US sabre-rattling not root cause of economic woes

By Professor Bonke Dumisa

AngloGold Ashanti formally officially announced on May 12 that it is redomiciling its company to the United Kingdom; but will have its primary share listing in New York.

The usually negative press in South Africa, which thrives on negative sensationalism, jumped at that to say AngloGold Ashanti has decided to redomicile to the UK presumably because of last Friday’s deliberate malicious mischievous political US sabre-rattling when their ambassador accused South Africa of selling arms to Russia. Imagine South Africa selling weapons to the military superpower Russia; it is as unbelievable as it is so laughable.

AngloGold Ashanti formally informed its major stakeholders about this move long before the week ending May 12, which is the bad economic week when we saw the rand weakening at historic levels; as it weakened to scary levels above R19.51 against the US dollar; weakening to levels above R24.14 against the UK pound sterling; and weakening to levels above R21.07 against the euro. Therefore, linking AngloGold Ashanti’s redomiciling to money markets bleeding of the rand is definitely misinformation at the least if not deliberately mischievous at worst.

Why is AngloGold Ashanti redomiciling to the United Kingdom? Looking at their total assets portfolio, as things stand now: 40% of their assets are in South Africa; 40% in the US; and 20% in other jurisdictions, including the United Kingdom, Australia, and the rest of Africa. Quite unknown to many people, including highly-knowledgeable financial fundis, is that AngloGold Ashanti no longer has any gold mining operations in South Africa.

They are now a distant minor competitor to the highly dominant Gold Fields in South Africa as well as in the rest of Africa, especially in Ghana. It is against this background that Ghana is now the top African gold producer, ahead of South Africa.

It therefore makes logical sense for AngloGold Ashanti to move their head office to the United Kingdom, to join many other top multi-national corporations which are domiciled in the UK. They will however have their primary listing in New York because it is much easier raising capital in the US than it is in many other jurisdictions. They will retain their secondary listings both in South Africa and Ghana.

It is encouraging that AngloGold Ashanti has made a firm undertaking that they will keep their technical support offices in South Africa to largely service its “rest of Africa” operations. They also emphasised they will keep their Environmental, Socio-Economic, and Corporate Governance (ESG) related commitments and programmes and funding in place. This is thus not a company that is leaving South Africa purportedly because “they are fed” up of South Africa.

It is however true that there are many companies that have been delisting in South Africa for a number of reasons, including those who have been listing elsewhere whilst retaining their Johannesburg Securities Exchange (JSE) listings. Let me briefly reflect on some of those companies which listed elsewhere.

South African Breweries (SAB) was taken over by the US multinational corporation Anheuser-Busch to form the largest brewer in the world. This did not compromise SAB’s presence in South Africa, instead it gave Castle Larger, SAB’s top beer brand, a larger global footprint.

On the other hand, Sasol, the former state-owned company which was quickly privatised just before we moved to a post-apartheid South Africa is good example of a South African company listing elsewhere “for wrong reasons”. Sasol definitely peeved the former president Thabo Mbeki when they irritatingly listed “affirmative action/ black economic empowerment” as one of the reasons they listed on the New York Stock Exchange. This was literally interpreted to mean that Sasol thought they will do better in jurisdictions where they will not be asked any questions about redressing the past apartheid economic imbalances. It is unfortunate that Sasol has had to explain itself about the massive failure of the Lake Charles project in the US where they did not have to care about any affirmative action / black economic empowerment issues. This just explains why it does not make sense for businesses to list elsewhere for wrong reasons.

Old Mutual did list in other jurisdictions with a lot of bells and whistles; the grass did actually prove that it was not really greener outside South Africa.

Shoprite, Pick n Pay, and Woolworths are successful South African retailers who have however had mixed fortunes in other jurisdictions outside South Africa, and had to abandon some of those far away jurisdictions after suffering some significant financial losses.

MTN is a sad example of how a successful South African company can be easily abused in foreign jurisdictions, without all these constitutional democratic protections we have in South Africa. It is no secret that they are seen as easy prey in Nigeria, where they are regularly arbitrarily fined millions of US dollars for questionable trading infringements.

There is a certain portion of South African businesses who have however simply chosen to delist from the JSE for purely understandable practical reasons; they felt that complying with the onerous “cumbersome” listing conditions at the JSE is proving more costly for them rather than if they are operating as big unlisted private companies.

It is therefore important for all of us to clearly identify the real reasons why some businesses are listing elsewhere outside South Africa; and do our best as a country to avoid and remove those negative factors, like economic uncertainty and political uncertainty, that may result in some businesses saying they are “gatvol” when they redomicile elsewhere.

But, we must not be misled into believing that many businesses will leave because of recent US sabre-rattling. But, the serious business uncertainties linked to Eskom’s unending load shedding will push out many businesses, if there are doubts if the government has the political will to fix this electricity problem.

* Professor Bonke Dumisa is an independent economic analyst.

** The views expressed here are not necessarily those of the DFA.