Suggests MTI has taken in deposits of R4bn, while founders reportedly received R309m. From Moneyweb.

A group called Anonymous ZA dumped what it claims to be the entire transaction history of Mirror Trading International (MTI), which has been accused of being a Ponzi scheme – a claim denied by the company’s management.

MTI disputes the accuracy and completeness of the data dump. The Financial Services Conduct Authority (FSCA) says it is aware of the data leak and is looking into it. Last month the FSCA said it was investigating the activities of MTI for conducting unlicensed forex trading, and its claims of returns as high as 10% a month. The FSCA advised MTI members to ask for their money back.

Read: FSCA investigating Mirror Trading International

MTI’s argument

MTI’s head of marketing Cheri Marks confirms there was a security breach of the company’s administrative portal. “Yes, it was a criminal act. Yes, we will be pressing charges and everyone publishing the personal information illegally obtained we will refer to our legal counsel. The security breach has been fixed and the information leaked is inaccurate and incomplete at best.”

Marks says MTI is fully compliant with all relevant laws, and is the subject of unwarranted smears and rumour mongering over its referral marketing methods (where commissions of 10% are paid for introducing new members). These commissions are paid by MTI and are not deducted from members’ deposits.

“We have 170 000 members worldwide with roughly 17 000 bitcoin. There is nothing in law that prevents us from using referral marketing. No-one has ever asked for a withdrawal and not received it. We get people daily asking us for withdrawals and we honour all of them without fail.”

She adds that the FSCA has been given access to live trades to prove that profits are generated by trading rather than new bitcoins receipts, as has been claimed by some. “We don’t make promises about returns, and we explain the risks, which is what any responsible company should do.”

The company has an 18-month verifiable trading history with only one negative day of trading, she adds. Some have questioned whether this is possible, to which Marks replies: “The bot is an amazing development. Sure, it makes many losing trades and results vary, but only one day since we started has it ended in a loss.”

When MTI stopped trading forex, it shifted to crypto trading and “our members are happy and informed,” says Marks. “We chose to be in relatively unregulated markets like crypto for the very reason that we cannot suddenly be stopped from trading and have our accounts frozen. We are helping over 170 000 people grow their bitcoin portfolios at a time when governments have failed them, the banking system has failed them, employment is at an all-time low and businesses are failing by the minute.”

Warning signs

However, FSCA is sticking to its guns.

“Our advice had not changed since we issued our statement on MTI last month,” says Brandon Topham, head of investigations at the FSCA. “We recommend clients ask for their money back without delay. Our investigation into the company is ongoing.”

The fact that MTILeaks was able to grab the entire transaction history, apparently without hacking, points to “low budget” and shoddy website security, according to one source who asked not to be named.

“All data was acquired using simple enumeration and scraping techniques on the mymticlub.com site. No hacks were performed because the lack of basic security did not require it,” says a statement by MTILeaks.

“If your bank gave you access to any other customer’s data in such an insecure fashion, would you trust them to trade with your Bitcoin?”

But what’s inside the database may be of greater interest: it suggests the company has taken in deposits of more than R4 billion since inception and paid out R309 million to the founders. Total withdrawal requests by members reportedly total R2,9 billion, leaving “money in the bank” of R1.3 billion after withdrawn amounts and cancelled withdrawals are accounted for.

Members push on

Several MTI clients contacted Moneyweb when we previously reported on the company to reassure us they were receiving returns as promised.

Read: Get-rich-quick scheme pulls a crowd, despite regulators calling time-out

One MTI client says he was able to verify forex trades reported by the company as accurate. The company says it has stopped trading in forex in an effort to remain compliant with regulators and switched to trading bitcoin using computerised algorithms. That claim has also raised eyebrows in the crypto community.

Switching from trading one asset class to another virtually without pause – and apparently without a break in profits – has the skeptics is disbelief.

In a statement issued last month by Globalcrypto, MTI refuted allegations that MTI’s multi-level marketing systems is a Ponzi scheme, and that “members are able to add or withdraw their funds (bitcoin) at any time, with no complication or fees.” CEO Johann Steynberg added that MTI wants to change the reputation of the online passive income generating industry and ensure that the company is professionally managed and complies with all regulations.

Yet regulators in Texas and Canada recently sounded the alarm over MTI’s business practices. The company is accused of making misleading claims about its returns, while the Quebec Financial Market Authority listed MTI as a company that solicits investors illegally. MTI clients are rewarded with 10% commissions of new sign-ups.

Read: Joining MTI may end in tears

A separate analysis of MTI by South African blockchain researchers shows that by the first week of August 2020, a total of 15 351 bitcoin had been sent to various addresses controlled by MTI. That’s worth $170 million (R2.78 billion) at current bitcoin prices.

MTI only accepts deposits in bitcoin. Some local exchanges have reported a spike in demand for Bitcoin in recent months, at least some of which is destined for MTI. “We started to notice this some months back and began questioning people who appeared to be elderly and buying Bitcoin to participate in MTI. Though we didn’t have much information at the time, we advised caution,” says one crypto executive who asked not to be named.

All bitcoin transactions are visible on the blockchain, so it is possible to trace bitcoin destined for MTI and where it originated. The majority of these bitcoin are purchased on crypto exchanges such as Luno, VALR, Binance and Coinbase and then shipped to addresses controlled by MTI. Crypto exchanges have no control over the destination of bitcoin sent by customers, though some have started to question clients and advise them against it.

The data dump suggests that of the bitcoin received by MTI, a total of 3 755 appear to have been sent to online sports betting site Cloudbet.com and a further 845 to FXChoice, a Belize-based forex trading broker.

In June FXChoice said it blocked MTI’s trading account after investigating its high return claims and its use of multi-level marketing to attract new customers. “Before the account was blocked, [MTI] executed just a few trading operations, which were performed manually, large and incurred substantial losses,” says a statement from FX Choice, adding that it is still waiting for documents to confirm the source of funds.

Marks says the FXChoice statement is misleading. “We chose to move our funds to another broker who understands crypto before FXChoice made that statement. FXChoice is a forex regulated broker and it has frozen a few hundred bitcoin belonging to MTI shareholders – not member-owned bitcoin. We didn’t want to be at the mercy of a regulated broker that has to act on rumours generated in the press. We are in the process of supplying the financial information FXChoice requested.”

The MTILeaks database shows a payout of R1,45 billion to members, of which R360 million was in the form of bonuses for referring new members. Marks says this is also misleading since attributing a rand value to bitcoin withdrawals depends on the timing and the price of bitcoin, which is changing all the time.

“MTI has never and will never discourage members from withdrawing, we want them to see the fruits of our service to them. In August this year MTI effected 34 734 individual withdrawals to the value of 5933.85 bitcoin without any limitation. The fact that the biggest issue with MTI is our CEO’s willingness to share the bot’s functions with members is ridiculous to say the least.”

“The ‘shortfall’ in bitcoin claimed to be factual by Anonymous ZA is based upon the assumption that MTI is not trading, which is not the case. MTI remains focused on servicing its members and delivering on our brand promise, which we have done an exceptional job of to date,” Marks says.

In a statement issued to members last month, Steynberg writes: ”The time has come, to for once and for all, address and reframe the reputational perception issues of regulators, the media and potential members about this industry, through MTI demonstrating that a genuine bona fide business and brand using an innovative business model of integrity can exist and grow sustainably in this sector. I am personally very determined to see this through and together with and supported by MTI’s professional advisors, this process is now underway.”

MTILeaks is available here (you need the Tor browser to access it).

Far away from Sandton and Constantia, the water does not flow and dinner by candlelight is a nightly affair. From Moneyweb.

One has to marvel at the resourcefulness of South Africans grown accustomed to life without running water and with candles as a source of light.

They seem to get on with life as best they can, with private contractors stepping in to remove refuse bags for a small fee, and farmers trucking in borehole water to towns like Bethal in Mpumalanga.

Where local government has all but given up, private enterprise fills the void.

Three weeks ago, angry residents of Bethal and nearby eMzinoni in Mpumalanga – black and white – expressed their outrage over power outages lasting up to 12 hours a day by burning tyres and blocking entrances to the town. You know you have a problem when the EFF, ANC, DA and FF+ supporters join in the tyre burning.

Political alignments discarded

Political alignments are discarded in times of crisis, and local businesses have been stepping into the role government promised to fill during lockdown, by providing food parcels to the poor.

Bethal resident Michelle Rademeyer has run a soup kitchen for years, but never has it been more needed than this year, during lockdown. Her notable soup kitchen helped many of the poorest in this agricultural town avert starvation.

“A lot of people would like to move to other towns like Secunda, which are not as badly run, but rental costs there are higher,” she says. She will stay and continue running her catering business in Bethal, relying on gas and batteries to make it through the dark nights.

Read: Is this the future of small town South Africa?

Residents of Bethal, which falls under the Govan Mbeki Municipality, have complained of up to four power outages a day. Residents say the load shedding is not the fault of the municipal manager, but of Eskom’s ‘maximum notification demand’, where the lights are switched off when electricity usage exceeds a predetermined cap.

And when the lights go out, the water pumps and cellphone signals stop working.

“Buy a generator,” was the advice given by a Govan Mbeki Municipal call centre operator to one resident asking when the power would come back on. Refuse remains uncollected for the last three weeks, and many of the poor in nearby eMzinoni are living on bread, if they can afford it, says Rademeyer.

Written campaigns don’t work …

Tyre burning seems to get the attention of local authorities far more effectively than letter-writing campaigns. The protesters were threatened with arrest if they continued – which they did, at least for a few days.

The Govan Mbeki municipal manager was suspended recently by the executive mayor for apparently doing a poor job, but Rademeyer isn’t so sure. “I think the municipal manager Felani Mndebele was the one person here who was trying to do something to improve conditions….”

However Mayor Thandi Ngxonono is apparently sticking to her story that the municipal manager is to blame for the “poor service delivery” – a clichéd obloquy for failed municipalities.

When local governance has broken down, the finger-pointing starts.

Dangerous territory

Last year in Mogalakwena municipality in Limpopo, two local ANC leaders, Valtyn Kekana and Ralph Kanyane, were apparently executed after investigating alleged corruption. Kekana was chair of the municipal public accounts committee and was shot in a crowded taxi rank hours after tabling a report into corruption in the municipality, which was declared by the Auditor-General (AG) to be one of the worst in the country after running up R1.1 billion in irregular spending. Residents were outraged at the killings and many believed it came from a rival faction within the municipality. Many are calling for the mayor to be removed.

Two years ago the AG pulled his staff out of Emfuleni, south of Joburg, when one of his auditors was shot. Some go about their work with police escorts.

Read: AG: How to improve the state of our municipalities

One mayor of an ANC-run municipality, who shall remain nameless, told us of receiving a visit from local mafia businessmen within days of assuming her position.

The purpose of the visit was to ensure that the corrupt contracts under the previous administration would remain in place.

Like many other mayors battling corruption-infested administrations (they do exist), she seldom moves without bodyguards.

Corruption creep

A million miles from Sandton and Constantia, many rural municipalities have become orphanages for discarded cadres who couldn’t make it on the national stage.

It’s time, says Ratings Afrika analyst Leon Claassen, to replace the cadres with professional managers and implement systems that have proven themselves workable in many parts of the country. It will be a slow and painful path back to solvency, but there is no other option.

Read: Other than in the Western Cape, municipalities are failing miserably

Survey after survey repeats the same mantra. Quality of life where it really counts, at the local level, is degenerating. Says Rodger Ferguson, former Cope parliamentary researcher: “The state of governance at the municipal level is 10 times worse than it is at provincial or national level. In just about every municipality you’ll find a symbiotic relationship between the local political gatekeeper and some external Gupta-like groups.”

In the Greater Tzaneen Local Municipality, water and power outages are the primary concern for local residents. The dams in many parts have run dry and potholes have gone unrepaired for years. At the stroke of a pen, Maruleng Municipality in Limpopo changed property valuation rates from agriculture to commercial as a way of bumping up revenue. It’s a tactic that many municipalities will be considering as a means of financial salvation. The problem is getting residents to pay at a time of grinding economic depression.

What to do?

Ferguson has spent the better part of 20 years researching ways to improve local government, and even he seems to be consumed by apathy.

“I’d hate to be an official in local government today,” he says. “You either capitulate to the crooks or you get hounded out.”

He recounts his time as a municipal government advisor in Kwazulu-Natal and intersecting with corruption at the local level. “I’d be driving down the road and a bakkie with tinted windows would pass by and I would cringe, expecting a bullet to fly through the window.”

Ferguson believes local governance is getting worse, especially now that National Treasury is under huge financial pressure. During lockdown it allocated R20 billion for local government bailouts, but this tap will eventually run dry.

Citizen Satisfaction Index

The latest South African Citizen Satisfaction Index survey conducted by Consulta looks at eight metros and finds Cape Town has the best citizen satisfaction rating for the seventh year in a row.

“Overall, the results show that citizens’ expectations of local government delivery of services are very far from being met, with a particular concern around the trend in the widening of the gap of expectations to quality,” says Ineke Prinsloo, head of customer insights at Consulta.

A major contributor to the below-par performance is the negative perception of reliability of services.

“Citizens’ expectations are increasing, and the index’s year-on-year decline points to an increasing dissatisfaction with the perceived decline in quality in service delivery.”

What are citizens’ main concerns? Water and electricity supply, refuse removal, unkempt streets and billing.

Precisely the services that municipalities are supposed to deliver.

Born in Cape Town, Luno came to dominate the crypto market in Africa and has now been bought by Digital Currency Group. From Moneyweb.

Having built a customer base of five million in more than 40 countries since launching in Cape Town in 2013, Luno came to dominate the cryptocurrency market in SA and other countries such as Nigeria.

Last week the company announced that it had been 100% bought by US-based Digital Currency Group (DCG), which has investments in some 160 companies involved in cryptocurrency and blockchain development.

AlphaCode, the fintech investment arm of Rand Merchant Investments and an early investor in Luno, announced that it had sold to DCG having achieved a 25% to 30% internal rate of return (IRR).

Luno was first into the SA market, introducing a million South Africans and five million people across the globe to Bitcoin.

It has since introduced trading in other digital assets such as Litecoin, Bitcoin Cash, Ripple and Ethereum.

SA has one of the highest Bitcoin penetration rates in the emerging world, with nearly 11% of internet users having purchased crypto assets.

This compares with 20% of the UK population, and about 25% across Europe.

Luno was founded by Marcus Swanepoel (CEO), Timothy Stranex, Pieter Heyns and Carel van Wyk, who departed the group in 2019. The existing directors will stay on, helping to implement the next phase of growth, which promises to be nothing short of a financial revolution.

Aiming for a ‘better financial system’

The company says it wants to upgrade one billion people worldwide to ‘a better financial system’ by 2030.

Luno, like many others in this space, sees a vastly different future for money in the relatively near term, where cryptocurrencies and digital assets – including ‘tokenised’ stock exchange shares – become the norm.

Says Swanepoel: “As the industry evolved over the past few years, it became clearer to me that the most effective way to upgrade the world to a new, better financial system – at scale – is by having a company and business model that is deeply integrated across the entire industry and value chain, and importantly also one where these parts are able to maintain their own identity and brand while ‘loosely coordinating’ between one another.

“There is only one crypto company in the world that has managed to lay the right foundation for this, and that is DCG,” says Swanepoel.

“So when the opportunity came up to become a fully-fledged part of the DCG family, we took the opportunity without any hesitation.”

For Luno, as with most crypto exchanges, 2020 was a record year in terms of new customer sign-ups, spurred by the Covid-19 pandemic and fears over the future of money.

“It’s been an astonishing growth story over the last seven years,” says Luno GM for Africa, Marius Reitz.

“We were launched at a time when people didn’t know much about Bitcoin or cryptocurrencies, so a lot of our early work was educating the public on cryptocurrencies, their risks and benefits. We went from nothing to five million customers in seven years in more than 40 countries, and we [tend] to dominate crypto trading in some of those countries, so it was inevitable that we would attract attention from serious investors.”

Read: Naspers-backed crypto platform Luno starts African hiring spree (Jun 2019)

Luno is now headquartered in London, with regional offices in Cape Town and Singapore.

No price has been disclosed for the Luno acquisition, though DCG first acquired a small stake in 2014 during an early round of fund raising. Other early investors were Naspers and Balderton Capital.

Like many investors in this space, DCG sees a radically different future for money based around technologies such as Bitcoin, Ethereum and blockchain, and Luno will form a key part of its growth strategy.

Globalcrypto reports that DCG enables its subsidiaries to operate as independent companies, providing leadership, partnership, and investment capital to help scale the businesses.

The Luno leadership team will remain entirely intact and Swanepoel will lead acquisition efforts in his role as CEO.

Reitz says Luno’s future plans include deeper penetration of the UK and European markets, and the US at a later stage. The company recently launched a crypto exchange in Australia, and has a presence in several European countries.

Read: Naspers-backed Luno takes Bitcoin-trading exchange to Australia

Dominique Collett, head of AlphaCode, says Luno is the company’s first investment exit, and was well within its target internal rate of return of 25% to 35%.

“We have enjoyed working with the Luno team and still believe in the potential of cryptocurrencies and Luno’s solid growth potential. We supported management selling the business to DCG as it is very well positioned to leverage the platform. We wish the Luno team and DCG all the best and will be watching their future success with interest.”

Rhodium now accounts for up to a third of their revenue. From Moneyweb.

Looking at the share price charts of Implats and Amplats, you’d imagine the lockdown had no impact on production whatsoever.

That’s not true: Amplats suffered a 25% drop in production in the first half to June, and reported a 585 000 ounce Covid-related loss of output. The impact on Implats was less severe, with tonnage and refined output down 14% due to Covid-19 for the full year to June.

The results announced last week by Implats were stunning. Buried in the detail is the impact of a formerly insignificant metal called rhodium, which accounts for just 6.5% of Implats’s output but 25% of revenue. It’s a similar story at Amplats, where rhodium accounts for 7.5% of platinum group metal (PGM) output but 34% of revenue.

Source: ShareMagic

The rise of rhodium

In January rhodium prices were already considered absurdly high at over $8 000/oz, with many analysts expecting a correction. That has not happened. Not by a long shot. This week rhodium traded at $13 300/oz, a 10-fold rise over the last decade.

Platinum, on the other hand, is down nearly half since 2010. The palladium price is up eight-fold over the same period.

Platinum has been steadily eclipsed by what were previously considered by-product metals – rhodium and palladium. Ironically, platinum fell victim to its own success, having traded at a high of over $2 200/oz in 2008 during the commodity super-surge.

Car manufacturers saw the risk of being dependent for virtually all platinum supplies on a region of the world where labour relations were souring and politics uncertain.

Manufacturers started switching to palladium, used in the manufacture of autocatalysts for petrol-driven vehicles, which traded at a substantial discount to platinum a decade ago.

This brought Russia firmly into the PGM driving seat as it had stockpiled palladium for years as a by-product of its nickel mining. Those stockpiles were unwound over the next few years, and as demand started to outstrip supply, the palladium price shot up more than four-fold.

Huge impact

SA producers account for more than 80% of global rhodium supply, a result of the relatively unique PGM geology in the sub-continent.

Though it accounts for a small percentage of total ounces produced, the impact on the bottom line is huge.

This is reflected in the latest results from Implats, which reported a four-fold increase in free cash flow for the year to June – with palladium accounting for 37% of its revenue, rhodium 25% and platinum 27%.

Source: ShareMagic

Johan Theron, Implats group executive for corporate relations, explains how a little bit of rhodium goes a long way.

“The importance of rhodium has exploded since the VW emissions scandal [where VW was found to be fiddling emissions from its vehicles]. Rhodium used to be a relatively insignificant part of our total business mix, but now it is substantial, because it is used as autocatalyst element for both diesel and gasoline vehicles to reduce nitrous oxide emissions. Stricter emission standards on both diesel and petrol vehicles have pushed the rhodium price to where it is today.”

Historically, platinum accounted for about 75% of Implats’s revenue. It now accounts for slightly less than half of all PGM ounces produced but just 27% of revenue. The changing dynamics of the PGM market, and a steady shift away from diesel, are reflected in the financial performance of producers.

At the PGM Industry Day in Johannesburg this week, Minerals Council of SA chief executive Roger Baxter outlined the devastation caused by the lockdown to PGM production – by June, it was down about half since the start of the year, though producers say production has ramped up substantially since then.

Sources: World Bank, Stats SA, SA Reserve Bank, Minerals Council SA

Baxter also highlighted the risks facing PGM producers who face unrelenting inflation pressures while changes in rand PGM prices are subject to wild swings.

For now, the inflationary pressures are overwhelmed by lofty commodity prices. PGM producers will be hoping rhodium and palladium’s crazy run is far from over.

Potential buyers of SAA might want to study the Acsa case before taking the plunge. From Moneyweb.

As South Africa tries to drum up foreign investor interest in South African Airways (SAA), potential buyers would be well advised to study the case of the “oppressed minority” shareholders in Airports Company of SA (Acsa), which manages the country’s nine largest airports.

That’s according to Alun Frost, who is advising minority shareholders who were enticed into buying 4.2% of Acsa two decades ago on the promise that the company would be privatised and listed.

That never happened, and the minorities want out. Three years ago it seemed both sides had come to an agreement, which was made an order of court, with the only question remaining: at what price?

SAA, now in business rescue, is flogging off its surplus fleet and looking for equity investors to refloat the airline. “My advice to anyone considering buying SAA is to take a close look at the case we have been fighting against the government to be bought out at a fair market price,” says Frost.

Broken promise, compromise, backtracking 

“We were originally promised a listing for Acsa, which never happened. Government took the minorities’ money and left us to hang, fighting us every inch of the way when all we wanted was fair market value for our shares,” adds Frost.

“This does not look good for any promises made by the government to outside shareholders or foreign investors going forward.”

After much to and fro in court, it was decided to appoint an independent valuer to come up with a price. Both sides agreed on RisCura as the independent valuer, and it came up with a price of R78 a share, equivalent to R1.6 billion if 4.2% of minorities chose to sell.

The deal was made with government’s consent, with Acsa agreeing to buy back the minorities’ shares. This was then made an order of court.

Once RisCura had finalised the valuation, Acsa’s major shareholder (government) leapt into the fray, arguing that the proposed share buyback would violate the Public Finance Management Act (PFMA) and devastate Acsa’s finances.

Read: Airports Company heads to court over shareholder dispute

Government asked the Johannesburg High Court to rescind the court ordered agreement, and last month got its wish when Judge Seena Yacoob granted the rescission application on technical grounds.

The minorities are now appealing that decision. Final resolution of the case is still probably some years off, with any decision likely to be appealed to the higher courts by the loser. It has already been five years since the case was first launched.

Minorities – all of them empowerment shareholders funded by pension funds – have pointed out that the share buyback agreement does not violate the PFMA, which only applies to transactions involving “significant” shareholdings. This means National Treasury does not have to be notified, nor does the finance minister have any legal interest in the case. Judge Yacoob disagreed, and ordered that the minister be joined to the proceedings.

The government also claimed this agreement bound it to a future financial commitment, which minorities say is untrue as Acsa is self-financing.

“Given the quantum of funds involved, government probably feels it is worth it to spend up to R50 million on legal fees to fight this case and deny minorities fair redress,” says Frost. “This doesn’t look good for anyone investing in SA on the promise of privatisation, now or in the future. The government can change its mind at any time and try to litigate its way out of broken promises.”

‘Oppressive conduct’

The RisCura valuation included compensation for “oppressive conduct” as defined under the Companies Act. This is where one or a group of controlling shareholders acts in a way that oppresses minority shareholders.

The oppressive conduct claimed by the minorities included the commercially irrational decision by Acsa to build the new King Shaka International Airport (KSIA) in Durban under pressure from government, with the project costs more than doubling to almost R10 billion. KSIA only made a R10 million profit in 2019 while operating at 80% capacity.

This was followed by another “irrational” decision by the dysfunctional regulatory system to drop airport tariffs. Frost says this was inconsistent with Acsa’s objective to earn a commercial return in each financial year.

Read:

We pay dividends and don’t need bailouts: Acsa boss (Sep 2019)

Acsa seeks state guarantees for $594m in new debt (May 2020)

Acsa to slash capex budget by 95% (Jun 2020)

Airports group ACSA gets new funding, shelves projects (Aug 2020)

Acsa originally offered to buy back minority shares at R12.87 per share, which was less than half of what they were worth on an audited net asset value basis. On this basis, minorities argued that Acsa’s balance sheet was materially overstated and should be impaired by about R6 billion.

The lesson to be learned in all this for potential SAA buyers: caveat emptor.

Source: Acsa 2019 annual report

AdvTech and Curro demonstrate remarkable agility during lockdown. From Moneyweb.

If the Covid-19 pandemic has taught us anything, it’s that online education has a future. How big a future remains to be seen, but private colleges have been able to adapt to lockdown with remarkable speed.

There has been debate among academics about the future of online learning in Africa. All it appeared to need is sufficient content and the ability to reach the farthest flung corners of the continent. Education is the great equaliser, but for that dream to flower, the internet would have to be cheap and ubiquitous.

Read: International study shows where SA’s education system needs more help

In reality, that dream is still some way off, but the alacrity with which private colleges have adapted to the new environment should be studied by our own Department of Education.

AdvTech suprises itself

AdvTech’s results for the six months to June 2020 were better than many expected, in large part due to the speed with which it was able to transition to online learning during lockdown.

“We surprised ourselves. We transitioned to an online format within three weeks of the start of lockdown, and we were able to offer a fully interactive experience which meant minimal disruption to the academic programmes,” says AdvTech CEO Roy Douglas.

Though Covid knocked revenue by R88 million, and added R72.5 million to doubtful debtors, overall student numbers are up 4% over the same period last year – despite losing 8% of pre-primary school enrolments and 1% of primary school enrolments. SA high school student numbers were up 4%, versus 12% for the rest of Africa.

These figures are similar to those of Curro, which last week reported a 5% growth in student numbers over the same period in 2019.

Curro’s student retention was buttressed by discounts amounting to 12.6% of revenue, which compares with 7.5% for the same period in 2019.

Embracing the new age

Private schools have embraced the digital age, with Curro connecting 60 000 devices to its network and dishing out 22 terabytes of data daily during lockdown.

AdvTech started investing in an online learning management system in 2015, then got buy-in from teachers and lecturers, backed by a centralised academic faculty and IT team to ensure students would be able to complete the full academic curriculum for the year.

Does this mean the future of education will look more like Zoom than classroom?

“I don’t think so,” says Douglas. “I see more of a blended model, using face-to-face tuition alongside online delivery. A very large percentage of our students couldn’t wait to get back to school once the lockdown was lifted, and this tells us you cannot displace the classroom environment and the social interaction which is a vital part of education.”

The disruption due to lockdown is evident in the results of both Curro and AdvTech, which eased into online tuition after hard lockdowns in Kenya and Botswana, as well as SA.

In Kenya, the government abandoned the entire academic year for the national Kenyan curriculum schools, and has stopped all schools from having students on site until 2021. AdvTech’s Crawford International School in Kenya was able to offer the Cambridge international curriculum online, while its Makini schools in Kenya had to develop an e-learning curriculum due to the government’s school closure until 2021.

AdvTech’s revenue for the six months to June 2020 was up 13% to R2.9 billion, with tertiary facilities and schools contributing roughly R1.2 billion each. Revenue from the job placement business was R490 million, which was 20% up on the same period a year ago – due mostly to business from the rest of Africa.

Overall, earnings before interest, tax, depreciation and amortisation (Ebitda) was up 5% to R610 million (2019: R580 million). No dividend was declared for the interim period, while the focus shifts to building balance sheet strength to help it ride out the uncertain times ahead. Capex for the year will be around R300 million.

In contrast, Curro’s revenue for the same period went up 7% to R1.59 billion (2019: R1.48 billion), with Ebitda increasing 12% to R466 million (2019: R415 million).

Rationalisation

“We expect the socio and macro-economic environment to remain weak in South Africa and have therefore taken the tough but necessary decision to further rationalise the business without harming it or destroying shareholder value,” says Douglas.

“We have considered the business environment, the expected impact of the economy on our stakeholders, on fees and collections, as well as the capital expenditure needs of the group in the short to medium term.”

A year from now we will have a better idea of how permanent online learning has become. But there seems little doubt it will be a crucial part of private education going forward.

Interest in Mirror Trading International seems undiminished, in spite of three strikes from three different regulators. From Moneyweb.

Mirror Trading International’s (MTI’s) promise of 10% monthly returns started getting the attention of crypto traders back in January. For seasoned traders, these claims failed the ‘smell test’, and they started talking about it online on IT news website MyBroadband.

Then two months ago Brandon Topham of the Financial Services Conduct Authority (FSCA) started looking into suspect claims being made on WhatsApp chat groups about the company’s incredible returns.

Read: FSCA investigating Mirror Trading International

As Moneyweb reported last week, the FSCA is investigating MTI and has urged the company’s clients to request their funds back as soon as possible.

That’s pretty blunt advice from the normally circumspect FSCA.

In July, the Texas Securities and Exchange Commission (SEC) issued MTI with a cease and desist order on the basis that its claims were materially misleading. The Quebec Financial Market Authority has also listed MTI as a company that solicits investors illegally.

Happy customers …

The company has reportedly signed up more than 130 000 customers around the world, and its defenders – and there are plenty of them – argue that no one has lost any money with MTI.

The following interaction on MyBroadband is commonplace:

“Anybody who is unhappy can withdraw all their funds immediately and leave, nobody is holding you back! This continued attack is just a reflection of a justifiable Fear Of Missing Out (FOMO)? You are showing your jealousy!” says Bruce, an apparently happy MTI client.

Replies Stevie: “Do you really believe that what you seeing on your [MTI trading] dashboard is as a result of a real trade, that like the vast majority of them somehow managed to beat every statistical law and probability, and have a positive return?”

The words ‘Ponzi scheme’ come up frequently.

One critic was reportedly served a cease and resist letter by an attorney representing MTI. It’s getting ugly.

Astonishingly, MTI has reportedly pulled in close to R3 billion from investors, using multi-marketing teams who are rewarded with 10% commissions on new sign-ups. It also claims that the 10% commissions are paid out of profits rather than the investors’ capital.

“Empower Thyself financially with the spiritual currency of bitcoin and ensure your future by investing your bitcoin and earning 10% compound interest per month,” says the company’s Facebook page.

Promised returns

Is it possible to make 10% a month with bitcoin?

“Absolutely,” says one trader who asks not to be named. “It’s even happened in a single day that bitcoin has gone up 10%. But when you promise to do that month after month, then it starts to look like [a lie].”

Read: Joining MTI may end in tears

Just prior to the FSCA warning, MTI claimed on its Facebook page to be a legitimate trading company that had been achieving an average 0.5% compounded growth per day, five days a week. But as traders have pointed out, this is virtually impossible.

The same Facebook page goes on to say that it trades with the “monetary value” of bitcoin, not with the actual bitcoin itself. The bitcoin apparently never goes into the trading company “as it is stored in a Triple A-rated insurance company in a cold storage facility in Europe”.

Cold storage in the crypto sphere means the bitcoin is stored on an electronic device not connected to the internet, and is therefore immune from hacking.

‘Profit machine’ powering ahead

Recent adverse publicity appears to have done little to dent enthusiasm for MTI. A recent live MTI webinar capped out at 1 000 attendees, with the host reassuring members that it was fully compliant with the laws in SA, and that the profit machine was powering ahead.

Experienced traders have called rubbish on the claim that out of 200 trading days, only one day was losing. Evidence of this win-lose ratio is rather thin.

MTI supposedly has about 14 000 bitcoin under its control, which would make it one of the top 60 or 70 crypto players in the world – sufficient to move prices should it throw a decent percentage of that firepower at the market.

The company has urged investors to send their bitcoin over so they can start trading an equivalent amount on the forex market. MTI says it uses a proprietary “bot” and artificial intelligence to trigger buy and sells, and trades both cryptos and forex.

Not licensed

You have to be licensed by the FSCA if you’re trading in forex, and MTI has just been stopped from doing that.

Its Belize-based broker FXChoice also recently froze its accounts on the basis that its hyped-up marketing claims are hard to believe. Read its statement here.

Crypto trading falls outside the jurisdiction of the FSCA, though legal amendments currently in the works will bring crypto intermediaries and financial advisors under its watch.

In response to the FSCA statement last week, MTI says it’s complying with the regulator. Topham says this is partially true. “Yes, they are cooperating to an extent, but we want to have sight of where the money is sitting, and that we don’t have yet.”

Moneyweb understands MTI has shifted its trading account to another broker based in St Kitts in the Caribbean.

In response to the FSCA statement, MTI posted the following notice, alerting investors that while it would cease trading forex, MTI’s crypto bot would be fired up on Friday last week (August 21):

“During this break from forex trading, MTI will continue to seek a trading licence so as to be as compliant as possible. Once this has been achieved, MTI will retake our position in the forex space. We anticipate that this will take no longer than four weeks, after which we will then be adding the forex trading as an additional bot for members to benefit from, actively then trading forex and cryptos. The purpose of this change is to offer more to our members and to ensure that MTI continues to help you grow your bitcoin!”

Timeline curiosity

MTI’s marketing whizz Cheri Marks posted trading results for August 20 on Facebook, claiming a 1.73% return for the day – despite MTI telling clients it would cease forex trading days earlier, and a day before the crypto bot was due to start operating.

“How is this even possible?” asks one trader. “By their own statements, they were not trading forex, and had yet to start trading cryptos.”

Marks (née Cheri Ward) and her now-husband Clynton were involved in BTC Global, which went down in a ball of flames in 2018 after the Hawks reported that $50 million (R854 million) had been lost in the scam (when its alleged founding trader Steven Twain disappeared), where investors were offered 14% weekly returns. However, it’s suspected that Twain was a fabricated person used as a scapegoat for the scheme’s collapse.

In a recent MTI presentation, US-based member Joel Santiago said MTI was 100% compliant with regulations in SA. “We execute anywhere from 400 to 800 trades per day, the system does, half of those are losing, half of them are winning.”

Presumably, then, the daily wins are sufficiently large to overwhelm the 50% losses that Santiago claims.

He adds that trading profits are allocated 40% to members, 10% to MTI, and the rest spread between “binary commissions”, leadership fees and traders’ fees.

Over the 11 months to June 2020, the company claims to have generated a 166% profit for members, or an average daily profit of 0.49%.

Playing on fears … 

The FSCA’s Topham says the company appears to have received a surge in inflows as a result of the Covid-19 lockdown, from people understandably concerned about their future source of income.

“Unfortunately, at times like these, some people make misguided investment decisions in the hope of making a killing, and I think this is one of those occasions.”

Bitcoin was conceived more than a decade ago as a kind of financial rebellion against reckless government money printing, and MTI plays on very real fears that governments have lost the plot and will try to print their way out of chaos.

In the last five years, however, the crypto community has worked with regulators around the world to bring a sense of order to what was seen as the financial Wild West.

Smelling off

Crypto and forex brokers are extremely sensitive to the vapours of scandal.

Broker FXChoice explained the reason for blocking MTI’s trading account.

Its statement makes it clear that MTI executed few trades prior to May 2020, and what trades it did execute before the account was blocked were “performed manually, large and incurred substantial losses”.

This starts to smell even worse. “We want to make it clear that the information naming FXChoice as the broker where MTI executes its forex operations is inaccurate,” FXChoice states. “The same can be said about their claims of using artificial intelligence software.”

The following is an extract from its statement:

MTI opened an account declaring that all the funds they were going to trade were their own.

Due to large deposits, and the fact that FXChoice was mentioned in their marketing videos, we had to take a closer look at MTI.

MTI opened a personal account profile in 2017 under the name of its current CEO, but we didn’t notice any suspicious activity with the trading volume and the deposits were small.

Their activity picked up in May 2020; by this time, the account had been converted to corporate status. This was when the deposits and trades were made.

Our research leads to the realisation that MTI is a multi-level marketing pool that claims high returns from trading forex for their members using artificial intelligence software.

Additionally, MTI uses a very aggressive multi-level marketing campaign with high rewards to get new investors into the pool.

Due to this new information, we blocked MTI’s account on 10th June.

In a July 2020 report published on Globalcrypto, MTI CEO Johann Steynberg refutes allegations that MTI is a Ponzi scheme, says referral fees are paid out of trading profits and not investors’ capital, and that not a single MTI member has complained or not been able to withdraw their bitcoin when they requested.

Steynberg concludes: “The time has come to, for once and for all, address and reframe the reputational perception issues of regulators, the media and potential members about this industry, through MTI demonstrating that a genuine bona fide business and brand using an innovative business model of integrity can exist and grow sustainably in this sector. I am personally very determined to see this through and together with and supported by MTI’s professional advisors, this process is now underway.”

Read: The FSCA’s Gerhard van Deventer, MTI spokesperson Cheri Marks and Galileo Capital’s Theo Vorster share their standpoints on Mirror Trading International here.

Steve Tshwete and eMalahleni are neighbouring municipalities in Mpumalanga run by the same party, but with very different financial performances. From Moneyweb.

There’s no question the DA does a better job than the ANC at running municipal finances. This shows up in survey after survey.

Read: Other than in the Western Cape, municipalities are failing miserably

There’s also no question the ANC has infested local governance with cadre deployments and the results have been catastrophic. People with no proven aptitude for management are left to run municipalities into the ground. In any self-respecting country, they would be run out of town with pitchforks.

The latest Ratings Afrika Municipal Financial Sustainability Index (MFSI) survey leaves one with no other conclusion than that the DA is trying to show up the ANC, and is succeeding. The DA-dominated Western Cape is leagues ahead of the ANC-heavy Free State and North West provinces when it comes to local government.

Most municipalities are so crippled with mismanagement that many will now become wards of National Treasury.

Local government was already in need of R30 billion to cover revenue shortfalls before Covid-19 came along, prompting national government to allocate R20 billion on an equitable share basis, roughly half of which will go to Covid-related costs. This won’t be enough. The revenue picture in metros and municipalities has deteriorated sharply since lockdown started in March.

Read: Proposed new taxes to help dysfunctional municipalities

The question of what to do to fix the problem is going to need serious attention. One of the suggestions is to merge successful municipalities with bankrupt ones, but this will be fought tooth and nail by those who have managed to keep their finances in some kind of order. Nor is it true that all ANC-run municipalities are failing.

Analyst Leon Claassen of Ratings Afrika, lead compiler of the MFSI, points to two neighbouring municipalities, Steve Tshwete (formerly Middelburg) and eMalahleni (formerly Witbank), which are both ANC-run. The former is a relative model of financial prudence, the latter is a basket case.

The difference

“What Steve Tshwete has done well is to retain the original administrators and managers, and has largely avoided making party political appointees. This shows up in their financial and operational performance, which has been rather consistently good,” he says.

“The same cannot be said for its neighbour, eMalahleni, which is failing terribly in both operating performance and liquidity management. In this case, the old management was tossed out to make way for cadre deployments, leaving people often with no experience to run a municipality of more than 500 000 people. These two municipalities have very similar economic bases so their financial performance should be very close. But they are not.”

Claassen says it is wrong to think the entire local governance model needs to be reimagined.

“What needs to be done is to look at the successful ones, and there are plenty of them, and adopt those as templates for the ones that are failing. The critical failing is in the area of management skills. We have to get rid of political deployees and put in professional managers if we are going to fix the problem.”

Read: AG: How to improve the state of our municipalities

The Ratings Afrika study takes a broad look at financial sustainability, measured around six components: operating performance, liquidity management, debt governance, budget practices, affordability, and infrastructure development. Municipalities are then given a score out of 100.

The largely DA-run Western Cape comes out on top with an average MFSI score of 59. Down at the bottom is the Free State (mostly ANC) with 21. The national average is 37 (or 31 if the Western Cape is excluded).

But that’s not to say all ANC-run municipalities are shockers. Steve Tshwete is an example of relative excellence.

Source: Ratings Afrika

What’s clear from the Ratings Afrika comparison of these two neighbouring municipalities is that basic financial management is much closer to National Treasury’s ideal at Steve Tshwete than is the case at eMalahleni. For example, the debtors collection rate at Steve Tshwete is an astonishing 98% (the target is 95%), while it has slipped below 65% at eMalahleni.

That in itself can mean the difference between solvency and bankruptcy.

Steve Tshwete has run consistent surpluses, while eMalahleni has clocked up deficits of R823 million for the three years to 2019.

eMalahleni has very little capacity to borrow, so has virtually no long-term liabilities, but its debtors figure has grown nearly four-fold over the two years to 2019 to R2.7 billion. That’s likely no more than a bookkeeping entry since the Municipal Finance Management Act prohibits municipalities from writing down overdue debtors even when there is little chance of recovery.

Staff costs as an indicator

Another useful index of municipal efficiency is staff costs as a percentage of revenue: 27.5% at eMalahleni versus 34.6% at Steve Tshwete (which has a larger area to service, though its population of 336 000 is smaller than eMalahleni’s 526 000). Steve Tshwete spends a larger portion of its total revenue on infrastructure development, which would account for the larger percentage of staff costs.

We previously drew attention to Steve Tshwete municipality and the pay increases it awarded itself during lockdown.

Read: Municipal manager gets 48% increase during lockdown

But in the larger scheme of things, it deserves credit where due.

Cash from operations as a percentage of total income is 8.7% at eMalahleni, compared with 16.2% at Steve Tshwete. This means Steve Tshwete is more efficient at charging for services such as electricity, water and refuse, and collecting property rates from residents.

“It’s not rocket science,” says Claassen. “There are centres of excellence in the municipal government arena, and we have to replicate those.”

This is my open letter to President Cyril Ramaphosa:

I am a journalist writing for many South African and overseas publications, including Moneyweb, GroundUp, The Citizen, Daily Maverick, and others.

I would like to endorse the nomination of King Sibiya, founder and President of Lungelo Lethu Human Rights Foundation, for the Order of Luthuli award.

I first came to know King Sibiya about six or seven years ago when I was invited to attend a gathering of perhaps 50 to 70 people in the Joburg CBD. All of them had been evicted from their homes by the banks. I wrote about it here:

Link: https://www.groundup.org.za/article/residents-fight-back-against-banks-eviction-tactics_3572/

This was astonishing news to me. How could this possibly happen? Victor Zuma and his wife Beverly were evicted over a R6,000 outstanding debt to FNB. The late Solomon Nhlapo was evicted from the Soweto home he inherited from his mother Mary, even though she had been paying the mortgage bond for more than 20 years.

Nedbank repossessed the property and onsold it to a new buyer for R100. Yes, R100. What possible benefit could there be to Nedbank to sell his home for such a paltry amount? And the evidence suggests Nhlapo was not in arrears.

Link: https://www.groundup.org.za/article/soweto-mans-house-sold-behind-his-back-r100/

But it got worse. Ernest Mashaba’s family was evicted five times from their Katlehong home even though the family insists it was never in default on the mortgage loan. Nedbank repossessed the home and onsold it to a new buyer for R10. That’s right. R10.

How Nedbank sold a family home for R10

A picture began to emerge, that poor, black South Africans were being victimised, not by the apartheid machinery, but by very slick commercial banks and their well-paid lawyers. Behind them, operating through the sheriffs’ offices, criminal syndicates were buying what were in effect stolen properties.

King Sibiya and Lungelo Lethu Human Rights Foundation was the last port of call for these desperate people.

King Sibiya has given his life to representing the poor and the downtrodden. During the apartheid years, he was one of the architects of the Mngomezulu versus City Council of Soweto case in 1986 that prevented tenants being evicted from their homes for non-payment of rent on the grounds that the City Council had not followed the law in setting rentals. The case was won on technical rather than human rights points, but it gave black residents greater security of tenure in their homes.

Fast-forward 30 years and not much has changed, only this time it is the banks doing the evictions.

King Sibiya has been offered bribes to shut his mouth (refusing each one with contempt), had his life threatened, and came within seconds of being rubbed out by a hit team sent from Kwazulu-Natal to eliminate him. When he explained what it was he does, the hit-men left him alone.

Most importantly, he has achieved victory for the people who count on him for support. In a landmark case heard in 2018 in the Johannesburg High Court, the judges ruled that homes cannot be sold at auction without a reserve price – something for which Lungelo Lethu Human Rights Foundation had campaigned for years. The effect of this is to prevent people like Ernest Mashaba and Solomon Nhlapo being evicted and having their homes sold at auction for as little as R10.

Link: http://www.writersroom.co.za/banks-slapped-down-over-home-repossessions-in-joburg-court/

But a bigger battle lies ahead: in February 2020, Lungelo Lethu and hundreds of its members filed a roughly R60 billion class action suit in the Johannesburg High Court claiming damages from the major banks for foreclosing and then selling their properties for a fraction of their market value.

Link: http://www.writersroom.co.za/banks-hit-with-class-action-suit-over-unlawful-home-foreclosures/

The basis of this claim is that tens of thousands of South Africans have lost their homes through foreclosure since the Constitution came into effect in 1994 – in violation of their rights to property, dignity and fair administrative justice.

King Sibiya is an unsung South African hero. He is motivated neither by money nor fame. He performs his work night and day for those with no place else to turn. And he does this for crumbs – without support from government or major donors. If those he has helped can afford a R10 donation, that’s how Lungelo Lethu survives. If any organisation deserves funding from Treasury, this is it. What it has achieved – saving the homes of hundreds if not thousands of people from unfair dispossession – with such meagre resources, is beyond remarkable.

With Sibiya’s Standard 5 education, he can cite chapter and verse of laws and leave judges and lawyers astounded. He can match them clause for clause.

Never, in my opinion, has there been a man more deserving of this great award.

While diversified miner South32 slips into loss. From Moneyweb.

In the week that was, Gold Fields announced it had doubled its interim profits for the period to end June 2020 and paid shareholders a special dividend equivalent to the entire previous year’s dividend. And this despite the Covid-19 shutdown of operations.

Impressive as this is, Impala Platinum (Implats) went one better, stating that it expects a nearly five-fold increase in headline earnings for the full year to June 2020.

In more good news for the platinum group metals (PGM) producer, criminal charges against Mark Munroe, CEO of Impala’s Rustenburg mining operations, were withdrawn. He was charged under the Disaster Management Act for recalling workers in early April during the Covid-19 lockdown; Implats maintained it believed it had exemptions for the return-to-work order.

The company says it is following global best practices in slowing the spread of the virus, though the charges against its senior executive in charge at Rustenburg shocked the business community at the time.

A weak rand and particularly strong palladium and rhodium prices are largely responsible for the improved performance.

“The benefit of a significant increase in the dollar basket price for PGMs, together with rand depreciation, has resulted in a meaningful increase in gross profit, which is expected to increase to R23 billion in the period from R7 billion in the comparative period, despite an expected 5% decline in refined and saleable PGMs to 2.8 million 6E ounces relative to the comparative period,” reads the Implats Sens statement.

It expects headline earnings per share (Heps) to be between R20.07 and R20.84, compared with R4.23 in the 2019 comparative period. Earnings per share (EPS) of between R20.34 and R20.72 are expected for the current year to June (2019: R2.05).

This is substantially better than the 6% contraction in interim Heps (to June 2020) at fellow PGM producer Anglo American Platinum (Amplats), despite a 28% increase in revenue. Amplats suffered a critical failure at a processing plant in March this year, causing it to declare force majeure and announce a drop in palladium and platinum production for the year.

Implats share price

Source: ShareMagic

The Covid-19 lockdown in SA had little impact on Gold Fields, whose sole SA-based operation is South Deep, now in the throes of a turnaround operation. Despite the Covid disruption to operations in April and May, the runaway gold price put smiles on the faces of gold producers everywhere.

Gold Fields has been investing in its Australian and West African mines to improve costs and extend mine life, and CEO Nick Holland says reserves outside of SA now total about 20 million ounces, equivalent to about 10 years of mining. There’s potential for more upside at its Damang mine in Ghana and new investments over the next three years will focus on increasing production and exploration in Australia, West Africa and the Americas.

The gold producer continues to work on keeping costs under control and is basing its future forecasts on a gold price of $1 300/oz, well short of the current $1 940/oz. Any upside will be for the benefit of shareholders in the next reporting period.

Gold Fields reported that its revenue advanced to $1.75 billion for the six months to June 2020 from $1.38 billion in the 2019 corresponding period. Diluted EPS stood at US 18c, compared with US 8c in 2019.

Net debt stood at $1.24 billion at the end of June 2020, from $1.66 billion just six months ago. “Our approach will continue to be reasonably cautious, as we do not know what challenges await us in the post-Covid world,” said Holland.

Gold Fields share price

Source: ShareMagic

Diversified miner South32 swung into loss for the full year to June 2020 as Covid-19 hit commodity demand. The company is bracing for further fallout from lockdown-related demand disruptions.

South32’s revenue for the year lowered to $6.1 million (2019: $7.3 million) while profit tumbled to $261 million (2019: $887 million). Loss attributable to equity holders came in at $65 million (2019: profit of $389 million). Heps dipped to USD 0.5 cents per share (2019: 17.2 cents per share).

South32’s portfolio of commodities were slammed by the global disruption caused by the pandemic, though the company expects increased production at the majority of its operations in the coming year.

“South32’s portfolio of commodities have been under pressure in terms of price. It hasn’t had exposure to iron ore or precious metals, which have been the stronger performers in the commodity space,” says Seleho Tsatsi, resources analyst at Anchor Capital.

South32 share price

Source: ShareMagic