Depressing malady lingers on at Eskom
For the mining industry the sense of déjà vu is depressing as mines are shut once again, thanks to Eskom. The state power monopoly is in all sorts of trouble, ranging from its Medupi power plant (built for more than R146bn) not performing as it should, ailing old plants, wet coal and flooded operations.
Whatever the excuses, Eskom has plunged SA into a crisis. The utility, drowning in R450bn of debt on which it can barely pay the interest, cut 6,000MW of power on Monday, telling big industrial users to reduce consumption.
For mining, it’s depressingly familiar, recalling early 2008, when heavy industry bore the brunt of Eskom’s failures and were warned it could not guarantee power.
Since then, the gold industry has gone into terminal decline, a shadow of itself as marginal shafts were shut, jobs cut and production sent into free fall. Mines were to cut consumption 10% and had to cope with a sixfold rise in prices in little more than a decade.
And here the industry is again. Mines hauled tens of thousands of employees to the surface rather than risk them being trapped underground if electricity supply fails.
With 6,000MW taken out of already constrained supply, underground mines scrapped night shifts and many kept workers on the surface on Tuesday because of uncertainty.
The loss in revenue and business confidence, combined with the disruption to people’s lives from the incompetence of Eskom, is beyond imagination. That bedrock industries are yet again dealing with problems that surfaced a decade ago and should have been addressed in the interim, is a disgrace.
If these latest blackouts serve as a wake-up call for a somnambulant government, then good. But history shows nothing much changes, not in the governing ANC, which refuses to learn from history and its own repeated failings.
OFFSHORE PROPERTY
Offshore-invested JSElisted property companies will have to fight it out for SA capital in 2020, given how many counters investors can choose from and a shortage of money to go around.
South Africans placed billions of rand overseas in the past five years in search of better returns than they could get from a battling local economy. They invested across a diverse array of markets including Germany, Poland, the UK, the US and Australia. By gross asset value, more than 45% of the R573bn listed property sector is now offshore.
But there isn’t much money to chase more offshore listings in 2020 because local holdings have let investors down so much. Average dividend growth has been about 2% for SA stocks, less than half inflation of 4.5%.
Some fund managers even stopped investing in SA altogether where their mandates allowed it. Some analysts stopped providing coverage on domestic property stocks.
With clearly so little interest in SA property, Europe-focused counters should be pulling out all stops to attract limited capital. There is a lot to choose from, including the likes of Sirius Real Estate, which invests only in German business parks and Stenprop, which buys multi-let British office parks, as well as mall owners Intu Properties and Hammerson, to name a few.
With so much choice investors must be selective. Stock picking will be essential.