What is to be done in reducing Eskom’s towering debt? Intellidex’s Stuart Theobald helps us answer this question. Featured in the CBPEP Colloquium 2020 conference report. 

Scant insight into how government’s decision-making works is a problem that infects business and investor confidence.

This column was first published in Business Day. 

There is a strange omertà in the ANC that they don’t often spill the beans on how decisions are made. Notice how there are lots of books from analysts on politics, but political autobiography just isn’t a thing in SA.

It took many years, and the Zondo commission, to start to pry out details on state capture. Not the high-level narrative which was already well known, but the intricate details of who said what to whom and when.

During March to June, at the height of the coronavirus crisis, decisions were coming out of government with seemingly little advice, no public consultation and with glaring contradictions.

When was the last time anyone who used to work in the National Treasury wrote a book? The Treasury seems happy just to pop its head above the swamp twice a year as it hunkers down to protect the institution.

Viewed from afar, economic policy decisions can appear chaotic. Closer up, even more so.

The management of the economic cluster in the cabinet is a key example, as is its failure to come up with any decent, cohesive plans given its leadership’s tendency to spout easy platitudes.

Why is all this important? Because we have a problem that infects business and investor confidence, because we have a challenge in understanding the machine.

There are several possible reasons for things happening or not.

The first is the technocratic impulse to make the country a better place and solve its problems.

Second, this is then bogged down in a world of left-leaning, state-loving arguments regardless of if there is any money, capacity or ability for the state to deliver.

Third, things are reflected through a lens of vested interests including those of the unions, communist party allies, big business, and through the obsession with the social compact.

Now throw in some egos and a whole lack of state capacity and you begin to see why things are simply stuck in the mud.

The issue for business and investors is what percentage of the problem pie do you assign to each of these buckets?

The president would like us think it is mostly about capacity. But is that a limiting constraint? If you solved the problem of capacity, would dealing with rent extraction and vested interests still dominate? The issue that is not appreciated is that all these factors are interlinked and co-dependent.

We can apply some important issues to this framework.

If we take the fact that the government has made no fuss about the major step of gazetting a section 34 determination that will allow bid window five of the renewable energy independent power producer procurement programme to occur, you must then ask why.

There are good people around the president who might understand how important it is to trumpet this. But then we get stuck at the vested interest and rent extraction stage. It would seem that for so much of policy — spectrum, for example — one cannot trumpet and promote one issue ahead of others.

The same is true for SAA. No sound costed and transparent proposals have been made for why R10.4bn should be provided by the state when it will come from slashing infrastructure budgets.

The technocratic urge has not been there. Then you get a layer of ideology (the state must have an airline) and vested interests with the unions, and the need to stick with ANC resolutions, and you then have the SAA money drain going on and on.

Private sector capacity has been brought into the department of public enterprises to accelerate this crash-landing. But this also shows where this framework breaks down. The ideology, the vested interests, don’t seem to count for enough to explain what’s going on. At its heart, is it just fiddling for the sake of it in an ego battle?

The president has clearly picked the department of public enterprises over the Treasury, but on whose advice? Has he asked why SAA is not even really part of a cohesive wider transport policy? Does he then understand the consequences for a forthcoming World Bank loan? Does he know what this means for the public sector wage bill and the court cases around it? How can decisions be taken like this?

All of this breeds uncertainty and is why radical sunlight is needed and much more transparent decision-making too.

As long as decision-making is messy and in private it will remain easy for bad decisions to be made and we will only really know when it is too late.

Attard Montalto is head of capital markets research at Intellidex.


The debate around a basic income grant has been going on for about 20 years. While it could reduce poverty in SA by as much as 75%, affordability is the issue, says Peter Attard Montalto. Featured in Business Tech.

A compact does not bind any party and is not ‘the government recovery policy’ – even if a Nedlac plan is ‘noted’ by cabinet, notes Intellidex’s Peter Attard Montalto. Featured in Business Tech. 

The politics was decided some time ago as there was a resolution within the ANC’s NEC that SAA needed to be saved, says Intellidex’s capital markets analyst, Peter Attard Montalto, in his interview on 702.

This column was first published in Business Day. 

How is the sorry saga of SAA going to end? We are stuck in an Alice in Wonderland that company law writers could never have predicted, with a party repeatedly promising cash and failing to deliver, but creditors stuck with nothing to lose in waiting and hoping. Meantime, the business rescue drifts on, burning cash as it goes.

Creditors are meeting again this week to decide what to do after the government missed yet another deadline last week to arrange financing for the airline. A cabinet meeting is also supposedly going to come to final decisions on how to fund the rebirth of the airline. It has already promised R10.3bn to cover liabilities incurred and must inject more to finance its rebirth.

I have tired of asking why the government is so committed to this path. There are things you can never get a straight answer on. The cabinet has made its decision, albeit with many unaware of the consequences of it. It flies in the face of its own 2017 transport policy for one thing, and in the face of the fundamental principle of equity the government proclaims to support, pumping cash into something that will serve the middle class at the expense of social programmes. Ministers this week will have to decide what budget lines to slash to fund the airline.

But it is the practicalities of what it wants to do that is imponderable. First, it has to find cash to fund the airline while it works on its longer-term solution. It is running out of cash and will probably be dry come month end. On Friday, the department of public enterprises said it is expecting banks to provide bridging finance for the airline. Banks effectively tipped the airline into business rescue in the first place by not rolling loans. Since then, the government has lost its credit grade and the appetite for more exposure, even if guaranteed by the government, is not what it once was.

Public enterprises minister Pravin Gordhan may think he can lean on banks, but he should be cautious. Banks said “no” when all kinds of political hellfire was thrown their way to fund the Guptas’ acquisition of Optimum Coal or Iqbal Surve’s acquisition of Independent Media and they aren’t about to start buckling now just because we have a different president.

Banks are carefully structured to be impervious to political pressure — large exposure committees are subcommittees of the board with a set of clear directives in bank regulations and in terms of the Banks Act. One regulation is that all credit decisions are made on an “arm’s length” basis — that means threatening a bank with consequences such as the loss of current accounts cannot sway the committee. And if it were swayed by such threats, it would be breaking the law.

Of course, if the cabinet is able to reallocate money out of other budget lines and needs bridging until it can make it official in the medium-term budget policy statement or through an appropriations act, then banks will play a role as they would with any client needing bridging finance for the short term. It would have to be guaranteed by the Treasury. It can be done, but whether that would be politically wise for the cabinet is a different matter.

As is the economics of it. The government is still committed to a vision of a strategic equity partner buying into the airline, bringing management expertise and cash in return for a minority stake. Of course, any deal can be done at the right price. And the price in this case would be that the government hands over full management control of the airline to the partner and absolves it from any financial risk. There are ways of doing that — an ironclad shareholders agreement plus some form of put option such that the partner can sell back any stake it takes to recover its money if things go wrong.

The department of public enterprises has said it has had 20 “unsolicited” offers. I am reminded, though, that anyone with a pen and paper napkin can make an unsolicited offer. We have no idea how credible any of them are. But it has been reported that Ethiopian Airlines is one that is interested. The department might be able to make a deal attractive enough for Ethiopian, but will the cabinet go along with a scenario in which the government has no control while assuming all financial risk?

It would be wise to think through the economics of that — you’d have someone incentivised to take big risks with the airline in the hope of scoring from upside, knowing they face no downside. Sounds remarkably like the Coleman Andrews structure that saw him march away from the airline having banked incentives in the hundreds of millions.

The other possibility, which has a non-zero probability, is that creditors vote in their meeting this week to put the airline into liquidation. The business rescue plan envisages them receiving 7c/rand of their exposure. If it went into liquidation, they would get zero. But creditors have been messed about in an almost incomprehensible way. I would not blame them if they decided holding out for a possible 7c is not worth the pain of interminable deadline missing by the government and vote to teach it a lesson. That would at least bring finality to the mess.

There is, however, low chances of that, so I think we’re going to watch as banks are cajoled into keeping the airline’s lights on while the cabinet continues to pursue a deal no-one wants without terms it cannot accept. Oh, what a mess.

The 2020 Top Stockbrokers survey, which combines client ratings of their brokers’ services with an Intellidex assessment of the brokers’ responses to a questionnaire, was conducted between 8 July and 17 August, when the initial panic had subsided but volumes remained elevated. Clients had experienced how their stockbrokers had responded to the pandemic both in terms of investments and in coping with the shift to working from home.

Standard Online Share Trading/Stockbroking (OST) is the Top Stockbroker of the Year. Its all-round strength in each category we assess makes it difficult to beat and it is a formidable presence in a highly competitive industry. It came second to Rand Swiss last year but has won the overall award in the previous three years.

What has particularly impressed us over the years of conducting this survey is that Standard OST never ceases to evolve, adapting to changing market conditions but also looking improve the customer experience. Despite its size it pays attention to detail, striving to be a market leader in every product category. The outcome is a stockbroker with an extremely powerful offering for every archetype, from the young saver at the one end to an extremely impressive family office offering for wealthy families.

Rand Swiss, last year’s overall winner, put in another strong performance this year to secure the Top Online Broker of the Year award. Client ratings are particularly strong for this firm across all categories. It’s still a young company, formed only in 2015, but has quickly entrenched itself as a leading player in the industry. Based on our survey results, the foundation for that success is its excellent client service levels. The firm also wins the special mention award for the top tax-free savings account.

Another young company that is keeping clients extremely satisfied is Unum Capital. It wins this year’s People’s Choice award, which is determined solely by client ratings. Unum, formed in 2015 through a breakaway from Vunani Capital, came third in the overall rankings.

Holding in check the strong drive from the young, up-and-coming brokerages is one of SA’s oldest traditional brokers, Sasfin Securities, which is the Top Advice Broker of the Year. Sasfin itself was established in 1951 (as a textile trading business that expanded into financial services) but its roots go back even further: in 2000 it acquired Frankel Pollak Securities which was founded in 1890 and was a pioneer of client portfolio management and stockbroking in South Africa.

Other awards go to IG South Africa (Top CFD Provider of the Year) and EasyEquities (Most Improved Broker). PSG Wealth’s Carlo Amorin retains his award as Top Relationship Manager of the Year.

Download the summary report here.
Read the FM Investors Monthly feature here.

Watch a recording of the event below. 

The delay in the release of mobile spectrum is a perfect example of what is holding South Africa’s economy back from catching up, argues Peter Attard Montalto. Featured in Financial Times. 

The design of the bank guarantee loan scheme was based on the assumption that the lockdown would be extensive, but SA emerged from it faster than expected, says Intellidex’s Stuart Theobald in an interview on SABC. 

The purpose that the bank loan guarantee loan scheme was initially designed to meet – buttressing businesses during the lockdown – no longer exists, says Intellidex chair Stuart Theobald. Featured in Reuters.