BizNews Briefing – Competition Commission; Shoprite, Boxer, PnP; Alphabet; Banxso; Bitcoin
In this episode of the BizNews Briefing, host Alec Hogg is joined by Piet Viljoen of Re:CM; Evan Walker of 36ONE; Anthony Ginsberg of Ginsglobal (from California); Gerhard van Deventer, Enforcement director at the FSCA; and Jason Welz, head of crypto at Jaltech.
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Summarized transcript of the Briefing:
Alec Hogg (00:28)
Good morning and welcome. We have a packed program today, starting with Piet Viljoen from Re:CM and Evan Walker from 36One, offering insights on market developments. Then, we'll hear from Anthony Ginsburg in California about Alphabet's recent impressive earnings. Following that, we'll revisit a whistleblower story with Gerhard van Deventer from the Financial Services Conduct Authority. And finally, we'll explore the booming Bitcoin trend with Jason Welz, head of crypto at JalTech.
Bloomberg News (02:01)
First, let's get the overnight news from Bloomberg with Charlie Pellet and team, including key closing arguments from Kamala Harris and Donald Trump ahead of the U.S. elections, as well as commentary on investor sentiment by Lori Calvicino of RBC. Alphabet's Q3 results beat expectations, driven by cloud computing growth, which analyst Aaron Kessler highlights as particularly strong.
Bloomberg News (03:53)
Bloomberg reports that Siemens is close to a significant acquisition of Altair Engineering, a deal that could be its largest ever, driven by the growing demand for AI-integrated engineering software.
Bloomberg News (05:15)
Meta platforms' earnings are expected soon, with insights from Mandeep Singh at Bloomberg Intelligence.
Alec Hogg & Piet (05:44)
Discussion on Astoria's latest quarterly results, detailing its status as an investment holding company with various business stakes. Despite its NAV per share being over 14,000, shares are trading at a discount, presenting a value opportunity.
Alec Hogg & Piet (08:00)
Shift to recent decisions by the Competition Commission. Vodacom's acquisition of Maziv and Sun International's attempt to acquire Peermont were blocked. Piet critiques the commission's decisions as examples of regulatory overreach and socialist policies hindering market efficiency and investment.
Alec Hogg & Piet (12:07)
Exploring the Competition Commission's motivations, Piet suggests that the commission's lack of business understanding harms sectors needing investment, potentially leading to less competition rather than more.
Alec Hogg & Piet (16:41)
On Coronation Fund Managers' trading update, Piet notes how South Africa's stagnant savings and rising industry competition pressure asset management. He comments that Coronation's flat profitability reflects these challenges.
Alec Hogg (18:22)
Piet Viljoen from Re:CM as always, we love getting insights from our man. He's the only person who has presented at every single one of the business conferences.
Alec Hogg (18:30)
Welcoming Evan Walker from 36One, Alec discusses the presence of 36One's Cy Jacobs at business conferences. Alec mentions recent retail market events, like Shoprite's trading statement and Pick n Pay's performance, noting that Shoprite and Pick n Pay used to be heavyweight rivals, but now the comparison is uneven due to contrasting fortunes.
Evan Walker (19:30)
Evan describes Shoprite's trading statement as "superb," noting unexpected 11% growth in the South African market despite low inflation. Shoprite continues to dominate, outpacing competitors like Pick n Pay, even amid increased competition. Shoprite's ability to reinvest significantly in logistics and its 6060 delivery service strengthens its market hold.
Alec Hogg (20:18)
Alec highlights how Shoprite's reinvestment power, built from organic growth, positions it as a formidable leader in the South African market.
Evan Walker (20:43)
Evan expands on Shoprite's capital investment, which is three times higher than competitors. Their business model, including the 6060 service, maintains gross margins while offering a competitive advantage in the digital landscape. He mentions Walmart's efforts to revamp its Makro and Game stores, though Shoprite remains unmatched due to strategic market understanding and data-driven customer focus.
Alec Hogg (22:59)
Alec shifts to Pick n Pay, referring to the listing of Boxer, its "jewel in the crown," and its potential impact on Pick n Pay's revival under Sean Summers.
Evan Walker (23:21)
Evan explains that Boxer's listing would enhance Pick n Pay's cash position, allowing it to address substantial losses. Sean Summers' goal is to restore profitability rather than chase market share. Evan notes that creating a "wow factor" in Pick n Pay stores is challenging, especially as Shoprite and other competitors have improved their store experiences.
Alec Hogg (25:01)
Alec asks about potential niches for Pick n Pay, mentioning the notable Pick n Pay store near Hurlingham Manor as an example.
Evan Walker (25:42)
Evan acknowledges the quality of some Pick n Pay stores but emphasizes that Shoprite's "store within a store" model, featuring offerings like Starbucks, gives it an edge. He commends Woolworths for its food quality but remains uncertain about Sean Summers' strategy to regain Pick n Pay's former appeal. Evan mentions that culling underperforming stores is a prudent move for Pick n Pay.
Evan Walker (28:03)
Evan says Boxer's separate listing could provide a valuable growth opportunity, particularly in rural areas where Boxer competes effectively with ShopRite. Analysts foresee a 3-4 year turnaround for Pick n Pay's profitability.
Alec Hogg (28:10)
Alec asks about the opportunity for Pick n Pay shareholders to participate in Boxer's listing.
Evan Walker (28:25)
Evan explains that Boxer's listing will likely be based on price bids rather than pro rata allocation to existing Pick n Pay shareholders. He speculates that Pick n Pay shares may see some benefit if Boxer performs well.
Alec Hogg (29:54)
Alec thanks Evan Walker from 36One for his insights.
Alec Hogg (30:03)
We're connecting with Anthony Ginsburg from Ginsburg Global, who is joining us from California. It's a big day with financial results out from four of the "Magnificent Seven" tech giants, including Google/Alphabet. Initial reports indicate that the market loved Alphabet's numbers.
Anthony Ginsberg (30:37)
Yes, indeed. Google's results were impressive, especially in their cloud division, with 35% year-over-year growth in cloud revenue. Overall, Alphabet's revenues grew by 15% year over year, and YouTube and search also saw double-digit growth, despite concerns about competition from AI technologies like ChatGPT.
Alec Hogg (31:55)
Can you tell us a bit about your journey to specializing in tech stocks? We appreciate your insights, which are often spot-on.
Anthony Ginsberg (32:40)
After starting on Wall Street in 1990, I developed a strong belief in index funds and now focus on broad-based and tech-specific ETFs. Our tech megatrend ETF is up 45% year over year and 14% in the past three months. The convergence of technologies like AI, cloud, and EVs is reshaping tech. In the U.S., South African expats like Elon Musk emphasize convergence, which is critical to understanding the value of firms like Tesla. We also see strong ties between cloud computing and AI, which benefit companies like NVIDIA.
Anthony Ginsberg (34:48)
Digital media is another area of growth. Microsoft's acquisition of Activision, after some regulatory hurdles, reflects the strategic push into digital entertainment, attracting more users to their ecosystem.
Alec Hogg (35:17)
It's a big week for quarterly results from major tech firms, including Meta, Microsoft, and Amazon. We've seen Alphabet's positive results; what's your outlook for the others?
Anthony Ginsberg (35:46)
We're optimistic. We expect good numbers for NVIDIA, influenced by Alphabet's cloud spending. Microsoft's Azure and Amazon's AWS are expected to report strong growth in AI investments. U.S. economic indicators, including expected GDP growth and potential interest rate cuts, create favorable conditions. Even second-tier tech firms are likely to post positive earnings, helped by a weaker U.S. dollar.
Alec Hogg (37:11)
Given Alphabet's cloud growth, could Amazon Web Services (AWS) face pressure, considering it's the largest in the field?
Anthony Ginsberg (37:38)
AWS, which generates around 50% of Amazon's profits, may lose some cloud market share but is still a huge profit engine. Amazon is gaining on Google's search advertising market share, which could balance out any cloud declines. Amazon still commands around 30% of the cloud market, and the broader economy is doing well, with GDP growth possibly hitting 3.5%, signaling a soft landing for the U.S. economy.
Alec Hogg (38:58)
Thank you, Anthony Ginsburg from Ginsburg Global, for joining us and sharing insights on these latest numbers from Los Angeles.
Alec Hogg (40:00)
Gerhard Van Deventer, from the Financial Services Conduct Authority (FSCA) and divisional executive for enforcement, joins us today. Yesterday, we discussed Banxso with an anonymous executive who highlighted that Banxso appears to have re-emerged as AfriMarkets, with the same chief operating officer. Gerhard, could you provide an overview of the FSCA's process in addressing this?
Gerhard Van Deventer (40:07)
Thank you, Alec. The FSCA highly values media's role in public awareness. Cases like Banxso's illustrate widespread AI and deepfake scams. We first noted Banxso's use of deep fake ads, featuring figures like Elon Musk, to lure customers. Such ads promised unrealistic returns, which is always a red flag. The FSCA started investigating Banxso, issuing public warnings and collaborating with the Financial Intelligence Centre, which froze about R90 million in Banxso's accounts. We then involved the National Prosecuting Authority's Asset Forfeiture Unit for a preservation order, though Banxso is appealing it. Additionally, we provisionally withdrew Banxso's license to further probe these activities. Recently, an investor filed for Banxso's liquidation, adding another process outside FSCA jurisdiction. Meanwhile, we're evaluating AfriMarkets due to shared personnel with Banxso, though it's too soon to determine wrongdoing.
Alec Hogg (44:13)
It's hard to tell if AfriMarkets is a clone or copycat of Banxso. With the same chief operating officer, one might assume a connection. But could another party be exploiting this situation?
Gerhard Van Deventer (45:04)
Impersonation in scams is indeed common, even involving FSCA staff or officials. However, AfriMarkets is a separate entity with its own license. While it shares personnel with Banxso, it's premature to allege misconduct. For the FSCA, ensuring financial services providers are suitable and compliant is paramount. If a firm promotes complex financial instruments like CFDs, which are high-risk and only suitable for informed, high-net-worth investors, then targeting vulnerable individuals becomes a serious issue for us.
Alec Hogg (48:15)
Those with large portfolios usually spot these scams right away. But it's the less financially literate who are targeted. Our source mentioned that Hashim Amla's image was used in Banxso's ads. The line between salesmanship and exploitation can get blurred. How does FSCA address this?
Gerhard Van Deventer (49:06)
That's a real challenge, Alec. The FSCA prioritizes educating vulnerable investors. Cold calling, high-pressure sales, and deceptive promises are all unacceptable practices. Fraud is sometimes masked as genuine losses, and victims are often urged to "reinvest" to recover. The FSCA's standards demand suitability, care, and diligence. If these aren't met, licenses can be revoked.
Alec Hogg (51:18)
Thank you, Gerhard. That was Gerhard Van Deventer, Divisional Executive at the FSCA.
Alec Hogg (51:30)
"Jason Welz is the head of crypto at Jaltech. Jason, good to be talking with you. We know Jaltech well; you're a reputable business partner, and we've had a long relationship with you. As such, I'm sure you'd feel as strongly as we do, along with the Financial Services Conduct Authority, about high-pressure sales tactics used by certain organizations. When it comes to crypto and Bitcoin, what advice can you give to people before they invest?"
Jason Welz (52:00)
"Crypto is indeed a high-potential asset class but also among the riskiest. Never invest more than you can afford to lose. Dollar-cost averaging, where you spread out your investment over time rather than in one lump sum, is a tried and tested approach. Anyone using this method historically in Bitcoin has rarely seen significant losses on their investment."
Alec Hogg (53:50)
"Could you explain dollar-cost averaging a bit more?"
Jason Welz (54:00)
"Dollar-cost averaging, or DCA, means spreading your investment over time instead of a lump sum. This way, you aren't locked into the price at one specific moment. If Bitcoin prices fluctuate, say a big drop after an initial purchase, it can be disheartening. By spreading purchases over time, you avoid huge losses from market timing. In volatile markets like crypto, DCA can help capture long-term upside without exposing you to significant short-term risks."
Alec Hogg (55:00)
"That approach sounds familiar to unit trust investors who buy monthly. Speaking of Bitcoin, it's up 63% this year. It's nearing its all-time high. What's driving this rally?"
Jason Welz (55:10)
"This rally isn't new—it began during the 2022 bear market. Several factors have bolstered crypto this year: the launch of Spot Bitcoin ETFs in January brought in new investors uncomfortable with self-custody risks, and the Bitcoin halving in April created a supply shock. High-profile endorsements, like BlackRock's Larry Fink calling Bitcoin a gold competitor, have fueled interest. Additionally, macroeconomic factors and an anticipated easing cycle in the U.S. play a role. Rising expectations of a Trump presidency, as he's pro-crypto and has suggested starting a U.S. Bitcoin reserve, could further strengthen Bitcoin's case. Meanwhile, risks to the U.S. dollar as a reserve currency are emerging, evidenced by gold also hitting all-time highs despite high interest rates."
Alec Hogg (56:10)
"With Bitcoin at $72,279, would you recommend buying now?"
Jason Welz (56:20)
"I personally stick to dollar-cost averaging for long-term crypto investments, as I don't rely on trading success. My retirement savings strategy is based on consistent, gradual investments into crypto."
Alec Hogg (58:00)
"So, no matter if Bitcoin's at $72,000 or higher, you continue investing because you believe in its long-term value?"
Jason Welz (58:30)
"Yes, I'm price agnostic. I believe in its value over a 10-year horizon, so I'm comfortable buying at current prices."
Alec Hogg (59:00)
"Thank you, Jason Welz from Jaltech. Bitcoin's surge is something business investors should note. In our portfolio, 2% allocated to Bitcoin has now grown to 8%. For those curious about our portfolios, we update them monthly in a BizNews Premium member webinar. Thank you for listening, see you at 7 a.m. tomorrow. Until then, cheerio!"
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