Monthly Archives: May 2019

Horizontal Count on Afrimat

Afrimat was originally a construction company which specialised in the supply of what are known as “aggregates” to the road-building industry. With the collapse of the construction industry following the 2010 Soccer World Cup, Afrimat set about re-inventing itself to become a mining company.

The decision to rely less on the road-building industry has paid handsome dividends. It began with the acquisition of the Demaneng iron ore mine in the Northern Cape. More recently (on 8th April 2019) it announced that it had put in a firm offer to buy Universal Coal Plc., a company listed in Australia but which has operations in South Africa. Afrimat has offered R2,1bn for the business which mainly supplies coal to Eskom through contracts valid until 2023. Read More

The Foschini Group

The Foschini Group (TFG) has done things that other clothing retailers have apparently been unable to do. The retail trade in South Africa has been beset by low consumer spending and fierce competition from overseas brands like Cotton On. Large iconic brands like Edgars are teetering on the edge of bankruptcy and yet TFG seems to be able to continue growing its sales and profitability.

The retail clothing business is extremely difficult to manage because of constantly shifting fashions and the need to keep stock levels under control. Rapid, accurate responses are needed to the ever-changing fashion world so that stores can display those styles of clothes which their clients are reading about online.

TFG said that it experienced difficult trading conditions in all three countries where it operates – South Africa, the UK and Australia and yet its results were outstanding.  In South Africa, turnover in the year ended 31st March 2018 was up by 8,9%, in the UK up by 31,3% and 58,3% in  Australia.

Working capital management is critical in this business. This means minimising the amount of capital tied up in stock and debtors. On the debtors side, 72% of TFG’s business is done in cash so the company is not dominated by its debtors’ book. Read More

Transaction Capital

Transaction Capital (TCP) describes itself as “an active investor in and operator of credit-orientated alternative assets”. This is a fancy way of saying that it goes where no one else dares to go in the new South Africa. It has made highly profitable businesses out of financing and servicing the burgeoning mini-bus taxi industry and also out of buying up high-risk debtors books for a fraction of their face value and then systematically collecting the outstanding amounts.

Both of these industries are risky, but both also have enormous potential to be profitable. Transaction Capital has made an excellent business out of finding high-tech ways to reduce the risks which leaves it free to exploit these two “under-served segments of the South African and Australian financial services markets” almost without significant competition. Read More


FirstRand (FSR) is a company listed on the Johannesburg Stock Exchange (JSE), well renowned and highly favoured by big institutions because of its large volumes (trading daily on average 1.3 million shares per day) and its quality management.

It operates in 10 African countries, and has platforms in Africa, Asia and Europe. It also has representative offices in Dubai and Shanghai, as well as a branch in India. The company was founded by Laurie Dippenaar, G.T. Ferriera and Paul Harris in the 1970’s. With a market capitalisation of R355bn, it is by far the largest banking group in South Africa. FNB offers a diverse range of banking products to consumers, small and large businesses and government departments. Wesbank is the largest asset financing company in Southern Africa covering vehicles of all types, both private and consumer, as well as aviation assets and agriculture. It also has operations in the UK and in Africa to the North. Ashburton is in asset management and related markets in the UK. RMB offers corporate and investment banking in 35 African countries. Read More

Learning from Steinhoff

The Steinhoff debacle, which really came to an end on Wednesday when they published their re-stated financials for the 2017 year (reported in Business Day of 9th May 2019), contains some vital lessons for private investors.

The financials reveal a web of companies which were used by a group of unscrupulous executives to move money around, overstate profits and obscure fraudulent transactions.

Clearly, the investing public and even the highly-qualified and experienced analysts at various asset management companies like Coronation, Allan Gray and the Public Investment Corporation (PIC) were fooled into thinking that Steinhoff was a solid blue chip company which was growing rapidly.

Steinhoff’s financial results were analysed exhaustively. Steinhoff executives were interviewed and questioned about various aspects of the business. Auditors did numerous spot checks of the figures and wrote clean audit reports. Nobody realized until it was too late that the structure and the published results were just “smoke and mirrors”.

How can a private investor with limited time and resources protect himself against this type of cataclysm? Read More

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