Industry News: Telkom, Commodities and more

A new week is upon us, and to better inform your financial activities, we bring you our top 3 picks of current affairs this Monday 17 August 2020.



  • Telkom Earnings Drop

Considering other entities we’ll cover in the industry news instalments, Telkom has been doing quite well. The company reported a 78% drop in earnings per share for it's last 12 months of trading. They did explain that the payout related to the job cuts earlier in the year, along with the impact of Covid-19, and a higher tax charge had siphoned their earnings deeply. But on the bright side, they had good revenue growth and the mobile business performance was outstanding.


What does this mean for you? Telkom’s results have been out since June, but there is still quite some volatility. The impact of Covid-19 hasn't been fully observed on most companies and this will likely loom over Telkom as well. But operationally, the business is sound, and not much change from the current level is expected.


Source: Businesstech

  • Not All That is Gold Glitters

In the wake of the Coronavirus pandemic and the subsequent financial battery and assault, investors flew to gold at lighting speed. But it just wasn't what the market expected. The response was a bit soft but significant. And it begs the question, why? In modern times, regulations and requirements for following rules are stricter. A strong possibility is that it was not easy for all big-money investors to just buy gold. If an investment mandate dictates specific assets that a fund must hold, deviations take time to implement and might come at a higher cost.


Another possibility is that investment selection may have been more informed as investors now resort to data-driven decision-making processes, and the data did suggest, from much earlier times, that certain industries will weather the Covid-19 storm. Thus big money investors may have been able to allocate money more resourcefully than simply stocking up bonds and commodities.


Nonetheless, gold will remain the Liverpool FC (in the 2019/20 season) - a winner. Sensibly so if you think about the fact that the money we see today is derived from gold in any case. It still holds its ‘store of value' function well. Gold's light might also be boosted by low-interest rates that have deteriorated government bonds, as bond yields drop when interest rates drop.


Source: CityWire



  • The Tax Elephant in the Room

With the uplifting of bans on alcohol and tobacco products, the question is about taxes now. Will taxes change to make up for lost revenue? Will prices rise to cover the tax gap? Will SAB and Heineken SA restore their multi-billion Rand investment projects? Will AmaPiano ever end? These are very important questions for the economy.


Sadly, none have been answered yet but SAB has always been one to not disappoint in the investment space, in very loose terms. Emergency treasury budget aside, corporate SA will ultimately decide how everything pans out for us financially. There has been immense, irreversible damage to the economy but this only presents new opportunities. With that said, it's high time Private Equity takes its pole position. Kickstarting the economy to ramp up taxes will be no softball, thus aggressive risk will be quite important.

Heavy Iron Insight Pick: Lockdown Level 2: How your portfolio will likely change.


With the country basically open again, you can expect some "return to normal" (that was super impressive wordplay). Major industries under the microscope are Hospitality and Tourism, Alcohol and Tobacco consumer products, and Lifestyle focused companies.

The resumption of business is good but it doesn't necessarily translate to positive returns. There's still a consideration of losses accumulated, impairment charges, bankruptcy risk, and possibly foreclosures on property and assets. It's a lot to think about. What's important is trying to understand what actions are going to be taken by the companies in your portfolio. This should be a mantra if you are playing the long game in investing.


The government will have to make moves as well. They have to create a conducive environment for new opportunities to be accessible and for consumers to feel safe. A concern drawn from history tells us that interest rates might start going up again soon as money gets to move around a lot more and starts affecting inflation. We won't have 2008 all over again but it might get ugly for anyone with a low-interest rate loan (who took the loan only because they could afford it at that low-interest rate).


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Author: Nkanyiso Nyawose


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