News & Insights
Vodacom denies it will manipulate market with fibre merger
The Competition Commission has ruled against the proposed deal by Vodacom to establish a company, called Maziv, in a multibillion rand deal, with Dark Fibre Africa and Vumatel. Commenting on the development, Mergence Head of Equities, Peter Takaendesa said that if the deal did not go through, Vodacom would probably invest in growing its other markets outside South Africa. He said a key issue that the Competition Commission is underestimating is the importance of the merger on promoting investment into the South African economy. The reality is that most telecoms markets will, ultimately, come down to a few operators that can sustain themselves over the long-term, given the capex intensity nature of the industry and declining returns as markets mature.
SA funds have only 2% invested in infrastructure
Institutional investors are allocating only around 2% to the infrastructure asset class, despite Regulation 28 effectively allowing for a maximum infrastructure investment exposure equivalent to as much as 45% of fund assets. This can be achieved by a 15% fund exposure to unlisted infrastructure through infrastructure private equity funds; a 15% exposure to unlisted infrastructure debt through direct exposure to infrastructure debt funds; and 15% exposure to listed infrastructure assets. Kasief Isaacs, Head: Private Markets at Mergence Investment Managers, explains some of the barriers to entry and describes Mergence’s approach to facilitating investment into infrastructure.
Squeezed Multichoice to grow new products
With its traditional pay-TV business under pressure – down 9% in the year to March 2023 – Multichoice has ambitions to build a portfolio of digital products layered on top of the traditional base to drive ongoing top-line growth. Mergence Head: Equities, Peter Takaendesa, commented that the period had been incredibly tough and said that while the group has been working on growing new revenue streams — insurance, sports betting, fintech and Showmax — they “are not enough for now to offset the structural and cyclical pressures on the traditional pay TV business”.
DA-ANC deal may boost rand to R17,50 but other outcomes will bring more sell-offs
Coalition politics are on the cards as final votes are counted in the National Elections. Based on News24 projections, Mergence CIO Brad Preston looks at various potential scenarios and their impact on the markets. He says that though a broad coalition of smaller parties led by the ANC could still achieve a majority in Parliament, it would require at least five, if not more, smaller parties to join such a grouping. The situation is likely to result in a tense week or two for SA markets, but we remain hopeful that a reasonably market-friendly coalition that ensures policy stability and continued positive reform can be reached.
Bombshell accusations rock municipal pension fund
News24 covers the legal action between Mergence Investment Managers and the Municipal Employees Pension Fund – whose administrator is Akani – mentioning arguments put forward by both parties. Mergence is disputing the purported termination of investment mandates by the MEPF and has also laid a complaint with the Financial Sector Conduct Authority which had already served a S26 notice on the MEPF, which is being taken by the latter on appeal.
Don’t put all your eggs in one basket
Mohamed Ismail, Mergence Head of Fixed Income, provided some comment in the Asset Managers feature in the respected Financial Mail Investors Monthly. Given the inflation risk and the fact that markets are not discounting the possibility that short-term interest rates have room to climb, Ismail believes a bearish stance on SA bonds is bullish.
The water crisis – there is some movement
In this thinkpiece on water, Chito Siame, Investment Principal at Mergence Investment Managers, takes a look at the water situation in SA. While the crisis is dire, there is some movement on the part of the authorities. Chito also explains that Public Private Partnerships are a way to mobilise capital and that the PPP that Mergence has with SA Water Works could serve as a model for other municipalities. Mergence is the only asset manager to be invested in the only two private water concessions in SA.
Mergence calls on the FSCA to probe alleged R1,7bn in excessive municipal fund fees
This Citywire article reports on Mergence Investment Managers’ appeal to the FSCA to investigate an estimated R1.68 billion in ‘excessive’ administration and property management fees paid by their former client over the past six years to their fund administrators.
SA’s only private coal-fired power station attracts new investors
Zungu Investments Company and Mergence Investment Managers have invested in SA’s only privately owned coal-fired power station, Kelvin Power Station. Located in the City of Ekurhuleni, Kelvin Power is said to provide 10%-14% of Johannesburg’s power. The Competition Commission has approved the purchase of Aldwych by Harith InfraCo — whose shareholders are the Government Employees Pension Fund (GEPF); Development Bank of Southern Africa, Mergence, Zungu Investments and Harith General Partners. Harith has a 46% in Mergence Investment Managers. Aldwych is an investment holding company which invests in assets that generate and deliver energy in various countries across Africa.
MEPF trustee: Mergence’s performance was dismal
This Citywire article examined the asset management fees and investment performance, citing an actuarial report. However, throughout the 19-year relationship between the client and asset manager, neither fees nor performance were previously addressed prior to the alleged termination of the investment mandate, which has now become the subject of legal proceedings. Mergence’s response to the findings of the Caelum report via an answering affidavit is also depicted in the article as being ‘patently incorrect and misleading’. (An analysis of the fees and performance is available from Mergence on request.)
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