TIME FOR TALKING
Business must speak up
Incredible, isn’t it … to hardly hear the distant din of things falling apart over the rousing cheers of the market as the JSE’s all share index swirls around the 54 000 point mark.
The vibrant JSE is a welcome distraction in these tremulous times, and punters would no doubt be delighted to hold positions in the large “global” index constituents like SAB-Miller, Naspers, Richemont, BAT, MTN, Steinhoff and Aspen.
One has to ponder whether the premium ratings accorded to some of the global listings are not a very dire pronouncement on the local economy. After all, it could be argued that a willingness to pay steep earnings multiples for offshore exposure means local investors are doing their damndest to hedge against the local economy, afflicted by a brittle rand, fractious labour relations and — most worryingly — a sputtering energy utility.
If the surging JSE offers investors a place where they are insulated from the economic realities of SA, then at least the unfortunate events at Evraz Highveld Steel & Vanadium could not have been better timed.
Evraz, caught in a scything steel cycle, recently threw in the towel and opted for business rescue. Of course, no one wants to jinx efforts to salvage one of the JSE’s stalwart heavy industrial listings, but the success rate in business rescues among listed counters does not throw up any encouraging statistics.
But the meltdown at Evraz coincides ominously with government reiterating plans to create 100 black industrialists before President Jacob Zuma’s term closes.
It would be wonderful to see emerging black industrialists, backed by the Industrial Development Corporation, rushing to the rescue of Evraz. But prevailing economic conditions probably demand circumspection, even if there is an abundance of political will.
In fact, the industrial landscape appears rather bleak these days.
Evraz, once controlled by commodity conglomerate Anglo American, was in the 1980s and early 1990s regarded as one of the many compelling heavy industrial businesses. In the days before the listing of the old Iscor, Usko and Highveld were the stalwart steel makers on the JSE.
Until 1995 the JSE was still populated with a good number of specialist industrial businesses, including Standard Engineering, Lenco, Dorbyl, BTR Dunlop, Darling & Hodgson, Bolton Industrial, NEI Africa, Longmile, Forward Corporation and Otis Elevator.
It’s not so much how the numbers have thinned out, but that some of the toughest contenders have capitulated in recent years. Once a leading engineering conglomerate, Dorbyl could not find traction with a much scaled down industrial offering. More recently Delta EMD, which supplies the battery industry, also opted to close what were once vigorous operations.
With this edition’s cover story on shareholder activism, perhaps it is time to contemplate a bout of business activism.
Clearly the uncertainty over the power generation capabilities of Eskom is a huge hindrance to strategic planning, the drawing up of capital expenditure regimes and potential corporate action.
Businesses can probably survive rigid labour regulation, changes to empowerment ownership criteria and a volatile rand.
Industry, however, cannot survive if its power source fizzles at a moment’s notice.
While the respected Brian Molefe’s appointment at Eskom suggests a new (economic) realism from government, there are still challenging years ahead in terms of securing reliable power supply to industry.
CEOs do grumble in their commentary on financial results about Eskom’s drag on operating performances. Surely, though, the time has come to formalise an approach to government with a view to ensuring accountability on nurturing an economic platform that is empowering for industrial participants?
Some frustrated economic participants have even argued for a tax boycott, which would entail paying taxes into a trust fund until government satisfactorily addressed the Eskom issue.
That’s never going to happen. Still, business can’t maintain a disgruntled but passive stance, and what might be required is a mustering of influential business personalities (Patrice Motsepe, Brian Joffe, Johann Rupert and so on) to advance on government with a mission to clear up economic uncertainties.