We had another quiet week on the JSE, which was handy as it gave us all the opportunity to follow the gripping and bizarre goings-on in the US.
All in all it wasn’t a great week for US President Donald Trump, but he doesn’t seem to notice these things. And he may be able to persuade himself that the release of tapes of his phone call with Georgia’s secretary of state (the recording of which is apparently permissible under that state’s law) was just more proof of how everyone is out to get him and will stop at nothing.
The January 2 phone call made for compelling listening in the same way the news clips of the January 6 storming of the US Capitol in Washington made for compelling viewing.
For South Africans of a certain age the storming of the Capitol might have brought back memories of June 1993 when the AWB (Afrikaner Weerstandsbeweging) stormed what was then known as the Kempton Park World Trade Centre. At the time the centre was the venue for multi-party negotiations ahead of the country’s first democratic elections.
Hopefully the Washington ‘stormers’ will become as politically irrelevant as the AWB did. But that will probably depend on how many of the approximately 75 million people who voted for Trump in November 2020 thought the violent and flamboyant outing was a bad idea.
Governance case study …
Possibly of more interest to corporate governance enthusiasts was Trump’s call to the Georgia election official.
The excruciating one-hour-and-two-minute call should be required studying for aspiring auditors and putative members of audit committees.
In fact, perhaps all members of listed company boards should be required to listen to the recording at least 10 times before being appointed. It provides an excellent lesson in how to push back against an overly exuberant chief executive who’s determined to have his way.
Admittedly, the Georgia election officials may have realised they could take a firm stance as they had time on their side with Trump due to vacate the presidency in two weeks’ time. But given his tedious repetition of allegations and seeming utter determination to have his way, it must still have been difficult to say ‘no’ to the president.
“Everyone knows we won” and “All we need to find is 11 780 votes” is repeated over and over again for much of the hour.
Many of us would have given up and agreed to ‘look’ for the votes just to make him stop.
But could it be that this is how truculent CEOs operate?
Is this how so much in the way of dodgy accounting practices gets past the auditors and the board? Is this how Steinhoff CEO Markus Jooste persuaded his board and shareholders to pay $3.8 billion – more than twice the market value at the time – for Mattress Firm back in 2017?
Could Jooste’s discussions with the board and key shareholders have been similarly repetitious and unrelenting?
“Everyone knows it’s really worth at least $5 billion to Steinhoff, just ask all our corporate bankers and lawyers” over and over again. Or was it already too late by 2017?
Likewise with Peter Staude’s board at Tongaat when it came to valuing biological assets and property. Everywhere you look you can see evidence of these sort of possible ‘Trump moments’.
Meanwhile back at the JSE we were reminded of how much more eerily quiet it may get in the coming months, with three companies – Accentuate, Mazor and Cartrack – signalling last week that they are on course to delist from the local bourse.
No doubt weak market conditions provide an opportunity for a cheap exit, and no doubt in some cases the costs of being listed may now exceed the benefits.
Cement producer Sephaku Holdings has taken a different approach to cost control in tough times.
It has managed to secure continued regulatory approval for not appointing a CEO to replace Lelau Mohuba, who stepped down in December 2019. The group’s finance director Neil Crafford-Lazarus will continue to do both jobs, on the grounds that the prevailing operating environment doesn’t warrant the appointment of a standalone CEO.
This must be one of very few instances of cost-cutting starting at the very top.
SAB and the alcohol ban
The pictures of empty ICU beds on New Year’s Eve might curb people’s sympathy for South African Breweries (SAB) in its latest bid to have the court declare regulations banning the sale of alcohol unlawful. But it’s difficult not to imagine there’s a more nuanced way of dealing with alcohol abuse than just banning alcohol sales.
The decision by SAB parent AB InBev to unilaterally suspend the employment and investment conditions imposed by the competition authorities on its 2016 acquisition of SABMiller looks to be a clever and somewhat opportunistic move. It puts additional pressure on government, which must be keen to encourage both employment and investment.
However the threat to cut jobs has hung over SAB since before Covid and alcohol bans intruded so grimly into its life in March 2020. In February 2020 the Food and Allied Workers’ Union threatened to file a complaint with the Competition Commission to block a plan to retrench hundreds of workers because of the “prevailing economic conditions” in SA.