In June, Cy Jacobs predicted SpaceX would one day buy Tesla. Now that the boards are looking at it, he explained why he still wouldn't buy either, and how passive money may be doing more to hold up Elon Musk's valuations than profits. Then he turned to the city he has lived in all his life. The 36ONE co-founder warned that Joburg was close to the point of no return, said who he thought would win the mayoralty, explained what a change in government could mean for the city's bonds, the rand and house prices, and answered whether he would take a job in a new administration..Listen here.Edited transcript of the interview.Alec Hogg (00:02) Well, Cy Jacobs is one of our very special people at BizNews. He will be at the BizNews conference again in March. He missed the August one, but we're very happy that he'll be back. And you might recall, if you watched or listened to the interview in June, that he predicted SpaceX would one day buy Tesla. Well, now Elon Musk says the boards are looking at it. So Cy will talk to us about that.But maybe closer to his heart is the Joburg election. He lives in Joburg, he's committed to the city, and he's been quietly working behind the scenes. And we'll find out where he's been putting his money. Cy, welcome back. Always good to be talking with you. Let's start with the SpaceX story, and credit where it's due. It wasn't just a gut feel that you had; I'm sure it was informed by the rational likelihood that Elon Musk would put these two companies together. But at the time, you said that SpaceX wasn't making any money. You used the Microsoft analogy, of Microsoft making $125 billion and SpaceX nothing. But it's starting to make money, or so it seems, from the latest quarterlies. So is your view changing at all?Cy Jacobs (01:24) I think they're lucky enough to have got a very good short-term revenue model, which may land up being long-term. There's a lot of shortage of compute around this AI story, and they have a lot of excess capacity, and they've been renting out that capacity at very high revenue numbers. As a result, the numbers look pretty good. Obviously Starlink's still got some good numbers, and it's a very good business. But it doesn't justify the valuation. You would need something materially bigger.So I think the combination of the AI windfall that they've currently been enjoying and Starlink does make the valuation a little bit less, let's call it, alien and a little bit more substantial. But that's not to say this business can justify a $2 trillion valuation. Very difficult at this stage. And the amount of capex that's going to be required in SpaceX over the next few years would require massive amounts of funding at SpaceX level. You've probably already seen, I think they've gone to market for a $40 billion financing package.Alec Hogg (02:39) Yes.Cy Jacobs (02:41) And I think that needs to recur almost annually. So it's very difficult to get to that equity value. But as I said, Musk has this illusion of grandeur. He's the god of equity markets. He's the king of the world. And as a result, people follow him. And as I said to you at the time, when we had the last discussion on SpaceX, it's still a matter of a very, very tight float and controlling that float.It'll be interesting to see, once all the shares are loose after a year of trading, how SpaceX performs. But nonetheless, both Tesla and SpaceX still have a massive market cap, and combined they would be by far the biggest company in the world. And I think that's the plan. And then, over time, to move the other listings, or the other private equity stakes that Elon has, into the same basket: Neuralink, the Boring Company, et cetera. Just like we've seen Twitter now effectively owned by SpaceX, I think we'll see those in the fold as well.Alec Hogg (03:51) Hmm. Well, your insights helped a lot of people, or stopped them from losing a lot of money. The hype that grabbed SpaceX initially sent the share price into the stratosphere, and you warned that sanity would prevail. But at the current share price, around $150...Cy Jacobs (04:15) Yeah, I think there's a lot of hype around AI. So whether there could be a merger of the two, it's difficult for me to say. From a valuation perspective, I wouldn't be buying it, but I wouldn't be buying Tesla either. And as you can see, just in the last few days, Tesla goes up 10% out of nowhere because maybe there are some good robotaxi numbers out of a small region in Texas, and suddenly everyone gets excited. Or who knows whether the options market is driving the actual share. I don't know. There's a lot of speculation in how you come to the valuation of both those businesses. So it's hard for me to say if it's a buy or a sell. Alec Hogg (04:59) I had a fascinating discussion with William Saunderson-Meyer earlier today. He's our new columnist. He's got the longest-running political column in South Africa; he's been going for more than 30 years. And I said to him, well, logically, this should be happening. He said, whoa, whoa, hang on a minute. In politics, it's all about emotion. Of course, where you and I are from, it's all about logic. And if you look at logic from what's happened in history, what is it telling us about where the whole SpaceX-Tesla story will end eventually? Can we draw anything from the rhyming of economic history?Cy Jacobs (05:38) From economic history, I think it's going to be difficult for those two businesses to sustain the profitability required to justify the share prices. A lot of promises, a lot of hype. We've now seen flying cars with Tesla, but those aren't cars that are going to be in production. It's difficult, but the game has gone on for long already, and I think it's got many years to go, because things are still evolving.Are their data centres really going to exist in space or not? Are we going to see rocket cars on the freeways? Is this humanoid robot going to arrive as promised, with tens of millions of them out in the next couple of years? All these promises, and the promises of the past mostly haven't materialised. I think it's a lot of hype, and I've always said it's controlled hype. So for me, I'm not a buyer.Alec Hogg (06:39) Just before we move off that onto your hometown: Elon Musk is now talking about getting to a trillion dollars in sales by 2030. That's just around the corner, three and a bit years. That would mean he's got to jump sales from the current annualised number by 17 times. Why does anyone even take it seriously? Or is there a prospect of that actually being fulfilled?Cy Jacobs (07:08) Well, if you go back over his previous 10 or 15 years of promises, pretty much 80 to 90% of them haven't materialised. I don't know what the percentage is, I'm just guessing, before some Tesla bulls come at me and say that's not true. But most of them haven't, and I honestly don't think he's going to have a trillion dollars of revenue in 2030. So yeah, I think there'll be another excuse when the time comes, and another project that looks fantastic a few years out and which everyone will believe in.Alec Hogg (07:42) So it seems he's playing a very smart game when it comes to getting valuations in the market. Just one final point there. Barclays says that in a merger of Tesla and SpaceX, Musk will end up with about 37% of the combined company, but he'll have 57% of the votes. Now that's putting a heck of a lot of money into the hands, or mind, of one person. Who wins in that scenario? Apart from him, of course. Cy Jacobs (08:15) Well, I think it's obvious Elon Musk has won. He's already won, with the two combined stakes worth approximately a trillion dollars, or close to a trillion dollars at one stage, now lower. Yeah, he wins. But the truth is he has created a lot of wealth for a lot of people. A lot of people were very early-stage SpaceX investors. The business was born out of nothing, really, and a lot of people have made a lot of money, including him. So he's attracted a lot of followers and believers. As I said, time will tell, but at the moment he's on the right side of everything.And what he has realised, just like when he got Nasdaq to change the free-float rule around passive investments at the time of the SpaceX listing, is that if he owns 37% of the combined entity, and he has two businesses which are worth whatever, one and a half to two trillion each, about another 50% of that will probably be bought up by passives. So you've got 50, and he's 37, and then you've got a cultish following. And then maybe you don't have such a big free float after all.Because what's become quite scary in markets today is the size of the passive interest in global markets, and the fact that the larger you are, the more interest you attract from all these various passive funds. And passive, as you know, is today bigger than active. It's using what's out there to create your own valuation. And I think that's where he's done exceptionally well.Alec Hogg (09:58) Passive, of course, means exchange-traded funds. In this country many people know it through Satrix. It's really mechanised purchases, dependent on what the weightings are in the index.Cy Jacobs (10:13) Correct. And what's very interesting is that I'm obviously an active fund manager. In other words, we choose what shares to buy; we don't follow an index rule. But had you followed the passive index rule, in other words buying ETFs that track the S&P or the Nasdaq or even the JSE, over the last number of years most active asset managers have not managed to beat the index, not managed to beat the passive ETFs. And as more and more passive funds are able to do that, and more and more active managers are less able to, more and more people are buying passive ETFs. And that is making the large businesses of the world ever more owned by passive ETFs. That's making the world all converge.And if you look at indices, particularly this year, the Nasdaq or the S&P, you'll see it's a very narrow band of companies that are actually up for the year. In fact, if you look deep down in the S&P or the Nasdaq, most companies are actually in a recession, share price-wise. They're down 20, 40, 50%, yet the index has remained remarkably static and slightly up, as a result of just a handful of businesses that have managed to outperform. And it's the passive money that's been chasing those businesses.And we won't get into it, but obviously all those businesses are interconnected as well in this whole AI scheme, where they own shares in each other, or they're financing their own purchasing and their own data centres, et cetera. So there's a little cohort of businesses right at the top that are managing to stay at the top as a result of all helping each other at the trough.Alec Hogg (12:02) Circular economy. And Elon Musk, who believes in first-principles thinking, would have worked this out, and clearly he's taking advantage of it. But now let's move on to Joburg. It's your home, it's your place, and you have now taken an interest in this election. Why, Cy? Your clients, I suppose, would say, hang on, you're supposed to be managing our money. I mean, they love you managing their money...Cy Jacobs (12:13) Absolutely.Alec Hogg (12:31) ...and we always get that feedback, because of your great performance. But why is Joburg, why is this election, that important?Cy Jacobs (12:39) I think it's do or die for Johannesburg. We're seeing the failing of Johannesburg, and I've lived here my whole life, to such an extent over the last number of years that I'm concerned we're tipping beyond the point of coming back. Whether it's infrastructure, whether it's water, roads, electricity: power outages are still happening in many areas. Some areas don't have water, sometimes for weeks on end. And nobody is fixing anything. And we have this massive patronage network which has been established, I'm sure, in lots of municipalities around Johannesburg.And we've seen that things can be fixed; the DA fixed a lot in Cape Town over the last decade. And I've been watching Helen campaigning over the last number of months, and watching teams that have worked under the DA actually fix things even without being in control, without being in a leadership role. They've gone into fixing roads, cleaning up suburbs. They've created this Blue Brigade that's even involved in getting new water projects online for township areas that never had any water. I'm sure you've seen some of the social media of an area being retarred in 48 hours.I just think we're seeing that it can work: that things can be fixed, and fixed in a reasonable amount of time and at a reasonable cost as well, which very much comes into it. And I've really enjoyed watching a lady who's no youngster, who's left her family, her friends, her children and her grandchildren behind in Cape Town and has come here, not for financial reasons, not to prove anything, but because she realises that the hub of South Africa, which is Johannesburg, needs to be fixed. And at 75 years old, she's shown that she's got enormous energy and the ability to take this role on. And nobody else, in my mind, has shown anything like that over the last number of months. She's been campaigning from early mornings in the winter, dressed in warm jackets, in townships, giving the message and showing the work that can be done by the DA.Cy Jacobs (15:03) And I think we all owe her, and we owe Johannesburg, a big thank you by going out and voting on the 4th of November, because this election is a lot closer than people think. Johannesburg has historically had a very low turnout. It was very low in 2021; it was a bit better in 2016. I think we were at 57% or something. But you're only looking at a million or so voters who vote in Joburg. If we get that up by 50,000 or 100,000, and those voters vote for a changed Johannesburg, I think we've got a very good outcome, not only for Johannesburg, but for South Africa.So I'm quite excited about next week. I just hope that everybody out there, even if they don't like the DA, but they like Johannesburg, will maybe at least vote for some kind of change. That's important. You've got to love Johannesburg and want Johannesburg to be fixed, which I think everybody who lives here does. So I'm just praying everybody gets out on the day, does their thing and votes. And I think we've then got a chance of starting the hard work of fixing Johannesburg, because that's not going to be easy either. But we need to start somewhere.Alec Hogg (16:24) Mm-hmm. The polls have Helen at between 35 and 40%. Mashaba's party is low, but there's a lot more support for him as a mayor: about a quarter of the people who were polled said they would like him to be mayor. And then, interestingly enough, Morero is down at 15% in that survey. But when you go onto Polymarket, and this is very interesting... Polymarket is where the money is. And the bets there have Zille as odds-on favourite. Now, I know from the racecourse that if you're an odds-on favourite, chances are you're going to win most of the time. That's a 55% chance. Then they have Morero at 21%, and then Mashaba only at 9%. So why do you think there's such a big disconnect between the polls and where people would actually put their money?Cy Jacobs (17:21) Yeah, I'm actually thinking that both are not that accurate, to be honest. I think Polymarket of late has been shown to be very inaccurate. Have a look at yesterday's election in Israel. They had Eisenkot winning and taking over from Netanyahu, and then, as the votes started coming in, it swung exactly in the opposite direction. We also saw it with the Brazilian election, with da Silva and Bolsonaro, where again Polymarket was not correct. So it's interesting. It's been correct on some stuff, but in polling and elections it's often shown to be a little bit misguided. I think the polling that you've seen is probably a bit more accurate than that. And as I said, she may run at around 40%, but you get an extra 50,000 votes and that goes to 45%.I listened to Dr Frans Cronje on a call the other day, and he said it's a very difficult election to predict because of the low voter turnout. But if we get a proper voter turnout, and I think we will get something more decent because people are fed up in Johannesburg, and there is a requirement for us to finally do something... I think people in past elections may have just given up, but they realise now there's hope. We've been shown a bit of hope. We've been shown that things can be done. Let's do them.On Herman Mashaba, I was watching some of his campaigning, and I know he spoke on your show a few days ago. I listened to his campaigning in the townships, and what is he campaigning on? To not allow the DA in. Should he not be campaigning to say, listen, this is what you've got from being an ANC voter, this is what you've got from the ANC in Johannesburg, let's vote and get change done? And he's been pretty specific that he will not go into a coalition with the DA, although in the last couple of days he's said maybe he should step out of the coalition talks and not be involved. So maybe something could happen on that front, because the principles of Mashaba's party don't seem to be too bad. But the violent way he campaigns against the DA, and continues to carry on like that, is not in the best interests of South Africa or Johannesburg. What we need to do here is fix the place. Let's lose the personalities. Let's lose the differences. Let's work at fixing the country. And I think that's the problem with some of these politicians.Alec Hogg (20:09) Very interesting point you make about Herman Mashaba stepping away from being involved in the coalition talks, because if you put ActionSA together with the DA, you've got your 50%, or very close to it. And that would be the most natural combination. There was a lot of antipathy between the parties in the past, and Herman doesn't hold back. He says he will not be involved if Helen Zille is the mayor, and he will not be involved in Tshwane if Cilliers Brink is the DA's person. Now, there's no way the DA is going to drop its two stars to satisfy Herman Mashaba. So perhaps there's a bit of sanity coming into his thinking too.Cy Jacobs (20:46) That's for sure.Cy Jacobs (20:53) Yeah, I found that comment very interesting, that maybe he should step aside in the coalition. I don't know if that's been verified or not; I only heard that comment yesterday. That could be interesting. But I think the fact that the two of them are polling a little bit above 50% combined could also make the ANC wake up here. The ANC could say, listen, if the DA and ActionSA are at war with each other, particularly over who's to become mayor, here's our chance. We don't want to be left out. We've got a massive network in Joburg. Joburg is key to the whole country. We are the ruling national party. Maybe we've got to accede to some of the DA's mandate, allow Helen to be mayor, and step into a coalition with the DA.Because if the DA and ActionSA are below 50%, that would mean that, theoretically, the ANC could involve every other little party and take control. But if that's out of the question, then maybe they would try to do a deal with the DA directly. And a two-party coalition, as we know, is not as good as being in control, but it's a lot better than what we've seen in the past. These multi-party coalitions are impossible to govern. My understanding of the national coalition we have is that in October or November 2025 the coalition met, agreed to meet every month thereafter, and has never met again. So we've seen that these coalitions are impossible.So I still think, at this stage, the objective is for one party to rule Johannesburg: one that can make the changes, that can try and fix things as best it can, that has one strategic goal in mind. And I think that's what voters have got to see here. And voters have also got to be very careful about voting for smaller parties this time, because what are you really doing by voting for these smaller parties?Cy Jacobs (23:15) I might like a couple of them a lot. I think some of them are excellent. I just think you're in a situation now where you've got to vote for Johannesburg to be fixed. And there's probably only, in my mind, one main party that can really attempt to fix Joburg properly.Alec Hogg (23:32) Hmm. It's a bit of a do or die. But from an investor's point of view, let's just say that the DA leads the new government in Johannesburg. What would make investors start buying the bonds again? What is the first thing they'd have to see?Cy Jacobs (23:50) I think it's a very positive move. First of all, the emerging-market money that's around today is a small pocket of money that moves a lot between different countries. We've seen what happened in Brazil, when we thought it was going to the right with Bolsonaro, but da Silva came in at the last second. I'm not sure if that was a fixed election. Statistically, a lot of people are questioning whether it was actually even possible. And now Bolsonaro's fled to the US, looking for his passport, et cetera. And as a result, that market has fallen 14%, I think, since that happened. On the initial day it was 17%, I think; a little bit of a comeback, but it's still down, call it 14 or 15%.I think we would see a similar knock if we got a full left coalition of MK, the EFF and the ANC, and that was where the country was looking to go. We would get something quite similar happening in South Africa. And the fact that we would instead get something more business-friendly, from the DA together with ActionSA, or even the DA and ANC, or the DA by itself, I think is a big positive. It's a good step in the right direction, especially because you're not only looking at this area; you could get quite a few metropolitan areas around the country changing at the same time.And I think it would be very positive if we started to see a move away from ANC control. I think that would lead markets to be a bit better, in my mind. This could be a small turning point, and the market could then be looking to the 2029 elections and saying, what could possibly happen there, and what coalitions could potentially improve things in South Africa? So I think this is a very interesting catalyst that could start something positive, as long as people turn out to vote, and vote correctly.Alec Hogg (25:56) But let's just say that it happens. Let's say that Helen Zille's the new mayor. What would investors, particularly investors in Joburg bonds, need to see to give them the courage to go and buy them?Cy Jacobs (26:10) Well, the rating of a bond is about your outlook and your perceptions. I think immediately you would see a lowering in those yields and a pick-up in the ability of people to fund those bonds. The positive sentiment would feed through immediately. And obviously, over time, you would need to see a clean-up: a clean-up of how municipal debt is managed, how expenses are monitored, how tenders are given out, how pricing is done, the follow-ups. It has to be a really big clean-up of government within Johannesburg. And I think that's going to be a big task. But the DA is prepared to take that task on, and I think that's what's required.That's not going to be an easy fix; it's a multiple-year fix. But I think we can start seeing small changes, and I think that will help Johannesburg bonds. I think the overall South African market will just have a better sentiment. I think we'll probably even see currency tailwinds; even the rand would do better, especially based on a more general change across South Africa's provinces, and we're hoping that happens next week.Alec Hogg (27:37) Property prices in Joburg?Cy Jacobs (27:39) Well, there are a couple of fund managers saying that's maybe the best quarter of all. We've seen a continual degrading of property prices here for a couple of decades. Take my own house: what I paid for it in 2010, I doubt I could get the same number in 2026. Sixteen years of negative growth. Imagine what that is on an inflation-adjusted basis. You've lost 70% or so of the value of your home.And that's why I've advocated over the last 10 or 15 years: don't buy a house in Johannesburg. Some people went mad at me on X a couple of years ago: you just don't want us to own homes. It doesn't make sense. You're buying an asset that's depreciating. Rather invest your money, buy passive ETFs in global markets, and rent. And I think that might change. I don't know for how long, but at least we might see a big kick up. I speak to some real estate agents around Johannesburg, and there has been a bit of renewed interest in the last few months. The gap between the Western Cape and Gauteng, particularly, has got so large that it's made some people revisit having to live in the Western Cape, et cetera. And I think we've probably bottomed for now in Johannesburg.Alec Hogg (29:08) Helen Zille has said there are enough DA voters in Johannesburg that, if they all turn out and all give her the three votes they can on the ballot, there'll be enough to get over 50%. What is stopping them from doing it?Cy Jacobs (29:27) I think it's just turnout. I think what happens is, if you live in a complex in Waterfall Estate and you think your area is safe and you're OK, and you couldn't care what happens in the election, those are the kind of people who just stay at home, don't venture out and think they're safe in their communities. But it's important to know that you've got to drive out of that estate as well, and everything around infrastructure feeds into that estate.I think people have just had voter apathy in the past, but this is so important. As you say, there are enough registered voters. Helen always says publicly that she needs 490,000, call it half a million voters. I don't know how many registered voters there are in Johannesburg, but there are a few million. You need half a million votes and you're over the line, and we can start fixing things.What is important as well is that business will invest alongside the DA after the election. The DA is no perfect party. I don't think any political party has the ability to have the right structures and substructures to fix this enormous job of turning Johannesburg around. But get the right people involved and the right strategy at the top, and business will be very happy to help fund initiatives, help bring people on board, and help professionalise many of the substructures that are required. So I think it's an exciting time, and we've got to step up. Helen has stepped up for months here and done the real hard miles and massive campaigning, and she's helped. I've seen it: old age homes in some of these townships, and schools, trying to bring things that the government has not managed to do. We're already trying to fix things, and I think we've got to give her and the party the chance going forward.Alec Hogg (31:37) What have you been doing to support that?Cy Jacobs (31:41) I've just been trying to get the message out there that we've got to try and fix things. I've always been involved in community work, whether it be schools that are being neglected by government, or communities who are suffering for various reasons. I don't want to tell you all the places, but a soccer team in Alexandra, or whatever it is. Just trying to build a community, build people, create opportunities, whether it be in poor townships, or communities that have been left behind, or businesses that have been neglected. It's continual. We've been lucky in business, and I love South Africa and I love Johannesburg. And I want everybody to know that there's a community that can help everybody. That's the message we want to give. And I think that aligns mostly with Helen's philosophy. I'd like to be seen to be giving her a chance, and let's see what we can all do together to fix things.Alec Hogg (32:55) And would there be a place for you in her new...Cy Jacobs (32:59) I'm continuing to work at 36ONE. This is a part-time passion project for me. Luckily, we have a very strong team at 36ONE, who need me 24/7. I've got to this stage in my life where I'd really like to help see this community grow. I love all the people of South Africa, and I'd love us all to get on and all thrive and do the best we can. That's just who I am and what I want to do.Alec Hogg (33:30) But what happens if Helen Zille phones and says, OK, Cy, I like what you're saying. We really need a finance MMC. I can't think of anybody who's better suited for it than you. What happens then?Cy Jacobs (33:44) I'm happy to probably oversee something. I would oversee something. I would find the skills. I'd be happy to fund some of the skills in there. Happy to help where I can on any project. I couldn't imagine myself as a full-time employee of a political party. But I think there are a lot of business people who would step up to the plate. Without mentioning names, there are people in this campaign who have used some of their staff to create ideas and help, and to see what we can fix. And I think that's a tremendous effort already. I've never seen that effort before at a municipal or provincial election. I think that is a very big change from what we've seen in Joburg.People are fed up. They want change. You just have to read comments on X, on Instagram, after a post. Some of these Helen posts have had millions of viewers, and you read some of the comments. People are tired of the failing of government. We have to vote. We have to get it changed. And once we get the right people in power, we have to support them. And we'll do that.Alec Hogg (35:00) So take off your political hat and put on your investor hat. What are the chances that Helen Zille will be the mayor after 4 November, or is it just too tough to call?Cy Jacobs (35:15) I think she will be the mayor. My call is that she will be the mayor.Alec Hogg (35:21) Cy Jacobs...Cy Jacobs (35:21) Hope I'm right.Alec Hogg (35:22) Well, I can tell you that I'm reminded of what Frans Cronje said around the time Helen Zille put her hand up and said she would stand for mayor. He said this could be the political decision of the decade, the best decision of the decade. A great chess move, he called it. Because if she's able to win, first of all, and then is able to bring the template that was employed in Cape Town to Johannesburg, that would be a massive opportunity for her political party to take it onto the national stage, presumably in 2029. So there's so much at stake for everybody concerned, but most of all for the people who live in Johannesburg.And Cy Jacobs, you're a smart guy. You've also got lots of passion, as you've explained to us now, about your home city. It's always great talking with you. I'm sure we'll be watching the Johannesburg contest with even more interest now after this conversation. Cy is the co-founder of 36ONE, and I'm Alec Hogg with your BizNews Edge..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.