Select Page

Fundamentals to support Rand?

Fundamentals to support Rand?

In last week’s Part 1 of this column we showed that there has been a very close correlation between the Rand/US Dollar exchange rate, the oil price and the JSE Allshare index. As the oil price (and commodities in general) rose, the Allshare index rose while the Rand weakened. Now that the oil price (and commodities in general) collapsed, the Allshare index appears to be stagnating where its close correlation with the oil price would have indicated at least a significant decline in the Allshare index.

12 month average world oil demand

12 month average world oil demand

It would have similarly indicated a strengthening of the Rand whereas the Rand has actually weakened significantly. History does indicate though that the Allshare index appears to ignore rapid changes in the oil price and the Rand/US Dollar exchange rate and that the recent swings in their fortunes may not necessarily lead to the index retreating significantly.
As we conclude above, the recent collapse in the oil price does not appear to be justified, which may be the reason for the Allshare index not having tracked this collapse. Similarly it appears that the recent ‘collapse’ in the Rand/US Dollar exchange rate is not justified.
On this basis, we conclude that the weakness of the Rand is overdone and that the Rand should strengthen on the basis of fundamentals. However this weakness is bound to result in an increase in the SA repo rate sooner and higher than expected. We also believe that it is bound to accelerate the rate of inflation which also will lead to an increase in the repo rate. , Finally, we believe that the weakness of the oil price (and commodities in general) is overdone and should reverse. However this reversal may take quite a while to manifest.
While we are faced with these very negative developments for which it is very difficult to time a correction, the investor should continue to focus on real returns rather than absolute returns to increase his wealth slowly and steadily. With an inflation rate of around 3% one should be quite content if one manages to achieve an investment return around of 8% per annum. As an active fund member one should not shun equities but should be cautious, spread the risks as far as the law allows and focus on stock picking. In terms of equity sectors, depressed commodity markets may offer selective buying opportunities but this may require patience to realise gains, and it may still just be too early. Consumer Goods and Consumer Services had a terrific run since the beginning of 2006, driven mainly by foreign investors. With the severe depreciation of the Rand, foreign investors will have been hurt and their interest is likely to wane. We therefore do not see much potential in these sectors any more. This leaves the Financial and Industrial sectors as sectors we believe to offer the best prospects.
In terms of diversification between different asset classes locally, the likelihood of a repo rate increase suggests that interest bearing investments do not hold good prospects at this stage. However the prospect of accelerating inflation favours inflation linked bonds.
Although global diversification must be part of any local investor’s investment strategy, the overdone weakness of the Rand suggests that one should currently not move capital offshore. More speculative investors with offshore investments may actually want to consider repatriating capital to capitalise on what we believe to be an unjustifiably weak Rand.

About The Author

Typesetter

Today the Typesetter is a position at a newspaper that is mostly outdated since lead typesetting disappeared about fifty years ago. It is however a convenient term to indicate a person that is responsible for the technical refinement of publishing including web publishing. The Typesetter does not contribute to editorial content but makes sure that all elements are where they belong. - Ed.

Following reverse listing, public can now acquire shareholding in Paratus Namibia

Promotion

20 February 2020, Windhoek, Namibia: Paratus Namibia Holdings (PNH) was founded as Nimbus Infrastructure Limited (“Nimbus”), Namibia’s first Capital Pool Company listed on the Namibian Stock Exchange (“NSX”).

Although targeting an initial capital raising of N$300 million, Nimbus nonetheless managed to secure funding to the value of N$98 million through its CPC listing. With a mandate to invest in ICT infrastructure in sub-Sahara Africa, it concluded management agreements with financial partner Cirrus and technology partner, Paratus Telecommunications (Pty) Ltd (“Paratus Namibia”).

Paratus Namibia Managing Director, Andrew Hall

Its first investment was placed in Paratus Namibia, a fully licensed communications operator in Namibia under regulation of the Communications Regulatory Authority of Namibia (CRAN). Nimbus has since been able to increase its capital asset base to close to N$500 million over the past two years.

In order to streamline further investment and to avoid duplicating potential ICT projects in the market between Nimbus and Paratus Namibia, it was decided to consolidate the operations.

Publishing various circulars to shareholders, Nimbus took up a 100% shareholding stake in Paratus Namibia in 2019 and proceeded to apply to have its name changed to Paratus Namibia Holdings with a consolidated board structure to ensure streamlined operations between the capital holdings and the operational arm of the business.

This transaction was approved by the Competitions Commission as well as CRAN, following all the relevant regulatory approvals as well as the necessary requirements in terms of corporate governance structures.

Paratus Namibia has evolved as a fully comprehensive communications operator in Namibia and operates as the head office of the Paratus Group in Africa. Paratus has established a pan-African footprint with operations in six African countries, being: Angola, Botswana, Mozambique, Namibia, South Africa and Zambia.

The group has achieved many successes over the years of which more recently includes the building of the Trans-Kalahari Fibre (TKF) project, which connects from the West Africa Cable System (WACS) eastward through Namibia to Botswana and onward to Johannesburg. The TKF also extends northward through Zambia to connect to Dar es Salaam in Tanzania, which made Paratus the first operator to connect the west and east coast of Africa under one Autonomous System Number (ASN).

This means that Paratus is now “exporting” internet capacity to landlocked countries such as Zambia, Botswana, the DRC with more countries to be targeted, and through its extensive African network, Paratus is well-positioned to expand the network even further into emerging ICT territories.

PNH as a fully-listed entity on the NSX, is therefore now the 100% shareholder of Paratus Namibia thereby becoming a public company. PNH is ready to invest in the future of the ICT environment in Namibia. The public is therefore invited and welcome to acquire shares in Paratus Namibia Holdings by speaking to a local stockbroker registered with the NSX. The future is bright, and the opportunities are endless.