Sometimes our (South Africa’s) socio political and socio economic issues get in the way of an investment opportunity…
I was covering the gas options meeting in Cape Town when an afternoon panel conversation turned adversarial. In one corner was the presidential advisor on energy and in the other were potential investors looking to invest in the county’s still to be born gas to power sector.
Each of the investors had a turn to share their thoughts on how they saw this sector unfolding. And then Silas Zumi reminded panelists that they needed to to help the government create jobs. Or there was a danger that the Arab Spring could become a reality in SA.
The mood on the stage switched. But Zumi wasn’t done. He then had a go at Singapore and Dubai saying that SA was more open and transparent and wasn’t interested in telling investors which companies to use or, as is the case in Singapore (or ZImbabwe, for that matter) that the government would own a significant portion of their business.
One of the panelists made a valiant attempt suggesting that’s part of business and a foregone conclusion; that it made business sense that companies work with communities and employ some locals in the area.
Another (South African panelist from CEF) suggested that gas to power creation and generation doesn’t jobs but allows the economy to grow and that creates jobs.
Realizing that his panelists’ mood had changed, Zumi backed down, citing low sugar levels in his blood stream.
But the mood among delegates had also changed. It was the first time I heard mumbling from the audience, and not good noises either.
It got me wondering about them and us. Them being investors (local and international) and us (South Africans, some more arrogant and demanding than others) and the government imperative of leveling the playing field. And also about timing. Was Zumi right to make the point then? Is there ever a right time to raise socio political issues?
Is it government’s job to demand job creation from investors or should government merely create an investor friendly environment that will attract investment and allow economic growth potential create the jobs? It’s a subtle nuance and I wonder whether government should stay in the business of politics and out of the business of business?
Are political promises to be kept by investors or should government act solely as a regulator and allow free market forces and businesses to do what they do best – compete and grow the economy. Or is it a mix of both?
Alphabet soup government economic plans won’t work
Government economic alphabet soup plans are the reason for the poor SA economy. You name it, and the government has used one of the letters of the alphabet in an economic plan.
The problem is that I’ve yet to find a business leader who actually implements the latest government plan. They will talk about it, pay lip service to it, say what a great initiative if is… But behind closed doors wonder about their future.
In fact I spoke to a business leader who simply wants to get on with business. He has his own plan and he wants government to get out of his way so he can make money, create jobs and spread the wealth. Something he says government is incapable of doing.
He suggested, rather forcefully, that government doesn’t have a clue about business and how it works, and should butt out. Putting hurdles in front of businesses for compliance to non sensical issues will eventually force business to go elsewhere.
They will play lip service to government compliance while quietly opening businesses in other investor friendly countries and when the time is right, and the new business is profitable, simply hand the keys to the local operation to whomever wants them and leave for greener, business friendly pastures.
My sense is that many business leaders are frustrated but don’t speak out for fear of incurring the wrath of the government.
Liberia must not be forgotten
How quickly one forgets… I’ve been back from Liberia for a month now and I’m still haunted by the living conditions of almost every Liberian I met while in the capital city.
It struck me that the death toll from the EVD could have been a lot higher, considering the complete lack of primary healthcare I experienced.
I now wonder what will happen to its citizens when the international aid agencies decide they have done enough to stabilize the situation. Who will rebuild the primary healthcare network? how will it be funded? What will happen to the ETU built by donor countries?
I’m thinking about these issues while comfortably ensconced in my secure enclave in Johannesburg, which is so far removed from the reality, and I realise that I live in a dual reality. I want to make a difference and my way of doing that is to report on what I see, seek out the success stories and balance that with a healthy does on reality.
Can I do more? Probably. Will I do more? Definitely. After all Africa is my home and we should be working to make it a better place. Each in our own small way…
Liberia – too early for post ebola blues?
Liberia – post ebola blues…
And I’m not referring the country suffering from post ebola blues… I’m suffering from them, and a lack of sleep. If want to know where the continent needs to start working together, then it’s airline links.
We will spend two full days in transit ‘lounges’ because our continent doesn’t understand the importance of air trade routes and the need for speed. It’s interesting because the continent’s economists, ministers of transport and probably finance ministers are looking for ways to grow GDP, but we can’t get on a plane from Liberia to Dakar, or Ghana to Sierre Leonne without several hours being applied to get the routing right.
And let’s not talk costs or my carbon footprints either… I’m complaining because all I want to do is get home now.
I can say that the process to leave Liberia was as thorough as it was to enter at Roberts Field. complete medical questionnaire, hand wash, temperature check, medics check form, take temperature again, certify it on the passport, and then go through passport control. Thorough.
The experience was a little more techno savvy, once we got to Mohamed V international airport in Casablanca. There was a 3D scanner or thermal camera or something, with a doctor type looking at the screen and looking for hotspots among our fellow passengers. I would have been surprised because everyone checked out when we left Liberia. But precautions are important.
But it’s like we are in a different world now. I’m still looking for plastic buckets of chlorine water to wash my hands in, and those pistol-like thermometers that security staff aimed our heads, checking temperatures…
And the accents. Thick, strong and county specific. I’m going to miss the people I met and spent time with. But I think I’ll be back. This story isn’t over…
Liberia – No room for complacency
It’s the end of our second week in Monrovia, Liberia and I was getting a little complacent. All the aid agencies were telling us that they were starting to get a handle on ebola…And then we visited two areas around Monrovia.
The battle against Ebola isn’t won overnight. In fact I don’t know if it will ever be won. Especially in a country that has no health system to speak of. This fact was brought home to me on Friday. We were driving back from interviewing football legend George Weah and were driving through the backstreets.
We came across a commotion and there was the MSF fast response vehicle, some first response members and people milling on the pavements. We slowed, then stopped. The news man in me sensed as story. The cameraman, Jacques, jumped out and started shooting. I climbed out and quickly realized something was up. Our fixer got the details. A suspected ebola death, the body inside, the relatives outside and the early response team trying to extract details from relatives.
We were perhaps 50 meters from the body. I was anxious, but the neigbours didn’t seem to perturbed. The looked on passively. Almost in resignation. It was in their eyes. They had seen it all before. I was nervous. The camera man continued shooting, capturing a crying relative. I didn’t want to stay any longer, anxious. He wanted one more shot, with the MSF logo and the house in the background. The first responders were getting antsy… It was time to go.
I reminded myself that ebola is not an airborne disease, but that was the logical side of my brain. My emotional side wanted to get away. The funny thing is where were in a much riskier situation the day before. We were in the 12th street market in district 6 following George Weah, while he spoke to residents about fighting ebola. Lots of sweating people, no wind to speak of and an oppressive humidity…
And then this morning (13 December) I was following up on the story of a 60 year old lady who is a recovering ebola victim, who is looking after two young siblings in the Tubmanburg. She’s a hero, like many of the unsung heroes here, the ebola survivors who help the aid agencies to nurse and look after the victims. I’m hoping to speak to her before we leave…
Dateline: UN drive, Monrovia, Liberia
Nothing for nothing – This is Liberia
This is the end of my first week in Monrovia, Liberia and I’ve realized that I have a lot to be thankful for. No, this won’t be about the usual platitudes that people from more developed countries repeat after spending time in less developed areas of our continent. I’m grateful for the small things. My health, my family and my support system.
I spent Friday driving around the capital city, on the “ring road” (I use the term road loosely). What I saw and experienced made me think of home and my cocooned life. I have built a wall around my family. A carefully constructed wall that keeps everything out that may hurt my sensibilities.
I saw thousands of people selling all manner of items. I saw people repairing vehicles. I saw families huddled under rickety umbrellas attempting to hide from the sun, selling square poaches of frozen water. I saw cellphone scratch card sellers, or should I say I heard them. They all carry megaphones which play out (scream out) recorded messages, imploring cellphone owners to buy top up cards from them. I saw desperation, dissolution and disappointment.
And I saw young kids running around, playing and shouting, chasing each other and laughing. I saw hope, happiness, and occasionally excitement.
And the reason I’m here is to report on this virus that sneaks around, hiding in unsuspecting people, just waiting to be spat out, or vomited out… I’m here to report on the country and how it’s fighting this menace.
And I walked into a looming political battle. The government bans its citizens from going onto the beaches for the traditional Tubman holiday at the end of November. There’s also a court challenge by several political parties to postpone a senatorial election, due in 10 days. And just yesterday the government banned political rallies.
So I see a deadly epidemic, a country with no healthcare system and tense political environment. But I also see a healthy democracy where people will gather publicly to voice their issues, in a peaceful manner. That was before the banning. But I also see the country’s cabinet gathering for an emergency meeting called by the president, to consult on a statement issued by the opposition.
And we complain in South Africa when a state owned entity doesn’t provide the electricity we demand, when we demand it?
We complain when we hear about corrupt relationships.
We complain when our money is spent on palaces?
We complain that the SA president is not in parliament?
Perhaps we need to learn a lesson from Liberia…
CEOs – grow some testicles
I haven’t blogged for a while, but then three spats caught my attention – PIC, PPC and HCI. The details of each are unique, but my reaction to each was the same. It’s about time CEOs grew some testicles.
I refer here to men and women leaders. And it’s not a uniquely South African condition. There seems to be a league of gentlemen’s code of silence for CEOs. If they remain silent they can then stay in the CEO pool and be hooked by boards of companies when those boards decide they have had enough of the incumbent.
But is it really worth it, to remain in the pool, I mean? I know of a CEO who woke up every morning and physically threw up, he hated what he was doing, that much. Another CEO said he couldn’t wait for his contact to end so he could become a human being again. And the third CEO said he wouldn’t talk to me because he is bound by a confidentiality clause. And these are the people that run huge businesses, controlling the lives of countless thousands.
Are South African CEOs starting to revolt? Are these three swallows the sign of a change in the corporate season? I doubt it. And of course we don’t know the full story, and we probably never will.
The boardroom will stay in charge and manage any messages and the outcomes, subtly and not so subtly threatening CEOs and aspirant CEOs to tow the corporate line, or risk being ejected from the corporate pool.
It’s time CEOs grew some testicles and stood up and take control of their lives, because you can only lead a double life for so long. Being one person at work and a different person at home. Eventually you will break…
Shareholders are people too
Watching as the ABIL share price got pulverized yesterday (7 August), I stood mesmerized. My first thought was that this is a great business story. Then I thought about the pictures I would need to ‘paint’ the narrative.
Being a business journalist first I started making calls. Looking for analysts who could give me brief insights.
The story came together beautifully… I filed it and then deep background sources started talking to me.
Negligence, criminal behaviour, flouting corporate governance, fraud. These were some of the words bandied about. And then perhaps the most telling comment. It was a throwaway line “…shit happens…” and this from a person with knowledge of the business.
So I thought I’d take a look at who the major shareholders were in this very large “Ponzi” scheme. I use the term advisedly.
In this case I understand a Ponzi scheme to mean a scheme where money is obtained from a third party (rights offer) and then used to settle debt (bad debts) that shouldn’t have been incurred in the first place (provisioning). The party (ABIL) obtaining the third party funding then doesn’t inform anyone about what that money is being used for. As business starts to unravel, the Ponzi operator decides to leave. Whether he was pushed (unlikely) or he jumped, remains to be seen.
I digress. At no point during this entire travesty have I heard any rumblings from the major shareholders, who read like a who’s who of continental asset managers. Chief among them is the manager of the government employee pension fund.
I’ve also not heard a squeak from anyone within any of the businesses (whistleblowers) about what was going on. And that’s telling, on both fronts.
Doesn’t anyone have a conscience? Doesn’t anyone with knowledge of the business at senior executive level give a shit? Or is it all about covering the audit trail and collective corporate backsides and hoping that people won’t notice and when they do, it will be too late and shareholders will be left carrying the proverbial can?
I vent because I’ve watched insider traders and corporate governance flouters walk away scott free from fraudulent behaviour, simply because people don’t appear to give a shit. And it wrong. It’s not up to the authorities, it’s not up to the judiciary, it’s not even up to the FSB or its oversight committee. Its up to the shareholders in the country’s pension funds to do something, because ultimately its our money they are stealing… So stop being a shareholder and start being a person of conscience…
Platinum producers respond to Manchester U and Wits U research
Being in television means that we have to distill the content we receive from sources and interviews into digestible chunks. Sometimes we can’t get the message across because its complicated. Yesterday I asked the platinum producers for a response to research released last week. I’ve published their response in its entity…
“…
The producers respond as follows to queries on a report, titled Demanding the Impossible? Platinum Mining Profits and Wage Demands in Context, which will be launched by Wits University’s Society, Work and Development Institute (SWOP) on Friday, 6 June 2014.
A copy of the report can have found here: http://www.wits.ac.za/files/l37a0_116609001402048726.docx
Regrettably, the producers did not have any input into the report nor sight of the report in advance. We welcome the opportunity to engage the report writers.
We offer the following observations:
The fortunes of resource businesses are typically cyclical and typically influenced by external factors – metal prices and exchange rates. Added to that, the platinum sector faces great volatility as it is influenced by fundamental supply and demand for the metal, and market sentiment. Investors in the business know and understand this, and most certainly accept this high/low reward cycle as part of the risk of investing in resource companies.
So, while there have been times of where profitability is high and shareholder/government returns have been very attractive, equally, there have been and will be times where profitability is constrained when shareholder/government returns have been and will be extremely low.
Typically, during ‘good times’ the companies will be more able to invest in growth and expansion, whereas capital spending is one of the first areas that is cut when profits are constrained.
However, in remunerating our employees (who currently account for between 50 and 55% of costs) and paying suppliers, we need to plan for relatively stable and consistent contributions through the cycle. Wages and other expenses simply cannot be dramatically curtailed at will and, in fact have consistently increased at rates greater than CPI. This is why it has been critical to consider the sustainability of wages and salaries over a long period of time, no matter where we are in the cycle.
In terms of comparisons, we also suggest that the following is considered:
http://www.platinumwagenegotiations.co.za/assets/downloads/faq/settlement-range-comparison.pdf.
We would suggest that the relative returns to all stakeholders must be considered over an extended period of time considering the entire investment cycle. Focussing only on a short boom or bust period by any of the stakeholders serves only to support individual agendas.
We suggest also that affordability has to be forward-looking, factoring in projected future earnings and considering future costs. If the increased cost base is not offset by projected earnings, then the business will be in financial stress and will have to take drastic action to restore profitability to be sustainable.
Please take a look at the following two graphs which illustrate the affordability of both the employers’ latest published offer and AMCU’s latest demand.
Click to access producers-offers.pdf
Click to access amcu-demand.pdf
None of the companies have said that they do not want to pay employees more; none of the companies have said that the housing and living conditions or socio-economic opportunity of employees is what it could or should be. Certainly the companies admit that, in respect of both employee quality of life (which the companies believe has gradually improved over time) and labour productivity (which has consistently declined over the period from 2000 – 2013), more needs to be done. Further, the companies recognise the financial needs, strains and aspirations of employees.
But the AMCU demand, even tempered over four years – which represents an annual compounded increase of 23% – is simply not affordable and it would be irresponsible of companies to agree to increases that would cause irreparable damage to our businesses and result in significant restructuring and consequent job losses.
Rather than how can we better split the profits we are not making, let’s turn the conversation around, and focus on how we can work together to generate the financial means to be able to better reward all our stakeholders, not only now, but in the future.
Put another way, the report concludes that the “public debate needs to take greater cognisance of all the facts, with a long-term view in mind, and deal with the broader issue of how best to manage our mineral resources to ensure all enjoy in the benefits they bring.”
We have no argument with this.
…”
The Platinum strike – an update
The Context:
The platinum sector strike has seen a flow of information and responses that has been marked by a complete lack of communication or an abundance of content. It’s either a flood or a drought.
The producers have formed a united content front via a website set up especially to deal with media requests and to manage their messages. Their press conferences have been carefully arranged to present a unified message.
Amcu responses have come from press conferences in reaction to the negotiations and report backs from their members. There have also been interviews conducted at Wonderkop stadium after Amcu leadership has addressed members.
Today members of the media got some insight into the negotiations when the AIDC called a press conference to provide data which they said showed that the three platinum producers had been underselling PGMs over a period of 10 years, between 2004 and 2013.
As an aside, this is the first time the media got an on the record understanding of some of the issues that are being discussed.
Back to numbers. I got a response to the allegations from Implats, before I sent the spreadsheets to them. Here is the full emailed response…
“…
Dear Angelo
Implats have responded to these unfounded and unproven allegations in the strongest possible terms and we view the inflammatory and unsubstantiated accusation in a very serious light (you would also have seen our formal statement last week).
As you would know, all metal sales and taxation activities are subject to careful assessment by the company’s external auditors as well as the country’s tax authorities and our audited financial statements and accounts are open for interrogation and scrutiny. These statements include the disclosure pertaining to the export of all final product, taxes due and foreign currency controls in repatriating money. Implats is a South African registered and listed company, and is largely owned by South Africans, which brings into question the rational for such allegations.
We don’t want to get bogged down in a public spat, but would like to point out how absurd these inferences are, hidden behind comments like: “in our opinion” and “we are still connecting the dots”, which is their right to do, but also protects them from legal recourse for allegations they know to be false. Regardless, we have publicly reserved our rights on this matter.
Please note that Implats has consistently sold metal at a premium to the market over many years. Our contracts are based on the average of the prior month’s actual trading price as determined on the London Metals Exchange (LME) and spot sales are made at a premium to the market – to complicate matters further, we also buy and toll-refine secondary material. The market trades daily and, in the absence of knowing when and how much metal the company has bought/sold, it is impossible to calculate relative market performance, specifically as this information is not publicly available. Such information is shared with our auditors and government regulators (Treasury), and we also regularly disclose our relative market performance. So, the inferences drawn from the extremely simplistic sales analysis published in the statement that AMCU’s advisors have issued is clearly wrong and misleading.
Our metal sales and metal inventories are independently audited and measured at the end of each reporting period. This information is tracked and analysed by more than 20 multi-national institutions and more than 40 independent financial analyst. Any unsold and/or undersold metal will be picked-up and reported by these institutions/analyst in their financial models and detailed analysis. You are welcome to contact them for expert opinion and/or ask the AIDC to bring to their attention any credible evidence they believe these entities might be missing.
In our opinion, these allegations smack of desperation as it becomes clear that the financial advice to AMCU has been completely off the mark, especially with regard to the affordability of the wage demands and the expectation created that the platinum price will move substantially as a result of protracted strike action in support of their wage demand.
The real tragedy is that these untruths and bad advice extended to AMCU has prolonged the strike to the point where it has now become a human tragedy. We have continually called for responsible leadership from the beginning of the strike and said that we are willing to implement a fair wage increase while we continue the debate on affordability and legacy issues to find ways to assist our employees further.
Please do not hesitate to contact us should you require further information.
Best regards,
…”
angelo2711 