From Ajay to Zondo

Financial Mail - - INVESTOR’S NOTEBOOK - @scranston

here is no doubt that 2018 never lived up to ini­tial ex­pec­ta­tions. Just look at how the JSE moved from Ramapho­ria in the first quar­ter to neg­a­tive re­turns of 11.4% by the end of De­cem­ber.

Still, I ex­pect busi­ness con­fi­dence to im­prove once there is progress in the coun­ter­at­tack against state cap­ture, es­pe­cially if it in­cludes jail sen­tences. And it’s clear that the rat­ings agen­cies have warmed to us since the ap­point­ment of Tito Mboweni as fi­nance min­is­ter and Re­serve Bank gover­nor

Le­setja Kganyago showed the courage to hike in­ter­est rates last month.

The ques­tion of ex­pro­pri­a­tion with­out com­pen­sa­tion is still the ele­phant in the room. A prop­erty-own­ing democ­racy could be cre­ated if peo­ple got ti­tle deeds for their prop­er­ties in ur­ban ar­eas and if what used to be called “tribal trust land” was handed to those who live on it. Then we could set up a com­mis­sion along the lines of those in East­ern Europe which pro­cesses claims from peo­ple who lost their prop­er­ties to pre­vi­ous regimes, like the Com­mu­nists and the Nazis.

True, we have the Land Claims Com­mis­sion, but it is sit­ting with thou­sands

Tof claims it hasn’t even started pro­cess­ing. Per­haps we need a tri­bunal more in­de­pen­dent of gov­ern­ment, that can move faster to get the job done. Still, it is en­cour­ag­ing to see a num­ber of fund man­agers repa­tri­at­ing funds to take ad­van­tage of op­por­tu­ni­ties in SA. For one thing, prop­erty shares have never been cheaper. This has noth­ing to do with ex­pro­pri­a­tion with­out com­pen­sa­tion — though tech­ni­cally, af­ter the con­sti­tu­tional amend­ment, the gov­ern­ment will be able to seize the Rose­bank Mall or Canal Walk in Cape Town. I hear that a good lo­cal shop­ping-cen­tre share such as Hyprop is a bet­ter buy than its UK ana­logue Intu, which has much higher gear­ing and a CEO who won’t get the hint that it is time to go.

Granted, US Trea­sury bills are start­ing to show a fair yield — but at 2.7% it is still half what you get from the div­i­dend flow out of Stan­dard Bank and those Trea­sury bills also don’t of­fer the op­por­tu­nity of cap­i­tal gains.

Few peo­ple would dis­agree that Stan­dard Bank is com­pe­tently run: I have seen at first hand that its hu­man cap­i­tal is im­pres­sive. I would buy its shares be­fore the likes of the in­dif­fer­ently man­aged Bar­clays or the Royal Bank of Scot­land.

To­day, of course, SA’S re­sources shares make up a smaller part of the

JSE than ever. BHP has even dropped the “Billiton” part of its name, and as it has no sig­nif­i­cant as­sets left in SA, per­haps it will con­sider leav­ing our bourse. At one stage, I had hoped it might go the other way: had Rio Tinto de­cided to join the JSE, all the largest min­ing houses would have traded in Jo­han­nes­burg — the great­est min­ing town ever built.

Gold rush re­dux

As far as in­dus­trial min­er­als go, clear signs of a cool­ing of the Us-china tar­iff war would be good news for them. But per­versely, hold­ers of gold shares must hope for uncer­tainty or even chaos, as gold still has safe-haven sta­tus. And yet, An­gl­o­gold and Gold Fields are both mak­ing or­derly with­drawals from SA.

Ul­ti­mately, how­ever, the main mover of the JSE share­holder weighted in­dex re­mains Naspers. It looks cheap, con­sid­er­ing it trades at a dis­count to its hold­ing in Ten­cent — but this is no dif­fer­ent to, say, Reinet’s dis­count to

British Amer­i­can To­bacco, so it could per­sist in­def­i­nitely. The best way for Naspers to un­lock value for share­hold­ers would be to un­bun­dle Ten­cent and fo­cus on its less glam­orous and loss­mak­ing bas­ket of so-called man­aged op­er­a­tions.

Few peo­ple would dis­agree that Stan­dard Bank is com­pe­tently run. Its hu­man cap­i­tal is im­pres­sive

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