🔒 Premium: Full transcript, audio of Alec Hogg’s post-Davos SA presentations

LONDON — Six presentations across South Africa in 10 days is about as intense a programme as I’ve had. But the message from Davos and afterwards was certainly heard: this remarkable country is on the mend and the smart money is already paying attention. We kicked off the post-Davos talks in Durban, and as tends to happen, the audience was settled a long time before the 6pm start. There was a flipboard in the room which, ahead of the formal proceedings, allowed me to informally share on the four quadrants of change which we must all progress through: Rejection; Resistance; Acceptance; Commitment. South Africa is changing. But as with any other change, each one of us moves through these quadrants at our own speed – the most fortunate have always been those who get to Commitment first and reap the rewards by adjusting their circumstances ahead of the crowd. Given the interaction both during and after these talks, information shared assisted some attendees in that process. Have a listen/read the transcript of the final presentation in Johannesburg last Thursday and perhaps you’ll join them. – Alec Hogg

The World Economic Forum is held in the highest town in Europe – only one way in and one way out – and as a consequence of this, since 1971 (48 years this year), there has been a gathering of effectively, the most powerful people in the world. But what happens in Davos, is that you get all these A-type personalities and they’re engaging with each other. A-type personalities (for those of you who don’t know this) are people who tend not to listen too well. They’re usually CEOs of companies who talk a lot and tell people what to do, but they don’t absorb a lot. So, now they get to Davos and all their heroes are there so they start listening. They all listen to each other, go back home, they’ve been educated and they effectively set the agenda for the world for the next 12 months until they get back together again and listen again, etc. South Africa’s always punched above its weight at the World Economic Forum.

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What do you find there, if you look on the far left-hand side? That is lots of security, which you wouldn’t be surprised at and the far right-hand side… I took a screenshot on my phone for two reasons. (1) My daughter doesn’t believe that I’m capable of doing that and (2) I wasn’t lying when I said it was -17 and it was -17. While I was walking (it was about a 25-minute walk) where I saw your boss – I suppose we don’t have to disclaim this – Sim Tshabalala – attending an ABSA function. I asked him when he came out, “Did you have lots to eat?” He said, “As much as possible.” That ABSA function was at 7am. ABSA have great exposure now on the promenade so during that week in Davos, people want to be seen. So, at the promenade, you have this huge ABSA building that they’ve taken over (just for the week) and at 7am when it looked like that in the middle – the moon up, freezing, -17 – you couldn’t move in that place for people who came along to hear the story of how to invest in South Africa.

Now, I said this last year. I’ve been going to Davos 16 times. Most of that time, it’s been terribly disappointing because there was no interest in this country. People didn’t want to invest. There was just no interest. In fact, in the most recent years, it’s been quite embarrassing to be a South African. There were sniggers when they saw your South African scarf that we are encouraged to wear. Last year, that turned around. This year, the smart money is coming. Now, we sit here in this maelstrom of fake noise, news, shouting, screaming, and ‘this is a noisy place’ and we think that it’s going to the dogs, or worse. Zimbabwe, here we come. The reality is, the smart money is not betting that way. And I saw that at the World Economic Forum again, not least -17 degrees, 25-minute walk, and the place was heaving. You could hardly get in there.

I mentioned my major themes because there are 400 different sessions at the World Economic Forum so most people who go there will return with a different impression. This year, the three themes I focused on was a lot on South Africa and I will be sharing that with you because it is my view that on the 18th of December 2017, there was a watershed in this country’s future – that this country went towards prosperity rather than towards penury. I wanted to see how much progress had been made and to also get an understanding – just by listening (being the observer), remember – how the country was progressing now that last year, the Deputy President was the President and whether he was in fact, implementing or whether the spirit was different to what I’d seen in previous years.

So, that’s the middle one. That’s the South African delegation at their press conference. I spent a lot of time with the South Africans this year. On the left-hand side is Hendrik du Toit who is the incoming Chief Executive of Investec. He is a member of the global body that the World Economic Forum has. They have it on various topics. So, when there’s a hot topic, they will put some really good people together. In this case, it’s the environmental topic – climate change/environment – which is chaired by the Chief Executive of Unilever or Polman and Hendrik is one of the executives who is in that. So he’s on that grouping. Between annual meetings, they engage with each other, go to conferences, find out the latest talk, and then feed it back into the World Economic Forum. He gave a breakfast presentation – very well-attended – where the focus was what we call ESG (Environmental, Social, and Governance).

That is no longer for the PR department. That is now mainstream. Hendrik’s view on this (and not just view). In London, they look after £150bn of assets. He says, “We believe that every company that we invest in must have an ESG Director and the reason for this is that the young people of the world are saying ‘we’re not prepared to have the world run the way it was in the past. We want things to be done differently’. Environment’s important. The social license is important and the governance of a company is important. So, just bear that in mind. If you’re investing in a company where the ESG rating is bad, you’re likely to find people like him and other asset managers abandoning that stock. Then, on the far right, I’ve got a picture of Klaus Schwab who is the founder of the World Economic Forum because he did a most unusual thing this year.

Every year, they have six co-chairs (six people who guide this whole meeting of 3,000 A-type personalities in 400 different sessions such as Nobel prize winners, CEOs of the biggest companies, and many of the top politicians) and the co-chairs guide this. This year, all barring one of the coaches, was under the age of 25. He went out and he got what I call global shapers, he brought them in, and they managed the meeting. Again, trying to understand what the next generation is doing. The one co-chair who wasn’t is Satya Nadella, the CEO of Microsoft and he is part of the theme because Microsoft is part of the whole big tech story, which was very big in Davos this year. Starting with the environment, that’s Sir David Attenborough.

I would urge you, if you have any interest whatsoever in climate change, the environment (and I get all kinds of interesting letters from people who are denialists on climate change), my suggestion is this guy probably knows more than most in the world. In the 1950’s, Sir David Attenborough came to Africa. He was exposed as a young filmmaker to the natural world there and he has watched, through the last 70 years how the change in the climate has affected the natural world. He was interviewed incidentally, by Prince William who did a fine job of the interview. He says that you cannot exaggerate the impact of climate change. The impact is beyond anything that anybody’s been writing about but he also says that he has hope for it because now mankind is finally waking up to the reality. When mankind does that…when mankind manages it or measures it, it starts to manifest.

So, that was his story. But environment is very strong this year. The other theme here: this is Mr Kai-Fu Lee who was previously the head of Google in China. He is a professor. He is at an American university and one of the go-to guys on AI (artificial intelligence). Our partners at The Wall Street Journal have parallel streaming sessions along with the WEF and I went along to a couple of the sessions that they invited me to, including this one, which was hugely insightful. To understand for the first time, how artificial intelligence is affecting our lives and why there is such a huge kickback now against the companies that have benefitted from taking personal data from individuals. Many of us don’t get it that while we’re surfing the net or looking at our Gmail, that suddenly adverts come up related to things that we’d been looking at recently.

Now, the reason for that is that big data (and in particular, Facebook and Google) have got so much information about you. If you’ve got Gmail, they can read your emails. They’ve got so much information about you that they can target you to advertisers in a way that traditional media cannot. The consequence of this is that Facebook and Google have scooped up about 60% of the global advertising market. Now if you think that we’re talking about China outside of that (because they’re not allowed to play in China), it gives you an understanding of how dominant they are in this country. The number is somewhere between 70 and 80% of digital advertising in South Africa…is either Google or Facebook. What happens in a case like that is that the authorities – the regulators – start kicking back. We had it with US Steel with Andrew Carnegie over 100 years ago.

We had it with John D. Rockefeller and Standard Oil, which was split up. It’s called Antitrust. Last year, there was a bit of bubbling coming through. This year, it’s moving aggressively against this duopoly who have dominated that field and who use the information of individuals to profit when the individuals don’t really know how much information they’re giving, so it’s a big theme this year. Those of you who have been following our Global Portfolio would have seen on my return from Davos, we sold Google (or Alphabet as it’s now called). I thought about it last year, but it still didn’t seem right last year. This year, it is right. Now again, as you’re very well aware if you’ve followed the changes in the Global Portfolio, I tend to do things very early but you’ve probably got a nice run if you stick with Google for a little longer but the world is changing now against these two.

Incidentally, Google (in the four years we’ve owned the shares) has doubled in value, so it’s done very well for us but the world is changing against them. So, I would urge you: if you have it in your portfolio, just think about it very carefully. Artificial intelligence is massive. It’s going to be dominated by a few people but that is when the regulators start stepping in. We’ve recently seen some very hefty fines as well being thrown at these guys. Just to give you a few of the people that I met and spoke to: on the far right-hand side is one of the co-chairs. This young man lived in a refugee camp in Eastern Kenya. He is Somalian. He has lived in that refugee camp for 18 years. Refugee camps are supposed to be in and out. He’s been there for 18 years. There are 185,000 other people there but of course, it’s Eastern Kenya and not in the middle of Europe somewhere.

After he did a pretty good job of co-chairing this meeting, he went straight back to the refugee camp. There’s something funny going on in the world. Next to him in the middle are two people who are researching aging. Not aging necessarily in the fact that we are aging (of course we are), but healthy aging. We’re living longer – much longer than we did in the past – and Linda Partridge (again, there’s a really nice interview that I had with her) is one of the experts in how to live longer healthier. Now, the big issue in aging are the two dread diseases, for which there are no cures at the moment and that’s Parkinson’s and Alzheimer’s and there is an enormous amount of investment that is going into it. Not surprisingly because in the rich north, people are getting older and more of them are getting dementia and these related diseases for which they haven’t found any cures.

It’s really interesting, what her and Constantinos Demetrios (he’s one of the young up-and-coming scientists who is a research star) … Both of them work within the European Council. In fact, he runs the ageing area at the Max Planck Institute. Now those of you who are into science would probably know it’s the most prestigious institute in Europe, anyway. Both of them say that it’s quite simple if you want to age well. Just make sure you get blood to your brain and that means walk, don’t smoke too much (don’t smoke), and just be all the stuff that our parents told us about but it’s interesting. They’ve been investigating ageing with mice, worms, and things like telomeres. How do you lengthen them not shorten them as people get older? It’s fascinating. The science of ageing is extraordinary.

And then this guy here is Popo Molefe. If you are in that first quadrant (rejection – that’s a lot of rubbish. What’s going on in South Africa?), just listen to this guy’s interview. What’s going on at Transnet. He’s the Chairman of Transnet. He’s starting to put people in jail. In fact, he saw a guy getting sentenced to 20 years – the head of ICASA (the Independent Communications Authority of South Africa) – the guys who issue radio licenses. He’s gone to tjoekie – 20 years – this week. We’re starting to see the orange overalls coming more into play and the work that’s being done at Transnet (remember, it was one of the targets) Eskom is all in the news now but Transnet was the template. That’s where Brian Molefe and Anoj Singh and McKinsey got going first and they’ve just continued along that line. Very interesting interview and I urge you to read that one.

Okay, onto South Africa. Why did this guy sing? His name is Agrizzi. He is the chap using the bridle. He’s in the wrong. He’s not GuptaLeaks which we all got and then had a look at and tried to work out what these noxious fellows were doing. He’s in the wrong. He’s the man who actually put the R100,000 per month together to pay the deputy NPA prosecutor Jiba who is now saying, “Oh, I never got the money” but he’s got evidence of it. He’s the guy who put the R300,000/month of cash to give to Dudu Myeni who has bankrupted SAA to the degree that we as taxpayers are now having to bail it out to the tune of billions. This guy’s got… It’s amazing how this works and I wrote about it the other day on divine intervention and got quite a bit of flaming from the atheist community. One of my heroes, Clay Christensen who is very aligned with my views on religion, if you like.

When I met him, I asked him, “What about atheists?” and he said, “No, anybody can teach you stuff” so I guess these guys were teaching me what they believe and what they believe is that there’s no such thing as divine intervention. But then, I don’t understand this because here’s this guy who leaves BOSASA – Prime Evil. He’s on his way. He’s got lots of money. He’s been paid every month as they did. They paid everybody off with hush money. Then he gets a tumour on the heart, goes to hospital, and goes into a coma. It’s like he’s gone but he comes back and when he comes back, he says, “Boy, I need to make good. I’m now going to spill the beans. I don’t care what Watson does to me. I don’t care what all these people that I’ve been paying off do to me because there’s something else going on in this life. I’ve got to make good with the big boss.”

It’s an extraordinary story. Read his affidavit. With what went on in this country, it’s surprising that we’re still standing. It’s surprising that the country’s still around. The depth of this, particularly at the NPA, which is where you start attacking corruption… Paul O’Sullivan, one of my heroes – I think he has 4 bullets in his body from being shot in various places at the worst of the time. When I had interviews with Paul, we could never announce it beforehand because he was justifiably concerned that if he came to the studio, he wouldn’t make it home because they’d be waiting for him and there are people who are clearly now not benefiting from the fact that O’Sullivan has been continuously fighting the good fight, but he’s not alone. There’s an armada of NGO’s who’ve been involved in this and the media’s role has been extraordinary.

At the time that Agrizzi was quiet, we knew there was a lot going on but we were the artists. We were the observers. We could only surmise and at one point in time, we all thought it was just really the Guptas. Well, we now know that that’s not the case and that there are many more but this has been a dramatic development in South Africa’s transformation. I ask you: If we had a president and a ruling party that did not want transparency, why would he have three commissions of enquiry looking into hanging up as much dirty laundry as possible? It’s an extraordinary time we’re living in right now, in this country.

If you have a look at this graph, I show it to you to give you an understanding of where the money flows have been going during the Zuma era. The red line is money leaving South Africa. That’s you guys who take your money offshore. As we said through the Global Portfolio in 2014; we said, Zumanomics are going to bankrupt this country. Get your money offshore as quickly as you can. Take it off and you did, and you did well. That was the rational thing to do – the exporting of capital. As you can see in 2017, the figure was about $7bn. That’s insane for a developing country. A developing country needs money. It shouldn’t be sending money out. The green is the money coming in. Look at that: 2017 was just about nothing – $1bn. It was during the Zuma era; the country was heading in the wrong direction fast. That’s was the net flow looks like.

A nett of -$6bn and going in the wrong direction. That was 2017.So, if you ever wonder about when I say to you ‘the watershed’, it’s extraordinary, isn’t it? And then, along comes Mr Ramaphosa. He was elected. You can see its around about that time there, if you recall. By the way, this is a Rand graph. When it goes in that direction (up) – when the Rand rises – for some reason, we always invert the Rand against the USD. That means it weakens. That means it strengthens. Okay, so what was happening during the Zuma era was that the rand was in that direction – weakening – and then around here, once it got to about R15 to the USD, people automatically started saying, “Well, maybe Zuma’s not going to win the election” because by then, it had blown up. It was starting to discount and move to 20/25 and even 30 if we were continuing along those lines.

And we know now, but reading Agrizzi, by reading Gupta Leaks, and by just listening to the president and others; we know where we were going. Suddenly the money started…not money coming into the country as fixed investments, but traders started taking a position and saying, “Well, maybe it’s not going to blow up that badly.” Of course, then we had Ramaphoria and as you can see over there after Cyril was elected: there’s Ramaphoria. The Rand came down its strongest at R11.80 and then recently we had Eskom. So, the Eskom story is now front and centre. I wanted to show you though, where we were going. My friend Brett Duncan, sitting in the front row here from Standard Bank said to me one day, “Go and have a look at where the Turkish Lira is going because the Turkish Premier – a guy called Erdogan – and Zuma…If you know anything about racing, they were coupled on the tote.”

These were the two guys who were in the same…they were carbon copies of each other. If you looked at what Erdogan was doing and you looked at what Zuma was doing, they are. So, South Africa and the Turkish Lira (their currency) continued pretty much in the same vein, right up until December 2017 and then suddenly, the South African Rand was pretty stable and the Turkish Lira blew out. It got there and at that point in time they jacked up the interest rates from around the same level that we have them at (6%) to (25%). If you were to take the Rand today to where the Lira is… In other words, if we had continued to follow each other, the Rand would be sitting at R20 to the USD. Imagine the impact of that on the petrol price etc. But worse than that, it would only be R20 because interest rates would be sitting at 25% — not at 6/7% as they are at the moment (we’re talking about the bank rate). That’s the bullet this country dodged.

Okay, let’s talk Eskom. I spent yesterday… At six o’clock I was in the lockup at parliament and from 6 – 2 going through all the details of the budget, we had a webinar last night on the budget, which was very well-attended. The main issue of the budget when you look back on it last year, it was the increase of 1%-point in VAT and #feesmustfall – R50bn that suddenly, was thrown at Cyril. This year, it’s Eskom. And the money that has been put into Eskom is the equivalent of 1%-point increase in VAT. Treasury said last year that VAT going up would give us R22.9bn extra into the fiscus. Us, the taxpayers already own 100% of Eskom but now we’re going to own 100% more. Well, it’s still 100% but we’re just going to put in R23bn for the next three years. Why? This is quite critical. First of all, if Eskom doesn’t work, the country doesn’t work. South Africa needs investment.

No-one’s going to invest when the lights aren’t on so the one thing you’ve got to get fixed is Eskom. The story in Davos was all about investment. When I met people, they said, “Oh, you’re South African guys.” They don’t want to socialise. They don’t want to talk about sport. They just want to talk about investment. They were sent there with one thing on their minds and that was ‘bring money into the country’. Eskom had to be fixed. If it wasn’t fixed, the whole plan just falls away. So, that R23bn per year is – and I don’t know why people don’t listen when particularly a guy like Tito… He spent an hour-and-a-half in the media conference yesterday. Half-an-hour longer in a media conference, trying to explain to the media than he spent actually delivering the speech. And in that hour-and-a-half he reiterated time and again that this is to help Eskom to get sorted out into three units.

The first unit is going to be the production of power. At the moment, Eskom is pretty much the only of the Independent Power Producers who’s come along but that area is going to be open to everybody. They will have competition for the first time. So, unit one: fully competitive. If you happen to invent a really good way of producing power, that’s what you can do. You can compete with Eskom. The second unit will be a monopoly. That is the transmission system – the national grid, if you like – and in that, the state is the shareholder. You’ll probably find that the PIC (they haven’t announced this yet) but certainly just the way the guys were talking and from my observations, it looks like some R10bn of what the PIC has lent to Eskom will be converted into equity so it will be a shareholder in the transmission side. And then the third bit is the distribution side – that thing that drives everybody in this country mad when they see the pictures of people stealing electricity.

That will be open to the marketplace. So, no longer will you have Eskom responsible for municipal accounts alone. If Eskom’s dumb enough to give money to the municipalities that are not going to pay them…well, fine. Then Eskom won’t be around for much longer but it’s going to have lots of competitors in that space. So, we’re going to have competition in distribution. We’re going to have competition in production but the national grid will remain as a utility for Eskom. That’s what the R23bn per year is meant to achieve and if you consider that we’ve had this monopoly for so many years and they’ve really screwed us over, maybe it’s not a bad price to pay. In Davos, this guy is the head. He’s the chairman like Paul Polman from Unilever. He is the chairman of the energy council in Davos so he’s like the smartest guy that they could find.

He comes from a company called Enel in Italy and whose door did Pravin Gordhan go and knock on? This fellow. He said, “Please help us. Enel have also sent out a few engineers. They’ve also invested in renewables in South Africa, so there is a connection. This is something that you need to be mindful of. It’s the direction that South Africa’s going, whether you like it or not. The future of this country is going to be determined, certainly from what I observed, by the philosophies that Mariana Mazzucato has expounded, she is one of the up-and-coming economists – one of the most respected economists in the world. She is the author of a number of books. She is someone who’s applied her mind, as have many, to this system that we have, which is not working. We know it’s not working. The reason we know it’s not working is because the rich are getting richer and the poor are losing hope.

At some point in time, what we’re seeing on the populists front; this year, for instance, we did not have Mrs May in Davos because she was too busy trying to sort Brexit out. We did not have Emmanuel Macron in Davos because he was too busy trying to sort out the yellow jackets. We did not have the president of Italy who had issues but of course, we did not have Donald Trump because he was trying to do his own thing in the United States. Now, that is almost unprecedented that you have so many cancellations because of concerns that are going on in the world. When you have a look at the way elections have been going towards populism; clearly, there’s something that’s just not gelling. Her thesis, which Pravin Gordhan (I sat next to him before she arrived – she was his special guest at the Brand South Africa dinner).

He said, “She will change your mind when you read her books and listen to her” and she certainly has. South Africa has been following something called the developmental state. If you don’t know that, then you don’t know why we have not been thriving – why the economy hasn’t been going well because when you have a developmental state and you have crooked people there, they just steal and we saw that. We saw the billions – the tens of billions – so, you had this developmental state, bad people, and that led to tragedy. Now, we’re getting the right people into the developmental state. It’s not changing because this country has huge issues such as a need to go for a more inclusive growth model than the one that exists elsewhere. But what her thesis is, is the entrepreneurial development state. There are many ways of unpacking this.

I suggest you read the book if you’re interested in it but just think for a minute. If you could have a country… If it were possible that you had a country where the brightest and the best went to serve – went to work for the public service. You’d probably say, “That’s impossible” but then I say to you, “Look at Singapore. The best job you can get in Singapore is working for the state.” That’s what she’s trying to do. There are many reasons why we kind of get things wrong. DARPA in the US. Steve Jobs. How did Steve Jobs create Apple? Was he this heroic entrepreneur? No. He went to PARK, which was a research facility of Xeroxes, funded by government and when he saw what was going on there, he could apply that. But the investment that had gone into that over many years, had been done by taxpayers and what Mr Lee from China was saying was that at the moment, in artificial intelligence.

America is kicking China’s butt because America is investing against China $11 to $1, meaning American state versus the Chinese state. America however, is doing it’s very best to give up that position of advantage because it has a president who doesn’t believe that the state should be investing in these things. We have a president who thinks differently. Who knows where it’s going to go? You can pay your money, take your choice, but that’s the reality of where South Africa is moving.

I had a fascinating interview with Koos Bekker. He is the guy who’s represented in all of your portfolios. Naspers is about 20% of the JSE, so if you have equity in your retirement funds, which pretty much everybody does then you have to thank him for at least some of that growth. When they bought a little company for $30m or half of it in 1990 called Tencent in China, no one knew what an amazing success story it would be or how it would enrich a nation, which it has done. He’s a most extraordinary human being and we chatted for about an hour. I couldn’t cut the interview down, but the interview is about 40 minutes long. It’s well worth listening to his assessment. The South African team did exceptionally well in Davos this year and he singled out the guy who was in the spotlight yesterday, Tito Mboweni for the contribution that he’s making.

Again, if you want to understand how things have changed, go, and listen to yesterday’s press conference of Tito Mboweni and you’ll be most surprised. Amongst the things he did was, he chided his fellow ANC members to start realising that the Soviet Union collapsed 30 years ago.

These are just a few pictures of Team South Africa who attended Davos in support of the government initiative. It is a Team South Africa thing. When you go there, you tend to have a very clear picture of what the country’s looking for. This year it was all about investment. Those were the two guys from Sasol. Adrian Gore tells me they’re working very closely with the Department of Health in South Africa on the NHI, which is a very good thing.

By the way, they’re working closely with the National Health Service in the UK as well and that I heard at an event where the equivalent of the Minister of Health in the UK was praising Discovery and saying how they realise that you need preventative otherwise the National Health Service, which is the jewel of the British system will fall over; Stephen Koseff who is a regular there. And then at the far right is Samantha Holman, who is a reflection of a really lovely South African success story; 11 years ago, a little South African company called LiquidChefs was invited to do an event in Davos. You can imagine, these events are the most prestigious and the most sought-after suppliers on earth.

This year, 11 years later they are by far the biggest events company in Davos; they do the Google party, they do the Facebook party, all the places you really want to get invited to; 42 events this year and they flew in 85 people. So, it just shows you that the pockets of excellence are being seen in the right places. I want to finish off with a little bit of uplifting news. This is an inappropriately named, I guess, rig called “Brulpadda” and the reason it’s “Brulpadda” is because many years ago the Apartheid government was trying to find oil about 150 kilometres off the Southern Cape because had the Apartheid government found oil it would’ve been in a position where it really didn’t need the rest of the world.

All they’d really needed then, the only thing this country didn’t have was oil and it tried its best because the geology of the Outeniqua Basin, which is a basin of about 350 kilometres along the Southern Cape Coast, the geology is extremely attractive for oil and gas. We know this as well because millions of years ago, I presume, when the continents broke up, we in this part of Africa broke away from South America, and the same geology exists in South America where they found plenty of gas and oil. So the geology’s there, it’s the Outeniqua basin and some clever guy decided to call this little block the “Paddavissie” block and then you had the “Brulpadda”, which is part of the “Paddavissie”, so I think we’re going to have some very interesting names coming up in future.

Anyway, Total had a right to explore in one of the blocks of this 350-kilometre-long exploitative area and it was going along quite nicely until 2014 when the shenanigans that were happening with the MPRDA by the Zuma administration got Total to say, “Well, look we think it’s exciting, but we don’t want any bit of it” and they left, as did Shell , they stopped exploring. They were exploring shale gas, which South Africa has either the fourth or the eighth-biggest reserves on earth and shale gas has transformed the American economy. In the Karoo, make it the eighth biggest on earth, that’s what exists there, shale exists under the surface. Total then left. They hadn’t been able to really find anything. The reason that they couldn’t find anything is that the seas are very rough in that area, in the area that is above the Outeniqua Basin.

In the interim, they started exploring in the Shetland Islands where the seas are equally rough. They got the technology right when a new dispensation came into South Africa, the new administration, Total returned. They put down their first feelers in December, in February they hit the equivalent of four years of South African oil imports. They have identified five similar areas in their block. Now I mention this because I’ve been following the oil story for a long time, not surprisingly, because it has a transformative opportunity in South Africa.

In the United States they knew there was shale gas there, but it took many years for the technology to catch up with the idea, but since 2009 when they learnt how to actually bring this shale gas up, America has turned around from being a net oil importer and invader of the Middle East to a net oil export and “We’re not interested in Syria or anything else that’s going on there, thanks very much”. The reality for South Africa is not that the gas will come in eight years’ time; it is that the entire industry is looking at this as a game changer. Indeed, that’s the way that it was described by Wood McKenzie, who are the preeminent advisory firm in oil and gas in the world.

This is a big deal, it’s a seriously big deal because once you start getting others, once they see it and incidentally Total in its last annual report made the Outeniqua Basin before it made the discovery, it made it the number one opportunity on earth, it was the one that they were going to go for, so it puts it into perspective as well. This long wait of decades of exploration for oil and gas has finally come. Now why didn’t it come while Zuma was around? Okay, divine inspiration, perhaps intervention. Who knows? However, the timing is impeccable. This is an updated graph. By the way, these figures come from the United Nations Development Agency, it’s called UNDP. You can go and look it up; it’s there all the time, UNDP numbers. So these aren’t numbers at the Stats SA. Some people say Stats SA’s not giving us the truth anymore, but this is what UNDP did.

You saw the numbers up to there, we don’t unfortunately have the outflow numbers, but we certainly have the inflow numbers for last year from UNDP. It’s gone from there in 2017, pre-Ramaphosa to there in 2018. Now if that doesn’t start making you scratch your head and say, “Hey, hier kom ‘n ding”, then I don’t know what will. We had the investment conference last year at which $20bn was committed. In Davos this year, Ramaphosa said he’s having another one this year where he expects another $20bn, but more than that, the message that he is giving is a very different one to the one we had heard in the past. He has four envoys that’ve been going around the world trying to help him in this audacious goal of introducing $100bn into South Africa in five years.

So Jacko Maree is one of them, Mcebisi Jonas is another, Trevor Manuel’s and off these four envoys go and they go and speak to investors and investors are telling them why they’re not bringing money in, they come back to the country and the president and explain why and things change on the continent. A wonderful talk to listen to is the Ramaphosa off-piste talk that I put my phone on at the Grand South Africa Dinner this year. This was an event that usually they would tie me down and put me in there just to get someone there, anybody, please come and eat our food. This year I didn’t crack the nod, I didn’t get an invitation because there were too many foreign investors who had actually requested to come, which is a good thing, but I pitched anyway and waited and I managed to get in. There was a spare seat.

As you know I sat next to Mariana Mazzucato and Pravin Gordhan, but after dinner, as he did last year, Cyril picked up the microphone and just walked and started talking for 20 minutes, no script. When you see many of these politicians around the world, what you don’t see is they have two autocues. Now having worked in television, an autocue is something that I know quite well, so I spot it, but it’s perspex, so if you’re sitting in the back of the hall you won’t even see these autocues, but on the autocues are the words and they’re reading there.

Watch these politicians, they’ll read and they’ll talk this side and then they’ll look this side and talk and you know Trump does this a lot. He’s not very good at it because you can see his eyes are kind of following the wording, but if you didn’t know, you’d think he was talking to this side of the room and then that side of the room. Ramaphosa doesn’t need a script, go, and listen to him. I’d also urge you if you are not sure, read Anthony Butler’s book, a biography that was written ten years ago. It’s all in the CV for this guy, as it usually is for most human beings and what changes they are given. So, the turnaround is quite stark and right now, there’s no reason for him not to be smiling. Thank you. We have a few minutes for questions. Can I interest anybody?

You mentioned technology. Can you elaborate on AI? What are the kind of trends, what are you seeing?

Yes, the question was, you mentioned technology, can you elaborate the trends. From an investor’s point of view, big tech is coming under increasing pressure. It used to be pretty easy when we bought those tech stocks four years ago; you just bought them and rode them. That’s no longer the case. If you recall in years gone by, we used to know the Rand would weaken and then suddenly we had this strengthening of the Rand. It’s that story that’s coming through, so the tech stocks are coming under increasing pressure, from regulators, from investors who are looking elsewhere. The whole story of artificial intelligence according to Professor Lee, there will only be six winners on earth because it is again the Gorilla Gang.

We know in Tech, that if you win, if you own the area like Google does with search, you tend to own 99% of it or 90% of it. The six that he identified were in the United States, Facebook, Amazon and Google, in China, Tencent, Alibaba, Baidu because they have the investments, the capacity to make the investments. It’s a little bit like a virtual circle. In China, well we can all, I think, be very happy that Naspers has such a big stake in Tencent. The philosophy there is, get it right to begin with. China has had privacy rules from day one in that you may not sell the personal information that you gather from people who you’re getting it from to sell to third parties.

This is what Professor Lee said. The United States does not have that, so in China when Tencent gets your information they can only use it themselves. When Baidu gets the Big Data and the same with Alibaba and whoever else, you happen to give it to, whereas in the United States they don’t have that. So the first thing that is likely to happen is that the United States will follow the Chinese example, which will then have a massive impact because if you can’t sell that data, why would people use it to advertise and that’s their business model.

I have the utmost respect for Cyril and I think that we’re very blessed. I worry about how thin his team is I always worry, if he were to fall over do you think David Mabuza’s the good guy, do you think we have people in place that are going to carry on this drive?

The question for those, who didn’t hear was, “There’s great respect for Ramaphosa, but what happens if he dies, what’s on the bench?” and it’s interesting, this week on Tuesday I went to a pre-budget discussion with people from the Treasury, people I’d never heard of, who are further down the pecking order and the brilliance blew me away. When I go to Davos and engage with people there, this year Stella Ndabeni-Abrahams, another person who has been given a bit of a rough ride by the media. Sure, she has stubbed her toe once or twice, but another person who speaks without having to have a script, she’s just bright. The bench is deep and strong and South Africans have had enough of corruption. It is not just South Africans it’s a global phenomenon. In Brazil they voted in a right-winger, they put the most popular president in the world in jail for 12 years.

If you take what’s happened in Brazil in Operation Carwash where there are more than 30 people in jail now, the US equivalent would be like taking the Head of the House of Representatives and the Head of the Senate and jailing them both for more than a decade. It’s an extraordinary backlash towards corruption that we are seeing all over the world and whatever David Mabuza is or isn’t and the New York Times certainly wasn’t flattering in that investigative piece that they did recently, there is a strong bench and there is a realisation that you cannot be on the wrong side of history now. The old days, there’s just too much technology, there’s too much information that someone will pass on. I’ll reference you to VBS, Venda Building Society, established in the old South Africa, it then became Mutual Bank, and it started being pillaged by two partners in KPMG.

It doesn’t mean that KPMG itself is rotten to the core, but they’re coming in for a roasting at the moment. They had a conspiracy of silence as tends to always happen. We saw why Agrizzi changed his mind because of a tumour on the heart and a coma. The conspiracy of silence was so strong that when the investigators spoke to the witnesses, the witnesses without question gave them this story, a story that said there wasn’t really anything wrong and actually it’s all business as usual etc. until it was explained that a new law that has been introduced, Section 140 of FICA, means that if you as a witness tell us something that is true we cannot send you to jail for what you’re telling us. Once this was explained to those witnesses more than half a dozen of them transformed their story 180 degrees and spilt the beans.

Hence, we had the investigation that managed to crack the case so quickly and it’s all there. The other work on VBS was through bringing in the private sector. What I saw in Davos, what I’m hearing, what I’m observing is that the belief that is in the administration today is one of public private partnerships. It’s one of saying, “Look we have good guys in the public sector, and in fact, we would love the public sector to be a place where it is the number one career option, but at the moment it’s people who are called and there are some really good people there. The more I am exposed to them, the more respect I have, but this is the only country that has business, labour, government, and civil society in the same camp talking around the same fire.

Elsewhere in the world, this doesn’t happen, so there are many things that are moving in the right direction – the role that Adrian Gore is playing at the moment and Discovery, whereas South Africa’s getting increasingly small in their international footprint. The role that they’re playing on helping on national health to find the right kind of solutions, the sensible solutions, the listening government that Ramaphosa says that he is in charge of today, the ability of this government to debate things like the land issue aggressively. Is it good or is it bad? Surely, it’s good that everybody gets the 702 option of 1993. Do you remember how the country was burning back there? However, we had 702 that people could all phone into and express their concerns and it took a lot of the heat out of the system. So there’s a deep bench, the more that I am exposed to it, the more I realise that the thinness is in the crooks, is amongst the bad guys. Thank you. Yes, ma’am?

Your thoughts on energy?

The one industry that Sought Africa’s done extraordinarily well in is renewable. Of the $7.1bn of 2018, $4.9bn I think were renewables, but it’s across the board. I have an office in London in WeWork. WeWork is the hottest shared office space company in the world. Softbank is a big shareholder, their market value is over $20bn and they’ve only been going for two years. They’re in pretty much every city that matters elsewhere. I have an office and because they are very sociable people, the people who work at WeWork, the community managers, that’s their whole process, I’ve been talking to them continuously about when they’re going to open an office in South Africa. Then looking around at the other side as well, the South Africans who’ve been engaging with WeWork and they weren’t coming.

They were looking, they were interested, but they weren’t prepared to invest. They announced about two weeks ago that they would be opening here in the third quarter of this year. We also saw an investment for a bit anyway, whether it’s going to be an investment or not depends on, I suppose BDS and the political ANC Youth League and whatever, but in the Israeli company making a R5bn bid for Clover that would’ve been done with quite a lot of consciousness behind it. It’s really across the board. South African assets are cheap and actually, my sense is that the offshore play should now be replaced by an onshore one, that this is the time. Ramaphoria got us all excited, Brett and I were talking about it earlier, we got terribly excited in January, February, and March of last year and then of course it didn’t happen immediately and everything then went back to normal.

It’s a little bit like when Bill Gates changed his mind on the internet. If you recall back in the early days of the internet, he was camped against it. Microsoft said, “This thing’s not going to happen” and he changed his mind. He wrote a book called, “Something at the Speed of Thought, I think it’s “Change at the Speed of Thought”, anyway it’s a big fat book and in the book and in his discussions of it afterwards he said, “We always overestimate these changes in the short term and underestimate them in the long-term” and the Ramaphoria thesis is totally aligned with that. Just look past the noise and it is across the board. Joburg audiences, are you happy guys? Oh, one last question. Okay, Sir.

I think just earlier on your comment on the Chinese tech companies, I feel like you’ve maybe just glossed over – even though they’re not allowed to give their data to third parties, it is a tacit assumption that it’s accessible to the government and I think that’s a huge concern from a privacy level, I think that’s a much bigger issue than privacy. Do you have any comments on that?

I don’t know what I don’t know. I think it was Socrates again who said that the beginning of wisdom is to say nothing and, on this subject, I know nothing. The only thing that I was passing on was what Dr Lee had to say about it. Those things are beyond my paygrade. Huawei, whether their 5G’s – the Brits are now saying that actually they’re quite happy that they’re going to take Huawei back into Britain. The Americans are trying to get everybody not to take Huawei equipment because the Chinese government will know what people are saying on cell phones. Who knows? We live in an incredibly complex world. The point that I was making there was that from a business and an investment perspective, they are not at risk in the same way as the American companies are at risk because they already have regulations if you like, whereas the Americans have to bring in regulations.

Yes, I think they had a late start. Sorry, I just have one more thing to say about that. I think that there’s good evidence that WeChat’s being used by the Chinese government and things like that, you know we all are shareholders in Naspers and in Tencent and I think we should be mindful of that.

Yes, and be mindful that the Chinese people don’t seem to mind.

There’s a lot of investment from China into Africa and then a lot of concern about the way China’s influencing Africa. Do you see the same kind of thing in South Africa?

Chinese investment in South Africa? Wow. Yes, well if you drive up to Bruma you’ll see there’s a pretty thriving Chinese community there. If they’ve all been brought in on proper visas or not, who knows. The thing that I guess and I don’t know about these things. You know I just don’t know. Are the Chinese better than the Americans are? We know that DOJ has done us a huge number of favours by nailing crooks because if you’re a corrupt person and you’re doing business in America they’ll arrest you as they did with the ex-Finance Minister of Mozambique over that “tuna bond” scandal.

There he was on his way to Dubai to see his girlfriend and at OR Tambo swapping planes, the South African authorities put him in jail where he is sitting at the moment without bail ahead of extradition to the United States on the “tuna bond” issue and it’s only the United States who does this, the DOJ does it. Whether China’s a force for good or bad I guess only time will tell, but the good news about that is that South Africa have people today who are not trying to do deals with China to line their own back pockets, they’re not trying to do a nuclear deal which will bankrupt the country, but build new homes in Dubai. The people who are in those positions today to make those decisions will think about it from South Africa’s interests not from their personal interests. That’s as an observer, the only thing that I can see. Yes?

You mentioned that there would be a possibility for South Africa to have young entrepreneurs, all the best entrepreneurs working with the government. What do you think we need to have for that to become a reality?

It’s coming. The developmental state was part of the National Development Plan, which was tabled in 2012. The National Development Plan might not be the best plan, but it is brutally honest. If you read it, you will see that there is nothing varnished there. Everything in the National Development plan shows the brutal truth about South Africa. Ramaphosa was intimately involved in that; Trevor Manuel was the Deputy Commissioner. So you have a president who spent years putting it together with some pretty smart people, a plan, which has just been gathering dust. That is being dusted off at the moment. The entrepreneurial state idea is an idea of the state facilitating, building the platform, making things right as they’re trying to do with Eskom at the moment so that the private sector can thrive from it. It’s great in theory.

When you look back at where we come from and you then consider that Tito Mboweni, the Finance Minister could say the things that he did say yesterday like, “This public protector, I have a problem with her. She’s a problem”. Under Zuma, you would never do that because she was a Zuma implant. The watershed that has occurred in this country has not been fully appreciated yet, that’s my thesis and from my observations I would suggest that we all need to do a little bit more homework and consider a little bit more on this quadrant of change because many South Africans are still caught in the view, rightly so they’ve been abused for the last nine years by kleptocratic state, that they’re still in that view that, “No, no, these new guys are no different”. I would suggest that they are and my observations are showing that they are and that means building something for young people for the future, it’s all that it’s about. Okay, last question.

I would like to know in terms of jobs and unemployment because there are so many young graduates that are brilliant and they can’t find employment ?

If you read the State of the Nation Address there’s quite a lot of realisation that the Fourth Industrial Revolution is a competition globally for skills. South Africa has dipped out of that up until now because that was not the priority of those who were governing the country. The priority of those governing the country was to line their pockets. We now have somebody who is putting an iPad into the hand of each school child because you can’t get your books to them in the first place and secondly, how can you get ready for the Fourth Industrial Revolution if you don’t have access to that? I hear then from people who don’t research it, assume, and say, “But where are they going to get the Wi-Fi from?”

Have a look at what young Alan Knott-Craig has done in Tshwane. If you go to Tshwane and you go to Mamelodi and Atteridgeville you will find there is free Wi-Fi there for the community and there are entrepreneurs who are using that Wi-Fi to build businesses into the future. It all begins with a change in attitude. You put your finger on it and this country is haemorrhaging skills at a frightening rate. That has to be reversed, but to end off with, I see many South Africans in the UK. We are a tribe, we are who we are, and we engage with each other.

The Brits have their own tribe, we do talk a lot, and it is very rare in the UK to find a South African who does not call South Africa home or who does not believe that they’ll return one day. It’s different in Australia; it’s almost like a different philosophy. When people go to Australia, my experience was that they go there to stay. However, in the UK where we have an estimated one million South Africans, most of them highly skilled residing now, they’re just waiting for the country to deserve them to return and that is something that the man who’s now running the country is fully aware of.