Unlikely party offers to rescue Eskom

BIZARRE is the only way to describe the proposal that state-owned diamond mining company Alexkor partner with emerging black coal miners to supply Eskom with up to 10-million tons of coal annually.

Eskom needs the coal, and the Department of Public Enterprises — which runs Eskom, Transnet and Alexkor — would like much of it to come from black-owned junior miners, despite obvious practical problems such as raising capital for new mines. The proposal is that a “coordinator” could combine several juniors to deal with issues like raising finance, putting together resource bases large enough to be exploited efficiently, and providing management and technical expertise.

But Alexkor does not look the organisation to take that role. For starters, its operational base in Namaqualand is about 1,600km from the Mpumalanga coal fields.

Alexkor’s technical expertise lies in siphoning diamond-bearing gravels from the seabed in shallow coastal waters, operating from small boats. There’s no overlap with coal mining. As for its management expertise, that has been undermined constantly by the state’s refusal to follow through on various privatisation options looked at since 1999. Alexkor has gone sideways or downwards as the government has opted to retain control, apparently for ideological reasons.

Also, co-ordinating junior coal mining companies? Get real. That will be like herding cats.

Bottom line? Eskom CEO Brian Dames is not going to sleep any easier knowing that the state diamond mining company intends coming to his rescue.

THE US Federal Reserve has more influence on SA’s listed property stocks than the underlying property companies, assets and managements. This is unwarranted, given the good health and stability of SA’s listed property, but it highlights the short-term nature of investments in the sector. This is ironic given that real estate is a long-term investment that should underpin a balanced portfolio.

The global “search for yield” in recent years has produced a close correlation between bonds and listed property — both yield-bearing investments. This correlation benefited listed property until May, thanks to declining bond and property yields which fuelled share prices. But bonds and listed property have been volatile since Ben Bernanke said in May the Fed would reduce its monthly bond buying programme.

Although listed property companies have performed in line or better than expected, managements have had to watch the erosion of their share prices and market caps. The Fed’s decision last week to delay its “tapering” gave listed property stocks a temporary boost, although these gains are likely to be shed when the Fed finally takes the plunge and sends global bond yields higher.