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More ups and downs for SA Inc

A bit of a bumpy ride with some high points. A look at Naspers/Prosus, Adapt IT, Shoprite, Steinhoff and Massmart.
Investors were evidently extremely unhappy about the trading update released by Massmart on Friday morning. Image: Supplied

It was another bumpy week for Naspers/Prosus shareholders who are probably beginning to realise this is the way it’s likely to be for the foreseeable future. It does look as though Beijing is now determined to catch up on 20 years of regulatory minimalism.

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Of course to suggest this is a determined move by ‘Beijing’ is to imply Beijing or the Communist Party of China (CPC) is united behind this regulatory upgrade. President Xi Jinping’s authority appears to be almost absolute but there are reports of some opposition and it does seem inevitable that powerful, wealthy individuals, whose numbers may include the odd member of the People’s Liberation Army, aren’t entirely happy about the threat to their wealth.

For the best part of two decades it all seemed to be working swimmingly. Investors and entrepreneurs made fortunes as their products made increasing inroads into the daily lives of over one billion Chinese; for better or worse they helped to propel China into the 21st Century.

It seemed that all government asked of them was to share whatever information they had and monitor social media activity.

Now government wants a tighter rein on that information and activity as Xi seems reluctant to continue tolerating alternative seats of power.

It’s probably an added bonus for the CPC that while some global investors see a touch of political whimsy about the clampdown many international commentators support the principle of reining in the power of seemingly unaccountable tech giants.

Although China’s ‘capitalism with socialist characteristics’ isn’t to everybody’s taste the fact is that Facebook, Twitter, Google, Amazon and so on have made a mockery of the democratic system the west boasts about. The leaders of these massive corporations behave as though they are above the law; and supposedly powerful politicians across the globe have enabled this behaviour.

Of course it doesn’t mean that China’s tougher policy won’t end in tears.

Adapt IT

Also in the world of tech – but on a much smaller scale – there was the rather disturbing news from Adapt IT last week that it’s CEO has resigned. The whole bizarre incident behind his resignation was extremely unfortunate, to say the very least, but full marks to the Adapt IT board for the manner in which it was handled.  The directors acted decisively and quickly and prevented an extremely unpleasant situation from causing untold reputational damage.

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Shoprite

Also acting decisively is the Shoprite board, which for decades was dominated by white Afrikaaners who oversaw the spectacular growth of an outstanding retail business.

But by the turn of the century the board profile was looking extremely jaded.

A number of major missteps by chair Christo Wiese – backing Steinhoff’s bid to takeover Shoprite and then trying to cash in on his preference shares – provided disgruntled shareholders with the opportunity to enforce much-needed board changes including removing Wiese as chair.

Last week’s two new Shoprite appointments – Eileen Wilton and Peter Cooper – should add just the sort of independence and expertise the board needs.

Steinhoff

Talking of Steinhoff it does seem that some progress may have been made with its remarkably complex settlement process. Last week it announced a further top-up of its offer, taking the proposed payout to a slew of claimants to R24.69 billion. This is the second increase in as many months.

Read: Steinhoff increases its settlement offer

Dublin-based Hamilton, which funds litigation and has launched a number of effective legal challenges across the globe on behalf of some of South Africa’s major asset managers, has said it agrees in principle with the increased offer.

But it’s not plain sailing from here.

Trevo Capital is unlikely to take Steinhoff’s unilateral decision to deprive it of the ability to take a claimant action, by redefining its status, without a fight. Steinhoff has decided to treat Trevo as a non-qualifying claimant instead of a Steinhoff International Holdings Proprietary Ltd market purchase claimant. “Steinhoff believes that this approach removes Trevo’s legal standing in the Section 155 proposal …”

Given recent history, Trevo may not share that belief.

Whatever happens with Trevo the news, announced on Friday, that Steinhoff had managed to secure a 12-month extension to the final maturity date for settling the so-called financial creditors will provide the Steinhoff board with some much-needed breathing space.

Given the extremely generous interest being accumulated, it can’t have been too difficult to persuade the creditors to hold on for another year.

Massmart

Also on the retail front, investors were evidently extremely unhappy about the trading update released by Massmart on Friday morning.

Although conditions have improved from the previous utterly grim interims they remain fairly gloomy.

The R570 million impairment of the carrying value of Game assets added to the general sense of despondency and pushed the share price down a hefty 9.14% to R54.95 by the close of business on Friday.

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COMMENTS   1

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Massmart… Came to SA believing they’d dominate & then move into Africa.

And has just gone completely backwards. Incredible how a business that was once a real (local) powerhouse is now racking up bad year after bad year.

End of comments.

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