The Burgundy2018-04-20T17:14:46+00:00

Mining in SA: A Tragedy of the Commons

SUSTAINABILITY OF THE SA MINING INDUSTRY The investment case in South African resource equities, as in all other equities, should be premised on sustainability.  In other words, if factors responsible for economic value creation in mining are not renewable, then mining companies cannot sustain the valuations investors place on them, regardless of the [...]

A Mobile Telecoms Perspective Part 2

ICASA TAKES STRONG STANCE AGAINST HIGH TARIFFS. In our previous note, we explained how the structure of the local mobile telecoms industry has led to inefficient outcomes for consumers.  An effective duopoly of MTN and Vodacom has resulted in pricing and tariffs that are amongst the highest in the world.  We showed high [...]

SA Mobile Telecoms – A Price War?

Over the past year, Cell C and 8ta have disrupted the SA mobile market by introducing aggressively priced data and voice offerings. These come against a backdrop of an implicit duopoly in the local industry that is protected by a strong ‘network effect’. Initially supported by high termination rates, high voice prices are [...]

Trouble Brewing in the Unsecured Lending Market

In our view, the massive growth in unsecured lending over the past couple years has been driven by a ‘gold rush’ mentality on the part of credit suppliers. With the economy at large growing slowly, but cost pressures biting the banks’ bottom line year after year, lenders are desperately seek high margin revenue [...]

Our Take on Platinum Part II

Since our last communication, we have observed the labor troubles that have gripped the platinum group metals ("platinum") industry and the world's attention morph into a broader political issue. In our view, these events, in fact, represent a grand failing of South Africa's industrial policy. Much of the political commentary on the tragic [...]

Our Take on Platinum Miners

We would like to begin by expressing our deepest sadness for the manner in which matters at the Lonmin-owned mine, Marikana, have unfolded in recent days. We also wish to convey our condolences to the families of the deceased. This grave outcome demonstrates that the conflict is simply greater than what we as [...]

Competitive Advantages and Economic Development

Since the first commercial mine in South Africa was established in the middle of the 19th century, mining has been a driving force in the country’s economic development and cultural history. The country continues to be famous for its abundance of natural resources which account for a significant proportion of world reserves and [...]

The Evolution of Valuation

The Holy Grail is not just a biblical concept. It transcends natural and social sciences as well as the arts. Not only does every researcher or practitioner have that one question they would love to see answered, successfully answering that question is what catapults them to the pinnacle of their profession. A great [...]

Implications of the US Downgrade

The US downgrade to AA+ is a concrete and highly symbolic step that merely acknowledges that which the market already knows. To those needing to park excess cash safely, the US remains amongst the best of various unsavory options for those investing trillions of US dollars. While we don’t expect an immediate rerating [...]

The Investment Value of Resource Equities

Commodity equities are difficult to invest in due to the cyclicality of commodity prices, a significant value driver. Over the years, macro economic factors impacting security of supply and consistency of demand caused cyclicality in commodity prices - the larger tHe shock to supply or demand, the wilder the swing in price. As [...]