Intellidex’s Peter Attard Montalto says the failure to release its report on SA has denied SA its ‘cathartic moment’ of actually knowing Moody’s opinion. More in Times Live

Peter Attard Montalto, head of capital markets research at Intellidex, says the failure to act by Moody’s will likely be marginally bad for sentiment in South Africa. Featured in Mail & Guardian

Peter Attard Montalto, head of capital markets research at Intellidex, analyses the latest interest rate decision on Business Day TV. Watch the full interview here.

Peter Bruce quotes “arguably the best analyst of the SA political economy” Peter Attard Montalto in lamenting the failure of hope at Eskom. More in today’s Business Day

Intellidex analyst Peter Attard Montalto speaks to Michael Avery on Moody’s call on SA’s sovereign rating and the Monetary Policy Committee’s interest rate decision. Listen to the full interview on Classic Business

Peter Attard Montalto, head of capital markets research at Intellidex, discusses the effects of the Moody’s ratings on SA. Watch the full interview on CNBC Africa

Intellidex analyst Peter Attard Montalto provides insights to Moneyweb’s Nompu Siziba on what the country can expect from the Moody’s announcement on Friday.  Listen to the full interview here

Eskom load shedding has not triggered greater urgency on national energy policy, says Intellidex analyst Peter Attard Montalto. Featured in today’s Daily Maverick

Long-term shrinking of per capita incomes would have profound fiscal and job-creation implications

This column was first published in Business Day

SA is a complex swirl of emotions: edginess, anger, despair and resignation. Most worrying is that such emotions apply to business too, putting the country at a very dangerous point — there is a risk of abandoning hope.

Hope should be carefully calibrated — both extremes are damaging. Too much of it leads to complacency, of which there was an excess in too many quarters between 2009 and 2018. Growth forecasts were constantly mean-reverting higher to precrisis averages despite the blatant evidence of serious damage being done.

Too much hope can mean people assume other people are doing the heavy lifting of reform and change or that solutions will magically present themselves because SA has been able to deal with its problems in the past. Some of this thinking infects policymakers now.

Panic is a good antidote to excess hope. As I wrote in December, we need to see hands-in-the-air panic on Eskom to drive change and clear political obstacles to taking the necessary decisions that are not being taken.

Moody’s Investors Service is quite clearly showing an excess of hope despite their framework being meaningfully shocked in October 2018 and now after the budget. As such we are unlikely to see any move in the rating level or outlook on Friday — indeed they may not release a report at all.

Just the right amount of hope is a necessary but not sufficient condition for a recovery in growth. Hope is another way of saying that companies and entrepreneurs are not overly risk averse and can take calculated risks with investment in an uncertain environment without derailing due to self-doubt.

Too little hope, and current growth falls and a lack of investment in productivity-enhancing improvements to human or physical capital lowers long-run potential growth.

This is the point at which we find ourselves at risk. Hope slowly faded during the Jacob Zuma presidency and resurfaced with force after the change of presidency in February 2018 and was sufficient to put a floor under growth falling significantly further but was insufficient without actual reform to meaningfully drive growth higher.

There was still a belief — a hope — that long-term potential growth, while driven down from 3.5% before 2008 to 2.0%-2.5%, was possible.

The Eskom situation risks removing this hope and making mean revision views of where the economy will go in future inappropriate. If no way out is seen and business invests even less than it has done in recent years,  meaningful damage will be done to potential growth.

Long-term potential growth of 1.5%-2.0% is very different to 2.0%-2.5% — it’s the difference between per capita growth increasing or not. Per head incomes would steadily shrink over the long term — a continuation of what was believed to be temporary since 2013. This would have profound fiscal and job-creation implications.

This is not to say that realism is not required. Load shedding is the sum of decisions made around Eskom for the past 25 years and the outcome of a standard way of doing business of a parastatal in a neo-patrimonial political economy. State capture only takes a minor part of the blame. Load shedding is unsolvable in the short run based on an interplay of random events triggering boiler leaks in a very fragile system that has not been appropriately maintained.

The government has been right to (just about) admit this lack of power in the short run. However, so much of the rhetoric has relied on blind hope that something is being done without the challenging decisions being taken to actually instil some real and credible hope in business.

Hope could be offered in so many ways, while boosting credibility, providing light at the end of the tunnel.

The department of energy and the National Energy Regulator of SA (Nersa) could declare an emergency roll-out of new small-scale embedded generation (SSEG) regulations to free the private sector to rapidly roll out units of up to 10MW, removing the arbitrary cap of 1MW. There are believed to be about 2GW of such SSEG capacity with applications submitted to Nersa ready to go. This would rapidly close part of the supply gap.

The department could declare an emergency renewable energy independent power producer programme (REIPPP) bidding window with relaxed conditions and take all bids below, say, 65 rand cents per kWh. Many such projects are ready with financing and such a process could force an additional 3GW-5GW of power onto the system, within as soon as 12 months.

The department could then concentrate on looking to gas peaking and battery storage potential in the next five years while Eskom’s older unreliable assets are mothballed and Medupi and Kusile shut down.

Hope ebbs away often when the solutions are easy yet are still not applied. As Carol Paton said in these pages last week, a toxic web of red tape, lack of capacity and inefficiency on top of politicking all keep the solutions from being deployed. Ultimately it is clear there is no panic to deploy political will to provide hope for business.

The risk is then that long-term growth will be 1.5%-2.0%, not 2.0%-2.5%, and that will be woefully inadequate to deal with the unemployment and inequality crises that are so easily forgotten when there is insufficient electricity.

• Attard Montalto is head of capital markets research at Intellidex.

According to Intellidex’s Peter Attard Montalto, Moody’s has remained unjustifiably optimistic about South Africa for too long and appears to be taking whatever the government says and promises at face value. Read more in Business Tech 

Moody’s could reduce its forecast for economic growth and raise its expectations for the fiscal deficit implications, says Peter Attard Montalto, head of capital markets research at Intellidex. More in Bloomberg

Peter Attard Montalto, head of capital Markets Research at Intellidex, says “The coming week should see only low stages of load-shedding and possibly only at the end of the week.” In Business Day 

According to Intellidex analyst Peter Attard Montalto government’s response (or lack thereof) to the Eskom crisis is telling. Featured in Business Tech

By Heidi Dietzsch

When a teacher asks, what do you want to do when you grow up, few children will raise their hands excitedly and answer, market researcher!

Rock stars, pilots and pixar animators would most probably top the list, while the more conventionally inclined want to become doctors and lawyers.

Despite the perceived absence of glamour associated with market research, it can be very fulfilling and interesting. The field is diverse and therefore a variety of characteristics make a good researcher, but the two core traits needed to be good at the job are analytical thinking and insatiable curiosity. When paired, these two characteristics create a researcher not only dedicated to the results, but also dedicated to the method.[1]

No one specific qualification is required but a bachelor’s degree is usually a prerequisite. Researchers have degrees in various disciplines including statistics, business administration, marketing, social sciences and communication. In some cases a psychology degree is necessary, especially for qualitative researchers, while some positions require a master’s degree.

As a market researcher you are required to perform a variety of tasks, including: liaising with clients, designing questionnaires, managing fieldwork teams, moderating focus groups, undertaking ethnographic research, monitoring the progress of research projects, analysing and interpreting data, writing detailed reports and presenting results.[2]

Successful market researchers also need to be friendly and approachable. They are expected to conduct personal interviews, moderate focus groups and brief fieldwork teams on a regular basis. All of these require good people skills and respondents need to feel comfortable in the presence of researchers. It is possible that their answers might be different if they feel under pressure, rather than being relaxed.[3]

Market researchers need to have the ability to stay calm in stressful situations. Many nerve-racking scenarios can play out during the research process. For instance: you are conducting an online survey and the fieldwork period is nearly over, but you don’t have nearly enough responses to complete our sample. Or, you are moderating a focus group and half of the participants don’t show up. And this is one most researchers will be familiar with: you have a strict deadline to deliver the final research report, only to realise that your data set contains errors. When these situations occur – and they will – researchers need to be focused, think logically and solve the issue.

Excellent written and verbal communication skills, as well as attention to detail, are important. Researchers need to be able to write reports and present results in a clear and understandable manner that make sense to a variety of audiences.[4] To interpret large volumes of data and telling an interesting story about it is an invaluable ability.

As a market researcher you will need the capability to adapt to rapid changes and will continuously have to embrace and master new technology. Today, the market research landscape looks completely different from 20 years ago and it will continue to evolve. Regular innovations disprove the saying that “there is nothing new under the sun”.

For instance, global research company Nielsen has developed the Consumer Neuroscience’s Video Ad Explorer (VAE), which delivers a comprehensive understanding of consumer response, evaluating non-conscious processing of attention, emotion and memory. This allows for the capturing of insights that might have been missed otherwise.[5]

The rise of smartphones as the consumer’s constant companion, as well as the interconnection of computing devices embedded in everyday objects, has unleashed exciting data collection and monitoring potential. These tools have the inherent advantage of being present at the exact point of problem solving or “instant of intent,” as it is called in the industry. With no market researchers present to bias the data collection process – which can happen in focus groups, for instance – respondents can be remotely observed and asked about their activities, needs and feelings as they occur in the real world.[6]

Most industries conduct market research, therefore an advantage of being a researcher is that you will learn a lot about different industries. However, many researchers tend to become specialists in a specific industry as they advance in their careers.

Another plus point is that the employment of market researchers is projected to grow 23% over the next 10 years, much faster than the average for all occupations. Employment growth will be driven by an increasing use of data and market research across all industries.[7]

Young graduates who start their professions as market researchers have ample opportunities to build a successful career for themselves. The industry allows for a great deal of learning opportunities and growth, together with creativity and innovation. Some market researchers become great leaders and innovators. One such a person is South African Dr Jannie Hofmeyr, a senior global thought leader at the Kantar Group.[8]

One of Hofmeyr’s biggest achievements was the introduction of the ConversionModel in the late 1980s. During this period the ConversionModel was a pioneering market research approach that considered both the customer and the market. More recently, Hofmeyr has been championing the use of expert systems and the integration of surveys with social media predictive analytics to disrupt the world of brand and image tracking.[9] He also studies the link between brand relationships and actual buying behaviour.[10]

There is no doubt that being a market researcher can be extremely taxing – demanding deadlines, difficult respondents, fieldwork disasters and data errors will always be part of the package. However, it is immensely rewarding when you are at the end of the research process and you’ve just delivered an insightful and meaningful report to your client. You’ve put in the hard work, correctly followed all the necessary steps, are confident that your findings are credible, and you know that your research will be used to make important business decisions.











Intellidex analyst Peter Attard Montalto says while Moody’s has given South Africa the “extreme benefit of the doubt” in the past, an outlook change to negative is very likely – based on the budget alone. In today’s Business Tech.

Bank results show customers are not particularly distressed with credit loss ratios surprisingly benign given the tough economy, says Intellidex chairman Stuart Theobald in his Business Day column.

Banks’ results for last year reflect an economy that grew just 0.8% in real terms

This column was first published in Business Day

Oh what a dull, decrepit time to be a banker, especially a banker in one of the big four.

Performance is a matter of the economy — banks’ businesses are so vast that they are stuck in the currents they find themselves in. About the best you can do is find ways to cut costs, with top-line revenue nigh impossible to grow in a market where no one wants to invest.

So the banks’ results for last year trickled out over the last two weeks and reflect an economy that grew just 0.8% in real terms or 4.8% nominally. Local growth for the big four banks was in the lower single digits on most metrics. For most, the top line was flat, with profits only nudged upward thanks to lower costs.

There are, however, some interesting areas of outperformance. Perhaps the clearest is FirstRand’s retail and business bank FNB. It managed to grow earnings 13% while delivering a market-thrashing return on equity of 42.2%.

FirstRand’s reporting cycle is six months out compared to the rest of the big four, so the figures are slightly flattered by a stronger second half last year. But only slightly. The return on equity figure is even more than Capitec’s, currently, the highest rated bank in the market (it earned a return on equity of 27% for the six months to August 2018).

FNB did it thanks to high efficiencies but also a big increase in personal loans which earn higher margins than other lending, growing 41% ( other banks’ personal loans also grew but not even at half that rate). FNB also grew mortgage advances faster than the market average at 6%.

Elsewhere, the stand-out feature was the contributions from rest of Africa. Standard Bank saw a lacklustre domestic growth in profits from personal banking of 3%, but rest of Africa quadrupled its personal banking profits to R817m. For the group as a whole, rest of Africa accounted for 31% of profits up from 28%.

At Nedbank, the group’s interest in Ecobank, long a governance and operational headache with a presence largely in West Africa, came to the rescue. It reversed a big loss the previous year into a contribution of R608m, helping profit growth to 14.5% rather than the 2.8% it would have been without it. At Absa, headline earnings for SA grew by 3%, but its rest of Africa business grew 10% in constant currency terms.

In a tough economy, attention quickly turns to the performance of borrowers. So far, though, the banks are not showing that customers are particularly distressed. Credit loss ratios, which show how much bad debt the banks have had to provide for, were surprisingly benign. Absa and Standard Bank managed to improve theirs, while FirstRand’s and Nedbank’s were flat to slightly negative.

There were accounting changes that muddied the waters around provisions and there were important base effects, particularly for Standard Bank which had written off amounts connected to an aluminium fraud the previous year, but partly recovered them last year. But on the whole, the performance reflects rather strong credit management by all the banks.

Credit performance remains a worry though. The financial distress that big companies such as Edcon and Group 5 are experiencing shows how difficult it has been in retail and construction, and we should see those problems filtering into bad debt figures particularly for corporate and investment banking during the current year.

In retail banking, however, despite unemployment continuing an upward creep, credit performance has been reasonable. I suspect that in part this has been helped by overzealous write-offs in the previous years that are now being written back into collection numbers. That was not deliberate smoothing, of course, but rather that debt models of two to three years ago were painting a particularly grim picture of the future. Luckily reality has been slightly better than feared.

For the year ahead it is all about costs. All of the banks have been reducing headcount and floor space. Standard Bank earned headlines last week for announcing that it would close 91 of its 629 branches in SA, losing 1,200 jobs. It had already reduced the number of branches by 11 in 2018. Absa reduced its SA outlets by 34 in 2018  and Nedbank by 82. Plus, the outlets that remain tend to be smaller format so overall floor space has been shrinking faster than the number of branches.

About the only cost line that will grow is for IT as banks invest more in digitising processes to help reduce costs. In part this reflects global banking trends — the big four are increasingly having to compete with branchless banks that can operate at a fraction of the costs.

Given the broader issues facing the SA economy, from power problems to election-driven political stagnation, the banking sector has done well overall to maintain its financial standing. But it desperately needs the economy to mount a sustainable turnaround before banking will be interesting again.

Ramaphosa’s strategy is to turn a blind eye to state capture when it comes to the election list, says Intellidex analyst Peter Attard Montalto. Featured in Moneyweb.

Read some of the findings of the 2019 Transformation in Banking report, which was commissioned by the Banking Association of South Africa (Basa) and compiled by Intellidex. Featured in Money Web.

The 2019 Transformation in Banking Report produced by Intellidex is covered in today’s Business Report.