In the country’s latest bestseller, author Pieter du Toit tracks the first public mention of “The Stellenbosch Mafia” back to a decade and a half back when David Shapiro used the reference in one of our interviews. But as SA’s favourite market commentator used it in a benign, almost admiring way – a far cry from the unlamented ex-Bell Pottinger inspired campaign which painted them as a malignant force of greedy Hoggenheimers. On Rational Radio this week Shapiro offers his perspectives on the Stellenbosch-based billionaires, what is causing renewed volatility in global investment markets – and why long-suffering Aspen shareholders should now dump the stock. – Alec Hogg
David Shapiro joins us now. Well Dave it’s been a very interesting week on markets. Just to help understand a little bit. This volatility, one day the Dow dropped 300 plus points. Next day the Dow rises 300 plus points. I know I am talking about America but it affects the rest of the world. What’s going on?
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The big worry is when Jerome Powell reduced interest rates in the US, he actually painted a steady picture of where the US economy is. That was reinforced by job numbers, so overall we’re in a very good space. We’re ratcheting up slowly and there’s no worries of recession. We are in a position where we can continue to add to our equity exposure globally. So that’s the kind of background that we paint. All of a sudden on Thursday, all hell breaks loose. Trump imposes further tariffs on China, to which China responds with possible currency weakness. Then you get this tit-for-tat. So why does it play out like this? It’s not because of what’s happening in the global economy, it’s the worry of business investment down the line. No one knows what the next move is. We don’t know what Trump’s ultimate aim is. Is the endgame just an election ploy, or is there a genuine desire to punish China. Then you don’t know China’s response and how that plays out. We’re in uncertain times because in this type of climate, will businesses reinvest and employ people? So this can spark a recession. We don’t know what the next move is and what Trump can do to further weaken the global economy.
When a guy in that office who is that powerful often influences people sitting in Johannesburg looking at their share portfolios, just because he might be wanting to get re-elected next year.
That’s exactly it. So to understand, this is simply a confidence factor. And that’s where the volatility is coming from. In the US people are prepared to put their money into a ten year bond to earn 1.6%, which just shows how desperate they are for safety. That’s why gold and precious metals are going up. On the other hand you’re getting the industrial metals going the other way.
David I’ve got a question from Kiran who wants to know from you why has Aspen been in a downward spiral. Is there any hope of recovery?
Aspen has come under immense pressure because of huge amounts of debt, and it’s taken a lot slower for some of the acquisitions they made to produce benefits. But as it lingers and nobody comes to save or buy the company, this leaves Aspen at levels that we last saw seven or eight years ago. Normally news creeps out into the market. It’s not meant to be insider but you pick up little bits that are happening at the company that gives you the confidence to go in and buy. We’re not seeing that. And I want to add we’re seeing the same thing in Sasol. Sasol at under 300 is starting to cause concern. There’s some positive stories about cash flow. Once the facility at Lake Charles is completed it will release a lot of cash which will be paid in dividends. No one’s buying the story and the share keeps getting weaker. So people are holding back.
When you look at Aspen that was listed in 1999, it got to R406 a share in 2014. Since then it’s been one way traffic and is down to R84 at the moment.
That’s right. I know that no one has been buying. Analysts have been a lot more sanguine about the outlook along that journey downwards. This is temporary. They’ll get it right. And so on. But there’s been no good news. The fact that they had to sell their milk formula business show signs of desperation. They’re still battling with a lot of debt and we haven’t heard anything positive come out yet. We need to hear something happening at the company that makes you feel positive, that puts you into the mark.
So does Kiran take his losses or does he hold on?
At these levels I would maybe take my losses. I wouldn’t say hold on. Let’s say the company does turn around, it’s going to turnaround properly. If I give up something now at least I’ve got the cash because at the moment it’s pointing towards further trouble.
David, – I have spent a few very fruitful days reading this Stellenbosch mafia the book – you are the man who coined that phrase according to Pieter du Toit 15 years ago on a radio show that we had. It’s now developed into this byword for a bunch of the richest people in the country.
I don’t know if it was me and I think it was done in a very nice way. It wasn’t done with any malice at all, it was merely saying these are very powerful businessmen who live in that particular area, Somerset West, Stellenbosch. We included them almost lightheartedly, not meaning to compare them to the Italian clan at all. But subsequently it’s taken on a different meaning – people who are sinisterly powerful. I think they were wonderful. Jannie Mouton was one.
Well he’s mentioned in the book as a member of the mafia, Johann Rupert and what about Markus.
Markus is the only genuine member of the mafia.
Markus the Mafia don. I guess that’s probably one of the nicest descriptions that we’ve heard of Markus in recent times.
But he was engaging at that time. He was always good entertainment. At that stage no one suspected anything was wrong. Jannie Mouton was superb. He was a wonderful man. Also huge respect for him still to this day. And of course Rupert. But we had the Capitec chaps down there, a lot of financial planners and lots of financial people were moving down there making that their home.
Have you read the book.
No I haven’t.
You’re not going to be able to put this one down. Often one sees in South Africa that journalists write books because it’s a topic that needs to be covered. But this one, Pieter du Toit is the right person to write the book. He grew up and went to school in Stellenbosch, went to university there and has access to all of these guys and it’s a good book and we’re going to talk to him in a minute.
