<div style="max-width: 700px;">
  <video-js
    data-account="1571595826001"
    data-player="c0AOssA7"
    data-video-id="6180196497001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script src="//players.brightcove.net/1571595826001/c0AOssA7_default/index.min.js">
</script></p>
<p>The COVID-19 pandemic and lock-down regulations have had an extensive impact on economic activity. Stats SA reported that manufacturing production decreased by 16.3 per cent in June 2020, compared with June 2019. Annabel Bishop, Chief Economist at Investec joins CNBC Africa to give insight into the contributors, and the utilisation of manufacturing capacity in South Africa.</p>


SA’s manufacturing production slides 16.3% y/y due COVID-19

<div style="max-width: 700px;">
  <video-js
    data-account="1571595826001"
    data-player="c0AOssA7"
    data-video-id="6175884802001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script src="//players.brightcove.net/1571595826001/c0AOssA7_default/index.min.js">
</script></p>
<p>In its latest Quarterly Employment Statistics update, Stats SA has announced that formal non-farm employment decreased by 3000 in the first quarter of 2020. It is expected that the second quarter will see a plunge in employment on the pandemic’s economic fallout. Annabel Bishop, Chief Economist at Investec joins CNBC Africa for more.</p>


COVID-19: SA sees decline in formal sector jobs in first quarter of 2020

<div style="max-width: 700px;">
  <video-js
    data-account="1571595826001"
    data-player="c0AOssA7"
    data-video-id="6174400364001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script src="//players.brightcove.net/1571595826001/c0AOssA7_default/index.min.js">
</script></p>
<p>As mentioned previously, the South African Reserve Bank has lowered the repo rate by 25 basis points, to 3.5 per cent. Joining CNBC Africa to look at how this further cut of interest rates means for South Africa locally and internationally are Annabel Bishop, Chief Economist at Investec and Elina Ribakova, Deputy Chief Economist at the Institute of International Finance.</p>


SA Reserve Bank cuts repo rate by 25 basis points

<div style="position: relative; display: block; max-width: 700px;"><div style="padding-top: 56.25%;"><iframe src="https://players.brightcove.net/1571595826001/default_default/index.html?videoId=6156637594001" allowfullscreen="" allow="encrypted-media" style="position: absolute; top: 0px; right: 0px; bottom: 0px; left: 0px; width: 100%; height: 100%;"></iframe></div></div>

<p>&nbsp;</p>
<p>With funding from the Oppenheimers&#8217; one billion rand relief fund for small businesses dried up, SMMEs in need of financial help to stay in business can now turn to the national R200 billion Covid-19 loan guarantee scheme, which opened yesterday. Richard Wainwright, new Chairman of BASA and CEO of Investec Bank joins CNBC Africa on how the scheme will work and which businesses qualify to apply.</p>


<p></p>


COVID-19: How SA’s R200bn loan scheme for SMMEs work

COVID-19: How SA’s R200bn loan scheme for SMMEs works


<p>A multi-billion rand loan guarantee scheme announced by South African President Cyril Ramaphosa last month is now officially in operation, with the assistance of the country’s major banks, including FNB, Investec, Standard Bank and Absa.</p>



<p>Ramaphosa announced the scheme as a measure to soften the blow of the <a href="https://www.cnbcafrica.com/videos/2020/05/13/how-african-economies-will-reawaken-from-the-covid-19-nightmare/">coronavirus pandemic </a>and national lockdown on banks as well as their individual and business clients.</p>



<p>The following statement provides more information:</p>



<p><strong>LOAN GUARANTEE SCHEME OPENS</strong></p>



<p>The Covid-19 loan guarantee scheme announced by President Cyril Ramaphosa in April will operate from today, 12 May 2020. The initial set of participating banks (Absa, First National Bank, Investec, Mercantile Bank, Nedbank and Standard Bank) are ready to accept loan applications from eligible businesses which bank with them.</p>



<p>The activation of the loan guarantee scheme follows the finalisation of legal details by National Treasury, the South African Reserve Bank and the Banking Association South Africa.</p>



<p>The loan guarantee scheme is an initiative to provide loans, guaranteed by government, to eligible businesses with an annual turnover of less than R300 million to meet some of their operational expenses. Funds borrowed through this scheme can be used for operational expenses such as salaries, rent and lease agreements, contracts with suppliers, etc.</p>



<p>Government and commercial banks are sharing the risks of these loans. Initially, the National Treasury has provided a guarantee of R100 billion to this scheme, with the option to increase the guarantee to R200 billion if necessary and if the scheme is deemed successful. Eligible businesses should contact their primary or main banker.</p>



<p>More details on the scheme can be found in a Frequently Asked Questions guide posted at <a href="http://www.treasury.gov.za/">http://www.treasury.gov.za/</a>&nbsp; <a href="https://www.resbank.co.za/">https://www.resbank.co.za/</a> Pages/default.aspx and <a href="https://www.banking.org.za/">https://www.banking.org.za/</a>.</p>



<p>Further queries should be directed to the individual banks, which are administering the scheme.</p>



<p>Jointly issued by National Treasury, The South African Reserve Bank and The Banking Association South Africa</p>



<p>Date: 12 May 2020</p>



<p>For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a></p>


Here’s how to apply for SA’s COVID-19 loan guarantee scheme


<p>By Stephán Engelbrecht, Fund Management</p>



<p><strong><em>The world is entering an unprecedented time and there is no historical playbook for what happens next. While not our base case, calamity risk is increasing (mass infections across South Africa [SA], with dire economic consequences), and nobody knows how to quantify this risk. We have many requests from clients asking for investment opportunities in this crash and we are happy to share our fundamental views. However, investors in any equities must bear in mind that, in the shorter term, cheap shares can get even cheaper and wild swings are likely. Our views are based on a 12-to 24-month timeline, with a base case scenario of the world normalising during this time period. So, risks have to be taken into account and any investment in equities should be considered in this context. Shares only become this cheap when risks are extremely high.</em></strong></p>



<p>In times of extreme market volatility (and corrections), it is often unnecessary for investors to look far down the quality curve to find attractive opportunities that will generate significant returns in future. This is oftentimes the correct strategy as those economic uncertainties causing market volatility can have far more dire consequences for lower-quality businesses. This can make a company look inexpensive on the surface, but the upside might be limited as the business first has to struggle through an earnings trough, or raise equity to shore up its balance sheet which will, in turn, dilute current shareholder returns.</p>



<p>However, sometimes it is worth taking the risk. During market corrections, fundamentals are often ignored, and some market participants will sell a share at any price. It is at these prices where, we believe, the risk-return profile is so attractive that these counters deserve a small allocation in a diversified portfolio. These calculated risks may just turn out to be some of the best performers in an investor’s portfolio.</p>



<p>With that as background, we have scoured the SA market for some very exciting investment opportunities. We concede that these opportunities do come with some risks, whether it be debt, currency, regulation, liquidity or, in some cases, a combination of these factors, associated with them. Nevertheless, we believe that, at current valuation levels, the investor is more than compensated for such risks. So, put your hard hat on and prepare for some volatility although, at the end of the day, we are confident that a portfolio of these shares will reward investors handsomely.</p>



<p><strong>MTN Group</strong></p>



<p>If one were to draw up a list of countries where it is notoriously difficult to do business, and that also have extremely volatile regulatory and economic environments, the chances are that a large number of these nations will be among the 21 countries in which MTN operates. Initially, with major global mobile operators reluctant to enter these markets and regulations being fairly light, these countries held the appeal of attractive emerging market (EM) growth potential, with limited competition, for MTN. While this worked well in the beginning, over recent years MTN has appeared to stumble from one exogenous shock to the next – wars, extreme currency volatility, sanctions, exorbitant regulatory penalties and various lawsuits – but the company has weathered all these setbacks. MTN’s vulnerability to these exogenous events means that it is typically sold off, particularly aggressively during periods of risk aversion. This time around, the market sell-off was amplified by the collapse in the oil price, to which a number of MTN’s markets are vulnerable (especially Nigeria). With MTN’s share price falling below R40, the counter has now declined &gt;85% from its 2014 peak and it is currently trading at levels last seen in 2005.</p>



<p>In an industry where scale is critical, the significance of MTN being a top-two market share operator across all the markets in which it operates should not be underestimated. Where the telecommunications sector globally has largely been consigned by investors to the status of an ex-growth utility, MTN stands apart for several reasons. First, many of the Group’s markets still have further opportunities to increase penetration of mobile telecommunications and the potential to migrate those users to smart devices and drive data adoption. Second, while most developed market (DM) operators are confined to the provision of commoditised voice and data services, MTN is capitalising on opportunities to also add digital and mobile financial services.</p>



<p>Although MTN CEO, Rob Shuter has announced that he will be leaving the company at the end of his contract in one year’s time, he assembled a very competent management team during his tenure. Shuter has set the Group on a self-correction course. This includes the disposal of non-core assets, with proceeds being used to pay down debt (R14bn in sales were raised in the first year, with guidance of a further R25bn to be realised over the next few years) and paying particular attention to turning around some of the Group’s underperforming business units.</p>



<p>Since many of MTN’s new revenue streams do not require significant capital investment and are delivered through over-the-top platforms already in place, it has enabled the company to provide guidance of low double-digit revenue growth, margin expansion and relatively flat capital expenditure over the next 3-5 years. With the strong double-digit growth in free cash generation that this guidance implies, MTN is targeting annual dividend growth of 10%-20%.</p>



<p>Even at the bottom of the dividend guidance range, the prospective dividend yield is 15%, while the price as a multiple of expected earnings in 12 months’ time is 5x. No doubt, Brent Crude oil at below $30/bbl poses risk in the short term of foreign exchange availability and currency devaluation in Nigeria (MTN’s largest profit generator in FY19, accounting for c. 40% of group EBITDA). However, we are mindful of the oil industry saying, “the best cure for low oil prices, is low oil prices” and it is unlikely that the current situation will be sustained long term. At current levels, we believe there is now enough of a margin of safety in MTN’s share price to compensate for the risks it presents, with the potential for a strong recovery as current headwinds abate.</p>



<p><strong>Investec</strong></p>



<p>Over the past four decades, Stephen Koseff and Bernard Kantor created an institution. Built on the foundation of entrepreneurship and being agile and nimble to service its customers, the distinctive zebra logo became one of the most widely recognised symbols in SA financial markets.</p>



<p>In the early 2000s, Investec started to expand offshore with the UK being a key target market. Unfortunately, the UK’s highly competitive banking environment, ever more draconian and complex regulation and a global financial crisis (GFC) that hit just as Investec started to expand aggressively in the UK, made the experience far more lacklustre than the firm’s local successes. However, the company stayed the course, and, over time, Investec has built a strong UK presence.</p>



<p>Nevertheless, the UK remains a considerable drag on the Group’s profitability and ROE. Since the disastrous acquisition of Kensington in 2007 and the harsher regulatory environment post the 2008 GFC, Investec’s UK division has struggled to achieve a ROE greater than its cost of capital. This has resulted in Investec rightfully trading at a discount to its book value for significant periods since the GFC.</p>



<p>This discount to book value reached extremely low levels during the current sell-off, trading at close to 0.3x book. In addition, it coincides with some real positive changes taking root at Investec. The old guard has moved on and the new management team have taken decisive steps to improve the profitability of the bank.</p>



<p>Management unbundled the asset management division to make the structure less complex, committed to improving the cost-to-income ratio in the UK and promised that there were no sacrosanct segments of the business that will not be cut in the event of underperformance. We are still at the initial stages of the new regime and it will be interesting to see whether management can indeed improve the UK division’s ROE.</p>



<p>Although we acknowledge that Investec is not the highest-quality bank in the world and its earnings growth and ROE profile are far more volatile than its SA peers, we believe that the current share price provides an opportunity to enter at depressed multiples that more than sufficiently reflect the lower quality. And, the investor may yet benefit from an improvement in operating metrics as the new management team start their work.</p>



<p><strong>Redefine</strong></p>



<p>In recent years, many SA (and global) conservative investors squirrelled their savings away in property shares to earn an attractive, growing income. This bubble burst over the last few months and even the highest quality property companies have seen their value decimated. Selected YTD (to 25 March) declines among local property counters include Growthpoint (-45%), Redefine (-74%), Resilient (-46%), Nepi Rockcastle (-40%), Vukile (-63%), Attacq (-58%) and Hyprop (-60%). This follows already steep share price drops across the board in 2019.</p>



<p>The dire economic outlook for SA had already impacted Redefine’s share price hard when the novel coronavirus (COVID-19) hit and the whole property sector is now in crisis. These are unprecedented times and the world has changed in the last few weeks. Some tenants (especially in the retail sector) will earn little or no turnover for some time, and we have no doubt that they will want to renegotiate rentals with landlords. Some smaller tenants will go bankrupt. It is clear to us that the property sector will be reset after panic around the virus has subsided. Thus, the fate of many property companies is largely dependent on SA banks, who have very strong balance sheets and who, we believe, will be very co-operative in working with these companies to navigate the way through the current crisis. Although loan-to-value (LTV) ratio levels are all stated in the debt covenants for property companies, we think that the credit providers’ focus will turn from LTV ratios to interest cover, cash flow and sustainability. It is not in the interests of the banks to “pull the plug” on some of their biggest clients. We expect Redefine to work its way through this scenario together with the banks, with “reset” value emerging.</p>



<p>Management have acknowledged that they have no idea where rentals will settle, and they will largely depend on the health of the economy and the tenant. About 30% of retail turnover is from “safe” companies such as food retailers, cellphone companies and banks. Many office tenants will remain robust and industrial/logistics rentals will depend on tenant quality. So, it is not a disaster across the board, but months of hard negotiations will follow.</p>



<p>However, for investors, LTV ratios will remain a key metric and something which Redefine will have to address. At its last results presentation (FY19), Redefine had an LTV ratio of 43%. To highlight the spiral, if we assume the company had R100 of book value and R43 of debt – that 43% LTV is only just within its debt covenants. If the book value is written down by 25%, the LTV ratio goes up to 57%! Asset sales are usually a partial solution, but this looks increasingly unachievable. Withholding dividend payments becomes the next, and most likely, scenario. If a company can generate an 8% yield on book value (we are assuming no tax payable, which may be contentious), ploughing this back into debt repayments (as opposed to dividends), with a two-year dividend holiday, can reduce the LTV ratio from 57% to 41% – back into the covenant zone. We note that Redefine has already announced a delay in its interim dividend payment.</p>



<p>A big issue with withholding dividends is taxation. REIT (Real estate investment trust) legislation allows companies designated as such, to not pay tax and to distribute income to shareholders who receive the distribution as taxable income. If REITs do not distribute 75% of their income, then the current rules say they must pay tax on their income. We believe the property sector is in the process of negotiating with Treasury in an attempt to waive this rule – at least for a once-off time period.</p>



<p>We conclude that in a base-case scenario, the adjusted book value will be well below current book values, but higher than the share prices. We calculate that Redefine is fundamentally worth 50%-100% more than its current share price (unless Armageddon prevails!). But there is a high risk of shareholders not getting dividends for one, or even two, years. The share price is factoring in a far worse scenario than our base case. But investors should focus on the balance sheet and track closely the progress the firm makes in degearing.</p>



<p>There is a long road ahead, but we believe that, in the end, we will look back at this as a great opportunity to buy the share.</p>



<p><strong>Northam Platinum</strong></p>



<p>The platinum group metals (PGM) miners were the talking point of 2019. After being priced for bankruptcy in 2018, the price of the PGM basket recovered in 2019 resulting in the share prices of these miners rallying by 250% or more. The higher basket price helped these miners reduce their leverage with some of the mining companies going into a net cash position. It was a remarkable turnaround and highlighted just how cyclical the fortunes of these businesses are. Which begs the question, do you want to buy into such a cyclical industry in these uncertain times?</p>



<p>It is a fair question, and the answer very much depends on the risk tolerance of the investor. The reason why we are comfortable with a small position in Northam is due to the precarious demand-supply balance which the industry faced going into the COVID-19 crisis.</p>



<p>Prior to 2019, the threat of electric vehicles (EVs) caused the PGM basket price to remain below the breakeven price for mining companies and they battled to survive. Capital expenditure was cut across the board, with mining firms struggling to pay for maintenance capex, not to even mention expansionary capex.</p>



<p>Then, in 2019, the combination of a greater focus on carbon emission worldwide, the more enhanced testing after the VW scandal and the lack of R&amp;D in combustion engines over the preceding few years forced vehicle manufacturers to just add more and more PGMs in their respective catalytic converters as emission standards became more onerous. With the costs of PGMs &nbsp;a small fraction of the total vehicle production cost, they had the luxury to do this. Demand for these metals surged and the miners were not in a position to increase supply. This caused PGM prices to rally, with rhodium and palladium hitting all-time highs.</p>



<p>In our view, this situation will not change in the short- to medium-term, despite the COVID-19 outbreak and the subsequent decline in global vehicle sales. We expect demand to remain strong due to higher emission standards. Importantly, the threat of EVs, which are expected to be close to 50% of global vehicle sales by 2030, will prevent PGM miners from investing in new mines, thus keeping a constraint on the supply response.</p>



<p>Northam is one of the few PGM miners that will see strong volume growth over the next few years. Due to some tough decisions taken by management during the lean years, the company was able to shore up its balance sheet and it continued to invest in operations. As a result, we expect Northam’s annual production volumes to increase from c. 600k ounces this year to 1mn ounces over the next few years. Northam’s mines are also of a very high quality, operating at very low operating costs due to mechanisation. Trading at very attractive valuations and offering significant earnings (at spot PGM prices) and production growth, Northam is a high-quality operator in a very cyclical industry.</p>



<p><strong>Alviva Holdings</strong></p>



<p>Alviva Holdings is not an exciting company! But it is one of the Africa’s largest providers of information and communication technology (ICT) products and services. The Group has three business segments – ICT Distribution, which imports ICT hardware and software and sells it into sub-Saharan Africa via resellers, Services and Solutions, which provides system integration and ICT solution services, and Financial Services, which provides leasing finance to small-, medium- and micro-sized enterprises (SMMEs) for their ICT products.</p>



<p>The risks to this business are real. It is difficult to see Alviva continuing to operate in the same verticals and products as it is currently working, in five years’ time. This is due to the ever-changing industry in which it operates. For example, cloud storage and processing will, likely, fundamentally change the role ICT service providers play in the lives of their customers. To survive, ICT service providers will have to adapt their business models quickly and also ensure that they have a balance sheet strong enough to absorb any shocks.</p>



<p>We believe that Alviva has both these traits. It has a very experienced and conservative management team, which have navigated through some very turbulent times in the past and we maintain that management should be able to continue to do so in future. In addition, management have also been conserving cash. Over the past few years, they have adopted a very conservative dividend policy, paying out only 10% of earnings in dividends.</p>



<p>At our last engagement with management, they conceded that the operating environment is very tough at the moment, adding that they were very disappointed in the company’s performance but that it should improve in the second half. Management have guided that they will first look to retire around R400mn in preference shares, after which they will engage with shareholders regarding potential share buybacks. Admittedly, this was before the COVID-19 outbreak.</p>



<p>However, Alviva’s valuation is ridiculous – it is currently trading at a historic PE ratio of c. 2x and a normalised free cash flow yield of 50% (and we believe that we are being conservative here), so the risk-reward profile for investors is very much skewed to the upside. Liquidity is a concern and we highlight that investors should be patient if investing in this counter.</p>


Our top share picks for the brave investor: Finding opportunities in times of adversity


<p>By John Wyn-Evans,  head of investment strategy, Investec Wealth &amp; Investment UK</p>



<p>My final social engagement a couple of weeks ago was a trip to the theatre to see Samuel Beckett’s Endgame, a play in which the characters are trapped in a box-like room to contemplate a fate that (in true Beckett style) never materialises. Their confinement appears to be the result of some sort of apocalyptic event. <br><br><strong>For more coverage on COVID-19 visit:</strong> <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a><br><br>Little did I think that two weeks later I would be similarly confined to my home, with the streets outside eerily devoid of the usual tidal flows of humanity. These are extraordinary times, and trying to make sense of them in terms of financial market analysis is proving to be a challenge. I am taking a three-pronged approach to the situation.</p>



<p><strong>The medical situation</strong></p>



<p>The first thing we need to monitor is the medical situation. It has become clearer in the last week that, from a policy perspective, saving lives takes precedence over economic activity. Thus we are experiencing ever more draconian measures aimed at “social distancing”. <br><br>I explained a few weeks ago that the pattern of epidemics tends to follow an “S-curve”. One sees a relatively slow initial build-up of cases, which then accelerates rapidly before flattening out again as counter-measures take effect.<br><br>We can already see this pattern playing out if we follow the virus from its beginnings in China. Containment measures in China itself mean that the province of Wuhan has not reported any new cases in the last four days. Indeed the majority of new cases in China appear to have been brought back into the country be returning travelers. This, and similar shaped curves in places such as Singapore, Hong Kong and South Korea, provides some comfort that containment is a viable strategy.&nbsp;<br><br>Unfortunately, the rest of the world is several weeks behind China in terms of the spread of the virus and also in taking measures to contain it. Thus we have, in all probability, yet to experience the steepest part of the curve here in the UK; certainly so in the world’s most important economy, the United States. The same will be true of many other countries. This means that the worst is yet to come in terms of reported new cases and deaths.<br><br>To exacerbate the situation, there remains much uncertainty about mortality rates, mainly because, owing to the lack of testing capacity, we have no idea how many people have actually had this virus. We are monitoring the daily data by country to watch for any signs of a deceleration in the infection rate. There will be some relief when that is seen in the core European countries, especially Italy. Developments in the US will also be key to restoring confidence.<br><br></p>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"><p>There is likely to be some system of “dynamic social distancing” that remains in place either until a vaccine is developed or until sufficient herd immunity has been acquired.</p></blockquote>



<p>However, any return to what we might consider normal will not be immediate. We have already seen new clusters of infection in South Korea, for example. There is likely to be some system of “dynamic social distancing” that remains in place either until a vaccine is developed or until sufficient herd immunity has been acquired. This will continue to weigh on general economic activity for some time.&nbsp;<br></p>



<figure class="wp-block-image"><img decoding="async" src="https://www.investec.com/content/dam/united-kingdom/staff/john-wyn-evans-quote-desk.jpg" alt="John Wyn-Evans"/><figcaption>John Wyn-Evans,  head of investment strategy, Investec Wealth &amp; Investment UK</figcaption></figure>



<p>&#8220;It is inevitable that fiscal deficits will rise sharply, but it is generally accepted that this is a price that has to be paid.&#8221;</p>



<h4 class="wp-block-heading"><strong>The financial system</strong></h4>



<p>The second area of focus is the financial system, which has definitely been creaking over the last couple of weeks. As we saw during the financial crisis, the world cannot cope without a functioning banking system, and central banks have thrown all their resources into ensuring that this does not seize up again. That’s not to say there have not been stressful moments.<br><br>The overnight repurchase market has struggled to cope with the demand for dollar cash as both companies and banks hoard funds. Asset markets have seen days when it has been difficult, if not impossible, to sell anything at a remotely sensible price. <br><br>On the more extreme days we have seen supposedly “safe” assets falling in value because they were the only things that could be sold in meaningful size to raise funds. Some of this was down to forced deleveraging by funds that manage portfolios based on the level of volatility.<br><br>With the VIX Index hitting an all-time high last week, they had no choice but to reduce positions across the board. There is some evidence that the worst of that particular phase of selling pressure has now peaked, at least, but redemptions and margin calls will continue to weigh.<br><br></p>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"><p>Then there has been governments’ response to the crisis. We have seen all sorts of extraordinary measures announced with commendable speed, ranging from payment deferrals to cheap loan facilities and cash handouts.</p></blockquote>



<p>It is inevitable that fiscal deficits will rise sharply, but it is generally accepted that this is a price that has to be paid. What will be intriguing is to see the extent to which central banks and governments work together.<br><br>Since the financial crisis, measures such as Quantitative Easing and zero interest rates, which were seen as temporary remedies, have become more permanent. It is possible that direct purchases of government debt by central banks will now become the norm. Once debt is “monetised” in such a fashion, it has major implications for how money itself is valued, which might well lead to very different types of portfolio construction in future.&nbsp;<br><br>The key point to make, though, is that no measure will be deemed too extreme or too costly in the short term to keep the financial system functional and to ensure that the private sector is provided with some sort of safety net to compensate for the enforced lack of activity. I have deliberately not provided exact numbers because they are virtually meaningless and will also be subject to frequent revisions.<br><br>Suffice to say that the words “whatever it takes” will be repeated often. There will be bumps in the road, as we saw last night is the US, where the Senate was unable to agree on a package of supportive measures. I can assure you that they will once they acknowledge just how bad the situation is, much as they did in 2008.<br></p>



<h4 class="wp-block-heading">Economic growth and company earnings</h4>



<p>The final pieces of the jigsaw are economic growth and company earnings, and here we are subject to the greatest uncertainty. Within the investment bank and independent forecaster communities there is something of a race to the bottom in terms of expectations, with every day bringing a new low.<br><br>The speed of decline will be unprecedented. For example, in the fourth quarter of 2008 following the bankruptcy of Lehman Brothers, the US economy shrank by an annualised 8%. <br><br>Goldman Sachs suggests a figure of -24% for the second quarter this year, while one member of the Federal Reserve Bank has ventured -50%. These figures were inconceivable just a few weeks ago. And although there will inevitably be a sharp rebound in activity, the trajectory of the recovery is hard to predict. It certainly feels that hopes for a “V” shaped recovery are too optimistic.<br><br></p>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"><p>Our key principle has been to remain invested in companies that will at least be able to survive the downturn and thus benefit from the recovery.</p></blockquote>



<p>From a company perspective, it is clear that earnings could, in aggregate, by wiped out for a quarter or longer, although there will be a huge gap between the haves and the have nots, one which investors are already anticipating to judge by the relative performance of different stocks and sectors. <br><br>Our key principle has been to remain invested in companies that will at least be able to survive the downturn and thus benefit from the recovery. There will be a time to consider more risky situations, but definitely not yet.&nbsp;<br><br>We often remind investors that dividends are the least volatile component of investment returns. That will be the case again, but the overall level of dividend payments is going to be significantly curtailed this year and potentially next as well. <br><br>We have already seen dividend suspensions from companies such as Marks &amp; Spencer and Intercontinental Hotels Group, both viewed as being in decent financial shape prior to current events.<br><br>But we remain far from despair. According to data from Goldman Sachs, the UK stock market trades at the 11th percentile of its price-to-book value since 1965 (and so has been more highly valued on this metric 89% of the time over the last fifty-five years). <br><br>Unless we believe that the ability to generate a reasonable return on capital has been permanently impaired – and we don’t – then investors will able to take advantage of some long-term opportunities once we have some greater clarity on the short-term pain.<br></p>


What does the COVID-19 end game look like for investors?

<div style="max-width: 700px;">
  <video-js
    data-account="1571595826001"
    data-player="default"
    data-video-id="6132230513001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script
  src="//players.brightcove.net/1571595826001/default_default/index.min.js">
</script><br />
President Cyril Ramaphosa’s 2020 State of the Nation Address is going to be a pivotal one with both ratings agencies, investors and the business community holding their collective breaths to see whether the President would finally implement meaningful structural reforms necessary to kick-start a stagnant economy. Joining CNBC Africa to break down these expectations is Andrew Duvenage, Managing Director, NFB Private Wealth Management and Ralph Mathekga, political analyst and Annabel Bishop, Chief Economist, Investec.</p>


#SONA: What business

#SONA: What business, investors want

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6123219111001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>South Africa may have its problems, but it isn’t prey to the persistent low interest rate environment that prevails in the developed world. According to PricewaterhouseCoopers, there is a 75 per cent probability of improved economic political outcomes in the country over the next five years. David Gracey, Head of Foreign Exchange and Fixed Income Trading at Investec joins CNBC Africa for more.</p>


Is there light at the end of the tunnel for SA’s economy?

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6121011265001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>With South African business confidence dropping to the lowest it’s been in 34 years in 2019 and the country&#8217;s manufacturing down 3.6 per cent year-on-year in November, what does this mean for the economy? Annabel Bishop, Chief Economist at Investec joins CNBC Africa for more.</p>


Manufacturing figures on a downward trajectory

Manufacturing figures on a downward trajectory, what does this mean for the SA economy?

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6120068111001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>With continued tensions between the U.S and Iran, oil shoots up a further 2 per cent today, pushing Brent above $70 a barrel. How will this surge of oil prices affect South Africa and its economic position for 2020? Annabel Bishop, Chief Economist at Investec joins CNBC Africa for more.</p>


Will tensions between Iran and the U.S affect SA – if so

Will tensions between Iran and the U.S affect SA – if so, how?

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6107120883001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>Investec&#8217;s share price traded lower after weak United Kingdom banking and wealth management performances dragged its first-half profit down. Investec said the spin-off of its asset management division next year was on track, a plan that will leave it with just banking and wealth management operations. Investec CEO, Fani Titi joins CNBC Africa for more.</p>


Investec CEO Titi outlines bank’s future

Investec CEO Titi outlines bank’s future, Hong Kong

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6107107932001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>The South African Reserve Bank Governor, Lesetja Kganyago announced today that the reserve bank will keep the interest rate unchanged at 6.5 per cent. Kganyago said the MPC looked at the risks to the growth forecast to be on the downside. Annabel Bishop, Chief Economist at Investec joins CNBC Africa to give analysis.</p>


SARB keeps rates unchanged

SARB keeps rates unchanged, here’s what it means for SA’s economic outlook

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6101503955001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>With the tough economic times in South Africa, the president Cyril Ramaphosa is looking for investors to help sustain the country. CNBC Africa&#8217;s Karabo Letlhatlha spoke to CEO of Investec, Fani Titi about which role the company will play to contribute towards an economic turnaround.</p>


Investec’s role in SA’s economic turnaround

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6100280542001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>On the back of Moody&#8217;s credit rating for South Africa changing from stable to negative, CNBC Africa is joined by Annabel Bishop, Chief Economist at Investec to unpack what this means for the economy.</p>


What does Moody’s negative outlook mean for SA’s economy?

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6097068789001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>South Africa’s headline consumer inflation slowed to 4.1 per cent year-on-year in September, from 4.3 per cent in August, data from Statistics South Africa showed. This paves the way for a drop in interest rates when the South African Reserve Bank meets next month. But crucial to its decision will be Moody&#8217;s sovereign rating on 1 November. Investec Chief Economist, Annabel Bishop joins CNBC Africa for more.</p>


SA’s September headline consumer inflation slows – what does this mean for interest rates?

<div style="display: block; position: relative; max-width: 730px;">
<div style="padding-top: 56.25%;"><iframe style="width: 100%; height: 100%; position: absolute; top: 0px; bottom: 0px; right: 0px; left: 0px;" src="//players.brightcove.net/1571595826001/default_default/index.html?videoId=6057928251001" allowfullscreen="" border=0 frameborder=0></iframe></div>
</div>
<p>Tertia Jacobs, Treasury Economist at Investec Corporate and Institutional Banking discusses the reappointment of Lesetja Kganyago as SARB governor and what this means for Eskom bond holders.</p>


Investec

SA’s manufacturing production slides 16.3% y/y due COVID-19

COVID-19: SA sees decline in formal sector jobs in first quarter of 2020

SA Reserve Bank cuts repo rate by 25 basis points

COVID-19: How SA’s R200bn loan scheme for SMMEs works

Here’s how to apply for SA’s COVID-19 loan guarantee scheme

Our top share picks for the brave investor: Finding opportunities in times of adversity

What does the COVID-19 end game look like for investors?

#SONA: What business, investors want

Is there light at the end of the tunnel for SA’s economy?

Manufacturing figures on a downward trajectory, what does this mean for the SA economy?

Will tensions between Iran and the U.S affect SA – if so, how?

Investec CEO Titi outlines bank’s future, Hong Kong

SARB keeps rates unchanged, here’s what it means for SA’s economic outlook

Investec’s role in SA’s economic turnaround

What does Moody’s negative outlook mean for SA’s economy?

SA’s September headline consumer inflation slows – what does this mean for interest rates?

What SARB’s Kganyago, deputy governors’ appointment means for bond holders

News Tips

Advertise With Us

Investec

SA’s manufacturing production slides 16.3% y/y due COVID-19

COVID-19: SA sees decline in formal sector jobs in first quarter of 2020

SA Reserve Bank cuts repo rate by 25 basis points

COVID-19: How SA’s R200bn loan scheme for SMMEs works

Here’s how to apply for SA’s COVID-19 loan guarantee scheme

Our top share picks for the brave investor: Finding opportunities in times of adversity

What does the COVID-19 end game look like for investors?

#SONA: What business, investors want

Is there light at the end of the tunnel for SA’s economy?

Manufacturing figures on a downward trajectory, what does this mean for the SA economy?

Will tensions between Iran and the U.S affect SA – if so, how?

Investec CEO Titi outlines bank’s future, Hong Kong

SARB keeps rates unchanged, here’s what it means for SA’s economic outlook

Investec’s role in SA’s economic turnaround

What does Moody’s negative outlook mean for SA’s economy?

SA’s September headline consumer inflation slows – what does this mean for interest rates?

What SARB’s Kganyago, deputy governors’ appointment means for bond holders

News Tips

Advertise With Us

Newsletters