And speaking of Eskom… Water

Yesterday, I wrote a post about Eskom and the trouble with low electricity prices and how they result in capacity disappearing.

Do you know what else is particularly cheap? Some might say unusually so?


Here’s a comparison of tariffs:

Here’s a map:

What you might notice is that there seems to be a fairly strong link between cheap water (China, India, South Korea and Mexico) and water scarcity. Of course, sometimes water is cheap because it’s plentiful (Russia). But surely it makes no sense that water should be cheaper where it is scarce?

Although I guess that you might say that those countries where water is scarce also have large populations of the poor – who cannot really afford to pay more.


Looking at South Africa’s Tariffing

South Africa doesn’t really have a central regulation for water tariffs – these are set by individual municipalities and water providers. So I went in search of the Johannesburg water tariffs, and found them here.

Bear in mind that Johannesburg has almost reached full water distribution capacity, in a country that is water-stressed (see how red we are in that map above).

For the 2013/2014 year:

  • The first 6 cubic metres of domestic water usage are free.
  • The next 4 cubic metres of domestic water usage are R5.84 each (about $0.50).
  • If you want to average that out, we’re talking $0.20 per cubic metre in your average domestic home – assuming each home uses 10,000 litres of water per month.
  • Which is about the same price as India’s water.

And if we’re going to look at commercial usage:

  • The first 200,000 litres are R20.96 per cubic metre (per 1,000 litres).
  • Anything above that is R21.72 per cubic metre.

If the correlation between low prices and water scarcity are anything to go by – Eskom might just be the least of our problems.

Here’s another map of water stress:

And because we’re talking about water, an infographic:

Infographic by Seametrics, a manufacturer of water flow meter technology that measures and conserves water.

Yoh – the day that rolling blackouts turn into rolling dry-days. Although, I guess it’s already happening in Johannesburg’s northern suburbs. Fourways, thoughts?

And if you’re really keen for some doom and gloom – check out this report from the World Bank. In particular, the picture of the receding waterline of Lake Chad. Hectic.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at

In Defence of Eskom: History and BHP Billiton

When Judge Masipa announced on Thursday last week that she would not be finding Oscar Pistorius guilty of murder – dolis eventualis or otherwise – twitter reacted with usual aplomb by baying for her blood and generally bewailing the racism of this black female judge that was failing women everywhere by making them unsafe in their own homes. Among the intelligentsia crew, there was much citing of legal expert – although most tended to ignore that there were legal experts on both sides of the argument.

Even Donald Trump took time out from his self-reflection to do a little crowd-pleasing:

Screen Shot 2014-09-15 at 8.04.46 AM

For anyone that’s still enraged, I just caution you to remember that you’re in @realDonaldTrump’s camp. The man who spent his Sunday retweeting these:

Screen Shot 2014-09-15 at 8.09.14 AM Screen Shot 2014-09-15 at 8.08.49 AM

You need to be more horrified, is my feeling.

Anyway – this week, the court of public opinion will undoubtedly cast its collective eye back again at Eskom, after Government announced support measures yesterday in order to prevent Eskom’s debt from being cut to junk status by the ratings agencies (specifically, S&P – who had placed Eskom on negative creditwatch pending this announcement from Treasury).

So before the rants start to flood in about Eskom’s uselessness and government incompetence and how much we all hate state utilities for being state utilities, I thought I’d find some graphs.

The Graphs That I Found

The first graph, of peak demand versus capacity:

Screen Shot 2014-09-15 at 7.33.31 AM


From early 1994, the demand for electricity just started to leap upwards toward Eskom’s installed capacity.

Which might make you think that, well, economics, so, the increase in demand with less than equal increase in supply means rising prices, amirite? Well no. You’d be wrong. Electricity prices, as it turns out, stayed pretty low.

And here are some price comparisons at the end of 2008:

Screen Shot 2014-09-15 at 8.15.54 AM


So South Africa had pretty cheap power for almost a decade and a half – at prices that were below the cost of supply. And by cost of supply, I mean two things:

  1. The cash cost of supply (employee costs, coal, etc); and
  2. The capital cost of supply (machinery replacement, etc).

And that distinction is important: because Eskom could continue to operate at a cash profit (by having a price that exceeded the cash cost) while continuing to operate at a loss because of depreciation (which is the general proxy for capital replacement).

Which hardly sounds sustainable.

The History of Eskom

  • Under Apartheid, the prevailing economic policies of the time were still quite Keynesian – so there was a strong emphasis on State provision of cheap electricity in order to stimulate industry and mining.
  • In the 1970s, the idea of supplying electricity into the rest of Africa gave rise to large investment programs into new power plants, etc.
  • But by the time these power plants were completed, sanctions were happening, industries were struggling, and Eskom had a whole lot of spare capacity.
  • So in the early 1990s, Eskom entered into some supply contracts (specifically, with BHP Billiton) that allowed cheap access to the “spare capacity” electricity. Some of those supply contracts were concluded in 1992, guaranteed supply for 30 years at those low tariff rates, and kicked into place in 1995/6 (just have a look at that first graph again).
  • Also, when the ANC took over in 1994, there was no good reason for them not to continue using cheap electricity as part of their stimulus/development plans. After all – the electricity was there to be generated, the capital infrastructure had taken place, so why not give the population a head-start by connecting them to the grid?
  • So electricity usage started growing, and according to this report, Eskom declared in 1998 that it would reach full capacity utilisation in 2007.
  • Instead of investing in the public sector, government went down the route that would have been thoroughly recommended by the World Bank and the IMF: it tried to attract private investment into the energy sector, and thereby break Eskom’s monopoly over energy.
  • Private sector involvement, however, did not really happen – generally attributed to government insistence that it get to dictate electricity prices.
  • So when government suddenly realised that all was not well in 2004, they’d already lost 6 years of potential expansion, meaning that an energy crisis was inevitable (because, as I understand it, it takes 7 to 10 years to bring any new developments online).

The Poor Economic Fundamentals

So to be clear, if Eskom were a private entity, we’d be looking at it and saying:

  • Yikes.
  • They’re undercharging.
  • And they have even lower-tariff commitments to BHP Billiton.
  • They should have been investing in new power plants six years earlier than what they have.
  • And they’re facing increasing demand requirements (because of the undercharging).

In fact, we’d probably be calling for a government bailout of a key industry.

Let’s Talk About Those Supply Contracts

Back in 1992, who would have thought that Eskom could ever have run out of supply? They just had so much capacity – and any potential supply issues felt, well, decades away – and surely something could be done in the interim if absolutely necessary…. So why not enter into some supply contracts for the spare capacity? At least it would give Eskom the liquidity to continue maintaining the power plants.

So BHP Billiton established some aluminium smelters with all the cheap electricity, and proceeded to import aluminium ore from Australia, smelt it, and then export it straight back out for manufacturing (to China)*.
*I’m being flippant. But it’s a bit true.

According to this moneyweb article, that tariff today works out to R0.27 per kWh (today). Compare that to the R0.36 per kWh in that price comparison graph up top.

Is it any surprise then that 25% of South Africa’s power consumption is taken up by the non-ferrous and gold mining industry (and 14% is used solely by the non-ferrous metals sector), while it only contributes 4% to GDP (see this Deloitte report)? When you have these large aluminium smelters that are basically established solely to take advantage of low electricity tariffs?

Have a look:

Screen Shot 2014-09-15 at 9.36.41 AM


It looks like it would almost be better for government to hire all those non-ferrous metal workers, pay them their current salaries for doing nothing, and shut down that sector entirely. Easier than building another Medupi.

In the interim, we’ll have to accept that there is no such thing as cheap electricity. Because if we don’t pay Eskom directly, then it gets paid for through taxes and government bailouts.

Either way – I don’t think it’s entirely Eskom’s fault. Perhaps more of just a bad situation.

For more, read this article from the Daily Maverick. I think it’s excellent – and I’m sad that it’s not getting more attention.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at

The Trouble With Territorial/Nationalistic Claims…

As I tangentially mentioned yesterday, we’re seeing a lot of big claim happening in the world. Namely:

  • ISIS/ISIL/IS/IC and their desire to restore the caliphate of old.
  • Scotland, and the apparent desire of the Scots to dis-unite the Kingdom à la Mel Gibson (the latter day Mel Gibson, with all the prejudice and the drunkenness).
  • Russian and the Crimea (although that’s come and gone).
  • Russian and the parts of Eastern Ukraine that aren’t the Crimea (although that’s not really the official russian party-line)
  • Those Senkaku/Diaoyu-Dao islands in the South China Sea
  • The South China Sea in general
  • Palestine
  • Somaliland
  • The oil-rich region of Abyei (between Sudan and South Sudan)
  • Kashmir
  • Tibet

And those are just the ones that are currently a bit newsworthy. The Greeks will still hail Constantinople as their City; Taiwan is still an awkward conversation; the Falkland Islands will come up every time an Argentinian president feels like she needs to deflect attention from herself; et cetera and backwards into history.

Which is why I think it’s worth sharing this time-lapse video/vimeo clip of European statehood over the last 1000 years.

As a sort of general reminder that territorial land claims should be treated with a bit more skepticism and a bit less nationalism – especially given that today’s successful nationalistic movement is the seed for tomorrow’s fight by the nationalistic movement of the loser.

The paradigm needs to shift. And if I’m looking for a model, I’d say that the UK’s offer to Scotland of greater autonomy in exchange for staying in the union…sounds like a good one.

There’s a rule about business deals – something about how the best deals are the ones where everyone walks away a bit dissatisfied, but everyone also walks away better off.

It’s this extremist “I must get EVERYTHING” attitude that needs a time-out. Is my feeling.

Check out that clip. It’s pretty awesome.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at

Alibaba: Open SesaNYSE

There are strange things happening in the world:

  1. Scotland seems to think it can separate from the United Kingdom without ramification (f***wits, if you’ll pardon my cockney).
  2. There is the rising threat of an Islamic Caliphate (is this the 7th Century?).
  3. U2 just gave away an entire album on iTunes. To everyone. For free.

Oddly, I am most concerned by that third one. Because I have feelings on the psychology of free stuff. Mainly:

  • I usually like the music I buy.
  • Not least because I bought it.
  • The act of giving up some options in order to own that album means that I’m naturally more inclined to like it. My brain, being loss averse, doesn’t like to admit that it might have made a bad buy – it wants to like whatever was bought.
  • Whether this is irrational or not is a bit irrelevant. It feels, to quote Sheldon Cooper, both prudent and evolutionary: to generally prefer what I have because I gave something up to have it.
  • The flipside being that if I get something for free, then it’s not worth very much.
  • So I’m almost certain to like the new U2 album less than the other music in my collection (after all, I’m loss averse about the paid-for stuff).
  • I still buy most of my music.
  • Which does place me in the diminishing minority.
  • So perhaps, in the grand scheme of things, the world will just settle on a newer lower equilibrium of appreciation for music. An equilibrium that tends toward ambivalence.

Anyway – that was an extraordinarily long prelude to this other strange graph*:
*and I owe a shout-out to my friend Yoyo on twitter, for so succinctly putting together the graph with the comparisons.


What you’ll notice is:

  • Since last week Wednesday, Naspers’ share price has been dropping off.
  • Almost entirely aligned with Tencent’s share price.
  • And Amazon, for that matter.
  • While Yahoo’s share price has been rising.


Alibaba. And the release of its IPO prospectus on September 5.

Alibaba is a competitor to Tencent and Amazon – hence the drop in their share prices in anticipation of Alibaba’s IPO next week. A significant stake in Tencent is owned by Naspers – hence the Naspers share price decline in tandem. And Yahoo owns a significant chuck of Alibaba – hence its share price rise in anticipation of the IPO (and more on that in a moment – you’ll see why shortly).

Who/What Is the Alibaba Group?

Its offerings:

  1. itself – which is basically amazon for companies.
  2. – which is basically amazon.
  3. – the Chinese ebay.
  4. Alipay – the Chinese alternative to Paypal.
  5. multiple other businesses that have spun off from the above.

Talking of does something for Chinese manufacturing that is not really replicated elsewhere. Instead of having to fly to China and source a fixer and visit strange factories and hangout at karaoke bars and have your prices pushed around and your products altered without your consent – you can now just alibaba it.

Would you like to buy a Boeing 747?

Good news:

Screen Shot 2014-09-11 at 8.39.04 AM

Perhaps you’d like to buy 10 boeings for your new budget airline start-up. Or rent them.

Good news:

Screen Shot 2014-09-11 at 8.40.07 AM

Maybe you’d like to order a diesel tanker:

Screen Shot 2014-09-11 at 8.43.28 AM

Or ship in some metric tonnes (at least 10) of green coffee beans that may be arabica but could also just be arabic:

Screen Shot 2014-09-11 at 8.42.37 AM

Ball bearings?

Screen Shot 2014-09-11 at 8.44.55 AM

Copper piping?

Screen Shot 2014-09-11 at 8.44.47 AM

A Go-Pro alternative to sell at flea markets?

Screen Shot 2014-09-11 at 8.40.47 AM

All very possible.

So what does Alibaba do? It introduces you to suppliers:

Screen Shot 2014-09-11 at 8.45.52 AM

And then it allows you to pay into an Escrow account until the transaction is complete:

Screen Shot 2014-09-11 at 8.46.18 AMI don’t want to call it “revolutionary” – but I’ve read the horror stories. I’ve also occasionally written about them (see News Item 2 in this post).

At the same time as protecting the western buyer, Alibaba is also opening up the door of Chinese manufacturing to the small business guy – the one that can’t afford to fly to China to try and work out the process. It allows him/her to compete on price of input with relative ease. For those bold enough to use it – it could prove re-generative.

And I guess it helps that there’s an IPO going on. As a case in point: I’m suddenly looking at Alibaba with more than just casual interest. I’m not the only one. I can’t help but think that this whole IPO situation is, in part, a giant PR exercise to bring the option to the attention of those businesses that might use it most.

So I like the idea. Next question: and what about the price?

The Alibaba IPO

Some facts:

  1. This IPO is huge. In the magnitudinal sense.
  2. Alibaba plans to issue 320 million shares.
  3. The share price is expected to be between $60 and $66 per share.
  4. If it lists at 66 bucks a share, then we’re talking about a capital raising of $21 billion (which would value the company at around $200 billion).
  5. It would also make it the most valuable IPO ever.
  6. That said – most of the capital being raised is not actually capital raised at all. It will go to the selling shareholders (it’s here in the prospectus).
  7. The IPO is being underwritten by six (six!!!) banks – and they’re not taking a particularly giant fee for doing so.

So talking about the $66 per share:

  1. It is quite a high PE ratio.
  2. But weirdly, it’s almost on the nose in terms of the valuation prepared by Aswath Damodaran (a finance lecturer at New York University). Here (check out the middle box on the left side):

  3. Which is probably a function of those 6 banks – because if they’re all sharing slices of the pie, then pushing the share price higher collectively doesn’t really get them too much more pie individually (read Matt Levine on this). So there’s less incentive to overdo it, and we seem to be watching price and value coincide quite nicely.
  4. Also – it’s a giant issue of shares, relatively speaking. So there could be some concern that not all the shares would sell if it’s priced too high (oh – the horror).

Meaning that, in my book, Alibaba is probably one to get in on.

The caveats:

  • There are Chinese government issues – so you’re going to be buying shares in a Cayman holding company that has a side legal agreement and it’s all quite complicated – but nothing ventured.
  • Also, in corporate governance speak, Alibaba is still going to be Jack Ma’s baby, and you’re not going to have too much of a say. Which is probably a good thing – I mean, leaving the company in the hands of a man that built Alibaba from nothing into the world’s largest e-commerce company? There are worse things to live with.

Getting Your Alibaba On

Unless you’re an institution or very mate-y with some Wall St guys, you’re not going to be able to buy shares until Jack Ma has rung the NYSE bell. Your options:

  1. Give your broker some orders and get him to buy shares on the day (because the IPO is so large – it will probably take a while for the price to move too dramatically – although high frequency traders could make your buy uncomfortable).
  2. Buy Yahoo shares immediately! They, after all, own 24% of Alibaba.
  3. I believe that it’s also possible to buy some options… But that’s not really my vibe.

As for dates: the rumour is next Thursday (the 18th).


Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at

The Investor Diaries: Week 25

Another Wednesday…

For the background to this series of posts: herehere and here. And the summary:

  1. Small investors have some investing options.
  2. You can invest occasionally in lump sums (the once-off investors) or monthly through debit orders (the monthly investors).
  3. As for things to invest in, I’m a general fan of low-cost equity-index-tracker ETFs (as is Warren Buffett). But there are other possibilities as well.
  4. This series of posts is there to see which would work out well.
  5. Then there are some indicators at the end. Just to get a feel for what things are good to know.

The Once-Off Investors

Week 25:

Screen Shot 2014-09-10 at 8.19.10 AM

In pictures:

Screen Shot 2014-09-10 at 8.19.33 AM

The Monthly Investors

Week 25:

Screen Shot 2014-09-10 at 8.19.22 AM

In pictures:

Screen Shot 2014-09-10 at 8.19.53 AM

The Indicators

Screen Shot 2014-09-10 at 8.18.59 AM

I’ve added in the Current Account above, as that seems to be the primary reason for this little situation:

Screen Shot 2014-09-10 at 8.22.09 AM

The rand is weakening again against the dollar – on the news that the current account deficit (which was released on Monday) was worse than expected. That said, the dollar is also strengthening all on its own against almost everything – so there’s that. But the current account is mostly a function of trade – and the second quarter of 2014 was still filled with strikes, and the fallout from the strikes, and the fact that gold and platinum prices (see below) remained rather stubbornly low. All of which combined to: a whole lot less export, and hence the larger current account deficit.

If you’re wondering why that should affect things, here’s how I see it:

  1. The exchange rate is the price of rands in dollar terms.
  2. It’s driven by the demand and supply of dollars and rands, where the demand for rands is the supply of dollars, and vice versa.
  3. That market is driven by three main forces: trade, short-term investment and long-term investment.
  4. When trade is mostly in balance (ie. a very small current account surplus/deficit), it acts as a stabiliser to the exchange rate.
  5. When it shifts strongly in one direction or the other, it acts as a propellant for short-term speculative trade.
  6. Current account deficits indicate that the country will have a higher demand for imports than exports in the near future, which suggests a weakening of the rand-dollar exchange rate.
  7. And it’s almost self-fulfilling – because people then sell their rands in exchange for dollars, in anticipation of the exchange rate weakening, which causes the exchange rate to weaken.
  8. At least, that’s how I see it.
  9. Totally open to correction.

The bond yield and the ALSI are both pretty much as they were:

Screen Shot 2014-09-10 at 8.22.18 AM

Screen Shot 2014-09-10 at 8.22.53 AM


And on the commodities front, I feel like we need to find some new explanations for why things are as they are. We face some supply uncertainties in all three, and yet…

Screen Shot 2014-09-10 at 8.22.40 AM

Screen Shot 2014-09-10 at 8.22.30 AM

The trouble is, while I understand that there may be stockpiles of platinum and oil gluts from the US and Saudi – that’s just not how these markets are meant to work. People are irrational and speculative – and when they see supply shortages in the future (especially with something like platinum), they’re meant to overreact by driving the price up.

Perhaps it’s because the world of commodities is less overrun with high frequency traders and private individuals.

But still.

Anyway – until next week!

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at

South African REITs: The Investment Conversation

Last week, I talked about:


  • What I’d be concerned by if I were investing in a REIT.

Firstly, here is a list of listed SA REIT members (that you can trade on the JSE): That list comes with website links to property portfolios and financials and all the good stuff.

A Word About Net Asset Value

In the time that I’ve spent thinking about REITs, and reading their financials, I have been surprised by how often the individual trust units trade at large premiums to net asset value.

Here is why that is so surprising (to me):

  1. If you went to go and buy a house, would you ever look at the listed price and say “Hey, let me pay a lot more than that!”
  2. You would not. If anything, you’d put in a lowball offer.
  3. Particularly if you only wanted to buy the property for investment.
  4. Then consider a shopping centre.
  5. How easy is it, really, to sell a shopping centre?
  6. Not easy.
  7. Mainly because the only people that would be in the business of buying shopping centres are other investment managers from other REITs.
  8. And their main interest would be the income-generating capacity of said shopping centre (ie. how much is the rental yield relative to the capital investment?).
  9. The capital appreciation…would come from the growth in rentals over time (the capital value is how much someone would pay to own that property – and if everyone that would buy the property would be basing their valuation on rentals – then the whole thing is basically a function of rental income).
  10. Also, in most REITs, the properties in the portfolio are revalued each year to market value – and that market value is based on…rental income models.
  11. So everything in the REIT is kind of already fully valued.
  12. If anything, maybe a bit overvalued. After all, assets tend not to trade at their full market value, because value is not the same thing as price, and if you were going to sell a property that large, then it must be for a reason, which means that you’re open to negotiation.

I guess there would be some fluctuation around Net Asset Value during the year – because revaluations of property would only take place intermittently. But still – when it comes to large properties, rentals tend to be fixed by long-term lease contracts.

And you could also say that there is some premium attached to properties under development (where the full value of the property can only be realised once the properties are completed).

But still –  I’d be cautious of large premiums to net asset value. There is a kind of circular referencing taking place that makes me uncomfortable – income driving property valuations driving income…

Property As A Business

  1. You have a property.
  2. You rent it out to tenants.
  3. You incur maintenance costs and insurance and rates and such.

Based on that, you’d have some concerns:

  1. Regarding tenants:
    1. Who are these tenants (credit quality, reliability, etc)?
    2. What are they using the premises for (retail, business, factory, government use, etc)?
    3. What type of leases are they signing (long or short term, escalation clauses, etc)?
    4. How likely is it that they’ll move (are they growing rapidly, are they in decline)?
  2. Regarding operating costs:
    1. How high are they?
    2. Who are the main contractors being used?
    3. Is there sufficient maintenance take place?

I don’t think that a REIT evaluation is any different.

So Let Me Use Delta Property Fund (DLT:SJ) as an example 

Some charts and things from Bloomberg:

Screen Shot 2014-09-09 at 10.56.42 AM

Screen Shot 2014-09-09 at 10.56.54 AMAlright. So looking at that, some observations:

  1. The shares are trading at a 24% premium to net asset value, if you look at the price to book ratio of 1.24.
  2. Even though everyone seems to be expecting worse earnings (look at the estimated P/E ratio of 10.8 versus the current P/E ratio of 7.5).

[An Updated Note: so, if you read this post a number of times yesterday, you may have noticed that my math was all over the place, and I fluctuated between discounts and premiums and better earnings and worse earnings like I was high. After the fourth update, I realised that I was having a Windows day, and it was best to wait for the ctrl+alt+del of morning before I tried again. Here are my thoughts today:

    • There is something weird going on between Bloomberg and the Delta Fund Financials.
    • According to Bloomberg, the price-to-book ratio is 1.24 - which implies that the book value per linked unit is R6.45 (and this would have been the last book value given out in an official results release, possibly adjusted for any distributions and new share issues).
    • In the latest Delta Fund financials, the book value per linked unit is given as R8.87 - implying that the price-to-book ratio is 0.902, and that these shares are trading at a discount.
    • Based on my rough calculations - if the market cap is 3,608 million, and the NAV was 3,262 million - then the price to book ratio is 1.106. And if you include debentures as part of NAV (which one should - as these are linked units), then the NAV was 3,812 million and the price to book ratio is 0.95.
    • That said - it's been a long time since February, so it's possible (even probable) that in the interim, new distributions have been made and new linked units issued.
    • Make of that what you will. My gut tells me that almost no one is right - because we're 6 months into the financial year, and the NAV will have changed.]

So assuming that my interest is now piqued, I would then go and have a look at their website. And I would start by looking at these graphs:

Screen Shot 2014-09-09 at 11.06.00 AM

I do appreciate a government contract. And it seems that Delta has plenty of them.

Screen Shot 2014-09-09 at 11.06.23 AM

And I like government contracts with good reason. You’ll notice that they get more rental from government than their proportion of Gross Letting Area (GLA) would imply.

Screen Shot 2014-09-09 at 11.06.09 AM

Then let’s have a look by geographical area. Lots of Gauteng and KwaZulu Natal. I might be a bit concerned by the KZN exposure. It’s not really the commercial heart of SA…

Screen Shot 2014-09-09 at 11.06.40 AM

And that’s demonstrated by the disproportionately low gross rentals…

Screen Shot 2014-09-09 at 11.07.05 AM

Look at all those nice long lease agreements (44% of which expire beyond 2017). Also, look at all those great rental escalations with government.

Then I’d go and look at the financials from 2014:

Screen Shot 2014-09-09 at 11.28.11 AM

And I’d wonder whether operating expenses of 23% of rental income were normal or not…

This would require some more digging (in which I’d discover that Growthpoint Properties have an operating expense that’s 33% of rental income!).

And then I’d remind myself that I prefer government offices to shopping centres because of all the empty stores in Cresta and Sandton and Hyde Park Corner… But again – perhaps that’s just me.

And if I did decide to buy some units…

Two ways about it:

  1. Call my stockbroker; or
  2. Sign up for FNB investor.

Hope that helps!

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at

Higher Education, Student Debt, and the Lifetime Earnings Debate

When Felix Salmon left Reuters to join the team at earlier this year, people raised eyebrows. After all, he had a successful blog and a massive following – why would he abandon some of that?

His justification:

“The reason why I am going to Fusion is that they have the ability to help me communicate in the ways that people are going to consume information in the future. Which is not 1,500-word blocks of text.”

Which I think is a really valid point – he said ironically in this block of text.

Anyway, since then, I’ve been checking in at every so often to see what he meant. And this weekend, I discovered this interactive illustration of the relationship between student debt, education, and lifetime earnings. Which entertained me for a good 20 minutes.

Some things I learned:

1. Men with standard degrees seem to have more money in their lives than people with Masters Degrees and Phds. But less money than men with MBAs. Eventually.

Screen Shot 2014-09-08 at 8.21.47 AM


2. It’s better to be a college dropout than a community college graduate, or a graduate from a “For-Profit” college (!!).

Screen Shot 2014-09-08 at 8.23.29 AM


3. Sorry ladies.

Screen Shot 2014-09-08 at 8.24.56 AM


4. Sorry ladies with MBAs even.

Screen Shot 2014-09-08 at 8.25.51 AM


5. Men with MBAs have a range of great prospects.

Screen Shot 2014-09-08 at 8.26.36 AM


6. Ladies with MBAs – less so.

Screen Shot 2014-09-08 at 8.26.48 AM


7. We should all have become doctors.

Screen Shot 2014-09-08 at 8.29.08 AM

Here are a few more “featured charts” from the Fusion writers.

But some observations:

  1. The data used here comes from
  2. Which is not a criticism – it’s just based on historic data drawn from survey forms completed by individuals that come to the website to find out whether they’re earning enough in their current jobs.
  3. This could skew the result in favour of those that are underpaid (after all, they’d have the greatest incentive to come and check things).
  4. Even if the data is very up-to-date, from what I can tell, it still implicitly assumes that today’s salaries are static, and therefore the best indicator of future salaries. Which might not quite be the trend.
  5. For example, if doctor’s salaries are so high relative to everything else, you might get more of today’s high school students trying to get into medicine, which could affect the whole equilibrium of supply and demand.
  6. But still, I was entertained.

Check it out.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at