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Letter from America: The mid-term elections and the battle for the soul of the US. "Every single thing you believe in is on the ballot."

That's how a Democratic Party activist summed up the meaning of the upcoming mid-term elections for a crowd gathered in Kansas City, Missouri, on Saturday afternoon.

This type of language is typical for the Democratic faithful as Tuesday's poll approaches. At stake, they suggest, is not just the opportunity for the Democrats to win control of the House of Representatives and the Senate. At stake is a chance to deliver a repudiation of everything President Donald Trump and his Republican party have sought to place on the national agenda since 2016.

At the same rally, Democratic Congressman Emanuel Cleaver would tell the audience that a vote for Democratic candidates in the election was a vote "for the sake of our nation and our unborn progeny".

Experts say that the Democratic Party in the US is experiencing an unusual wave of energy and support in the run-up to elections which are often seen as the less important step-child of the four-yearly presidential ballot.

"Republicans tend to be more likely to show up and vote in mid-term elections, but Democrats have been engaged and enraged since the inauguration of Donald Trump," political science Professor Diane Lowenthal of the American University in Washington DC, told Daily Maverick.

"There's the highest interest (in the mid-terms) from people under 30 since the Vietnam War, and they're one of the groups who traditionally turn out to vote at the lowest rate."

Over 30-million votes have already been cast in the 37 states which permit early voting - one clear indicator that the general voter turn-out for the mid-terms is likely to radically outpace the traditionally muted interest in these interim elections.

Pollsters have been notably wary about making firm predictions as to the mid-terms' outcome, after the 2016 presidential elections' shock result. But a Washington pollster told Daily Maverick that the Democrats look likely to take control of the House of Representatives, while the Senate - the higher chamber - will remain in Republican hands.

If Democrats do take the House, the effects will be more tangible than just a symbolic smackdown to the Trump administration.

With the House in blue hands, Democrats would win control of all the House committees - meaning that the party is certain to commence investigations into numerous aspects of alleged Trump malfeasance. They could, for instance, subpoena Trump's tax records.

Most significantly, the Democrats would almost certainly begin proceedings to impeach Trump.

A situation where the Democrats control the House and the Republicans control the Senate would mean gridlock when it comes to the passing of most legislation, which would thwart Republican intentions in instances where Trump cannot use his executive privileges to force laws through. But the Senate would retain the all-important right to appoint Supreme Court judges - which, history has shown, could have a major impact on the general legislative and political state of play.

The Republicans know that the stakes are high.

"We're on defence," a Republican strategist told Daily Maverick. The aim: "Limit our losses and hold the majority."

It is a staple feature of American mid-terms that the party which does not hold presidential office - in this case, the Democrats - tends to pick up seats in the first ballot after the presidential elections. But in this particular case, the Republicans are also contending with the wave of liberal indignation that has been building since Trump's election.

In the final days before the mid-terms, Trump himself appears to be doubling down on his base. While the Republicans do have what the ANC would term a "good story to tell" when it comes to the current state of the US economy and employment, Trump's last-minute messages have focused on demonising immigrants and the media.

Tellingly, a number of Republican Senate candidates for the mid-terms have soft-pedalled any relationship with Trump, focusing their campaigns on tax cuts and jobs and largely avoiding the president's favourite hot-button issues.

By and large, however, bipartisan appeals are hard to come by. There are increasing signs that fervent supporters of the Republican and Democratic parties are no longer inhabiting the same moral universe. In the week after Brett Kavanaugh's controversial hearing for a Supreme Court position, for instance, donations to the Republican Party increased by over 400%.

"I'm sure Democrats keep telling you we're crazy. Well, we think the Democrats are crazy," a self-described Trump supporter in the town of Independence, Missouri told Daily Maverick on Sunday.

Another Trump fan manning a Republican campaign stand outside early voting in Fairfax, Virginia, explained her admiration thus: "God often chooses flawed people to do the work He wants."

The Democrats are aware that they have a golden opportunity currently to parlay Trump-based outrage into votes, particularly among voters who may have stayed away in 2016 on the basis that Hillary Clinton's victory was a foregone conclusion.

And Democratic Party representatives are already talking victory - at least in public.

Asked by Daily Maverick what he expected to happen on Tuesday, Maryland Congressman Jamie Raskin responded: "I expect an absolute transformation of everybody's spirits. There's been such a sense of dread and anxiety in American life, and I think that if we get the big blue wave that we've been looking for, we're going to renew people's sense of optimism and faith in the future."

But if that "big blue wave" fails to materialise, pundits warn, the Democratic Party will take a knock from which it could be hard to recover.

"There's been this very high level of engagement," says Lowenthal. "If, in the end, all of that results in no change, or just a few seats - that will be devastating to Democrats." DM

Rebecca Davis is in the US for the mid-term elections as a participant in the US State Department's International Visitor Leadership Programme.

AYO to miss forecasts on contract delay. The technology holding company will report higher earnings for the year but will miss its pre-listing forecasts.

Ayo Technology Solutions has flagged a strong rise in full-year profit but says it will fall short of its forecast for the year.

In a further trading statement yesterday, the tech business that was spun out of African Equity Empowerment Investments (AEEI) and listed on the JSE last December said net profit for the year to end August would be up to 870% higher than last year. While basic earnings per share (EPS) would be up by as much as 574% it would be well below the 242.68c it forecast when it listed. Similarly, an 856% increase in HEPS would miss its forecast by between 77.7% and 80.4%.

AYO said a contract with a multi-national company, scheduled to start earlier in the reporting period, had been delayed until the latter part of the financial year. However, it still incurred once-off costs as it prepared to implement the contract. Earnings were also affected by acquisitions that were not concluded within the expected timelines, it said.

One such acquisition, announced in September, was for a 55% stake in investment holding company Zaloserve, which ultimately owns Sizwe Africa IT. It paid R165 million for the Zaloserve stake. AYO says Sizwe generated over R1 billion in revenue last year and reported cash from operations of R75 million and earnings before interest, tax, depreciation and amortisation (EBITDA) of R70 million.

AEEI is controlled by Iqbal Surv and his Sekunjalo Group. The Public Investment Corporation was the sole participant in December's IPO, investing R4.3 billion for 99.8 million shares in the group at R43 each. The 29.9% stake bought by the PIC valued Ayo at R14. 8 billion on its listing.

Its shares closed 4% higher at R24.95 yesterday in two deals, valuing the company at R8.59 billion.

Pan African set to meet 2019 guidance. The gold producer is ceasing high-cost production as it focuses on new projects including the Elikhulu tailings retreatment plant and Royal Sheba at Barberton.

Pan African Reduces says it's on track to achieve its full-year production target after commissioning its Elikhulu tailings retreatment plant.

The gold producer had guided for 170 000 ounces of gold for its 2019 financial year, assisted by production from the plant, which process old mine dumps. It poured its first gold in August, ahead of schedule and within the projected budget.

Elikhulu is expected to be a flagship operation within Pan African's reconfigured low-cost, long-life asset base. It has also taken the decision to cease some unsustainable production at its Evander operations.

For the first quarter of its financial year, the group produced 37 792 ounces of gold. However, Elikhulu only ramped up to its design capacity of 1-million tonnes per month during October. Pan African said the incorporation of the Evander Tailings Retreatment Plant (ETRP) will increase Elikhulu's capacity to 1.2 million tonnes a month. This is expected to be completed by January.

The group said it had commenced mining and vamping of the remnant high-grade stopes as part of the phased closure of the underground mining operations at Evander Miners. Equipping and preparatory work to advance the mining of the 8 shaft pillar at Evander is expected to be completed early next year.

Barberton Mines is on track to meet full-year production guidance of 100 000 ounces, while the drilling programme on the Royal Sheba prospect has been completed.

We look forward to updating shareholders on the progress of this exciting growth project in the coming months with an updated resource statement to be released by the end of November 2018, and the feasibility study still on schedule for release in February 2019," CEO Cobus Loots said.

Its shares rose 0.7% to R1.54 yesterday.

Rebecca visited the new Pan African Resources Elikhulu plant in Evander to gather material for the development of site specific operator training modules. The new plant is up and running...

-- MetSkill (@MetSkill) November 1, 2018

Moab acquisition boosts Harmony. The gold producer reported a sharp rise in first-quarter production from a year earlier, helped by its Moab Khotsong and Hidden Valley mines.

Harmony Gold Mining has had a strong first quarter thanks to rising output from Hidden Valley and the inclusion of Moab Khotsong.

The group grew production by 30% in the three months to end-September from a year earlier. However, it was 2% lower than the previous quarter, while all-in sustaining unit costs rose 8% to $1 166 an ounce. It said the increase in operating costs was due to the seasonal higher winter electricity tariffs and higher labour costs, including once-off leave liability adjustments following a wage settlement agreement last month.

Hidden Valley, in Papua New Guinea, generated free cash flow for the first time since achieving commercial levels of production in June. Recovered grade and gold production are expected to improve for the remainder of its financial year as mining into the deeper and higher grade areas of the ore body progresses.

South African production rose 19% from a year earlier, mainly due to the addition of gold produced by Moab Khogsong, which was bought from AngloGold Ashanti in March.

Hidden Valley and Moab Khotsong have boosted the group's production and free cash flow generation compared to the September 2017 quarter," CEO Peter Steenkamp said. "We are confident that we will achieve our annual production and cost guidance as we continue to focus on safety, production and cost management."

Harmony said it took advantage of the weaker rand over the quarter to top up its hedging programme.

Its shares fell 3.1% go R25.31 yesterday.

Group Five’s Ghanaian headache just got worse. The engineering and construction group says there's been yet another delay to completing the Kpone power plant, this time due to contaminated fuel.

Group Five has missed yet another deadline to complete the Kpone oil and gas power plant in Ghana. The contract was supposed to have been completed early last month and, while it faces rising penalties for missing the deadline, it's also suing its client, Cenpower Generation Company.

Its shares fell as much as 21.7% to 90c on the news.

The disastrous project has faced a series of delays, many of them no fault of Group Five's. It blames the latest obstacle on contaminated fuel that was provided by Cenpower. It says completion of Kpone is dependent on the resolution of the fuel issue. Other problems hindering the project included a change in Ghanaian law affecting the clearing of goods arriving at the country's port and also due to setbacks in seawater tunnelling.

In the year to end-June, the engineering, construction and infrastructure group recognised a loss of R1.3 billion on its Kpone contract, resulting in an operating loss for the period. The Kpone delays have also affected Group Five's cash position.

The board and executive management continue to implement strong actions to assess the ongoing financial position of the group," Group Five said. "Due to its materiality, the Kpone contract and its cash flow requirements are separately monitored, with detailed estimated gross cash monthly outflows and inflows."

In the meantime, it has turned to arbiters for relief. It said it had made a submission to the International Chamber of Commerce in Paris for claims against the client and that it had been advised that its claims have merit. It has also instituted legal proceedings in the Johannesburg High Court to interdict Cenpower's demand of $62.7 million in penalties from Group Five. Judgement has been scheduled for today.

The company's shares retraced most of their losses to close 0.9% down at R1.15.

Wayne Duvenage: Tax non-compliance and e-toll revolt is government-induced. Over the past two weeks, activity around the e-toll saga has reached new heights, triggered this time by a comment during Finance Minister Tito Mboweni's recent Mid-Term Budget Speech that eTolls must be paid. Then a week later on Friday 2 November, Head of Tax and Financial Sector Policy at The National Treasury Ismail Momoniat suggested that the Organisation Undoing Tax Abuse (Outa) was impacting on tax morality through its anti-e-toll campaign.

The real issue, however, lies in another comment made in the same article by Mr Momoniat, which carries far more weight than government cares to pay attention to: His acknowledgement of "judgment calls made by Sanral on the e-toll project being questionable". He follows this up by saying there has been no evidence to suggest that Sanral has been corrupt in its administration, as if to imply that policies may be dubious or unjust, so long as there was no corruption linked to their implementation.

And that's where it has all gone wrong. Far too often government has displayed a flippant or nonchalant attitude towards the need for sound and rational policy-making, believing that citizens must simply accept and be compliant with irrational and often unworkable policies and processes.

The anti-e-toll position occupied by Outa, and similarly hundreds of thousands of Gauteng motorists, was never based on a view that the scheme was corrupt (there was, however, clear construction collusion and questions of Sanral's conduct on the freeway pricing). Instead it was the issue of seriously flawed decisions and "questionable judgement" about the policy that had everything to do with the public defiance campaign.

Declining tax morality more often than not is due to government's ignorance of its role and conduct that gives rise to the problem.

In the case of the e-toll decision, these "errors of judgement" by government and its state-owned entity Sanral were so substantive that whether an organisation such as Outa existed or not, eTolling in Gauteng was always going to fail over time.

Government punts eTolls as a user-pays scheme, as if it is the only mechanism it has or ever used to build public infrastructure. What it overlooks are a few basic fundamentals to be in place in order to achieve public compliance, the following few being central to Outa's position:

Respect for the very users required to participate in government's scheme. By ignoring the constitutional rights for meaningful consultation and engagement with the public, their rights and ability to influence the decision were ignored, and this has a tendency to make them angry. I can assure Mboweni and Momoniat that given the chance, the public would have provided rich input for consideration and positive influencing of Gauteng's urban congestion. But that opportunity was robbed of them by Sanral's shocking attitude.

Government's policies must be administratively efficient, user-friendly and practical to apply. Unfortunately for Sanral their scheme relied heavily on information from the inaccurate eNatis (vehicle ownership registry) system. The e-toll system also relied on efficient postal services and a sound, incorruptible enforcement process. The picture of certain failure gets clearer.

Aside from those who are legitimately granted free services, all users must pay for a user-pays scheme and non-compliance must be easily enforced and administered. In the case of eTolls, a sizeable number of road users were always going to get away with non-payment. The inability and high cost of chasing the non-compliant users was always going to be prohibitive. International research on eTolls shows that when compliance levels drop below 80% it becomes too costly to chase up payment from the 20% non-compliant road users. Sanral never achieved over 40% compliance throughout the first five years of operation.

The e-toll scheme was so flawed that even those who received "free passage", such as the taxi industry, refused to get an eTag in order to access the zero-rated tariff. In addition, people with physical disabilities who were granted free passage on e-toll routes were also unable to practically participate.

New tax policies and levies need to be rational and justified, followed by efficiencies in administration, collection and enforcement, if they are to garner the support and compliance of the people. No one enjoys living in a society where the rules are not applied consistently. Adding insult to injustice are the vast amounts of hard-earned taxes being squandered by corrupt and inefficient government officials and entities. This motivates even ardent law-abiding citizens to seek ways to buck the system, tackling the weaker taxes such as TV licences and e-tolls, followed by other taxes where the savings are higher.

It may interest Mr Momoniat and others in Treasury that Outa received hundreds of calls to start a tax revolt, especially during the height of Zuma's plundering. Yet we took a responsible position and spoke out against the notion of a tax revolt. It was Outa that encouraged those not paying TV licences to do so once the new SABC board was appointed and Hlaudi Motsoeneng had left the building. It was Outa that posted opinions to encourage heightened tax morality once President Cyril Ramaphosa was appointed and again when Tom Moyane was suspended.

Government needs to stop shooting itself in the foot when it comes to driving a culture of tax morality. Complying with meaningful engagement on matters that impact the public is a good start. It also helps to not position civil society as the enemy when it criticises Government policies and processes.

Government should also stop giving in to political meddling when trying to enforce compliance on dysfunctional municipalities. The law is clear that government grants for municipalities are applicable only when financial hygiene and regulatory compliance is adhered to.

Yet Treasury and government leadership succumbs to political pressure and feeds the non-compliant monster that municipalities have now become.

The same plight has befallen Eskom, which is no longer taken seriously and is now unable to cut electricity supply to delinquent municipalities.

By allowing politicians to meddle with administration and run roughshod over laws, it is government and not civil society that has stimulated a culture of non-payment. DM

EVITA'S FREE SPEECH: Ep. 167: Evita proves that Albert Einstein lives next door (Video).

Massmart rings up higher sales. The wholesaler and retail says sales have mostly improved since mid-year but new accounting standards will distort its results.

After a flat first half, Massmart says sales picked up in the subsequent 10-week period, with the exception of hardware sales.

In an update ahead of an investor visit to its stores in the Zambian capital, Lusaka, today, the wholesaler and retailer said sales growth had improved since its previous update for the 33 weeks to 19 August. It said total like-on-like sales for the 43 weeks to 28 October increased by 3.5% to R70.5 billion, with comparable store sales increasing by 1.7% and product deflation of about 0.4%. For the first half of its financial year, the group reported comparable store sales of 0.2%.

All four divisions and the four major product categories reported higher sales growth, apart from Massbuild and the DIY category where sales slowed slightly. Its SA stores grew sales by 3.5%, with comparable sales up by 2%. Sales outside South Africa grew 5% and were 0.1% softer on a comparable basis in constant currencies. However, in rand sales rose by a smaller 3.4% in total and declined by 1.8% on a comparable basis.

Massmart said the adoption of the IFRS 15 accounting standard would distort full-year sales numbers as the accounting standard uses the 'modified retrospective approach', which requires that the comparative period not be restated. On that basis, it said 43-week were down on all metrics.

Its shares rose 2% to R101.95 yesterday.

The Week Ahead of 6 November 2018. Markets snap back

The US mid-term elections could have far-reaching ramifications for President Trump's actions over the next two years and could also have an impact on the US equity markets. Currently, the Republicans control the Executive (the Presidency), the Senate and the House of Representatives. If, as seems likely, the Democrats win the House of Representatives, this would tend to put a brake on some of Trump's more extreme policies. There is an outside chance that the Republicans could lose both the House and the Senate, in which case only the Executive would be controlled by the Republicans. While the anti-Trump fraternity would no doubt be euphoric about such an outcome, it could have some serious side-effects. Trump would undoubtedly be hamstrung in his efforts to further deregulate the US economy and implement further fiscal easing and this might leave him with no option but to intensify his trade war rhetoric against China and perhaps even the EU. Such moves would further dampen global trade activity and would be perceived negatively by global equity markets. Already there is mounting evidence that increased tariff activity is dampening global trade.

If the Republicans manage to hold onto the House and the Senate, expect US equity markets to rally in anticipation of the US economic recovery being extended beyond the 2010 US Presidential election.

It has been noted in this column some weeks ago that corporate insiders have been selling stocks into the very strength that was created by their own activity in large-scale share buybacks. Businesses have been holding back on repurchases during the last few weeks as they have been in one of their closed periods for buybacks, due to the imminent release of third-quarter earnings. Now that most companies in the S&P 500 have given their Q3 updates, closed periods have lifted, and the likelihood is that these buyers will return to once again support the market. The S&P 500 rose 2.7% during Tue and Wed last week, having dropped almost 10% and flirting with correction territory in the previous four weeks.

The JSE All Share Index (Alsi) snapped a long losing streak by rising by almost 7% between 30 Oct and 2 Nov. From its Jan 25 peak, the Alsi is now down 12%. The main factor driving this bounce was the massive rise in the share price of Naspers, increasing by 22% from R2370 to R2899 between Oct 31 and Nov 2. This once again highlights the huge degree of sensitivity arising from Naspers' weighting in the Alsi.

The US Federal Open Market Committee meets on Nov 7/8 and the consensus view is that there will be no change to short-term US interest rates at that meeting. But expect a rate hike at the next FOMC meeting in Dec and a further four rate hikes in 2019.

British prime minister Theresa May appears to have negotiated a deal with the EU that would allow the UK to remain within the EU customs union for as long as is required, while Britain secures trade deals with other countries. If true, this would remove a major stumbling block between the UK and the EU ie the Ulster/Eire border and would smooth the path towards a Brexit deal being signed before the end of Mar 2019.

Companies reporting this week

5 November 2018

Redefine Properties Final

8 November 2018

Indluplace Properties Final

Rebosis Property Final

Richemont Interim

Economic related events this week;

5 November 2018

Standard Bank PMI Oct

7 November 2018

SA Manufacturing Production Sep

SA Mining Output Sep

8 November 2018

US FOMC Meeting

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Redefine takes cover from domestic headwinds. The real estate investment trust says its geographical diversity should provide cover against a tepid local economy.

Redefine Properties says the fundamentals for SA property are likely to remain weak due to an uninspiring economic outlook and low confidence, with decisive economic policy interventions only likely after next year's general elections. The Top 40 real estate investment trust (REIT) believes that its geographical diversity should provide cover against the domestic headwinds.

However, global financial volatility is also likely to continue for the foreseeable future due to the US-led trade ware and geopolitical tensions, it says.

The REIT's property asset platform expanded by 8.6% to R91.3 billion in the year to end-August, with the portion of foreign property increasing to R18.9 billion to make up just over a fifth of total property assets.

It grew recurring income by 6.9% in the year to end August. Total revenue and gross distributable income rose by 8.3% and 8.2% respectively. Property portfolio revenue increased by 4.6% to R8.13 billion. It's increased its final distribution by 5.6% to 49.8c, giving a total distribution of 97.1c for the year. The 5.5% increase was in line with guidance. Its international property investments contributed 24% to distributable income.

Redefine has guided for distribution growth of 4% to 5% for the year ahead on the assumption that current trading conditions will prevail.

Almost every sector in the economy is under huge pressure and everyone is feeling the pinch," the person who said it here which is red "However, we are up for the challenge and will continue deploying capital in SA and abroad, developing properties that are well located, with strong upside potential," says Redefine CEO Andrew Konig."

The REIT's shares ended trade 2.1% up at R9.95.

Items in Redefine's results: (1) Leases for 497491m renewed at an ave rental -1.5% (FY17: +2.9%), (2) Net arrears amounted to 10.9% (FY17: 9.4%) of gross monthly rentals. & (3) Retail vacancies jumped from 3.3% to 4.5% & (4) It impaired its investment in Redefine International!

-- Keith McLachlan (@keithmclachlan) November 5, 2018