Visa, the German development finance institution DEG, and existing investors, Speedinvest and Cathay AfricInvest Innovation Fund have invested in Ghana’s Oze, a provider of AI-powered digital lending solutions for financial institutions and SMEs. The financial terms of the investment were not disclosed, but the funding will be used to scale the fintech’s Lending Management System. Oze currently operates in Ghana, Nigeria, Guinea, Benin, Rwanda, Madagascar, Zimbabwe and Lesotho.
UK development finance institute, British International Investment, has announced a US$100 million Tier 2 capital facility to KCB Bank Kenya to increase lending capacity to climate-related projects and women-led SMEs.
Pelangio Exploration has announced a strategic agreement with FJ Minerals to acquire up to an 83% interest in the Nkosuo Project in Ghana’s Ashanti Region. The project is situated adjacent to Pelengio’s Manfo Project and the agreement stipulates that upon transferring a 17% stake in in Manfao to FJ, a JV will be formed which includes both projects. Palangio will hold an 83% stake and FJ, a 17% stake. The option must be exercised by 15 December 2025.
Alterra Capital Partners has acquired a majority stake in ARP Travel Africa Ltd from the founding Moledina Family. The destination management company, headquartered in the UK, specialises in tailored travel experiences in East Africa. Founded in Tanzania in 1978, the company has established partnerships with travel agents in 50 countries, spanning five continents, catering to international travellers looking to experience the East Africa region. Financial terms were not disclosed.
Fawry, the largest e-payment platform in Egypt, has announced three strategic investments in the Egyptian fintech space. The company has acquired a 51% stake Dirac Systems; a 56.6% stake in Virtual CFO and a 51% stake in Code Zone for a total of US$1,6 million.
The Private Infrastructure Development Group (PIDG) and EDFI Management Company, through the Electrification Financing Initiative (ElectriFI), have invested a total of €4 million in Zambia’s Supamoto. The investment will enable Supamoto to increase pellet production at its facility in the city of Ndola as well as allow the company to expand its logistics and distribution infrastructure to meet growing demand. The transaction will finance 14,800 new fuel-efficient cookstoves which are anticipated to deliver cost and time savings for up to 74,000 people.
Gozem, a super app that operates across Francophone West and Central Africa, has secured US$30 million in Series B funding – $15 million in equity and $15 million in debt — led by SAS Shipping Agencies Services and Al Mada Ventures. The company operates in Togo, Benin, Burkina Faso, Cameroon, Ivory Coast, Gabon, Mali and Senegal.
Artificial intelligence (AI) and open-source software (OSS) have become critical components of modern business, making their evaluation a key aspect of merger and acquisition transactions (M&A transactions).
While these technologies drive innovation and reduce costs, they also introduce unique risks, particularly around intellectual property, compliance and integration. Proper due diligence is essential to ensure that these assets add value, rather than liability, in M&A transactions.
A primary consideration is the ownership and licensing of AI technologies. Target companies relying on AI systems should be able to demonstrate clear ownership of their proprietary algorithms and models or, alternatively, that such target company is licenced to use the same. This includes assessing whether the data used to train these models is proprietary, licensed, or sourced from publicly available datasets, as this impacts data privacy and intellectual property considerations.
It is also crucial to understand whether the target company has either developed or procured the AI system. Depending on the scope of deployment of AI systems, these systems may be at different stages of the AI lifecycle. The acquiring company should consider raising some of the following questions with the target company:
Where do ownership rights in the AI model, training and testing data, and inputs and outputs reside?
Does the target company have mechanisms, such as policies and training, in place to regulate internal usage of the AI systems and to protect the integrity of confidential information, personal information, and sensitive proprietary or corporate information?
Have the relevant AI Terms and Conditions been vetted?
Has an Ethical Impact Assessment been conducted on the AI system?
Has a Privacy Impact Assessment been conducted on the AI system?
Generally, does the AI system comply with applicable laws and internationally accepted standards for the ethical and responsible use of AI?
Will or has the AI system impacted on any jobs and, if so, have the relevant labour law requirements been complied with?
Has the deployment of AI resulted in any tension between job losses and automation and, if so, what reputational impact has this had on the target company?
How is AI governance treated by the target company?
Does the board of directors of the target company have full line-of-sight as to how AI is being deployed and governed?
Some other important AI considerations include: (i) whether the target company has implemented processes to monitor and mitigate data and algorithmic bias; (ii) whether the AI system is actively monitored for cybersecurity risks; and (iii) whether the AI system has been properly audited and accurate audit logs maintained.
Based on the risks identified in the target company’s use of AI systems, the acquiring company should consider including AI-specific representations, warranties and indemnities to bring the identified risk level within the acquiring company’s risk appetite.
While the risks around AI can be mitigated through representations and warranties insurance, the question for acquiring companies always remains whether the acquirer is in the business of purchasing insurance or whether they seek to purchase a company with a functioning AI system.
Understanding the target company’s use of OSS is equally critical. Open-source components often form the backbone of IT systems, but their use is usually governed by various licensing terms, such as General Public Licence (GPL), Apache, or MIT. These terms commonly address, inter alia, patent use, source disclosure, licence and copyright notice, liability, warranties, and trademark use. Non-compliance with such licence terms can lead to legal claims, including requirements to open-source your proprietary code or to renegotiate licensing agreements. Therefore, it is important to understand whether the target company has utilised any OSS software and, if so, whether it has complied with software security and licensing requirements. Identifying and addressing these issues early in M&A transactions is vital to avoid incurring unanticipated costs, either during or post completion of the transaction.
OSS dependencies also introduce operational risks. Acquiring companies should evaluate whether the target company has a clear process for tracking, updating and managing OSS components, such as whether the target company has implemented and maintained an up-to-date Technology Stack List (also referred to as a Software Bill of Materials), documenting which OSS and other technologies have been used or incorporated into other software or systems, and what the applicable licencing terms are.
From a cybersecurity perspective, use of outdated or unsupported open-source libraries can expose the company to security vulnerabilities, allowing hackers to gain unauthorised access to corporate systems or data. Acquiring companies should consider sunsetting any OSS software which is outdated, or mitigating to newer OSS to avoid the cybersecurity vulnerabilities and risks introduced by outdated or unsupported OSS.
Finally, the integration of AI and OSS into the acquirer’s IT infrastructure poses strategic and technical challenges. Differences between the target company and acquiring company’s technology stacks, licensing models and/or licence compliance practices can complicate post-transaction integration. A clear roadmap for harmonising these systems will realise the acquirer’s strategic vision as envisioned by the M&A transaction. Additionally, acquirers should consider how AI and OSS assets align with their broader business strategy to ensure that they deliver long-term value.
AI and OSS introduce both opportunities and risks to M&A transactions and are key components of any credible IT environment. Conducting a comprehensive due diligence on the ownership, licensing, cybersecurity and operational management of AI and OSS technologies, and the extent of their use within the target company, is critical to mitigating risks and maximising the value that can be harnessed by these technologies post transaction completion.
Ridwaan Boda is an Executive and Head of Department and Alexander Powell a Candidate Legal Practitioner in Technology, Media and Telecommunications | ENS.
This article first appeared in DealMakers, SA’s quarterly M&A publication.
As the new year unfolds, the private equity (PE) landscape in South Africa is marked by both opportunities and challenges shaped by economic conditions, geopolitical shifts, regulatory changes and other factors. Despite such complexities, PE, known for its resilience, remains a significant asset class and should continue to attract investment.
According to the 2024 Private Equity Industry Survey conducted by the South African Venture Capital and Private Equity Association (SAVCA), 62% of PE firms expect high deal flow in Southern Africa in 2025.1
Several trends are expected to drive growth and shape South African PE in 2025, with the deal value in the local PE market expected to increase by 6.51% to US$62,12m in 2025.2 This article considers some of the trends which are likely to influence the South African PE market this year.
There is notable optimism among local PE firms compared with their global counterparts in relation to exit activity. The African Venture Capital Association reported that the volume of exits in the first half of 2024 surpassed that of the same period in 2023.3 It appears that this will be a continuing trend in 2025. According to the abovementioned 2024 SAVCA survey, PE firms in Southern Africa are more optimistic about an increase in exit activity than their global peers.
Furthermore, as managers seek new capital sources and investors aim to reduce fees, co-investments are becoming increasingly prevalent. Offering co-investment opportunities to limited partners (LPs) has proven advantageous and is expected to remain a key strategy for improved fundraising, increased deal flow and risk mitigation.
Macroeconomic factors
The macroeconomic environment, including inflation and interest rate trends, will significantly influence PE activity in 2025. Several major economies, most notably the United States, have begun cutting interest rates and several African countries, including South Africa, have followed suit. Lower interest rates can stimulate investment activity by reducing the cost of borrowing, allowing PE firms to finance acquisitions and expand their portfolios.
Additionally, political stability will be crucial for investor confidence and market growth. Following the recent elections in South Africa and the subsequent transition to a Government of National Unity (GNU), there are promising signs of progress in addressing structural obstacles to economic growth. This has prompted both local and international investors to reassess their perspectives on South Africa as an investment destination.
However, much depends on the GNU’s ability to create and foster a more business and investor friendly environment.
LPs will seek managers capable of delivering strong performance at the microeconomic level despite macroeconomic challenges, which is essential for achieving successful exits and delivering distributions.
ESG | Impact investing
There is a growing shift towards sustainable and impact investing driven by increased awareness of environmental, social and governance (ESG) factors. As part of integrated ESG and impact investing, there is also a rise of impact orientated strategies such as gender-lens investing, which entails investing in women-owned or women-led businesses, climate action, and inclusive development. These trends are expected to continue gaining traction as investors increasingly seek to align their financial returns with positive and sustainable outcomes.
In addition, these trends are reshaping the competitive landscape, influencing capital allocation decisions across various sectors and prompting a re-evaluation of traditional investment strategies. As a result, ESG criteria and impact initiatives will be integrated into investment strategies, recognising the potential for long-term value creation.
South Africa’s historical context underscores the critical need for investments that address social disparities, driving PE firms to prioritise businesses that foster job creation and empowerment. This focus aligns with regulatory frameworks such as Broad-Based Black Economic Empowerment.
Sector specific opportunities
Attracting private capital to generalist funds is becoming increasingly challenging, compared to funds with specific strategies that align with the objectives of investors interested in particular sectors. Consequently, targeted investment and specialist funds which focus on specific industries are expected to continue receiving favourable attention.
Technology, Fintech and Innovation Investment in the technology sector is anticipated to increase, driven by the imperative for digital transformation across various industries. This trend is bolstered by the growing need for internet services, mobile technology, and digital finance solutions, particularly in underserved populations across the country. The fintech sector provides significant opportunities to scale financial inclusion in South Africa.
PE firms are likely to pursue opportunities in innovative, AI and machine learning companies. South Africa’s tech industry is emerging as a significant growth driver, with the country being positioned as a hub for innovation and digital transformation on the African continent. The government has also expressed a commitment to foster a business environment that encourages entrepreneurship and innovation.
Infrastructure Development and Renewable Energy South Africa’s logistics and industrial real estate sectors are notably robust, driven by increasing demand for warehousing and distribution centres to support e-commerce growth and telecommunication infrastructure development.
There is a growing demand for economic and social infrastructure projects in South Africa. The government has plans to improve its infrastructure, particularly in energy, healthcare, transportation, and water management. Furthermore, the government has opened up power generation to independent power producers, which have become key players in developing renewable energy projects. This presents collaboration opportunities through public-private partnerships and PE involvement in such projects.
The renewable energy sector in South Africa, particularly solar, wind and nuclear energy, presents one of the most promising investment opportunities. The country’s integration of renewable energy sources is not only a strategic response to climate change, but also a critical necessity due to the country’s ongoing energy crises, specifically in electricity generation.
According to the South African Institute of International Affairs, South Africa is one of the African countries with the highest share of renewables on the continent.4 This positions the nation as a key player in the continent’s transition to sustainable energy solutions, offering significant potential for PE investments.
Conclusion
The South African PE market in 2025 stands at a pivotal juncture, offering exciting opportunities despite the challenges. As one of Africa’s most developed economies, South Africa presents a diverse array of investment prospects across various sectors. By adeptly navigating the key trends within the PE market, investors can identify where growth opportunities lie and strategically position themselves to capitalise on such opportunities.
Alcoholic beverage volumes are dropping at AB InBev (JSE: ANH)
Sober curiosity is a global trend that isn’t great for these companies
I recently wrote a piece in my Financial Mail column that considered whether alcohol could go the way of smoking and eventually become taboo. Even if that is where we end up, I think we are still a long way off that state. Still, the trajectory is a concern for investors in this sector.
AB InBev and its peers have been having a tough time in their share prices. The market seemed to love this week’s update though, with the price closing 7.9% higher. This is despite yet another drop in beer volumes. In fact, the Q4 drop was even worse than the full-year drop. For example, own beer volumes were down 2.1% in Q4 and 2.0% for the year.
The group is therefore focused on pricing increases and manufacturing efficiencies. This is the bit that the market liked, with revenue per hl growth of 5.5% in Q4 vs. 4.3% for FY24. This led to revenue growth of 3.4% in Q4 in constant currency, or 2.5% as reported. The full-year growth was 2.7% in constant currency and 0.7% as reported. Despite such little growth, normalised EBITDA was up 10.1% for Q4 and 8.2% for FY24.
This means that there was normalised EBITDA margin expansion, which shareholders are always thrilled to see. The other cause for celebration was an improvement in the net debt to normalised EBITDA ratio from 3.38x as at December 2023 to 2.89x as at December 2024.
The improvement to the balance sheet was enough for the board to be comfortable with a dividend of €1.00 per share. Thanks to the added benefit of recent share buybacks, that’s a substantial 22% jump vs. the previous year. The underlying growth in HEPS was just 4.2%, so I wouldn’t treat the dividend as an indication of sustainable growth.
The market is backing AECI’s outlook (JSE: AFE)
The recovery momentum in the share price is strong
Before we even get into the latest financial results, just take a look at this AECI chart after the release of earnings:
Based on this, you might be expecting to see excellent numbers in the latest release. This couldn’t be further from the truth, as revenue from continuing operations fell 3.8% and EBITDA was down 12.7%.
In fact, HEPS tanked by 36%. How on earth does a share move like this happen in response?
It’s all about understanding the outlook going forwards vs. what the market was expecting. As you can see, the stock is still well off mid-2024 levels. It had suffered a precipitous drop in late 2024. This is a case of a turnaround strategy that the market has finally latched onto.
Usually, a turnaround includes a year of particularly poor numbers in which the kitchen sink is thrown at the financials. All the tough decisions around disposals and impairments tend to happen quickly, giving the company one really bad year as the new base off which to improve. The narrative in the AECI results is that the bottom is in and that things will get better from here.
If we look at the underlying segments, we find that AECI Mining saw profit fall by 24.8% in a weak demand year that was further compounded by planned statutory shutdowns. They had a strong Q4 though, which would’ve added to the share price rally. Over at AECI Chemicals, profit from operations jumped by 30% thanks to efficiencies and cost management, so that’s a good news story.
There’s still a long way to go in cleaning up the group, with six businesses identified for sale and sale agreements in place for only two of them. They are all profitable except AECI Schirm, which was so loss-making that it put the entire discontinued segment into a loss of R383 million.
I must note that the tax expense is an effective tax rate of 71%. That’s obviously not the norm and they are working on ways to reduce it. Some of the reasons for the high rate appear to be non-recurring in nature, while others are not.
Net debt reduced to R3.7 billion, helped by a significant increase in cash and cash equivalents. Net debt to EBITDA at 1.2x is in line with the prior period. Working capital improvements in AECI Mining also helped them here, as did a substantial decrease in capex.
The management team has a big year ahead of them. They need to sell the remaining businesses earmarked for sale and they need to drive improvements in the continuing operations. Against this backdrop, I was pretty surprised to see a decent dividend of 219 cents per share based on HEPS of 755 cents per share. It shows you that dividends are a powerful way to send a message to the market. If you’re interested in learning more about that topic, you’ll enjoy my latest Moneyweb podcast about the stickiness of dividends.
Barloworld shareholders shunned the scheme (JSE: BAW)
And by a far greater percentage than I think anyone expected
At the recent Barloworld AGM, directors only narrowly survived the re-election vote. They received support of roughly 57%, which is abysmal. The market was sending a key message about its views on how the conflicted position of CEO Dominic Sewela was handled.
When I saw that outcome, I figured that the scheme would be a close-run thing and that some other shareholders might join UK-based Silchester in saying no to the R120/share price on the table. I just didn’t expect the scheme to fail so spectacularly, with support from only 36.6% of shareholders present at the meeting.
Although attendance at the meetings might not have been identical, we can safely assume that roughly 20% of shareholders were happy to keep the board but reject the offer. That feels like an odd position for someone to reach. If you hated the scheme, surely you would want a new board as well?
In the past 5 years, the highest price we’ve seen Barloworld trade at was nearly R130. Bearing in mind that this is a cyclical group and that they’ve suffered the destruction of value in the Russian business, an offer price of R120/share is pretty close to that level. It didn’t look terrible to me, but clearly investors wanted more.
Sector peer Bell Equipment is a useful case study here. The share price is currently R37, so one wonders how the investors who said no to the R53 per share scheme feel at the moment.
In the case of Barloworld, the 36.6% who agreed to the scheme can still go ahead and accept the standby offer if they want to get paid out. In some respects, I think the standby offer sent a message that the price was on the light side. It’s like saying: “I’m willing to pay this for a 100% stake, but come to think of it, I’ll take what I can get at this price as well.”
The bigger question for me is around the future for the management team. Rightly or wrongly, Dominic Sewela isn’t on many Christmas card lists for institutional shareholders on the register. On the flip side, if he’s willing to be part of a consortium buying at R120 per share, institutions should welcome a CEO who is aligned with them at a price way above the current R105 per share!
For further insights into the standby offer and for the full statement by the board regarding their handling of the corporate governance situation, Barloworld has placed this article in Ghost Mail for my readers. It doesn’t reflect any of my opinions, but I think it gives great additional information around the situation and is well worth a read.
Onwards and upwards for Bidcorp (JSE: BID)
Even though the rand turned out to be the wrong flavour in this period
Food services group Bidcorp is one of South Africa’s very best business stories. They’ve genuinely built a global giant (operations in 33 countries), with consistent bolt-on acquisitions and organic growth to support the story. Of course, when the rand gets weaker, this makes the reported numbers look even better due to the global exposure. When the rand gets stronger, the opposite happens.
This is why you see a situation in which revenue for the interim period increased by 3.6% as reported, yet it was up 7.1% in constant currency. That theme continues in trading profit, up 6.8% as reported and 10.7% in constant currency. HEPS is much the same recipe, up 6% as reported and 10.0% in constant currency.
Cash generated from operations is always a very important metric here, as this is a working capital intensive group that has to manage its cash carefully to support growth. With a 17.6% jump in that metric, I think we can tick that off as a success.
The interim dividend is 6.7% higher at 560 cents per share. They have a modest payout ratio due to the level of reinvestment in the group. The context here is that HEPS was 1,221.6 cents.
In case you’re wondering, the United Kingdom saw the strongest constant currency growth among the segments. It was up 7.2% in revenue and 30.4% in trading profit. I’ll resist the temptation at this point to make any baked-beans-and-beige-food jokes.
Earnings down and dividends up at Hammerson (JSE: HMN)
The share price fell 6% on the day of release of results
Hammerson released its full-year 2024 results, capping off what they describe as a “transformative and successful” year for the group. This is a fancy way of saying that they sold a lot of assets in an effort to improve the balance sheet. There are some other positives, like a strong increase in rental rates and an uptick in occupancy.
Still, for all the fanfare, sales growth at tenants was 5% in the UK and 3% in France. Western Europe is by no means a high-growth area, but those are still unexciting numbers. This is reflected in valuation growth of 4.2% in the UK and 1.5% in France. Alas, valuations in Ireland fell by 13%. As all South Africans know, the Irish just can’t win when it really counts!
Adjusted earnings per share fell from 23.4p to 19.9p and an IFRS loss was reported due to impairments and revaluation losses. The continuing portfolio might be putting out decent numbers, but they had to take some pain to sell certain properties.
The benefit of that pain was felt in net debt, which fell by a substantial 40% year-on-year. Of course, that’s also because the balance sheet shrank due to disposals, so the right metric to consider is loan-to-value (LTV). This improved from 34% to 30%.
The full-year dividend of 15.63p is up 4% despite the pressure on earnings. That looks like a fair reflection of the underlying portfolio performance.
There’s yet more momentum at Momentum (JSE: MTM)
The stock has had a great few years
Momentum released a trading statement for the six months to December 2024 that shows why the share price has been on a charge over the past year (or three). Normalised HEPS is up by between 43% and 48%, so there’s much to celebrate.
This performance was driven by a number of supportive factors, ranging from persistency in life insurance through to underwriting margins and favourable weather conditions in the short-term book. Market returns also helped, as large insurance houses benefit from the returns earned on their reserves.
Detailed results are due for release on 20 March.
Oceana’s earnings are well off the previous interim period (JSE: OCE)
The disappointing end to the previous financial year has continued
Oceana had a truly spectacular interim period last year. Daybrook posted a record-breaking performance in an environment of record fish oil prices. Alas, those days are firmly behind Oceana, with a tough second half in the last financial year and now an interim period that needs to be compared to such a high base.
It’s therefore not surprising to see that interim earnings are lower year-on-year. The expected decline in HEPS is at least 40%, with one of the major factors being that fish oil prices have fallen off.
Although the share price is only down 13% over 12 months, it’s worth noting that this announcement came out after the market close. There’s therefore a chance of more pain in the share price when markets open on Thursday.
Detailed results are due on 9th June.
Nibbles:
Director dealings:
A director of Altron (JSE: AEL) sold shares worth R1.2 million. This should be seen in the context of a 12-month share price performance of 118%!
To add to the purchase earlier in the week, a trust associated with the CEO of Tiger Brands (JSE: TBS) bought shares worth R493k.
Acting through Titan Premier Investments, Christo Wiese has bought R190k worth of Brait ordinary shares (JSE: BAT).
Sibanye-Stillwater (JSE: SSW) is taking a cautious approach to its capital allocation strategy, as evidenced by its decision not to proceed with the Rhyolite Ridge Lithium-Boron Project. This is part of a proposed joint venture agreement with ioneer Ltd, who I’m sure were less than thrilled to receive this news. In October 2024, Sibanye received updated project and technical information that didn’t fill them with confidence, as the project doesn’t meet Sibanye’s investment hurdle rates (required rate of return) based on conservative pricing assumptions. The company makes it clear that they are still committed to both the US market and the battery metals strategy, so this is a project-specific decision.
Cilo Cybin (JSE: CCC) has received a dispensation from the JSE in terms of the timing of distribution of its circular related to the proposed acquisition of Cilo Cybin Pharmaceutical as a viable asset under SPAC rules. The circular is now expected to be distributed by 7 April.
Choppies (JSE: CHP) has renewed the cautionary announcement that was first released on 16 January. They give no further details unfortunately, so this is as bland as a bland cautionary can get!
There’s more sad news from Harmony (JSE: HAR), as one of the employees injured in the Mponeng accident on 20 February has lost his life. My understanding is therefore that two employees passed away from this accident, which is exactly two too many. Mining remains a dangerous way to make a living.
The listing of AYO Technology Solutions (JSE: AYO) has now been suspended due to the company failing to publish its annual report for the year ended August 2024 within the prescribed period. Sigh.
Note: this release has been provided by Barloworld to the readers of Ghost Mail and does not reflect any opinions of The Finance Ghost.
As a result of the resolutions tabled at today’s EGM not being passed by the requisite majority of Barloworld Ordinary shareholders present and entitled to vote, the Standby Offer has been triggered, as contemplated in section 7 of the Circular in respect of the proposed transaction.
The timeline applicable to the Standby Offer, will be announced on SENS and A2X in the coming days. The procedure for acceptance of the Standby Offer is outlined on page 37 (section 7.5) of the Scheme Circular, available on the Company’s website.
The Standby Offer
The Standby Offer is now open for acceptance by Barloworld shareholders at ZAR 120.00 per share in cash, maintaining the same value as proposed in the scheme of arrangement. The total value unlock of the offer continues to represent a significant premium of 87% to Barloworld’s 30-day VWAP as at 12 April 2024, being the last trading day prior to the first transaction-related cautionary announcement, with the total transaction value remaining at ZAR 23 billion.
The period for which the Standby Offer will remain open for acceptance and the detailed acceptance procedures are set out in the Circular.
Implementation mechanics
The Standby Offer is conditional on its acceptance by Barloworld shareholders holding at least 90% of Barloworld ordinary shares (excluding shares held before the Newco Offer by Newco, ZTHM, Entsha, and their respective related or inter-related persons, persons acting in concert, nominees or subsidiaries).
Shareholders are reminded that Newco has the right to waive this 90% condition at its sole discretion. This means that Newco could elect, at its own discretion, to acquire a lower percentage from shareholders who wish to tender their shares. In such an instance, and should the Standby Offer become unconditional (following the fulfilment of all other conditions precedent that it is subject to), Barloworld would remain listed on the JSE and the shareholders who have not accepted the Standby Offer would remain shareholders in Barloworld.
Process and timelines
It is anticipated that the Standby Offer announcement (Standby Offer Announcement) will be published in the coming days and will contain a detailed indicative timetable in relation to the Standby Offer.
Not later than 16:30 South African time on the 45th business day after the Standby Offer Opening Date, Barloworld and Newco will release an announcement on SENS confirming whether the Standby Offer condition as to acceptances (requiring 90% of Barloworld Ordinary shareholders, excluding members of the Consortium, accepting the Standby Offer) is fulfilled or waived, and whether the Standby Offer is terminated or will proceed.
The Longstop Date for fulfilment of all the conditions precedent to the transaction is 11 September 2025.
The Longstop Date will be automatically extended by 3 months if any regulatory approval has not been obtained by 11 September 2025.
The Standby Offer will be open for acceptances by Barloworld ordinary shareholders for a further 10 business days after the fulfilment or waiver of all the conditions precedent to the Standby Offer has been announced (Standby Offer Closing Date).
Path forward
The Standby Offer is now open and a Standby Announcement will be published containing a detailed indicative timetable in relation to the Standby Offer. Detailed information about the procedures to accept the Standby Offer is set out in the Circular. The timing for the implementation of the transaction will depend on acceptance levels of the Standby Offer and receipt of the required regulatory approvals. The business will continue to operate as usual throughout this process.
Response from Barloworld Board regarding Governance
The Barloworld Board has taken note of market commentary, particularly related to the alleged lack of transparency in relation to the process as well as the board’s handling of the conflicts of interest in relation to the Barloworld CEO.
The Barloworld Board wishes to provide further clarity in this regard.
As Barloworld is a “regulated company” as defined in section 117(1)(i) of the South African Companies Act, an offer such as the one brought forward by the Consortium is regulated by chapter 5 of the Companies Act read with chapter 5 of the Companies Regulations, 2011 (the “Takeover Regulations”).
In accordance with section 119 of the Companies Act, the Takeover Regulation Panel (“TRP”) is the primary regulator in respect of transactions of this nature. Given Barloworld’s JSE listing, the JSE also acts as a secondary regulator, enforcing applicable rules set out in the JSE Listings Requirements.
In accordance with section 95 of the Takeover Regulations, all negotiations between the Independent Board and the offeror must be kept strictly confidential and any communication with the market needs to be pre-approved by the regulator as set out in s117 of the Takeover Regulations before publication. Further, if a leak of price sensitive information occurs, or there is a reasonable suspicion of such a leak, the Company must immediately release a cautionary announcement disclosing that information to shareholders.
From the onset, the Independent Board has abided by the regulations governing this transaction and has accordingly, timeously issued communication to the market.
From the time the Consortium approached the Company with a non-binding indicative offer, the composition of the Consortium and the nature of the Group Chief Executive’s involvement was fully disclosed to the Board and the resultant conflict of interest was declared. The Group Chief Executive was immediately recused from Board discussions related to the proposed transaction. In line with the Board’s statutory and fiduciary duties, the Board sought legal advice and implemented strict governance measures, based on global transaction precedent and best practice, to ensure a thorough and unbiased evaluation of the offer in the best interests of the company and its shareholders. The Independent Board has duly discharged its duties in this regard.
The Independent Board reiterates that management led buy-out transactions, are not unusual in capital markets. Whilst recognising that such transactions do present an opportunity for conflicts of interest in relation to the management members involved, the Independent Board also recognises that if properly managed, they could result in positive outcomes for shareholders of the Company.
Further, in such instances it is the Independent Board’s responsibility to institute robust governance processes whilst ensuring minimal disruptions to the day to day running of the business. The board has to consider the merits of the transaction including, as per the TRP requirements, obtaining external advice from an independent expert on the fairness and reasonableness of the offer. In this instance, the Independent Board appointed Rothschild. Finally, if appropriate, the board has the duty to not to frustrate the process of bringing a fair and reasonable offer to shareholders, for shareholders’ consideration.
It should also be noted that it is not market practice, nor a regulatory requirement to place conflicted members of management on long-term gardening leave during a management buy-out process.
The Board continues to engage openly with its key stakeholders on matters of governance. To this end, it has recently concluded its governance roadshows where it has engaged with key shareholders on matters of concern to them.
The Independent Board remains committed to ensuring that the Standby Offer strictly follows the regulatory process and is managed and governed transparently, in the best interest of all stakeholders.
Responsibility Statement
The Independent Board (to the extent that the information relates to Barloworld), individually and collectively, accepts responsibility for the information contained in this statement and certifies, to the best of its knowledge and belief, that the information contained in this announcement is true and that this announcement does not omit anything that is likely to affect the importance of the information included.
Note: in case you missed it right at the top, this release has been provided by Barloworld to the readers of Ghost Mail and does not reflect any opinions of The Finance Ghost.
There’s nothing bright and cheerful about African Rainbow Minerals (JSE: ARI)
The iron ore cycle can be cruel
African Rainbow Minerals released a trading statement for the six months to December 2024. HEPS is expected to be down between 45% and 55%, so earnings have halved at the midpoint of that guidance. Interestingly, the share price is only 18% lower over 12 months.
The main reason for the decline is exactly what you would expect: a significant drop in iron ore prices. Average realised US dollar prices fell 22%. To add to this pain, iron ore and manganese ore sales volumes were lower, there were higher cash costs and the currency went the wrong way for them. The only offsetting factor was PGM ounce production.
Of course, when the cycle is more favourable, there is indeed a pot of gold (or iron ore?) to be found at the end of this rainbow.
Anglo American and the Botswana government have locked in further diamond partnership agreements (JSE: AGL)
Will people still be buying mined diamonds 10 years from now?
Anglo American announced that De Beers and the Botswana government have signed new formal agreements for a 10-year sales agreement (with a possible extension of 5 years) and a 25 year extension of the mining licences out to 2054. That’s all good and well, but of course it does nothing to address the real risks to the sector.
At least one of the risks is off the table, giving De Beers the best possible chance to carve out a sustainable model for mined diamonds. It’s amazing how at one point, Anglo shareholders would’ve pointed to the relationship with the Botswana government as perhaps the biggest risk and key dependency. These days, lab-grown diamonds are the problem!
Curro is struggling to get those schools filled (JSE: COH)
But at least earnings are up
Curro has released a trading statement dealing with the year ended December 2024. Although it might sound impossible to you if you’ve ever fought for a place in a school for your kid (perhaps this is mainly a Cape Town problem?), the reality is that Curro has a large footprint of schools and not all of them are full. In fact, if you look at the capacity utilisation stats across the group, filling these schools is a challenge.
Affordability is one problem. The other has been emigration of the South African middle class, creating constant churn in the schools. Curro is still managing to grow, as evidenced by recurring HEPS growth of between 9.3% and 17.5%, but it’s not easy. Share repurchases to the value of R120 million during the year helped boost HEPS.
In case you’re wondering why a trading statement was triggered, earnings per share (EPS) will be up by between 117.1% and 217.1%. This is heavily impacted by impairments, which is why the market focuses on HEPS.
Speaking of impairments, the 2024 year saw impairments of R340 million to R380 million. Around two-thirds of this impairment is attributed to eight schools that had already been impaired in the prior year due to slower than expected growth. A further major problem is the two schools impacted by the closure of steel manufacturing operations. You don’t have to be an award-winning detective to guess that this relates to ArcelorMittal. In small towns, when a big local employer is in trouble, things can deteriorate rapidly. Ghost Mail is cool; ghost towns are not.
Overall, Curro had 72,109 registered learners in early February. That’s below the 72,553 they had in November 2024. With numbers going the wrong way, the share price followed suit. Curro closed 4.3% lower. The share price is up 14% in the past year, which is in line with the midpoint of HEPS growth guidance.
Grindrod’s earnings are down – yes, even their core earnings (JSE: GND)
The logistics industry isn’t straightforward
Grindrod released a trading statement dealing with the year ended December 2024. From core operations, they expect HEPS to be down by between 25% and 28%, so that’s not good news.
The issues were related to Grindrod’s terminals, where export volumes were down from 17.3 mtpa to 16.5 mtpa. Performance was impacted by lower commodity prices, disruptions at the border and low container handling throughput. They reckon that just the border disruptions cost them between R180 million and R200 million in headline earnings – the risk of doing business in frontier markets!
The group is looking to the future, with plans to deploy billions in capital into the rail network. I think the entire market appreciates how focused Grindrod is these days, although it took a lot of work to get to that point by getting out of assets like the North Coast properties.
From a total group perspective, which includes fair value and expected credit losses linked to disposals to finish cleaning up the group, HEPS will be down by between 67% and 71%.
NEPI Rockcastle had a strong year – but watch those per-share metrics (JSE: NRP)
The balance sheet is also in great shape
NEPI Rockcastle achieved 11.8% growth in distributable earnings for the year ended December 2024. That sounds really strong on paper, until you see that distributable earnings per share only increased by 5.6%. This is because of the large number of additional shares in issue.
Now, this disconnect shouldn’t happen every year. Although NEPI (and its peers) enjoy doing regular scrip dividend alternatives where shares are issued in lieu of cash dividends, this shouldn’t lead to such a gap each time. Instead, it’s activity like large bookbuilds (equity capital raisings) that is to blame. Assuming they don’t do them on an ongoing basis, the strong performance in the underlying portfolio should translate into higher per-share growth as freshly raised capital is deployed into income earning assets. Notably, net operating income grew by 13.2% last year, so there’s no shortage of growth in the portfolio.
Still, the per-share jump isn’t expected to happen in the 2025 financial year either, with an expectation for distributable earnings per share to be just 1.5% higher.
The loan-to-value ratio ended the year at 32.1%, which means the the balance sheet is in great health. Property funds need to operate in the right window for debt, as too little is problematic for returns and too much is problematic for ongoing existence!
Redefine’s renewal success rates are up – but at the cost of negative reversions (JSE: RDF)
A pre-close update makes for interesting reading
Redefine Properties released a pre-close update presentation for the six months ending 28 February 2025. Once you’ve worked through all the usual corporate gumph in the opening slides, you’ll find a lot of useful numbers.
Compared to the end of the 2024 financial year, occupancies increased from 93.2% to 94.2%. The renewal success rate also jumped considerably. This comes at a cost though, with rental reversions deteriorating from -5.9% to -8.5%. The office portfolio was still to blame, with an ugly negative reversion of -17.2%!
At least retail has a far better story to tell, with reversions of positive 0.6%. Although there seems to be some pressure on tenant turnover growth, the renewal success rate has increased. Also, space taken back from Ster Kinekor and Pick n Pay has been partially relet.
The highlight seems to be the industrial portfolio, with positive reversions of 4.5% and a strong renewal success rate.
The group also has exposure to Poland and the story in that country continues to be positive, with solid demand in the retail sector. There was a dip in footfall though in 2024, so that’s something to keep an eye on.
Happily, the group weighted average cost of debt fell by 30 basis points to 7.2% thanks to rate decreases in Europe over the period. The see-through loan-to-value is 47.5%, which is roughly in line with the last couple of years.
Guidance for FY25 of distributable income per share of between 50 cents and 53 cents has been maintained.
Nibbles:
Director dealings:
The operations director of the main operating subsidiary of Lewis Group (JSE: LEW) sold shares worth R2.75 million.
A trust associated with the CEO of Tiger Brands (JSE: TBS) bought shares worth R1.2 million.
Acting through Titan Premier Investments, Christo Wiese bought another R523k worth of Brait ordinary shares (JSE: BAT).
Super Group (JSE: SPG) shareholders gave their resounding support to the proposed disposal of the stake in SG Fleet. in Australia. The transaction was approved by holders of 98.54% of shares represented at the meeting. This is only one of the approvals required for the deal, as shareholders in SG Fleet need to also approve the scheme. Super Group only has 53.584% in that company, so there are many other shareholders who need to agree to go along with the plan. They expect to release the results of that meeting on 8th April and they hope to implement the transaction by the end of April.
Putprop (JSE: PPR) is one of the smallest property funds on the JSE, with a market cap of just R150 million. The company released a trading statement dealing with the six months to December 2024 in which they note an expected increase in HEPS of between 16.7% and 36.7%.
Things are still far from easy at Accelerate Property Fund (JSE: APF), with GCR Ratings downgrading the credit ratings of the fund and keeping it on Rating Watch Negative. The increasing risk of a near-term default or distressed debt exchange has driven this decision. Accelerate is working with funding partners to extend current loan term facilities and maturities. R1 billion is maturing at the end of February 2025 (now, basically!) and R1.4 billion at the end of March 2025. The fund believes that improved performance at Fourways Mall, combined with the asset disposal plan, gives it a good shot at concluding the refinancing.
Old Mutual (JSE: OMU) announced that Nomkhita Nqweni is resigning as an independent non-executive director of Old Mutual in order to take up the role as Chairman of the Old Mutual Bank Limited board. It’s worth highlighting that the Prudential Authority at the SARB has approved the Old Mutual Bank board and the key executives.
Some very interesting and frankly quite worrying precedent has been set by the Takeover Regulation Panel (TRP) in respect of the Mustek (JSE: MST) mandatory offer by Novus (JSE: NVS). The TRP ruled that DK Trust became a concert party to the deal by virtue of giving Novus a written undertaking that the trust would not accept the mandatory offer. There are other factors at play as well, but that’s going to set a few hares running among corporate lawyers. More worrying, the Takeover Special Committee is not currently constituted, so any appeal or review needs to go through the High Court. This kind of thing isn’t exactly encouraging for dealmaking.
Continuing operations at Altron are on the up (JSE: AEL)
Discontinued operations made a loss, though
Altron’s share price has more than doubled in the past year, so the market got behind this turnaround story in a big way. The focus is clearly on the growth in continuing operations, along with a view on how quickly the management team can navigate their way out of discontinued operations.
Starting with the former, HEPS from continuing operations is expected to be 40% higher for the year ended February 2025. Revenue growth was only in the low single digits, while EBITDA was up double digits.
Netstar is one of the obvious highlights here, achieving double-digit growth in EBITDA. South Africa is by far the better story here, with a solid performance from the business that looks even better in the context of Netstar’s Australian operations being loss-making. The other two businesses in the broader Platforms segment also put in solid results, with Altron FinTech and Altron HealthTech both up double digits in EBITDA.
The IT services segment is also part of continuing operations and is more of a mixed bag. Although Altron Security is slightly up on the EBITDA line, revenue in that business has dipped. In Altron Digital Business, revenue is flat and profits are down. Altron Document Solutions has been re-integrated into continuing operations and grew its EBITDA despite flat revenue.
The final part of continuing operations is Altron Arrow in the distribution segment. This is a story of weaker revenue and maintained profit margins. Remember, constant margins at lower revenue means that profits fell by the same percentage as revenue.
In discontinued operations, Altron Nexus is still on the chopping board. Despite year-to-date improvement in the business, it remains a loss-making business. Altron is trying to sell the thing, noting that there are advanced discussions with a potential buyer.
As you can see, it’s still pretty messy. The share price growth in the context of these numbers shows you just how bad things were!
Burstone is deploying capital into Australian industrial assets (JSE: BTN)
They also get exposure through asset management activities
Burstone Group has a 50% interest in the Irongate Group. In turn, Irongate has established a joint venture with TPG Angelo Gordon that they call the Programmatic JV. This JV has A$200 million to invest in industrial assets in Australia and this amount could increase as capital is deployed.
Burstone’s exposure to this is two-fold: it has a minority co-investment in the JV through Irongate and it benefits from Irongate providing the investment and asset management functions.
The focus is on industrial and logistics assets on the eastern seaboard of Australia. The JV as concluded the acquisition of A$280 million of industrial logistics assets, with the equity cheque being A$133 million and the rest presumably being funded with debt.
The targeted returns at JV level are 15%. If they can get that right, that’s a solid hard currency return.
A slight uptick in earnings at Cashbuild (JSE: CSB)
Perhaps slow and steady will win this race
Cashbuild’s share price has suffered the same sell-off this year that many consumer-facing groups on the JSE have experienced. A deterioration in sentiment isn’t kind to share prices and I’m now concerned about the impact of loadshedding as well.
Still, it’s up 34% over 12 months and I’m not cashing in my profits yet. I’m still optimistic about the benefit of lower interest rates working their way through the system. Most of all, I’m hoping that this recent weirdness at Eskom is an anomaly rather than a sign of things to come.
The release of a trading statement is triggered by a move of at least 20% in earnings. Alas, such a move only applied to Earnings Per Share (EPS) at Cashbuild, which more than doubled due to impairments in the base year. The metric that the market cares about is Headline Earnings Per Share (HEPS), which ignores impairments. HEPS only increased by between 0% and 5%, so Cashbuild is slowly inching its way higher.
2025 will need to reflect significantly better growth than this.
Gemfields is catching up on lost sales in emeralds (JSE: GML)
The share price has had a great week
Gemfields recently announced that the ridiculous export duty on emeralds has been suspended once more by the Zambian government. That was very good news, as it really called into question how sustainable the business model would be. The share price being up 15% in the past week tells you how worried the market was about this.
With the export duty out of the way (for now at least), Gemfields felt inspired to catch up on some lost auction revenues. Market prices are still well off their highs, but at least bids were higher than at the last auction. You need to be careful when comparing different auctions, as the quality of the underlying emeralds will vary from one auction to the next. With 10 out of 13 lots sold and auction revenues of $4.8 million raised in the process, at least there’s positive momentum at Gemfields once more.
Sadly, this doesn’t offset the immense business risks and the extensive capex in the business. Here’s the 5-year chart that really puts this latest share price bump into perspective:
Prosus is acquiring Just Eat – and the market seems nervous (JSE: PRX | JSE: NPN)
New CEO Fabricio Bloisi might be more focused on profits than his predecessor, but he still has a growth mandate
If you’re hoping that Prosus – Naspers will sell off the Tencent stake and do share buybacks into perpetuity, then you’ve missed the point about why a CEO like Fabricio Bloisi has been appointed to the group. Although they are certainly more aware of profitability and capital allocation after the headaches that previous management caused, it’s also unrealistic to think that they won’t be making any acquisitions along the way. Bloisi is a founder and operator of businesses and these type of people don’t sit still.
With a 5.8% drop in the Naspers price and a 6% drop in the Prosus price on the day, the market conveyed its displeasure at the announcement of an offer by Prosus to Just Eat Takeaway.com shareholders of €20.30 per share. This is a €4.1 billion transaction, so it’s material to the group. Still, they aren’t exactly betting the farm, as the Prosus market cap is €103 billion.
Bloisi has a lot of personal experience in the food delivery space, albeit in South America rather than in Europe where Just Eat operates. Although on paper it looks as though he’s really paying up here with a 63% premium to the closing share price, take a look at this 5-year chart of Just Eat for context:
Unlike the deals done during the pandemic, this isn’t exactly an acquisition at the top of the cycle.
Food delivery isn’t my favourite vertical, although I do have a long position in Uber. It can work well as part of a broader tech play (as is the case at Uber), with Prosus looking to “create a European tech champion” in this space. Platform businesses are certainly capable of generating immense wealth if things go well.
Unfortunately, they are also capable of losing a fortune while scaling a business model with unappealing economics. Just Eat has been around since 2000 and they reported attributable losses of €1.6 billion in the year ended December 2024, or €490 million excluding Grubhub, the US business that Just Eat recently sold. There will need to be a substantial focus on getting the unit economics right.
The board of Just Eat has unanimously recommended that shareholders accept the offer. The CEO and other board members hold 8.1% of the shares in aggregate and they will tender them in the offer. In order for the offer to go through, Prosus requires a minimum acceptance threshold of 95%. They do have a plan in place to make it work based on 80% acceptance. They could technically waive the threshold to 67%, but I doubt that would happen in practice.
With the disposal by Just Eat of Grubhub out of the way, Prosus is swooping in on a depressed share price. They see this as a European opportunity where they can take the learnings from iFood and apply them to a new region. It shows you how bruised the market is from the previous management team that the immediate response was to hit the sell button.
I continue to believe in the opportunities that Prosus has under new management and I’ll be keeping my shares.
Also, based on the percentage drop in the Prosus share price and comparing it to the market cap, the market has basically assumed that all the money being spent on this acquisition (and more) will instantly be worthless.
Overreaction, much?
An even larger pot of gold at the end of Rainbow Chicken (JSE: RBO)
The year-on-year improvement is even better than they thought
Things in the poultry industry are certainly looking far more favourable these days. We’ve seen this narrative from other companies in the sector and now Rainbow Chicken has added its name to the list.
The market already knew that the year-on-year improvement was huge, with a trading statement on 28 January reflecting an expecting for HEPS to improve by at least 1,100% for the six months to 29 December 2024. Obviously, a percentage increase like that isn’t helpful, so it’s better to look at the actual numbers involved. In this case, the expectation was for interim HEPS of at least 28.35 cents.
Shareholders will be thrilled to learn that the words “at least” were working hard here, as the improvement in HEPS has actually taken it into a range of between 35.40 cents and 35.89 cents. You can safely ignore the year-on-year percentage move as a useless metric. Instead, I must highlight that the midpoint of this range is a full 25.7% higher than the guidance of 28.35 cents given in the January trading statement.
You can safely expect to see some fireworks in the share price on Tuesday morning, as this announcement came out after the close on Monday.
At least cash generation improved at Sasol (JSE: SOL)
But free cash flow still came in negative
Sasol has released earnings for the six months to December. With a 13% drop in the average rand price of Brent Crude and pressure on refining margins, it wasn’t a happy time. To add to the difficulties, there was a 5% decrease in sales volumes due to lower production.
Revenue came in 10% lower year-on-year, while adjusted EBITDA fell by 15% as operating leverage worked against the company. That impact would’ve been a lot worse in not for cost control measures.
As you work down the income statement, you eventually reach a drop in HEPS of 31% to R14.13 per share. The Sasol share price is just below R87, so that’s a P/E multiple of 6.15x.
None of this sounds great, obviously. There is a highlight of sorts at least, which you’ll find in the statement of cash flows. Cash generated from operating activities jumped by 20% as Sasol unlocked working capital. Capital expenditure was 6% lower. The combination led to a much better period from a free cash flow perspective, albeit still in the red with an outflow of R1 billion That’s much better than the outflow of R6.5 billion in the comparable period.
This isn’t a good enough improvement to support the payment of a dividend. Sasol is happy to pay 30% of free cash flow as a dividend provided that net debt is below $4 billion. With net debt currently at $4.3 billion and free cash flow in a deficit position, they clearly haven’t met the requirements.
Sasol’s share price is down 40% over the past 12 months.
Sasol values Ghost Mail readers and has placed the full results in your favourite financial publication at this link. Go check it out for the story directly from the company and use it to help you form your own view!
Rentals and occupancies are mostly up at Stor-Age (JSE: SSS)
UK occupancies are the only blemish in this update
Stor-Age has released a trading update for the four months to January 2025. It’s generally positive, particularly in South Africa where the owned portfolio increased occupancy by 1.5%. The way they measure this is based on the quantum of occupied square metres as at the end of January 2025 vs. September 2024, rather than the occupancy rate. They do provide the occupancy rate as well at least, coming in at 93.5% as at 31 January 2025 in the South African owned portfolio. I just wish they included the comparable occupancy rate in the announcement as well, as working off the total number of square metres tells you nothing about like-for-like performance.
These occupancies are being achieved despite the average rental rate being up 7.8% year-on-year, so that’s very encouraging for the local numbers. To add to this, the occupied square metres in the joint venture portfolio in South Africa increased by 22.8%, so they are still expanding the business locally. They are particularly busy in Cape Town, taking advantage of the growth up the West Coast towards Melkbosstrand. If you’ve ever driven through Sunningdale, you’ll know how rapid the growth there is.
The UK doesn’t tell such a great story in this period, with occupied square metres down 1.1% over four months. Stor-Age points out that this is a seasonally weak period in the UK business, so this is the problem with looking at this metric over four months rather than on a year-on-year basis. At least average rental rates were up 4.1%, so that’s encouraging.
Stor-Age is looking to drive return on equity through third-party management deals. This is common practice in the hotel industry and it makes sense in storage as well. Essentially, you do wonders for return on equity if you can generate more returns without using up more equity! By managing facilities on behalf of property owners, Stor-Age can receive fees from the properties without having to lay out the capital to build them. There’s a development pipeline of six such properties in the UK market, adding to the three which closed in May 2024.
Nibbles:
Director dealings:
As part of the increased Black Ownership that Spear REIT (JSE: SEA) was instructed by the Competition Commission to achieve to get the Emira portfolio acquisition approved, an associate of a director of Spear has bought shares worth R3 million in on-market trades and has pledged them to Nedbank as part of the larger financing deal worth R30 million.
The spouse of a non-executive director of The Foschini Group (JSE: TFG) bought shares worth R337.5k.
In an example of one of his smaller purchases, Christo Wiese (acting through Titan Fincap Solutions) bought R26.6k worth of Brait Exchangeable Bonds (JSE: BIHLEB).
Family members of the CEO of Altvest (JSE: ALV) bought shares worth R4k.
An associate of a director of 4Sight Holdings (JSE: 4SI) sold shares worth R1.8k.
Castleview Property Fund (JSE: CVW) seems to have its eye on SA Corporate Real Estate (JSE: SAC). We just don’t know yet whether an initial investment might turn into something bigger. For now, Castleview has acquired a stake to the value of R139 million in SA Corporate. That’s a chunky amount of money, but it’s worth noting that SA Corporate’s market cap is R7.2 billion and so this is still firmly a minority stake.
Not only does it rain at Anglo American Platinum (JSE: AMS), but it pours as well. Luck really isn’t on the side of the PGM sector at the moment, with the latest challenge being widespread flooding in the northern part of South Africa. Anglo American Platinum has indicated that operations at the Amandelbult Complex were impacted. All operations have been reinstated except for the Tumela Mine. Tumela contributes around 10% to monthly metal-in-concentrate production. At this stage, the group does not expect 2025 production guidance to be impacted.
Metrofile (JSE: MFL) announced that Bradley Swanepoel will be talking over as CFO of the group. He’s an external appointment, with his current role being Chief Risk Officer at MTN South Africa. His exact start date will depend on the negotiations around his notice period. Metrofile could really do with some new growth ideas, so hopefully this will help going forward.
Supermarket Income REIT (JSE: SRI) is still struggling for liquidity on the local market. This is an example of a very large UK-based property company that added a JSE listing to its capital structure. The company gave the market an update on progress made in its portfolio. This included the sale of a retail property to Tesco for £63.5 million, which is a 7.4% premium to the June 2024 valuation. The fund also renewed three Tesco leases at a 13% premium to what the valuer assumed the rental value would be, so that’s likely to lead to an uptick in capital values on the balance sheet. Finally, the company stepped across the Channel and acquired a portfolio of nine Carrefour supermarkets in France for a total of €36.7 million. The acquisition was priced at a net initial yield of 6.8% and the Carrefour stores represent 5% of the fund’s assets.
After all the recent mining updates from the big names in the sector, you may well be sick of them by now. In case you aren’t, BHP (JSE: BHG) has released the presentation from the BMO Global Metals, Mining and Critical Minerals Conference. You’ll find it here.
As part of the drawdown on the R500 million facility, Mantengu Mining (JSE: MTU) has listed another 24.9 million shares. To give context to this dilution, the company has 286 million shares in issue.
Although I don’t normally make note of institutional shareholding changes in Ghost Bites, it’s unusual to see large hedge fund changes. Trencor (JSE: TRE) announced that All Weather Capital has decreased its stake from 13.29% to 3.22% and that African Phoenix Investments has decreased from 15.15% to 4.89%. This comes after the company paid out most of its value as a special dividend.
This results summary is brought to you by Sasol and does not include any opinions or editorial by The Finance Ghost.
Sasol’s financial performance for the six months ended 31 December 2024 was impacted by a challenging macroeconomic and operating environment. However, stringent cost and efficient capital management helped to offset the impact and improve free cash flow generation compared to the previous corresponding period.
Revenue of R122,1 billion is 10% lower than the prior period, mainly due to a 13% decline in the average Rand per barrel Brent crude oil price and a significant decline in refining margins and fuel price differentials, as well as a 5% decrease in sales volumes as a result of lower production and lower market demand. This was detailed in the Production and Sales Metrics published on 23 January 2025.
Adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA) of R23,9 billion is 15% lower mainly as a result of the aforementioned lower revenue with stringent cost management implemented in response helping to mitigate the impact. The relative contribution from International Chemicals increased from 6% to 13%.
Earnings before interest and tax (EBIT) is 40% lower to R9,5 billion. This was impacted by non-cash adjustments including:
A net loss of R6,2 billion from remeasurement items compared to a net loss of R5,8 billion in the prior period, mainly due to further impairments of the Secunda liquid fuels refinery cash generating unit (CGU) of R5,0 billion and the Sasolburg liquid fuels refinery CGU of R0,6 billion. Both CGUs remain fully impaired, resulting in amounts capitalised during the current period being impaired.
Unrealised losses of R0,1 billion on the translation of monetary assets and liabilities, and valuation of financial instruments and derivative contracts compared to unrealised gains of R2,7 billion in the prior period.
As a result of the above, basic earnings per share (EPS) decreased by 52% to R7,22 per share and Headline earnings per share (HEPS) decreased by 31% to R14,13 per share compared to the prior period.
Cash generated by operating activities increased by 20% to R17,6 billion compared to the prior period mainly due to changes in working capital. Capital expenditure, excluding movement in capital project related payables, amounted to R15,0 billion, 6% lower than the prior period.
At 31 December 2024, our total debt was R116,9 billion (US$6,2 billion) compared to R117,7 billion (US$6,5 billion) at 30 June 2024. Sasol deposited R5,4 billion (US$0,3 billion) on the Revolving credit facility during the current period. Our net debt (excluding leases) was R81,8 billion (US$4,3 billion) compared to R73,7 billion (US$4,1 billion) at 30 June 2024 with the increase due to the aforementioned negative free cash flow.
Dividend
The Company’s dividend policy is based on 30% of free cash flow generated provided that net debt (excluding leases) is sustainably below US$4 billion on a sustained basis. Free cash flow is a deficit of R1,1 billion and the net debt at 31 December 2024 of US$4,3 billion exceeds the net debt trigger, therefore no interim dividend was declared by the Sasol Limited board of directors (the Board).
Tax-free savings accounts (TFSA) are one of the most building blocks in any equity portfolio. The advantage of compounding tax-free returns over a long period is incredibly powerful and can really turbocharge a long-term wealth creation journey.
To discuss the importance of TFSA investments and the opportunities available to investors in the ETF universe, familiar voice Siyabulela Nomoyi of Satrix* returned to the Ghost Stories podcast.
*Satrix is a division of Sanlam Investment Management
Satrix Investments Pty Limited and Satrix Managers RF Pty Limited are authorised financial services providers. Nothing you have heard in this podcast should be construed as advice. Please do your own research and visit the Satrix website for more information on all their ETF products. This podcast was published on the Satrix website here.
Full transcript:
Introduction: This episode of Ghost Stories is brought to you by Satrix, the leading provider of index tracking solutions in South Africa and a proud partner of Ghost Mail. With no minimums and easy, low-cost access to local and global products via the SatrixNow online investment platform, everyone can own the market. Visit satrix.co.za for more information.
The Finance Ghost: Welcome to this episode of the Ghost Stories podcast. It comes hot on the heels of a pretty crazy time in South Africa where our budget speech casually did not happen! When I was prepping for this podcast with my guest today, we talked about: wow, you know, I wonder if the tax-free savings limits will be increased and if there’ll be something to encourage people to save? Then meanwhile, there’s a budget that basically wants to fleece us of more money through VAT and it got thrown out. So, not exactly what anyone was hoping for, I don’t think. But anyway, it is what it is. We’ll wait and see what the next version of the budget speech looks like in this ongoing little disaster.
And in the meantime, all of us as South Africans will just keep doing what we do, which is doing our best to move forward in life. To help with an understanding of how tax-free savings can help you with that, we have Siyabulela Nomoyi from Satrix* on the show.
Siya, you’ve been on many, many times. You’re certainly no stranger to the listeners of the Ghost Stories podcast. Having said that, we had some big tech issues with your laptop now, so even though your laptop has also been on many, many times, it decided that today was not its day. This podcast was almost like the budget speech in that it last minute almost didn’t happen. But luckily here we are, you came up clever plan and we can do the show. So welcome.
Siyabulela Nomoyi: Yeah, thanks Ghost. Thanks for having me. Bit of drama to start off, but let’s do it.
The Finance Ghost: No, absolutely. We made a plan.
Tax-free savings accounts, that’s a favorite topic of mine. I think it’s a favorite topic of yours. And yet I think there are still a ton of people out there who firstly just don’t really understand them or why they are valuable. Then for those who do understand that this stuff exists, there are a lot of mistakes that get made out there, some of which is just driven by, in my opinion, quite bad advertising, etc. We can get into that later.
For me, it’s a mistake not to have a tax-free savings account. It’s rare to make a blanket statement like that, but I feel confident in saying that if you don’t have a tax-free savings account, as a South African, you are severely missing out, right? It’s a liquid way to save with a government incentive. That’s a wonderful thing, right? Would you agree with that?
Siyabulela Nomoyi: Yeah. I think it’s quite important that anyone listening to this recording goes and actually educates themselves more on their tax experiences which they are exposed to when they are investing in their direct accounts or using platforms, brokers, LISPs through a bank and so on. For anyone to actually appreciate the importance of a tax-free savings account, they need to first understand that part, otherwise this topic won’t make any sense to them.
Very quickly, when you are investing in capital markets, holding shares, commodities, bonds and so on, the aim there is to have your capital grow, right? Otherwise you would not be investing. Also, I know South Africans love dividends, they love dividend income. Others actually invest just to get income as well.
The taxman also takes a cut from your gains, unfortunately. And this comes in the form of being liable to pay capital gains tax. And when you receive dividends, you are taxed on your income and interest as well.
So, this applies to every legal investment you do. You will be taxed. This is where the tax-free savings account actually comes in. And it’s in the name: tax free.
This means that you can open account in your name, in your kid’s name, in your spouse’s name or your grandma or whatever, and that is actually tax free.
You can look at it like this: when you look at all the pockets on your pants, that one small pocket which you can only stick one finger in, that’s your tax-free savings account. This means whenever you invest, you can put money in all your pockets, front, back pocket, you can go to the pocket that’s down by your knees, but the taxman is always going to come and tax your gains in those pockets. This is where the small tax-free savings pocket comes in. All the money you put in it, if you have gains or you receive income like dividends or coupons in there, the taxman does not touch it, it’s all yours.
But remember, it’s quite a small pocket. It’s got its limits, value wise. At the moment clients are only able to save up to R36,000 per year and can’t go over that. Otherwise, they will be taxed on the difference.
It’s quite a tax efficient way of investing and it’s a way to encourage individuals to actually save or should I say to invest more while not actually being worried about things like tax.
The Finance Ghost: So Siya, I never thought I’d say this out loud ever in my life, but now I’m imagining what your pants look like – awkward, I know – with that pocket down the front by your knees. I feel like I don’t have a pocket down by my knees. I need to see what kind of pants you’re wearing because you clearly have more pockets than me. Maybe there’s some other ways of saving that you know about that I haven’t figured out yet.
Siyabulela Nomoyi: You need to keep up with the fashion, eh?
The Finance Ghost: Apparently! I just don’t have enough pockets. This is clearly an issue in my life, but I think the point is that you’ve got to take advantage of the pockets that you do have. And this is why I say a tax-free savings account is just always a good idea. Even if you’re not able to max it out every year, at least do what you can.
I think the name tax-free savings is just so misleading in my opinion. I wish this thing was called a tax-free investment account because that’s the way to treat it. That’s what you should be doing with this thing. You should be putting money in and letting it grow over the long term so that you are compounding your returns pre-tax effectively. It really makes a gigantic difference. Those who understand the power of compound interest will know that if you’re compounding pre-tax gains, that looks very different to compounding post-tax gains. It really does. I’ve seen ads out there, I won’t mention specific names but I’ve seen ads of stuff like oh, save towards your wedding using a tax-free savings account. Now the issue with that is yes, it might give you a short-term boost to your savings because you’re not going to pay tax. But if you’re saving towards an event, you have to withdraw for that event, right? You’re specifically saving towards a date and when you withdraw from your tax-free savings account, that’s it, your contribution limit is a lifetime limit. There’s no allowance to say, okay, well sorry that you had to take some out, don’t worry about it, you can put that back in later. Once you’ve hit your lifetime limit, you’ve hit your lifetime limit.
What are your views on this? Do you also wish it was called a tax-free investment account like I do?
Siyabulela Nomoyi: Yeah, so funny part about this Ghost is that if you go on the SARS website, it’s actually called the tax-free investment. It’s actually TFI there. They are literally talking about investing and not savings. There you go. It’s actually tax-free investments. But look, there’s a long list of providers who offer this type of account either through a licensed bank or an FSP, insurers and the government and so on. Some of them actually have savings products and I guess Ghost, marketing is not my strongest skill, but I’m guessing TFSA is much more sexier than TFIA, right?
So, back to your point, I would encourage anyone to make use of tax-free savings accounts for long-term investing rather than short-term savings. I mean you’re quite right when you’re saying that it’s going to give you a short-term boost, but you really want to realize that over the long term. And for the positions that you buy inside your – I’m going to call it a TFSA to shorten it – all the income and realized gains are all yours. You can rotate between positions, buy and sell positions in there like ETFs or unit trust without worrying about hitting tax deductions.
A tax-free savings account should be untouched money. It should not be your emergency fund or your wedding savings. It should be there for the long-term. If you started investing to the annual limits from the start when they introduced this thing back in 2015, by 2030 you should be hitting the R500,000 lifetime limit. If you have this invested in capital markets, it’s a huge advantage on how much you would be avoiding to pay on tax. The opportunities there are actually endless.
The Finance Ghost: Yeah, absolutely. It’s also why I say even if you can’t do the full amount in a year, do what you can because if you have a windfall next year, you can still only do R36,000 in a tax year. Even if you have the year of your life, you’re going to have to then wait and max it and then the following year max it again. So don’t let a year go by in which you put nothing in. If you can’t do R36,000 then you can’t do R36,000. But even if you can just do R10,000 or R12,000, it’s R1,000 a month, it makes a significant difference.
To your point, there’s a lot you can do around rotating exposure, etc. That’s some of the more advanced concepts and maybe we can chat about a few of those later. That’s certainly something that I very much enjoy doing in my tax-free savings account. It’s something we’ve talked about before and I’ve written about before on various platforms.
I think before we get to that, people need to understand what they can actually buy inside a tax-free account. You’ll sometimes hear people talk about how it’s quite limiting and you can’t go and punt on single stocks. And yes, that’s true. If you want to do some trading, the government is not going to give you a tax-free outcome there. That kind of behaviour is not what they are encouraging here. They are trying to encourage saving and investing, hence the instruments that you can buy are limited, but it also isn’t really limited because you can pretty much buy the entire suite of ETFs or exchange traded funds of which Satrix has a huge range.
I think this is a good opportunity to maybe just open the floor to you to just on a high-level explain what that ETF universe looks like. Because it is so much more than just oh, I’m going to invest in the JSE Top 40.
Siyabulela Nomoyi: Firstly, yeah, I think it’s important to know that an individual can actually open as many tax-free savings account as they want. The only thing you need to keep track of is the annual R36,000 limit. Well, that’s the limit at the moment. If you’ve got those different pockets and different providers, you can actually split that R36,000 and as you mentioned you can actually split that over the year. People do debit orders over the year for this to actually have it add up through the year. You can split that amount amongst your tax-free savings accounts but just be careful on not going over that limit.
Now, the underlying investments here, you could have this in a fixed deposit, you can buy unit trusts under it. Also what you have mentioned, you can buy ETFs and have exposure to them in your tax-free savings account. The longer your investment horizon, or should I say your term of investing, the more you would actually probably want to be bit aggressive in terms of what you want under your tax-free savings account. Also, if you have an investment that you know generates a lot of income, maximizing exposure to them using the tax-free savings accounts is also actually a good idea.
Investors have access to a wide choice of local and international funds covering all risk profiles. Our ETF landscape in South Africa allows investors to choose from quite a lot of options. Just talking about ETFs in general in South Africa, 117 ETFs listed on the JSE, that’s actually more than the tradable universe of stocks on the JSE! That includes the 26 active ETFs recently listed on the stock exchange.
From that, investors have a choice of investing in foreign equity ETFs which have 50% of the entire ETF landscape, while they can also invest in local equities and bonds and whatnot. If you go into the Satrix universe, there’s plenty of choice there. We have about 38 ETFs listed on the JSE out of that 117, so you can have exposure to tracking indices like the MSCI World, the S&P 500, the Nasdaq. Internationally there’s quite a lot of opportunity there in terms of diversification.
Also, you have the choice of investing in our property ETFs if you are looking for yield and generating income, or a divi kind of strategy. The Top 40 that you mentioned, if what you want is beta exposure to the market at a very low cost, then that’s where you’d want to actually be in. Unfortunately, you can’t buy individual stocks. I think you mentioned that. You can’t buy commodity ETFs, the government doesn’t want you to be taking too much risk. As you said, the aim there is to actually encourage people to save and invest.
Those will be your limits in terms of what type of products you can go for. But in terms of investing in ETFs and also unit trusts, there’s quite a lot of variety there. Whether you are just going the Satrix route through our Satrix platform or you go another route from a broker.
The Finance Ghost: I think an important point to raise here is when you’re looking at all these options, just take into account where you’re going to get the best tax benefit. The point of a tax-free savings account – everything you can buy in your tax-free account, you can also buy in a normal account. Because you are limited in your tax-free savings account, let’s assume you have the financial means to invest more than R36,000 rand a year and you’re maximising your tax-free account and you’re doing more than that on top. Great! Now you’ve got to think to yourself, okay, what do I put in my tax-free account versus the rest? And here you need to look at: where am I paying the most tax?
For example, property funds, specifically REITs, they are taxed as income. It’s as though you owned the property and you rented it out to someone yourself, right? You are taxed at your income tax rate. You are not taxed at a capital gains tax rate, you are not taxed at a dividend withholding tax rate, both of which are much lower than an income tax rate. On a property fund you’re going to pay a lot more tax. In fact, you’re going to pay – I think it’s probably the highest. Even if you go and buy government bonds and you earn interest, everyone still gets a certain amount of interest free every year. But you don’t get any allowance for, hey, I got some REIT dividends, so I think that’s effectively your biggest tax burden. If you like property funds and property funds are something you want to own long-term, then that’s a really smart inclusion in a tax-free savings account because there are some very good property ETFs available.
As I say, those property distributions then are tax free. Remember, REITs themselves basically don’t really pay tax. What’s happening is you are then turning yourself into a little pension fund, right? You’re saying, I’m going to go and invest in these REITs, they don’t really pay tax, I’m not paying tax in my tax-free savings account. There’s zero leakage. It’s the same life that pension funds enjoy when they don’t pay tax. That’s why pension funds love investing in property funds so much.
So, that’s quite a favourite of mine. It just shows the value of the tax-free savings account. It’s in the name, it’s the “tax-free” piece. So, make sure you understand that stuff and think about where you’re going to put your money accordingly, right?
Siyabulela Nomoyi: 100% Ghost. I think the other part that I would mention is that when it comes to long-term investing, when you think about your kids, you think about the investment horizon or the time that you would want them to have an investment account. If you are saving or investing for your child to be at university and they’re still quite small, that’s quite a lot of years to actually be invested. You want to be investing in a product where the capital gains that you’ll be realizing in 15 years’ time, they’re all coming to you. You don’t want to be having this investment that has grown quite a lot over the years and then suddenly when you want to actually disinvest, you have all these tax payouts that you actually need to take care of.
I think the other part of that, outside the income part, is also just the underlying products that you consider and would like to actually hold for the long term where you don’t want to be taxed on your realized gains. I think that’s also very important for investors as well.
But definitely the part which I also consider as well is the REITs, the property funds, where there’s yield, that part where you get taxed more. You need to consider that.
The Finance Ghost: Yeah. I want to touch on this concept of how a tax-free account kind of becomes this beautiful little walled garden of money. You build it up every year, you put your R36,000 in or whatever it is that you can do, or if they ever actually increase that limit, we can only hope, then you’re building up over time.
This actually becomes quite a meaningful amount of money a few years down the line because remember, it’s growing as well. That R36,000 a year is your contribution limit. Obviously the great hope is that it’s growing in the background, it’s compounding all the time, so it can actually become quite a chunk of money over time.
That goes back to that point about how you can then rotate exposures. If you have made a lot of money, say on the US market through the S&P 500 or the Nasdaq-100, and let’s say valuations have gotten to a point where you’re now feeling quite uncomfortable, but you really like what’s going on in South African property, you like where we are in the cycle, you can now rotate exposure. This is a very real-world example because it’s exactly what I did. You can now rotate exposure, reduce some of your US exposure, jump into SA property, all doing this via ETFs and there’s zero tax leakage along the way.
Now I know that this can be done through a brokerage account, but the question I wanted to ask you is: on the SatrixNOW platform, which is another way to invest in ETFs, does it also allow for the buying and selling of ETFs within a tax-free savings account? What sort of functionality does the platform have in that regard?
Siyabulela Nomoyi: Sure. Thanks, Ghost. The SatrixNOW platform certainly allows for that. The platform allows investors to open under their name a standard direct investment account. They can open a retirement annuity and a tax-free savings account. You have that under your profile and have these different tabs that you can actually go and switch between. Once you’re in, you can choose from what I call the Satrix universe of products. You switch between ETFs in the platform, as you mentioned, so you can gain exposure to for instance, your Satrix Top 40 ETF.
Then if there is a point where you want to rebalance against your portfolio and want to buy property, the Satrix property ETF or the unit trust, or you want the international route where you want exposure into the Nasdaq or our infrastructure ETFs, you can actually do that inside the platform. I don’t like talking about withdrawals, but that’s also there as well as part of the platform. If you have been investing with us for quite a number of years, you want to withdraw money from your investments, you can certainly do that. You can also deposit, you can arrange for debit orders on the platform where you can actually split your debit order, whether you want to buy into one individual ETF or you want to split your debit order between different products, you can do that. So if you want, with your debit order, you can have that directly investing in one product as your product of choice or you can split it, have 50% in setting a certain ETF or unit trust. You can set that up in the platform.
As I mentioned, you can switch between ETFs on the platform. You can deposit, you can withdraw money from the SatrixNOW platform. The reason why I’m saying I don’t encourage withdrawals or I don’t like talking about that – I mean, there’s something about opening the platform and watching your money grow. It doesn’t have to be on a daily basis. That’s where a lot of investors actually start panicking. When you refresh your platform every day, you’re looking at your returns on a daily basis. If you’re investing for the long term, you don’t want to be doing that. You can check and see if your views, I guess, on what you invested still match with what you have as an exposure on your portfolios, but it’s always good to actually just go and check what your returns are in the platform.
You can download statements. But of course, the other advantage if you are in the SatrixNOW platform is that there are no minimums to investing. You can literally buy an ETF with your last R10. You can deposit the money to the platform and you can just buy a fractional share of the ETFs.
You can also get access to it through the SatrixNOW app. You can download that from your app store and you get exactly the same stuff that you see on the website on the platform. You log in there, you just check on your investments, you can switch between the products or on the app as well and also you can switch between the products inside. Let’s say if you want to disinvest money from your direct investing product and you want that money to go into your tax-free savings account, you can do that in the platform. I’ve seen people who actually get dividends from direct investments and then they want to take those dividends and invest them into topping up their tax-free savings account. You can actually switch between those platforms. You get everything there. The only thing that you can actually trade in the platform is the Satrix universe. All the unit trusts, all the ETFs that you can invest in Satrix, they are all in there.
The last part I wanted to mention is that you can also buy vouchers to gift people, which is I think the quite cool and unique way of gifting. You can buy a voucher, let’s say for R2,000, you can allocate to someone and then they can actually start the investment journey, which is, I think it’s a great way of starting or a great way to actually gift someone.
The Finance Ghost: Yeah, absolutely. All of these are really important points and I think the debit order can be really powerful. South Africa doesn’t have a budget right now, but you certainly should as a listener to this podcast! That means that if you understand how much you can save every month, if you set it up as a debit order, you can actually get to your limit every year just with a monthly debit order. It’s happening consistently in the background and you’re just managing your month-to-month expenses and in the background you’re busy saving.
That works really, really well for someone who’s maybe not watching the market all the time and trying to pick exactly what they’re doing. To your point here, sometimes that behaviour is really not a good way to create wealth over the long term. People look at this the wrong way.
I think speaking of the ways to do it, maybe as we bring this podcast to a close, I think it might be quite fun to talk about how we each use our tax-free savings account. To the extent you are willing to share, what are some of the ETFs that you have in yours? Is it a bit of a mix between local and offshore? What do you look at?
Siyabulela Nomoyi: Yeah, so currently it’s actually quite concentrated on what we spoke about and that’s going to be the Satrix Property ETF. I feel like the SA equity valuations are cheaper when you compare them to offshore, so I also have a big exposure into our Satrix Capped All-Share ETF in the tax-free savings account. This is for the long term because this is definitely money that I don’t actually touch. But also as I mentioned when we were starting the podcast, sometimes you want to be more aggressive, especially if you’re looking over the long term. Certainly the Satrix Resi ETF is one of the ETFs that I hold and quite a big chunk of it because some of these miners are also still paying dividends. They made up quite a lot of the divi strategy, which means they do actually pay quite a lot of dividends, but they’ve been battling quite a lot. I’ve been buying up some Resi exposure in the last period to actually have that turnaround in that ETF. It’s one of my favourites anyway, if you look at it over the long term as well.
Then just exposure to the US market, I mean the valuations are quite high. I’ve reduced my exposure there and I think I’ve taken my gains there. As you mentioned with the rotation part, I think I’ve done my part there, but I still do have a bit of exposure just to follow what the sentiment is in the US markets.
The Finance Ghost: So yeah, in terms of what’s in my portfolio, I’ve got the Satrix S&P 500 ETF. That’s quite a big exposure for me. So obviously that’s giving me the offshore exposure. Then there’s a Satrix Property ETF as well, and as mentioned earlier, I really like the fact that I get the REIT distributions tax free. That’s been nice for me. There, when you’re looking at the performance in your portfolio, you have to be careful because it’s going to show you, I guess depending which platform you use, it’s going to show you the capital growth. But a big part of why you would invest in property is because you’re earning dividends and those would then land in the cash portion of your account. They won’t necessarily show as a gain on that position, but in reality your total return on that position should include the dividend. So that’s just an important nuance.
Similarly, I think you’ll be proud of me here – a bond ETF! We’ve done some fixed income ETFs before, Siya, I see you nodding there happily. Kind of a similar vibe, I guess, in terms of earning interest, so there’s a tax benefit there. Yes, I made the point earlier around getting an annual amount of interest tax free, but once you go above that then you’re no worse off whether you’re earning interest in your tax-free savings account or a REIT distribution. So that’s just quite interesting diversification.
I’ve got some other stuff in there as well. Obviously, there’s a wide world of ETFs out there, but I think what’s great about Satrix is you have a really good mix of products. You have the ability for people to pretty much express a view on almost anything.
Here we are at the end of February. We’re going to get this podcast out before the end of the month. And if you haven’t maximised your tax-free savings, then just try your best to get it in there. If you can’t do anything about it still this tax year, then at least plan for the coming year to try and do as best as you can with your tax-free savings account. It really is the starting point, in my opinion, for anyone. If you’re interested in shares or whatever, that’s where you start. Until you’ve maxxed out your tax-free savings account, I genuinely don’t think that anyone should be dabbling in single stocks. Go and get the market exposure, go and start buying those ETFs and learn about how the markets work. That’s very much my view. It’s the approach that I’ve taken with my money. It’s the approach that when friends and family ask me for an opinion, it’s the same opinion that I give them. That’s just my approach, Siya. I’m really grateful that you could join me on this show to unpack why these tax-free investments are so valuable.
Siyabulela Nomoyi: Awesome, Ghost. Thanks so much for inviting me. It’s been a great topic to go through.
The Finance Ghost: I think just to finish off for those who are interested in SatrixNOW and want to go and find out more and invest that way, what is the website that they can go and visit?
Siyabulela Nomoyi: Yeah, so they can go to satrix.co.za. Obviously that website will show them the info about what Satrix is about, but there’s also a tab where they can actually register or log in to our SatrixNOW platform. They can go directly to the SatrixNOW platform if they search for it or they can go to the website, they can register. It’s quite quick these days.
Back in the day when you register on these platforms you have to wait for FICA documents to actually run. So now it’s all running in the background. You can register now and within a day or so you’re ready to actually invest and deposit your money.
They can go on that website. As I mentioned, the other alternative is download the SatrixNOW app on their app stores and also just log in there.
The Finance Ghost: Absolutely. Nice and easy and well worth it. So to the listeners, if you’re not already busy with a tax-free savings account, go and check it out, do the research. And Siya, maybe one of the next shows we should do is about how to read the fact sheets of these exchange traded funds, these ETFs so people can understand what the options are to look at.
But I think that’s a great topic for another show and we’ll do one of those soon. This one was very much about these tax-free investment accounts. So thank you for joining me for that. And to the listeners, as I keep saying, go and check this out. You really are leaving money on the table if you’re not taking advantage of this.
Siya, thanks. I look forward to having you back.
Siyabulela Nomoyi: Awesome man. Thanks. Cheers.
*Satrix is a division of Sanlam Investment Management.
Disclaimer:
Satrix Investments (Pty) Ltd is an approved financial service provider in terms of the Financial Advisory and Intermediary Services Act, No 37 of 2002 (“FAIS”). Satrix Managers (RF) (Pty) Ltd (Satrix) is a registered and approved Manager in Collective Investment Schemes in Securities. The information above does not constitute financial advice in term of FAIS. Consult your financial advisor before making an investment decision. Collective investment schemes are generally medium to long-term investments. In Unit Trusts and ETFs the investor essentially owns a ‘proportionate share’ (in proportion to the participatory interest held in the fund) of the underlying investments held by the fund. With unit trusts, the investor holds participatory units issued by the fund, while in the case of an ETF, the participatory interest, while issued by the fund, is made up of a listed security traded on the stock exchange. ETFs are index-tracking funds, registered as a Collective Investment, and can be traded by any stockbroker on the stock exchange or via investment plans and online trading platforms. ETFs may incur additional costs due to being listed on the JSE. Past performance is not necessarily a guide to future performance and the value of investments/units may go up or down. A schedule of fees and charges, and maximum commissions are available on the Minimum Disclosure Document (fund fact sheet) or upon request from the manager. Collective Investments are traded at ruling prices and can engage in borrowing and scrip lending. Should the respective portfolio engage in scrip lending, the utility percentage and related counterparties can be viewed on the ETF Minimum Disclosure Document. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. The index, the applicable tracking error, and the portfolio performance relative to the index can be viewed on the ETF Minimum Disclosure Document and/or on the Satrix website. A feeder fund is a portfolio that invests in a single portfolio of a collective investment scheme, which levies its own charges and which could result in a higher fee structure for the feeder fund. International investments or investments in foreign securities could be accompanied by additional risks such as potential constraints on liquidity and repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information. A money market portfolio is not a bank deposit account. The price is targeted at a constant value. The total return to the investor is made up of interest received and any gain or loss made on any particular instrument and in most cases the return will merely have the effect of increasing or decreasing the daily yield, but that in the case of abnormal losses it can have the effect of reducing the capital value of the portfolio. Excessive withdrawals from the portfolio may place the portfolio under liquidity pressures and in such circumstances a process of ring-fencing of withdrawal instructions and managed pay-outs over time may be followed. Seven day rolling yield is calculated by taking into account the interest earned by the fund during a 7 day period minus any management fees incurred during those seven days. Income funds derive their income primarily from interest-bearing instruments. The yield is a current and is calculated on a daily basis. Tax Free Savings Accounts: Annual limit of R36000, lifetime limit of R500 000, 40% tax penalty applicable for contributions above the limit, per individual. Past performance is not necessarily a guide to future performance and the value of investments / units may go up or down.
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