Absa Fails to Impress

The recently rebranded Business Day TV satellite link bombed this morning, and was initially unable to transmit CEO Maria Ramos’ presentation of the latest Absa interim results, leading to a delay in the event, to which many had battled through rush-hour traffic. Maybe this was a service to the viewers, as the heavily-scripted and wooden presentation lacked lustre. The numbers were not awful, with headline earnings up 8%, and there was a special dividend of 708 cents a share. Bad debts seem more under control, but are still a concern. The outlook is cautious. The market, however, was not impressed with the results, and the share price slumped. Parent Barclays will no doubt welcome the dividend flow. There was some talk of how Absa is combining forces with Barclays to become what it calls Africa’s Go-To bank. They seem to think this is a great catch phrase, but it doesn’t rattle my cage. And the much anticipated re-branding is now to happen. Bye bye Absa: hello Barclays Africa Group on the JSE. But the high street Absa brand remains in SA Finally, it was a bit absurd for Ramos to thank Barclays for help in launching the Absa app – as they are well behind the pack in an innovation which could and should have been developed in SA under more tech savvy management?…..What did our experts make of the results?

Ron Klipin of Cratos Wealth

The results were very disappointing and below expectations. The presentation and outlook was very subdued. Operating conditions are very challenging going ahead. Barclays Africa will prove to be a major growth area, but this will take a lot of time and a lot of investment. Their lending book growth has been subdued because of concern about the economy.

Independent analyst Ian Cruickshanks

This was disappointing. There could have been more warning to the market. I think they must retain the strong brand in South Africa. They are doing the right things, but have woken up late. Is this because Barclays took too long to put their mark on Absa’s African strategy? Will Barclays be milking SA performance to feed the Barclays group, which needs the money?

Lavan Gopaul. 28E Capital

Ten years after the Barclays Absa ’merger’ I have yet to see the value add – of the Africa connection and the promised synergies of corporate banking that we were led to expect. The payment of the special dividend is an admission of not being able to place capital during a period post the National Credit Act which made lending in SA very difficult…


Bankers are not required to be interesting, but with strict parent Barclays pulling the strings from London, there is a much room for improvement in presentation and performance.

Tweet of the day:

Denis Leary (@denisleary): Pope to gays: I accept you. Gays to Pope: bring back the red Prada shoes.

The Don’ts and Don’ts of Office Sex

Office romances are in the news at the moment, with a certain trade union leader indulging in the wrong sort of congress.  But this is a serious issue, can ruin careers, and we must never forget that if there is harassment or worse, there will be a victim.  ZA Confidential asked some of our experts about how to handle things if there is attraction in the office, and this is what they had to say….

Jeff Osborne – Former CEO of the RMI, now heading up Gumtree Auto ZA:

It is common cause that many relationships have started in the work place.  Perhaps this is not surprising,  given the circumstances,  which are indeed highly conducive to getting to know someone. You see them at their best and on occasion at their worst.  There is of course a level of intimacy and more time together than is likely to occur during social circumstances. However,  there is much sensitivity surrounding work place relationships. Firstly,  it behoves the more senior person to ensure that the junior does not enjoy any special favour or preference. Then I believe that once the relationship becomes permanent,  then it is probably better if the one or the other seeks  employment elsewhere.

Mario Prerorius – CEO Telemasters:

Power attracts and subservience entices. This is and has been a potent cocktail through the ages. Many men fail to grasp the limits of authority that power brings. Worse, if the enticement flows upwards, it could be horribly tough to resist and terribly calamitous to succumb. One could see such attraction as a stern test, like an envelope full of cash, needing a new home. Resist it and get rid of the source – you. Whipping out a picture of the loving wife will get the message across if you’re spoken for, and introducing the Lolita to your hottest bud will send the signals. Its a no-no; it will get complicated. If after 6 months of abstinence the vibes still roast rocks, reconsider and then bet the house. It’s been known to work, but not as a casual heave-ho. Good luck

Debbie Goodman-Bhyat, CEO of Jack Hammer recruitment:

Don’t go there! It can only end miserably, for both parties.


It is natural that people will be attracted to workplace colleagues, and this can lead to romance.  However, the dynamics of an office environment may lead to the abuse of power and seniority.  If there is mutual attraction, and a desire to develop the relationship, it would be best for one of the parties to move out of the office.  And any boss who is not aware of the potential of blackmail and repercussions of getting intimate with an employee…..may not be the best person to lead the organisation.

Tweet of the Day:

Nein.  (NeinQuarterly): Quiet despair walks into a bar.  Impotent rage walks out.


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New Anglo American CEO Impresses

With the words: “you can’t sit there” I was welcomed to Anglo American’s Johannesburg HQ for the presentation of their latest financial results for the half-year to June. Recently-installed CEO Mark Cutifani made a few jokes about himself being an Australian and his CFO a Frenchman. “You have the smooth and sophisticated – and you have the Frenchman," he quipped. Cutifani suggested he wants more cash flow growth from the business, an almost doubling of the return on capital employed to 15%, and he came over as relaxed, confident, with a clear vision and strategy for the company. “For us it’s about making sure the engine is working and delivering to its potential…..The opportunities for improvement are significant. In terms of our project pipeline, we are constipated,” he said. This is just one of the areas where he is shaking up Anglo, and one wonders whether there had been too much complacency until his arrival? Certainty there has been a shake-up of management which should already make the company leaner and meaner. On South Africa: “the uncertainty conversation is still a legitimate concern … There need to be conversations about regulatory certainty and social cohesion. The relationship has to change. There is a lot of work we have to do.”His best quip was: “I know what a mine looks like, so I have an advantage over many leaders in the industry.” Which woman could he have been thinking of?

NB. ZA Confidential was annoyed last week when we were told the media would be barred from Cutifani’s presentation. And even though it was being beamed from the company’s London HQ, I am glad the company’s spin doctors changed their mind and let me in. He is an impressive presenter, and I walked away impressed.

Expert Opinion:

Craig Pheiffer from Absa Investments:

Anglo American’s interim results were slightly ahead of expectations. Higher costs and weaker commodity prices run across the global mining industry and so it was no surprise that earnings for the period were lower. The market was indeed expecting lower earnings but underlying operating profit and bottom line earnings did beat the consensus earnings outlook. Key to the positive surprise were the better than expected results from thermal coal, diamonds and copper divisions (some driven by lower than expected costs). The net debt position of $9,8bn was better than expected as net operating cash flow surprised and capex for the year was less than forecast. With Anglo American adopting a progressive dividend policy, an unchanged dividend of US32c for the period was probably the best we should have expected given the lower earnings result (underlying operating profit -15% and underlying earnings -28%). New CEO Mark Cutifani has implemented a new organisational structure in a bid to improve organisational effectiveness and eke out more efficiencies in the business (only 11% of Anglo’s operations are consistently meeting their targets). A key driver going forward will be the allocation of capital. Cutifani has taken to heart the market’s concerns around value-destroying M&A and there will be a sharp focus on capital allocation and value going forward. In a pedestrian global growth environment where commodity prices are under pressure, fine-tuning the business model is essentially what will drive the bottom line in the short-term (and pave the way for longer-term returns when the commodity markets do turn). That may still be some time away.

Ron Klipin from SA Stockbrokers:

Mark Cutifani is a man of steel with around 38 years experience in the industry. He is a hands-on operator. He is CEO of Anglo SA as well, which means he is engaging directly with the unions and the government. He is conducting an asset review, with results out in November, and there are no sacred cows. It looks like major changes are still to come at Anglo in terms of cost cutting, delivery and asset optimization


The jury is still out but Anglo now has a leader with balls.

Tweets of the Day:

Leonardo Arellano (@lifeofleonardo): @Debhopey @NeinQuarterly Q. How do you get a philosophy grad off your porch? A. Pay him for the pizza.

Estiaan Keuler (@ThatAwesumShowi): *During sex, I suddenly stop moving* She: "What are you doing?" Me: "Shhh its oky, I’ve seen this on Pornhub, its called Buffering."

Are There Too Many Prescriptions to heal ZA’s Economic Ills?

Government has its NDP strategy for boosting the economy, but this week the ANC appeared to be offering a rival approach. Are there too many players with too many ideas knocking about, as the economy limps along at 2% GDP growth a year? We asked some of our experts whether there are too many voices…..

Frans Cronje from the SAIRR:

There are too few. Many of them have the same ideas. More transformation, more employment equity, more black empowerment, and more land reform. There is actually no battle of ideas. From the DA to the ANC there is one overall dominant idea and that is how to use the State to redistribute resources in the society. We call this the DANC consensus. It is very dangerous and explains to a T why we are not growing. A particularly stupid thing was reportedly said (by business representatives) at a conference on the NDP yesterday that "while the plan is far from perfect it needs to be implemented as it is better than no plan". None of them would run their businesses according to a half-baked set of contradictory ideas devoid of serious budget forecasts – so why do they believe a country can be run along such lines? This anecdote sums up very well the defeatist attitude that has become so prevalent within the private sector. What is necessary is fundamental reform to free the economy to draw in entrepreneurs and investors to boost growth which will in turn boost jobs growth. This requires deregulating labour markets and scrapping racial policy. That neither the government, nor business, nor the opposition are prepared to consider this means that we must expect a few more low growth years. Whoever breaks from the DANC consensus and seeks to drive reform has a shot at successfully governing a future South Africa.

Christo Luus from Ecoquant:

Yes, probably. And a major problem is that some government ministries and departments are headed up and staffed by people with some serious ideological baggage slanted towards a socialist /communist state-controlled model – a model which has never and nowhere returned the hoped-for results. On the one hand the basics are neglected: The education system is not delivering; infrastructure maintenance and expansion are neglected; national savings are not treasured or well promoted; crime is not kept in check sufficiently; corruption is not rooted out aggressively enough; our natural resources are not well protected; food self-sufficiency is not a priority; and border control is virtually non-existent owing to crumbling police and defence forces. Persons responsible for these issues (specifically the ministers) are well rewarded for their lack of success. On the other hand, too much is being done and too many resources directed to achieve perverse targets. Neo-apartheid thrives with draconic BEE codes; enormously elaborate documents need to be filled out regularly by businesses if they simply want to buy/sell/contract with clients or suppliers, and they are burdened with numerous regulations, taxes, fees, levies, payments, licences, certificates, fines and prescriptions. Persons coming up with these flamboyant red tape measures are also well-rewarded. Ordinary citizens succumb also on a daily basis to maltreatment by unhelpful and often ill-informed public servants at all levels of government. They and their bosses are also well rewarded and probably never evaluated for service delivery. Finally, every now and then a very clever political leader of some sort tells us that private property need to be re-distributed (read confiscated?). This is enough to depress the national mood and entrepreneurial spirit – just look at what has transpired in Mugabe’s Zimbabwe (yes – it is HIS country) as a result of such policies.


We have had lots and lots of debate. It would be nice to see some delivery. The continued grass-roots support for Julius Malema points to the way in which expectations remain high. If we cannot meet those expectations and deliver some hope, it is difficult to see how social unrest can be held in check…..

Tweet of the Day:

FreeMarketFoundation (@FMFSouthAfrica): “Bureaucracy defends the status quo long past the time when the quo has lost its status.” Lawrence J Peter

Pleasant Surprise with Inflation Number

There was some good economic news today with CIP inflation for May coming in at 5.5%, below most forecasts. But does this number change the economic landscape? We asked some of our experts…..

Nedbank Economic Unit:

The latest inflation numbers do not alter our interest rate view. We believe that rates will remain at current levels well into 2014. The MPC will need to strike a balance between high inflation and still poor economic growth outcomes, with the current policy stance likely to remain in place.

Peter Attard Montalto from Nomura:

CPI surprised strongly to the downside at 5.5%. The drop was led by household items like furnishings and service prices – showing that there is still minimal wage push inflation occurring from retail sector. Insurance costs, which have a huge 9.9% weight, also surprised to downside. Uncertain survey items like housing actually surprised us slightly to the upside. This number will probably still be seen as a one-off by the SARB, which will still see the same risks around the outlook – but this will reinforce the fact there can be no change in rates this year. The data today does not change our medium-run view of inflation outside target next year on structural issues, and so hikes next year.

Azar Jammine from Econometrix:

There were indeed several price declines that are quite surprising, bearing in mind the fairly steep depreciation of the Rand in May. However, the principal reason for the headline number coming in lower than expected was a steep decline in the inflation rate of public transport, which is difficult to understand given the increases in fuel costs. In addition, what appears to have been a -0.1% decline in inflation when rounded off to the nearest decimal point, actually amounted to merely a -0.017% decline in inflation.Without doubt, the lower-than-expected inflation outcome will tend to reduce inflation forecasts of econometric models marginally and in so doing shift down the probability of any interest rate hikes in the foreseeable future. However, purely on account of the petrol price increases of July and August, the inflation rate is still set to rise strongly in the 3rd qtr, to well in excess of the 6% upper end of the inflation target. Together with the fact that other emerging market central banks have been raising interest rates, it would therefore be wrong to assume that on the basis of these figures, the Reserve Bank will be inclined to reduce interest rates in a hurry.


It may seem good that we have lower than expected inflation, but this might be a way of telling us how slowly the economy is growing. And, as some of our experts suggest, there are rises in sight…..

Tweets of the Day:

EricWest™ (@EricJWest): CONDOM HISTORY: In 1272, the Arabic Muslims invented the condom, using a goat’s lower intestine. (continued)

EricWest™ (@EricJWest): (continued) In 1873, ,the British somewhat refined the idea by taking the intestine out of the goat first. 😉

Should we be Beaming About New Satellite TV?

I for one welcome the news that there could soon be a new free satellite TV service for SA consumers, which might help to break the monopoly of DSTV. Of course the devil is in the schedule. We already know that you can have 100+ channels but there just ain’t much you want to watch…. What do our experts say?

Massmart CEO Grant Pattison:

I think there is plenty of room for more competition in this market, with such a large market share held by a single player. Prices should come down.

Duncan McLeod of Tech Central::

South Africa desperately needs more competition in the television broadcasting space. There is limited choice in free-to-air broadcasting (no new national broadcaster has been licensed since e.tv), and in pay television the market is thoroughly dominated by one player in MultiChoice. Introducing a free-to-air satellite player should add an interesting dynamic to the market ahead of the licensing of new terrestrial broadcasters on the upcoming digital platform. For consumers, all these developments mean more choice and should help keep the incumbent broadcasters on their toes..

Telemasters’ CEO Mario Pretorius:

Like bread and circus of the yore, the modern populace is soothed by cellular loquacity and televised mindlessness. As long as the bootless and unhorsed can be calmed by 20 more free TV channels, everyone should be happy – living vicariously is second best to the life of Riley and infinitely preferable than crouching on a koppie in Marikana with a grudge. Bring on the channels, broadcast the waves, the people need their opiates. Down with SABC state propaganda, down with the DSTV Capitalists – eFree shall reign.

Malcolm MacDonald from Tersos:

An additional Satellite TV service in South Africa now, even one that addresses a different set of needs, could be beneficial. But a large part of their investment in satellite broadcast technology will have a limited lifespan in my opinion due to IP TV, which must replace satellite TV at some point. IP is the great leveller, which has over-promised until now, but with the advent of Telkom’s VDSL, it will now start to change broadcasting in South Africa. A new satellite service may have longevity if they target the population who do not have good internet service, but then that part of the population do not have a lot of disposable income to spend on entertainment anyway.


It is always nice to get something for free, and, putting aside the cost of the decoder, I am sure many South Africans will be curious to see what is offered. Put a few porn channels on the satellite and you can be assured many will be clutching their remotes into the early hours of each morning….

Tweet of the Day:

Royal baby, royal baby and more bloody royal baby…… twitter is to be avoided.

Is Jo’burg a World Class City?

The Advertising Standards Authority (ASA) ruled recently that it was “misleading” for Jo’burg to claim it is a World Class African City. Harsh, or true? ZA Confidential sought the views of some of our experts….

Writer, speaker, diner, drinker and cigar buff David Bullard:

I have previously referred to it as a "Third World Class City" which is nearer the mark. The ASA were reacting to a complaint from a member of the public and I think they have ruled correctly. If you watched the prize presentation of the Tour de France from Paris last night, and then compare Jo’burg to a city like Paris…well it’s laughable. Our infrastructure in Jo’burg is in such poor repair that we look more like one of those recently bombed places in Syria. To pretend that Jo’burg is world class is delusional and, as the ASA ruled, deliberately misleading. A bit like saying that Zurich is flat and full of poor people.

Economist Chris Hart:

The payoff byline of the City of Johannesburg is clearly more aspirational than a reflection of reality. The ASA ruling emphasizes this in that the City of Johannesburg cannot claim that it IS a "world class African city". If the payoff line said "aspiring to be a world class African city" there would be less contention. The biggest problem with the existing payoff line is it fails to acknowledge certain obvious shortcomings as to current service delivery reality and what constitutes "world class". To become "world class" the City of Johannesburg needs to benchmark their service delivery effort against credible benchmarks and then meet those benchmarks. This would also constitute the cost effectiveness of that service delivery and the relative harshness of the tax burden.

Lawyer Emile Myburgh:

They probably meant that there are no criteria to determine when a city is world class and when it is not. Alternatively, they may mean that Johannesburg is not a world class city at all and that claiming that it is, is deceiving people. Either way, with the frequent water pipe bursts, electricity shortages, difficulty in getting rates clearances for transfers, it may still have a long way to go before it will be world class in the minds of the residents.

Branding guru Jeremy Sampson:

I guess one has to ask by what metrics was Jo’burg measured to deserve the
epithet ‘A World Class African City’? Sadly when cities are rated by such magazines as Monocle, African cities don¹t rate a mention. And then we have Cape Town, World Design Capital 2014. Now that’s something to be proud of!.


We all want Jo’burg to be world class, and delight in its African vibe. But there are genuine concerns about administration and service delivery, and it would be better to see solid achievements before the boasting begins.

Tweets of the Day:

Political Humor (@PoliticalLaughs): The Congress has just ordered a new missile for the armed forces. It’s called the civil servant – it doesn’t work and it can’t be fired.

Keith McLachlan (@keithmclachlan): Chuck Norris once had a fight with Superman. The loser had to wear their underwear outside of their pants.

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