Rejected Curro needs a face-saving tactic

WHAT would be the best thing private education group Curro Holdings could do to reinforce the notion that it’s business as usual following its slightly mortifying retreat from acquisition target Advtech?

Well, it could forecast strong full-year profits when its interim numbers are released next week.

Or it could accelerate its stated seven-schools-a-year building target — remembering the company has land-banked plenty of sites for development.

But probably the best ploy would be to clinch another deal. It doesn’t have to be the biggest deal in the world, but preferably a transaction that gets investors mulling new growth opportunities.

In this regard it might be worth taking note of market whispers that Curro is looking to bring an acquisition in Namibia to book. The target is a well-established school in Windhoek, although one suspects there might still be some regulatory hurdles for Curro to clear.

The deal, if consummated, probably won’t move the needle at Curro — not when its self-developed schools are moving swiftly up the Jcurve. But a shift into Namibia will signal a willingness to move into selected African markets. The wider African private education market is frighteningly fragmented, but Curro has a brand with a simple operational formula that might travel rather well.

IT HAS become common to link the weak rand only to adverse local economic conditions, ranging from power shortages to sluggish economic growth. The rand has lost more than 10% against the dollar so far this year, but other emerging market currencies have done worse.

In the first seven months of the year, the Brazilian real has dropped 22% and the Turkish lira 15.4%.

This indicates a structural devaluation affecting all emerging markets rather than anything specific to the rand.

Weak emerging-market currencies are caused by the stronger dollar and lower commodity prices. Among emerging markets, those with twin current account and fiscal deficits, such as SA, are most vulnerable. SA has seen its share of devaluation, but first prize in these stakes must go to Brazil, which has seen its currency tumble despite hiking interest rates five times so far this year.

The situation differs from previous periods of rand weakness, such as in 1998 and 2001, when the currency bounced back on more favourable global and local growth conditions. Today growth in emerging markets is largely linked to China, which needed commodities to fuel its ship. But it is shifting to more of a consumer and service-orientated economy, so it needs fewer commodities, which explains the resources rout.