Digital Edition 2018 | Volume 21

When the commission into state capture began two weeks ago, many of the people I spoke to weren’t very hopeful, or even positive. They decried previous commissions (Spy tapes, Marikana) and predicted that this latest instalment would simply follow the path of farces that preceded it. “Oh, yea of little faith”, I protested, “This time will be different”, I proffered. Well, if the opening fortnight of the Zondo commission is anything to go by, the insidious perpetrators of state capture and wide-scale corruption had better begin booking their flights to Dubai…

Hawks anti-corruption task team unit head Zinhle Mnonopi, who was suspended on Thursday afternoon, may have just become the first victim of the commission headed by Depity Chief Justice Raymond Zondo. She was implicated by former deputy minister of finance Mcebisi Jonas in his evidence last week when he claimed Mnonopi tried to kill a case in which one of the Gupta brothers, Ajay Gupta, was accused of having tried to bribe him with R600m and a ministerial post. In one of many startling revelations, Jonas testified how he was contacted by former Hawks head Berning Ntlemeza, who later assigned his known ally – Major General Mnonopi – to handle the case. “She [Mnonopi] initially contacted me in June 2016 ... she was investigating complaints that had been laid by Mr [Dennis] Bloem and Mr [David] Maynier ... She said she was coming to see me with a prepared statement ... I called my attorney, Max Boqwana ...” Jonas said Mnonopi came with a prepared statement that contradicted his stance on the case in many respects, including that he was “not a witness” and not interested in opening a case in future.

“I refused to sign the statement,” Jonas told the inquiry.

Soon after Jonas had concluded his bombshell-dropping testimony, it was the turn of former parliamentarian Vytjie Mentor. She testified that the Gupta family might have possibly “taken charge” soon after former president Jacob Zuma became president. During her session, she revealed how, in early 2010, the Guptas were already “running things” and she the explained how she was offered the position of public enterprises minister by Ajay Gupta, predicated on the proviso that she tweaked certain routes flown by the state airline, particularly to India, that favoured the affiliates of the Guptas.

The Zondo commission’s legal team on Saturday confirmed that they were now in the process of finalising who should be called to appear before the commission in the next few weeks. That list should make for interesting reading, provided that no holds are barred, and that the mandate of the commission will be aggressively fulfilled.

In my opinion, this commission and its nascent successes should be viewed as a proxy for the status quo in South Africa. Yes, there has been damage caused, much of it severe and enduring. But with the right people and the helm, and the force of the judiciary and civil society behind them maybe, just maybe this is the new beginning, or dare I say, the ‘new dawn’, that many of us have been hoping for…

THE ZONDO COMMISSION BARES ITS TEETH, MTN TAKES A TUMBLE, AND EMERGING MARKET CURRENCIES LEFT BAT-TERED AFTER THEIR RUMBLE… THE ZONDO COMMISSION BARES ITS TEETH…

Stewart DandoInvestment Specialist | MIFM Squawk Editor in chief

Weekly Squawk - by Stewart Dando

MTN takes a tumble: Wireless Carrier MTN and the Nigerian government resumed their acrimonious relationship last week Thursday as Africa’s largest mobile-phone company was accused of illegally moving $8.1 billion (R118 billion) out of the country in the form of dividends paid through local banks. The order comes about two years after Johannesburg-based MTN was first accused of repatriating dividends in contravention of foreign exchange laws. They were cleared in a report issued in November 2017 following a probe commissioned by Nigerian lawmakers. MTN said in 2016 that its bankers had obtained central bank approvals before any dividends were issued.

“The re-emergence of these issues is regrettable as it damages investor confidence and, by extension, inhibits the growth and development of the Nigerian economy. We will engage with the relevant authorities and vigorously defend our position on this matter and provide further information when available.” MTN said in a statement on Thursday.

My personal opinion is that the Nigerian government is struggling to plug its fiscal deficit and believes the solution is lying somewhere in the deep pockets of MTN. This smacks of extorsion.

Pain at the pumps: As a tumultuous week was about to end last Friday, the Automobile Association (AA) provided us with a nasty little sting in the tail. Commenting on month-end fuel data supplied by the Central Energy Fund (CEF), the AA said, “International petroleum

prices remained virtually unchanged on average during August. But the Rand lost substantial ground against the US dollar, increasing the landed price of fuels.”

Petrol is expected to increase by between 23 and 25 cents a litre, with diesel rising by around 28 cents. The AA noted: “This will, for the first time, push the cost of 93 unleaded octane fuel inland above the R16 a litre mark, a significant barrier.”

Come what May: President Cyril Ramaphosa and UK Prime Minister Theresa May took a welcome break from land reform and Brexit negotiations respectively last week as the two leaders met in Cape Town to discuss and cement economic ties. Ramaphosa would have been keen to secure future investment from the UK while May would seek trade opportunities as her country is still embroiled in complex Brexit negotiations. They identified key sectors for investment to boost economic growth and development - including manufacturing, agro-processing, infrastructure development, mining, energy and tourism.

“We have noted with great satisfaction the strong relationship between South Africa and the United Kingdom in wide-ranging areas of co-operation including energy, science and technology, education, health, arts and culture” – Ramaphosa.

Now isn’t that sweet?

Indicators:

AT THE CLOSE, OR AT 06:00 SAST TODAY:

JSE: 58,668.48 POINTS

GOLD: $1,199.71/OZ

DOLLAR/RAND: $1/R14,7592

R186 YIELD: 8.98%

BRENT CRUDE: $76.75/BL

REPO: 6.5%

CPI/INFLATION:5.1%

Interesting Stuff

Weekly Squawk - by Stewart Dando

Article of the Week

Clem Sunter, former Anglo American chairperson and author of ‘The Mind of a Fox’, shares his thoughts on South Africa’s ‘flags’ in this week’s featured article. I’ve been a fan of Clems for some time now, and this latest offering doesn’t disappoint.

https://www.news24.com/Columnists/ClemSunter/breaking-futures-the-latest-south-african-flags-and-scenarios-20180829

Quote of the Week

“Data suggests that the economy expanded by 0.5% quarter on quarter seasonally adjusted and annualised, but we caution that there is high, two-way forecast risk depending on whether there are any revisions to the first quarter data. The broad-based economic weakness suggests that our growth forecast for this year may well be too optimistic, as the growth required in the third and fourth quarter to achieve it will be a very tall order” - Mamello Matikinca, Chief Economist at FNB, says that while the bank believes SA will stave off a technical recession, it will be a ‘close call’.

“ “

What is the ‘Business Cycle’?

Jargon of the Week

The business cycle describes the rise and fall in production output of goods and services in an economy. Business cycles are generally measured using rise and fall in real – inflation-adjusted – gross domestic product (GDP), which includes output from the household and nonprofit sector and the government sector, as well as business output. “Output cycle” is therefore a better description of what is measured. The business or output cycle should not be confused with market cycles, measured using broad stock market indices; or the debt cycle, referring to the rise and fall in household and government debt.

Source: Investopedia

Weekly Squawk - by Stewart Dando

In Conclusion

Global investors will look back at August 2018 as a month of ‘violent currency vicissitudes’ in emerging markets. The MSCI EM index of currencies was down 2.2 percent for the month, a fifth monthly loss, the longest stretch since September 2015. The main culprits were the Turkish Lira, the Argentine Peso and our Rand.

Driven by political tensions, increased tariffs and ratings agency downgrades, the Turkish Lira had a terrible August, at one point being down as much as 40% against the US Dollar. The sanctions placed on Turkey by the US early in August were retaliation for President Erdogan’s refusal to release American evangelical pastor Andrew Brunson. Brunson was detained by Turkish authorities for his alleged support for the outlawed Kurdistan Workers Party and the Gulenist movement, both of which are accused of being involved in 2016’s failed coup against the President. This event proved to be somewhat of a catalyst for the volatility in global markets that was to ensue.

Latin America’s third-largest economy also had a month to forget. Onerous borrowing costs, deep government spending cuts and a crippling drought have thrust Argentina into a bona fide economic crisis, one that almost guarantees that the country will enter a recession in the third quarter. In an effort to halt the plunge of the peso and curb runaway inflation (31% at time of writing), the Argentine central bank raised interest rates to a colossal 60% at the end of August. This did not have the desired effect, as the currency

continued its spiral downward when markets got wind of President Mauricio Macri’s deal with the International Monetary Fund to accelerate disbursement of a $50 billion loan programme, heightening concerns over the trajectory of the ailing economy.

And then came the Rand and the JSE. A perceived lack of cohesion on the part of the South African government on land reform and how it will be implemented exacerbated the effect of negative sentiment towards emerging market economies and currencies, causing the Rand to have its worst August on record. The plunge in the Naspers share price after disappointing Tencent results and more recently the reignited feud between the Nigerian Government and cellular giant MTN (causing a drop of more than 20% in the price of the stock) impacted negatively on the local bourse, giving local investors even more headaches.

But now that August is behind us and the promise of Spring is in the air we can all take a breather and relax, right? Um, no. The issues I mentioned above are anything but transitory, and market turmoil looks set to continue as President Donald Trump appears to be hell-bent on imposing a fresh round of tariffs on China as early as this week. And the amount? A whopping $200 billion!

Strap yourselves in boys and girls. The rollercoaster ride continues.

© 2018 - 2018 Zapiro (All Rights Reserved)

Originally published in one of these publications: Daily Maverick, Sunday Times, The Times, Mail and Guardian, IOL, or Sowetan in 2018.

Printed/Used with permission. More Zapiro cartoons at www.zapiro.com

The Squawk thanks the following sources of inspiration: Daily Maverick, Bloomberg, News24, Moneyweb, Financial Times and Investopedia.

Until next week, make good decisions, and happy investing.

“The opinions and views expressed in this newsletter are those of the author and do not necessarily represent those of the attooh! Group or its affiliates. Content stated as fact was fact at the time of writing. The information in this newsletter is not intended to constitute financial advice as contemplated in the Financial Advisory and Intermediary Services Act”

Emerging markets didn’t live up to their name in August…

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