Chickens coming home to roost.

We are seeing some consolidation happening in big listed companies. Shoprite is disinvesting from Nigeria; MTN is pulling out of the Middle East to focus on Africa; and SAB abandons R5 billion of capital investment in SA. It is clear that doing business in Africa and the Middle East is just too difficult. Although it is a market where millions of customers can be targeted, the political situation is just not conducive to business. Corruption, sanctions and volatile currencies make it impossible to generate a steady profit, resulting in the whole company being dragged down.

We have also seen a continuation of the “brain drain” happening in South Africa with another high profile CEO, Rob Shuter of MTN, trading in SA for the UK. This comes hot on the heels of the resignation of Andrew Lapping, CIO of Allan Gray, who will be leaving at the end of the year.

On the bright side, Eskom and the Special Investigating Unit is initiating a R3,8 billion lawsuit against the Guptas, Brian Molefe, Anoj Singh, Matshela Koko and some others. One can only hope that some of the state capture money will be recouped and that those found guilty will not only be financially liable, but will also go to jail.

Unfortunately we saw the rand weakening again from around R16,50 to R17,55 to the US$, making the R70 billion loan from the IMF now a R74 billion loan. The gold price has breached the $2000 level for the first time ever, making goldmining companies very happy. This is good for the South African Resources sector and the combination of international exposure and SA Resources companies provide investment portfolios with a good buffer against the currently weak worldwide economies.


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