today=history tomorrow=gone future=now
THE SECRET KNOWN BY ALL:
“The rich rule
over the poor,
and the
borrower is
servant to the
lender”
PROV 22vs7
TO BE COVERED
 Intibane Investment & Social Club
(IISC);
 Johannesburg Stock (Securities)
Exchange (JSE);
 BB-BEE (incl MTN Zakhele Deal) and
 Questions
Intibane Investment & Social Club (IISC)
…an introduction and an insight…
health &
wellness
recreation
general
advisory
investments
Intibane Investment & Social Club (IISC)
…an introduction…
Intibane Investment & Social Club (IISC)
…an insight…
Intibane Investment & Social Club (IISC)
…an insight…
Intibane Investment & Social Club (IISC)
…an insight…
Intibane Investment & Social Club (IISC)
…an insight…
Intibane Investment & Social Club (IISC)
…an insight…
THE JSE
THE JSE
…building, running, listing & exiting a business…
Portia
Paul
Nancy
Jabu
THE JSE
“Buza-Kithi Capital (Pty) Ltd”
THE JSE
…major players hired…
MAJOR PLAYERS
Investment and Merchant Banker
Transfer Secretary
Attorneys
Reporting Accountants
Legal & Tax Advisors
THE JSE
THE JSE
CEO &
top mngt
Board of
Directors
share-holders
PROV 22vs7
THE JSE
…a company is being owned by the masses: ME & YOU…
THE JSE
making money on shares
Capital
Gain
Dividend
Payout
JSE
…share ownership…
…share ownership means
owning a portion of the
business, and is
rewarded by dividends when
profits are made, but high risk
when the business is doing
badly…
JSE
…capital gain…
 Peter buys 100 FSR shares on 1
Jan 2010 at R20 per share =
R2 000
 Peter sells 100 FSR shares on 31
Dec 2010 at R25 per share =
R2 500
 Peter has made a capital gain of
R500 in 1 year
 Equals 25%
JSE
…market capitalisation…
=
number of shares
issued
X
price per share
JSE
…market capitalisation…
…note the
difference between
authorised and
issued shares…
JSE
…market capitalisation…
CATEGORIES (MAIN BOARD)
LARGE CAPS (BLUE CHIPS)
MID-CAPS
SMALL CAPS
ALT- X
JSE
…indixes/indices…
o FTSE/All Share Index (J203)
o Top 40 Index
o Dow Jones
o S&P500
oNASDAQ
o DAX
o CAC
THE JSE
OTHER FACTS ABOUT JSE
Largest SSF market in volume
Take-over of BESA
69 319 trades a day
World 20 largest exchange
Corn futures endorsed by
CBOT
Appr R10 bln traded daily (VS
R696 bln traded at NYSE)
REVENUE STREAMS (2008)
7%
27%
15%
Equities Trading Fees
Risk Management
Listing Fees
Equity Derivatives
Commodity Derivatives
10%
Information Sales
16%
5%
13%
Technology Services
Other Streams
7%
25
THE JSE
the alternatives
o trading account with the local bank (FNB, Standard
Bank, etc)
o visit the local stockbroker:
 Sasfin Frankel Pollock
 Investec
 PSG Konsult
o phone any stock-broking firm in SA or oversaes:
 Rand Merchant Bank (RMB)
 Cadiz
 etc
o open you own trading account on internet (ie
www.sharetrakin.com)
JSE
…fees on R10 000…
COST
Brokerage fees
Strate
Securities Transfer Tax
(STT)
Investor Protection Levy
Vat
AMOUNT
R50
R10.92
R25.00
Total Fees
R94.47
Dealing Cost Percentage
0.94%
R0.02
R8.53
THE RATIONALE FOR BB-BEE
The definition of B-BBEE by dti:
“ an integrated and coherent
socio-economic process that directly contributes
to the economic transformation of South Africa
and brings about significant increases in the numbers of
Black people that manage,
own
and control
the country’s economy,
as well as significant decreases in income inequalities”
BEE & FDI:
BUSINESS CONFIDENCE INDEX:
BEE & FAILURE:

•
•
•
•
•
•
Reasons for failure of some BEE
transactions:
Narrow focus of ownership control
Lack of effective integration
Excessive imbalance between partners
Lack of trust
Funding
Complex financial structures
BB-BEE: THE OVERALL
Broad Based - BEE
…funding…
INVESTORS
OWN
FINANCE
THIRD
PARTY
FINANCING
FINANCING
SCENARIOS
VENDOR
FINANCE
FUNDING
OUT OF
FUTURE
PROFITS
BB-BEE
…the banks…
BB-BEE
…the banks…
BB-BEE
…the banks…
BB-BEE
…the banks, an oligopoly…
Conditions for successful collusion:
•Small number of firms & known to each other
•Similar production methods & average costs
•Homogeneous products
•Significant barriers to entry
•Stable market
•No government intervention to prohibit collusion
Oligopolists also sometime compete on the basis
of advertising, product development, etc
Price competition is often avoided
More aggressive competition affect profitability
BB-BEE
…banks & deal making…
o SA banks are in an extremely powerful position;
o serious lack of competition (they pick the deals they like);
o deals are structured in a skewed and unfair manner;
o deals are sometimes extremely complex;
o strong relationship between owners of banks and the
companies that are issuing stakes;
o limited consequences to the banks when the deals fail;
o a too conservative outlook from the banks;
o steep fee structure and lack of competition sustain the most
arrogant banking houses;
o we want more Capitec, TEBA, African Bank, to enhance
competition.
MTN Zakhele BB-BEE Deal
…an analysis (the facts)…
o number of shares : 80 900 000
o MTN shares IS NOT EQUAL TO MTN
Zakhele Shares
o minimum subscription : 100 MTN Zenzele
Shares
…which amounts to R2,000
o the deal will be off : when money raised
through Zakhele is below R 429 mln.
o Deal start : 09H00 (30 August 2010)
o Deal ends : 16H00 (14 October 2010)
o deal size: 4% of MTN
MTN Zenzele BB-BEE Deal
…an analysis (the facts)…
MTN Zakhele BB-BEE Deal
…funding of the deal…
o money raised from the
public;
o MTN donation;
o Notional vendor
finance;
o Third party bank
funding
MTN Zakhele BB-BEE Deal
…funding of the deal…
o money raised from the
public;
o MTN donation;
o Notional vendor
finance;
o Third party bank
funding
MTN Zakhele BB-BEE Deal
…funding of the deal…
FUNDERS
BFC
BLACK PUBLIC
MTN
MTN ZAKHELE
VARIOUS
PIC
MTN
MTN Zakhele BB-BEE Deal
…the underlying values estimates…
MTN share price
R80.00
R90.00
R100
R110.00
R120.00
R130.00
MTN Zakhele
underlying value
R8.09
R17.40
R26.72
R36.03
R45.35
R54.66
MTN Zakhele BB-BEE Deal
…can I loose everything…
“You can ultimately
loose all OR part of
the investment,
this is an investment
after-all”.
MTN Zakhele BB-BEE Deal
…pooling funding together…
TOTAL (R million)
R 1,618
R per MTN share
R20.00
UPFRONT COSTS
MTN DONATION
BIC PREF SHARES
(R189)
R1,294
(R2,160)
(R2.33)
R16.00
R26.70
VENDOR FINANCE
R3,214
R39.73
EQUITY FROM
ZAKHELE
MTN Zakhele BB-BEE Deal
…what has MTN done for me…
o MTN will donate R80 for every R100
provided by Black public
o MTN has arranged R3.2 bln from vendor
finance
o MTN has assisted MTN Zakhele to source
R2.1 bln from third part lenders
o MTN has been instrumental in negotiating
with PIC to sell their MTN shares
MTN Zakhele BB-BEE Deal
…in perspective…
For every R2 000 that you invest, MTN will
be able to invest R10 010 into MTN
shares.
In other words:
For every R100 that you put in, MTN and
funders will put in another R400 into your
MTN investment
MTN Zakhele BB-BEE Deal
…the minimums & maximums…
o 100 shares at R20 per
share = R2 000
o you can then add
R100 worth of shares
with no maximum
MTN Zakhele BB-BEE Deal
…the trading restrictions…
o first three (3) years, you cannot sell your
Zakhele shares
oyear 4 – six, you can sell to Black shareholders
(BIC) subject to approval by BSTC.
o during the first six years, you cannot use your
Zakhele shares as a security.
o after 6 years you can do what you like with
your Zakhele shares
oyour Zakhele shares will only trade in the OTC
market.
MTN
…who are these guys?…
o R127.75 is the last share price
o from +/- R50 in 2006
o R235 bln in market capitalisation
o P:E ratio of 15.5
o Dividend yield of 2.66
o ROE of 24.26
o Authorised shares = 2.5 billion
o Issued shares
= 1.8 billion
IN CLOSING…
“ We simply attempt to be
fearful
when others are
greedy,
and to be
greedy
when others are
fearful”
PLEASE THINK THIS OVER…
“Anything
that CANNOT
go on forever
WILL end”
THE COMMENT:
“…if a free society
cannot help the
many that are poor, it
cannot save the few
that are rich”
John F. Kennedy
THE COMMENT:
WHEN SHALL EVER BE
PEACE IN ATHENS?
“WHEN THOSE THAT DO
NOT SUFFER ARE AS
ANGRY AS
THOSE THAT DO”.
QUESTIONS