BNC#5 – Cy Jacobs Q&A: Our stock market is not a reflection of SA – massive opportunity out there

In this BNC#5 Q&A, Cy Jacobs highlights the massive opportunity in the renewable energy sector and the trillions of dollars that will be spent globally. Jacobs discusses the involvement of various companies in the industry, cautions against the slow turnaround time for fixing coal-fired power stations, and the challenges facing manufacturing businesses in adopting renewable energy. The discussion also touches on the impact of loadshedding on the market and the potential for investment in Transnet assets. Despite the challenges, there is hope for increased investment in renewables across various sectors of the economy.

Some extracts from the Q&A

On the massive opportunity in renewables 

There’s a massive opportunity in renewables and I think we haven’t seen a CapEx cycle globally as big as this renewable cycle that I can think of. So I think people are underestimating how much is going to be spent here, and we’re talking trillions of dollars globally and that the banks are going to be funding that. 

On who else is going to be potential winners

There are services companies that are going to obviously be involved in servicing this. The one thing I probably would not venture into in South Africa is maybe our construction companies because their history hasn’t been that fantastic. And the way they are structured, they’re more in favour of management teams than shareholders. But I think there are various services companies, big equipment companies – Caterpillar globally. And there’s going to be some new companies that emerge. Maybe some new ones will come to market. There are many solar companies that have done extraordinarily well, but they’re more in the private equity space and they’re still rolling out funding and I’ve seen a few of those come to market offshore. Unfortunately, the market valuations in South Africa are such that maybe they don’t want to come to the SA market. But there are a lot of benefiting companies. 

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On who is investing in renewables and other energy sources 

Besides the mining companies spending on renewables, shopping centers, for example, are trying to go off the grid, they’ve got massive space on top of buildings. We’re seeing a lot of renewables in that space. And the biggest problem is for manufacturing businesses. They really struggle the most. So there, I think, is a difficulty because of the amount of power that’s required, it’s difficult to get a renewable source to provide that. So they’re still using massive diesel generators which aren’t environmentally friendly and cost a fortune to run. So I think there are large parts of businesses, offices, shopping centers, less manufacturing dependent businesses, services businesses that are investing a lot. How much residential investment there’s been in batteries and solars and inverters just in this room over the past year, I’m sure is quite a significant number. So it is happening. But obviously in mining, it’s critical and they are globally enormous businesses.

Read more: Winning both ways – 36ONE’s Cy Jacobs on the genius of Hedge Funds for retail investors

On who is willing to buy a piece of Transnet at the moment

There definitely would be takers for pieces of Transnet. They probably would want some guarantees from government around security, etc. – that I’m not an expert on how that would happen, but there’s some very valuable assets in there. And the mining companies need Transnet to operate efficiently so there is will to make that happen.

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