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Is SA about to see a flood of disinvestment?

The ‘odd’ deal is suddenly resembling more than just a trickle.

Friday’s speculation reported by Bloomberg that NTT Group was looking to offload African operations it acquired when it bought Dimension Data in 2010 left me a little uneasy. It isn’t clear if the assets in question are all the group’s assets in Africa or what is far more likely: Internet Solutions (IS). Whether or not it’s only IS is immaterial.

What’s important here is the pattern. And when one considers a wave of foreign disinvestment (or of investment), timing is, obviously, critical. What would be telling – if these assets were to be disposed of – is why NTT is doing so now.

IS has never quite fit into a far larger, far more globally diverse managed services business in Dimension Data. This is not a new revelation. Inside NTT, it’s an even more uncomfortable fit. But, it could’ve been unbundled during the original DiData transaction (or, it could’ve been sold shortly thereafter). Why now?

Clearly, South Africa is not in a good place currently. A flurry of ratings downgrades over recent months has left us barely clinging onto investment grade. An unstable (and weak) currency is nothing but a headache for foreign firms who have (or have bought) operations in the country. Policy uncertainty makes long-term planning (and investment) very difficult.

If this sale of assets by NTT were to go ahead, more than R10 billion will leave the country (they are valued “at about $800 million”, according to Bloomberg).

Barclays Plc’s (slow-motion) sale of its controlling stake in Barclays Africa made everyone sit up and take notice. This is something that made global headline news. This was disinvestment writ large. The first placing (or 12.2% of Barclays Africa) in May 2016 raised over R13 billion. The far bigger chunk (33.7%) sold this month raised nearly R38 billion. That’s a R50 billion vote of no confidence in the country, and the continent. Had ‘Nenegate’ not happened, would Barclays Plc still have made the decision to hightail it out of Africa (and, most importantly, South Africa)? A lot of smart – and well-connected – people suggest not.

Barclays Plc will argue (and it has!) that this has nothing to do with South Africa and everything to do with European banking regulation. Ho hum.

It sounds a lot like the excuse proffered by General Motors for its planned exit from South Africa, after being here for 90 years. It called it “a business decision, based on GM’s global business priorities”.

If our economy was growing at a decent clip, and if sub-Saharan Africa was too, GM’s decision might not have been so simple (other carmakers have been blunt and suggested that without the mammoth subsidies provided by the state, they’d be long gone).

But, the disinvestments aren’t limited to only Barclays and GM (and possibly NTT). India’s Tata Communications dumped Neotel for R6.5 billion last year and Saudi’s Oger Telecom is happy for its majority shareholding in Cell C to be halved to 30% following its recapitalisation. Anglo American is selling most of its operations in South Africa. At this point, this has been confined to platinum, manganese and coal assets. But if it can find a buyer for Kumba Iron Ore, that’ll be gone too.

Malaysia’s Petronas has been trying to sell its 80% stake in Engen for a while. In 2015, when PetroSA still harboured outlandish ambitions to buy it, it had a price tag of R18 billion. Sinopec (China Petroleum and Chemical Corporation) bought Chevron’s local operations (Caltex) for $900 million earlier this year. Ironically, this price was dampened by the roughly R40 billion in refinery upgrades required at Chevron’s Cape Town plant (this is one of the reasons the sale took longer than three years). 

Look around… there aren’t too many external buyers for these assets!

They’re mostly being snapped up by local (or regional) capital. The Public Investment Corporation bought a further 7% of Barclays Africa in this month’s placing. Allan Gray (on behalf of clients) more than doubled its holding to over 5% (in the coming weeks, we’ll know who else bought sizeable chunks). Neotel was bought by regional player Liquid Telecom.

MTN Group’s name seems to crop up in nearly every possible transaction in the tech/media/telecoms space. It’s cited in the Bloomberg report as one of the buyers of IS (this might not go down too well with competition authorities). It was also named as a potential acquirer of Naspers’ pay TV assets in the rest of Africa.

What would be cause for panic?

A glance down the list of the country’s largest listed companies offers two where “sell-downs” would cause more than indigestion.

Vodafone clearly has something up its sleeve, given the folding of its Safaricom holding into Vodacom. What gives some hope is that it is retaining a tiny direct stake of 5%. If Vodafone Ghana (run by Yolanda Cuba) gets folded into Vodacom, then a sale of the African business could be a hop, skip and a jump away.

And one wonders just what sums are being run by Wal-Mart in Bentonville, Arkansas….

Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.

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funny how all them capitalist governments, business, and foundations who fought and sanctioned so hard to have this corrupt govment at the wheel, now hop, skip and a jump away on business decisions, leaving us with the cANCer monster they helped created.

for SA the writing is on the wall, will stay a 3rd world country in the rest of the world eyes, will only be a cheep holiday destination for foreigners, but unlikely a investment opportunity, or not until a cure for cANCer been found, and the country at least 2/3 years in remission.

When the decision was made to support the transition to majority rule that many years ago, there was no indication that the very people the “capitalist governments, business, and foundations who fought and sanctioned so hard to have this corrupt govment at the wheel” (as you put it), that the ANC would become a criminal entity to dismantle the dreams and aspirations of the entire nation and rob the country and its people of the wealth, infrastructure, safe existence and dreams that was intended to benefit all the people especially those who had in the eyes of the world no future due to their prior circumstances.

It is not the “capitalist governments, business, and foundations who fought and sanctioned” that caused the problems, but you can blame the ANC AND each and every person who despite several indications and warnings from all quarters in South Africa and from all over the world, continually voted for them who are to blame for the mess we are in. Despite many continuous warnings and examples of corruption, theft, and dishonesty, the electorate kept believing the lies they were fed by those in charge and kept the ANC in power because the dishonesty enriched so many who all were feeding from the trough provided by the gravy train. So, if you were one of those who kept voting for the ANC, then you too must accept a part of the blame for the mess the country is in. Stop blaming others when it is you who who needs to face reality and the truth.

I disagree – all the signs were there. People who did not mind killing innocent women and children using landmines and bombs could not be expected to exhibit high moral values once in government.

I also disagree with your “there was no indication” remark only.Would any of us on this forum buy or hold our shareholding in a company that replaced their whole Board and Exec team with the Robben island Old Boys Club!? I think not, given that company RSA, was the largest “corporation” on the continent at the time and therefore required experienced leadership! Not only that, the rest of the continents track record at that point in time also told a story for the future! In a way we only have ourselves to blame for our blind optimism, if we are complaining that is!

Sweetpea. sorry for the late reply, been out on my second work,(what I need to do to keep our my child on university).
“capitalist governments, business, and foundations who fought and sanctioned” – back in history – ANC banned in SA and classified as a terrorist organisation, they went “underground” and get funded and support(for their underground operations – Guns, training, Funding & money, and propaganda press ext.), by ? – UK, Ireland and especially Sin Fein(also a terrorist organisation then), USSR, Cuba, Africa States, USA, almost all Europe states, and this

When the decision was made to support the transition to majority rule that many years ago, there was no indication…on the contrary various warnings made from the 70’s in parliament, newspapers and press predicted the outcome – if you now make it off as just apartheid doom government and press,…well history proved them right!. Unfortunately, it’s been proof that “rebel”, “freedom fighter”, organisation who become a ruling entity, ended up as a dictatorship and not a democracy(especially in Africa.

This all not just all about “apartheid” but to establish a government more favourable to their own, as the old NP under Verwoerd seen as non friendly same as Trump today – SA first after the great depression to rebuild SA.(and what an economy we had?), the world did not care about apartheid, it was just a scapegoat for their own profit.

I agree with wrongs of the past, especially with the neglect of education. If the populace were “inclusive” educated from the ’60s, we would have a different outcome today. But even than, the education institutions available were burned and vandalised as “apartheid” institutions, same as today. Schools were burned – as western education systems and they demand African education. School children died under this, by SACP/ANC propaganda using them as shields for their own gain and to feed a foreign world (the rest) hunger for SA riches.

What I don’t agree is that all were excluded – lets take the Mandela just as a example – from a cattle herder, to lawyer,(and this all in apartheid era when their were no opportunities to blacks). It all comes down to the will to succeed and drive to work for it.

Believe me, the ANC will never get a X from me, never will and never had, the reality and the truth is SA on downhill path on all fronts, just as predicted – I’ve seen the reality since the 80’s, when PW Botha crossed the “Rubicon”, but maybe its just before your time, and do I blame many more than the ANC for this fiasco.

Money has been pouring out of this country since 2012. I think there “columnists” are slow off the mark. Maybe they should do some research before going to print?

On the platteland we have witnessed the results of disinvestment in our communities. Not long after the businessmen(Boere Jode) move out of town, the Somalis, Nigerians, Pakistanis and Chinese move in.

The delivery of services and the neatness of the town leave with the businessmen, and the potholes, drugs and crime arrive with the incomers.

That’s the symptom, not the cause. Our towns are dying because the resources that once caused our rural areas to boom are nearly depleted. The original businessmen are leaving because the good money has already been made. Those moving in are vultures picking what they can off the carcass. Sorry, sad but true.

Those who invested in South Africa believed that their investments were safe. And, so it should be. The government had a duty to ensure that the environment for business remains safe and secure. But when the very government are the ones plundering and stripping the assets away from the country’s infrastructure, then those who invested before have every right to remove their investment and take it somewhere else that is safe.

The unfortunate thing that emerges is that the very people who continually support the powers who are corrupt and who have sabotaged the wealth and stability of this country and the very people who continue to support the rotten apples and then bleat and complain and blame everyone and everything else except themselves who are keeping the corrupt in power with their votes. It is time to remove the blinkers and the ANC from power.

I wonder where all thosr Magnus haters are now? Or those clever, lying and dishonest financial analysts and finiancial industry specialists who keep promoting SA as a investment destination due to the law limiting there ability to move more money offshore.

Magnus has been wrong for a year and a half. If you followed his advice and bought Biotech after Nene was sacked you would be down 27% in Rand terms over 18 months. If I had a cash investment his relative underperformance would have been between 35% and 40%. Bottom line is nobody can forecast and nobody knows.

they bought high and are now selling low. classic investment mistake. If there are buyers it is not disinvestment. Or is it only investment if it comes from British, Americans and Japanese Hilton?

Good point. GM was being taken over by Isuzu, Barclays there was to be a deal from Bob Diamond. Divestment for me would be the shutdown of these assets.

The whole purchase of ABSA by Barclays looks dodgy. For example, Barclays moved the physical holdings backing the NewGold ETF to the UK. Then, under the Diamond, there is the curious situation of ABSA’s African assets being not good enough for Barclays, but quite good enough for the new firm Diamond forms straight from Barclays.

Barclays bought ABSA to asset-strip it and then sell us back a shell.

Same game that has been going on since sanctions end – the process of expatriating the ill-gotten gains of Apartheid under the stealth process of privatisation and M&A.

In short, those sharp business men who have held the country to ransom from the Anglo-Boer war onward found a way to move all that capital to their pet tax havens, e.g. UK

Is it really as simple as this Hilton? Many an article abound on GM’s own (global) problems, ditto Barclays and Anglo.

We are just being de-colonized…
Surely that must be a good thing, if you listen to the lunatic left.

DD – R10bn leaves the country, ok, they bought it for R24bn. So what if another foreigner buys the stake from NTT? What if a local company buys.
Barclays – I believe half of what was sold by Plc went to foreign investors, and locals were complaining that they didn’t get what they wanted. So there were willing buyers ..so what’s your point.
GM – it is exiting Europe as well, not just S.A. Tesla is turning this industry upside down …so what’s your point
Petronas – even Saudis are diversifying away from oil. So what’s your point?
What’s wrong with locals buying these assets.
S.A is a terrible place at the moment, we all agree, but these type of articles are just clutching at straws. Someone had to come up with an article for the week, but couldn’t come up with anything worthwhile ..me thinks.

The point is that SA is not an attractive investment destination to foreign investors because: (1) corruption, poor leadership and lack of any coherent policy stymies growth, (2) no clarity on property rights – not limited to land issue – one hand wants to take ownership away from existing investors and the other wants to to entice investors to commit fresh capital.

No investment = no jobs = inequality increase.

But you keep deluding yourself.

Clever money has been shouting its intentions loudly for a long time. Only investment corporate SA has done has been outside SA.

I am not disputing your points, but the writer chose wrong examples to put these across.

I see it this way:
The whole Western world sits together in a crashing airplane with the USA as pilot. The passenger are shouting and having fist fights. Sometimes this guy is on on top, next time he is on the floor. They are so and blinded by their anger and inward looking that they do not care to look outside. The purser is keeping the passengers busy by telling some of them that they are naughty and should behave. The pilot is called Fred. He looks wearily at gauge indicating reserve kerosene. The kerosene is not working anymore! How come? From August 15 1971 onward they promised that this kerosene would be the best in the world!
Fred wants to go up. The plane wants to go down. Only one on them is a force of nature.

Very interesting analogy.. Just curious to know where the rest of the world fits in or compares with your “vision of the West” at the moment? On a slightly different note, what’s your view on the future of Gold?

The West has developed a mental disease. Their feeling of risk has been anesthetized by unlimited amounts of money. Hence snow flakes, unlimited wars, war machines and social security and pension funds without cover, Billions for the bail out of the financial industry, Trillions to keep the system going and everybody playing the game of “confidence”.
We are more than f#cked. War is a certainty. Pensioners and depositors will hold the bag. The West will be hardest hit. South Africans, Russians, Indians know more or less “how to make a plan”. Europeans not. They do not have a clue. The population will insist on a gold/silver standard. This will only take 30-40 years and the whole Spiel will start again.

This is yesterday’s news…………..stale as a week old loaf of bread.

Yes, this started a few years ago and as foreign boards realise to what extent corruption rather than good long term economic decisions rule the elite in this country, so they will sensibly exit.

corruption is not any better than it was in the past, the difference is not there is free media. So you can actually make corruption go away by clamping down on media. 🙂

Corporate disinvestment is seldom as simple as the article would suggest. It is a very costly exercise and selling anything in SA over the last couple of years would have been extremely poor timing.

Barclays has to hold a substantial amount of capital to service clients through Absa. That is not made up, it is a major part of the reason. The other may be the fact that Absa has not exactly shot the lights out in the investment bank arena and has been bleeding retail customers for a while now. It does not seem a stretch to me that the ROI on that investment does not make sense considering the capital they have to hold.

GM I understand is not doing too well globally and most likely does have to raise cash to fund more profitable ventures. I’m sure things like the labour strikes have not made them overly fond of SA generally.

I would say the bond market is a more interesting indicator than corporate M&A. If I was a foreign corporate investor looking at SA then the returns must be fairly attractive at the FX rates over the past 24 months.

Bond market yields have spiked and we have started to see some liquidity dry up, both are signs that SA is not doing well in the foreign investment rankings.

We do love to shoot ourselves in the foot however, look at the renewable energy programme, literally billions of foreign long term capital lining up to invest and we stall them.

I don’t think it would take all that much to get our investment grade back and to get a solid funnel of investment, we just need to get rid of the ANC.

PIC is happy to buy anybodies scrap
me thinks they are a bubble waiting to pop,
but then who cares, employment in government is the only growth sector in azania

Okay, so ABSA is scrap? Just cause Barclays couldn’t manage they investment and faced issues including currency volatility,does not make ABSA suddenly a bad business
If you genuinely think the PIC is a bubble waiting to burst, then a lot of companies are in trouble. For the PIC to burst, it would mean the entire JSE Top 40 should burst, not to mention the numerous offshore investment the PIC has, and also most of the Asset Managers and brokers who invest in the same companies. Extremely unlikely, but if you think so…Sure!

..yes a lot of JSE are in trouble that is exactly why the the likes of Steinhoff have their main listing in Germany, Wiese is trying desperately to get his SA assets into Steinhoff and then divorce overseas assets from Azanian assets because the smart money sees the writing on the wall.
Another genius move was when PIC bailed out Afrisam from a ill conceived buy out from Holcim Switzerland.
Barclays are dumping Absa while there is still some value left- they found how difficult it is to operate in a country where BBEEE legislation forces companies to employ useless anc appointees like Ramos
That is why 75% of the Alsi top 40 profit is earned offshore.
The PIC has no problem funding illconceived investments because it sources it’s funding comes from govt pension funds which means your tax

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