Little by little, the war for new jobs must continue
April 15, 2004
By Edward West
Some thoughts on the election issues are appropriate today, even though it is a foregone conclusion that the ANC will keep control over the government and its purse strings.
Joblessness, crime and HIV/Aids have been listed as top election issues, although it can be argued that resolving the former problem will go a long way towards resolving the latter two.
The only way to create jobs is to attract investment in new businesses. Businesses are created by innovative ideas and people or institutions willing to fund those ideas. Sadly, this does not make for emotive electioneering.
Just before the election, members of the Western Cape government launched a project aimed at funding small business development.
Perhaps they were electioneering, perhaps they were honestly hoping to get the project under way just in case they did not win the provincial seat.
There have been other small business development projects, at both national and provincial level, that have not been very successful.
But it doesn't matter that the success rate is dismal. Little by little, the war for new jobs must continue. And it is in the areas of innovation and new technology development where additional funding is required. EW
Insurance Punt
Steve Meintjies, an analyst at stockbroker Imara SP Reid, is optimistic that the life sector on the JSE Securities Exchange will be rerated.
He puts it down to four reasons:
Yield;
Better markets;
Cost cutting; and
A belief, rightly or wrongly, that life can't get worse!
Meintjies recommends Metropolitan as an add, along with Liberty and Capital Alliance. His buy recommendations include Sanlam and Old Mutual, while he has a hold recommendation on Aflife. Sanlam is his first choice on the fundamentals.
On a fundamentals basis, Old Mutual makes little sense as there are just too many headwinds, he says. These include the market having already discounted Nedcor's recovery; potential heavy fines in the US regarding Pilgrim & Baxter; the life business standstill in South Africa; and the mere 1 percent discount to its last published embedded value.
Meintjies points out that its shareholders' equity, net of goodwill, is a mere 4.9 percent of insurance and other assets (excluding banking) and an even more microscopic 2.8 percent of total assets.
"However, these health warnings are likely to be ignored in the short term," Meintjies says, citing the sector's imminent rerating.
Old Mutual tends to trade in line with the Standard & Poor's (S&P) index - except for the past 12 months, during which it rose 25 percent against the S&P's 40 percent. This means there is still room for the share to move higher.
Piet Viljoen, the managing director of Regarding Capital Management, favours life companies ahead of banks, merely because life shares have priced in all the bad news and are cheaper relative to banks, which have priced in all the good news. VW
Paraprop
Listed property loan stock company Paramount Property Fund (Paraprop) recently acquired three new properties worth R42.2 million in total: the Goodwood Shopping Mall, the Zomerlust Landgoed office estate in Paarl and the Tsebo Building based in Rosebank, Johannesburg.
These came shortly after the fund declared a 12.5c a share distribution for the first quarter of 2004, which is 4 percent higher than the period last year.
The purchases follow the acquisition of office blocks in Sandton and Claremont during the last quarter of 2003, which brings the company's recent purchases to more than R150 million. Its total portfolio is close to R1 billion.
Last year 53 percent of Paraprop units in issue changed hands - a high percentage for a company with a small market capitalisation, indicating plenty of investor support.
Although last year's distribution per linked unit was substantially below the previous year, at 49c from 86.4c in 2002, directors have predicted a modest improvement this year. Last year the company renegotiated loans, so it should benefit from lower interest payments.
There is also no sign of the property market letting off steam. EW
Mine Unions
The National Union of Mineworkers (NUM) is recruiting the help of geologists from the Council of Geoscience.
Correct us if we're wrong, but does this not mean it's calling in the heavies to find out if Harmony Gold Mining is in fact telling the truth about the need to close up to six of its shafts?
Funny enough, all seemed hunky-dory last week when the NUM and Harmony were under the watchful eye of minerals and energy minister Phumzile Mlambo-Ngcuka.
After the ranting and raving that went on just after Harmony suggested that about 5 000 jobs could be affected by the restructuring of its operations for a "weak gold price environment", the two parties were saying they were sure they could find an amicable solution.
But it's not so much the outcome of the talks as the use of independent geologists that could be an industry breaker. The NUM may be about to set a precedent. SB
ICT Charter
The gathering of sufficient consensus on drafting an empowerment charter for the information and communications technology (ICT) sector has laid a good groundwork for the acceptance of the final document.
The working charter group should be congratulated on avoiding the question of setting numerical empowerment targets for the industry. The principle is to make sure the final document addresses issues that are key to the sector, such as skills transfer, enterprise development and employment equity.
There is no use debating numerical targets when people lack skills.
Furthermore, different regulations developed by the government will help the working group to come up with a coherent industry charter.
For example, the industry regulator has set a minimum of 15 percent shareholding by disadvantaged individuals in value-added network service operators.
The working group should then ensure that it uses some of the regulations already in place to compile a final charter that will stimulate sustainable economic growth through the sector. GM
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