The new carbon tax is “a bad idea” because government has delayed reforming SA’s energy sector, blocking the shift away from carbon intensity that the tax seeks to encourage, says Intellidex analyst Peter Attard Montalto in Business Day.

Intellidex analyst Peter Attard Montalto struggles to see real economic reformers, policy wonks and implementers entering cabinet. Featured in Business Day

Get to know Intellidex’s head of capital markets research Peter Attard Montalto through an entertaining question and answer article in this week’s Financial Mail

“I can’t think of anyone within Eskom who has the political savvy and technical knowledge required of the CEO, or who would want the position,” says Intellidex analyst Peter Attard Montalto. Highlighted in Bloomberg 

NHI, Reserve Bank nationalisation, the Mining Charter, the Credit Amendment Bill and the manner of land reform are but a few issues that could stand in the way of growth-inducing reforms

This column was first published in Business Day

SA is full of contradictions and things that don’t make sense. It will be the job of the new administration — in the process of being appointed as this column goes to press — to pick at these knots.

Firstly, what are the binding constraints on growth and how are these nested inside each other? The year 2018 showed that growth was harder to kick-start than expected. Removing “negatives” was not sufficient and whilst sentiment improved, animal spirits did not return. (Economist John Maynard Keynes coined the term “animal spirits” to refer to emotional mindsets.) The first quarter of 2019 was the same, masked by load-shedding, underlying growth would have actually been exceptionally weak anyway even if there hadn’t been load-shedding.

A further improvement in sentiment after the elections will not cause growth and the resumption of animal spirits without someone opening the taps. Given the constraints on the fiscus and monetary policy, that is going to have to be banks. However, bank cost-cutting and risk aversion are likely to mean a large-scale leap higher in credit growth is unlikely.

Banks did not come to the party in 2018 and so credit growth dropped to only 5.6%,  the weakest since 2011. We see it only recovering to 6.4% growth in 2019 . Credit booms can be unhealthy and are unsustainable, but are a useful bridging mechanism before the impacts of structural reform can take root.

Two other binding constraints are skills and electricity, and these show further contradictions here. If the economy couldn’t find the skills when it was growing at 1%, how will it find them quickly enough when growing at 2%, 3% or 4% ? Education and skills problems in the country are eminently solvable — but it takes significant time. The quick fix is importing large numbers of skilled immigrants (including into key state-owned enterprises management) — and is yet again (as I’ve written here so often) why the visa issue will be the key issue to watch.

The same is true for electricity. With the system unable to cope at 1% growth, how will it cope with faster growth? Yes, we will have more Renewable Independent Power Producer Procurement windows from later in the year and an Integrated Resource Plan eventually, but with no new investment since 2014 it will take at least 18 months to start seeing new capacity. New capacity from Medupi and Kusile will come on-stream but with required mothballing of old plants and efficiency issues of new units running anywhere near their nameplate capacity, so that is not a silver bullet.

In 2018 also taught that clean-up was not sufficient for growth. This needs to be borne in mind in the coming year as we see a fresh cabinet that is clean as necessary but not sufficient for growth. The far more important qualification will be implementation skills, raw management capability and the ability to manage change.

The point here is that if positive change can come, the constraints of growth will take time to be lifted.

The economy is basically in a kind of South African-style Japanese deflation, with low growth reinforcing low expectations and reinforcing risk aversion, and that in turn reinforcing low growth.

The Public-Private Growth Initiative process on the surface is another form of statist Industrial Action Policy Plan-style command and control, yet is possibly one way to kick-start things. But it is not a sustainable way of running an economy and risks reinforcing the same statist mindset into policy-making.

The next contradiction is that SA has no growth, yet it has all the right plans. I think one of the most negative things we could see from the new administration would be the announcement of a new economic plan formation process involving more summits. All plans are already on the table. There is always an obsession within ANC circles of finding low-hanging fruit that no one else has thought of. Indeed, I’ve often been interrogated by ANC members as to some secret growth-boosting policy that for some reason is being kept secret …

That ultimately comes back to mindset and the need for implementation. A reformed presidency may be able to shift the dial somewhat but capacity constraints and vested interests will come back to bite. Hence a running jump on implementation is needed.

In the coming months, we need to be careful to split PR from substance, policy from implementation. This will be most critical with Eskom but also visas and other reforms. We should also be cognisant to consider reforms in “net” terms. In other words, two steps forward can be offset by a step backwards.

This is especially true of the National Health Insurance, Reserve Bank nationalisation, the Mining Charter, the Credit Amendment Bill, prescribed assets and the manner of land reform.

“Negative reform” to coin a clunky phrase, can hold the economy in this South African-style Japanese deflation. Adding in political contestation and factionalism can only make those issues worse,  as well as 19 extra EFF MPs. Such issues can’t simply be kicked into the long grass.

Investors are surprisingly sceptical, seeing my view that we get back to 2.0% growth in three years as rather bullish! A poll of investors Intellidex conducted before the elections showed only a one-third probability of successful implementation of meaningful growth-boosting reforms in this parliamentary term. Investors have seen already strong PR and a glossy message during interactions with the president but been more sceptical about the substance. The same is true of local businesses as well when the supportive veneer is peeled back.

Growth is hard. The global environment is making it doubly so. SA doesn’t need a long walk to reform but, with a wild run and jump towards the goal. It’s now or never.

• Attard Montalto is head of Capital Markets Research at Intellidex.

Intellidex’s Attard Montalto is expecting a series of positive “big bang” announcements and events over the coming month that will stoke fresh “Ramaphoria” and broadly keep SA assets on the front foot. In today’s Financial Mail

Peter Attard Montalto, head of capital markets research at Intellidex, says that absence of Gigaba, and Mokonyane from Ramaphosa’s mooted new cabinet is largely market positive. Featured in Business Tech 

While the Financial Mail rankings represent the views of asset managers and other institutions in SA, the Extel rankings are based on the opinions of institutional investors in the rest of the world. You will be able to see both in the magazine next week in one package.

As South Africa’s capital markets have become increasingly traded by foreign investors, their opinions have become more important. Many South African-based brokers target a worldwide customer base.

The Extel survey assesses teams for their coverage of SA, rather than individual analysts as the FM rankings do. The Extel results are derived from an online survey conducted in March and April covering asset managers in approximately 55 countries. The FM rankings are based on a survey of 40 institutions, but the feedback is broken down into 40 different research sectors, ranging from large cap equity analysis to analysis of derivatives and risk management. The FM’s firm rankings are then based on a weighted addition of each research sector. Read more on Extel’s role here

By Heidi Dietzsch

Creating a well-designed survey but no one completes it is a bit like throwing a huge party and no one pitches up.

The market research process consists of many important steps, but probably the most vital is to entice potential respondents to participate in a study. All the other steps might have been perfectly executed – you even have a visually compelling online survey in place – but if people don’t complete your survey, it’s is as good as doomed.

There are many reasons why people are hesitant to complete surveys, but there are ways to diminish this unwillingness.

Possibly the main reason is that the questionnaire is too long. Researchers often feel they want to gather as much information as possible and need to ask lots of important questions. However, overly long surveys can have the opposite effect than was actually intended. A 2017 study (Consumer Participation in Research) conducted by GreenBook investigated the impact of poorly designed surveys on research quality and respondent experience. It found that 45% of respondents believe that surveys should be take less than 10 minutes to complete.[1]

Ensure your survey is short and concise. Expecting respondents to participate in a very long survey might convey the impression that you don’t value their time and disregard them as being unimportant. Respondents are the lifeblood of market research and should be treated fairly and with respect. Apart from low completion rates, lengthy surveys can also result in poor data quality because respondents might rush through it without really considering the questions.

People are usually willing to participate in surveys, especially if they have a vested interest in it, or if they believe the research will lead to positive change. However, if participation requires additional effort – for instance if respondents are asked to check which brands all the electrical appliances in their homes are – they will lose interest fast. You are already asking them to take time out to complete the survey but now you are also expecting them to step away from their computers or cellphones and do extra work. Few respondents will adhere to such a request.

Respondents’ boundaries should also be respected. To researchers, online surveys can seem like a conveniently impersonal way of asking people for information. After all, it’s easier to ask people sensitive questions when you are not dealing with them personally. However, for respondents, those questions can be just as sensitive as they would be in person. Asking questions that make respondents uncomfortable can cause a great deal of respondent fatigue.[2]

Researchers know too well that not all topics are easy to talk about. People will naturally shy away from certain subjects  because they are deemed to be too personal, stressful or sacred, or they fear stigmatisation.[3]  Controversial topics that might cause respondents to think twice before taking part include personal income and finance, sexual behaviour, illegal behaviour, drug and alcohol use, religion and health – especially mental health.

It might be necessary to minimise the number of controversial questions or exclude them altogether, although this can affect the robustness and granularity of the data. Otherwise, such questions can still be included in the survey but shouldn’t be mandatory. If respondents cannot skip a sensitive question they will most probably leave the survey at that point. Researchers should also think of clever ways of making these types of questions less offensive so that respondents are more likely to answer them.

Many respondents would prefer to complete surveys on their smartphones. Researchers should ensure that surveys fit perfectly onto a small screen device with the question layout in exactly the same format as it would be on other devices. It’s extremely frustrating if a survey on a smartphone requires considerable up and down and left to right scrolling. This is also likely to result in many respondents abandoning the survey.

Non-responsiveness is not the only obstacle: another is respondent bias. This occurs when respondents are unable or unwilling to provide accurate or honest answers to a survey. This could be due to various reasons, but most often it’s due to unfamiliarity, respondent fatigue, faulty recall, question format and question context.

Acknowledging this, researchers need to be vigilant in framing their questions clearly and to the point. But even the most well framed and thought-out questions are not bullet proof to inaccurate answers. That is why it is imperative that every question has an opt-out choice. This is usually in the form of a “Don’t know,” “Not sure” or “Undecided”. Not only will adding the opt-out choice eliminate a lot of inaccurate answers, but it will also provide researchers with valuable information. For instance, you can learn how many people have not made up their mind or are uneducated on a topic.[4]

Unwillingness to provide accurate or honest answers might also stem from a phenomenon called social desirability bias. This occurs when respondents feel pressured, either internally or externally, to provide a socially desired response. Accordingly, the information from these respondents will be biased and will not accurately reflect the target population.[5]

Social desirability bias is particularly prevalent when respondents participate in employee satisfaction surveys, political polls or behavioural studies. For instance, when employees are asked to rate their working environment or manager, they might give a more favourable rating than they actually feel to be the case out of fear of being ostracised in the workplace. It can also lead to over-reporting “good behaviour” or under-reporting “bad behaviour”.  This can happen even if employees are ensured that the information they provide is anonymous.

Similarly, voters may tell pollsters that they are undecided or will vote for the socially acceptable option while planning to vote for a more controversial candidate on election day. Also, when confronted with the question, “How many glasses of alcohol do you consume per week?”, respondents will tend to downplay this number. Similarly, research on feelings of insecurity has shown many times that men tend to downplay their feelings of insecurity as they are – rather stereotypically – expected to have less fear than women.[6]

Of course, participation rates can be increased by offering incentives. There are many ways in which respondents can be incentivised and it can be monetary or non-monetary. The value of the incentives will depend on the type of project and the amount of time the respondent will spend taking part in the survey, as well as the topic being researched. When research topics are very sensitive or personal in nature, the value of the incentive generally needs to be higher.

Studies have shown that cash is king and is most likely to pique the interest of potential respondents. Non-monetary incentives such as thank you gifts are less successful in increasing response rates.[7]

Disregarding the respondent experience in the research process is unproductive and senseless. Respondents are doing you a favour by participating in the research and this should be valued. Survey participation should be a pleasant and informative experience, and should not be associated with washing dishes, preparing taxes or standing in lines at government departments.

[1] https://greenbookblog.org/2017/04/25/why-most-respondents-dont-like-participating-in-research-and-what-we-can-do-about-it/

[2] https://www.surveymonkey.com/curiosity/eliminate-survey-fatigue-fix-3-things-respondents-hate/

[3] https://antedote.com/9-tips-research-sensitive-topics/

[4] http://fluidsurveys.com/university/tips-for-avoiding-respondent-bias/

[5] https://www.survata.com/market-research/resources/social-desirability-bias/

[6] https://www.checkmarket.com/blog/sensitive-topics/

[7] https://www.surveymonkey.com/curiosity/offer-survey-incentives-without-sacrificing-good-data/

Johannesburg -For the first, time, the annual Financial Mail Ranking the Analysts results will include the views of global investors.

Next week the FM will carry this year’s results of the highly sought-after awards and ratings for analysts who service institutional investors in South Africa. Intellidex, which conducts the research for the survey, has now included the Extel/Institutional Investor rankings of South African sell-side industry by global investors.

While the Financial Mail rankings represent the views of asset managers and other institutions in SA, the Extel rankings are based on the opinions of institutional investors in the rest of the world. You will be able to see both in the magazine next week in one package.

As South Africa’s capital markets have become increasingly traded by foreign investors, their opinions have become more important. Many South African-based brokers target a worldwide customer base.

The Extel survey assesses teams for their coverage of SA, rather than individual analysts as the FM rankings do. The Extel results are derived from an online survey conducted in March and April covering asset managers in approximately 55 countries.

The FM rankings are based on a survey of 40 institutions but the feedback is broken down into 40 different research sectors, ranging from large cap equity analysis to analysis of derivatives and risk management. The FM’s firm rankings are then based on a weighted addition of each research sector.

For further information on the Financial Mail Ranking the Analysts survey, click here.