The “fragile five” – the most vulnerable emerging markets – have certain key features in common. The fragile five are Indonesia, Brazil, India, South Africa and Turkey. And an analysis on the CNBC website says: “As the cost of employing workers in these countries has risen, there has been less investment from foreign companies, fewer exports and slower economic growth. This has hit those countries’ balance of payments – which measures the balance of a country’s transactions with the rest of the world.”

And it noted: “Coupled with relatively weak economic growth in the fragile five, these current account deficits are alarming investors. Add elections next year, in four of the five countries, and there’s further cause for concern.”

One of the four is South Africa.

Rian le Roux, the chief economist at the Old Mutual Investment Group, notes that a poll of investors by The Economist, showed South Africa is seen as the most vulnerable – and ranked 19 out of 19 emerging markets.

Investors chose Singapore as the best bet by far, because the city state has a current account surplus equal to 18 percent of its gross domestic product (GDP). It is followed by Taiwan, which has an 11.7 percent surplus. Another six countries have smaller surpluses and one breaks even. The rest are in negative territory, with South Africa a worst case at 7 percent of GDP.

Another factor influencing investors is the size of the budget deficit. Of the 19 emerging markets, Singapore, South Korea and Hong Kong have small budget surpluses, while the rest run deficits.

The largest deficit is that of India at 5.1 percent of GDP, while South Africa runs second at 4.6 percent.

The reason South Africa is investors’ last choice is that the two measures combined show the country is in worse shape than any of the others. page 20



If it happens, the possible merger of two related listed property funds, Octodec and Premium Properties, will raise the profile of residential property as an investment.

South Africa’s listed property is significantly underweight in its exposure to residential property and Octodec and Premium Properties are currently the only listed funds with exposure to this sector of the property market.

Stanlib earlier this year estimated that the local listed property sector had only 1 percent exposure to residential property by value compared with 11.4 percent in developed markets and 15.2 percent in emerging markets.

In a country with a housing backlog and apparent shortage of quality residential rental accommodation this seems absurd.

However, demand for residential rental property will not necessarily translate into good investment returns because of affordability issues and even legislation that in investment circles may be regarded as being too friendly towards defaulting tenants.

There were plans in 2004 to list a residential fund on the JSE but the initiative did not receive sufficient backing.


However, if a merger between Octodec and Premium Properties does materialise, it will raise the profile of residential property as an investment, despite the fact that neither of these companies are pure residential funds.


But City Property, the managers of Octodec and Premium Properties, have been around the block, are well aware of the intensive nature of residential property management and the importance of residential buildings being secure, clean and well managed.

Any listed residential fund would have to replicate this model while educating the investment community about the differences between a listed residential fund and listed commercial property fund, where the focus is on the yield of the portfolio.

A listed residential property fund generally has a lower yield, but it should appeal to investors seeking income and capital growth. page19



It will probably be of very little comfort to either the ANC or the mining companies that their belief that there is a considerable gulf between them is not shared by mine workers or the members of mining communities – particularly those in the platinum sector.

Workers and community members in the platinum sector seem absolutely certain that the ANC is working hand-in-glove with the mining companies.

They believe that a major reason why workers and community members are unable to secure sustainable living conditions is because influential members of the ANC have been co-opted by the mining companies and have been rewarded with attractive directorships or generous black economic empowerment- type share allocations. They believe that it is only because of close relationship between the ANC and the companies that everyone turns a blind eye to the dismal work and living conditions.

Rightly or wrongly, these beliefs could cause the ANC a large chunk of votes in the Rustenburg region at next year’s elections. Although regarded as something of an opportunist in the region, Julius Malema is seen as someone who might provide access to a parliamentary voice that will speak for the workers and community members.

As to the complaints by mining companies that the government and organised labour are not taking a sufficiently long-term perspective on the industry, there’s really only one thing to say – “executive remuneration”.

The design of executive remuneration packages with the inevitable focus on share price performance ensures that the executives of mining companies are focused on the profits that can be generated or extracted in the current reporting period. In the world of executive remuneration long term is usually defined as three to five years.

It is time for a fundamental review of executive remuneration so that when executives talk about the need for long-term commitment from other stakeholders, they sound at least a little credible.


Edited by Peter DeIonno. With contributions from Ethel Hazelhurst, Roy Cokayne and Ann Crotty.