Jamie Carr Columnist

A run for the money

After many years of imitating the 90-pound weakling and getting sand kicked in its face, the rand has finally started to eat its spinach.

It would be an exaggeration to say the currency is now positively bulging with muscle, but the gains it has made since the election of Cyril Ramaphosa as ANC president suggest there is real hope that the years of kleptocracy may be coming to an end, and the ship of state may set sail for an altogether less self-destructive future.

There seems little point in keeping a dead man walking at the helm, and a lot of upside in giving the order of the boot to all those complicit in the chaos of the Jacob Zuma era and bringing in new blood.

This strategy has been warmly received at Eskom, where the prospect of avoiding a default on debt has been drastically improved by credible new leadership being put in place at the utility.

There are still plenty in the higher echelons of the ANC who do not have their haloes intact, but the hope must be that clear leadership from the very top of the party will usher in a new era of probity.

The rand’s recovery may of course be tested in coming months by the situation in Cape Town, where the scale of the fast-approaching calamity appears to have been greeted by the populace at large with a remarkably insouciant shrug of the shoulders.

The prospect of supplying the city’s water needs from 200 distribution points sounds optimistic at best, with huge risks to business, tourism and public health, but it’s the only solution they’ve got.

Down like a ton of bricks

While a few local fund managers have come forward to point to the absence of Steinhoff in their portfolios, that company’s collapse certainly came as more of a shock to the market as a whole than the demise of Carillion, the UK’s second-largest construction company.

Carillion has been described as a slow-motion train crash. It won the distinction of being the most shorted company in the FTSE 350 as long ago as the spring of 2016, with almost a quarter of its shares out on loan to vultures.

Carillion’s share price had been on a downward trend since 2014, but it really went into full Stuka mode last July, when the company announced a cheeky £845m of write-downs on hospital contracts in Birmingham and Liverpool, the Aberdeen bypass and contracts in Canada, Oman and Qatar. The Qatari project being built ahead of the 2022 World Cup has been particularly damaging, with £200m of cash being trapped and the Qatar Foundation resolutely refusing to get out the chequebook on the grounds of contractual failings by Carillion.

Despite this, the UK government handed Carillion a £1.4bn slice of the High Speed 2 rail project a few days after the profit warning, and its collapse leaves a mighty hole in the many government contracts it was servicing. The future of its 45,000 employees remains uncertain, as does that of the thousands of subcontractors to whom it outsources most of its work. The future of its private finance initiative deals is also in question.

The reverberations of Carillion’s collapse will cause chaos in the outsourcing sector for years to come.

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