NOT ‘IN THE SAND’, THE JSE LOSING ITS SHINE, AND MANDATORY ANNUITISATION OF PROVIDENT FUNDS, IT’S ABOUT TIME.

NOT ‘IN THE SAND’, THE JSE LOSING ITS SHINE, AND MANDATORY ANNUITISATION OF PROVIDENT FUNDS, IT’S ABOUT TIME.

“The opinions and views expressed in this newsletter are those of the author and do not necessarily represent those of the attooh! Group or its aliates. Content stated as fact was fact at the time of writing. The information in this newsletter is not intended to constitute fnancial advice as contemplated in the Financial Advisory and Intermediary Services Act

HOT TOPIC: The battle begins…

Corruption, fraud, alternatively theft and more seriously, money laundering are among the 21 charges that the National Prosecuting Authority (NPA) are pursuing against ANC secretary-general Ace Magashule. The various charges relate to his alleged involvement in the R255 million asbestos eradication project in the Free State.

Having last month been delivered a dose of fake news concerning the arrest, citizens were sceptical at first. But that quickly melted away as every media outlet in the country began to splash the news across their digital and print platforms. It was the headline that most South Africans had been waiting for and, finally, that most rare and beautiful of things: an arrest warrant for a (very) high-ranking ANC official. But champaign didn’t cascade from the heavens, nor did any velvet ropes part, finally ushering in that ‘New Dawn’ we’ve been hearing so much about. For this, my friends, is just the beginning.

On Friday, outside the Bloemfontein, Ace Magashule addressed a crowd of people he had earlier in the week asked not to come. “I will never leave the ANC. You won’t remove me, you’ll find me there. You can’t follow a fool. Because if a fool says ‘Ace Magashule’ is corrupt. I will show you corruption, at the right time”. When not playing either the victim or race card, another popular strategy is that of threatening mutual destruction, the premise being: We’re all corrupt, and we all have evidence on each other. If you spill the beans on me… You get the picture.

Former president Jacob Zuma has been employing these tactics for years. And, he continues to do so, but with dwindling success. Ace has read the playbook, and likes what he sees, but there are some flaws. Jacob Zuma had the backing of a very powerful ANC in KZN. The ANC in Bloemfontein court does not carry nearly as much weight. Jacob Zuma was (this author admits through gritted teeth) a likeable and charismatic character. Ace is neither of those things. Also, and perhaps most importantly, Jacob Zuma’s dastardly tactics at avoiding prosecution and any form of accountability were ingenious and carefully crafted. As a citizenry, we were encountering them for the first time. This time around, not so much. We’re battle-scarred and fatigued now.

 

We’ve seen that movie. We know how it ends.

Being a Cyril fan, it was particularly painful to watch him in parliament last week, essentially backtracking on the ANC NEC’s resolution that all cadres officially charged with corruption should step down or step aside until the case is heard and decided upon in court. He said, “The issues of the leaders of the ANC is a matter that’s handled by the ANC. The ANC, through its own processes, is dealing with these matters. Like I said before… let us wait for all these processes to unfold. In time these matters will be addressed, and everyone will get to know how the ANC is addressing these matters.”

No Cyril, no! How can you backtrack as quickly and shamelessly as a parent who backtracks on a promise of an ice-cream to a toddler throwing a tantrum? Very, very disappointing. But sadly, unsurprising.

It is fair to say that now, however, the battle lines have officially been drawn, and not ‘in the sand’ this time. ANC cadres must now choose sides. Their futures, should they decide foolishly, are in danger. Will they help part the velvet ropes that will finally herald a genuine ‘New Dawn’, or will they close ranks around corrupt leaders, fearing that their seemingly limitless access to the feeding trough may be in jeopardy?

Let the fun and games begin. Happy Monday everyone.

INTERESTING STUFF

A worrying trend: JSE-listed Anchor Group is the latest company to announce plans to delist from the Johannesburg Stock Exchange (JSE). The investment firm, which was founded in 2012, and listed in September 2014, and now has R64.9 billion in assets under management, is making a R4.25 per share offer to shareholders. If accepted, it will amount to a R900 million offer and see it delist in 2021.

“This is an exciting next step in the evolution of our group. We have built critical mass, with over 15 000 clients and over R65 billion of assets under management and administration, and we believe we will better service our clients in the long term as an unlisted entity,” says Anchor Group CEO and founder Peter Armitage.

The number of companies leaving the exchange has driven concerns that the JSE is losing its stature as a preferred place for companies to source capital. Armitage echoes this view. He says the SA-listed equity market has been very difficult for the last few years. Since the cost of funding is now the cheapest in decades, it made sense for the company to propose buying out shareholders – who wish to sell – at a premium to the listed price. The move is emblematic of a worrying trend on Africa’s biggest stock exchange.

An end to monetary policy easing: According to a Reuters poll on Friday last week, the South African Reserve Bank (SARB) will keep the already-historically low repo rate on hold for now, and probably for at least the next 12 months, as inflation is expected to tick-up in the coming months.

In the poll conducted in the past week, 17 of 22 economists expect Reserve Bank Governor Lesetja Kganyago to hold rates steady at 3.5%, after cutting them a cumulative 300 basis points earlier this year as the coronavirus pandemic swept the world. The remaining five analysts forecast a 25-basis-point cut. Investec economist Annabel Bishop expects no change in the repo rate next week.

However, she said that next year rising consumer price inflation will put expectations of no change in interest rates in the first half of 2020 at risk. “Base effects will lift the year-on-year inflation next year from the start of the second quarter in 2021, to above 4.0%,” she said, ushering a negative interest rate differential in the second quarter of 2020 without an adjustment.

Note to readers: Even though some ‘big ticket’ items (car, house) may now be affordable at these ultra-low rates, be careful not to over-extend yourselves. While it may be tempting, the eventual raising of rates could put enormous pressure on your budget in the not-too-distant future.

It’s about time: The next few months are going to be very busy for retirement funds and their administrators. This is because the new tax rules regarding the annuitisation of provident funds will be coming into effect on 1 March 2021, says law firm Bowmans. These rules were first mooted in 2013 and formed part of the process to harmonise the tax treatment of the different kinds of retirement funds, the firm said. In the explanatory memorandum that accompanied the Taxation Laws Amendment Bill of 2013, National Treasury stated that:

“A strong link exists between insufficient retirement income for retired members of provident funds and the lump sum payouts made by provident funds at retirement. In short, the absence of mandatory annuitisation in provident funds means that many retirees spend their retirement assets too quickly and face the risk of outliving their retirement savings. In view of these concerns, it is government’s policy to encourage a secure post-retirement income in the form of mandatory annuitisation.”

The Squawk is very much in favour in this. And why? Because, sadly, most people would trade food tomorrow for a flatscreen TV today.

INDICATORS

At the close, or at 06:00 SAST today:

JSE: 57,182.60 points | Gold: $1,895.27/oz | Dollar/Rand: $1/R15,4698 | R186 yield: 6.99% | Brent crude: $42.53/bl | Repo: 3.50% | CPI/Inflation: 3%

Quote of the week:

“There will be a smooth transition to a second Trump administration” – US Secretary of State, Mike Pompeo. This bold statement was well received by many of the other inhabitants of Narnia (apologies Trump supporters, I couldn’t resist).

Article of the week:

Momentum’s head of fixed income, Ian Scott, is sure that environmental, social, and corporate governance (ESG) is a “game changer for fixed income”. However, there is still a lot to learn about how to incorporate ESG considerations pragmatically into a fixed income portfolio.

Article of the week:

What is ’Insider trading’? Insider trading involves trading in a public company’s stock by someone who has non-public, material information about that stock for any reason. Insider trading can be either illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still non-public, and this sort of insider trading comes with harsh. Source: Investopedia

In Conclusion: A peaceful transfer of power…

“We would never accept that out of our own kids behaving that way if they lost, right? I mean, if my daughters — in any kind of competition — pouted and — and then accused the other side of cheating when they lost, when there was no evidence of it, we’d scold ’em” – Former US president Barrack Obama in an interview on CBS.

There is a difference between ‘asserting’ one’s rights and ‘exhausting’ them. While Donald Trump is well within his rights to ask for election recounts in narrow-win results for Joe Biden, launching a slew of lawsuits alleging widespread voter fraud and irregularities appears to be (sans any concrete evidence to the contrary) the strategy of a desperate and desolate man. In a tweet on Friday, President Trump claimed credit for how secure the election was, while at the same time pushing his claims of election rigging: “For years the Dems have been preaching how unsafe and rigged our elections have been. Now they are saying what a wonderful job the Trump Administration did in making 2020 the most secure election ever. Actually this is true, except for what the Democrats did. Rigged Election!”

A coalition of state and federal officials pushed back against President Trump’s claims of widespread election fraud, saying they have no evidence that ballots were compromised. “The November 3rd election was the most secure in American history. Right now, across the country, election officials are reviewing and double checking the entire election process prior to finalizing the result,” they said in an official statement.

In the recent past, I have taken some abuse (some justified, some not) from Trump supporters who accused me of ‘playing the man and not the ball’. I took it on the chin, accepting that polar-opposed political views can sometimes blur one’s vision (mine included), jeopardizing any hope of compromise and conciliation. Without imposing my own views, I’ll leave you with this tweet from Trump on November 7th:

“THE OBSERVERS WERE NOT ALLOWED IN THE COUNTING ROOMS. I WON THE ELECTION, GOT 71,000,000 LEGAL VOTES. BAD THINGS HAPPENED WHICH OUR OBSERVERS WERE NOT ALLOWED TO SEE. NEVER HAPPENED BEFORE. MILLIONS OF MAIL-BALLOTS WERE SENT TO PEOPLE WHO NEVER ASKED FOR THEM.”

My question is simple: If your observers did not see them, how do you know they happened? It is this type of incendiary accusation that is not helping anyone. If you have the facts, present them. If you do not, you need to (eventually) accept reality. While there should be no effort spared in guaranteeing that the result of the election is accurate, spouting conspiracy theories is counterproductive. Or maybe that is just what the Democrats want you to believe.

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