of Sentio will have 22%. Notably, Investment Managers Group (part of Momentum JSE: MTM) currently has a 30.05% stake in Sentio and will be exiting the stake entirely, as being diluted to a small stake isn’t part of its strategy.
Vunani Fund Managers is paying for the deal in cash and shares. If I understand the announcement correctly, shares in Vunani Fund Managers will be issued, not new shares in Vunani as the listed company.
The deal isn’t categorisable under JSE rules, so we won’t be getting any further details on it at this stage.
Nibbles:
Director dealings:
Discovery (JSE: DSY) directors and prescribed officers received quite the payday, especially Hylton Kallner as the CEO of Discovery Bank. I’m sure that his KPIs had big green ticks next to them after the bank recently turned profitable! He only sold the taxable portion of his shares, but the same can’t be said for all the execs. Other than sales purely to cover tax, over R40 million worth of shares in aggregate were sold by multiple directors and prescribed officers.
The chair of Mondi (JSE: MNP) bought shares worth over R1 million. He took advantage of a massive negative move in the price in response to results.
A director of Standard Bank (JSE: SBK) sold shares worth R338k.
eMedia Holdings (JSE: EMH | JSE: EMN) is getting value investors hot under the collar at the moment, even if the company seems to have paid a meaty price for the offshore investment in a visual effects business. This is balanced by a significant recent share repurchase programme, with 3.44% of N ordinary shares in issue having been repurchased since 30 September 2025. I suspect that the unbundling by Remgro (JSE: REM) led to plenty of shares being offered in the market, with eMedia only too happy to sit on the bid. The average price for the repurchases is around R1.81 per share, with the N shares currently trading at R2.05. Of course, the downside to repurchases of this magnitude is that they hurt liquidity in the stock, something that smaller companies always need to keep in mind.
In good news for Barloworld (JSE: BAW) shareholders who want to accept the offer from the consortium, the TRP has issued a binding ruling that the final consideration per share must be R120 per share, not the R118.80 that the consortium tried to get through as an adjustment to the price for a recent dividend. The offer is open for acceptance until Wednesday, 15 October.
MultiChoice (JSE: MCG) announced that Canal+ is up to a 72.46% stake in the company. There are further acceptances in place that will take them to 76.52%.
Visual International Holdings (JSE: VIS) is raising R2 million (for context, the market cap is only R55 million) through an accelerated bookbuild process. As the capital raise has been timed in such a way that they aren’t in a closed period, it looks likely that directors will participate in the raise. The way it works is that related parties have to buy shares at the price at which the book closes. The question will of course be whether the market is particularly interested in this raise. It would probably help if the company actually had a working website…
Assura (JSE: AHR) is going through the motions for the cancellation of its listing. The shares are suspended from trading on the JSE and will be delisted on 23 October. In case you missed all the news related to this company this year, Assura was acquired by Primary Health Properties (JSE: PHP), which remains listed on the JSE.
MTN Zakhele Futhi (JSE: MTNZF) has renewed its cautionary announcement regarding the final unwind of the scheme and the calculation of the residual value. They haven’t given an updated view on the timing of when this might happen.
With Jan Potgieter deciding not to stand for re-election to the board of Italtile (JSE: ITE), his long journey with the company (including 5 years as CEO) comes to an end. Notably, the ex-CEO of Pepkor (JSE: PPH), Leon Lourens, has been appointed as a non-executive director. No shortage of retail experience there!
Shareholders in Marshall Monteagle (JSE: MMP) almost unanimously approved the resolutions required to execute the equity capital raising activities of the company.
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