When Telkom’s now-suspended chief financial officer bought R6 million worth of Telkom shares, most people who gave it a second thought probably reckoned that he’d used his own money for the deal. He has apparently got a lot of it so it wouldn’t have been too much of a strain for him.
But what a quaint notion that turned out to be – a senior executive using his own money to buy shares in the company he works for. Why would you bother dipping into your own vast resources when you can so easily access interest-free funds from your employer?
Jacques Schindehütte was showing a profit of almost R1m within just three weeks of purchasing those shares at R24.45 a piece. That is a return of almost 17 percent for a three-week-old investment.
There was of course absolutely nothing wrong with the timing of the purchase.
Schindehütte has said he had the necessary approval from the chief executive and the chairman, and that he would not have traded if he believed he had access to information that Telkom had not already been shared with the market.
Unfortunately for Schindehütte, and all other Telkom shareholders, the share price has been under pressure since news of the chief financial officer’s suspension. It peaked at R28.65 on October 18, and not even this week’s strong results have been able to lift market sentiment towards this long-troubled company. But it is still ahead of the price at which Schindenhütte made his investment and, assuming shareholder anxieties are settled, it is likely in time to strengthen.
But, if it is the case that Schindehütte’s interest-free loan has contravened section 45 of the Companies Act, presumably he will not be allowed to keep the profits from his share purchase.
The whole thing is quite bizarre. Telkom’s statement on the matter raises more questions than it answers and how can it be that a company that probably pays more in legal fees than any other JSE company is unsure of how the law applies in this situation?
Construction
International Monetary Fund (IMF) forecasts of strong economic growth in many African countries have resulted in many companies positioning themselves to take advantage of this increased economic activity, which will be driven by increased investment in infrastructure.
JSE-listed cement and lime producer PPC is one of those companies that appears ahead of the rest because its strategy to benefit from the growth in Africa is already far along.
The company already has four projects that are advanced in the Democratic Republic of Congo (DRC), Ethiopia, Zimbabwe and Rwanda and expects to finalise a fifth project early next year.
Indicative of PPC’s efforts to position itself in new markets is its R2.7 billion capital expenditure budget in its current financial year, which is expected to increase further next year. The budget is aimed at enabling the company to achieve its target of generating 40 percent of its revenue from outside South Africa by 2017.
Some may question why PPC has taken this step when the local government has a R4 trillion infrastructure programme. The reality is that since the government’s programme was announced, very few tenders have been issued and the ability of the government to finance such a massive infrastructure rollout has been questioned in the current economic environment.
In addition, there will shortly be a major new entrant to the South African market in the form of Sephaku Cement.
Meanwhile, there is increased competition in coastal regions from imported cement that PPC indicated accounted for an estimated 7.6 percent of national cement demand in the first six months of this year.
In this environment, margin compression seems inevitable. If that becomes a reality, PPC’s venture into Africa and the diversification of its revenue streams appears extremely prudent. page 19
Manufacturing
Trade and Industry Minister Rob Davies is one member of the cabinet who is a stickler for time, so it was a disappointment to see him about 15 minutes late for an engagement yesterday.
It is a pity he did not apologise for the lateness or even blame it on the traffic.
The event was to launch the Buy Back SA campaign, which included the unveiling of an advert clip of 60, 45 and 30 seconds to be flighted on national television networks in support of localisation and the purchase of South African-manufactured products. The advert features John Kani, the revered veteran actor.
It is a pity there are no incentives offered for buying South African in the campaign. Otherwise South African products would fly from the shelves this festive season. The intangible incentives are pride and patriotism.
Certainly Davies did not intend to shame his cabinet colleagues when at question time he said he was driven by a mere Toyota Fortuner instead of a luxurious German imported sedan. However, he warned: “Just because some parts of a model are manufactured here, does not mean it is manufactured here.”
Davies, however, gave a useful hint for patriotic South Africans. He said the first three digits on a bar code of a product indicate if it was at least packaged in South Africa. The digits are 600.
Davies said the campaign was similar to the Buy American campaign that was launched in 2009 after the global financial crisis. Since 2010, it had created 500 000 jobs.
Coenraad Bezuidenhout, the executive director of the Manufacturing Circle, brought some optimism to the launch when he said 40 percent of materials for manufacturing were now procured in the country by local manufacturers.
The bad news he had was that 300 000 jobs had been lost in the manufacturing sector since 2008.
Edited by Banele Ginindza. With contributions from Ann Crotty, Roy Cokayne and Wiseman Khuzwayo.