David Shapiro to Telkom: Take an AGM tip from Warren Buffett

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David Shapiro's family has been through a tough time lately. Last week his home was broken into, his wife Linda and their long-serving staff tied up for a couple hours, with the thieves taking personal effects, many with only sentimental value. It's tough to see any half full glasses so soon after such a traumatic experience, and today David didn't have much material to work with either. So he let loose with both barrels at Telkom chairman Jabu Mabuza's mismanagement of this morning's AGM and Government policy which prioritises transformation above economic  growth – adding to misery that accompanies growing unemployment. Shapiro telling it like he sees it. As ever.  – AH


ALEC HOGG: Let's get a more in-depth view of the market today. David Shapiro from Sasfin is in the studio. Wasn't that extraordinary – Christine's feedback from the Telkom AGM? You can't ask questions because you're in the media and if you are a shareholder, well, you're restricted.

DAVID SHAPIRO: If you're a shareholder, it's the one time in a year, when you have to meet management and to talk to them.   To say you're only restricted to one question goes against the whole spirit of the Companies' Act. This is where you, as a shareholder, are allowed to interrogate the company on its results and on various matters. I think you should be allowed to talk for hours and hours (if required). The one thing we don't have in South Africa are proper AGM's. Shareholders don't rock up there and when they do rock up, you should accommodate them. You should actually give them refreshments for actually turning up, but also to give them an opportunity to ask what's on their minds.

ALEC HOGG: No, but the point is that it's once in a year. You can't arrive at the CEO's office at any other time and say 'tell me what's happening in my company'. However, there's this disconnect. We had Frank Thompson in here, earlier in the week and he said he doesn't talk to Vunani because Vunani are not professional. Vunani have been very critical of Advtech, so Frank Thompson says he won't talk to them.

DAVID SHAPIRO: They're shareholders of his?

ALEC HOGG: Well, they're investment analysts. I don't know if they're shareholders – probably not – given that, they're so critical. In a case like this at Telkom, people might have come from Pofadder, sat in the audience, and had one question but never got the opportunity. It's strange that management of an organisation can actually think that they are able to act that way.

DAVID SHAPIRO: Again, that's one thing about Warren Buffett. Whether you have 100 shares or one share, he treats every one of those people as a partner and will talk to them as a partner, and that's the attitude they should have. These are their partners. Regardless of how many shares they have, to say 'you're allowed one question' is a bit harsh.

ALEC HOGG: Maybe the JSE needs to start doing a little bit more teaching of the directors, particularly with the guys who run Telkom. Anyway, that's off the table. Coal of Africa: I don't know if you've been following that. Did you see that announcement? They now settled $10m for not supplying coal to Grindrod. It's quite nice for Grindrod, but the Coal of Africa share price has reacted well.

DAVID SHAPIRO: It has and it's also in a restructuring mode, so it's not that one that I follow very closely, but I'm glad to see that David Brown (ex-Impala) is finally getting the company on its feet.

DAVID SHAPIRO: Disappointing. You know where the disappointment comes…on the distributorships. Remember, they assemble the cars from Korea (MH Holdings) and that's the thing that's brought them down quite dramatically, and why the Won has strengthened a lot. Therefore, importing cars has made them less competitive with other imported models here. This was supposed to be the cheap model that they could sell, but many people are competing with them at the same level. This is the one area that's dragged them down. Other areas are doing very well – Mark Lamberti coming there. Like Super Group, if you look at their logistics business, they're doing incredibly well. I'm surprised at them saying their outlook is daunting. That's a bit harsh. I have to look at them a lot more carefully because I haven't gone deeper into them. I just went through, very superficially.

ALEC HOGG: And indeed, it is a lengthy set of numbers. It came out at 7am, so no excuses, David. You knew you were coming here later, but it does go on and on for many pages. The thing that jumped out at me was in their headlines, they're telling you the good news. The good news is that we now have 27% of earnings from foreign sources.

DAVID SHAPIRO: That's a trend.

ALEC HOGG: If you highlight the foreign sources in that manner, you're trying to tell shareholders something about where the bulk of the earnings are coming from.

DAVID SHAPIRO: That's exactly right. They're trying to say… In fact, it's been one of the highlights of a number of companies, including Standard Bank and Super Group. All of these companies are stressing how they're expanding outside of South Africa for growth because they see South Africa as virtually ex-growth, and they see many problems within South Africa. Companies are now searching to expand their operations outside.

ALEC HOGG: Back to my question that I wanted to ask of you right in the beginning. Tomorrow, Gill Marcus has a top team from the SA Reserve Bank at a wonderful sounding hotel called Misty Hills. Cyril Ramaphosa's going to be there to tell them about the challenges in South Africa. If you wrote his speech, what would you be saying?

DAVID SHAPIRO: The biggest challenge we face in my view, and I actually discussed it with you when we were on The Insiders in Durban… I said the biggest issue here is security and safety. If we can address those issues – and this is not necessarily economic…

ALEC HOGG: But you feel that because it's happened to you recently?

DAVID SHAPIRO: It's happened to me as well and I have to deal with my wife when she comes back from America. We have to deal with the issue of security, because as long as she feels insecure, she doesn't want to stay here. If we start to give people security and guarantee that there isn't someone around the corner, trying to take away whatever they built up – and it happens all the time… I've just had an Internet issue as well: someone breaking into the Internet and trying to steal your money. It's happening in every part of our lives and when we address that and make people feel comfortable about living here, so they'll start to contribute. As with Imperial, don't give them reason to look elsewhere for growth, safety, and the expansion of their businesses.

ALEC HOGG: Maybe a good place to start would be by appointing a cop as head of the cops, rather than a PR lady….

DAVID SHAPIRO: I think so, and you have to increase your force. You have to pay them more. To me, it's a prime issue.

The other one is to put growth above transformation.

Forget about policies. Forget about scorecards and all the issues that businesses have to face. Just on my travels now – I must tell you because it identifies this – I met a young lady who wants to start a business. She's taking the risk of starting a business and all the issues it involves. What happens is she goes to the IDC and the first thing the IDC says is 'you have to have an empowerment partner with 25 percent'. She says 'hold on a sec. I'm taking the risk. Why do I have to have an empowerment partner? Down the line, I will create employment. I will buy goods here. I will create economic wealth here. Why do you have to keep putting those types of impositions on me?'

We have to start thinking 'growth'. She wants to grow a business here. Give her the opportunity.   Say 'what can we do for you, to make you grow'. Don't put obstacles in the way. I think that's where we have to start changing our mindset now, towards 'let's get people to remain here and start growing, and stop putting impediments in their path'.

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