Monday 23 December - DAILY NEWS SUMMARY
Pretoria News (www.pretorianews.co.za) Page 8 – Leaders to discuss N Korea concerns Page 8 – West Africa renames CFA franc currency The Star (www.iol.co.za)
Page 12 – Kim gets defensive Citizen (www.citizen.co.za) Page 3 – 2019: a year of chaos
Page 15 – Kim ramps up further tension Page 20 – What investors can expect in 2020
Kim gets defensive
The Star Early Edition
23 Dec 2019
SEOUL: North Korean leader Kim Jong-un has held a meeting with top military officials to discuss steps to “bolster” the country’s armed forces, state news agency KCNA reported yesterday, amid looming threats of confrontation with the US.
Kim presided over an enlarged meeting of the Central Military Commission to give a briefing
“on the complicated internal and
2019: a year of chaos
UPHEAVEL: THREE POLITICAL PARTIES EXPERIENCED LEADERSHIP CHANGES
The Citizen (Gauteng)
23 Dec 2019
There was political upheavel as three parties experienced leadership changes and many of the country’s state-owned enterprises faced financial ruin and had to be bailed out by government.
SOEs had their own share of drama, with some on the brink of financial collapse.
The year 2019 could best be described as the year that the dominoes fell – as the country’s top three political parties experienced leadership changes, some dramatic and painful while others displaying the power of democratic processes.
Political economy analyst Zamikhaya Maseti said the year was marked by political chaos in both the governing and opposition parties. He said it was a year that exposed several
weaknesses in Cyril Ramaphosa’s leadership, including failure to contain rampant unemployment.
“Ramaphosa is very indecisive and his policies are not yielding the expected results. At government level there is a crisis – they don’t know how to resolve the Eskom issue,” Maseti said.
The Democratic Alliance (DA) experienced a dramatic change of leadership after Mmusi Maimane resigned as party leader on 23 October. He fell out of favour with the party after its poor showing at the May elections.
He was under pressure to quit but resigned of his own accord, citing the DA’s failure to accommodate all South Africans. The DA replaced Maimane with its former chief whip, John Steenhuisen, as an interim leader until next year’s party elective congress.
Under Steenhuisen, the party has undertaken to change its course, including stopping the bashing of the ANC, which was Maimane’s style.
Political analyst Xolani Dube said this was a decision imposed by white business that funded both the DA and the ANC that the two parties must work together now that Ramaphosa is in power.
Helen Zille’s return as federal council chairperson was a big issue in the party. A liberal turned conservative, Zille annoyed many when she said colonialism was the greatest thing to happen to South Africa and that Eastern Cape residents in the Western Cape were illegal migrants.
Her election sparked uncertainty in the party and led to belief that the DA was returning to its old ways of being the party of the whites.
Observers said Zille was elected to undo Maimane’s legacy of making the party a home for all, including blacks.
South Africa’s latest political drama happened last week when three senior members of the Economic Freedom Fighters (EFF) national command team were voted out.
The congress ousted party national chairperson Dali Mpofu, secretary-general Godrich Gardee and treasury-general Leigh Mathys.
Party leader Julius Malema stamped his leadership hegemony as the party boss with no threat to his power from within.
Maseti said it might be good for the EFF to shed some of its “dead wood” leaders.
The state organs had their own share of drama, with some on the brink of collapse resulting in calls for privatisation.
The SA Broadcasting Corporation was saved from imminent collapse with a bailout of R2.1 billion from Treasury.
SA Airways was so broke it has to be put under unprecedented business rescue.
Eskom remains an albatross around the neck of the Ramaphosa government. The R59 billion (R26 billion this financial year and R33 billion in 2020-21 financial year) bailout was
unlikely to make a dent in the utility’s massive financial needs.
The loss-making power utility implemented marathon load sheddings, including the dreaded stage 6 which forced Ramaphosa to abruptly shorten his visit to Egypt to attend to the local hot potato.
Again this year government failed to resolve the e-tolls saga as promised. This is despite an instruction from Ramaphosa that Transport Minister Fikile Mbalula, Gauteng Premier David Makhura and Finance Minister Tito Mboweni find a lasting solution to the saga once and for all.
The pressure continued to mount against the government to cancel the system, where Gauteng motorists are expected to pay for the installation of gantries on the province’s highways. Cosatu, Saftu and the opposition parties and civil society body, Organisation Undoing Tax Abuse, intensified the fight against e-tolls.
Government was intent on strictly applying its user-pay approach on the matter, with Mboweni stressing the need to accumulate revenue via service payments and taxes.
The minister is grappling with country’s R62 billion debt and how to turn around revenue collection, which drastically dropped over the last few years.
In August, Mboweni introduced an economic growth blue print which was widely welcomed by business but vehemently opposed by ANC alliance partners who are working on an alternative policy.
R59bn the bailout extended to SA Airways
It might be good for the EFF to shed some dead wood
Kim ramps up further tension
The Citizen (Gauteng)
23 Dec 2019
– North Korean leader Kim Jong-un held a meeting of top military officials to discuss boosting the country’s military capability, state news agency reported yesterday amid heightened concern the North may be about to return to confrontation with Washington.
Kim presided over an enlarged meeting of the ruling Workers’ Party’s Central Military Commission, KCNA news agency said, to discuss steps “to bolster up the overall armed forces of the country ... militarily and politically.” – Reuters
Seoul
What investors can expect in 2020
WEIGHING IN: ASSET MANAGERS SHARE THEIR VIEWS
The Citizen (Gauteng)
23 Dec 2019
Picture: ShutterstockLOOKING UP. In some respects, local stocks are more attractive now than they have been for some time, precisely because of how poorly they have fared.
JSE’s recovery may be dependent on global economy’s resilience.
In a highly uncertain environment, it is extremely difficult for investors to know what to expect from the next 12 months. The South African economy is still searching for a route to recovery, a global recession cannot be ruled out, and political risks across the world remain high.
In this kind of context, what has worked in the recent past is not necessarily the best approach going forward.
Don’t bet the farm
“Investors would do well to position their portfolios for multiple outcomes and not to simply remain in cash,” said Mark Dunley-Owen, portfolio manager at Allan Gray.
“South African equities and bonds have priced in historically low expectations, which makes them attractive for patient investors if the future turns out to be less worse than feared.
Globally, politics is likely to have an amplified impact on the investment environment, the most important being the US-China relationship. And global bonds and highly valued US equities appear unattractive as the Goldilocks period of recent years is unlikely to be repeated.”
South African investors should therefore be cautious about assuming that international investments will inevitably continue to outperform.
The opportunity on the JSE
In some respects, local stocks are now more attractive than they have been for some time, precisely because of how poorly they have fared.
“In the past, when five-year trailing returns from South African equities were as low as is currently the case, subsequent returns from this asset class turned out to be very strong regardless of the prevailing macro environment at the time,” said Herman van Papendorp, head of investment research and asset allocation at Momentum Investments.
Nadir Thokan, portfolio manager at 27four Investment Managers, believed there was also potential that foreigners may return to the JSE next year. This would be positive for share prices.
“The biggest reason would be relative valuations,” Thokan said. “Foreign investors have not seen South Africa trade on 11 times forward earnings since the global financial crisis. On a dividend yield basis [excluding Naspers] the JSE is also the cheapest it’s been since then.”
The other side of the coin
However, any meaningful recovery on the JSE may be dependent on the global economy remaining resilient.
“While attractive valuations also provide some margin of safety for South African equities against a weak local growth environment, a major near-term risk for local equities is a hard landing for the global economy, as the South African equity market typically performs poorly around the onset of a US recession,” Van Papendorp warned.
There are also downside risks posed by the local economy. The environment for domestically focused companies is difficult, and can’t be ignored.
“We think mean reversion of returns and margins to historic median levels will not take place due to the increased cost of doing business in South Africa. This can be seen through higher utility tariffs, higher taxes, low expected government expenditure and continued deregulation,”
pointed out Truffle Asset Management chief investment officer Iain Power.
However, given how low valuations are already, he does see the potential for some upside if government is able to successfully implement structural reforms.
Given these variables, investors need to position themselves in a way to be able to earn returns from multiple sources. Holding a well-diversified portfolio is the best defence against unpredictable markets.
