Companies spend big on loopy buybacks

Telkom’s share repurchase programme certainly did create value for some people during 2004 and 2008, but none of them were long-term investors in Telkom. At the height of its repurchase programme in 2008 Telkom paid as much as R144 a share. The shareholders who sold at that stage must have been delighted; the shareholders who believed that Telkom was a good long-term investment and didn’t sell, must be feeling a little peeved.

You have to wonder on what basis did Telkom imagine – in financial 2008 – that the market price was low and justified the company using over R2 billion of its cash resources to buy back 16.8 million shares. Could this stem from the sort of arrogance that is so often associated with a lumbering state-backed monopoly?

Of course, Telkom is not the first listed company to blow a small fortune on buying back its own shares and it definitely won’t be the last. Remember Anglo American’s £10.85bn (R140bn at yesterday’s exchange rate) splurge between 2006 and 2008? It did seem that the higher the price went, the more determined Anglo was to repurchase its shares. In 2008 the share price peaked at £36.80 before the market crashed and Anglo came tumbling down to a low of £10.54.

Of course, as anyone who keeps a wary eye on stock exchange news service announcements will realise, the £10.85bn pre-crash splurge has not dented Anglo’s enthusiasm for share buybacks. Almost daily the company announces that it has bought back shares. The daily announcements are courtesy of the tougher rules of the London Stock Exchange, which requires that listed companies disclose details immediately after repurchasing.

Previously many of these repurchasing announcements were nestled in between announcements that executives had exercised share options and sold the shares into the market.

Despite the uncertain benefits and the potential conflicts of interest, buybacks have become fashionable and few people seem to challenge their use.

Treasures

High-net-worth individuals hold on average around 10 percent of their total net worth in treasure assets – which include items such as jewellery, fine art, wine, antique furniture, classic automobiles and precious metals.

This insight into the behaviour of the wealthy is provided in the latest report by Barclays Wealth Insights.

The report said only 19 percent of these treasure assets were held for financial reasons. Despite the increased public interest in collectables and record prices set at auction, the report found investors were far more likely to buy treasure assets for emotional, rather than financial, reasons. And a third of the 2 000 wealthy respondents surveyed globally confirmed that they were holding more treasure types today than five years ago.

The report, Profit or Pleasure? Exploring the Motivations Behind Treasure Trends, said South Africa was in line with the rest of the world, with wealthy individuals holding about 11 percent of their total net worth in treasure assets.

The report also reveals that 38 percent of South African respondents hold precious metals, an asset traditionally thought to retain value when financial markets are turbulent, and the majority (92 percent) agree that diversification is valuable.

Globally, a number of different factors appear to affect the popularity of treasure asset types, from the age of the investor to the wider economic stability of their region. Precious jewellery is by far the most popular treasure asset type for wealthy individuals across all countries, with 70 percent of respondents investing in this asset, followed by fine art (49 percent) and antiques (37 percent).

In South Africa, 74 percent of respondents held fine art pictures and paintings; about 58 percent had antique furniture and 52 percent coin collections. South Africans top the global list (with 46 percent) of individuals planning to hold coin collections in the next five years.

Green report

South Africa will have a fairly good report to present on its carbon emission reduction and green economy initiatives at the UN Conference on Sustainable Development, the Rio+20, taking place next week in Brazil. The government and businesses have actively engaged in changing the way South Africans treat the environment and use energy.

The objective of the conference will be to secure renewed political commitment for sustainable development, to assess the progress to date, and to determine what the remaining gaps in the implementation of the outcomes of the major summits on sustainable development are. The themes will focus on a green economy in the context of sustainable development, poverty eradication and institutional frameworks for sustainable development.

Since the COP17 climate conference in Durban last year, the government has adopted the national climate change response policy, which serves as a clear roadmap of how South Africa will respond to climate change.

The departments of Mineral Resources, Energy, and Water and Environmental Affairs, with the help of the National Treasury, have sought to create opportunities for the green economy.

At the centre of this report, South Africa will give an update on how many green jobs have been created through such projects. The Energy Department will obviously boast of its approval for 28 independent power producers, which have been given licences to operate in the areas of solar and wind power generation.

The report will also feature the Industrial Development Corporation and its Green Energy Efficiency Fund, which benefits businesses that are investing in modernisation of industrial equipment and use energy efficient technologies that will result in reduced demand. page 16

Edited by Peter De Ionno. With contributions from Ann Crotty, Ethel Hazelhurst and Nompumelelo Magwaza.