Gold hits record highs in 2025 and Nersa weighs interim tariff relief for the ferrochrome sector.

Episode Transcript
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Speaker 1 (00:01):
And now The Money Show with Stephen credits on seven
oh two.

Speaker 2 (00:06):
Let's walk little.

Speaker 3 (00:07):
The Money Show with Stephen Crutis is brought to you
by ABS of Corporates and Investment Banking, a Pan African
bank that's invested in your story because your story matters.
Good evening, Welcome to the program. Nine minutes after six times,
Stephen crutis one of those sort of astonishing days. And
I've probably said that about ten times already this year.
Probably only had fifteen or sixteen money shows so far

(00:28):
this January or twenty twenty six, simply because so much
has happened. Gold shooting through five five hundred dollars seems
extraordinary that it can be moving quite so quickly. At
the same time, of course, we have what probably matters
more actually for you and I is the Reserve Bank's
decision to keep interest rates on hold. Normally you might
see a little bit of reaction from some shares on

(00:50):
the JSE, some of the financial shares to a decision
like that. I sort of get the sense, and we'll
speak to people who know more about it than I do.
That really, the way in which it's been signaled that
there will be cut further down the line. The general
tone I thought of the Reserve Bank Governor Najo suggesting
that you know, inflation is well contained, to use the

(01:11):
technical expression, I was rarely struck by the point he made,
and I thought it was a very important point about
what's happening in other economies. And he said specifically that
this is rarely about what's happening. He sort of said
key economies. The one was the trade imbalance that we're
seeing in some economies, and he suggested that China last

(01:33):
he had a balance of payments of one trillion dollars
in their favor. The second was the government deficits in
some economies and the US, he said, approaching two trillion dollars.
And these are unsustainable. And I have to say, if
you consider all of the conversations you and I have
been having about Chinese cars and Indian cars, the imports,
the cheaper imports, I mean absolutely that's correct. You would

(01:56):
expect that not only will South Africa bring in other tariffs,
but so will other people, and that is going to
lead to all sorts of consequences that cannot really go
unlike this. And I noticed, and I was very interested
that we're starting to see the car industry push back
a little bit against tariffs. And it's a reminder, as
we discovered once again in the run up to the
Trump administration tariff's how interconnected everything is. So I notice

(02:20):
the BMW COO for South Africa, Peter and Pinsberg, and
he was speaking to John Pulman on seven oh two earlier,
basically pushing back against the idea of tariffs. Will play
a clip of that a little later in the show
because I thought it was very important. We'll see here
from the World Gold Council in a few moments. John
Reed's already on hold. He's the market strategist there and
predictions despite what we saw today, despite what we've already

(02:43):
seen this year, but in fact gold could stay at
these levels and who knows, perhaps higher for quite some time.
Patrick butter Lesi and economists at some LAM investments. We'll
get his view on the interest rate decision today by
the Reserve Bank. An amazing decision by nurser. They had
no choice. Don't blame them for making the decision, but
there's an amazing set of circumstances around it. Eskim essentially

(03:06):
asking for permission to charge two smelters less than they
would normally charge to provide them with the electricity. I
still don't know who's going to make up the difference.
As I talk to you now, I have a sneaking
suspicion who it might be. Get out your phone, tap, camera, tap,
look at me as if you're taking a selfie. And

(03:26):
then I think you're probably gonna see who's going to
pay for it. If I can put it like that,
We've been told that it won't be you, and I
I suspect that maybe it will be Nellis Besta. It's
the chair of the Pharaoh Alloy Producers Association. You'll have
a more informed view than I. And then more talks,
more conversations around the gas cliff that's been looming. Government,

(03:46):
it seems in talks with Mozambique to get more gas
from more fields. But think of all the infrastructure that
needs to be built to make that work. Yucko human
Is the executive officer at the Industrial Gas Users Association
of Southern Africa, will get his view that before seven o'clock.
Good to hear from you. I don't know if you
think the Reserve Bank could have gone the other way?
Was it a time for a cut. Is a reserve

(04:08):
bank just a little gun shy? Did they blink? Oh
seven two seven oh two one seven oh two? Also,
of course your cause on a double one double A
three oh seven two and two one four four six,
five sixty seven.

Speaker 1 (04:21):
The Lenny Show with Stephen krutis live on ninety two
point seven and one six FM, streaming on the Prime
Media Plus naven.

Speaker 2 (04:29):
And TSTV channel eight five six.

Speaker 3 (04:32):
Late last year, you heard some predictions on The Money
Show suggesting that gold could hit five thousand dollars announced
by the end of the year. Before the end of January,
gold hit five thousand dollars an ounce and today it
was halfway from five thousand to six thousand. Dollars. Went
past five thousand dollars on Monday. Today's Thursday hit five thousand,

(04:53):
five hundred dollars announced today. Meanwhile, the World Gold Council
releasing a report in which they predict still I'm all
sustained strong demand. John Reid is the market strategistic the
World Gold Council. Good evening, I can imagine you're in
high demand today yourself, so thank you for your time.
Your report is primarily based on what happened last year.

(05:14):
But I imagine you and I presume other people at the
Council might be a surprise to so many of us
as to how quickly gold is moving at the moment.

Speaker 4 (05:23):
Well, I'm certainly surprised by how fast it got up
to the high today, which was just shy of fixed
fifty six hundred dollars announce and that I was actually
quite surprised when at three pm London time, gold traded
down basically four hundred dollars in the space of nine minutes.
So there's been some really strong gains so far this

(05:44):
year in the price. But the volatility that we've seen
today I suspect will be the shape of things to come.
This is not the gold market of twenty twenty three
or twenty twenty four. This is a gold market where
we've seen lots of investment come into to the space,
particularly over the last six to nine months, and that's
going to lead to more volativity going forward. Even if

(06:06):
we do see strong demand, even if we see prices high,
there's going to be moments when you're you know, when
you're clutching your throat and wondering, what's the hell's just happened.

Speaker 3 (06:16):
Well, I mean, part of it, I think is that
people have put so much money into gold and gold shares,
but let's focus on gold, and suddenly there's that nasty
moment when you think this is just too much. I mean,
we said other analysts suggesting five thousand dollars is bubble territory,
and in the same breath pretty much say but they
might be wrong, And who can blame them for saying

(06:36):
both those things.

Speaker 4 (06:38):
Yeah, we're very fortunate that we don't make forecasts about
the gold price, and sometimes that can be a bit
of a frustration for me. But for the last I
don't know, for the last year, it's actually been a
relief because, to be honest, anybody that makes a forecast
in gold at the moment is really guessing. There's too
many factors at play, and some of them are just
too hard to predict. One thing we can say with confidence, though,

(06:58):
is that the very strong investment demand that we saw
last year is likely to continue. The factors that have
driven investors to add gold to their portfolios are likely
to continue. Lower interest rates, concerns about fed independence, belligerents
in terms of military adventures from the White House, all

(07:19):
of these factors are likely to continue, and it would
take an outbreak of peace, harmony and collaboration I think
to take the wind out of gold sales properly this year.

Speaker 3 (07:27):
Yeah, Unfortunately that seems unlikely. The factor of central central
bank buying, I mean that's been a big element to
this for quite a long time. Banks are sort of
leaving the dollar their buying gold. You suggest towards the
end of last year the pace was still at record levels,
but it did slow a little. Do you have any
idea why that pace slowed a little? Was it just

(07:49):
the price was too much? I think the price is
playing a role here. If you could imagine that you're
a central bank and you've set a target and say
you want to have twenty five percent of your reserves
in gold, and you've got less than that, so you
start buying. That obviously helps, that increases the share that
gold makes up of your reserves. But then the gold
price goes up sixty five percent, which it did last year.

(08:10):
Then suddenly you've got more gold than you expected to,
not because you've bought gold, but because the goal price
has gone up. So I think that maybe playing a
role in causing some slow down in the rate of
purchases that we've seen from central banks, it's still a
very healthy amount. We saw I think eight hundred and
fifty three tons of gold bought by central banks last year.

(08:31):
That's lower than the thousand tons that we'd seen in
twenty twenty two, twenty twenty three, twenty twenty four, but
it's still much more than we'd seen prior to that. Now,
in terms of what we get for this year, our
central bank and research teams have put their heads together
and come up with a central forecast of eight hundred
and fifty tons. I personally think that might be a

(08:52):
bit high. I think, you know, with the gains we've
seen in the gold price, the issues about proportion that
gold makes up for foreign exchange reserves will be you know,
we'll be having an impact on some central banks. So
maybe we see a little bit less net buying this
year than the eight hundred and fifty tons that we're expecting,
but it should still be a good amount. It should
still be a healthy amount, and much more than we saw,

(09:13):
say between twenty ten and twenty twenty one. One of
the factors of last year, which you point to in
your report, is that there was a new record for
gold production? Was that just one percent last year? You
compare that to how much the price is risen, it's
virtually nothing. Obviously, we're seeing sort of some places where
people are investing as much as they can and getting

(09:34):
gold back into the market. The easiest is probably recycling
of gold from different places. But we still don't see
that much investment yet in the production of new gold.
And that's obviously a time frame issue. It's a time
frame issue, but it's also in some respects an exhaustion issue.
And I think South Africa is a great example here.

(09:56):
When I worked in the South African gold mining industry,
we were producing about six hundred and twenty six hundred
and thirty tons a year. But some of those minds
were getting on for one hundred years old, and many
of them have now closed. It's not because the price
is too low. It's literally because the gold has been mined.

Speaker 4 (10:12):
And if I look around the world, you know, people
tend to forget that gold mines aren't like factories. They
don't last forever. You run out of reserves. Eventually, you've
got to keep replacing them with new discoveries, new minds,
new shafts, and that really hasn't been taking place fast
enough over the last decade. So the industry probably did
hit new all time production in twenty twenty five. We'll

(10:34):
have to wait until all the mining company's results come
out to be absolutely sure, but compare that to the
previous all time high that's in twenty eighteen. So we've
had seven or eight years really of flattish gold production,
and that's probably the medium term outlook. There are some
new mines coming on stream, there are some restarts of
old operations that were closed around the world, but there

(10:57):
are also some minds getting mature and closing too, So
it's got to be tough for the industry to grow
materially despite these record prices.

Speaker 3 (11:04):
John Reid really appreciate the time tonight, Thank you, market
strategist at the World Gold Council. As he says, gold
dropping what was it, several hundred dollars, four hundred dollars
in just nine minutes. Volatility may well be the name
of the game. Twenty minutes after.

Speaker 1 (11:17):
Six, Stephen contact at at Stephen.

Speaker 3 (11:24):
The Reserve Banks Manetary Policy Committee, confirming today you'll continue
to pay the same amount on your debt interest rates
being kept on hold. Patrick but Lezi as an economist
at sun Lam Investments. Patrick, good evening, Thanks for your time.
Was it just me or was the tone of the
governor quite sort of optimistic about the inflation outlook? I mean, clearly,

(11:44):
by any measure, inflation is going to stay quite contained
for at least the medium term.

Speaker 5 (11:50):
Yeah. I think you've got it right.

Speaker 6 (11:54):
Yeah, So he was very positive about inflation outlook. So
for instance this yeah, they revised inflation forecast lower to
about three point three and previously, which was in November,
they had inflation it's around three point five percent, so
just a slight reduction. And the reason why they ritues

(12:16):
inflation forecast is because of the currency that has been
extremely extremely strong.

Speaker 5 (12:23):
But now there is the one side.

Speaker 6 (12:26):
But the thing here is they are targeting inflation at
about three percent and they want to anchor inflation expectations
at three percent. So the last inflation outcome, which is
for December, it was about three point six percent, which
is above.

Speaker 5 (12:48):
Three percent.

Speaker 6 (12:49):
And also there's three point three percent is above a
three percent which is the target. So I think given
their inflation is still above the targets, and also there
are certainties so globally. So you mentioned Ai for instance,
also mentioned the issue of debt and the imbalances, so

(13:12):
for instance, in China running a large trade a surplus
it is.

Speaker 5 (13:18):
Yeah, so those risks as well.

Speaker 6 (13:21):
So as a result, the community leaned more on the
question side, but within the community because there was a
strong case for a cut.

Speaker 5 (13:34):
So that is why there were.

Speaker 6 (13:36):
About two people who preferred a twenty five pass point cut,
but four, which is the majority, they opted for a
more cautious kind of stance.

Speaker 3 (13:48):
I mean, I mean, I'm so glad you brought up
the issue about the trade imbalance primarily China and the
fiscal devisit primarily the US. I mean, at some point
those dynamics have to run out of room, and there's
no easy way to do that. We'll probably see tariffs
here just trying to stop Chinese cars for example. We
won't be the only ones.

Speaker 6 (14:09):
Yeah, no, of course, I mean those risks. There's nothing
they can do about those risks.

Speaker 5 (14:17):
And I think for.

Speaker 6 (14:18):
Me, what I think is the dominant is more local risks,
like for instance with NARSA. Now they are to correct
and allow ESCOM to a collect about seventy six a billion,
which is very high, so that could have implications for
higher electricity tariffs and.

Speaker 5 (14:40):
It will fit to inflation.

Speaker 6 (14:42):
And also I think the concerns within the inflation basket.
So what has been happening is good prices have been
very low, in fact extremely depressed. But the problem is
the sticky services component of inflation baskets. For instance, when
whether you're looking at medical aid for example, there is

(15:06):
running very high.

Speaker 5 (15:07):
So very sticky.

Speaker 6 (15:09):
But it is encouraging that inflation expectations at least as
drifting lower. So currently five year inflation expectations that are
about three point seven percent, which is the lowest on
which is the lowest on record. So as inflation expectation
is drifting, So what that means is economic agents absolowly

(15:32):
adjusting to the reality of lower inflation. But now inflection
is still at three point seven percent. And I mean
you can see the governor they want inflation at three percent,
not at three point seven percent.

Speaker 3 (15:47):
Sure for years, I mean literally probably a decade, Patrick,
We've seen the governor give a sort of lecture every
two months at these announcements about the need for fractual
reform in the economy. I don't think I'm going to
miss the lecture that much, but he didn't give it today. Instead,
he reminded us that last year was a watershed year

(16:09):
for the economy and its absolutely vital that the reforms continue.
I mean, obviously he's correct, but he also clearly thinks
that last year was vitally important. Something has shifted. I
suppose there's one way of looking at it.

Speaker 5 (16:22):
Yeah, I think it is very true.

Speaker 6 (16:25):
So South Africa has been implementing reforms. So they started
with operations within their life was phase one and phase
two was launched I think last year or a year
to four, so implementing reforms and we're beginning to see
the benefits of these reforms where they're from the energy side,

(16:47):
last year load shedding very minimal.

Speaker 5 (16:50):
In fact, that load.

Speaker 6 (16:52):
Sheding I mean any part of the year, most part
of the year, we didn't have a load shedding. On
the logistics side is also showing some improvement, so we're
moving in the right direction.

Speaker 5 (17:06):
And also I mean we're removed from.

Speaker 6 (17:09):
Listing and also they introduced new lower inflation targets. So
all the combination of all these reforms I mean are
very positive for South Africa. There is also why we
saw for instance, the rating agency also shifting shifting the outlook.

(17:33):
So yeah, so I think I think we I mean
South Africa. The sentiment is clearly shifting from where the
sentiment was last year or year before. It was extremely negative.
But things are tending in the right direction. And I
think also just siclically in terms of trade, are also

(17:53):
providing that boost for South Africa.

Speaker 5 (17:56):
So for this year, for.

Speaker 6 (17:57):
Instance, giving where the comedy crisis, they should provide support
for the fiscals for for instance, which I mean we've
been struggling on the fiscals side, but now because of
terms of trade plus the reforms, whether for on the
implication on the implication side, because interest right now and

(18:19):
you alls have dropped, so they should put very well
for the government finances as well.

Speaker 3 (18:25):
Patrick brought lezie thank you economists at some LAMB investments,
the money show, the market, Graham Conners at the kind
of perspective, Graham good evening. Would you have gone for
a cat.

Speaker 7 (18:36):
Good evening, Stephen, you are good to chat to you. Yes, Frankly,
I would have probably one of the fifty percent who felt,
you know, the tone of the governor not just today
but in the run up to it some of the
comments out of DeVos, for example, he was sort of
teeing us up for it. And I think my view
was that if you look at at our South African
repar rat at six seventy five compared to the US

(18:59):
FED fund rate at the up a band of three
seventy five, are inflation rates are not that different. But
if I look at it, and I think take the
banks for example, they were about a percent firmer today.
So I think the market's probably taking my view that
it's not if but when they cut, And you know,
I agree with Patrick, but I think the reality is
if we do get anchored at three percent, that differential

(19:22):
between where our interest rates are on the rest of
the world actually gives us more than the good old
fashioned fifty basis point cut outlook. So yeah, I was
hoping and expecting a cut, but it was a fifty
to fifty toss of the coin.

Speaker 3 (19:38):
Gold, I mean, at five five hundred dollars earlier. Platinum
also very strong. I noticed though that in fact other
miners did better than gold and platinum miners today.

Speaker 7 (19:49):
Yes, So interestingly enough, you've seen copper power through fourteen thousand,
for example, So interestingly the diversified miners that have obviously
got more exposure to things like copper and base metals.
Actually both the HP bullet and Anglo glenk Or having
a good day. But as you say, even when when
the gold price was looking a touch better, gold shares

(20:11):
under pressure. So you get the feeling that, you know,
the equity investors at least are starting to move a
little bit closer to the door. But I mean it's
just phenomenally if you think about it, Steven, that you know,
the daily move in platinum, let's say ninety dollars an
answer often that's like ten percent of where the price
was late last year, you know, when the price was

(20:32):
nine hundred dollars and answer, that's the order of volatility
that we've seen.

Speaker 3 (20:37):
But I think a lot of people.

Speaker 7 (20:39):
Are sort of feeling, you know, golden platinum has been
a you know, like an eighty degree upward slope and
that probably is due for a little bit of a correction.

Speaker 3 (20:49):
Will with down six percent today, there's seasonal update that
twenty six weeks to the end of December. I didn't
think it was too bad, but clearly people are a
bit concerned about it. Yeah, So when you look.

Speaker 7 (20:59):
At it operationally, and they talk about food sales up seven.
I think comparable stores were just over five.

Speaker 8 (21:07):
You know.

Speaker 7 (21:08):
Even in personal care things looked a little bit better.
Dash is doing well, but it's just a reminder of,
you know, how terribly the South African retailers have expanded internationally.
So Country Road I think grew revenue at two percent,
but it's it's a very very competitive industry, so in
a way it was a handbreak. But for me, you know,
valuation is really important Stevens. So if you look at it,

(21:32):
this company is still delivering similar earnings let's say for
the year to June twenty six to what they did
maybe ten years ago or even five years ago, so
it's not as though we're getting any massive earnings growth.
And the thing was sitting at sixty bucks let's say,
on a pe of around sixteen times, so I think
I think again it's probably more just gravity. But you know,
the South African retailers, all of them have have had

(21:54):
a really torrid six months. But yeah, operationally it looked better,
but I think it's more case of the marketers maybe
hoping for for more good news than that actually got
from an operational point of.

Speaker 3 (22:07):
View, Graham Kenneth, thanks so much from the Kurrent perspective.

Speaker 2 (22:10):
What uped Stephen on seven two seven oh two one.

Speaker 3 (22:15):
Twenty minutes to seven were good to hear from you tonight.
Yesterday on the Money Show, you heard a conversation about
the idea of imposing tariffs, newer tariffs, higher tariffs on
a cheaper cars, by which we really do mean, let's
be clear, Indian and Chinese cars being imported into the country.
And you heard from the Chief Commissioner at the International

(22:36):
Trade Administration Commission, Aya Bonerawe on the subject. He seemed
to be exploring it, excuse me quite carefully. We heard
from one of the automotive associations. They're also quite keen,
the BMW SACO, Peter van Binsberg, and he was on
John Pulman on seven oh two this afternoon and he
was quite interesting about why he opposes the imposition of

(22:58):
more tariffs by South Africa.

Speaker 9 (23:00):
The policy in South Africa and very intelligent system and
we're asked for and what we asked for when we
were there on Tuesday was to look at the various
factors in the policy and adjust them in a balanced
in a balanced manner so to avoid any unintended consequences.
And I think the one unintended consequence of increasing duties
to a very high rate would be the increase in

(23:21):
prices for the consumer, and that would affect both us,
the local manufacturers and the pure importers. Because remember a
company like the MW manufacturers X three in South Africa,
but we import the rest. So I think it's important
that you need to.

Speaker 3 (23:34):
Look at the big picture.

Speaker 9 (23:36):
And so the things we're talking about is, yes, maybe
take a look at import duties, but nothing radical. Let's
take a look at the topic of at the lorum
tax that was designed as a luxury tax on cars
many years ago. It hasn't moved over years, even decades,
and so due to inflation and price increase, even the
cheapest car today attracts at the lorum tax a luxury tax.

(24:00):
Look at that move that curve. We've proposed to other
measures like allowing the local manufacturers to rebate their at
balreum tanks with the GQ rebates we gain by producing
in South Africa. That would help the price attractiveness of
locally produced vehicles.

Speaker 3 (24:16):
Well interesting sort of to see the pushback from our
car industry, Peter and Vinsbergen is the bmw A South
Africa CEA and you're speaking to seven oh two is
John Pullman a point that I made last night Stands,
which is I understand wanting to protect the local industry,
but as always with trade, consequences go in lots of
direction and of trade between countries generally speaking, makes things cheaper.

(24:38):
Tariffs will have completely the opposite effect. Are you happy
to pay more for a car to protect our industry?
Seven two seven oh two one seven o two.

Speaker 2 (24:47):
The Lanely Show with.

Speaker 1 (24:48):
Stephen Cruts Live on ninety two point seven and one
six FM, streaming on the Prime Media Plus.

Speaker 2 (24:55):
NAP and DStv channel eight five six.

Speaker 3 (24:58):
Thirteen minutes to seven. Now the time Well an announcement
from the Energy regulator NURSES today it's approved a new
temporary cheaper power tariff for two smelters that have said
they'll be shutting down at current electricity prices. The man
called Chrome and the Glenn call Moraphe Chrome Venture. They'll
now be charged eighty seven cents a killer what hour

(25:19):
by eskim. That's a lot cheaper than what they were
paying before. Nellis Bester is the chair of a ferro
Alloy Producers Association nell US Good Evening. There's a lot
of numbers in this, but just to be clear, eighty
seven cents per killer what hour? That doesn't actually help
you make a profit? Right? That's still too high? Is
that right?

Speaker 10 (25:38):
That's right, A good Evening, Steven, Yes, two hundred percent correct.
You know, I think this industry, not only ferrochrome, but
the rest of the beneficiation industry in South Africa has
made it clear through through various simulations, that we've done
that to break even pointy sixty two cents, and this

(25:58):
industry cannot be maintained at this eighty seven cent.

Speaker 3 (26:03):
It's a temporary relief, but it's.

Speaker 10 (26:05):
Definitely not going to save the smelters in South Africa
if that is the lowest that we can go.

Speaker 3 (26:14):
Asystem that made the application, were you part of the process.
I mean, it's quite strange in a way that Eskin
makes the application. I'm sure there's a technical reason for that,
but were you part of the formal process? I mean
the hearings I think two days ago, were you part
of those? Yes?

Speaker 10 (26:31):
Of course FARPA presented and various of the other smelters
within South Africa also presented the case to to NASA
at the public participation hearing. So yes, we all indicated
that we are happy that there is the interim relief
for the chrome industry. It can certainly alleviate some of

(26:52):
the pain and the hardship, but it's not going to
take the problem away.

Speaker 3 (26:56):
And therefore, you know, we were supportive of the.

Speaker 10 (27:00):
Call that we need to extend this to the other industries,
but definitely get to the sixty two cent that is
most important.

Speaker 3 (27:11):
From every report I've seen, there's still no explanation from
ESKIM as to how this is going to be funded.
So I completely accept what you say, eighty seven cents
ago or what hour is not enough. Sixty two cents
might do it. I understand that's the sort of long
term for the government wants to look at. But Nurse
did say from all the reports that I've seen that
it should not be other consumers who end up paying more.

(27:32):
To put it bluntly, it should not be other consumers
that end up subsidizing you. Are you able to get
us any information on where the money is going to
come from to make this happen.

Speaker 10 (27:45):
I'm really not sure who's going to pay for the
bill of the eighty seven cent this is the additional
thirty five percent reduction. Remember, both the companies of Lincore
and some man Core does have approof NPA negotiated price agreement,
so there's a legal contract on which they've declared hardship,
which then went to es COM and Iscom approached NASA

(28:07):
for a temporary relief on the tariff. Now my understanding
is that for the NPAs, it is the consumer or
government that will have to stand in for this. And
obviously this is not sustainable. The sixty two cent solution
that has been proposed by government, is Com and Industry

(28:29):
have been calculated very precisely and for that there is
no funding necessary.

Speaker 3 (28:35):
There is a model that.

Speaker 10 (28:36):
Can work which involves mining activities, is COM and industry
and obviously the government that can get to that figure
without any subsidy. So that's really the win win solution
that we want to see and at the.

Speaker 3 (28:50):
Soonest okay, but I mean, just in case I've misunderstood you,
you're saying eighty seven cents. We don't know where the
money is coming from, but sixty two cents could be sustainable.

Speaker 10 (29:01):
Also because the eighty seven cent as I've indicated, is
part of the NPA which.

Speaker 5 (29:08):
Has been approved.

Speaker 10 (29:09):
So there's a specific contract between these companies and es
COM and that is subsidized. We know that as part
of the tariff increases, all of us in public does
pay a portion of that NPA subsidy. When we talk
about the sixty two industrial tariff, this is a whole
different ballgame whereby we actually make use of coal mines

(29:35):
and many of these are dormant today. So there is
amplitude of coal available in South Africa which then is
generated by ESCOM in the power stations that is idle today,
so low cost plus. We have a huge quantity of
excess power available today from ESCOM. I mean only in
terms of rooftop it is exceeding seven thousand mega what

(29:57):
now and in the renewable program is also giving seven
thousand to that. So a combination of additional generation through
new coal contracts with coal mines that is eager to supply,
we can get to that figure of sixty two cent Nelis.

Speaker 3 (30:15):
I really appreciate the clarity. Thank you so much. Nelli.
Sperster is the chair of the Pharaoh Alloy Producers Association.

Speaker 8 (30:23):
The Money Show with Stephen Quetez is brought to you
by abs as cib a Pan African bank invested in
your story and the potential it can unlock because your
story matters as as the restered FSP.

Speaker 3 (30:37):
SEX minus to seven the time. Well, a reminder today
of how fragile our gas supplies can sometimes look. Cecil
which supplies Guess to Joe Bergsy Goalie Gas saying that
the recent flooding in Mozambie could lead to some shortages.
Just to be clear, e Gooli Gas saying their systems
are running normally at the moment. There's really no reason
to worry about this, but confirmation in Parliament yesterday our

(31:00):
government is talking to Mosenbeaks government about opening new gas
fields there. Jako Human is the executive director at the
Industrial Gas Users Association of Southern Africa. Yeah, COO, good evening.
You particularly and your association have been warning of a
sort of gas clu for quite a while. We know
some of the fields we rely on in Mozambiqua are
about to run out. How worried are you now that

(31:22):
this is still going to be a major problem in
about two years time?

Speaker 11 (31:27):
Good evening, Stephen, and it's good to talk again. The
gas cliff is real, and I think everyone acknowledges that,
you know, whether there's government or business and other stakeholders,
we are certainly concerned the gas cliff. Of course, we
have gas supply potentially up to twenty thirty and at

(31:49):
that point, of course, the current gas supplier SASIL, is
indicated that it will not be in a position to
supply the market with any gas.

Speaker 3 (31:57):
Now it may sound far in the future.

Speaker 11 (32:00):
The issue, though, of course, is you've got to work
backwards from that point in time to understand that significant
infrastructure developments are required. We need to build and operate
and construct our energy liquefied natural gas terminals, et cetera.
And that takes time. So it really leaves us with
an extremely narrow window in order to put a commercial

(32:23):
construct together for the importation of gas.

Speaker 3 (32:27):
Now.

Speaker 11 (32:28):
The government is particularly unclear at this point, at least
to the industry in terms of where they find themselves.
Our calls are really around how do we stack the
demand and sufficient demand to underwrite and bank this type
of infrastructure that we refer to, And secondly, what is
the fiscal construct of a transaction of this nature. Yes,

(32:51):
we've seen the media recently around memorandum of understanding being
concluded between the two governments, etc. But I think in
the South Africa context we should guard against celebrating signing
of memorandum of understanding. What is missing in those are
typically hard to execute these plans and how to put
the commercial constructs together, and we are far away from that.

Speaker 3 (33:12):
Yes, we are concerned. I mean it's one thing to
say we're going to do this, but when it comes
to gas in particular, there's so much infrastructure that would
need to be built, never mind working out who gets
what who who? You know, how this is going to
be administered. I mean, would see whatever happens. From what
you say, Yaku, it's not going to get done in time.
I mean, namely one big construction project that has been

(33:37):
this is the risk Stephen. I mean, the gas supply
chain is extremely complex. You typically sit with upstream upstream developments,
particularly if you have domestic gas or regional gas availability
or energy. So we call that the upstream part of it.
The middle pieces of course, the midstream.

Speaker 11 (33:56):
You know, how do you connect those molecules with the
markets where the gas are required? So so it it
and then you're sitting with a downstream demand. You have
to build out the demand to underwrite and bank all
of the above. And and it's that conversation where we
believe requires a critical coordination by the government to what

(34:17):
we refer to as the demand stack. South Africa needs
to commit to a particular demand profile. The difficulty with industry,
despite all its initiatives around gas up the establishment of
a commercial platform or market platform for gas is scale.
Industry doesn't doesn't have sufficient scale to underwrite this. We
need other sectors, the power sectors, the petrochemical sectors actually

(34:41):
to stack this demand out and it's critical. We are really,
we are really running out of time and we simply
don't know where the government stands.

Speaker 3 (34:50):
Is governments I mean treating this with a necessary urgency
from your point of view, once you said so far
it doesn't sound like it.

Speaker 12 (34:58):
We don't know.

Speaker 11 (35:00):
That's the short answer we've been asking for. I think
the last time we had constructive engagements, particularly in this
time of crisis, almost was roughly two years ago, and
since then we simply don't know where the government stands
in terms of its action plans and what it is required.
There is an absolute need for collaboration between government and

(35:23):
private sector, and we have difficulty picking up that diraction clearly.

Speaker 3 (35:28):
Yachure Human thanks very much indeed, executive officer of the
Industrial Gas Users Association of South Africa. And it sort
of reminds me that there's been talk about this for
such a long time and we hear so little from government.
Now government might be doing all the right things behind
the scenes, it's possible, but if you don't tell everyone
that that's happening, well, then you're going to have problems
because people are still going to panic. I do think

(35:50):
maybe the time is comfortable of government communication on this
and if there is a major issue to say what
the major issue is. I'm reminded, of course that when
you're dealing with another country, things always just about ten
times as complex because no one wants to be seen
to be putting pressure on another country, and that gets
particularly difficult. We'll be talking more about AI in the
next little while, strategy plans and small business and don't

(36:13):
forget investment in school. Tonight is a time to ditch
the dollar. It's seven o'clock.

Speaker 2 (36:19):
And now the Money Show with Stephen Credits on seven
oh two.

Speaker 3 (36:24):
Let's walk little the Money Show with Stephen Crutis is
brought to you by ABS, a corporate and investment banking,
a Pan African bank that's invested in your story because
your story matters. Good evening, seven minutes after seven the
time we'll talk about AI agents an agent sprawl. I
had to sort of read it three times before I
made sure I understood it. Arthur Goldstack, in fact, will

(36:46):
explain that to you in just a moment in our
tech feature in Small Business Focus tonight. Why it's so
hard for small businesses to actually implement a particular strategy.
I mean, I've so often been in a business or
a meeting or a thing. I mean, for goodnessake, I
think tennis clubs and strategy meetings nowadays, and people will
spend hours talking about the right strategy, but no one

(37:07):
ever implements it. Why is that?

Speaker 13 (37:10):
Now?

Speaker 3 (37:10):
Alon Rees is the business incubation pioneer CEO at Race Cars.
We'll hear from him in a moment, and then should
you be ditching the dollar? We'll be speaking to Patrick
Mettidi and Gary Boyson tonight in Investment School this evening.
Good to hear from you. O double one double A
three oh seven two two one four four six, O
five six seven and voice notes on seven two seven

(37:32):
oh two one seven O two.

Speaker 1 (37:35):
The Laly Show with Stephen crudis live on ninety two
point seven and one six FM, streaming on the Prime
Media Plus.

Speaker 2 (37:43):
NAP and DStv channel eight five six.

Speaker 3 (37:46):
I'm sure you know by now that I'm a resident
in joe Burg, and when I hear the story around
how the sort of vote of confidence in the ANC
mayor there, Dada Morrero has now been deferred. And when
you hear of the fight, the sort of infighting among
the coalition, and then it seems the solution to all
of joe Berg's problems is to have a position of

(38:08):
deputy mayor, and it seems so transparent. The reason they
want a deputy mayorship is simply so that the current leader,
the newly elected leader of the ANC's Joeberg region, Loiso Masoko,
can take over that position. And I mean in the meantime,
and I don't know if anyone's thought this through. You
have do de Morrero, who is the mayor of jo Burg.

(38:29):
He says that the ANC's regional election that saw him
losing was wrong. He's contesting, he's disputing the outcome, but
the Joeberg a n C says no, the outcome was correct.
What they're saying then, is that do de Morrero is
not telling the truth. But this person is the mayor

(38:51):
of joe Burg and he's kept there by the joe
Burg region of the ANC. I mean, is it just me?
It just doesn't seem to make sense sometimes. And in
the meantime, I don't know what's going to happen in
the joe burgay and see when it comes to who
is going to run as the candidate. Is it going
to be Morrero in the local elections? Surely not. Is

(39:13):
it going to be Lismusoko? Probably is Latuli House going
to come in and say, actually we need a national
figure against Helen Zillah because we know she's going to
be the candidate for the DA. And I guarantee you
there'll be demands for public debates on this. There's gonna
be a lot to watch in Joeberg over the next
few months. I suspect your views O seven two seven

(39:34):
two one seven.

Speaker 2 (39:34):
O two how many shall take? Thursday?

Speaker 3 (39:39):
Arthur Goldstuck, finder of Worldwide Works, joining us now in
for ci Pumolela this evening, Arthur Haws has been a while,
thanks so much for joining us. We're talking about AI
agents and agent sprawl, and when I hear the phrase
agent sprawl, I think of people in very dark black
sort of suits to work for the FBI, and they're
all over the place. Just balance me here first, what

(40:01):
are AI agents high seeming?

Speaker 13 (40:05):
Well, think of it like the Joeberg City Council, where
you've got someone for every role, but numerous people backing
up every role as well, and eventually you don't know
who's doing what. So it's a much like with our agents.
But to step back a moment, an AI agent is
an AI app that does to work for you without

(40:27):
you having to keep asking it. So it doesn't simply
answer questions like chat GPT or Microsoft co Pilot or
Google Gemini. It actually watches information, pools data together, can
send messages, prepare reports because of those you're going to
want to report and trigger actions automatically. It sounds like

(40:47):
a disaster, wheen didn't you happen? But to a lot
of functions in the corporate world that you want to
happen automatically. As certain pieces of information trigger certain events,
you want an automatically delivered to you with talking to
ask for it. And that's the essentially what an agent
will do. It's a digital assistant that keeps working in

(41:08):
the background. The problem with this is that all the
big AI software companies are coming up with agent strategies.
Excited about two years ago with coming called salesforce, who
are in effect u should in the era of the
AI agent with sales agents and tools, and very quickly

(41:30):
it became the dominant term. And now you can create
your own agent for almost any purpose you want. You
can create an agent right now while asking JPT or
co pilots to do it for you, or a Gemini.
But the problem with this is, especially in their business world,
people are now creating agents handover fist and it's getting

(41:52):
a bit out of control. The IDs C, the not
the local on the International Data Corporation Estimate set are
gained you one point brilliant AI agents by twenty twenty
eight around the world. And I thought of that, and
I thought that's crazy. That's just a mess, and we
need to describe that mess. So the term I came
up with was agents scrawl, because it feels like scrawled

(42:15):
that you.

Speaker 3 (42:15):
Country and I mean, the problem, Arthur, is that I write,
I get someone, you know, I get chut GPT or
whatever to great an agent for me to I don't know,
track the local football league or something, and then I
forget about it. And isn't that the exactly that's never culd.
It never never goes away.

Speaker 13 (42:33):
Exactly. People create the agents and when the use goes away,
they forget about it. The problem is that agents don't
sit idle. They're still reading data or moving information in
business at triggering workflows, et cetera. And today was the
Microsoft AI Tour in Santin at the Convention Center, and
I've got to sit down with Mark Juban, who's the

(42:55):
corporate vice president for Commercial cloud Solutions at Microsoft, and
he was in Jannsburg to deliver a keynote at the event,
and I asked him about the concept of AI score
and he fully agreed with that. He said that agents
organizations are already rolling out these agents department by department,

(43:16):
often without any oversight, and managers are becoming almost agent
managers or agent bosses, and they've got to assign work
to AI agents as well as to people. And the
result is that you gained you have a lot of
unmanaged agents behaving like rogue code, almost you could say,
running in the background long after anyone who remembers why

(43:39):
they exist even.

Speaker 3 (43:41):
Okay, so what do you do then? I mean, companies
are I suppose pretty good at actually managing employees. How
do they manage agentsactly?

Speaker 13 (43:51):
That's exactly a question I asked Mark Shubin and he said,
the core question is how you manage AI agents in
the same way manage employees. So people have identities and
access rules and security checks and accountability, And that's exactly
what you have to have for every single agent. They
have to have rules that govern their behavior. They have

(44:13):
to be security checks that monitor them as well, and
they have to be accountable. There has to be some
kind of report back system. I remember last year doing
an interview with one of the vice presidents of Salesforce,
who you could almost blame for this, although they were
just ahead of a trend. And I asked him that
same question and he said that you're going to need

(44:36):
something like an agent in chief, and that's an agent
that will manage other agents, but they will still have
to be accountable to a human manager and accountable based
on those access rules and security checks. So in effect,
you're going to have to allow the same discipline to
software as you're going as you always have to people.

Speaker 3 (44:58):
I mean, I suppose the other thing is that is
that each agent, when it is created, needs to have
a kind of this is how long it will last.
One needs to have an automatic switch off button. And
I mean, I've read so much science fiction that you
know certain AI computers the first have that too. I mean,
that would surely be the way forward. And I can
imagine actually all sorts of problems that will come then too.

Speaker 13 (45:18):
You eat an l on their head. It's exactly that
it needs some kind of built in kill switch, which
will be very sad for the agents that start becoming
conscious of the existence. But the real way to do
it is to have some kind of rules built in
that says, at certain stages or over certain time periods,

(45:39):
the agent has to check in with an AI manager
or an agent manager, who has to determine whether it
still has a purpose or whether it should be reconditioned
or repurposed, for example. And if they don't do that,
there's huge risk of data leaks and compliance failures.

Speaker 3 (45:57):
For example, I'm just imagining this piece of code asking
me why am I here? Stephen God ask the question
why am I here? Arthur Goldstuck. I love that phrase,
agent sprawl. Thanks so much. I mean there's a song there,
Agent sprawl. Arthur Goldsacks, founder of world Wide Work. Seventeen
minutes after seven.

Speaker 2 (46:17):
The money showed small business focus.

Speaker 3 (46:21):
I'm sure you've spent time in agy strategy session that
have watched your bosses, or your owners, or your I
don't know, fellow football players talking about what they plan
to do and the problems they need to solve, and
yet as they're doing it, you kind of know so
little of this is actually going to happen. And this
happens particularly in small business. Alon Raise is the renowned

(46:44):
business incubation pioneer and CEO of Ray's Corps. A lot
nice to meet you, Thanks so much for coming in
this evening, Thanks for having me. Smaller firms do this
too right. They drop a wonderful strategy, spend quite a
lot of time on it, work out what all the
problems are, and then just fail to actually do it well.

Speaker 12 (47:00):
It's not just small firms, it's big firms, medium firms,
it's all firms, but it's more with small firms, so
big firms. Just if you want the stats big firms,
thirty percent of large firms only thirty.

Speaker 3 (47:12):
But this is very interesting.

Speaker 12 (47:13):
Only thirty percent of large firms so large corporates actually
do a strategy, write a formal strategy, and only thirty
percent of those strategies actually meet their objective within seventy
percent accuracy. So she work up the mass there. That's
nine percent of large corporates actually achieve this strategic intent.

(47:35):
In small businesses it's twelve percent. Around twelve percent of
them actually do some sort of back of a cigarette
box kind of strategy, and only ten percent of them succeeds.
So one com a two percent actually meet the strategic objectives.

Speaker 3 (47:49):
So that's the stats out there.

Speaker 12 (47:51):
And that's the big problem is that we talk about
doing all these wonderful things, but we never ever actually
land up doing them.

Speaker 3 (47:58):
Where does the problem sort of lie? I mean, people
will talk about priorities, and the moment I see someone
with more than sort of two or three priorities, my
eyes start to roll back into my head a little bit.
Is that part of the issue too many priorities?

Speaker 12 (48:13):
Well, first of all, the problem, Steven, is that there
is very little understanding of what strategy is. And if
you'll allow me to just give you the little framework,
So strategy is you know, when you say what is
your strategy. I want to be in five African countries
by the end of the decade. That's not strategy. That's vision.

(48:34):
That's where I want to go. Strategy is how I'm
going to get there. So the framework is your current
situation where I am right now, where I want to be,
which is vision, and the strategy is how I get there.
But most organizations that I deal with, small, medium, and
even large today do not differentiate between operations and strategy.

(48:57):
So if I can give you a simple metaphor operations
or a model to think about it, how you differentiate
operations is more of the same. So if there's anything
we're you doing more of the same, it's operations. It's
at somebody's job to do more of that, sell more
of those, make more of those things. Do that, And
the language of operations is targets. With strategy there is

(49:25):
about the creation of new. Something new has to happen.
So if I can give that to you as an example,
if you there wasn't a website and then I have
to create a website to get me closer to my vision,
then that's strategy. That is strategic growth strategy. But once
I've made the website and somebody has to manage that website,

(49:47):
it's somebody's job and I have to get a certain
amount of visits or hits or followers or whatever the
case may be. That moves into operations, and most entrepreneurs
don't understand how to differentiate between in the two.

Speaker 3 (50:01):
Do you think it's because most entrepreneurs are sort of
often stuck in operations because when they start is off
in a service, they provide themselves personally, and that sort
of keeps them stuck.

Speaker 12 (50:15):
You've hit the nail on the head. When I train entrepreneurs,
there's one slide I've got, which is, you know, I
just want you to all understand you're an addict. You're
addicted to operations, and they're addicted to operations because it's
the place of comfort, their confidence, they know how to
do that thing, Whereas when it's the creation of new
it's a place that is unknown, and operations always seems

(50:36):
far more urgent, because what do you want me to do?
Do you want me to deal with that client? That's screaming,
or do you want me to go and build some stuff?
Like what do you want me to do? So operations
is always the winner when it comes to being forced
into a decision which way to go. What I try
and get small businesses to understand is that if they
want to move to the next level, they've got to

(50:59):
bring equality between the operations, which in another way I
call the queen and the strategy, which is the king.
They have to have an equal space at the table.
Otherwise the business doesn't grow because you're not creating anything
new to support growth and take you to vision.

Speaker 3 (51:17):
It's so interesting that sort of difference. Is there a
problem with resource allocation? In other words, there's a strategy,
so this is how we're going to get into five
African countries over the next few years, but you need
to invest to do that, and small companies as we
always as we know, often don't have the capital.

Speaker 12 (51:37):
Well, if you do the strategy correctly, it's not that
you wouldn't you wouldn't set You would say, there's the vision,
this is what I want to do in your one, two, three,
and four, and you would plan according to those resources.
And if you don't have those current resources. The question
would be how do I get those resources? What I
need to do to build to create in order to
do that. So if you if you think about the

(52:00):
creation of strategy, it's actually quite logical.

Speaker 3 (52:03):
It's just it's a whole bunch of.

Speaker 12 (52:05):
If then statements that you need to create, and then
it's a whole bunch of choices that you have to
make on the way. And that has to do with
a your resources, but far more importantly of around your
core competencies. And you see a whole bunch of businesses
chasing things that do not resonate or do not include
their core competencies. So they basically starting these s curves,

(52:28):
is these growth curves again or learning curves again? On
how to do those things as opposed to using what
they're good at to create the competitive edge, which is
ultimately what you're trying to achieve with strategy.

Speaker 3 (52:44):
Are they obvious ways to you know, have the strategy
session come out, you know, have the strategy nicely written
down and I don't know, beautiful letters, and then sort
of actually implements it. I mean the obvious sort of fixes.
And I suppose the one is to say to the
the entrepreneur. You aren't allowed to spend all your time
on operations. You might have to drag them kicking and
screaming from that, but you actually have to be quite

(53:06):
hard about it. Yeah.

Speaker 12 (53:08):
So when I invest in businesses, and when the first
thing I do with a CEO is that I take
them through a process called LFF or letter from the Future.
So I'll take them into a room for a day
and I say, what do you want, but let's write
that five years Hence, in other words, you five years
into the future and now write the story of how

(53:28):
your business has grown over the past five years, with
all the obstacles, all the friction that is in place.
And then you ascertain which are queen things, which are
operational things, and attach targets to that, and which are
king things. We attach strategic objectives to those, which is,
you have to build these things. And then the next

(53:50):
point is to assign those two people, allocate those to
people in your organization. And the holl's where it all
falls down. People do not then make that part of
performing banashment, because as soon as you attached that to
performance mansion, you said to your team you have to
execute on these targets. But more importantly on these strategic
objectives to build things, then it doesn't work.

Speaker 3 (54:13):
Thanks so much for coming in, Elan lots to think about,
really appreciated. Elon Raise is the renowned business incubation pioneer
and CEO of Ray's Corps.

Speaker 2 (54:21):
The Money Show Investment School.

Speaker 3 (54:24):
Twenty four minutes. Now to on Investment School tonight. The
technical term for this discussion is should you be diversifying
away from the US dollar? But I'm going to call
it should you ditch the dollar? You can see, of
course that the dollar has to depreciated quite dramatically over
the last few months, and in particular you can see
that through the strength of the rand. You can also
see how many people are selling dollars and buying gold.

(54:47):
We'll discuss why that is happening, how far it could go,
and what you should do tonight. Patrick Matidi is the
head of multi asset Strategies at Aliwani Capital Partners and
Gary Boysen as a director at where Anne Swiss Gens.
Thanks so much for your time tonight. Patrick. Let me
start with you. I suppose the first question is why
are so many people moving away from the dollar, And

(55:09):
part of the answer has got to be the fact
that the president Donald Trump says he wants a week
of dollar.

Speaker 14 (55:16):
Yeah, the mix stident and you give me and Gerry
thanks for having me. Look, I think, you know, it's
a topical question, and I think that two factors need
to consider before we answer that. One is, you know,
is this cyclical as it shelp us, you know, as
in one the US president you know, sort of a

(55:37):
stratus office term and then things go back to normality,
you know, whatever that looks like, or is this a.

Speaker 15 (55:43):
Reset in terms of you know, it's mouth structural as
in indeed, you know, the double economy is moving our
way from from dollar based assets, be both from a
trade point of view and also from an investments point
of view, right, And we don't have a firm view
on that, but what is clear though is that you know,
the shift away from the dollar is based on what

(56:05):
one can see as you know, sort of a transiend
factors to do with the uncertainty that has been brought
about by the Trump presidency, whether on the trade front
in terms of the tariffs, but also the geopolitics in
terms of uh, you know what what that can do.
And as well know, you know, the one thing that
capital likes the most is some element of certainty. And

(56:27):
in an envelopment where there is less and less certainty,
you do find that the flow of capital going into
other markets where it can find a bit more comfort
and a bit more certainty.

Speaker 3 (56:38):
Okay, So, Gary, isn't the point of the US dollar
that it didn't have cyclical downturns? Is that the whole
point of it was that it was stable.

Speaker 16 (56:48):
Certainly for many. I mean, it's the reserve currency of
the world and has been, as Patrick saying, you know,
is this a time where this is now really being
called into question? And is there going to be a
true d dollaration? Are we going to see you settlement
currencies like bricks the unit being created? You know, are
the other nations of the world starting to see, you know,

(57:10):
the financial systems that the US dollar is based on,
you know, being essentially manipulated and used to control and
extend the USHM. And we saw obviously Mark Carney speech
at the WEF talking about a rupture in the global
order and you know how you've got to take your
sign out of the shop window if anyone's watched it,
and I mean it was powerfully reminding people that, you know,

(57:32):
even even the neighbor of the US, Canada, you know,
which has been you know, the brunt of many kind
of trump vicious rhetoric attacks, you know, is now sick
of this and looking at all other alternatives as well.
And that's I mean, that does signal that this could
potentially be a true regime change for the US dollar.
You know, we can see it just in trading patterns certainly,

(57:54):
Like I mean, if you look at it, you know,
typically you know, along with the Frank then gold tour
an extent as well, the US dollar was a safe
haven asset, you know, when you had you know, geopolitical turmoil,
that the dollar was strengthened. Now we've got the opposite.
It trades like an emerging market currency where you know,
generally it's the US now causing the problem. So so
you get the dollars sold off when you get you know,

(58:16):
any any new geopolitical announcements. So definitely, it's it's I mean,
it's it's important to understand, but I think maybe just
to put it in the context of historic moves in
the dollar as well, if you look at the dollar index,
yes it has you know, if you take it back,
you know, measure it back to kind of the nineteen sixties. Yes,
it can fluctuate all the way up to one hundred

(58:37):
and fifty down below eighty. You know, it can be
very volatile. The dollar can change value significantly, but in
kind of a much shorter time period, let's say the
last twenty years. You kind of feel that, you know,
an expensive dollars at at you know, very strong dollars
at one hundred and ten, very week dollars at about ninety,
and that's kind of where you pick up the support
and resistance. And as you know, the Trump administration came

(58:59):
in to the White House that you know could towards
the beginning of last year, you know, there was this
huge exuberance around deregulation and how strong the US economy
would be, and that that is actually playing out. I mean,
we are seeing you know, some incredible growth prints out
of the US at the moment. So I don't know
if it's time to just ditch the dollar, as the
title of the show says. But you know, we're currently

(59:21):
ninety six ninety seven on the dollar index, so you know,
we're on the weaker side of kind of the average
of where we've been, but we're still well within rational
balance that I think it's just the speed at which
everyone is feeling the move. And certainly that's I think
why we're having so many meetings and so many people
approaching us and kind of asking, you know, should we
be diversifying into frank should we be disversifying into pounds

(59:41):
or euros, or or where should we be putting money
at the stage, it.

Speaker 3 (59:46):
Also, as supposed depends what you're going to do with
that money. And Patrick, I mean, you can, for example,
just put your money into dollars and keep it in dollars,
or you could be using dollars and investing those dollars
in other emerging markets, or you could be taking those
dollars in investing in the US on you know, in
a video or something. It does, I suppose matter what

(01:00:10):
you're actually going to do with the dollars that you
have and what kind of use you're putting them to.

Speaker 14 (01:00:16):
Yeah, still, and I think I think it does matter.
I think the two factors to consider, you know, one
is you know the currency diversification. You know the weather
it's going to the euros or the yen or any
other but also you know the asset class that you
then get into. You know, when you think of davisifying
and I think the important part there is you know

(01:00:38):
what we call you know, correlations. Right, so you need
to be careful that you know, as and when you
think of DAVI is flying away from my currency, you
don't end up with different assets you know, in your
in your basket that actually behaves similarly. Right says that
if you get one theme across you know, incorrect, you
get hit multiple times. So so diversification on it, oh,

(01:01:00):
you know, it's as well and good, but that the
real trick comes in when then look at correlations. But
it's the behavior of whatever the assets you have, you
know in a basket, you know, towards each other. You
want to make sure that those behave in a manner
that is not highly correlated, such that if one or
two don't work out, at least two got three or
four that can still pull you through and you end

(01:01:21):
up you know, with the portfolio that still you know,
generate dissent returns irrespective of whatever currents you're investing in.
So so yes, you know there has been moves to
that fire way from the dollar. But again you know
the trick thing is, you know, a lot of the
assets one way or the other has got some correlation
with the dollar, right, just because the US as an

(01:01:43):
economy is the largest in the world, so you really
can run away from it not that far. So you
therefore need to pay a little bit more attention in
terms of that correlation factor. Has Anne trying to put
together your portfolio, Yeah.

Speaker 3 (01:01:55):
I think I think that's you. You mean, gett your
sort of view on that. I mean, the problem is
is that it's it's almost impossible to think of a
world without the dollar, and not just without the dollar,
but without the dollar being as strong as it's been
or maybe as.

Speaker 16 (01:02:08):
Important as it's been. So, I mean, you know, to
Patrick's point around the diversification and you know the correlations
and that, I think it's important to make a distinction between,
you know, the translational effect of the dollar and what
you're invested in. So if you go and open a
you know, offshore bank account out of man Guernsey wherever
it is, and you stick a whole bunch of dollars
in there, you're probably feeling pretty bruised after the last

(01:02:31):
year thirteen percent fall. You're looking at the rand you're going,
what did I do? I thought I was making the
prudent move to diversify my assets overseas. The problem is
cash is just about always a poor place to invest
over the longer term. And while the dollar traditionally has
protected South Africans in that the South African currency was weakening,
I think around six percent a year is kind of

(01:02:54):
the average, depending on where you take your starting point.
You know, they look at the interest rate in the
South African bank on Rand and they go, well, I'm
getting six seven percent there, but I can get almost
nothing on dollars. But don't worry, I'll appreciate by you know,
I'll get this appreciation and I don't need to make
an investment. And what's happened of the last year, that
thirteen percent pullback has kind of made everyone reassess that
assumption and going, wait a minute, Like I could have

(01:03:16):
had six seven percent interest in rand and I could
have had a thirteen percent lift in the value of
my currency.

Speaker 3 (01:03:21):
This is really bad.

Speaker 16 (01:03:22):
What have I done?

Speaker 3 (01:03:23):
And I think that the issue is.

Speaker 16 (01:03:24):
That when you cash is a bad investment where it's dollars, rands, euros,
Franks sitting on cash long term it's not a growth asset.
These are fiat currencies that will devalue over time, so
you need to deploy that capital. And as Patrick saying,
into watch asset class does that go. But if you're
buying stocks, if you're buying businesses that have operational assets,
you know, whether the translational effect of a dollar weakening,

(01:03:46):
that doesn't matter if you're buying a US dollar asset
that's sitting in the like when I say an asset
a US dollar security, but that security is a multinational company.
I'm not going to say Microsoft because it's ten percent today.
But if you buy a company that has a global
reach and the dollar starts a week and that stock
price naturally lifts. So your investors that might have dollar

(01:04:08):
base portfolio and when I say dollar based, the translational
effect that the reporting currency as dollars, but they're invested
in high quality assets, have actually had a fantastic ride.
And it's really it's the importance of having the funds invested.
And I mean, I suppose with that translational effect, and
we'll probably talk a little bit about citis, you can
get the same exposure through other currencies. You can buy

(01:04:28):
an S and P five hundred tracker reference the US
dollars you can buy an S and P five hundred
tracker referenced than Swiss francs. You're getting the exact same thing.
It's just how it's being reported to you at the.

Speaker 3 (01:04:37):
End of the day. Okay. So, so I suppose this
then gets to where you go when all of this
volatility is happening, and Patrick, what it must do is
make your investment decisions a little bit more complex than
their previously were. Because even if you're just going to
take something that we can all accept as doing very

(01:04:58):
well at the moment, so take your video here in
the US stock market, you suddenly have to do quite
a lot more mass to work out what it's actually
worth in rand terms for you. And just that alone
might make some people cautious of investing in the US
stock market, even though by almost every measure it would
still be the place to invest.

Speaker 14 (01:05:18):
Yeah, absolutely, Stephen.

Speaker 15 (01:05:19):
I mean that we've seen this over the last a
couple of years now, where previously, you know, just conventional
wisdom was that the random always to appreciate. So so
don't worry, you know, in terms of trying to figure
out where it's going to land directionally is going to
appreciate and whatever that you appreciation is and that will
be a bit of pay and some came on top.

(01:05:40):
You know, if you take you mone off shore and
invest it in that the US or whatever.

Speaker 14 (01:05:45):
Clearly that has changed in the last year or so
where we have seen the rent actually you know, come
back quite strongly and cites that your rant based in
our returns of your off your investment investments SARN don't
look as fantastic because as very mentioned, you know, lost
a little bit on the currency translation and even whs
you know, if if that dollar based asset or that

(01:06:05):
cren based asset has actually done badly for you, you
get what you call it double wheming. So so yes,
you know, the you know, to date, you know, trying
to figure out where to invest has become a bit trickier.
What we tend to do though, for our multi asset
products is being South African investors investing with the Afican clients.
We try and maximize on the local allocation first to

(01:06:27):
see where I resume opportunities domestically, and then once we've
reached what we call our max and from a restuar
what point of view, then the residual then look or
show to say, okay, where can we get the best returns,
you know, given what we're seeing out there, And then
the rant can be a big deciding fact on that.
And yes, we do have a few tools you can
use to try and hedge yourself from that ran STrenD

(01:06:49):
coming back to you and the form of derivatives, but
it is a consideration. So even if you're going to
buy insurance in the form of a derivative, you know,
bet comments at some cost, which will obviously eat into
your returns whatever you see them. And then the third
part is then once you've got the rand sorted or
the currency sorted, then obviously you tould pick you know,
which which region, which stocks that can give you the

(01:07:09):
best return of your of your money. And then to date,
you know, despite all the issues with that would be
with the dollar itself, you know, it's kind of tricky
to see the growth elsewhere in the world, right that
that that that can take over from the US. So
you do therefore tend to deflect back to the US
and try and pick stocks that you think will do well.

(01:07:31):
And then that's what the actually vidias and all it
can stuff which sort of come up. From a growth
point of view, you have to think about valuation. But
what I'm suggesting is despite all the issues with the US,
you know, from a growth point of view, you know
it's it's it's it's kind of tricky to find other
regions that can grow faster and and you know, good
quality arnings and that kind of stuff.

Speaker 3 (01:07:51):
Patrick Matitious, head of Multi st Strategies at Aliwani Capital Partners,
Gary boys and director at rand Swiss. Should you that
the dollar?

Speaker 9 (01:07:58):
More?

Speaker 3 (01:07:59):
In just a moment on Investment School ten minute state The.

Speaker 8 (01:08:02):
Money Show with Stephen Quotas is brought to you by
abs as cib a Pan African bank invested in your
story and the potential it can unlock it because your
story matters.

Speaker 5 (01:08:13):
That does the rast f SP.

Speaker 2 (01:08:16):
The Money Show, Investment School.

Speaker 3 (01:08:19):
Eight minutes now to eight the time. Patrick Matidi's head
of Multi sid Strategies at Aliwani Capital Partners, Gary Boysen's
director at rand Swiss. We're talking about should you ditch
the dollar? Garry. One of the issues is what you
would call the d dollarization trade, and there's been a
little bit of talk about sort of trading another currencies,
perhaps the sort of bricks kind of digital currency, which

(01:08:40):
for the moment doesn't look like it's going to go anywhere.
It might in the future. But just that talk, the
fact there's so much of it, the fact that digital
currencies make it more of a possibility, all of that
must weaken the dollar. We know it infuriates Trump, so
it must do certainly.

Speaker 16 (01:08:56):
So if you look at it when I say thesolars
reference current, you know, think about it just in terms
of how we do an offshore transaction. For example, you know,
if I want to go and buy you know, let's
say New Zealand dollars for a client today, I don't
get to go into the Swift system and go and
buy New Zealand swap my South African rand for New
Zealand dollars. I've got to swap my South African rand

(01:09:17):
into US dollars. Then I've got to swap US dollars
into New Zealand dollars. That is the mechanism. And that's
that's when I say how crucial the US dollar is
to the system. And I mean this is all like
all international payments at the mode or most run through
the Swift system. And you'll remember, you know, when the
Russia Ukraine conflict started. How you're one of the tools
that the West used was to freeze Russia out of

(01:09:38):
the swift system. And I think what happened there is
you know that that was kind of unprecedented. It was
saying like, wait a minute, these this this massive financial
infrastructure that the globe has relied on for so long,
is now almost being weaponized in geopolitical conflict. Immediately, You've
got the likes of Russia, China, bris all looking at
this going wait a minute, if it happened to Russia,

(01:09:58):
it can happen to us as well. And I think
that's where you've seen And if you if you look
at a chart you know of kind of central bank
assets and aggregate, you can see it quite clearly. Central
banks around the world have been selling off their dollar
assets and replacing them with gold. The other assets that
sit on central bank balance sheets have actually been pretty stable.
It has been a deed dollarization trade. It's been a
move away from US dollars selling US dollars, picking up

(01:10:21):
precious metals as a as a counter and it's I
think to remove the reliance. And where the endgame is
I think is still years away. But for anyone very
interested in monetary policy, it's it's a big shift. It's
a big shift, and it's it's you know, it's one
of the reasons that we've got the gold price above
five thousand dollars an ounce at the moment and doesn't
look like that's going to stop anytime soon, because until

(01:10:42):
the central banks stopped doing this, it's going to keep going.

Speaker 3 (01:10:46):
Patrick Matidi, one of the key questions to all of
this is where we think the dollar will end up,
As always in a possible question when you're looking at
currencies or the gold price or whatever. And it's one
thing to say, as Gary pointed out, that on the
dollar index, it's still within kind of historical norms. My
own sense of it are no experts on American politics,
but unfortunately we've all become kind of experts. My own

(01:11:09):
sense of it is that Trump is only just beginning,
That the attacks on the independence of the US Federal
Reserve and your own power will continue, That whoever succeeds
power will be more inclined to listen to Trump, That
that sort of anchor of the world economy will possibly
fall away. I mean all of those things again, everything
that pushes a higher goal price is likely to lead

(01:11:31):
to a week a dollar and then that means if
you don't know where the sort of floor of the
dollar is in the next three years, how do you
make investment decisions from there?

Speaker 14 (01:11:42):
Yeah, Steve, and those are the issues we crap them
with in term of trying to see you know that
they are another light on this one. Look on the
politics side, I meanly Trump.

Speaker 15 (01:11:53):
Is highly unpredictable and and anything is possible, you know
when it comes toships in politics. But I think there
is a bit of a backstop coming up. You know,
it may still be a bit further away and they
do that is the mid terms, and then a little
bit more imminent could be you know, sort of what
they shut down where that maybe can sort of sober
up a little bit. But but you know, there is

(01:12:14):
called being a political analyst, which I'm far from being.

Speaker 16 (01:12:17):
Fun.

Speaker 14 (01:12:18):
I suspect, you know, the end, assuming is survived this
upcoming events, you know, the end of you will obviously
be when he's out of you know, out of office,
and and then hopefully we get someone a bit more taen,
a bit more understanding. But also you know, I think
the average American can can start to feel the brand
of his policies and hopefully, you know, they start to

(01:12:39):
do the right thing in terms of their boating patterns.
But that being a side and to which again a
huge disdain and moder an expect on I think on
the on the finance side, where do we have some
little bit of insight? I think they do the one thing.

Speaker 5 (01:12:54):
You can do.

Speaker 14 (01:12:55):
You can't call you know.

Speaker 15 (01:12:56):
Any currency, but what you can do is established by yourself.
And also that way it ends accused to for a
few more leaders in your portfolio that you're not hit
by taking massive directional views that you have not yell
insight in terms of being able to call. So so
that that that is probably I guess, as they say,
you know, the one freelanted when it comes to investing,

(01:13:17):
I just adversify yourself, make sure that you know you're
not pinning or hopes on one singular event that may
or may not play out, and if it doesn't, you know,
you find yourself on the wrong side of things.

Speaker 3 (01:13:28):
So interesting, Gary, there's another way to look at all
of this, which is that if you want to get
into the US stock market, and it's expensive right now,
but in two years time, maybe it won't be.

Speaker 16 (01:13:41):
Problem is where do you park in the meantime, because
you said, you know, with a with a weekening dollar
worth three years left, you know of the Trump administration
at least you know it doesn't look like the momentum
is going to slow at any point. Where do you
not want to be and you don't want to be
in cash, So you need to find some way to park,
some sort of safe av in the parking and wait.

(01:14:01):
If you are going to wait for a dip in
financial markets. The problem is that trying to time markets
and call the slide is incredibly difficult. And despite incredibly
negative news headlines that we've had over the last say
twelve months, the mark, other than the Liberation Day sell
off that we had last year, markets have been remarkably
robust and you know, waiting for a sell off in

(01:14:24):
the US companies where we have very strong GDP predictions,
you're looking at the earning season that's rolling through at
the moment. I mean, yes, there's been missus here and there,
there's been a couple of big stock moves. In aggregate,
it's been very, very strong, and it's not rarely the
kind of earnings momentum that you'd probably want to better
against you. You might take a view on the valuations

(01:14:45):
because the US stock markets do look expensive, but they
are expensive kind of for a reason, because there's a
lot of earnings momentum at the moment.

Speaker 3 (01:14:53):
Gary Boyson, thank you so much, director at rand Swiss
and Patrick Matidi's head of multi asset Strategies at One
Capital Partners. Gentlemen, really to appreciate your time. I hope
you're going to ask some I hope we've given you
some insight on whether or not you should ditch the dollar.
On Investment School, The.

Speaker 8 (01:15:10):
Money Show with Stephen Curtis is brought to you by
abs as cib a Pan African bank invested in your
story and the potential it can unlock because your story matters.

Speaker 3 (01:15:21):
That is a raised f sp Well, while we've been
talking about whether it's time to ditch the dollar, splash
on roses that Trump plans to announce his Federal Reserve
chair next week. Something to look forward to. I suppose
in the meantime, US markets not having a good day.
The Dow Jones is flat down point zero one, the
Nasdaq is down one point four to three. In the

(01:15:42):
s and P. Five hundred is down zero point sixty five.
Aubrey Maasuanle will be more uplifting. Good evening. It's eight
o'clock

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