🔒 Alec Hogg: Capital allocation – the reason Froneman is bearish on SA

Mining veteran Neal Froneman and his board at Sibanye are capital allocators par excellence. Since the company’s 2013 creation through cast-offs from the once-venerable GoldFields Limited, the gold mining orphan has been transformed into a R150bn global giant. Achieved, Froneman says, by following a clear strategy and disciplined capital allocation.

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In Monday’s Rational Radio webinar, Froneman lived up to his billing as one of the most forthright of all South African CEOs. It was a distressing discussion for the naturally optimistic. But one stemming from the most rational of foundations – the benefits of efficient allocation of capital. Take time to reflect on Froneman’s pessimistic view of South Africa, and much of it will resonate.
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All of life is about choices. Act in ignorance and you reap the consequences. Do your homework and apply discipline following timeless laws, and rewards accrue. Given that SA has for decades been run along outdated idealogical lines, it should be no surprise that Warren Buffett, the world’s best capital allocator, has never invested into the country. Nor is he likely to anytime soon. With the tide having receded, this country’s naked economic ignorance is obvious to all.

Read also: Alec Hogg: The webinar mania – and why corporates are blowing it. Again.

Although still connected to the country of his birth, Froneman applies a similarly rational approach to investing in SA. His conclusions are simplicity itself: The ANC’s ideology destroys wealth. The party is unable to fix itself because turkeys don’t vote for Christmas. So, for as long as the ANC rules the country, Froneman believes, the economy’s downward spiral will continue. No rational being throws good money into a sinkhole. So he won’t. Neither, he adds, will any sane global investor. Sobering.

For your attention today…

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* A comment by Andy Wright under the YouTube recording reads “Thanks Men, that was fascinating, well done.” Indeed. Neal Froneman, David Shapiro and Peter Major might have delivered a cold shower in the Rational Radio webinar yesterday, but it’s always better to be forewarned. Here’s the link: https://www.youtube.com/watch?v=qjFxAV25280

* My colleague Nadya Swart is producing some brilliant short-form videos featuring highlights of our best content. Here’s the link to a two minute clip of Rob Hersov’s views of his mentor and fellow billionaire Johann Rupert: https://www.youtube.com/watch?v=qjFxAV25280

* Nadya also does a great job illustrating our daily Flash Briefing. Here’s the link to today’s video: https://www.youtube.com/watch?v=UmDi9wVrfts

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