CAPE TOWN - Get a side-hustle, a friend advised, because you are going to need it in the years ahead as the country struggles through the financial morass that has been created by the Zuma era of looting, neglect and government over-spending.
Finance Minister Tito Mboweni did not mince his words through his Medium-Term Budget Policy Statement last week when he said South Africa “spends more than it earns”, “things need to be done differently”, that the situation was “grave” and that “there is no time left to act”.
Wow! Unless you are a government employee with good pay and perks for life, most of us have been all too aware of our declining standards of living for some time now.
Perhaps, as political analyst Daniel Silke remarked, Mboweni was using the opportunity to drum some reality into his own party, which has largely, through years of failure to act, been responsible for the mess we are in.
Generally, Mboweni did not provide any noteworthy solutions for Eskom, promised cuts in government spending through successive recent budgets have consistently failed to materialise and the government is likely to remain hobbled by the ANC’s left wing alliances when it needs to take tough decisions on matters such as cutting a bloated public service wage bill and tackling decisively with failing state owned organisations.
It wasn’t all bad news, though. There has been some improvement, albeit small, in fixed capital formation, indicating rising investor confidence, the government really does appear committed to restoring fiscal health, and there are attempts to deal with corruption, some visa issues have been tackled and it looks like the Infrastructure Fund might work.
Sadly though, it is not going to turn the economy around soon.
In my view, one of the best “side hustles” to protect against coming economic headwinds, as one doughty asset manager told me, is to invest whatever you can in strong, well managed and growing companies.
Consider that, while JSE overall returns have not been great in the past five years, over 50 years stocks on average returned 13.5percent a year before taking inflation into account.
There were five companies that reported results last week that I believe could make up a secure side-hustle over the medium term, or three years.
One company that to me has all the characteristics of a strong, well managed and fast growing company is Afrimat.
It has never failed to declare a dividend since listing, annual compound operating profit growth is around 20percent and this is in spite of a weak economy. Its industrial and construction material minerals mining operations are diversified.
Earnings increased 94.6percent in the six months to August 31, and the second half looks promising.
The share price opened at R31.93 on Friday and I see no reason why the 12.5percent gap between the 52-week high won’t be narrowed, if not beaten, in the not too distant future.
Last week Capitec Bank concluded the R3.56billion acquisition of Mercantile Bank.
Mercantile does banking mainly for established small and medium-sized businesses and entrepreneurs, and aligns easily with Capitec’s business banking strategy.
Capitec is the only bank I have seen recently that is hiring staff and expanding its branch network, all the while continuing along its digital evolution. It has been gaining 200000 new clients per month.
Its share price opened at R1372.98 on Friday, off a * :e of 27.5, which is quite expensive for the local market, but the rating is warranted.
Another company growing well in the tepid local economy is Cartrack Holdings, which sells telematics locally and into an increasing number of global car markets.
Chief executive and majority shareholder Zak Calisto is confident about further rapid growth. Recent interim-headline earnings per share were up 28percent to 72.2cents. Subscription revenue is growing fast abroad.
The share price was static at R26.01 on Friday morning, but its * :e is 64, high for the JSE. In global terms, considering how this company is growing and the role the telematics in the future of electric vehicles, maybe not.
Imperial Logistics issued a trading statement last week: double digit operating profit and headline earnings growth is anticipated in 2020 from a strong pipeline of new contracts.
It is divesting from unprofitable business, consolidating contracts and cutting costs.
Also reporting good results last week was Investec Australia Property Fund (IAP), which is now dual listed after listing on the Australia Stock Exchange (ASX) in May. The share trade turnover of IAP shares on the ASX has risen six-fold compared with the JSE.
It should benefit from stronger property markets in major Australian metropolitan areas. Its dividend was slightly lower at 4.79 Australian cents (R0.51) in the six months to September, but the full year guidance was unchanged and there is headroom on the balance sheet to grow.
The share price was 0.25percent higher at R16.29 on the JSE on Friday, just shy of its 52-week high. A good share to buy for asset and geographical diversification.
Also reporting strong results last week was platinum group metals and gold miner Sibanye Gold, which lifted earnings before interest, tax, depreciation and amortisation by a staggering 240percent in the quarter to end September 30.
The group was boosted by rising precious metal prices due to tougher air pollution controls that require the use of platinum group metals in vehicles. The higher price trend that has continued into the fourth quarter.
Sibanye’s share price was 0.8percent up at R29.33 on Friday, with the share price gaining steadily from only R9.30 a year ago. A possible primary New York listing in two years, possibly even dividends next year, all point to rising prospects in the medium term.