By: Equity analysts at Momentum Securities, Nancy Bambo and Stephen Meintjes
Equity analysts at Momentum Securities, Nancy Bambo & Stephen Meintjes comment on the impact of the Carbon Tax bill implementation on certain JSE listed companies and the proposed infrastructure investment.
In his National Budget Speech on Wednesday 20 June, Minister Mboweni announced that the Carbon Tax Bill will be implemented on 5 June 2019. Steel and cement producers are known to be the biggest contributors to greenhouse gases (GHG) globally. They are therefore likely to be affected by the carbon tax, as well as energy intensive and energy producing companies. Companies such as ArceloMittal, PPC, Afrisam, and Sasol are likely to be affected. As per its 2017 IAR (integrated annual report) ArcelorMittal mentioned that the “tax could affect the viability of the company”, and PPC has estimated a cost of R80-100m attributable to the carbon tax (for cement and lime).
2.Investment into infrastructure investment and the impact on the construction industry
In his National Budget Speech on Wednesday 20 June, Minister Mboweni explained that there are four aspects to improving infrastructure – creating a sensible project pipeline, streamlining the law to make it easier to build, providing better information for everyone and then – to actually build. This integrated development strategy is good news for the struggling South African construction industry, and we believe the sensible project pipeline issue is key. It would address one of the construction industry’s biggest challenges which is that it needs a steady flow of work in order to plan and build up the necessary capacity. Having massive surges such as the 2010 World Cup followed by cutbacks leads to loss of skills and capacity, often to other countries.
Rapid urbanization has already resulted in “going up” as exemplified by the high rise residential structures mushrooming in Rosebank and elsewhere. But we believe the Minister is correct in saying that there is room for more of this and a return to site value rating only (municipal rates on land only as was the case in many cities before 2004) would land make land more readily available for this purpose instead of having it tied up in “land banks”.