BizNews Edge: Second prosecution boss falls at Madlanga Commission; ANC heads into a tough November

Two prosecution bosses down, and counting. The Madlanga Commission has just claimed its second casualty, and a leaked recording shows exactly how bad it got. Meanwhile fresh polling suggests the ANC is about to lose over 500 council seats, Interpol has crowned South Africa the ransomware capital of the continent, and the FSCA has landed a R2.8 billion fine on the company behind those Elon Musk deepfake ads, the same scam BizNews first exposed. On the markets side, Nedbank, Telkom and Stor-Age all moved today, Lewis Group looks like a Buffett-style bargain hiding in plain sight, and Amazon just delivered one of the biggest single day gains in its history. Andy Jassy explains, in his own words, exactly why..Listen here.Episode breakdown.Well, we're into August already, the eighth month of the year. Alec Hogg here, and welcome to the BizNews Edge.Here's the show for you today. We've got another big scalp for the Madlanga Commission. Fresh polling shows the ANC is heading for a bruising November — 550 of its councillors aren't going to be getting their jobs back after the 4th. Interpol's verdict on South Africa's cybercrime exposure: we are basically the cybercrime capital of Africa. There's a record R2.8 billion in fines from the FSCA, and the story behind most of it, a company called Banxso. Then results and updates this morning from Nedbank, Telkom, Stor-Age, and a name we've just added conviction to in the Ricardo portfolio for South African stocks. And then we'll close on Wall Street, and explain why another Ricardo portfolio stock, Amazon, just had one of its biggest days ever, up on the release of its quarterly numbers. Let's get into it.The Madlanga CommissionWell, let's start with that story that should worry anyone who believes institutions ought to do their job. Our columnist John Matisonn has tracked the Madlanga Commission, where the head of the Investigating Directorate Against Corruption, IDAC, Andrea Johnson, resigned last week.Her resignation was accepted immediately by President Ramaphosa, as we have reported on the BizNews Edge before. This was after evidence that showed her unit had put National Police Commissioner Fanie Masemola in the same dock as an alleged crime kingpin, on charges Justice Madlanga said had no legal basis.Add to that a leaked recording that caught Johnson admitting she felt like the dumbest lawyer in South Africa. Three investigators have since been suspended. Matisonn's piece has got a deeper point, though. Johnson is now the second prosecution boss in a row to flame out over Madlanga Commission cross-examination, after NPA head Shamila Batohi's own troubled run.His conclusion, echoed by the Democratic Alliance's Glynnis Breytenbach, is blunt: IDAC was a bandaid on the NPA's wounds, and now South Africa genuinely needs an independent anti-corruption commission instead.ANC pollingNew polling released this morning by The Common Sense shows the ANC is heading for a rough November. Support has slipped to 39%, down from 46% at the last local elections in 2021. Even with the electoral system's built-in advantage, the ANC's spread-out support lets it win more council seats than its vote share alone would earn. The party is projected to take only about 4,000 of the roughly 9,000 municipal seats up for grabs, versus 4,548 currently. So there are 550 of its councillors who aren't going back into their jobs after the 4th of November. Beyond the dented pride, that guts ANC patronage networks and organisational muscle, and it helps explain the disturbing rise in councillor assassinations.Interpol's cybercrime warningInterpol dropped its African Cyberthreat Assessment this morning, and if you're a South African business owner, it's worth reading twice. We are in the eye of the storm here in our country. A very high share of every ransomware attack detected on this continent last year hit South African targets. The Weather Service, SAA, telecoms, all hit. We also account for a large share of Africa's phishing attempts. Continent-wide cybercrime losses have more than doubled to $484 million, according to Interpol, with AI now doing the criminals' dirty work: deepfakes, cloned voices, fraud at machine speed. Interpol's message: laws are improving, but enforcement capacity isn't keeping pace. Guard your business.FSCA's record fines and the Banxso storyOn a related topic, the FSCA just dropped its enforcement report, out on Friday. The number is staggering: R2.8 billion in fines this past year, 24 times what it levied the year before. Let that sink in — 24 times more enforcement action. Well, almost all of it traces to a story we broke at BizNews: a company called Banxso, running fake ads using Elon Musk and Johann Rupert's faces. It took whistleblower Advocate Petra van Niekerk coming to us, as embarrassed as she was to admit it, telling us she'd lost her life savings, and she was now determined to crack the case open. Banxso has now been fined over two billion rand, and all the executives involved have been put on a blacklist. They may not operate again in South Africa.Steinhoff's Stehan Grobler and Medbond added more: 678 investigations closed in the year, a record. Well done, FSCA — you're showing South Africa you have teeth.NedbankOn to company news now, and Nedbank dropped a leadership change this morning, a day before it releases its financial results. COO Mfundo Nkuhlu is taking early retirement at year end, closing out 22 years at the bank. Nedbank is not replacing him — in other words, the chief operating officer role itself is being scrapped, and his responsibilities are being passed to the rest of the executive committee.The timing is notable. As mentioned, it comes a day before Nedbank's interim results, and the market's verdict was a shrug. The stock actually firmed slightly this morning, trading near 52-week highs, which suggests investors are expecting some good numbers tomorrow. That's comfortably inside its recent uptrend. Investors clearly see this as an orderly succession, not a red flag, and they're saving their attention for tomorrow's earnings and dividend instead. We'll have all that information just as soon as it drops here on the BizNews Edge.TelkomNedbank might be in the news on the banking side, but on telecoms, the morning belongs to Telkom. It released its first quarter update, and that landed well with the JSE. Group revenue grew a modest two and a half percent to just over R11 billion, but the real story is underneath. Data revenue was up nearly nine percent, and it now accounts for almost two-thirds of everything Telkom earns, while mobile subscribers climbed past 25 million. That's a huge number. Cost discipline did the rest — capex fell almost a fifth, and EBITDA, the operating profit line before depreciation and amortisation, jumped ten percent, with profit margins expanding sharply.The one soft spot was BCX, its IT services arm, which saw revenue drop over ten percent on delayed hardware deals, though cybersecurity and cloud both grew strongly there. The market loved it. Telkom shares jumped more than five percent on the news.Stor-AgeAnd another stock the market loves, Stor-Age, is expanding its self-storage footprint. This is an area that's been booming in South Africa of late. The self-storage story was inherited from the United States, where it was one of the best-performing sectors of the past couple of decades. The Stor-Age REIT is buying ten Extra Space properties for R387 million, plus a further R38 million it will spend on planned upgrades, while also signing a two-year deal to manage six more Extra Space sites. Together this adds nearly 52,000 square metres of lettable space across the Western Cape, Gauteng and KwaZulu-Natal. It's fully debt-funded, expected to boost earnings per share for Stor-Age once it completes, and keeps gearing within the target range. Growth without diluting existing shareholders, something investors love. The market gave it a modest tick higher, in a sector drawing steady institutional interest as interest rates stabilise and the value of self-storage as an asset class becomes more apparent.Lewis Group and the Ricardo portfolioWell, let's turn now to the Ricardo portfolio, and in particular a name I want to spend some time on: Lewis Group. At every Berkshire Hathaway AGM I attended in Omaha, Warren Buffett kept returning to the same idea: the market will occasionally offer you a dollar for 70 cents, and your only job is to have the courage to pick it up. Lewis Group's freshly filed annual results, out on Friday, read like exactly that kind of offer.Lewis is a member of the Ricardo South African rand portfolio, and I noticed we received R5.60 in dividend per share a couple of weeks ago, which was added to our portfolio and then reinvested in the past month. The furniture and appliance retailer delivered another stellar year. Dividends rose 12% for the year, to 897 cents for the year as a whole. Headline earnings jumped 18%, and revenue got through a billion rand for the first time, up 11%.That does not describe a company in anything other than rude health. Yet Lewis shares are still stuck around R88, on a price-to-earnings multiple of just five times. For a business compounding earnings in double digits, that only makes sense if the market believes something's badly wrong. Nothing in the numbers, nothing in the annual report, supports that fear. Lewis's edge is its credit book — furniture sold on terms of up to 36 months to South Africans mainstream banks won't touch. Management is provisioning conservatively, not optimistically, for a weak consumer.There are two blemishes worth flagging, though. The new specialty division swung to a loss after an impairment charge. And for the first time in its listed history, Lewis now has meaningful debt — gearing is 40% of equity. It's worth watching, not ignoring. Lewis explains it took on the debt to expand its debtors' book and grow more outlets. It's that confident in its business model, and people like Piet Viljoen, one of the savviest investors around, tend to agree.On the back of these results, we've lifted our adjusted intrinsic value per share for Lewis from R120 to R130, up R10. Blended earnings and dividend yield give us a fair value of between R130 and R150 a share, above Lewis's own net asset value of R106. Put those two together and you've got a margin of safety at the current share price above 30%. Hence the Buffett story of buying a rand's worth of assets for 70 cents.Global markets roundupWell, good news from Lewis, but even better news in our Ricardo US dollar portfolio, with the single biggest market story of the week: Amazon, one of our stocks held there. First, a quick lap around other markets, courtesy of the team at Bloomberg.Oil had a wild few hours on the back of Washington's on-again, off-again approach to Iran. Tokyo has spent a genuinely staggering sum defending the yen. And there's a mega-merger brewing in pharmaceuticals that could reshape the drug industry. Here's today's big international news.US President Donald Trump has again shifted course on Iran, with new talks set to begin today. The latest reversal comes after Trump once again ratcheted up the threat of more strikes, continuing a now-familiar pattern of escalation and de-escalation. The president says he stepped back from the latest attacks following appeals from Saudi Arabia and other US allies in the region. Here's what he told reporters aboard Air Force One:"We're talking to them in the form of a negotiation. It begins tomorrow afternoon and we'll see if it's true. I'd love to do that, save a lot of lives, save a lot of unnecessary [damage]. It's taken many, many years to build. I don't think it would be even buildable back. So we had an attack that would be the biggest attack since World War II."Brent crude fell by as much as 7% after President Trump suggested a deal to reopen the Strait of Hormuz may be close. Japan's battle to support the yen is intensifying, with traders betting that authorities intervened again after last week's historic joint action with the US. The yen swung from a small decline to gains of as much as 1.4% against the dollar during morning trading in Tokyo. Japan is estimated to have spent a record 8.45 trillion yen, the equivalent of about $53 billion, buying yen last week. US Treasury Secretary Scott Bessent has signalled Washington is prepared to act again if needed, raising the stakes for investors betting against the yen. While the intervention has reversed much of the currency's recent slide, investors remain focused on whether policymakers can sustain the rally.Pharmaceuticals giant AstraZeneca is said to have explored a mega-deal to create one of the world's biggest drug makers. Bloomberg's Tiwa Adebayo has more:"AstraZeneca and Bristol Myers Squibb have reportedly held early-stage discussions about combining. Bloomberg understands it's unclear whether the conversations are ongoing, or if they will result in a transaction, but any agreement would be significant. The merger could provide AstraZeneca with a bigger foothold in the US market, complementing its more than $260 billion valuation. Meanwhile, Bristol Myers Squibb is preparing for the loss of patent protection for some of its biggest products, including a blood thinner and a cancer drug, which make up about half its sales. In London, Tiwa Adebayo, Bloomberg Radio."Looking at the markets: Brent crude futures are down 5.3% this morning on the back-and-forth around US-Iran negotiations, at $83.29. Treasuries are rising, yields down about 4.5 basis points, with the 10-year US Treasury yield at 4.69%. Chip stocks are down this morning — after that record rally on the Kospi, you actually have the Kospi retreating some 5.4% this morning. That Korean market really is all over the place.AmazonBut bear all of that in mind, because the number we're about to unpack is rippling through those same markets. Amazon's share price jumped on Friday after the release of its second-quarter results. That's a market value swing larger than the whole South African GDP, and it's after an earnings call, rather than a takeover rumour.Here's why. Amazon Web Services grew 37% year on year — the fifth straight quarter of acceleration, the fastest pace in 18 quarters. That is rocket fuelled. That alone would have been notable, but AWS's operating margin also expanded. So not only is it growing at hyper speed, its profits are also expanding — the margin in the results was 39%, up about six points on a year ago. Growth accelerating and margins expanding at the same time is exactly the opposite of what the market has feared from every big AI spender this year, the hyperscalers, as they're called.Add a $496 billion order backlog, growing at triple-digit rates, in other words over 100%, and you've got real forward visibility, not just a good quarter. And then there's the capex. Amazon is now guiding the market that it will spend roughly $220 billion in 2026, up from $200 billion three months ago. Free cash flow will go negative, for the first time in many years.That would normally spook the market, but it didn't, because Andy Jassy explained during the conference call exactly what's going on. It's worth hearing him in his own words:"For servers and networking equipment, on average, it takes a little less than three years to break even on that investment. The servers currently have a useful life of at least five to six years, and most of our AI capacity these days is being contracted for at least five-year terms. That means we're driving significant free cash flow on the servers and networking equipment in the two to three years after we break even. So for our data centres, which have 30-plus year useful lives, we should get at least five to six generations of server economics, like I explained earlier, with subsequent generations after the first having even better overall economics, because we don't have to repeat that upfront data centre investment.This means that in the short term, when demand is necessitating so many data centres being built simultaneously in advance of when we can start monetising them, we'll spend a lot of capex and encounter free cash flow headwinds until these data centres come online, can be monetised, and we get a few years into these servers being utilised. But as we get a few years out, and revenue growth outpaces the incremental capex growth, which will happen at some point, the resulting revenue, free cash flow and return on invested capital is very compelling. We've done this before in the first era of cloud computing, just over a longer time horizon, where demand built more gradually than it has in AI. But we see the margins and returns in AI tracking what we saw with cloud at the same point of evolution, actually a little ahead.We now believe we will spend approximately $220 billion in cash capex in 2026, the higher cost of memory pushing this number up from our prior estimate of about $200 billion. But even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027 too. In fact, the demand we already have for 2028 is striking. And remember, enterprises are still very early in using inference at scale on their current production applications. We long believed AWS could become a few-hundred-billion-dollar revenue business, and now believe it'll be at least double that, and very possibly a trillion-dollar annual revenue business for us in time, with very appealing accompanying free cash flow and return on invested capital."That's what the market loved listening to. Andy Jassy has been there, done that — they were the leaders in cloud computing, four to five years ahead of everyone else, if I recall. And he knows what it takes. In a nutshell, what he's saying is: they invest now because there's huge demand for the services, and they know they get a payback of two to three years, after which the same capex generates free cash flow for the next three to four years afterwards. That's a good business.Well, that's the BizNews Edge for today. As always, you'll find the full detail on every one of these stories, and more of our coverage, on BizNews.com. Thanks for being with us. I'll see you tomorrow.

BizNews Edge: Second prosecution boss falls at Madlanga Commission; ANC heads into a tough November

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