Brait’s venture into UK retail affordable, but brave

OOPS. It looks as though Brait and Seardel are definitely not in any sort of talks and the coincidental release of cautionary announcements by the two firms on Friday were just that: coincidence. The Brait team is in the UK trying to finalise the details of its part in the acquisition of Uk-based Iceland Foods. Brait is one of three potential funders of a £1.55 billion (R18.86bn) deal that would keep Malcolm Walker, the 66-year-old founder of Iceland Foods, at the helm.

Iceland Foods has been up for sale for almost a year as a result of the failure of Landsbanki, an Icelandic bank that held 67 percent of Iceland Foods. The sluggish condition of the UK retail sector appears to have dampened interest in Iceland Foods, and by the end of last year the only interest shown was by two private equity firms.

For recently remodelled Brait the deal would not be its only exposure to the retail sector. One of its big investments is Pepkor. And Christo Wiese of Pepkor and Shoprite fame is the anchor shareholder in Brait. It would also not be the first time Wiese has ventured into UK retail. And after last year’s successful rights issue Brait does have the funds to join in the transaction.

Nevertheless, it would be a brave venture given the tough trading conditions in the UK and the fact that there is little sign of relief from these conditions. And at £1.55bn it does appear that Walker and his backers are paying full price. But Wiese has not become one of the wealthiest men in South Africa by shying away from challenges.

And as for Seardel? That is a completely different story – much more of it later.

US elections

Electioneering politicians are not known for their logical discourse or enlightened vision. But even by this standard, the US Republican presidential candidates seem to engage in some really weird debates.

Once upon a time, the benchmark slogan for US politicians was: “It’s the economy, stupid.” It was coined during former president Bill Clinton’s successful 1992 campaign. While the phrase may now be more appropriate than ever, the minds of Republican politicians are elsewhere.

Rick Santorum, reportedly the main challenger to former Massachusetts governor Mitt Romney in the race for Republican nomination, says that US President Barack Obama practises “a different theology” that is “not a theology based on the Bible”.

According to Bloomberg, he used the phrase in a speech to Tea Party activists in Ohio. Even John Mccain, one of the Republican Party’s own, has had to speak his mind about the antics of that faction of the Republican right wing fringe. In July last year he described Tea Party activists as “hobbits from Middle Earth”.

At the time, the Tea Party was bent on sabotaging any bipartisan agreement on addressing the problem of US debt. The failure to achieve agreement led to the US losing its triple-a rating from Standard & Poor’s and triggered a fall in stocks globally.

Mccain described Tea Party strategy as “crackpot thinking” and warned that it could help re-elect Obama.

Many countries have elections this year, so we can expect increased global warming due to the additional release of hot air.

Matt Brenzel of Cadiz Asset Management says the most important will be in the US, France, Russia and China, which make up 40 percent of global gross domestic product and are key political players. “Other elections to watch will be those of Greece, Egypt, Venezuela and South Korea.”

Parliament

DA finance spokesman Tim Harris was brimming with enthusiasm when he presented his alternative budget yesterday.

Yes, he said, the party had a diametrically opposed view to the ruling alliance about such matters as state control over the economy. Yes, the ANC wanted greater control, if not nationalisation, through what he called “state capitalism” dressed up in the language of “a developmental state”.

“We believe state capitalism is not going to work… as we don’t have the capacity to deliver even the most basic services at a national level,” he argued.

In fact, the ramping up of state involvement in the economy fundamentally undermined liberty if it blocked the private sector “from balancing the power of the state”. It also worsened cronyism and increased the prospects for corruption.

The DA said South Africa should follow the example of its Brics partner, Brazil, which recently semi-privatised its national airport at São Paulo. Money raised from privatisation or semi-privatisation of the Industrial Development Corporation, SABC, Eskom, Safcol and a few others would immediately raise R55bn to invest in job-fuelling, growth-enhancing infrastructure spending.

One could even list projects to attract necessary private sector capital. Workers should be encouraged into ownership schemes by allowing 50 percent of the value of shares awarded to them to be tax-deductible for the employer. The corporate tax rate should be slashed to 25 percent from 28 percent.

Cosatu’s Patrick Craven rejected the DA’S notions. “We are opposed to privatisation in any shape or form.” SACP spokesman Malesela Maleka said commercialisation of the state-owned enterprises had already taken place – where they were run on a commercial footing – but the party did not think this had helped the country.

The private sector also did not have the capacity to invest in required public infrastructure in areas “where it is needed”, he argued.

It seems the twain will never meet between the left and right, with both firmly believing the other is dead wrong.