Monthly Archives: September 2018

Anglo American

Conventional investment wisdom is that commodities are risky. This is because their prices are set in an international market which the mining company has little or no control over.

With Anglo American this risk has be mitigated in a number of ways. Firstly the company has diversity of different minerals which will reduce the impact of any one mineral entering a bear trend. Secondly, in some markets, like the diamonds market, Anglo is such a large player through De Beers that it is possible to control pricing to some extent. Thirdly, the traditional mechanism to avoid risk is to have a very strong balance sheet with plenty of “headroom”. That way, if things turn bad you can ride out the storm. Read More


Suid-Afrikaanse Nasionale Trust en Assuransie Maatskappy Beperk (Santam) is the largest short-term insurer in Southern Africa. The company has been in existence for 100 years and has developed and grown with the South African economy. Santam does not get involved in any kind of investment insurance. Basically, it insures you against risks which you cannot afford to (or do not want to) take yourself. So you cannot get an annuity endowment policy from Santam – but you can insure anything else.  It is instructive to look at a long-term logarithmic chart of the Santam share (SNT) price going back to 1985:

Santam (SNT) Semi-Log Chart August 1985 to September 2018 – Chart by ShareFriend Pro (Click to Enlarge Image)

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The R186

South Africa is an emerging economy, together with 18 other countries, whose economies are considered to be not as well developed, regulated and secure as first world countries. These countries are perceived to be growing more rapidly than first world countries amid high political risk. The higher political risk associated with emerging economies means that, for them to attract investment capital from the first world, they must offer higher interest rates.

So, for example, the South African government’s benchmark long bond, the R186, trades at an effective yield of around 9% at the same time that the US government’s 10-year treasury bill trades at a yield of around 3%. The difference between these two yields is a direct and objective measure of the political risk associated with South Africa. Read More

The Confidential Report – September 2018


The DA’s loss of Nelson Mandela Bay and its near loss of Tshwane are perhaps a sign of the shift in political power since Cyril Ramaphosa took over as president. Without the political incompetence of Zuma to work off, the DA appears to have descended into in-fighting and has clearly lost some support. The ANC, on the other hand, appears to have benefited from Ramaphosa’s on-going reform of key government institutions – such as the National Prosecuting Authority and with the new Integrated Resource Plan (IRP) which eliminates nuclear power and moves strongly in the direction of renewable energy sources. The EFF is doing its best to be king-maker in the hotly contested administrations like Tshwane. The weakening of DA support will be a major factor in the 2019 elections.

Steady and essential clean-up of state owned enterprises (SOE) by Pravin Gordhan, with the backing of the president is vital to the recovery of the South African economy. The recent settlement with the public enterprises director general, Richard Seleke, is a good example. Seleke was implicated in various Gupta-linked e-mails and came to some negotiated agreement with the presidency to step down. The nature of the agreement is not known, but it is clear that the process of getting rid of captured senior officials at the SOEs continues. Gordhan has come in for criticism from the EFF for being too autocratic and engaging in a “reign of terror” – but perhaps that is exactly what was needed. South Africa cannot afford to delay in this clean up. Seleke also faces criminal charges from OUTA for his involvement in state capture. Read More