Intellidex head of capital markets research, Peter Attard Montalto, gives an analysis of the losses incurred at Eskom. Watch the analysis on SABC News here:

Intellidex head of capital markets research, Peter Attard Montalto, speaks to Al Jazeera about how embattled parastatals pose a threat to South Africa’s economy. Watch the full interview below: 


The risk of load shedding is still real as operational issues at Eskom were not fixed but were merely put to bed during winter. Those issues will return as summer draws closer, says Intellidex’s Peter Attard Montalto. Featured in The South African

A joint CEO and chairman for Eskom presents governance challenges and is not a sustainable solution even in the short run, says Intellidex’s Peter Attard Montalto Featured in Daily Maverick

There’s been massive build-up of financial stress at state-owned enterprises. Some are really right on the edge and require significant amounts of taxpayer support, says Intellidex’s Peter Attard Montalto. Featured in Al Jazeera

Strong leadership is needed to sweep aside ideological cobwebs to drive reforms but government has shown we cannot expect this

This column was first published in Business Day

SA has never had macro-level austerity in any real sense in recent years. Expenditure has continued to grow even in real terms in ever year bar a small dip in 2016/2017. Indeed, expenditure this fiscal year will grow about 11.6% including the special appropriations bill.

This was the fallacy of the Pravin Gordhan years of fiscal “prudence”, which were driven off a noncredible view of long-term potential growth, backed up by analysts blindly accepting the paradigm.

Ratings agencies, such as Fitch Ratings last Friday, will now drive the reality home: growth in per-capita terms is at best around zero (that is, headline growth around 1.7%) in the coming years.

Gains from improved collection by new management at the SA Revenue Service will be offset by emigration and lower growth than forecast. There are no gains to be had from higher taxes — they will simply reduce buoyancy more. Debt service costs will climb faster with higher debt.

All these populist pressures will be dressed up as ‘Thuma Mina’ and social compacting, but the reality is that the issues here are no-one else’s to solve but the government’s.

Eskom has eaten up all the space for doing anything interesting with expenditure to support growth. Instead, raising more debt for this will crowd out private sector investments the government so sorely needs to turn sentiment. The government is on the one hand asking the private sector to invest more in the economy while on the other asking for more money into government bonds. It cannot do both.

The result is that the abstract concept of “misallocation of capital” is now, for the banking sector and asset management industry, becoming the reality, hence low growth and low productivity growth get entrenched.

National Treasury will always be trusted to utilise to the maximum extent possible the political space it has to ensure fiscal sustainability. However, there are no easy options left. The result will be that status quo at state-owned enterprises and public sector wage increases are protected for ideological reasons stuck in the 1960s, but programmes are cut. The government will become more grossly inefficient and unproductive as a result.

The Treasury has started this process with its current negotiations into the October medium-term budget policy statement, laying down scenarios for discussions of reductions versus budget of 5%-7% in expenditure. This is huge in logistical, growth impact and political terms. It would shave off R47bn and R50bn in the coming two fiscal year.

Such cuts will limit the ability to implement reforms and limit the optionality for the government going forward, but there is no option. It is too late. They will be required not so much for just Eskom’s bailout but to offset the underlying weakness in the fiscus.

While it is uncertain if these scenario-based cuts will survive the budget process through cabinet, it shows the real intent of the Treasury to drive home the realities. They could be blocked but they will have tried to keep the show on the road.

This has blowback for the Cyril Ramaphosa faction into the 2022 elective conference (and the 2020 national general council). The question will not be “did you keep the show on the road”, but “what did you do to the rent pie?”

This will drive a desperate hunt for more populist routes, including more pressure for rate cuts and QE (quantitative easing) from the SA Reserve Bank, more lending from state development banks, more pressure on local banks and asset management, and with it prescribed assets chatter will reach fever pitch. These factors will achieve little or set back growth by damaging credibility and sentiment further.

The Bank is not here to do the heavy lifting the government is meant to do. Even if it did cut rates sharply there would be a one-off growth spurt that would then quickly die back to a lower growth rate than now as credibility was lost.

All these populist pressures will be dressed up as “Thuma Mina” and social compacting, but the reality is that the issues here are no-one else’s to solve but the government’s.

This is not just about things such as visas and industrial policy not making progress, but also “fallout risk” of making the situation worse. The best example of this in the coming weeks will be an unfundable, unworkable, unconstitutional National Health Insurance (NHI), which can only work by restricting private property rights and private access to health care into a centralised system that will be a fertiliser bed for future state capture while driving medical professionals overseas.

The turnaround at Eskom, however, is the most acute example of the strong message that nothing is happening. No political capital is being deployed and problems have been kicked down the road to a chief restructuring officer that should hopefully be appointed this week. Investors now realise that ideological blocking forces in the government are preventing reforms proposed by the task team to keep the status quo. That coal will crowd out renewables and unbundling may be in name only. Private participation may well eventually happen, but with no minority shareholder rights if some in the government get their way.

Downgrades will further limit political options and ability to implement and reform with such a politically risk averse leadership, and indeed will increase calls for populism. Once you are over the “scary” hump of downgrade calls for fiscal restraint, it will be easier to brush aside.

For me, it is these psychological impacts of a downgrade that are far more important than the short-run market and economic impact themselves.

What is needed is fiscally zero-cost reforms that allow the private sector to step in and drive growth, job creation and development. The only way to do that is strong and immediate leadership to sweep aside blockages and ideological cobwebs. The past two months have shown, however, that this should not be expected.

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

Eskom needs to appoint a restructuring officer and advisors, formulate a plan, get the plan approved and then execute the plan. This is likely to take a year before any unbundling can occur, says Intellidex’s Peter Attard Montalto. Featured in Tech Central 

Classic Business with Michael Avery speaks to Intellidex analyst Peter Attard Montalto on the Special Appropriation Bill in relation to Eskom. Listen to the full interview below:

The lack of detail on what the Eskom cash injection will be used for or how it will be funded is disappointing, says Intellidex head of capital markets Peter Attard Montalto. In Bloomberg today

By: Heidi Dietzsch

There is one sure thing in this world we live in and that is change. Various developments and innovations, especially technological innovations, are reshaping the world faster than ever before. This is certainly the case for market research.

Change is, however, never without challenges. The future of market research is full of challenges – how to incorporate and use new technologies, how to redefine the role of researchers and how to build and strengthen partnerships with clients,[1] among others.

For decades, market research was in a stable, comfortable position, but is now being forced to evolve and revolutionise to keep up with a society that is changing rapidly. These could be scary times indeed for market researchers who are unwilling to adapt. Data quality, respondent recruitment, traditional methods and even the purpose of market research have all been subjected to transformation and will undoubtedly lead to uncertainty.[2]

One of the main changes relate to the survey as we know it. For the longest time surveys have been at the forefront of data collection. However, the growth of smartphone penetration globally has brought a great deal of change to traditional surveys.

A big challenge of orthodox surveys is that respondents need to rely totally on their memories – which is not always to be trusted. One of the solutions to this are short intercept surveys (SIS) where respondents document their views and perceptions on their smartphones while busy with a particular action – for instance, buying a new product at the store. SIS are short and unlikely to cause respondent fatigue and are done while requested information is still fresh in respondents’ memories.[3] Michalis Michael, the CEO of UK market research firm DigitalMR, believes that these types of studies will eventually replace long monthly customer tracking studies.

Michael also believes that social listening analytics will become an absolute must-have for market researchers.[4] Social listening entails the monitoring of a brand’s presence on social media, followed by an analysis of the perceptions social media users have of the brand. This tool allows brands to realise how big and influential their presence is in social media, how many mentions they receive and on which channels, and whether these mentions are positive or negative. Also, brands can see how they compare to their competitors and whether their image and reputation are favourable.

Social listening analytics can also enable brands to take concrete action. They can create the kind of social media content that attracts clients, come up with new ideas – and even products and services – based on industry trends. Brands will be able to improve the customer experience by interacting directly with clients and continuously shift their customer strategy to fit the current need.[5]

Another rising trend is the use of passive data that is collected without specifically asking people for it. This is also called implicit data. Conversely, use of active data or traditional data relies on the participation of people and is known as explicit data.[6]

Kristin Luck, founder of US management consultancy ScaleHouse, believes that market researchers will increasingly make use of passive data.[7] Passive data collection has signalled the era of big data – the volume of data which you can gather in a short space of time can be staggering. Imagine the scenario: people are purchasing on an app. It might only take them a few moments to complete the purchase but in that short space of time researchers can glean their location at point of purchase, their interests, their spending behaviour and preferences on payment methods. If they’re using a loyalty card, you then have all that information to mine as well.

The passive data collection process requires minimal involvement from researchers themselves. However, the researcher’s role as an analyst who mines a vast quantity of data to pinpoint key information will become more important.[8]

As in most areas of our everyday lives, market research is progressively becoming automated. This is good news for clients – who need results yesterday – as well as for researchers who can now free themselves of time-consuming tasks and focus on generating insight.

One of the most difficult tasks in market research is to recruit respondents to participate in studies – that is, enough respondents to reach clients’ samples and also fit their sometimes very specific respondent criteria. This process has become more and more automated due to the increase in aggregation services. These services refer to sample vendors that use multiple sources to create larger, more accessible respondent panels. While the premise of aggregation is simple, it is the filtering and selection technology behind it that thrusts vendors into automated territory. By simply selecting a few basic parameters, these panel providers send invitations to relevant respondents, making it easy to fulfil nearly any client requests.[9]

Then there is artificial intelligence (AI). People tend to confuse AI with automation, but these two concepts are not the same. Even in its most complex forms, when a task is automated, software follows the instructions it has been given. The software does not make any decisions or learn something new each time the process runs. Learning is what distinguishes AI from automation.

AI can empower researchers with insights and analysis that would not have been possible previously. For instance, it has the ability to process open-ended data or large, unstructured datasets using statistical analysis techniques.[10]

All these new developments and technological advancements can certainly create a sense of unease – especially in an industry that is renowned for its tried-and-tested methods. Nevertheless, they do have strong potential to enhance market research and help ensure the survival of the industry. Stalwarts desperately clinging to the “good old days” will, unfortunately, not be so lucky. New technologies should be embraced and researchers must be willing to learn and adapt. Most importantly, however, deep insights require the creativity and imaginability that no machine will be able to replace.

[1] https://www.researchworld.com/the-future-of-market-research-challenges-and-opportunities/

[2] https://www.insites-consulting.com/the-3-futures-of-market-research/

[3] https://www.digital-mr.com/blog/view/2019-predictions-future-market-research

[4] https://greenbookblog.org/2015/02/09/10-predictions-about-the-future-of-the-market-research-industry-in-the-digital-age/

[5] https://blog.hubspot.com/service/social-listening

[6] https://blog.hubspot.com/customers/converstional-data-collection-active-passive

[7] https://greenbookblog.org/2018/10/15/the-future-of-market-research-and-insights-is-passive-data-collection/

[8] https://blog.flexmr.net/passive-data-collection-vs-observational-research

[9] https://blog.flexmr.net/market-research-automation

[10] https://blog.flexmr.net/artificial-intelligence-market-research