“ 57% of clients rate their broker's service as excellent, up from 40% last year ”

- 2017 Top Stockbrokers survey

“ 6% of stockbroker clients execute trades worth more than R100,000 a month ”

- 2017 Top Stockbrokers survey

“ 40% of stockbroker clients average monthly trades of R5,000 or less ”

- 2017 Top Stockbrokers survey

“ 52% of clients have assets under management of between R1m and R3m ”

- 2018 Top Private Banks & Wealth Managers Survey

“ 39% of wealth clients have been with the same firm for more than 10 years ”

- 2018 Top Private Banks & Wealth Managers Survey

“ Of the 100 largest JSE-listed companies, 87 conducted BEE deals, 35 of which included public benefit organisations ”

- 2017 Empowerment Endowment

“ R32.6bn in endowments are now held by foundations set up as a result of BEE deals that will support charitable activities ”

- 2017 Empowerment Endowment

“ 50% of clients rate their wealth manager as excellent and 31% as very good ”

- 2018 Top Private Banks & Wealth Managers Survey

“ 33% of clients rate the value for money they get from wealth managers as excellent, against 18% for transactional banking ”

- 2018 Top Private Banks & Wealth Managers Survey

“ R51.6bn value created specifically for charitable recipients through BEE deals ”

- 2017 Empowerment Endowment

“ 81% of clients are very likely or extremely likely to recommend their wealth manager to friends of family ”

- 2018 Top Private Banks & Wealth Managers Survey
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Category: NEW PROJECTS

The Future of Energy

Intellidex’s The Future of Energy, a 36-page full colour supplement, was distributed in Business Day on 30 October 2018. It assesses SA’s energy sector, focusing on the state of the renewable energy industry. This is the second publication produced by Intellidex on this sector. The first, Five Years of Renewable Energy, came out two years ago when the environment was dramatically different.

Then, excitement was in the air: a new industry was being developed, new businesses were starting up as a result, foreign companies were pouring investment into the country.

Pride was also prevalent. From a base of zero, 6,800MW of energy capacity had been procured through four bid windows, with a third of that already contributing to the grid. For the first time, significant amounts of power were being generated by independent producers. State utility Eskom still holds a strangling grip on SA’s energy sector, but a chink had been cleaved out of its monopoly.

The process had been conducted professionally by the Independent Power Producer (IPP) Office, a unit jointly set up by the energy department and National Treasury. Extremely strict security protocols and levels of efficiency that are not exactly the hallmarks of other governmental departments won the IPP Office high praise.

That, and the falling prices that resulted from the auction process in which IPPs bid for prices at which they will supply electricity to Eskom, produced the sincerest form of flattery: countries across the globe emulated the IPP Office’s processes.

Mike Peo, Nedbank’s infrastructure head, said at the time: “There’s no question about it: at every international conference on energy, SA is being widely acknowledged as having the most successful renewable energy programme ever undertaken.”

That first publication celebrated this success. It remains a remarkable achievement for a country beset by so many socioeconomic problems.

As we were going to print with it, however, there were already rumblings from discontented quarters. Eskom started raising various objections to signing the power purchase agreements with the IPPs from round four, confusing its own financial difficulties with the financing of the IPPs. Its objections, despite contradicting cabinet-level decisions, created serious delays. Compounding the issue was then-president Jacob Zuma’s nuclear ambitions and a belief that the IPPs somehow undermined them, stopped the industry’s development in its tracks.

Today, the renewable energy programme is back on track but the environment is starkly different.

Back then there was perhaps a naivety in the sense of achievement in that there was little understanding of the extent of damage a few corrupt people in powerful positions could cause in pursuing nefarious agendas. Today that awareness is acute, honed by the near death of SA’s renewables industry.

There is now a growing sense of confidence at having overcome those travails. Having been so close to the brink, things are up and running again. But there is cautiousness too; an awareness of how quickly things can change, of how close the industry came to being permanently stunted. The excited teenager has matured into more world-weary adult, albeit one whose confidence in its abilities has been honed by its past successes, both in developing an efficient industry and in overcoming its political struggle for survival.

“When we started with renewables we just jumped in and swam,” says Karén Breytenbach, who as head of the IPP Office has overseen the entire renewable energy process. “Now we know; we have learnt. We need to be ready for what is coming, not just jump in.”

Much of the credit for rejuvenating the renewables programme can go to Energy Minister Jeff Radebe. He wasted little time in getting Eskom to sign the round four procurement agreements with the IPPs, notwithstanding continuing resistance from the utility – which introduced an element of absurd hilarity. Last-minute court applications failed to stop the process but Eskom continued to prevaricate and delay, right up to the signing ceremony. First they said they had no mandate to sign, which was immediately dismissed as nonsense. Then they tried to renegotiate prices and were again rebuffed. Finally, at the signing ceremony, the appointed Eskom official shifted in his seat patting pockets, saying he couldn’t sign as he had no pen. The minister, with alacrity, produced one from his jacket pocket.

Those 27 round four projects, Radebe announced at the signing, will inject R56m of new investment into the economy, put downward pressure on the end price of electricity and provide 61,600 full-time jobs of which 95% are for South African citizens, mostly during the construction phase. The local community equity shareholding in the 27 projects amounts to 7.1% or R1.6bn-worth, and those shareholders are likely to receive R5.9bn in dividends over the 20-year lifespan of the projects. Another R9,8bn will be spent on socioeconomic development initiatives and R3.4bn on enterprise development over the 20-year contract periods.

Radebe’s next big achievement has been the publishing of the draft Integrated Resource Plan (IRP) 2018, again in the face of resistance, this time spearheaded by the National Union of Mineworkers. That maps a path for South Africa’s energy future and instils a sense of certainty in the industry. Investment decisions can be made accordingly.

The main focus of this publication is on the future of energy in SA. It’s an exciting time: the IRP opens the way for independent power producers within coal and gas, introducing new elements of competition for Eskom. Indeed, the future structure of Eskom is pivotal to the future shape of the industry, and we explore options that might improve operational efficiency and financial sustainability. And the renewables industry itself is ever-evolving, with technological advancements and falling costs making it a compelling solution to the ever-increasing urgency with which planet Earth has to address the consequences of global warming.

Click here for the full publication.

 

 

The Empowerment Endowment

Since 2002, R51,6bn in value has been created specifically for charitable recipients through BEE deals, including community trusts, existing charities and newly established foundations. There is R32.6bn held by foundations set up as a result of BEE deals that will support charitable activities on a perpetual basis, while R19.06bn has been generated in contributions to public benefit beneficiaries, outside of the new foundations, some of which are existing endowments.

These are the main findings from a study conducted by financial research house Intellidex into trusts and foundations established from SA’s black economic empowerment transactions. The figures are based on an analysis of a sample of 35 companies’ deals, which includes all those of the 100 largest JSE-listed companies which had a charitable component to their BEE deals.

The full research findings can be found in the Empowerment Endowment by Intellidex, funded by FirstRand. Intellidex is solely responsible for the research and content of the report. FirstRand’s funding was not contingent on any of the findings contained in this report. The full report can be accessed here.

Key findings include:

  • Of the 100 largest companies on the JSE, 35 conducted empowerment deals that included public-benefit organisations as beneficiaries. These were mostly made up of trusts whose beneficiaries include the most in need in South African society.
  • In total, these deals resulted in value of R51.6bn of value for beneficiaries, made up of a mix of endowed assets and cash flows to beneficiaries.
  • Of those deals, 27 involved the creation of new trusts which have been endowed with assets to support foundations.
  • Collectively, the new foundations have endowments totalling R32.6bn. We estimate that these endowments should generate funding for philanthropic activities of about 10% per year, resulting in spending of over R3bn per year.
  • Most of the new foundations are structured with independent boards of trustees. However, the sponsoring companies usually retain some control over the investment strategies for the endowments, usually ensuring that the endowments remain invested in the sponsoring companies’ shares.
  • The new foundations support a wide variety of objectives, but education stands out as a priority area. We estimate that 67% of the financial resources the foundations command is focused on education-related funding objectives. This is followed by community development (10.6%) and entrepreneurship (8.4%).
  • It is clear that the assets and spending power of the new foundations will make a major impact on the overall philanthropic sector in South Africa. There is little comprehensive research on philanthropic endowments currently in South Africa. One sample of prominent foundations found a total of R12.6bn held in endowments (Gastrow & Bloch 2016). A study of corporate social investment in South Africa estimated annual total spend of R8.1bn (Trialogue, 2015).
  • Most of the new foundations are less than two years old and are still gearing up to launch full activities. The findings therefore indicate a change that is currently in the making and will have an impact in the years to come.

Sizwe Nxasana, chairman of the FirstRand Empowerment Foundation, has called for greater co-operation between sponsoring companies, trusts and foundations to maximise the impact of these initiatives. “Collectively the impact that these could make is far greater than any of us acting alone. This fact calls for innovation and coordination to really maximise the difference this legacy can make in the country.

“We should aim to develop, share best practice and collaborate where possible. Knowing more about each other and working together can only help,” he says in the introduction to the Empowerment Endowment report. “This research helps us to understand the lay of the land. By having a clearer picture of what other companies are doing, we can better shape our own activities to ensure a better overall outcome.”

Intellidex chairperson Stuart Theobald, who headed up the research project, says that the R32.6bn in endowments, of which most are destined to exist in perpetuity, can make a long-running difference to the lives of millions of South Africans.

“The key challenges facing these new entities are a shortage of skills and lack of infrastructure. Many are struggling to find the required staff to run operations. Foundations also have to think through the right operational model, that will balance efficiency with the need to be independent of their sponsoring companies. The use of sponsoring company infrastructure lowers costs, but can come at the loss of real independence in grant making activities.

“Foundations also have to find ways to manage the concentration risks inherent in their portfolios. All have major exposures to the shares of their sponsoring companies. This is an outcome of the current BEE regulatory environment which requires companies to maintain BEE-qualifying investment levels. But it leaves foundations with inefficient investment portfolios. Some have begun diversifying by using a proportion of cash flows to diversify their portfolios. But more creative solutions are surely feasible, such as total returns swaps, a form of derivative.

“There is clear potential for foundations to cooperate, both in dovetailing their programmes to maximise impact, and in sharing best practice, infrastructure and potentially in pooling financial risks and jointly supporting projects.

“The new foundations also bring a corporate culture, particularly in driving innovation, into the philanthropic sector that could have spin offs for the rest of the sector too. This could result in new innovations such as social impact bonds, philanthropy markets, activist investing, and so on.”

Methodology

The Empowerment Endowment report is based on a year-long research exercise into the charitable and community components of the 100 largest JSE companies’ empowerment deals implemented since 2002, when community schemes started to be included in BEE deals. It follows an earlier research report by Intellidex, The Value of BEE Deals, which considered the top 100 companies’ deals overall. The sources for this research included the published documents of the companies, but also extensive interviews and other engagements with various company executives to obtain information. Additionally, Intellidex interviewed several other individuals involved in philanthropy who provided background information and context.

Intellidex

Intellidex (www.intellidex.co.za) is a leading South African research and media company that brings together top financial analysis skills with media experience.

It produces research-driven content published in partnership with some of South Africa’s leading media companies. It also consults to a range of financial services companies to help them understand their markets better and produce better products.

Intellidex projects include:

  • Top Stockbroker of the Year survey (in partnership with FM Investors Monthly magazine)
  • Top Private Banks and Wealth Managers survey (in partnership with FM Investors Monthly magazine)
  • Financial Mail Ranking the Analysts survey
  • Most Empowered Companies survey (in partnership with Empowerdex and Independent Media)
  • Intellidex’s financial analysts also produce research on financial instruments and investment strategy. This includes sell-side research on listed instruments and valuations in partnership with brokers and other firms.

The company also undertakes significant research on various aspects of the financial services industry and capital markets each year. That research allows financial services companies, investors and the public at large to better understand the market and products available to them.

Intellidex was founded in 2008 by Stuart Theobald, Vuyo Jack and Chia-Chao Wu.