Digital Edition 2020 | Volume 03 - AWS
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Digital Edition 2020 | Volume 03
Weekly Squawk - by Stewart Dando
WEEKLY SQUAWK
A SUSPICIOUS SAVIOUR, ZUMA’S TIME RUNS OUT, AND
THE CORONAVIRUS TRIGGERS A STOCK MARKET ROUT
A suspicious saviour...
I n a surprise move, the Congress
of South African Trade Unions
It’s an interesting proposal.
Compelling, complex and
Stewart Dando (COSATU) says government, unions seductive. But I fear, as is almost
Investment Specialist | MIFM and business have “in essence” always the case, that the devil lurks
Squawk Editor in chief accepted a proposal to use funds in the details.
from the Public Investment
Corporation (PIC) and other state Exactly how the intervention will
institutions to cut Eskom’s huge work is still unclear. But here are
debt burden by around 60%. The some points worth pondering:
PIC is South Africa’s state-owned
asset manager and invests on behalf • COSATU will do everything in
of the large Government Employee its power to preserve jobs at
Pension Fund (GEPF) and four Eskom. While in essence this is a
smaller state-run funds, including good thing, it cannot come at the
the Unemployment Insurance Fund. expense of the restructuring that
It manages over R2 trn in funds Eskom so desperately needs. I fear
in total. Eskom has a debt burden that this investment may provide
of R450 bn and does not make COSATU with an uncomfortable
enough from selling electricity at amount of leverage over Eskom’s
current prices and volumes to even future.
pay off the interest on the debt, let
• COSATU has also said that it
alone settle the debt itself. wants the R104bn of Eskom’s debt
held by the state pension fund
“It was a Cosatu proposal and manager to be converted into
government has accepted. This will equity owned by workers. Again,
assist the economy and position not necessarily a bad thing, but
it to create jobs. This will be to I’m concerned about how this
the ultimate benefit of workers shift in the balance of power will
because without electricity there hamper restructure and reform
is no jobs,” spokesperson Sizwe initiatives.
Pamla told Fin24 on Friday morning. • Most of public sector pension
Weekly Squawk - by Stewart Dando
INTERESTING STUFF
savings are in defined benefit
funds. This is important, as
it means that pensions are
guaranteed whether or not the
fund has money. So, should the
fund not be able to honour its
commitments, who would then
carry the burden? Well, it would
be the state, or more accurately,
If you thought he was bad before: Following five months of
animated hearings, hampered investigations and shocking revelations
taxpayers. about President Trump’s dealings with Ukraine, a divided United States
• The question of prescribed assets Senate acquitted him on Wednesday of charges that he abused his
should also be raised here. Should power and obstructed Congress to aid his own re-election, bringing
this deal happen, COSATU would an acrimonious impeachment trial to its expected end.
probably begin to disingenuously
complain that public sector In a pair of votes whose outcome was never in doubt, the Senate fell
workers are having to bail out well short of the two-thirds margin that would have been needed to
the state. Why isn’t the private remove the 45th president. The verdicts came down — after three
sector coming to the party? I’m weeks of debate — almost entirely along party lines, with every
concerned about how slippery a Democrat voting “guilty” on both charges and Republicans uniformly
slope this may become. voting “not guilty” on the obstruction of Congress charge.
Proposals to reorganise the R450 Trump has acted with impunity since the day he took office. This
bn owed by Eskom are days away victory, and the fact that it’s an election year, will galvanise him to a
from completion, according to degree that will be frightening.
an official who’s overseen their
formulation. A report that sets
out the options for dealing with
the debt will be submitted to More Public Protector ignominy: When Public Protector Busisiwe
Public Enterprises Minister Pravin Mkhwebane released her report into the so-called SARS ‘rogue unit’,
Gordhan, who will decide if her findings were quickly dismissed and denigrated. She was found
and when to release it, Freeman not to have interviewed key witnesses, ignored pertinent evidence
Nomvalo, whose tenure as the when it didn’t support her assertions, and even lied about not being
utility’s outgoing chief restructuring able to interview department head Johan van Loggerenberg, despite
officer officially ended last month, his having contacted her attorneys directly on many occasions.
said on the sidelines of an event
in Johannesburg. He declined to And now, inevitably, the charges have been dropped. In a statement
elaborate on the contents. issued on Friday by the NPA, National Director of Public Prosecutions
advocate Shamila Batohi stated that she had decided to withdraw
Don’t get me wrong, I’m all for charges against Ivan Pillay, Andries Janse van Rensburg and Johan van
rescuing Eskom. Having a reliable Loggerenberg.
power supply is critical to a
functioning and growing economy. “After a careful assessment of the evidence and other relevant
But the country cannot be held to material, the unanimous conclusion of the panel in respect of all
ransom. This proposal conflates far counts, is that there are no reasonable prospects of a successful
too many conflicting interests. I prosecution” – NPA.
don’t like it.
How much more punishment can this woman take?
His judgement cometh, and that right soon: The Pietermaritzburg
High Court has issued a warrant of arrest for former president Jacob
Zuma for his failure to appear before court in relation to the arms
deal case. The warrant has been stayed until May 6, the date on
which the case is set to resume.
It was at the request of the National Prosecuting Authority (NPA)
who are now taking a tough stance on Zuma’s continued failure to
appear before court in the arms deal case that the court granted the
warrant of arrest. The NPA’s lead prosecutor, Advocate Billy Downer,
Weekly Squawk - by Stewart Dando
argued that it was a criminal
offence that the accused, Zuma,
was not availing himself to appear in
court. Then there was the outright
absurdity of a ‘sick note’ produced
by Zuma’s defence, stating that
he was suffering from a ‘medical
condition’. The timing coincidence
angered the judge, and the warrant
followed soon afterward. Risk happens now,
The issuing of the warrant is a
veritable hammer blow. I hope that
return happens later
the NPA will glean much confidence - Stewart Dando
from this as it readies itself for a
year of prosecutions.
Weekly Squawk - by Stewart Dando
Weekly Squawk - by Stewart Dando
INDICATORS
At the close, or at 06:00 SAST today:
JSE DOLLAR/RAND BRENT CRUDE
57,276.49 POINTS $1/R15,0141 $53.76/BL
CPI/INFLATION
GOLD R186 YIELD REPO 3.6%
$1,570.76/OZ 7.98% 6.25%
Weekly Squawk - by Stewart Dando
Weekly Squawk - by Stewart Dando
ARTICLE OF THE WEEK “R isk happens now, return happens later” – Stewart Dando. So often, investors will justify investment decisions based on an over-emphasised view of the immediate past, with little to no consideration of long-term trends and averages. Don’t fall into this tempting trap. https://www.moneyweb.co.za/investing/investing-is-about- looking-forwards-not-backwards/ JARGON OF THE WEEK What is a ‘Swap’? A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything. Usually, the principal does not change hands. Each cash flow comprises one leg of the swap. One cash flow is generally fixed, while the other is variable and based on a benchmark interest rate, floating currency exchange rate or index price. The most common kind of swap is an interest rate swap. Swaps do not trade on exchanges, and retail investors do not generally engage in swaps. Rather, swaps are over-the-counter contracts primarily between businesses or financial institutions that are customized to the needs of both parties. Source: Investopedia Weekly Squawk - by Stewart Dando
QUOTE
“Government is not in agreement with the BRPs
about the decision to cancel certain flights. We as
government are saying we need to sit down with
the BRPs and discuss the matter”
- President Cyril Ramaphosa, irked about the SAA business
OF THE WEEK rescue practitioners’ decision to cancel certain SAA flight routes.
IN CONCLUSION When a Black Swan flies in...
A black swan is an unpredictable
event that is beyond what is
returns have been wiped out as
the death toll climbs higher and
“So how can we make a reasonable
assessment of the potential impact
normally expected of a situation higher. Public health outbreaks of the Coronavirus? As long-term,
and has potentially severe and epidemics like this quickly valuation-driven, fundamentally
consequences. Black swan events scare investors and, eventually, based investors, our concern is any
are characterized by their extreme affect economies and businesses. potential impact to businesses’
rarity, their severe impact, and theThe Coronavirus outbreak has cash flows. For example, will the
practice of explaining widespread shut down airports, halted trade, collective impact of the outbreak
failure to predict them as simple and led to the rapid construction (fewer flights, less trade, loss of
folly in hindsight. of new hospitals in China. Across productivity, etc.) affect a few
the globe, airports are replete businesses, a few industries, or
The year 2020’s Black Swan event with people wearing ominous entire markets? That’s the question
has come early. And it’s called the looking gas masks and eyeing each we’re asking. Our answer is that, at
novel Coronavirus. other suspiciously when someone this stage, we have to assume the
coughs or sneezes. The effects outbreak will take a similar path
At the time of writing, 910 deaths of the outbreak may push China’s to other recent epidemics, and
have been recorded, with 2 economy into a period of slower thus we feel there’s no reason for
happening outside of mainland growth, with stocks trading lower investors to be alarmed.”
China. The number of confirmed as investors seek protection.
cases in mainland China stands I would urge my readers to not let
in excess of 35,000. Outside So, how should you react? This fear and panic guide their long-term
China, almost 300 cases have is a difficult question to answer, investment decisions. Remember,
been confirmed in 25 countries given the number of unknowns, investing is a test match, not a T20.
(according to the World Health the various moving parts and the In the long run, courage, balance and
Organization (WHO)), with two complexity of the virus itself. But consistency are always rewarded.
fatalities - one in Hong Kong and when assessing these types of While it would obviously be callous
another in the Philippines. outbreaks, history can often prove to the label the virus ‘noise’ with so
a useful guide, as the team at many people losing their lives, from
Equity and commodity markets Morningstar suggests: an investment point of view, that’s
around the world have reacted hopefully all it is.
violently. Massive chunks of 2019’s
Weekly Squawk - by Stewart DandoThe Squawk offers its sincere
condolences to all of the families
and loved ones of the victims.
Until next week, make good decisions, and happy investing.
© 2018 - 2019 Zapiro (All Rights Reserved) Originally published in one of these publications: Daily Maverick, Sunday Times, The Times, Mail and Guardian,
IOL, or Sowetan in 2019. Printed/Used with permission. More Zapiro cartoons at www.zapiro.com The Squawk thanks the following sources of
inspiration: Daily Maverick, The Economist, Bloomberg, News24, Moneyweb, Financial Times, Investopedia and Anchor Capital.
Designed by:
“The opinions and views expressed in this newsletter are those of the author and
do not necessarily represent those of the attooh! Group or its affiliates. Content
stated as fact was fact at the time of writing. The information in this newsletter
is not intended to constitute financial advice as contemplated in the Financial
Advisory and Intermediary Services Act”
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