Today’s big story is PPC – David Shapiro discusses

Ketso Gordhan. (Lucky Morajane, City Press)
Ketso Gordhan. (Lucky Morajane, City Press)
The PPC board has been reshuffled and Ketso Gordhan is out. What does this mean for PPC, Gordhan and shareholders? David Shapiro, Alec Hogg and Gugu Mfuphi knock around some interesting observations. David also comments on Sasfin buying Fintech and ArcelorMittal’s 6% bounce yesterday. -CP

ALEC HOGG: To give us more in-depth views on the markets and how they’re performing, and to tell us where his hometown is (because we all know about Newcastle), is David Shapiro from Sasfin. It’s good to have you, as always. He’s a Jozi boy, like me, but I’ve been adopted by…

DAVID SHAPIRO: This is where I’ve spent 42 years of my life – at the Johannesburg Stock Exchange.

GUGULETHU MFUPHI: Where were the other 60-odd?

DAVID SHAPIRO: The others were in Greenside. The other 60 years, did you say? Nice.

GUGULETHU MFUPHI: I’m teasing, David. I’m teasing.

ALEC HOGG: She’s learning slowly, David.

DAVID SHAPIRO: She’s getting it from you, Alec.

ALEC HOGG: But we know that you’re a walking miracle. He is. He still has an upright stance/gait.

GUGULETHU MFUPHI: But he’s actually a quite young.

ALEC HOGG: Is he a quiet guy?


ALEC HOGG: Oh, quite young. I thought you said he’s a quiet guy.

GUGULETHU MFUPHI: He’s active. He goes out for his run every morning at 05:00. Anyway, tell us about the markets, David.

DAVID SHAPIRO: It’s a difficult period and I think what’s going to define the market next year is where commodity prices go and where the oil price goes. I don’t think anybody can call it yet. I still think there’s further downside pressure on oil and I think further downside pressure on commodity prices as well – both of them suffering from a glut and not enough demand to actually, pick them up yet. It doesn’t mean that they’re going to fall dramatically from these levels but I think it’s perhaps a little too early to position yourself for a major turnaround.

ALEC HOGG: David, that’s brave. Many believe it’s going the other way but something you know everything about…

DAVID SHAPIRO: You mean falling dramatically…

ALEC HOGG: It has a long way before it bottoms out. Talk about PPC. Come on. That’s the big story.

DAVID SHAPIRO: I think Ketso overplayed his hand. I think he had a point. Maybe you’re dead right. I think everybody needs a circuit breaker in the brains, just to stop them from saying those words. In other words, to prevent them from coming out. Perhaps his mouth was ahead of his brain, he shouldn’t have said what he said, and he probably does regret it. As it went on and the fight became dirtier, it appeared that he was not going to win the battle. I think that he should have just held back and let some of the institution support it, but the more overt he became and the more visible he became, it was clear that he wasn’t going to win it. If you don’t have PIC and you don’t have some big support behind your name then you know to pull out or pull back. I see that Bheki is going to resign as well, which is unusual.

ALEC HOGG: Do you know the new chair, Zibu Kganyago?


ALEC HOGG: I don’t know if she’s related to the Reserve Bank governor. Is she?

GUGULETHU MFUPHI: I’m not too sure, either.

DAVID SHAPIRO: I don’t know. Look Alec, take nothing away…this is a company under severe pressure – battling with the economy where it is (the very low spend). I know that they’re pinning their hopes on Africa but I think another worry is will Africa grow the kind of way that we think it is, particularly with commodity prices/oil prices coming down. Africa might also suffer some kind of reduced growth.

ALEC HOGG: But you have to look at where they are: they’re in the Democratic Republic of Congo, which is just burgeoning with mineral chests. That’s their new plant. They’re in Ethiopia, which of course, has no oil or anything. Their greatest asset is people. They’re looking at Algeria, who are very wealthy so I guess they’re not really going to be struggling at this kind of oil price and Zimbabwe, which despite all the sceptics, continues somehow. The point I would have thought is important here is when Ketso was sitting in your chair, he said ‘there was an Africa strategy two years before I arrived, but nothing had happened so I started executing it’. With him out of the way, what are the chances of the execution continuing?

DAVID SHAPIRO: Well, it depends on who’s going to take control. Alec, don’t underestimate the importance of good management. I know that Buffett always says that certain companies can manage themselves. I think we’ve probably seen breweries like that – why – because they’re continually breeding managers within themselves. That’s why it always seems like… almost a seamless change in management. Not many companies are like that.

ALEC HOGG: So we have to see who the new CEO is before making an assessment.

DAVID SHAPIRO: There’s a lot of competition, as well. There’s a lot of local competition coming as well. There are imports, etcetera.

ALEC HOGG: What happens to Ketso?

DAVID SHAPIRO: He can go to government. I don’t know. He’s a good man. I like him and I’m really sorry that it came to this. I think people liked him. I don’t know what happened in the boardroom but obviously, he’s destroyed himself in PPC. He’ll get a job.

ALEC HOGG: Gugu, what’s going to happen here because Ketso was trying to revolutionise executive remuneration, remember?

GUGULETHU MFUPHI: Yes, with the sacrifice… I think it was a R1m cut that he took on his salary.

ALEC HOGG: And if that is now going to be misinterpreted… When you want to revolutionise executive remuneration in South Africa, you get the chop.

DAVID SHAPIRO: I have no doubt that that plays a big part. I was just looking at the ‘rich list’ in South Africa. It’s very, very difficult for some of these executives to explain why they get those kinds of salaries and it’s a nice little cosy club – the board of directors. I don’t always agree with the King Commission. I’m not sure about the value of independent directors, and how independent they are.

ALEC HOGG: But David, look further. Ketso’s cousin is Pravin Gordhan. He was finance minister until he stood up one day on Budget Day and said ‘all of you (my constituency): we’re going to cut you back. No more business class travelling. No more credit cards, etcetera’. How long did he last?


GUGULETHU MFUPHI: Then that’s a sad case for South Africa. If we look at leadership and people who try to bring about change in that way: if we punish them instead of rewarding them aren’t we heading in the wrong direction?

DAVID SHAPIRO: Well, I think it’s worldwide. Companies: the difference between the top and the bottom is so vast now and it’s almost as though it’s driven within. That’s why I say it’s driven at board level. It’s a remuneration committee. Who’s on the remuneration committee? People whom you’ve appointed and they dare not cut you because it means cutting their own fees that they’re getting. I’m not going to win this battle. I’ll tell you, quite honestly, I’m not going to win but it does raise a huge number of questions about why the board of directors are there. Are they there for themselves or are they really there to promote the company?

ALEC HOGG: A story of Cocker Spaniels and Rottweilers.

DAVID SHAPIRO: Exactly. Buffett says they would never invite him onto a remuneration committee because it’s generally packed with Cocker Spaniels, rather than with Dobermans.

ALEC HOGG: Cocker Spaniels wag their tails when the CEO walks in the room.


ALEC HOGG: So we do see a little bit of vested interest there, but Ketso Gordhan will pop up at another company – there’s no doubt. He is a man still in his prime. David, outside of that, one of the big news stories today is your own company – Sasfin – and the Fintech deal. Tell me you didn’t know.

GUGULETHU MFUPHI: We’d be worried if he didn’t.

DAVID SHAPIRO: Look, it’s not a huge deal but it’s a good deal and I think what I like about it, and I’m really not involved so I’m not disclosing any kind of inside information… I think it’s a company trying to grow and I think it will grow. I think they have fresh management. I was at the office party last night, there’s a wonderful young spirit there, there were many young people there, and that impressed me. It really impressed me. Roland will be 70 next year, I think and Michael, whose in his early thirties, is a fabulous young chap – wise beyond his years. I think the company will be in good hands and all these deals are being driven by young management. I’m impressed with them. Our side is doing very well, as well. We’re a small company but watch it – and that’s not ‘insider’.

ALEC HOGG: Gugu, ask him about my hometown.

GUGULETHU MFUPHI: Newcastle. Do you really want to know about ArcelorMittal? Wow, there you go. David, are you quite optimistic on Arcelor Mittal?

DAVID SHAPIRO: Why a 6% bounce yesterday and then today, we get the news?

GUGULETHU MFUPHI: Well, somebody knew something.

DAVID SHAPIRO: ‘Let’s tell old Alec’…

ALEC HOGG: Do you think that someone in Newcastle was on the blower?

DAVID SHAPIRO: Does it surprise you?

ALEC HOGG: It does, actually.

DAVID SHAPIRO: News tends to come out there. It’s also in a difficult area – steel production.

GUGULETHU MFUPHI: Clearly, you’re not optimistic on it as an investment case, then.

DAVID SHAPIRO: For no other reason than steel prices globally, are coming down and there’s a lack of demand here. Our economy is not growing the way it should be growing. ArcelorMittal is a great company. It was a great company, years ago. I still think management is very good there, but they’re fighting difficult battles in South Africa. That comes back to the point I made right at the beginning, that I think we’re going to have to watch markets very carefully, particularly developing markets because as you say, I’m a little more optimistic on commodity prices and oil prices. I don’t think they’re going to fall dramatically from where they are but the pressure’s still downwards. I think you’re going to hear George Osborne today in the UK. Britons have to become more efficient. He’s going to tell them ‘you have to work harder. You have to work smarter.

'You have to work more efficiently’ and that’s a message we have to pick up here, but people don’t want to do it. They still want to be paid heavy salaries with minimal effort.

ALEC HOGG: When one is in a comfort zone, one is in a comfort zone. That was David Shapiro from Sasfin – never in a comfort zone when he’s in our studio.

GUGULETHU MFUPHI: Well, the PPC saga has been unravelling on the channel today and we’ll continue to go further with this story, but catch what executive chairperson of the PPC board Bheki Sibiya had to say about the cancellation of the PPC general meeting, which was set for this coming Monday.

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