Judging by the cold numbers, 2019 looked like an impressive year for the JSE, which scrambled 8% higher. But don’t be fooled: those investors who did not tap into the resource boom would have felt considerably poorer at the end of 2019.
The great swathes of SA Inc stocks, from retailers and leisure providers to industrial and construction counters, took another awful hammering as consumer confidence dribbled lower, policy uncertainty hurt and Eskom’s blackouts thrust a stake into whatever was still standing by year-end.
In that context, battered investors might argue that the high single-digit return for the JSE was perfectly acceptable. But consider how bleak the longer-term picture really is: the JSE’s all share index "boasts" a five-year return of less than 15% — a dismal annualised return of under 3%.
Had it not been for a boom in some commodities last year, this number would look even worse.
In 2019, the JSE’s platinum index soared more than 200%. Impala led the way, its price rising 291%, but Sibanye also shot up 258%, Anglo American Platinum climbed 148%, Northam gained 185% and Royal Bafokeng Platinum rose 87%.
The gold index — a relatively concentrated collection of listings these days — wasn’t far behind, also climbing more than 200%. Here, the "Roodepoort Rocket", DRDGold, blasted a 139% annual return, followed by Harmony (103%), Gold Fields (94%) and AngloGold Ashanti (75%).
Bringing up the rear of this charge, you had industrial metals companies, which returned over 55%, and the general mining index, which climbed 44%.
All of those gains masked the true picture, which was that local shares — hailed as "undervalued" and "showing enormous value" a year ago — stumbled even lower. It seemed unlikely: at the start of 2019, experts said these shares were already impossibly cheap, and surely couldn’t go lower.
The experts were wrong. The household goods index tumbled 51%, industrial transportation — perhaps the most accurate measure of the pulse of the economy — dropped 11.5%, and construction companies fell 13.4% off an already smashed base.
General industrials tumbled 9% and retailers, which had offered solace to investors in past years, crumbled 18%.
Few shares outside the resource universe did well — but there were some. Vehicle tracking group Cartrack gained more than 60%, Clicks climbed 36%, Capitec grew 31%, services conglomerate Bidcorp rose 23%, and niche financial services group Transaction Capital gained 24%.
Johann Rupert’s family investment company Reinet jumped 33% after a share buyback and a rally in its tobacco investment.
But let this not detract from the central thesis, which is that the big losers for 2019 reflect the dangerously brittle condition of the local economy.
Some former stalwarts of local industry were obliterated: steel giant ArcelorMittal, which decided to mothball its Saldanha Steel plant, lost 65% of its share price; and cement giant PPC lost half its value. Aluminium processor Hulamin, industrial products supplier Invicta and packaging group Nampak all lost around 50% over the year. The value of lighting group ARB dimmed by more than 40%.
The biggest blow to a "mainstream" JSE company was arguably gaming group Phumelela, which fell an ominous 84% after warning shareholders that its balance sheet was saddled with a hefty debt burden.
Premier Fishing & Brands lost 70% despite a satisfactory performance and a big dividend, while troubled tech groups Blue Label Telecoms and EOH both dropped by more than 50%. Supermarket chain Shoprite, a longtime favourite with JSE investors, shed about 32.2%.
Private education shares got caned as well. PSG-aligned schools business Curro and tertiary specialist Stadio were down 25% and 40% respectively, while AdvTech dropped 30%.
Even the JSE’s global giants took strain: luxury brands group Richemont and technology conglomerate Naspers both gained about 20%, but pharma group Aspen dropped 11.5% and Naspers-aligned Prosus fell 13%. Beer giant AB InBev was up a frothy 23%, and cigarette giant British American Tobacco blazed a gain of more than 30%. But UK-based property group Intu shed 70% of its value, while Steinhoff International lost another 50% of its value, if you can believe it.
So if the experts were comprehensively wrong about 2019 being the turning point across the JSE, what should the investment strategy be this year?
Better and more judicious stock picking, for a start.
Adrian Saville, CEO of Cannon Asset Management, says: "There are quality assets in a bad trading environment. If you take five years of growth away, [there are] only a few companies that manage to flourish. These are the companies to look at in 2020."
Saville points out that takeovers are not taking place at large JSE-listed companies but rather among the second-line shares such as Pioneer Foods, Clover, Metrofile and Peregrine. "These are all good businesses … ones that were able to defend earnings."
He concedes that under President Cyril Ramaphosa, SA has much work to do to recover the "lost decade". But he argues that the country and economy are gaining momentum and making progress.
"With this recovery under way, helped by the strengthening of institutions and policy reforms, SA assets as a broad category are attractively priced," he says.
While the local market is indisputably risky, Saville says this only makes a stronger case for deploying capital. "Sentiment towards SA means that mid-and small-cap stocks are deeply unloved and substantially underinvested. With history as a guide, current valuations have corresponded with real returns of between 10% and 20% per annum over the subsequent three years. We believe this makes for a robust investment cocktail."
Asief Mohamed, chief investment officer of Aeon Investment Management, expects interest rate cuts of at least 2% this year in SA. While this would typically boost the retail sector, Mohamed says this might not be the case this time, since it’s likely to be offset by below-inflation wage hikes for government employees.
He also expects government infrastructure investment to pick up late in 2020. This should support the construction sector — specifically more robust counters WBHO and Raubex. But Mohamed predicts that, for the financial sector, new banking and insurance sector disruptors may put a brake on earnings growth in 2020.
One of Mohamed’s big picks this year is Exxaro. "It’s a controversial pick … provided management do not poorly allocate capital like they have done in the past and provided all earnings are paid as dividends to shareholders."
And he’s also holding out for a recovery in the beleaguered small-cap sector. "The small-cap sector has been the hunting ground for private equity funds as they have become too cheap. These shares offer great long-term value should GDP pick up on a sustainable basis above 3%," he says.
That’s a big if — and it’s dependent on Eskom, on less obviously bonkers government policies, on more stability in the rand, on how severe ratings downgrades will be, and on firm leadership from Ramaphosa.
So while it’s true that bombed-out local stocks — many trading at low single-digit earnings multiples — are tempting, there are reasons for caution.
Current valuations of JSE shares correspond with real returns of between 10% and 20% over the next three years
— What it means
Nonetheless, Nic Norman-Smith, chief investment officer of Lentus Asset Management, believes SA Inc stocks are the pool to fish in during 2020.
"It’s high risk, but there could be high reward to be found. We would be looking for businesses where the share has priced in bad outcomes that, on a risk-adjusted basis, might not turn out that bad," he says.
Norman-Smith says he’ll be backing diversified investment trusts in 2020 — specifically those with share prices that are heavily discounting high-quality portfolios like Remgro, Reinet and Hosken Consolidated Investments.
Saville picks niche property group Stor-Age, investment company Sabvest and technology conglomerate Altron as three compelling investment ideas for 2020.
Last year, our FM portfolio came out more or less square, showing a 0.4% loss once dividends were included.
Astoria (up 21.3%), Reinet (up 28.5%), Anglo American (29.1%) and Naspers (20%) were our star performers. But the returns were weighed down by Sasol (down 27.1%), Telkom (-39.7%) and Mr Price (-22.8%).
The FM’s stock pick portfolio for this year is a mixture of underloved, beaten-down stocks (including Absa and Nepi Rockcastle), companies with impeccable management credentials (including Afrimat and Momentum Metropolitan) and those in a promising space (Libstar). And should there be any recovery, as Saville expects, we can expect many of them to rocket.
BANKS
The JSE’s banking sector is a dependable, and still undervalued, part of a share portfolio. Other than outlier Capitec, on a p:e of 30, the rest sit on relatively cheap multiples of about 10.
Capitec still justifies its premium rating, growing its customer base by a net 200,000 people a month, which will reduce its dependence on the interest it makes on personal loans.
With its low-fee model, it looks well placed to defend itself from newcomers such as TymeBank and Bank Zero.
Of the big four, FirstRand remains the best-quality bank, and it looks as if it will see off Discovery’s bid to pinch clients. The unbundling of FirstRand shares from RMB Holdings adds more uncertainty. Its three historical competitors, notably Absa, are determinedly playing catch-up.
Standard Bank’s share price fell 9.5% in the past year. While the quality of Standard’s results are improving, it handled the closure of 91 branches badly at a time when it needs to defend its strong consumer franchise.
Nedbank remains underestimated. Its retail and corporate banks are well managed but investors want to see its new strategy following the unbundling from Old Mutual.
Perhaps Nedbank CEO Mike Brown, who has been in the hot seat for a decade, needs to consider who will replace him.
Absa, at least, has a new CEO in Daniel Mminele, a former deputy governor of the Reserve Bank, to lead its rebuilding.
Stephen Cranston
BUILDING AND CONSTRUCTION
The terminal decline of SA’s construction industry continues, with former big firms either slipping into business rescue or selling off struggling construction assets.
Last year promised much but delivered little for the troubled sector. Early in the year, hopes rose after President Cyril Ramaphosa’s announcement of a R100bn infrastructure fund that would form a core part of an economic stimulus package.
Instead, another iconic firm, Group Five, fell by the wayside, joining Basil Read in business rescue. Like its peers, Group Five succumbed to liquidity pressures as cash flow dried up.
Industry Insight, a consultancy which provides market intelligence on the construction industry, pointed out that the sector is continuing to struggle.
In the third quarter of 2019, it contracted 2 .7 %, which marked the fifth consecutive quarter of decline.
So in this context, is there any reason for hope in the short term?
The answer is not really. Stats SA’s building figures paint a grim picture as falling numbers of building plans point to further contraction in building activity. It’s a reflection of the wider stagnant economic growth, but it means not to expect miracles from the sector anytime soon.
Still, some shares prevailed last year.
Raubex rose a scarcely believable 41%, Afrimat gained 18%, and WBHO lifted 4.4%. But these were the exceptions, not the rule.
Siseko Njobeni
ENERGY
Globally, 2019 was a fairly uneventful year for oil, which averaged $64 a barrel. It was more lively for coal — prices plummeted from highs of around $100 a ton as plentiful and cheap natural gas supply hit demand in European markets.
Growing concerns about climate change also hurt sentiment around coal, depressIng hopes of new investment.
In SA, after March Eskom was able to stave off load-shedding for several months, only to have the scourge return with a vengeance in October. In December the power cuts reached stage 6 — their most severe yet, as 6,000MW had to be cut to keep the system stable. This threat will hang over the economy in 2020.
Synthetic fuels giant Sasol also had a tough year as delays and cost overruns at its Lake Charles mega-project in the US infuriated investors. After an independent probe, the company’s two joint CEOs quit.
The trend of major coal miners divesting from SA continued. South32 progressed with plans to sell off its SA Energy Coal operations to black-owned Seriti Resources.
Politically, President Cyril Ramaphosa combined the mining and energy portfolios back under the leadership of minister Gwede Mantashe.
On Christmas Eve, Mantashe’s department published the draft Upstream Petroleum Resources Development Bill, which proposes that a 20% cost-free interest in projects be awarded to the state.
Lisa Steyn
FINANCIAL SERVICES
The biggest event of this year will be the split of Investec into Investec Bank & Wealth, which presumably will move to the banking sector, and Investec Asset Management, which will become Ninety One.
The only other listed independent fund manager, Coronation, had a mediocre performance, hardly shifting from R40 a share.
But Ninety One is much more diversified, with 60% of earnings outside SA, much of it from the UK, which may benefit from short-term euphoria around the large Tory majority and the conclusion of Brexit. It will probably only list separately in March, or later.
Elsewhere, Alexander Forbes is being knocked into shape and, given its cash-generative nature, looks quite cheap, trading on a p:e of about 13.
But much can go wrong in a business so dependent on people, as well as one with such a high correlation to the JSE’s performance through its core multimanager and pension fund administrator. Forbes will also become an even less liquid stock after it distributes the R1.9bn it will get for selling its short-term insurer.
While the financial sector had one of the worst performers of last year, Brait, there are still some very well-managed businesses, such as taxi lender Transaction Capital and, of course, the JSE itself. But both are subject to risk, if the SA economy shows no signs of life.
PSG remains the premier brand in the sector, but this year the FM opts for a pure rand hedge in Quilter.
Stephen Cranston
FOOD AND BEVERAGES
The past year was another lean period for the JSE’s broader food segment. Even the counters that focus almost exclusively on higher-margin brands took strain.
For example, the normally stout AVI, which for many years had an uncanny knack of balancing market share gains with price increases, fell 14% over the 12 months.
Tiger Brands, the sector’s heavyweight, fell 23%. Tiger Brands, which faces a reputationaLly damaging lawsuit over the 2018 listeriosis outbreak, plans to slim down by selling its Enterprise processed meat division.
However, the standout event for 2019 was international food giant PepsiCo’s takeover tilt at PSG-aligned Pioneer Foods.
PepsiCo paid a decent 56.5% premium for Pioneer at a delicate time for the SA economy.
This prompted speculation around whether local investors were too jaundiced about food stocks. More pertinent, perhaps, was the debate around whether larger international players were interested in other JSE food producers.
This might be wishful thinking. But there are nonetheless expectations of corporate action at RCL Foods (a takeout by parent Remgro being the most obvious), as well as at unlisted Premier Group (whose main shareholder, Brait, needs to degear).
During the year there was good money to be made on the JSE’s “big bird”, Astral Foods.
The share ranged between R145 and R196 in the first five months of 2019, before spiking to about R215 now.
Marc Hasenfuss
HOSPITALS AND HEALTHCARE
It was another year of convalescing for the JSE’s broader health-care sector. Pharmacare giant Aspen was the stock to get pulses really racing; punters might have considered it a bargain at R133 at the start of last year, but then endured a stomach-churning collapse down to R64 in August.
After CEO Stephen Saad placated the market following its June year-end results, Aspen had a sustained rally back to R120.
Remgro-controlled hospital group Mediclinic International also jump-started its long-awaited recovery. Its share price moved from just R60 at the start of 2019 to finish 25% higher at around R75. But it was the lone bright spot in the hospital sector, as Netcare and Life Healthcare remained depressed.
However, the year’s tranquilliser prescription would probably need to go to shareholders of Ascendis. The bid to reduce debt got off to a bright start when the pharmaceutical conglomerate received an unsolicited offer for Remedica, its large (and profitable) offshore business. Unfortunately, prolonged negotiations came to nought. This emotional upheaval meant that Ascendis’s stock started the year at 416c, then spiked to over 600c in late February before finishing the year at 148c.
Though Aspen will probably attract the most investor attention in 2020, Ascendis is likely to provide an interesting sideshow.
Whether it can be sold in its entirety, or in parts, remains to be seen.
Marc Hasenfuss
INDUSTRIALS
The downward trend in manufacturing production persisted in 2019, hurting SA’s once impregnable industrial icons.
The Absa purchasing managers’ index, which measures business conditions in the manufacturing industry, fell to 47.7 points in November. This indicates gloomy conditions in manufacturing, as a measure of 50 points is considered neutral.
It’s not surprising, however, given that wider GDP growth remained wedged below 1%, and Eskom’s load-shedding made any prospects of a quick turnaround in manufacturing an increasingly dim prospect.
Predictably, most industrial stocks felt the pain, amid an 11% fall in the index. Africa’s largest diversified packaging company, Nampak, whose former CEO André de Ruyter has just started his tenure at the helm of Eskom, lost more than 50% of its value in 2019. KAP Industrial fell 48.2%, while Transpaco shed 31.82%.
Barloworld just about held even, losing 2%, while industrial conglomerate Bidvest fell just 1%.
Looking wider, paper company Sappi lost 47% of its value, but its rival Mondi actually gained 7%.
While this reflected the wider gloom, it does mean that many of these companies, which boast strong management teams, are at bargain-basement prices. For example, Barloworld, KAP and Mondi all trade on p:es of less than 10, and are well primed for any positive news.
Siseko Njobeni
INVESTMENT COMPANIES
On paper, investment companies should, especially in tremulous times, offer a bastion of safety to jittery investors in the form of defensive diversification, dogged value appreciation and reliable dividends.
But last year provided a real mixed bag. The big Stellenbosch investment companies — Johann Rupert’s Remgro and the Moutons’ PSG Group — were more or less flat. Hosken Consolidated Investments was down over 25%, and debt-burdened Brait shed half its value (from already depleted levels).
Empowerment investment companies also took a hammering. African Rainbow Capital Investments lost a quarter of its value, Brimstone shed 22% and African Equity Empowerment Investments lost 75%.
In this brutal context, there was one standout performe r: the Rupert family’s Reinet Investments. Its shares appreciated 33%, thanks to its main investment activity for the year, which was an aggressive share buyback exercise.
Though share price performances varied wildly, a factor common to almost all the JSE’s investment companies was a widening of the share price discount to the intrinsic value of the portfolio.
In years gone by, discounts of between 15% and 25% were regarded as acceptable. But these days discounts of 40% to 50% are becoming fairly common — even in counters that boast management teams with proven capital allocation skills and quality cash-generative assets.
Marc Hasenfuss
LIFE INSURANCE
Last year’s pick, Old Mutual, was expected to reap the benefit of its refocus on Africa and its new-found independence from London.
But much of the thesis depended on the leadership skills of its CEO, Peter Moyo. By June, Moyo had been dismissed and a damaging war with the board started.
The Old Mutual share price couldn’t possibly reach its potential under these circumstances, and it ended up falling 12.2%. But with the dispute still unresolved, it is too early to pile back into the share.
Discovery performed even worse, falling 25% over the past year. Discovery Bank was an anticlimax as TymeBank grabbed a far higher market share, while Discovery’s medical aid business was hurt by the government’s decision to power ahead with National Health Insurance.
Sanlam continued to outperform Old Mutual. Its new business increased 6% to R200bn in the first 10 months of 2019, with spectacular growth in its funeral policy sales through Capitec. It also has considerably more scope than Old Mutual to grow in Africa, after Bellville’s purchase of Moroccobased Saham Finances.
But in 2020 the best opportunity will come from a rerating of the recent underperformers, Liberty and Momentum Metropolitan, previously MMI. Liberty has revitalised its product suite, and should get a bigger slice of the employee benefits market. Asset manager Stanlib is looking stronger, but Momentum’s recovery is further down the track.
Stephen Cranston
LISTED PROPERTY
Sadly, there’s no improvement in sight for the besieged property sector, which has been hit by an oversupply of office, retail and industrial space. The SA listed property index shed about 6% last year — on top of the hefty 30% drop recorded in 2018.
Because of this, few SA-focused property counters ended 2020 in the black. The FM’s top pick for 2019, Vukile Property Fund, whose shopping centre portfolio is split roughly 50/50 between SA and Spain, ended the year flat in terms of share price growth.
However, a still strong and growing dividend stream gave shareholders a fairly decent total return of about 6.6% last year.
As we won’t be taking any bets yet on a potential recovery of the SA economy, this year’s top pick is Nepi Rockcastle, which generates 100% of its earnings in euro and is the largest mall owner in Central and Eastern Europe (CEE).
The company lost about 50% of its value in 2018 following allegations of insider trading and share price manipulation, but was cleared of any wrongdoing last year. The stock has since clawed back about 20% of its losses and appears poised for further recovery, given that the robust CEE economy remains in good shape and local consumers continue to shop up a storm.
Nepi also offers an attractive dividend yield of 7.6% and is expected to deliver dividend growth of an average 7.5% (in euro) a year for the next three years — among the highest in the JSE’s property sector.
Joan Muller
MEDIA AND ENTERTAINMENT
For years, Naspers has been the automatic pick for investors looking for gems in SA’s media industry. Powered by its stake in Chinese gaming and chat platform Tencent, Naspers’s share price has rocketed 670% over the past decade. This has left rivals like Caxton and Tiso Blackstar (which has since sold its media assets) in the dust.
Last year Naspers tried to deal with the huge discount between the value of its assets and its share price by splitting itself into three. It unbundled satellite TV operator MultiChoice, then listed its international consumer internet assets as Prosus on the Euronext Amsterdam stock exchange.
Prosus, which has a secondary listing on the JSE, is the second-largest technology listing in Europe. Naspers is still unanimously tipped, by the 10 analysts who cover it, as a “buy”. On average, these analysts expect a 35% upside to its current share price, However, it’s unclear what the imminent catalyst for this rerating might be.
Equally, seven of the nine analysts who cover Prosus rate it as a “buy”, the other two as a “hold”, with a 19.3% potential upside.
In this context, perhaps MultiChoice has the clearest prospects to boom this year. It has close to R7bn in cash and is on course to pay R2.5bn in dividends in its 2020 financial year.
Of the seven analysts who cover it, five rate it a “buy”, expecting a 31.6% increase in the share price on average over a year.
While media is an unforgiving investment, there are still pockets of promise.
Alistair Anderson
MINING
If there was one sector that defied the gloom of 2019 it was mining, where a handful of commodities had stellar performances.
Precious metals had a particularly good year. Gold moved from below $1,300 an ounce to end the year at around $1,520.
AngloGold Ashanti and Harmony Gold soared 75% and 103% respectively.
Platinum group metals (PGMs) fared even better — the platinum price remained rather lacklustre but palladium soared to record highs of near $2,000 an ounce and rhodium more than doubled to over $6,000 an ounce.
PGM producers reaped the benefits.
Share prices for Anglo American Platinum rose 148%, for Sibanye-Stillwater more than 250% and for Impala Platinum 291%.
Unlike other bulk commodities, iron ore bumped up as a result of supply concerns following the Vale tailings dam disaster in Brumadinho, Brazil, in January.
By comparison, prices of base metals like copper, nickel and zinc languished. Low aluminium prices took their toll on South32.
On the labour front, a wage dispute in the gold sector was damaging for both the Association of Mineworkers & Construction Union and Sibanye-Stillwater, but it smoothed the way for a speedy settlement in the platinum sector later in the year.
In policy matters, it was hoped the latest Mining Charter would end some of the uncertainty in the sector but it remains subject to dispute and could well end up in the courts.
Lisa Steyn
RETAIL COMPANIES
Last year, the FM predicted that the retail sector would be led by those brave companies daring enough to grab market share and capitalise on a recovery in GDP.
Well, there was no recovery in GDP.
Instead, serious blows were exchanged in the fight to retain any share of a shrinking market at all as consumers grew increas -ingly price-wary. High consumer debt levels and a cost-of-living crunch precluded any serious efforts at margin building. As a result, retailers cut back on expansion plans.
Understandably, fashion retailers were victims of the belt-tightening. The share prices of Truworths International and Pepkor unravelled. TFG, as usual, showed it was a cut above the rest — though shareholders will hope the 7% decline in 2019 does not stretch into 2020.
The supermarket giants weren’t spared either. Pick n Pay and Woolies trundled lower, as did Spar, whose convenience niche had looked more robust. But the biggest beating was reserved for Massmart and Shoprite — down more than 50% and 30% respectively.
Health and beauty retailer Clicks bucked the trend as its share price gained more than 30% — which might have helped rival Di s -Chem register only a small price drop.
At this point, there’s not much to like about the retail sector, since any recovery hinges on an economic spark. Naturally, those that can win market share without damaging margins too severely will be teed up for better times.
Marc Hasenfuss
TECHNOLOGY AND TELECOMS
For the third year in a row, technology and telecoms stocks took a beating on the JSE. Regulatory pressures were again among the main reasons for this, and the year ended just as badly as it began, when the Competition Commission decided that the largest mobile operators, Vodacom and MTN, must slash their data prices by up to 50%, or face prosecution for not doing so.
In the end, MTN ended 2019 with the fewest scars, as its stock shed 5% during the year. Vodacom ended 10.5% lower.
The FM’s stock pick for 2019, Telkom, had a particularly turbulent year. The share rose 60% in the first half, before falling off a cliff. In the end, Telkom lost 43% overall last year — despite more than doubling its subscriber base since 2017.
However, the worst telecoms performer was prepaid specialist Blue Label Telecoms, the largest shareholder in the ailing third mobile network, Cell C, which risked being buried under a mountain of debt. Cell C’s future remains unclear. Blue Label lost 51% of its value in the year.
Among technology companies there was drama at EOH, which lost 58% of its value during the year. Governance issues, which resulted in the loss of a Microsoft licence, and an investigation by ENSafrica into various irregularities, tarnished the company.
New CEO Stephen van Coller is trying hard to restore credibility, but it’ll be a long slog.
Good news was hard to find, but Datatec bucked the trend, ending 18% higher.
Mudiwa Gavaza
TOURISM AND LEISURE
The tourism sector, like many, suffered a bleak 2019, partly because it tends to move in tandem with economic growth or contraction.
You’d think that with a relatively weaker rand, international visitors would be flocking to our shores, but the share prices of listed hotel and tourism companies don’t reflect that.
Over the past year, City Lodge’s share price has fallen 40%, Sun International 37% and Tsogo Sun, which was the FM’s pick for 2019, 22%. The best performer was probably Tsogo ’s hotel division, Hospitality, which fell just 4.1%.
Investors also have fewer options since Wilderness Safaris delisted from the JSE.
Cullinan Holdings, which owns brands such as Pentravel and Thompsons Holidays, left the exchange some time a go.
But if SA can get its game together and attract more visitors, the depressing trajectory may shift. In 2018, Cape Town International Airport recorded a 9.6% increase in foreign visitors, so there is potential.
Again, the rogue factor that could derail any tourism revival is SA’s power crisis, which disrupts the operations of restaurants, hotels and other essential infrastructure.
President Cyril Ramaphosa said last year he is confident the country has a chance to double its tourism numbers by 2030. To that end, the government has done away with its unabridged birth certificate requirement for tourists who travel with children. But solutions for the power question remain critical.
Alistair Anderson
TRANSPORT AND LOGISTICS
Like most largely consumer-facing sectors, transport and logistics became intensely competitive last year as pressure on margins tightened.
When conditions are ideal, this is a sector that offers attractive returns. However, 2019 was far from ideal; the JSE’s industrial transportation index fell by almost 13%.
The sector’s two giants, Super Group (the FM’s 2019 stock pick) and Imperial Logistics, dropped by 16.21% and 13.97% respectively, while niche logistics provider OneLogix lost more than 14% of its value.
But there were a few bright spots too, notably Grindrod Shipping, which rose 28.7%, and container company Trencor, whose share price climbed 16.85%.
This shows that in a poor economy a diverse footprint is a strength. For example, tough a time as Super Group has had, it would have been worse if it had not been for a strong performance from its commodity businesses in the rest of Africa. Yet its other international operations are still exposed to Brexit-related uncertainty.
OneLogix’s share price might have fallen, but operationally it continued a trend that has resulted in an uninterrupted profit trajectory for over a decade.
Its recipe has been to maintain a strong entrepreneurial focus, which has reduced its over-reliance on the auto-logistics industry.
This means that today the company’s earnings streams are diverse; they include agricultural logistics and bulk liquid logistics.
Siseko Njobeni
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