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South Africa Starts Post-Zuma Graft Crackdown With Arrest of Former Minister

Former State Security Minister Bongani Bongo was arrested in a case related to bribery and state-owned companies. Bongo appeared in a court in Cape Town Thursday to face a charge of corruption. “This is the first big arrest,” said Claude Baissac, the head of Eunomix Business and Economics Ltd., which advises on political risk.

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Comments of the Day

22 November 2019

 

 

Video commentary for November 21st 2019

 

Eoin Treacy's view

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: bit coin drops below MA, trade war sentiment improves modestly, stock markets quiet, governance improving in South Africa and India, Dollar steadies, gold eases, oil firm.

 

 

Modi Makes Biggest Privatization Push in Decade to Spur Economy

This article by Anirban Nag and Vrishti Beniwal for Bloomberg may be of interest to subscribers. Here is a section:

 

On Wednesday, Indian authorities went into overdrive. The government decided to sell its entire stake in the country’s second-largest state refiner, and its biggest shipping company. It also approved a proposal to pare stakes below 51% in some companies and pushed for an introduction of a new industrial code bill. Meanwhile India’s central bank seized a troubled shadow lender to try and contain defaults from spreading in Asia’s third-largest economy.

“This is Modi’s renewed attempt to instill confidence in India’s economic potential,” said Priyanka Kishore, head of India and Southeast Asia Economics at Oxford Economics, Singapore.

She added it was imperative for the Modi government to announce these measures as it attempts to bridge a widening fiscal deficit following the dismal tax collections and cuts to corporate tax rates worth $20 billion. Earlier this month Moody’s Investors Service cut the country’s sovereign debt outlook to negative amid concerns over slowing growth and revenues.

 

Eoin Treacy's view

Cutting corporate taxes, privatising non-essential industries, finally intervening to stop the slide in nonbank lenders setting up a strategy so the country’s potential to become a manufacturing hub is not squandered are all very positive for the medium-term future of India. In fact, one might think of them as necessary components if the country is to continue to progress economically.

 

 

South Africa Starts Post-Zuma Graft Crackdown With Arrest of Former Minister

This article by Paul Vecchiatto and Antony Sguazzin for Bloomberg may be of interest to subscribers. Here is a section:

Former State Security Minister Bongani Bongo was arrested in a case related to bribery and state-owned companies. Bongo appeared in a court in Cape Town Thursday to face a charge of corruption.

“This is the first big arrest,” said Claude Baissac, the head of Eunomix Business and Economics Ltd., which advises on political risk. “It’s demonstrating that at long last some criminal charges are going to be brought against African National Congress members and clearly pretty senior ones.”

More than 500 billion rand ($34 billion) was stolen from state companies and government departments during the nine-year rule of President Jacob Zuma, according to Ramaphosa. While he has promised to fix the economy by curbing state costs and splitting up the indebted state power utility, a demand for arrests has been a constant refrain in the nation’s media and on radio talks shows.
 

 

Eoin Treacy's view

Respect for minority shareholder interests, property rights, a free press and independent judiciary are the hallmarks of states with good governance. The extent to which these ideals and institutions are supported and improved dictates whether governance is improving. South African corruption has put all in jeopardy over the last decade and it is particularly good news the Ramaphosa administration is will to begin to do something about it.

 

 

Private markets come of age

Thanks to a subscriber for this report from McKinsey which may be of interest. Here is a section:

Private credit. Private credit fundraising softened in 2018 (down 15 percent versus 2017), but its long-term growth trend remains intact. In fact, 2018 was the second-highest fundraising year in history for the asset class (Exhibit 5). Seven-year trailing fundraising has grown at an average of 9 percent per annum since 2013, outpacing both PE and closed-end real estate growth, on the back of sustained low interest rates and a long economic expansion. Annual returns for private debt have averaged around 10 percent since 2008, with higher yields than are available in public debt. This has been an attractive proposition to more and more investors. A good indication is high-yield spreads, which reached ten-year lows in 2018 before widening again in the fourth quarter.

Private credit funds (and hedge funds, which are not included in our data) are now filling a financing void for many middle-market and sponsor-owned companies, helping sectors and providing security structures avoided by banks. Private credit has also increasingly returned to covenant-light lending as the market has grown hotter: in a recent survey by the Alternative Credit Council, 38 percent of North American private credit lenders reported lower financial covenants in the past year, versus just 8 percent reporting higher covenants.

 

Eoin Treacy's view

There are obvious merits to investing in privately held companies. For one thing the reporting requirements are considerably less onerous but there is also cashflow and the ability to invest in growth at an earlier stage; thereby catching more of the base effect as businesses expand. The flip side is these advantages are well understood and the desire to capture yield has reduced returns and driven up prices.

 

 

Eoin's personal portfolio: precious metals long initiated

 

Eoin Treacy's view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change. I'll change the title to the date of publication of new details so you will know when the information was provided.

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