GEOFF CANDY: Hello, good evening and welcome to SAfm Market Update with Moneyweb on a Friday. My name is Geoff Candy. It's a day that's been in a little bit of green, but unfortunately we are down for the week, and it's been a pretty dismal one for markets.
    We are going to be chatting to Wayne McCurrie of RMB Asset Management about the markets, about the R1bn bond issue by the SA National Roads Agency, as well as the G20 Summit, among other things, and what's going on with the Dow.
    Peter Major of Cadiz Corporate Solutions is on hand to talk resources, and in particular the dismal performance by Uranium One. And there's also another instalment of our tax series.
    Then we hope to chat to Clive Venning CEO of Boschendal about a property which is probably a little too rich for most people's blood, but they now have final clearance for these Founder Estates at the Boschendal Wine Farm.
    But first here's the business news headlines with Hilton Tarrant.

HILTON TARRANT: Absa's Robert Emslie quits as head of corporate and business banking; Uranium One to cut exploration and spending as its loss widens; Nampak says profit may fall by 55% - that's less than earlier forecasts; and vehicle sales to drop as much as 7% next year.
    The all-share closed up one-and-two-thirds percent at 19 413. Gold's currently 4% higher at $743/fine oz, a barrel of Brent at $52. The rand is at R10.02/dollar, R14.77/pound and the euro at R12.69.

GEOFF CANDY: Thanks, Hilton. Wayne McCurrie is with us in the studio from RMB Asset Management. Wayne, an interesting week on the markets - not a very happy one, but...

WAYNE McCURRIE: No. Look, the market's down at 19 400. Even though it's up on the day, as Hilton said, about 1.75%, it's fallen below 20 000 this week. So certainly not good news. I suppose we are lucky it closed when it did, because the Dow is down heavily at the moment. It's down 3/3.5% at the moment on the back of, in essence, bad news. Don't expect any good news.

GEOFF CANDY: A lot of bad news, but particularly the retail sales numbers.

WAYNE McCURRIE: Yes. The retail sales numbers were the worst on record. Remember this is now reporting for October, and hopefully October was not a normal month. That is when credit markets and the interbank market totally and utterly died on us. In other words, in theory - and it's a bit of an overstatement - but capitalism ceased to function in October. It froze for the month. So don't take that as being a portent for the rest of the time. We sincerely hope that it'll be a little better going forward.

GEOFF CANDY: But we are unlikely to see a particularly buoyant Christmas period for anybody.

WAYNE McCURRIE: For anyone, ja. In South Africa we are, only on a comparative basis, quite well-off here. We do not understand the crisis overseas here. We've seen the rand fall and shares fall, but our economy's still functioning. We don't know how bad it actually is out in the UK and in the US and in Europe. But I doubt very much whether retail sales will grow in real terms. Might keep pace with inflation, but there's no real growth, and it could quite easily be below inflationary growth in retail numbers. No-one's going to spend money this Christmas in any big way. You can look at motor-car sales. The retailers realised this a long time ago. So they are not going to be overstocked. I don't think they are going to be caught with it, because they have scaled back their purchase plans for the December period.

GEOFF CANDY: I suppose that has a multiplier effect as well?

WAYNE McCURRIE: Yes, all the way through the system. Don't expect any good news anywhere in the whole world for probably three months, six months, and the economies will only really start growing again globally in about two years' time. Hopefully the South African economy grows in about a year's time, maybe 18 months. But there is no good news out there, unfortunately, and that's why shares have fallen down to the levels where they are.

GEOFF CANDY: Well, talking about that and the essential difference between South Africa and the rest of the world, South African National Roads Agency managing to raise a billion rand.

WAYNE McCURRIE: Yes, they'll easily manage to raise it. Our credit markets are working properly. In fact, we are in a bull market in bonds at the moment, and the Roads Agency - you know their revenues, they get them from toll fees. So you know it's fairly stable, it's not massively cyclical - they'll easily raise that.

GEOFF CANDY: Would they have been able to do it offshore?

WAYNE McCURRIE: I don't know, actually. It's quite possible they would have, because it's been a huge bull market in bonds in America, as long as people perceive that you are a good credit rating and if you have such stable income and your company's highly unlikely to go bankrupt. I mean, your revenues don't fall by 40%. They might fall by 2% or 3%, but they don't fall by 40%. So they probably would have been able to, yes.

GEOFF CANDY: What did you make of Astral's results? In line with expectations?

WAYNE McCURRIE: I think they were in line with expectations. They did OK on the animal feedstock section. In fact, I think they did quite well in the animal feedstocks - excuse the pun, but they were slaughtered in the poultry section. Input costs just absolutely killed them. And I think there was about a R20m expense to the income statement for some options that they bought that probably went against them. But, considering the circumstances, not a bad set of results. And, going forward, the output costs are dropping. Fuel has halved. Food is coming down rapidly. So they should repair their margins. I think the margin halved in the chicken business from about 12% to about 6%. I mean, the margin came under pressure in the animal feedstock section, but not nearly to the same extent. So it's actually looking quite good on that side. If you take Comair, Comair's revenue growth in their last set of results was actually quite good. Even if their revenue growth comes under a bit of pressure, the drop in the fuel price just goes absolutely straight to the bottom line. You hope they haven't hedged at $140[/barrel], because I hear stories that SAA has hedged at $140. In fact, I heard earlier that the price of Brent is down at about $52, and it's probably going to fall through $50. So their costs are dropping. I think they were justifiably right in their optimistic outlook.

GEOFF CANDY: Just to close off with, the G20 summit starting today - what are we likely to expect? Are we going to see coordinated fiscal influences or fiscal policies, or what exactly...?

WAYNE McCURRIE: The problems are not really on a fiscal side. The problems are on a monetary side. In other words, the liquidity in the market disappeared in October. It has got better now, and the authorities and the central banks are pushing a lot of money into the system. But we are going to see some fiscal. We are going to see governments spending money, and we are lucky in a certain respect. Look, there's always a price to pay. Nothing's for free. But we are lucky in a certain respect - that there is no inflation. In fact, the world is in deflation. You've just got to report it. You've got to wait six months or 12 months for the numbers to actually show, but we are already in a deflationary environment.

GEOFF CANDY: What does it mean for South Africa?

WAYNE McCURRIE: We are not going to go into it, luckily enough. We won't go into that. Our inflation rate will fall dramatically next year, and we should see interest-rate cuts coming through. We are going to come through this whole global turmoil as one of the better places in the world. Only two areas of our economy are going to be severely affected by this. You are going to get the resource side, the mining side - the price of platinum has halved. You see Anooraq coming out today saying basically we are pulling back on the projects, and Uranium One. But it's not just those two. Every single mine in the country is not going to spend any capex or is going to scale back their capex. So that will be severely affected. And, of course, if the rand collapses anyone who relies heavily on imports for their business is going to be severely affected. But the good old-fashioned South African consumer is, actually, in a way-better condition than overseas.

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