‘The result has been that it has definitely helped weaken the rand, and across the board that is negative for South Africans’: Nick van Rensburg – All Weather Capital.
SIMON BROWN: I’m chatting with Nick Rensburg from All Weather Capital. Nick, I appreciate the time. In a recent opinion piece you wrote around Regulation 28 offshore limits, which of course were increased recently, you made the argument – and a fairly compelling argument – that there are actually some unintended consequences of this. Ultimately these are negative across the board. They’re bad for exchanges, they’re bad for investors.
And then if you look at the government, government is trying to raise more funds. We saw your previous [guest] speak about the budget and, to do that, we need more bond money in South Africa. You can see that in the bid to cover ratios at the bond tenders there’s less demand for longer-term bonds, which is not beneficial for the government, and it’s also not beneficial for taxpayers because it raises the interest charge [to] the government, which we eventually have to pay via tax.
One example that I mentioned in the piece – unfortunately the chart couldn’t go in – Sasol would’ve traded probably at about R325/share at the moment, and it’s trading at R250/share if you look at the correlation it had with the Zar oil price. So just there alone there’s a 25% loss to anyone who owns Sasol. When the pool was larger, it would’ve traded much closer to, let’s say, the fair value. And that’s kind of a difference.
And then at the same time we are going through a capex cycle in South Africa where the private sector’s investing very heavily in diversifying energy sources, so we are importing solar panels and batteries, and we are doing that with the weaker rand, which is kind of unfortunate. It would’ve been better if it was, let’s say at R16/dollar [rather than] R19/dollar.
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