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South Africa’s petrol price increases of R1.21 per litre on Wednesday puts petrol inflation at 33.9% year on year, says Kevin Lings, chief economist at Stanlib. With electricity inflation also at 14%, South Africa’s energy cost is now far outpacing incomes, he warned, adding that access to reliable and affordable energy sources is critical for South Africa’s economic success. Speaking to radio station 702 , Lings said that the considerable petrol price increases seen earlier this year didn’t have as significant an effect on households, as people weren’t travelling as much due to lockdown restrictions. “There’s obviously a huge price effect that we’re now going to have to deal with more fully because we’re obviously trying to open up the economy and we’ve got the prospect of a bit more domestic tourism, people moving down to the coast for holidays,” he said. Based on current metrics, Lings said that another increase was likely in December. “Unfortunately, given where the currency is right now, there would be next month another increase of around 50c a litre if the oil price stays where it is, and the currency stays where it is. That would take us to R20 a litre.”
“If you’ve got electricity at 14% inflation and fuel at 34%, those increases are well in excess of any household income or business activity growth.”
Once SA’s petrol price increases by R1.21/l on Wednesday, petrol inflation will be 33.9% year on year. With electricity inflation at 14%, the cost of energy in SA if far outpacing incomes. Access to reliable and affordable sources of energy is critical for SA’s economic success
The Automobile Association of South Africa (AA) has also warned that R20 a litre is likely on the cards before the end of 2021, with further increases expected in the coming months. “With oil demand buoyant and supply lagging, the ongoing issues with natural gas cost and supply, and refining costs a worry, we see little cause for optimism. “Added to this is the volatile rand/US dollar exchange rate, and users of liquid fuels in South Africa are probably in for a rough ride in the next three to six months,” the AA said.

Expect more petrol price increases in South Africa over the coming months

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Pretoria - The Palm Ridge Specialised Commercial Crimes Court has remanded in custody an alleged fraudster, 42-year-old Wayne Anthony, who was arrested for allegedly defrauding an insurance company of approximately R20 million in the form of a client's policy payout. Hawks Gauteng spokesperson Captain Ndivhuwo Mulamu explained: “It is alleged that, in August 2020, Anthony allegedly intercepted the Stanlib insurance company’s system and created a fraudulent email under the Outsurance letterhead applying for a withdrawal of the R20 million on a policy payout.”
As a result, Stanlib allegedly processed the R20 million transaction into a business account belonging to a software company, Panase Projects, based in Gqeberha in the Eastern Cape. “Through internal forensic investigation, Stanlib discovered that the application was fraudulent and immediately reported the matter to the authorities,” said Mulamu. “The case was transferred to the Hawks’ serious commercial crime investigation in Johannesburg for further investigation. The court issued a warrant of arrest for Anthony’s apprehension on the alleged fraud against him.”
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The investigation team effected an arrest on Tuesday at the Pretoria Specialised Commercial Crimes Court when Anthony was attending to unrelated fraud charges against him. “Police subsequently charged Anthony with fraud and he appeared in court yesterday (on Thursday) where he was remanded in custody pending investigation. He is positively linked to other fraud-related allegations in Gauteng and the Eastern Cape,” said Mulamu. The case was postponed to November 2 for a formal bail application. Earlier this month, a 54-year-old man appeared in the Palm Ridge Specialised Commercial Crimes Court charged with fraud of about R2.2 million. “It is alleged that Christiaan Frederick van Wyk created fraudulent payment transactions between 2012 and 2018 when he was working at a Melrose-based company, PEG Holdings, as a secretary and financial manager,” Mulamu said at the time. She said further investigation by the Hawks’ serious commercial crime investigation team in Johannesburg revealed that Van Wyk had transferred about R2.2 million on different transactions into his bank accounts for the period. A warrant of arrest was issued and Van Wyk handed himself in at the Johannesburg Hawks’ office, where he was formally charged with fraud. IOL

More nights in jail for R20 million fraud accused Wayne Anthony

Partner 15 June 2021
Herman van Velze and Kobus Nell; STANLIB Balanced and Equities team. Speaking at the 2021 Investment Forum, hosted by The Collaborative Exchange earlier this week, STANLIB’s Balanced and Equities team Herman van Velze and Kobus Nell shared their views on the pressing topic of growth and inflation in a post COVID-19 environment. With inflation trending lower for many years prior to 2020, the word “inflation” was less prevalent in investment vocabularies. This year, “inflation” is one of the words most bandied about in markets. For some investors it is a concern, and for others it represents an opportunity. In the short term, economic indicators, both globally and in SA, are indicating price pressures. But we believe that in the medium term, growth will slow, and inflation will moderate to lower levels, mainly due to the underlying structural factors that kept inflation low pre-COVID-19 are still in place. Interestingly, global trend growth since 1980 has been around 3.3%. Beyond 2022/23 we see growth back to that level again, or lower. Government support to protect asset values is ultimately negative for structural growth beyond the cyclical recovery. The classic “accounting 101” equation is that assets are equal to shareholders’ equity plus liabilities. Similar to the global financial crisis in 2008, Governments stepped in during the current pandemic to protect the asset base by taking on more debt. This in effect sustained manufacturing capacity and an imbalance between debt and equity in the economic system occurred, which ultimately affected the confidence to invest negatively. We are further of the view that this move by governments largely provide a once-off and not sustainable benefit to the economy, and in fact depresses growth as debt servicing burden won’t go away for quite some time. Since the 2008 global financial crisis, when the US government stepped in to protect households and financial institutions from the consequences of excessive borrowing in the preceding years, government debt has been increasing faster as a proportion of GDP. After the recent pandemic, the US government took on even more debt, and it currently stands at over 120% of GDP. Normally, a recession is followed by an investment boom when asset prices correct and available capacity contracts. That may not happen in the current cycle, as it did post the global financial crisis in 2008. The level of government intervention has been the key factor that explains the difference in our view. Another longer-term potential structural factor impeding growth is the ageing population in developed countries, with Japan providing empirical evidence of how that practically slowed consumption and growth. In the short term, there are concerns that supply bottlenecks and job vacancies in the US will push up wages and inflation. As a result of shutdowns, there were shortages of many inputs such as semi-conductors, shipping capacity and lumber, but these shortages are unlikely to persist as economic activity normalises and supply chains gets readjusted. Interestingly, Americans seemed to have shown a reluctance to return to the workplace, partly because of generous handouts to the employed and unemployed, and partly because of fears of infection. But underlying the current shortage is a structural deficit in the labour market, which we think will persist, as corporates have focused on technology and cost-cutting in recent years, which was excelled during the pandemic. Economies have become more innovative, creating capacity, which increases the output in manufacturing ahead of end-user demand. A further stand-out has been the low level of bankruptcies and liquidations during the current pandemic, which means there has been minimal downward adjustment in capacity. The cost of oil as a percentage of GDP remains an important variable in US inflation, but since COVID-19 there has been many changes in behaviour, including people traveling much less as the work from home phenomenon became more integrated with the enhancements of technological solutions that are freely available, for instance frequent long-distance business travel may also be reconsidered given the increased focus to reduce the carbon footprint in general. This implies a lower level of oil utilisation in the economy. In future, we see intensity of oil use remaining at lower levels, which is likely to cap the longer-term price of Brent crude and will contain inflationary pressures. Our view is that inflation expectations are overstated at current levels and likely to moderate in time implies that future interest rates will be contained at moderate levels. Our balanced portfolios favour long-dated local and global bonds. Currently, our Balanced Cautious Fund is tilted towards local bonds (40%), global equity (21%) and local equity (18%). SA’s government debt levels have ballooned, but strong metal prices have supported tax revenue collections. We are also seeing positive political and economic developments, which we expect to maintain the momentum that started to filter through. These factors, coupled with a low inflation outlook, favour longer-duration bonds especially Emerging Market markets in countries including Mexico, Indonesia and Columbia. Over the last 10 years, the STANLIB Balanced Cautious Fund has only delivered nine positive years of returns, and in many other years it has delivered double-digit returns, showing the benefits of diversification. We are confident that in a future lower inflation environment, balanced funds will continue to be an attractive investment. Subscribe
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STANLIB balanced funds position for a low-growth, low-inflation future

Partner 9 March 2021
By Vaughan Henkel, Portfolio Manager, STANLIB Absolute Return Strategies
Government’s need to finance its fiscal shortfall is not promising, in the longer term, for consumer spending in South Africa. But we believe the market’s current short/medium term outlook on banks is too negative. Our initial view was predicated on a “back to some form of normalcy” likelihood in client behaviour (credit growth, bad debt provisions and credit experience), coupled with the banks’ credit loss ratio in 2020/1 being almost 20% above the level during the 2008/9 Global Financial Crisis. The thesis is:
The South African consumer outlook is poor, however…
Banks’ share price performance has been extremely poor. Banks’ provisions are very large but are primarily backed by assets which limit banks’ losses. The outcome will be less severe than early extreme forecasts. Earnings will be revised upwards as the outcome becomes less negative. Bank stocks are traditionally value stocks, so they may also benefit from style rotation, which is currently front of most investor’s minds. Economics (fundamental view)
The current environment is extremely challenging for countries and consumers as a result of the COVID-19-induced lockdowns and their economic impact. 1. Consumer Income – wages and jobs
About 80% of the banks’ personal loan book is derived from mortgage loans and instalment finance (mainly vehicles) which, by definition, are sought by higher-income clients. Although the latest South African Quarterly Labour Force Survey (QLFS) shows 1.4 million fewer people were employed in Q4 2020 than in Q4 2019 (pre-COVID-19), we argue this will have a lesser impact on bank clients, as they are typically Decile 9 or 10 earners. The vast majority of highly-skilled workers received full pay, so they would be able to service their debt levels, after three percentage points of interest rate cuts. 2. Bank Provisions
Banks’ provisions were larger than during the GFC. Given massive global support and the shorter-term impact of the crisis (governments were quick to shut economies globally and relatively quick to open them again), it appears that the provisions were more than sufficient. 3. Potential losses if consumers default
Although consumers are under pressure from job losses, 80% of the banks’ personal loan book is secured either by property (primarily houses) or by assets (primarily vehicles). Having assessed the potential losses of default on the banks’ mortgage, vehicle and general loans against the security that they hold, we believe that the earnings forecasts contain material upside. On average, the Big Five banks (including Capitec) at mid-2020 held provision levels at 90% of their profits. Valuation
Price: earnings (PE) is a simple value indicator and allows the widest comparisons across multiple sectors. Comparing the PE of financial shares (largely banks) against the ALSI PE, we note:
Although the Financials PE has re-rated from March 2020, it is still lower than its history, excluding the GFC and the 1997/8 Asian and Russian crises. Relative to the broader ALSI, Financials are the cheapest they have been since the GFC and at the end of 2015 (when SA’s Finance Minister was removed). Momentum – Price and Earnings
The Banks Index is now above its 200-day moving average and shorter moving averages are supportive. The JBNKS Index (Bloomberg Index of Banks) has now turned positive in terms of three-month earnings revisions (December 2020). The change in earnings revisions (although still negative before November) was trending upwards from the lows in May of 2020 (Source: Bloomberg). Sentiment
The BoFA ML fund managers’ survey, which provides insight into the views of the majority of South African fund managers, showed managers are c10% overweight banks, which is in line with the historical average range of 5% to 20%. Volatility
South African volatility is 20.2% (three-month at-the-money implied), which is 0.4 standard deviations above average (five-year average), so it is slightly elevated but not materially so. This is down on a three- and six-month basis. Liquidity
Bank liquidity is more than adequate for most funds to transact, as this is a large and liquid sector. For example, the market cap of the Big Four South African banks ranges from R59 billion for Nedbank to R258 billion for FirstRand. Conclusion
The Absolute Return team has a positive view on South African banks, based on the following factors:
Fundamentals for banks offer support in the context of job losses (limited upper end), wage experience for upper income consumers, large bank provisions relative to history, interest rate cuts and a positive view on the loss given default expectations. The valuation for banks is cheap relative to history and relative to the ALSI index. While this offers limited value for the shorter term, it can lead to significant returns. Momentum, both price and earnings, is supportive. Neither sentiment, volatility nor liquidity is particularly risky for this investment at present. This is a summary of an article by Portfolio Manager, Vaughan Henkel. We would highly recommend reading the full article on STANLIB.com, by clicking here. This article was published in partnership with Stanlib. Subscribe
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South African Banking sector investments: STANLIB Absolute Return Strategies

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Sydney , 23 May 2017 -- Bravura Solutions Limited : Bravura Solutions Limited today announced it has signed a long-term contract with STANLIB , part of the Liberty Group , for the implementation of its Sonata platform .

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