🔒 Members Only Ep2 – By-elections, Zille and why SA assets still very cheap

In this made-for-members video, BizNews editor Alec Hogg and Nielsen Network founder Bronwyn Nielsen provide context on the big stories of the past week. Not surprisingly, politics continues to dominate, with useful context on what the latest developments mean for SA asset prices (hint: at Tuesday’s webinar update we’ll be increasing the SA exposure in BizNews model portfolios.) 

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Highlights from the interview

In the second episode of “Members Only” by BizNews, Alec Hogg and Bronwyn Nielsen discuss significant political and business developments in South Africa. Bronwyn, speaking from Cape Town, has set up a makeshift studio. They begin by highlighting the recent political events, including interviews with Helen Ziller and Pete Feilune. Bronwyn emphasizes the ongoing uncertainty in the political landscape and the critical need for effective governance. Alec notes that by-elections have provided a snapshot of public sentiment, showing shifts in voter support, particularly for the DA in Cape Town and IFP in KZN, while the MK party struggled.

Alec shares insights from his conversation with Gideon Rachman, who found President Cyril Ramaphosa to be in control. The discussion also covers the DA’s strategic gains in recent by-elections and the challenges posed by political funding, particularly from foreign sources. Bronwyn and Alec stress the importance of consistent, visible improvements in governance to maintain public trust.

They also delve into the business front, referencing interviews with figures like Pitful Yun and David Shapiro. They discuss the potential upswing in South African stocks due to their low prices and Yun’s cautious optimism about the political and economic future. The episode concludes with Bronwyn’s anticipation of broadcasting from Italy next week and Alec’s appreciation for the engaging discussions.

Read more: 🔒 Members Only Ep1 – Witnessing SA’s ‘second transition’, a political watershed

Edited transcript of the interview  

Alec Hogg (00:07.054)
Members only, episode two Bronwyn. It’s so good to catch you wherever in the world you might be. Where are you at the moment?

Bronwyn Nielsen (00:15.259)
I am in die Waterkant in Cape Town and I’ve made an amazing makeshift studio here, Alec. I’m going to have to send you a behind-the-scenes picture.

Alec Hogg (00:19.726)

Alec Hogg (00:23.734)
I see you got one of your fans there with you, a rather large one. That’s nice to be. Great stuff. Well, we’ve got lots to talk about for this week of Members Only. And just to remind anyone who’s watching this for the first time, this is for the Biznews subscribers.

Bronwyn Nielsen (00:30.477)
Rather large fans, always works as a background, that fan, you know, in the absence of anything else.

Alec Hogg (00:50.126)
It’s a very special thing that we’ve put together. If you’re a subscriber on YouTube or to BizNews Premium, then you get access to this. Bronwyn is the founder and boss of the Nielsen network. And I’m Alec Hogg from Biznews. Let’s get straight into it because it’s been one of those weeks where politics is front and centre, especially in South Africa.

Bronwyn Nielsen (01:26.811)
Absolutely. And it’s fueling everything, Alec. I’ve watched a number of your interviews this week, specifically Helen Ziller, Pete Felewyn, the by-election discussion. I know we’re going to go through each of these in more detail, but it’s driving everything. And from a business perspective, my week has been about context. There’s still uncertainty about how things will pan out. You’ve got the optimists, but as Helen Ziller said, there’s lots to be done.

Alec Hogg (02:12.334)
Yeah, she was trying to manage expectations. It was like a CEO ahead of financial results. They manage expectations down and surprise everyone on the upside, and your share price rises.

Bronwyn Nielsen (02:24.987)
100 percent. That’s the key to investor relations. But that managing of perception, even at the municipality level, fixing potholes and traffic lights, painting traffic signs, people want to see those they elected making a difference. That is not a quick fix. Helen’s conversation with you made that clear. Pete Feilune also mentioned he’s not 100% sure this will all hang together. There could be a stalemate given the huge differences between the ANC and the DA.

Alec Hogg (03:20.174)
Exactly. I had a conversation with Gideon Rachman this week too. He saw Cyril Ramaphosa at home, very relaxed. Gideon couldn’t say much as it was off the record, but he found Cyril in control and comfortable. The next day, Gideon invited me onto his podcast, the Rachman Review. Gideon’s a top guy, chief foreign affairs commentator for the Financial Times, writing one article a week. He can travel and talk to anyone. It was interesting being on the other side of the mic, and I found myself being pretty positive. Now, I put a few slides together for us today, starting with the by-election results. Can you see that clearly on your screen?

Bronwyn Nielsen (05:19.067)
Yes, very clearly. There’s that theme of the D.A.

Alec Hogg (05:26.734)
Yeah. There were 18 by-elections on Wednesday, the first chance for voters to express their opinions post-election. By-elections in South Africa are only held at a local government level. If a ward councillor dies, resigns, or gets kicked out, you have another by-election. Of the 18, we’ve had 220 in the last two and a half years. Beaufort West is relevant because the Patriotic Alliance founder, Gaten Mackenzie, was mayor there for about a year. The DA took two wards from the PA and another from the ANC, giving them a majority in the council for the first time.

Bronwyn Nielsen (07:38.075)
Helen said they have a serious seat at the table, meaning extensive negotiation. The results demonstrate this. You also mentioned Zumbi, where the IFP held their own, and MK was nowhere to be seen. Can you elaborate?

Alec Hogg (08:17.006)
After the election on May 29, MK party entered this by-election confidently. Jacob Zuma told six ANC councillors who moved to MK to resign, forcing by-elections. Of those six seats, only one went to MK. The ANC held two, but the IFP got three. The ANC had been dominant there, but now they got quite a roasting from MK and IFP. The city of Cape Town saw the DA voters come out in force. In one by-election, 98% voted for the DA, a super landslide. People of Cape Town love their governance, while in KZN, they’re leaning towards the IFP and supporting the DA in Newcastle. By-elections are a temperature gauge, not to be extrapolated too aggressively. MK peaked at the election but didn’t achieve much. People might be returning to ANC or moving to IFP.

Bronwyn Nielsen (11:58.907)
You talk about Obama, I interviewed President Zuma in his house in Cape Town. I had to ask him about corruption, and despite his charm, I didn’t get a clear answer. Anyway, moving along.

Alec Hogg (12:53.838)
Knowing him, he probably chuckled and deflected in his charming way. He’s charismatic but awful at governance. Back to our presentation. There was Ashor Sarupen, DA’s deputy campaign manager for election 2024. He had interesting things to say about by-election results, particularly the EFF getting single-digit returns. Funders might reconsider if they keep doing poorly. MK did okay in some areas but got a good hiding in others. The PA might have also peaked. Let’s refer quickly to R.W. Johnson.

Bronwyn Nielsen (14:31.163)
Ashor mentioned the time of fractional parties is over in South Africa. It’s about significant seats at the table. He also said by-elections show that people have moved beyond theatrics, looking for those who can execute, not grandstanding.

Alec Hogg (15:15.790)
That’s so important. Watching the opening of parliament, the EFF’s theatrics probably made people question if they want their taxes supporting this. The by-election results might reflect dissatisfaction with that behaviour. R.W. Johnson, our top columnist, wrote about Jacob Zuma, pointing out he’s not the chess master his supporters claim. It was funny seeing memes of Zuma accusing the IEC of not being able to count.

Bronwyn Nielsen (17:35.835)
They have a weak legal case for another election. Ziller pointed out the need for succession planning in the party, mentioning Duru Zile and Duru Zani’s charismatic traits. She also highlighted the money reportedly coming into MK’s coffers from Russia and China. Should we still be alert to foreign money boosting MK?

Alec Hogg (18:50.382)
The Kremlin’s involvement isn’t going away soon. We need to investigate these issues to protect our democracy. The old government lacked the backbone, but with people like VF and some DA members in parliament, there might be a different approach. For now, there are other priorities, like getting South Africa working again. Political party funding in South Africa is concerning. Helen Ziller, despite her flu, made it clear that the government of national unity is not a rubber stamp for the ANC. The DA has joined on certain conditions and will stick to them.

Bronwyn Nielsen (21:58.939)
It was a great interview. The key point was the longevity and hard work required. Setting expectations, this is not an overnight fix. The successes they’ve achieved have been hard-won with a lot of commitment. We need to be patient.

Alec Hogg (22:44.014)
Yeah, Cape Town took a lot of work, as did the Western Cape. The other interview I wanted to refer to was with Pitful Yun. He’s a realist, probably the most rational person I know. He looks at investments based on likely returns and current prices, much like Warren Buffett and Charlie Munger.

His view is that despite the noise around the government of national unity—there will be turbulence, disagreements, and media fights—rational discussions will prevail behind the scenes. He believes South African stocks have just started their upswing, not due to an economic boom, but because they’re so cheap.

On Tuesday, we have a business portfolio update, adding more South African exposure. This is for premium members, so don’t miss it. Join us on Tuesday at noon for some exciting changes.

Bronwyn Nielsen (24:03.579)
Having chatted to Pete at the BN6 news conference in Jiminas late last year, his conversation with you directly reflected his election expectations. He’s enthusiastic about the future, saying this is just the beginning. The negative risk premium is being eliminated, but the upside hasn’t been factored in yet. It’s a relief that it’s not an all-down scenario but a rational way forward.

However, I must caution that Pete mentioned it can blow up. This isn’t going to be a bed of roses, but it’s glass half full right now.

Alec Hogg (25:19.854)
Tell us about Rainbow. I loved the interview with Martinez Stando, whom I’d never heard before. And dear David Shapiro, he just keeps going, doesn’t he?

Bronwyn Nielsen (25:31.323)
David, 20-plus years, is probably one of the biggest brands in business television. He’s on BDTV, CNBC, BizNews, every platform we know, and the audience loves him. David gave us important insights on Rainbow Chicken. He said the market has been hurt by Astro and the chicken reality. He asked Martinez what they plan to do differently.

Martinez explained the challenges: exchange rate volatility, regulatory environment, and unforeseen events like a Russian ship in the harbor halting imports. They’re pursuing short-term goals, extracting business efficiencies, and have three areas: chicken (Rainbow Chickens, Farmer Brown), animal feed, and generating their own electricity from animal waste and excess water, fueling their abattoirs. An interesting discussion, and they debut next week.

Alec Hogg (27:33.166)
Are you going to buy the shares?

Bronwyn Nielsen (27:37.915)
I actually don’t buy shares, Alec. For the last 22 years, I keep thinking this is a good one, but I never have the impetus to do it. I suppose that’s terrible to disclose as a longtime business journalist. I’m always sceptical.

Alec Hogg (27:59.086)
Well, maybe let me put it differently. Should we be putting this one in our business portfolio?

Bronwyn Nielsen (28:08.315)
I’m a farmer’s daughter, Alec. Anything in the agricultural space, I temper with my experiences growing up. Agriculture is not for sissies. I salute what they’ve done. They’ve got a huge operation and as a heritage brand in South Africa, they’ll likely do well. But again, I’m not in the market.

Alec Hogg (28:44.430)
Well, Warren Buffett says never invest in something if you’re going to lose sleep over it. Agriculture is turbulent. In the interview, you made it clear there are bumps in the road. Before we close, we can’t leave Koki out.

He was enthusiastic, especially about financial stocks and banking shares, which have seen a big rebound. I reminded him of Yanni Mouton from PSG, who once said there was a 10% chance of South Africa becoming like Zimbabwe. Ahead of the election, Koki said it was 80%. It’s sobering.

Bronwyn Nielsen (30:26.043)
Very sobering. Koki, a longtime expert in financial stocks, has always been our go-to for insights. He sees this rally continuing, especially in the banking sector. As the election results were coming in, his international clients asked for advice, and he was clear: buy the banks.

Alec Hogg (31:04.781)
Well, we’ve had a fascinating half hour. Thanks for your wonderful inputs, Bron. Maybe one day I’ll be a jet setter like you.

Bronwyn Nielsen (31:20.027)
I’ve got a surprise for you next week. I’ll be coming to you from Puglia, Italy.

Alec Hogg (31:30.094)
Wow, that sounds exotic. Is it a holiday or work?

Bronwyn Nielsen (31:33.659)
I’ll make sure I’ve got a nice view, and hopefully, we can talk it up.

Alec Hogg (31:38.958)
Magic. Bronwyn Nielsen is the founder and head of the Nielsen Network, and I’m Alec Hogg from BizNews. Thanks for joining us for Members Only, episode two.

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