Classic Business

Joon Chong

Partner on the Tax Practice at Webber Wentzel

Nic Haralambous, Global Speaker and Entrepreneur

Industrial conglomerate Bidvest, the operations of which span from cleaning services to property interests, upped its interim dividend after experiencing strong demand for hygiene-related services during Covid-19.

The group raised its interim dividend 2.8% to 290c per share in its six months to end-December, about a R987m payout, benefiting from strong demand for Covid-19-related work.

Trading profit from continuing operations grew 3.5% to R4.1bn, off a pre-pandemic base, enhanced by the consolidation of PHS, the UK’s biggest commercial cleaning service.

Group revenue grew 3.4% to R44.4bn, while cash generated from operations surged 86.2% to R6.2bn, amid focus on working capital management, as well as cost containment.

Trading profit in the group’s services segment — about 30% of revenue — jumped 37.9% to R1.7bn.

Michaele Avery caught up with new CEO Mpumi Madisa, to talk about taking over the reins during a pandemic and where the margin value sits in the hygiene business and how the firm plans to deploy capital into value enhancing growth acquisitions.

Miles Dally, CEO

As we closed out February last week, the so-called taperless tantrum sent stocks tumbling and emerging market currencies weaker as the US Treasury yield briefly snuck above 1.6% on worries that inflation is just around the corner.

Its worth casting our minds back to 2013, when the Fed was in the third round of its Large-Scale Asset Purchase program, more commonly known as QE3. In congressional testimony that May, Fed Chair Bernanke hinted that the pace of monthly asset purchases would be reduced (“tapered”) at some point. Bond yields snapped higher. The stock market sold off a month later when Bernanke signaled that tapering would happen by the end of the year.

Fast Forward to Feb 2021, and in his monetary policy testimony, Fed Chair Powell indicated that the Fed has no intention of altering the monthly pace of asset purchases (currently $120 billion per month). The Fed’s focus is on the job market and Powell said that the Fed is still a long way from achieving its inflation and employment goals. Other Fed officials echoed this view.

But the market seems to think otherwise, the bond market that it is.

Chris Holdsworth, chief investment strategist at Investec Wealth and Investment spoke to Michael Avery about why the market is worried about inflation.

Are we in a stock market bubble? And if we are, what should investors do about it?

Historically, it's always been hard to know how far a bull market can go. And value has proven to be a very weak read on which to lean, because value can go up and up. The nightmare for any value manager is Japan in 1989 when the price earnings ratio went to 65 times. It had never previously been over 25 until that cycle.

But bond market moves this week have made investors nervous that the frothy parts of the market could be the first to go in panicked selloff. The forecast for average inflation over the next decade, derived from bond prices, has risen to nearly 2.2%, the highest level since 2014, partly reflecting soaring commodity prices.

These nerves have turned the global government bond market into the weakest start of the year since 2015, as inflation erodes the value of interest payments on bonds and reduces the value of debt.

The scale of the selloff prompted Australia’s central bank to launch a surprise bond buying operation to try and staunch the bleeding, helping yields there come off early peaks.

If rates rise sooner than expected Tito’s budget forecasts might have be tossed out the window.

To review the week that was Michael Avery was joined by Warwick Lucas Chief Investment Officer at Galileo Asset Managers, & Raymond Parsons, professor in the School of Business and Governance at North West University

The words of Harvard economist the late Martin Feldstein, who served as chairman of the Council of Economic Advisers and as chief economic advisor to President Ronald Reagan, are worth recalling at this time in South Arica’s development.

Increased government spending can provide a temporary stimulus to demand and output but in the longer run higher levels of government spending crowd out private investment or require higher taxes that weaken growth by reducing incentives to save, invest, innovate, and work.

Government and ANC ideology are a perpetual constraint on business.

Take mining for example, the flywheel of this economy. Electricity is the number one issue. The Mining Charter, transport and exploration are second-order issues. Instead of acting, we score more own goals.

Ahead of the budget there were many key questions for the market.

Revenue receipts were going to come in well ahead of previous expectations. A consensus view. And anything around the R100bn level would be taken positively, and it was just under that.

But it was also about what we do with the money. Would the Minister use this windfall to meaningfully address our rising debt trajectory? Would we see a meaningful longer term shift lower in the primary budget deficit and debt to GDP metrics?

Michael Avery spoke to to Annabel Bishop, Investec Chief Economist; Peter Attard-Montalto, head of capital markets research at Intellidex; And Keith Engel, the Chief Executive of SA Institute of Tax Professio

Annabel Bishop, Investec Chief Economist

Peter Attard-Montalto, head of capital markets research at Intellidex

And Keith Engel, the Chief Executive of SA Institute of Tax Professionals

Jeremy Sampson, MD of Brand Finance Africa

The Johannesburg Securities Exchange delivered a Strong performance in core business units for the full year, underpinned a 19% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to R1.06 billion (2019: R889 million). The JSE’s record revenue during the period largely reflects the impact of increased market volatility.

IT’s been a busy period for the JSE too, announcing it will approach regulators about listing instruments across a range of currencies including the US dollar as part of sweeping proposals aimed at positioning itself as the centre of capital-raising on the continent. Sealing the deal with Link Market Services.

And lifting the lid on a transaction with next generation UK fintech company, Globacap Technology Limited (Globacap) to progress a digital private placements platform and registry services. The deal brings together the JSE, Africa’s largest Stock Exchange, and Globacap, a leading regulated private placement and capital management platform that digitally administrates over £1 billion of private shares and debt instruments for 60 companies and over 8,000 shareholders worldwide in 35 countries

The JSE concluded a deal late in the fourth quarter that sees locally listed shares become available for trade by Chinese traders active on the Shanghai Stock Exchange as part of a plan to encourage more offshore traders to begin inbound trading on SA’s most dominant securities exchange.

But also a time when delistings are on the rise and small and mid-caps seeking secondary listings offshore is increasing as executives are vocal about the cost benefit of remaining listed in SA.

Michael Avery sat down with the CEO of Africa’s largest exchange, Dr Leila Fourie, to talk about a transformative time for the JSE, and how she approaches these competing forces on the business.