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<p>With both Net1 &#038; Blue Label impairing their Cell C investment to nil for their year ends, CNBC Africa’s Fifi Peters asked Henry Biddlecombe, an Analyst at Anchor Capital, whether he would be buying Blue Label?</p>


Blue Label impairs Cell C investment to nil for year end, is it time to buy?

<p>Words by Magda Wierzycka</p>
<p>The failure of Steinhoff has shocked even the most seasoned asset managers.  It is the biggest corporate failure on the JSE.  Allegations of earnings manipulations, uncontrolled acquisition sprees and tax fraud are just the tip of the iceberg.  Off-balance sheet companies were set up to hide losses, executives collaborated with each other to defraud investors, and debt was taken on at a massive pace.  The warning signs were all there.  The most obvious of those was the cynical move by shareholders in PSG to, in a sleight of hand, swap their shareholding in PSG shares in South Africa for a suddenly-Frankfurt-listed Steinhoff, thereby externalising their wealth without the need for foreign exchange controls approvals.  This alone should have been a strong indicator that one is not dealing with pillars of society.  Many names are implicated.  Many more will follow.</p>
<p>The serious question to ask is how so many active asset managers in South Africa missed this.  Priding themselves on meticulous research, scrutiny of balance sheets and income statements, backed by interviews with management, they should have seen what was obvious from the beginning that this was as close to a corporate-structured Ponzi scheme as one can get.</p>
		
				
		
<p>When I looked at the financials of Steinhoff (not my day-job, by the way) I had another Net1 moment – it took me exactly half an hour to figure out that the structure was obfuscated, that financial items made no sense, that the acquisition spree was not underpinned by any logic and too frenzied to be well thought out, and that debt levels were out of control.</p>
		
				
		
<p>I am a vocal critic of many things.  This time I am going to push the envelope by testing the liability clause that most asset managers include in their management agreements, that of “gross negligence”.  Most managers think of the clause as dealing with their operational risks and administrative failures.  Unlucky for them, gross negligence also covers negligence as far as management of portfolios is concerned. Management includes research.  I firmly believe that the blind faith in the Midas touch of Christo Wiese made many oblivious to the obvious.  The right questions were not asked, the corporate structures were not analysed in any great detail, earnings versus debt calculations were not done, management was taken at its word – all this against a backdrop of marketing exactly the opposite and charging savers and investors for the privilege.  Hence, one can assume that marketing was at best a misrepresentation backed by incompetence, at worst a falsehood.</p>
		
				
		
<p>Critics will immediately accuse me of using this as an opportunity to punt passive asset management or index tracking.  So, let me declare my vested interest, backed by my core beliefs, backed by 24 years of observing the asset management industry, and shared by Warren Buffett – I do not believe that active asset management adds value commensurate with what is being charged to investors.  Net1, ABIL, Steinhoff – the landscape is littered with asset managers missing the obvious.  If there are any ethical asset managers out there who believe in their own skills, right now is the time to prove it &#8211; please use some of the performance fees you have levied in the past before destroying value for investors to compensate them for the recent destruction.  I challenge you.  However, asking an active asset manager to put his hand in his pocket is like squeezing blood from a stone – I have seen that personally in the recent past when trying to raise money for another very worthy cause (time will come to name and shame, by the way).  The greed is unprecedented. As far as I am concerned the time has come to pay the piper.</p>

Steinhoff – the largest corporate failure of the active asset management industry yet

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<p>Joining CNBC Africa for a look at the local markets is Wayne Mccurrie, Senior Portfolio Manager, Ashburton.</p>


Funding free education with social grants, crazy and unlikely – analyst

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<p>Joining CNBC Africa for a look at the local markets is Wayne Mccurrie, Senior Portfolio Manager, Ashburton.</p>


Net1 will pay social grants into 2018 – analyst

<p><span class="articleLocation">JOHANNESBURG</span> (Reuters) &#8211; Net1 UEPS Technologies will invest 2 billion rand ($153 million) for a 15 percent stake in debt-ridden South African mobile operator Cell C, scaling back its commitment in the original deal to take over the company.<span id="midArticle_byline"></span></p>
<p>Net1, a payments company with extensive operations in emerging markets, is part of a group led by Blue Label Telecoms, an airtime distributor, working to cut Cell C&#8217;s debt to 6 billion rand from around 20 billion.</p>
<p>Net1 has however dropped its plan to take a stake in Blue Label as part of the deal.</p>
<p>Cell C, the number three mobile operator in Africa&#8217;s most advanced economy, has struggled the past decade to compete in a mature market where Vodacom and MTN hold sway.</p>
<p>&#8220;Net1 and Blue Label have agreed that Net1 shall confine its investment to a total amount of 2.0 billion rand, which will be invested into Cell C,&#8221; Blue Label said in a statement.</p>
<p>Net1 will no longer subscribe for the Blue Label shares, both companies said in separate statements.</p>
<p>Net1 had previously said it would buy 2 billion rand worth of Blue Label shares and pay a further 2 billion rand for a 15 percent stake in Cell C.</p>
<p>The airtime distributor said it has signed agreements with other investors to take Net1&#8217;s place and subscribe for 2 billion rand worth of Blue Label shares.</p>
<p>Blue Label said last year it would pay 5.5 billion rand for a 45 percent holding in Cell C, a company founded in 2001 by Saudi Arabia&#8217;s Oger Telecom and former director Zwelakhe Mankazana. ($1 = 13.0715 rand)</p>
<p>(Reporting by TJ Strydom; Editing by Keith Weir)</p>


Net1 caps investment in South Africa’s Cell C at 15% stake

<p>JOHANNESBURG (Reuters) &#8211; Investment company Allan Gray said on Friday its 16 percent stake in Net1 allowed it to call a shareholders&#8217; meeting over the company&#8217;s handling of the South African welfare contract, local media reported.</p>
<p>&#8220;Sixteen percent allows us to call a shareholders&#8217; meeting,&#8221; Allan Gray Chief Operating Officer Rob Dower told Talk Radio 702.</p>
<p>Chief investment officer Andrew Lapping was quoted in the Business Day newspaper as saying Allan Gray could push for the removal of the Net1 board.</p>
<p>South Africa&#8217;s Constitutional Court was set to rule on Friday in a case concerning the unlawful tender of a contract to Net1 unit Cash Paymaster Services (CPS) to manage welfare benefits to 17 million people.</p>
<p>(Reporting by Ed Stoddard; Editing by Subhranshu Sahu)</p>
<p>© Thomson Reuters 2017 All rights reserved</p>


Net1

Blue Label impairs Cell C investment to nil for year end, is it time to buy?

Steinhoff – the largest corporate failure of the active asset management industry yet

Funding free education with social grants, crazy and unlikely – analyst

Net1 will pay social grants into 2018 – analyst

Net1 caps investment in South Africa’s Cell C at 15% stake

Allan Gray may call Net1 shareholder meeting over Sassa handling

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Net1

Blue Label impairs Cell C investment to nil for year end, is it time to buy?

Steinhoff – the largest corporate failure of the active asset management industry yet

Funding free education with social grants, crazy and unlikely – analyst

Net1 will pay social grants into 2018 – analyst

Net1 caps investment in South Africa’s Cell C at 15% stake

Allan Gray may call Net1 shareholder meeting over Sassa handling

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