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Ghost Bites (BHP | Kore Potash | Motus | Richemont)

The Finance Ghost
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Ghost Bites (BHP | Kore Potash | Motus | Richemont)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

BHP takes a knock in metallurgical coal (JSE: BHG)

Production of other commodities is in line with guidance at the halfway mark of the year

If you know anything about mining, you’ll know that it is fraught with production risks and things that can go wrong. Production updates are big news, as the mining house can control production but cannot control commodity prices. In many cases, management is measured based on production rather than anything else.

BHP is halfway through its financial year and is showing a strong first half in copper, iron ore and energy coal. It hasn’t been a good half for metallurgical coal due to a combination of planned maintenance and low starting inventory values. Full year guidance for BMA (the metallurgical coal) asset has been decreased, which means expected unit costs of production also go up. To achieve an appealing cost per unit, production needs to be running at high levels. This is true for any commodity.

Another headache for BHP is a sharp fall in nickel prices, leading to tricky production decisions. They refer to the problem as being a number of structural changes in the nickel industry and a cyclical low in realised pricing. Average realised prices for nickel are down 24% year-on-year for the first six months of the year.

Comparing the BHP share price to other mining giants like Glencore and Anglo American reveals that even when buying the large “diversified” groups, you still need to understand the underlying exposures:

Kore Potash: still awaiting PowerChina’s EPC proposal (JSE: KP2)

In the meantime, the CEO and CFO have both left the company

Doing business in a place like Republic of Congo is no joke. Not only does it take forever to get a proposal to build a mining operation because of all the complexities involved, but there are also notoriously difficult government departments to manage.

You can imagine how delicate the position is when the SENS announcement talks about having a “moral guarantee” from the government to keep supporting the project despite milestones not having been met, as well as the importance of a ceremony that was held at the site and attended by dignitaries.

Moving on from politics, Kore Potash has had its own management challenges. The CEO resigned in October 2023 and the acting CFO in December 2023. The current chairman has assumed the role of CEO and a “non-board CFO” has been appointed as well. The company is trying to save on costs and is avoiding making commitments to new people until the financing proposal for the project has been received from the Summit Consortium.

That funding proposal isn’t going to happen until the Engineering, Procurement and Construction (EPC) proposal is received from PowerChina. These contracts are exceptionally complicated and need to manage the risks for both parties. When you read of major construction companies losing a fortune or even going bankrupt, it’s usually because a specific contract went really badly. This is why PowerChina is investing heavily in getting the contract proposal right, including having boots on the ground for months now to properly assess everything from the design of the facility itself through to service corridors

PowerChina has confirmed that it has received all required information and that internal reports are being finalised. It’s do-or-die for Kore Potash, as I can’t see the project or the company surviving if this contract isn’t finalised and the financing proposal isn’t obtained shortly thereafter.

Motus confirms a substantial drop in HEPS (JSE: MTH)

The market seemed to fully expect this, with the share price in the green for the day

The car business is cyclical. Sales are impacted by all kinds of factors, ranging from interest rates through to inflation. The aftermath of the pandemic was a great time to sell cars because of supply shortages, forcing consumers to really pay up for new vehicles. Of course, distortions like that eventually experience a correction.

This correction has come to Motus, with the market seemingly expecting it based on the share price actually closing higher for the day despite HEPS for the six months to December 2023 falling by between 20% and 30%.

Interesting strategic nuggets include the company acknowledging oversupply of vehicles from the manufacturers, leading to discounts on new vehicles and a negative impact on margins. This is a complete turnaround from the post-pandemic supply shortages.

Despite this, the announcement notes double-digit revenue growth and stable operating profit for the six months to December 2023, so that doesn’t really make sense in the context of the commentary on pricing. The drop in earnings is mostly being attributed to higher financing costs because of working capital tied up on showroom floors and vehicles in the car rental business. Acquisitions made by Motus have also driven debt higher.

They are looking to reduce the rental fleet and unlock working capital savings. This should come through in the second half of the financial year as this is a seasonal business.

Unexpected riches at Richemont (JSE: CFR)

The market got this one totally wrong based on other luxury brands

Richemont is a gigantic company. To see a group this size put a 10% gain on the share price in one day is extraordinary. The sales update completely blew the market away, along with anyone who might have had a short position. Such a position would’ve been pretty logical based on what we’ve seen from other luxury brands like Burberry.

Of course, if the markets were easy, you wouldn’t even be bothering to read this.

For the three months ended December 2023, Richemont managed to grow sales by 8% at constant exchange rates and 4% at reported rates (being euros). The important news is that the company achieved growth across almost all regions, including the Americas where luxury has had a wobbly.

Asia Pacific grew 13% in constant currency. China, Hong Kong and Macau were good for a combined 25% growth. Europe fell by 3% with an overall reduction in tourist spending. The Americas grew by 8%, with Richemont believing that part of this is domestic purchasing by Americans rather than spending abroad (with Europe suffering as a result). It was Japan that really shone though, growing 18% in this quarter despite a whopping 43% growth in the prior year. Middle East & Africa grew 10%, with the UAE and Saudi Arabia as strong contributors.

I’m not surprised that online retail was down 5% in constant currency. It’s a very small component of the group, thankfully. I suspect it will stay that way as I don’t understand why people would buy a timepiece that costs the same as a family car (and sometimes a family home) online! The retail channel grew 11% and the wholesale and royalty channel was up 4%.

As a final comment on online, YOOX NET-A-PORTER (recognised as a discontinued operation) saw sales drop by 11% on a constant currency basis. Richemont notes a “continuing challenging environment” for pure online businesses in this space.

Looking at product categories, the Jewellery Maisons did particularly well with an increase of 12%. Specialist Watchmakers managed 3% and the Other segment dropped 1%. The Jewellery Maisons business contributes over 70% of sales revenue, so the segment that needed to perform is the one that did perform.

If we consider the nine months to December 2023 as a year-to-date view, sales increased 11% at constant rates and by 5% at actual rates.

All eyes will be on LVMH later this month. Where Richemont is genuine luxury (with a number of watchmaking brands that I can’t even pronounce), LVMH is exposed to mass affluent businesses like Sephora cosmetics stores and Hennessy Cognac. I could be way off the mark here, but I don’t think this positive surprise from Richemont is a guarantee that LVMH is going to deliver good numbers.

Little Bites:

  • Director dealings:
    • The company secretary of Trematon Capital Investments (JSE: TMT) sold shares worth R277k.
    • The matchy-matchy buying at Invicta (JSE: IVT) continues, with the CEO Steven Joffe and Dr. Christo Wiese each buying shares worth R202k in the company.
    • The chairman has bought shares in Life Healthcare (JSE: LHC) worth R185k.
    • An executive director of Santova (JSE: SNV) has bought shares worth R56.5k.
    • An associate of the CEO of Mantengu Mining (JSE: MTU) has bought shares worth R35k.
  • There’s a new executive management structure at PPC (JSE: PPC), including two major hires of internationally experienced executives. Although much progress has been made in turning the group around, it shows how much still needs to be done that there’s space for a Chief Strategy Officer and Chief Revenue Officer.
  • Sappi (JSE: SAP) is making some changes to its balance sheet by issuing a notice of early redemption for 5.25% convertible bonds issued by Sappi Southern Africa. Holders of bonds who do not want them to be redeemed would need to convert them into equity instead. The value of the bonds outstanding is well in excess of R1.1 billion.
  • If Kibo Energy (JSE: KBO) had a dollar for every time that the company releases a SENS announcement, by now the share price would be higher than one cent a share. The latest announcement relates to an extraordinary general meeting to amend rights related to shares. If you’re a shareholder in this thing, go check it out.
  • Steve Phiri served as CEO of Merafe (JSE: MRF) and then as a non-executive director some years ago. He has also been the CEO of Royal Bafokeng Platinum. Phiri has now joined the board of Merafe once more as a non-executive director.
  • In the unlikely event that you are a shareholder in Cafca Limited (JSE: CAC), one of the most illiquid stocks on the JSE, you may be interested in their financial results. The short-form announcement gives no details at all, which might explain why nobody ever trades in this thing.
  • Dan Marokane is stepping down from his role as interim CEO of Tongaat Hulett (JSE: TON) to take the reins at Eskom, perhaps the hardest job in the country. He will work with the team until the end of February to assist with the handover to current CFO Rob Aitken who will move into the CEO role.
  • Chrometco (JSE: CMO) has renewed the cautionary announcement linked to “circumstances relating to a material subsidary of the company” – it’s suspended from trading anyway, with caution or otherwise.

Ghost Bites (Grindrod | Kibo Energy | Ninety One | Trustco)

The Finance Ghost
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Ghost Bites (Grindrod | Kibo Energy | Ninety One | Trustco)

Get the latest recap of JSE news in the Ghost Wrap podcast, brought to you by Mazars:

Grindrod’s investment in the Port of Maputo is telling a great story (JSE: GND)

And with the trajectory of South African infrastructure, that story could easily continue

Grindrod holds an indirect 24.7% stake in the Maputo Port Development company. The exciting news is that volumes handled by the port came in at a record level of 31.2 million tons in 2023, growing more than 16% vs. the previous year.

Of the 31.2 million tons, 25 million were made up of various ores. It’s also worth noting that 61% of volumes were handled by road and 39% by rail, representing a significant increase vs. the previous year in terms of rail use.

We can only dream as South Africa, with our headlines filled with a story about two Transnet coal trains crashing on the coal export line.

Kibo Energy: still full of dreams, but not funding (JSE: KBO)

Trading at just one cent a share, is anything ever going to happen here?

Kibo Energy really needs to catch a break. The company puts a lot of effort into regularly telling its story to the market. The problem is that the story is full of words like “concept stage” and “advanced project development” rather than anything to do with tangible cash flows. To add to this difficulty in convincing anyone to get excited, they make basic errors like getting the percentage shareholding in Mast Energy Developments wrong in the first version of the announcement.

When a company is trading at literally one cent a share, it can mathematically only double in price or go to zero from here. This is why speculative punters love a good penny stock. One piece of good news from Kibo could see ridiculous percentage returns. Of course, you can easily lose everything here.

The announcement highlights a potential joint venture with a multinational food and beverage producer to build and operate a pilot plant to produce bio-coal. If the pilot plant works and financing can be obtained (and those are big “ifs”) then the client would look to transition from fossil coal to bio-coal.

The other major news in the announcement is that conditional preliminary approval has been obtained for development funding for an existing waste-to-energy project. This is subject to due diligence and is from a development banking institution in Southern Africa. Although this is still far from guaranteed, perhaps this could be the catalyst for the share price to move off the one cent mark?

There are a number of other projects in the group, several of which are one step away from something exciting happening. That seems to always be the case though, which is why many punters have run out of patience. The lack of closure around the Proventure payment for the joint venture with Mast Energy Developments has been damaging to the company’s reputation in my opinion.

Ninety One reports a slight uptick in AUM (JSE: N91 | JSE: NY1)

Well, provided you look over three months rather than year-on-year

Ninety One announced its assets under management as at 31 December 2023, coming in at £124.2 billion. Although that is higher than £123.1 billion at the end of September 2023, it’s still well below the level seen a year ago at the end of December 2022 (£132.4 billion).

Remember, assets under management is impacted by two things: client flows and asset prices in the market. The former is more under the control of an asset manager than the latter.

Trustco is working on two deals with Riskowitz Value Fund (JSE: TTO)

A cautionary announcement has been issued

Trustco released a cautionary announcement dealing with two potential transactions with the Riskowitz Value Fund.

The first is a potential equity investment of up to NAD950 million by that fund. Oddly, the company notes that one of the value adding activities that this would unlock is further share buybacks. No, I have no idea why a company would issue shares for cash in order to do more buybacks, unless the issue for cash is at a much higher price (and why would that realistically happen?)

The second potential transaction is for Trustco to increase its stake in Legal Shield Holdings by 11.35%, taking the stake to 91.35%. The seller would be Riskowitz Value Fund, so there are a couple of negotiations underway at the moment.

Little Bites:

  • Director dealings:
    • The CEO of Marshall Monteagle Plc (JSE: MMP) bought R9.8 million worth of shares in an off-market transaction.
    • The controlling family of Acsion (JSE: ACS) has bought more shares, this time worth R22.6k.
  • Although I don’t usually mention asset managers increasing or decreasing their stakes in companies (as they do this all the time), I do think it is relevant that Allan Gray has bought shares in Pick n Pay (JSE: PIK) and taken its stake to 10.1139%. I guess they believe in what Sean Summers is doing!
  • RMB Holdings (JSE: RMH) has obtained approval from the SARB for the special dividend to be paid at the end of January.
  • The soap opera that is the PSV Holdings (JSE: PSV) business rescue continues. DNG keeps saying that it wants to proceed with a formal offer backed by proof of funds. The business rescue practitioners seem to be tired of waiting and want to follow a liquidation process. The liquidation application is set to proceed on 22 January and DNG will oppose that application.
  • And if you think PSV is full of drama, then wait till you look into Afristrat Investment Holdings (JSE: ATI). The company is so bad that business rescue isn’t even an option as there is no reasonable prospect of it being saved. The directors are simply waiting for the outcome of a liquidation application before acting on the conclusions in their assessment of the company.

Ghost Wrap #59 (Merafe | Pick n Pay | Frontier Transport | Tharisa + Northam Platinum)

The Finance Ghost
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Ghost Wrap #59 (Merafe | Pick n Pay | Frontier Transport | Tharisa + Northam Platinum)

The Ghost Wrap podcast is proudly brought to you by Mazars, a leading international audit, tax and advisory firm with a national footprint within South Africa. Visit the Mazars website for more information.

In this episode of Ghost Wrap, I covered these important stories on the local market:

  • Merafe’s 2023 production numbers are a good reminder of the importance of not just availability of electricity, but also the cost thereof.
  • Pick n Pay has a critically important year ahead and Sean Summers has now appointed his executive team – can they save the share price?
  • Frontier Transport announced a substantial special dividend, rewarding shareholders who dig around on the JSE for cheap shares.
  • Tharisa and Northam Platinum announced recent production numbers, for the quarter and six months ended December 2023 respectively. Tharisa’s share price has been slightly shielded by chrome production in the past year, but both are well down as the PGM market has suffered.

Ghost Bites (Metair | Northam)

The Finance Ghost
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Ghost Bites (Metair | Northam)

Metair (aka the JSE’s unluckiest company) has a new CEO (JSE: MTA)

Paul O’Flaherty is taking the top job

I meant what I said in the headline to this particular bite. I really cannot think of an unluckier company than Metair. If they aren’t dealing with floods in KZN and the impact on customers, they are trying to navigate hyperinflation in Turkey.

The share price is down roughly 40% in the past 12 months. This makes it a rather interesting speculative play, particularly when you look at this chart and realise how important the current level is:

The company has a new sheriff in town, with Paul O’Flaherty moving into the CEO role from 1 February after the resignation of Sjoerd Douwenga for health reasons. O’Flaherty comes with considerable experience in tough situations, having been in top executive roles in the construction and steel industries. He also once worked at Eskom, which might make Metair seem simple.

You might also recognise his name from the role he played in the separation of ABSA Bank from Barclays PLC.

This is a 36-month contract that will bring some stability to management. The bigger question is what it will bring to the share price!

Northam’s production moves sharply higher (JSE: NPH)

Purchases from third parties more than doubled in this period

Northam Platinum released a production update dealing with the six months to December 2023. This represents the first half of the financial year.

Total equivalent refined metal production from own operations was 10.6% higher, mainly due to a 14.9% increase at Booysendal and a handy contribution from Eland with a 51.8% increase. Zondereinde was 0.4% lower.

Equivalent refined metal purchased from third parties more than doubled, up 114.5%. This now represents 16% of total production including purchased material.

The total production metric is 19.9% higher year-on-year, with the company attributing the overall increase to a strategy of mechanisation. Despite this, Northam hasn’t escaped the carnage in the platinum sector, down 37% over the past year.

Little Bites:

  • Director dealings:
    • Two directors of major subsidiaries of Santova (JSE: SNV) exercised share options at significant discounts to the current market price. One director sold all the shares immediately and the other director sold just over 78% of the shares acquired. Finally, a director of the listed company sold shares worth R400k.
    • Acsion (JSE: ACS) is 77% held by the Anastasiadis Family Trust. This clearly isn’t enough for the family, as an associate of the director has bought further shares worth R65k. It’s a small purchase but you need to keep in mind that there isn’t much liquidity in this thing.
  • Mantengu Mining (JSE: MTU) has released the pro-forma effects for the proposed issue of shares and warrants. This is linked to the R500 million facility to be made available to Mantengu by GEM Global Yield. Basically, pro-forma numbers tell you what the financials would look like assuming the deal had already gone ahead. Think of it as a before and after at a specific imaginary date, in this case 28 February 2023. The impact is that the loss per share would’ve been 12 cents instead of 10 cents. This is the combined impact of R10 million in additional administrative expenses (a 2% commitment fee) and the issuance of many shares under the structure.
  • Although creditors have now approved the business rescue plan at Tongaat Hulett (JSE: TON), the company is still technically listed and so updates must be given on the process. The only information in the latest update that is relevant in my opinion is the news that Tongaat is seeking leave to appeal the judgement regarding sugar levies that was handed down in early December 2023. This is important for the broader sugar industry. Critically, the practitioners have reaffirmed their view that the business has a reasonable chance of being rescued – under the future ownership of the Vision consortium, of course.

Boeing, Boeing, gone!

Dominique Olivier
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Boeing, Boeing, gone!

When a restaurant cuts costs to improve profit margins, diners may receive tougher-than-usual steaks. When a business like Boeing cuts costs, the consequences can be far more dire.

I used to think of aerophobia, or fear of flying, as an irrational fear. That was until Boeing started making headlines for all the wrong reasons between 2018 and 2019, and now again in 2024. Perhaps there’s nothing more rational than being afraid that your plane might drop out of the sky – particularly if you’re flying on a 737 Max.

If it’s Boeing, I’m not going

In 2018, a brand-new Boeing 737 Max 8 fell out of the sky shortly after taking off from Soekarno–Hatta International Airport in Jakarta, Indonesia, killing all passengers and crew onboard. While Boeing was very quick to point the finger at Lion Air pilots (who were operating the aircraft at the time), an investigation by Indonesia’s National Transportation Safety Committee attributed the crash to the aircraft’s MCAS system pushing the plane into a dive based on data from a faulty angle-of-attack sensor.

It felt like the ink was barely dry on those headlines before Boeing was in the spotlight again, less than six months later. Another 737 Max 8 – this time operated by Ethiopian Airlines – crashed just 6 minutes after takeoff. There were no survivors. Evidence collected from the crash site indicated that the aircraft was set up to dive, resembling the configuration of the failed Lion Air that had crashed in 2018. Ethiopian Transport Minister Dagmawit Moges made a statement that the crew “meticulously followed the procedures repeatedly issued by the manufacturer but were unable to regain control of the aircraft.”

Despite the evident issues with the 737 Max, the US Federal Aviation Administration (FAA) hesitated to ground the aircraft until after the occurrence of the second crash. By the time the FAA finally issued the grounding order, 51 other regulatory authorities had independently grounded the plane. As of March 18, 2019, all 387 aircraft in service had been grounded.

On November 18, 2020, the FAA officially lifted the 20-month-long grounding, marking the lengthiest suspension in the history of a US airliner. The series of accidents and subsequent grounding inflicted a substantial financial toll on Boeing, resulting in an estimated $20 billion in fines, compensation, and legal expenses, along with additional indirect losses exceeding $60 billion due to the cancellation of 1,200 orders. Commercial flights for the Max resumed in the U.S. in December 2020, and by January 2021, the aircraft had received recertification in Europe and Canada.

Earlier this month, the FAA once again issued a grounding order for the 737 Max (this time for the 737 Max 9) after an Alaska Airlines flight suffered a mid-flight blowout of a plug filling an unused emergency exit. This opened a hole in the side of the aircraft, which led to rapid decompression of the cabin and necessitated an emergency landing. Fortunately no lives were lost in this incident, although passenger retellings of the experience are believably horrifying. Multiple witnesses who were onboard the aircraft at the time describe small loose items such as headrest covers being sucked out of the cabin through the hole, while one anecdote describes a shirt being pulled off a child while his mother held on to him.

A runway to trouble

Once upon a time, The Boeing Company was the first and last name in passenger aeroplanes,
inspiring the popular phrase “If it’s not Boeing, I’m not going” among pilots. Founded in Seattle in 1916 by aviation pioneer William Edward Boeing, the business quickly established a reputation for unquestionable engineering precision and a steadfast commitment to passenger safety. This legacy of trust, reliability and American-built quality stood fast and practically unshakeable for just over a century.

So what went wrong with the 737 Max?

Some would argue that the trouble started in the M&A space. In 1997, Boeing orchestrated a momentous acquisition, assimilating its long-standing competitor McDonnell Douglas in what stood as the nation’s tenth-largest merger at that time. Despite maintaining the Boeing name, the merged entity not only adopted McDonnell Douglas’s brand but also absorbed its cultural and strategic blueprint.

This transformative period unfolded as a clash of corporate cultures, pitting Boeing’s traditionally pioneering engineers against the more financially-focused decision-makers from McDonnell Douglas. Unexpectedly, the smaller company emerged triumphant in shaping the post-merger trajectory. The consequence was a notable departure from Boeing’s historical commitment to groundbreaking engineering, ushering in what critics labelled as a more cut-throat (and cut-cost) culture.

This cultural shift prioritised cost containment and exhibited a preference for enhancing existing models over investing in wholesale innovation. The aftermath saw Boeing veering away from its historical penchant for groundbreaking engineering, reflecting a strategic pivot influenced by McDonnell Douglas’s business philosophy.

Prioritising shareholder value, once a marginal concern, became increasingly paramount. Many employees faced challenges adapting to this shift, perceiving it as a transformation in priorities where investors took precedence over passengers. The original passion for exceptional aircraft gave way to a new focus on affordability.

Competitive pressure

The decades-long rivalry between Boeing and its European competitor Airbus has played a crucial role in fostering innovation and elevating industry benchmarks. This competition has spurred the creation of more fuel-efficient aircraft, advanced safety features, and upgraded passenger experiences, ultimately contributing to the overall improvement of the global aviation sector. Unfortunately, this competition may also have been at the heart of Boeing’s missteps with the 737 Max.

Under pressure to deliver a new aircraft that could compete with Airbus’ A320 Neo, Boeing decided to fast-track the design process by making alterations to their existing 737 design, which had been the core of their fleet since 1968. The 737 Max was fitted with bigger engines, which increased the risk of the aircraft stalling at a certain angle. To counteract this risk, the Manoeuvring Characteristics Augmentation System (MCAS) was built in – the same system that would later send two 737 Max aircraft into uncontrollable nosedives.

In their haste to do whatever they could to keep up with Airbus, Boeing made a series of bad decisions that not only went against the engineering-first ethos that the company was built on, but ultimately led to the deaths of hundreds of people and a reputational freefall that I’m not quite sure they will recover from.

Today’s share price, tomorrow’s problem

There’s a lot that businesses can learn from Boeing’s ongoing saga with the 737 Max, and many questions that we can ask. For starters, would it have made a difference to Boeing’s reputation if they had admitted that there was a problem with the 737 Max and grounded it themselves instead of waiting for a grounding order from the FAA (and therefore allowing a second crash to happen)? And why did they decide to keep making and selling “fixed”’ 737 Max models after the grounding order was lifted, instead of cancelling the entire project and starting something new?

The answer to these questions goes back to the clash in company culture that I highlighted earlier in this article. Before their merger with McDonnell Douglas, Boeing was an engineering business run by engineers. Their belief was that quality came first and profits followed, and for many decades, this was exactly the case. Boeing stayed ahead of its competitors through innovation and adherence to the highest possible standards of safety and reliability. Their stock market performance was a reflection of their stellar reputation in their field.

The story of the 737 Max is a cautionary tale about what happens when share price obsession takes root in a business that has a direct impact on human safety. We can argue all day about the role of the FAA and why adequate oversight was lacking. Yes, oversight and regulation are important when it comes to businesses that impact on our safety. But ultimately, the buck stops with the management team that turns a blind eye to concern and decides that profit and share price performance are more important than diligence.

To highlight this, consider that when Dennis Muilenburg was removed as Boeing’s CEO in 2019, he got $62.2 million in stock and pension awards. To truly put that number in perspective, each of the families of the 346 people who lost their lives in the 737 Max crashes got roughly $1.45 million from Boeing’s victim compensation fund.

And yet, despite everything, the share price gave a stronger reaction to the onset of COVID lockdowns than any of the disasters mentioned above. Even if we can’t put a price on the lives of our loved ones, it seems that the market can (and does).

About the author:

Dominique Olivier is a fine arts graduate who recently learnt what HEPS means. Although she’s really enjoying learning about the markets, she still doesn’t regret studying art instead.

She brings her love of storytelling and trivia to Ghost Mail, with The Finance Ghost adding a sprinkling of investment knowledge to her work.

Dominique is a freelance writer at Wordy Girl Writes and can be reached on LinkedIn here.

Ghost Bites (Frontier Transport | Merafe | Sappi | Schroder European Real Estate | Tongaat)

The Finance Ghost
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Ghost Bites (Frontier Transport | Merafe | Sappi | Schroder European Real Estate | Tongaat)

Frontier Transport makes investors feel special (JSE: FTH)

The market clearly liked this, with a strong rally on the day

You always have to be careful when looking at the share price of illiquid small- and mid-caps. Frontier Transport is better than many others, but I still look at the volume traded along with the price moves, particularly when the stock closes nearly 22% higher on a single day. With volume on the day more than 3x average trading volume according to Moneyweb’s data tools, that suggests this was a proper rally rather than just illiquid distortions in the price.

The catalyst? An announcement by the company of a special dividend of 137.38 cents per share. The share price started the day at R6.07 per share, so that’s a big portion of the share price. Even at R7.40 where it closed, that’s a substantial cash payout as a percentage of the share price. This is what happens when a share trades at such a low earnings multiple!

The dividend is due for payment in February, provided the SARB approval is obtained in time. The SARB needs to approve all special dividends by JSE-listed companies. I can’t think of an example off-hand where the approval wasn’t given, but sometimes it can be delayed.

Merafe confirms the drop in production for 2023 (JSE: MRF)

Production was curtailed due to market conditions and electricity costs in winter

Merafe has announced its attributable ferrochrome production for the fourth quarter and year ended December 2023. I decided that this was best explained with a chart of quarterly production for the past three years:

I’ve made it very easy for you to spot the problematic quarter. Load shedding was so terrible this year and electricity costs were so high during the colder months that the Lion smelter was the only smelter in operation over the three-month peak demand season. Of course if Eskom was actually operating properly, then power availability and pricing would probably be more palatable.

Instead, we have a scenario where full-year production for 2023 was 300kt, well off 384kt in 2022 and 379kt in 2021. The 2021 and 2022 numbers show how reliable production can be when electricity is available at an economically viable cost.

Sappi shuts the Lanaken Mill (JSE: SAP)

The paper market in Europe is in a tough space

Back in October 2023, Sappi announced a consultation process relating to the possible closure of Sappi Lanaken Mill in Belgium. It employed 581 workers and produced coated woodfree paper that was sold into the European paper market.

You’ll notice the use of past tense there. Sadly, production of paper stopped in December 2023 once Sappi had completed and agreed on a social plan for the employees. The closure of the site is expected to be completed during the second quarter of 2024.

Financial information relating to the closure will be provided during the results announcement for the first quarter.

This is part of a broader strategic focus by the company on packaging, speciality papers, pulp and biomaterials. Exposure to the graphic paper segment is being reduced. The European business needs to be more resilient overall, which inevitably means difficult decisions like this one for uncompetitive assets.

Interestingly, production is being transferred to other Sappi facilities with no disruption to customers. This shows that there was just way too much capacity in the European business, leading to inevitable closure of the least competitive sites.

Valuations at Schroder European Real Estate Investment Trust are still moving lower (JSE: SCD)

The yield curve is still hurting European property

Schroder European Real Estate Investment Trust announced the updated independent valuation of its property portfolio as at 31 December 2023. The company does this every quarter.

The direction of travel is downwards, mainly due to the capitalisation rates being applied by the independent valuators. This is just a fancy term for the required rate of return on the properties, a rate which is directly influenced by the yield curve (the government bond rate curve).

When rates are higher, the valuation of the portfolio comes down. This is why property funds have been struggling in recent times. The shape of the curve also matters, as the valuation experts will likely use a longer-dated rate in these valuations.

In terms of valuation vs. the end of September, the direct property portfolio fell 1.8%, the portfolio office assets were down 2.5% and the portfolio industrial assets fell 1.2%. The German retail portfolio was flat, thanks to strong investor demand in that space. The “alternative assets” fell by 4.3%.

The portfolio loan-to-value is 33% based on gross asset value and 24% net of cash. That’s in line with September 2023 numbers. The fund is in good shape overall, with some valuation relief hopefully not too far away if we start to move into an environment of decreasing rates.

The Tongaat business plan has been adopted (JSE: TON)

By the time of the meeting, there was only one proposal left on the table

If you’ve been following the Tongaat-Hulett business rescue process, you’ll know that bidders other than Robert Gumede’s Vision consortium had walked away before the final meeting of creditors to vote on a business rescue plan. In other words, the vote was basically a formality unless creditors voted against having any plan at all, in which case they would lose everything and there would be a social catastrophe.

Thankfully, the plan was approved by roughly 98.5% of creditors. It has therefore been adopted and the plan is final and binding on all affected persons as defined in the legal process.

Little Bites:

  • Director dealings:
    • Argent Industrial (JSE: ART) is quite popular among local small cap enthusiasts, but the CEO isn’t doing the story any favours at all by selling shares worth R4.3 million in his own name and in a trust of which he is a trustee.
    • A divisional executive of Capitec (JSE: CPI) exercised options to acquire 1,555 shares at a strike price of R973.05. He borrowed some money to do it, as the total value is R1.5 million. It sounds like a major show of faith in the financial services group, but you also have to keep in mind that the current market price is over R2,000 per share and so it’s arguably a no-brainer at that strike price. What I did find interesting is that the financing is for a period of 6 years and 6 months, which implies a long-term holding strategy for them.
  • Rex Trueform (JSE: RTO) invested in just under R5 million worth of Texton (JSE: TEX) shares as an underwriter to the recent rights issue.

Ghost Bites (Efora Energy | Kibo Energy | Pick n Pay | Tharisa)

The Finance Ghost
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Ghost Bites (Efora Energy | Kibo Energy | Pick n Pay | Tharisa)

Efora Energy: suspended, but buying property (JSE: EEL)

This stock hasn’t traded since 2020

The only reason I’m including anything related to this story is that you may find it interesting that a company that is suspended from trading can still carry on with its day-to-day business. The JSE has the power to suspend a listing that doesn’t meet the continuing obligations of being listed (like financial reporting), but it doesn’t have the power to prevent the company from doing corporate actions – provided those listings requirements are still adhered to.

Even though the shares of Efora Energy haven’t traded on the JSE since 2020, the company can still go ahead with a Category 2 transaction to acquire a property worth R3.8 million. Interestingly, the property is owned by Labat Africa!

The property supports Efora’s wholesale strategy by providing storage in a key industrial node that is close to major oil companies.

A major funder of Kibo has converted exposure to shares (JSE: KBO)

This is highly dilutive for shareholders but gives the company more breathing room

Kibo Energy announced that a whopping 500,000,000 new shares were issued to RiverFort Global Opportunities PCC Limited, based on conversion rights attached to a debt facility. This is interesting, considering that Kibo is trading at R0.01 per share i.e. as low as it can go. The company seems to spend most of its time at the moment trying to persuade a potential joint venture partner to figure out how internet banking works so that payment can be made!

Following this conversion, RiverFort will have a stake representing 11.68% of shares in issue. This is a substantial switch from debt to equity. I think the positive signal attached to this more than outweighs the dilution at this stage. Kibo is priced like a binary outcome and any reduction of debt can only help.

Sean Summers makes his leadership changes at Pick n Pay (JSE: PIK)

The old guard is out and some major internal promotions have been made

Pick n Pay’s share price has carried on this year where it left off in 2023. The share price is already down 6% in 2024, taking the 12-month drop to around 65%. It’s very ugly for the retailer right now.

In desperation, they dusted off Sean Summers in the hope that he can bring some bull market magic back to the retailer. This is a major changing of the guard, which comes with various leadership changes in the structure.

The man entrusted with returning Pick n Pay Retail to profitability is Dallas Langman. He was running the Rest of Africa division, so he knows all about running businesses in tough situations. This kind of get-the-hands-dirty operator is probably the right choice.

There are various other changes in the structure. Most of all, I’m pleased to see Pick n Pay Clothing getting recognised at executive level. That business is a little gem and needs to be given as much capital as possible to grow.

Will we finally see an improvement in Pick n Pay? I ran a poll on Twitter / X to see what people think. The poll hadn’t finished running by the time this was published, but the provisional results tell a story of a market with no consensus on the direction of this stock:

Tharisa worked hard over the festive period (JSE: THA)

The three months to December 2023 saw a significant improvement in production

The quarter ended December 2023 represents the first quarter of the 2024 financial year for Tharisa, so don’t get confused when it gets referred to as Q1’24 even though it was at the end of the 2023 calendar year.

In this period, production of PGMs increased vs. the immediately preceding quarter (Q4’23) and record chrome output was achieved. The PGM basket price moved just 1% higher in dollar terms and the average chrome price was steady.

Despite the improved production story, net cash fell from $126.6 million to $94.9 million.

Production guidance for FY24 remains between 145 koz and 155koz for PGMs and between 1.7 Mt and 1.8 Mt of chrome concentrates. It would also help if PGM prices continuing ticking upwards from here, giving some relief to a battered sector.

Little Bites:

  • Director dealings:
    • An associate of a director of Huge Group (JSE: HUG) has bought shares worth R85k.

Ghost Bites (Kibo Energy | Life Healthcare | Lighthouse | Telkom | Texton)

The Finance Ghost
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Ghost Bites (Kibo Energy | Life Healthcare | Lighthouse | Telkom | Texton)

Kibo is still chasing the joint venture money (JSE: KBO)

The excuses from the joint venture partner are just embarrassing now

I feel for Kibo Energy in this situation. The company isn’t exactly hot property right now, so opportunities to raise capital (either at listed or subsidiary level) are few and far between. When they do come up, one hopes that the counterparty acts properly and professionally. Sadly, that really isn’t turning out to be the case for Mast Energy Developments (MED), the subsidiary of Kibo that is trying to put together a joint venture.

The partner is Proventure Holdings. It’s not a great sign that I can’t get onto their website because their security certificate has expired. It’s also not a great sign that the payment for the joint venture still hasn’t happened, despite several extensions and promises.

The latest excuse? “A lack of coordination and administrative difficulties on the side of Proventure over the festive period” – do me a favour.

What kind of joint venture partner can’t make a payment over the festive period after agreeing to that deadline?

The CEO of Proventure is supposedly travelling to London soon to finalise the deal. It’s not impossible that Proventure will attempt some last-minute changes to the deal. After all, what other reason can there be for non-payment and a meeting in London? Messy stuff.

Life Healthcare meets all conditions to sell Alliance Medical Group (JSE: LHC)

The transaction is expected to conclude at the end of January 2024

A deal is never done until all the conditions are met and the money is in the bank. It’s rare, but theoretically any deal can fall over until that point. This is why shareholders (and the advisors getting paid a success fee) breathe a large collective sigh of relief when a transaction becomes “unconditional” in accordance with its terms – in other words, when all conditions have been met.

Although the disposal by Life Healthcare of Alliance Medical Group is expected to close by the end of this month, investors will have to be patient for a special dividend. Offshore debt must be repaid, transaction costs must be settled and Life also wants to hang onto some of the proceeds for general corporate growth purposes.

The “majority of the net proceeds” will be returned to shareholders, but at this stage we don’t know exactly how much or when this will happen.

Lighthouse sells another big chunk of Hammerson (JSE: LTE | JSE: HMN)

The capital will be redeployed into direct property opportunities

The market doesn’t have much love for investment structures that see listed companies holding shares in other listed companies. This inevitably leads to higher discounts to net asset value (NAV) per share, as investors (quite rightly) don’t see the point of incurring the costs of the Lighthouse structure in the middle when they can hold Hammerson directly.

I therefore see it as a positive that Lighthouse has sold off R651 million worth of shares in Hammerson. The proceeds will be used to pursue yield-accretive direct property opportunities. Direct opportunities are what investors are looking for, as they can’t access those opportunities themselves.

Telkom one step closer to perhaps selling Swiftnet (JSE: TKG)

There’s a renewed cautionary and a further milestone that has been reached

Back in November 2023, Telkom told the market that it was in exclusive negotiations with a B-BBEE consortium regarding the potential sale of Swiftnet. This masts and towers business has been for sale for quite some time and it would help Telkom greatly to get the deal done.

Although nothing at this stage is remotely certain, it is good news that the potential buyer has completed its confirmatory due diligence. Although the announcement doesn’t say it, this suggests that the parties will now try to firm up the commercial terms before a firm deal is announced.

Again, there’s every chance that absolutely nothing happens here, so don’t get ahead of yourself.

Texton closes its rights offer (JSE: TEX)

The underwriters didn’t get much in the end

The structure of the recent Texton rights offer made it incredibly punitive for shareholders not to follow their rights. Some investors dug out their last coins between the couch pillows to make sure they didn’t get painfully diluted, with 94% of shareholders following their rights. This left only 6% of the issued shares for the underwriters.

We need to dig deeper though, as the shares are tightly held by insiders and these are (quite rightly) shown as existing shareholders. Of the 36,378,030 shares subscribed for by existing shareholders, a whopping 34,796,946 went to three directors.

The uptake among external shareholders was nowhere near 94%, that’s for sure.

Little Bites:

  • Director dealings:
    • An associate of a director of Huge Group (JSE: HUG) has bought shares worth just over R1k. If the associate in question wasn’t a hedge fund, I would make jokes about Janu-worry budgets for buying shares!

Why is Keith Haring everywhere right now?

Dominique Olivier
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Why is Keith Haring everywhere right now?

Keith Haring’s career as a commercial artist is absolutely booming at the moment, which would be a big deal for him if he hadn’t died 34 years ago. Even if you don’t recognise his name, you’re sure to recognise his artwork, which has made it onto shirts, mugs, cellphone covers and pretty much every other printable surface in the last three years. This begs the question: why Keith, and why now?

As an artist myself, I’m never one to put down the success of another artist. But I will admit that I range between confusion and mild irritation whenever I spot a child wearing a sweatshirt emblazoned with one of Keith Haring’s ultra-recognisable designs. It’s not that I don’t think Haring deserves the recognition. As an artist who used his unique talents and popularity to bring awareness to the AIDS crisis in the 90s, he absolutely deserves all the praise and attention. I just don’t understand why this is happening more than three decades after his death. 

Source: Keith Haring Foundation

First, let’s talk about the man and his work

Keith Haring played a pivotal role in the vibrant New York art scene of the 1980s, leaving an indelible mark with his colourful creations and iconic motifs. Beyond the graphic visual allure of his works, Haring’s art served as a powerful response to the pressing social and political issues of his time.

Haring directed his creative energy towards addressing crucial events like the battle against apartheid, the AIDS epidemic, and the issue of drug abuse. As an openly gay artist, he didn’t shy away from representing the struggles faced by the LGBTQ community, championing the cause of gay rights through his art.

Keith Haring Foundation

Inspired by the raw and expressive nature of graffiti artists, Haring transformed empty poster spaces in New York’s subway stations into canvases for his chalk drawings. His motivation was to break down barriers and make art an accessible experience for everyone. These impromptu works, visible to passersby on a daily basis, allowed Haring to engage with a diverse audience, fostering a connection between art and the public that transcended traditional gallery spaces.

Make no mistake: there is an inherent product-mindedness in Haring’s work. His dedication to the notion of accessible art really paved the way for his designs ending up on t-shirts – in fact, this is an idea that Haring embraced throughout his career. His “Pop Shop” opened its doors in 1986  in the Soho neighbourhood of Manhattan, NYC. The curated selection of products at The Pop Shop went beyond conventional art offerings to include t-shirts and novelty items adorned with Haring’s unmistakable motifs. This innovative approach to merchandising not only made Haring’s art tangible but also turned everyday objects into canvases for his bold and dynamic visual language.

Keith Haring Foundation

Keith Haring dedicated himself to raising awareness about the AIDS epidemic, a cause that became deeply personal when he received his own diagnosis in 1988. In the wake of his diagnosis, Haring took a decisive step by establishing The Keith Haring Foundation just a year later. This foundation became a beacon of support, providing crucial funding and resources for AIDS research, charities, and educational initiatives. Keith Haring succumbed to AIDS-related complications on February 16, 1990, at the age of 31. Since then, his body of work has been managed by the Keith Haring Foundation. 

Haring: the new Kahlo

The Haring phenomenon isn’t the first example of a prominent (dead) artist becoming hyper-commercialised to this scale. Just a few years ago we were all still firmly in the grip of Fridamania, with images of Mexican painter Frida Kahlo slapped on everything from throw pillows to coasters, like this one from The Cushion Mall:

The height of the global Frida obsession is estimated to have been around 2017 –  63 years after her death – but the commercial remnants of that time can still be found in the corners of gift shops across the globe. From vials of nail polish and lip glosses to Kahlo-themed cafés, restaurants, and street murals that dot urban landscapes, the prevalence of her image reached new heights. Even seemingly mundane items like bars of soap and posters became canvases for celebrating Kahlo’s distinctive features: her hair braided into a regal crown adorned with colourful flowers, her unapologetic monobrow, and the piercing intensity of her defiant gaze.

Like Haring, Kahlo used her work to speak to particular issues that were close to her heart, such as feminism and her Mexican heritage. Adriana Zavala, an esteemed scholar specialising in Latin American art at Tufts University and the curator behind Frida Kahlo’s 2015 exhibition at the New York Botanical Garden, offers a thought-provoking perspective on the pervasive presence of Kahlo paraphernalia. According to Zavala, the widespread availability and consumption of Kahlo-themed merchandise has, over the course of three decades, led to a dilution in the nuanced understanding of the Mexican artist’s profound contribution to art history.

Image courtesy of WikiArt

After all, how many of the people decorating their homes with Frida fridge magnets and coffee mugs are aware of her artistic journey and the messages that she expounded through her work? In the same vein, are the parents who are dressing their toddlers in Keith Haring onesies aware of how much work he did on major social issues?

So, who’s getting paid for this?

Every time Mickey Mouse has been printed on a sweatshirt, Disney got a cut of the profits of its sale through licensing fees. Interestingly, the original image of Mickey Mouse has finally entered the public domain in 2024! Leaving that aside, how does licensing work when the original creator of an image is deceased? 

In the case of Keith Haring, licensing is handled by his foundation. Under US law, Haring’s copyright to his own work lasts 70 years post-mortem. His foundation will continue to handle all licensing (and collect all fees) for the next 36 years. For Frida Kahlo, things are a bit more complicated, as her copyright is held under Mexican law, which protects the copyright of artists who died before 1956 (like Kahlo) for only 25 years post-mortem. Kahlo also died intestate (without a will) and had no children, which meant that her intellectual property was automatically handed over to the closest living heir, which happened to be her niece, Isolda Pinedo Kahlo. 

If I had to detail the intricacies of the legal battles that ensued over Kahlo’s intellectual property after those 25 years elapsed, I’d have to write another 100 pages. The long and the short is that a corporation was started to manage Kahlo’s works, and there has been a long and arduous tussle between said corporation and her family for years. If you want to really get into it, you can read on here. 

Of course, we’re assuming that every corner store that sells a Frida Kahlo or Keith Haring t-shirt is, in fact, doing the right thing and paying licensing fees where they are due. Since the internet exists and images can be accessed for free by anyone who knows how to work a computer mouse, the far more likely truth is that many small-time manufacturers are flying under the radar and getting their prints for free. 

Keith Haring Foundation

As for my original question…

I wish I could tell you that my extensive research on this topic has led me to some interesting and insightful reason behind the current Haringmania. But alas, my question remains largely unanswered. I don’t know why the global hive mind has settled on Haring in particular as the artist of the season. Is the team at his Foundation just really good at securing licensing deals? That may be so – but then again, why so many different brands, and why now, an arbitrary 34 years after his death?

I turn to you and your theories, gentle reader. Have you noticed a surge in Haring imagery around you recently? Why do you think that may be? Let me hear your best guesses in the comments below. 

About the author:

Dominique Olivier is a fine arts graduate who recently learnt what HEPS means. Although she’s really enjoying learning about the markets, she still doesn’t regret studying art instead.

She brings her love of storytelling and trivia to Ghost Mail, with The Finance Ghost adding a sprinkling of investment knowledge to her work.

Dominique is a freelance writer at Wordy Girl Writes and can be reached on LinkedIn here.

Letter from the Editor: From Cape to Clarens

The Finance Ghost
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Letter from the Editor: From Cape to Clarens

Yes, even ghosts sometimes need a break. I thought I would share my experience on a recent trip from Cape Town to Clarens (and back again).

There were animal skulls on the table at one of the padstals we visited. It was kinda cool, but I can’t really explain why. Perhaps the Karoo does a better job than big cities of understanding that death is the other side of the coin to life?

Either that, or I’m just not used to sharing my space with the ghost of a sheep. This place is all about ghosts at the moment.

If you were a ghost looking to haunt something, then you could do worse than some of the potholes in regional roads in the Free State. Some of them are practically two bedroom, one bathroom apartments. Years of government neglect have taken their toll, making it very difficult (and arguably just silly) to try and take alternative routes through the province unless you drive an impressive bakkie. There are no such problems in the Western Cape, where the goal is to jump off the N1 as quickly as possible and get onto the regional roads.

In many ways, a roadtrip is the very best way to get to grips with the state of play in the country and the megatrends shaping everything from property prices to investment in different industries. It’s also a terrific way to fall in love with South Africa all over again.

Rangers. Rangers everywhere.

Ford must be selling these things faster than they can build them. The new Ranger is everywhere. I must admit that they look fabulous, even when the driver has decided to overtake from five cars back in the queue behind the truck.

Aah yes, the trucks. There are far too many of them. We can thank the state of national infrastructure for that as well, as the railways are a sad and sorry situation and road freight has happily picked up the slack.

A trip to Matjiesfontein (blink and you will literally miss it) is a reminder of a time in this country when the railways really mattered. This tiny outpost was built around the railway. Now, all you’ll find there is an ancient signal box and a man on the platform singing Die Trein na Matjiesfontein on repeat. Between that and the bartender at the hotel bar singing Ou Ryperd on the piano (accompanied by a dire sounding cough), it was quite the musical experience in that rather odd (but charming) place.

Those two songs have become quite the appropriate pairing, as there are about as many horses these days as there are working trains. Perhaps 2024 will bring some improvement at Transnet. We can only dream.

Not all small towns are lekker

I’m a car enthusiast of note and the proud owner of a 1969 Alfa Romeo that has done its fair share of roadtrips, even if it wasn’t the noble steed of choice for this particular trip. That honour went to my girlfriend’s VW T-Cross, a very cleverly designed piece of kit indeed. If you’re looking for a fun family car, you should have that on your shortlist.

Anyway, I’ve concluded that small towns are a lot like classic cars. You see, there’s a major difference between a classic car and an old car. One is collectible and the other is scrap metal. The reasons vary, but generally an old car needed to be something special to transcend into classic status.

Similarly, small towns range on a spectrum from filthy disasters through to an artistic paradise nestled in the mountains. There are many small towns that are unappealing or simply ignored. There are those that are loved and cherished, attracting tourists from across the country (and sometimes even overseas). The difference comes down to many things, including the history of the town. It might also come down to how pretty the inevitable church is, with Graaff-Reinet making a practically unbeatable case for itself in that regard:

A lot of it seems to rest on whether anyone has bothered to invest in the place and create a reason to go there. If you want to understand more about these small town economies and how to pick a good one for your weekend house, I enjoyed reading Moving to the Platteland by Julienne du Toit and Chris Marais. You’ll find it at pretty much any bookstore in these towns. Reading it accompanied by a cold gin and tonic in a small town is my recommended approach.

When it comes to lekker towns, Clarens is very tough to beat. Close to the Lesotho border and with good road access (provided you do your research on the correct route), the town benefits from its relative proximity to Gauteng and other major areas. The place works because it does a roaring trade on weekends, not just in school holidays. Being close to Bethlehem (a pretty large town) also makes it easier for the restaurants and shops to be well-stocked. Visiting Clarens is like going to an art district just outside a city. It’s a gorgeous place and well worth a trip, although it’s a proper drive from Cape Town and you need to plan accordingly.

We now head to the other end of the spectrum: towns with less-than-lekker stories. At the risk of referencing failing infrastructure again, you can do some reading on Noupoort (near Graaff-Reinet) and how the demise of railway usage has had a negative socio-economic impact on the town. I could see that pretty clearly while driving through it. Also, if you have a strong stomach, do some research on some of the allegations that were historically levelled against the Noupoort Christian Care Centre – a rehab centre that seems to market itself as a place for last chances. It’s quite the story.

Padstals: another hit and miss

If you’re the type of person who hates taking a chance, then the typical forecourt complex on major highways will sort you out for lunch. If there’s a Wimpy, it can even sort you out for breakfast as well. These forecourts (and the inevitable Famous Brands franchise to be found there) are entrenched in South African roadtrip culture.

The alternative, of course, is the padstal. Apart from the seemingly endless assortment of preserved fruits and interesting jams (does anyone really buy that stuff?), you’ll probably find a medium-sized bird aviary featuring an assortment of doves.

I wish I was joking.

Why, for the love of all things, do people in the Free State enjoy collecting doves? There’s an entire decision tree you have to go through to arrive at a decision to keep doves, including saying no to obvious options like budgies.

If you’re lucky, you’ll also find a clean bathroom and a small place to buy a warm meal and a coffee. The quality varies drastically, even though the price generally doesn’t. There was one absolute stand-out on this trip: Karoo Padstal just outside Richmond on the N1.

Have the lamb roosterkoek and thank me later.

On the topic of lamb

Frontiers Restaurant in Graaff-Reinet has been open for 7 months. This is according to the friendly lady who assisted our table. Frontiers is a gorgeous little spot that brings more than just a touch of class to one of my favourite roadtrip towns.

Fascinatingly, they are fully booked for dinner and have been for weeks now. We could only get a table as we went very early to make allowance for the smallest traveller on this trip, who very much enjoyed sharing her mother’s lamb ragu fettuccini with every element of her clothing. It’s wonderful to see a business like this doing well and creating much-needed jobs. In these towns, it’s quite easy to see the direct impact of investment and the resultant job creation. It’s much harder to see this in practice in big cities.

There are too many mozzies on this stoep

No amount of Peaceful Sleep is improving the situation as I try to write this article under duress from the mosquito population of Graaff-Reinet. Perhaps the delicious lamb shank I ate a short while ago has made me smell irresistible to the little you-know-whats.

There’s a sunset walk through the historic streets coming up, providing the perfect environment for me to talk about everything and nothing with the person I most want to do that with. It’s been a magical trip that has been filled with reminders of what really matters in life.

It’s time to close the laptop, avoid the mosquitos and make some more memories.

My advice to you? Get in your car and experience South Africa in the very best way possible. Every small town has a story. Pretty much every padstal has a working bathroom. Most of the roads starting with “N” even have tar on them.

But most importantly, everyone you meet along the way will dish out those smiles that South Africans are famous for.

We cannot possibly ignore the problems in this country – and small towns seem to highlight them better than anywhere else – but what a place this is. Here’s to all the opportunities and experiences that 2024 will bring!

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