Motheo: Covering the markets today Siboniso Nxumalo, CIO at Old Mutual Investment Group. Siboniso, again, welcome to the Money show. Marginal gains for the JSE today. Mining shares down more than 2%. Industrials are rebounding from what we saw on Friday. Your reading of the market today. 

Siboniso: Yes, Motheo. Good evening to you and good evening to your listeners. Yes, a flattish day in the market, as you say, but that obviously always masks what's going on underneath. And like you say, resources on average were down like 2.4% with the precious metals, which is gold and platinum. Those were down quite materially, but actually they come from a good run, if you looked at them last week. So, they were very strong. Whereas in industrials we saw Naspers and Prosus they were up. Naspers is up 2.66 and Prosus was up 1.8%. So that was strong. So Pick n Pay up 5% and Pepkor up 4%. And so there's some strength there. And then if we look at the financials, we saw Discovery up two and a half percent and Old Mutual up 2.3. And so, yeah, again, a flattish day, but the devil's in the detail. But Motheo, we need to talk about there's Capitec, there's Aspen, and there's a lot.

Motheo: A lot happened on the market, I think. Let's start with Aspen with that particular deal that came through a big one for the pharmaceuticals industry. Aspen really expanding well into Asia now, buying that Swiss group, Sandos. 

Siboniso: Yes. So I think we've got to step back when it comes to Aspen and look at the investment case and say, actually, what is Aspen trying to do? Now, if you looked at Aspen's business model, they've got four divisions who break their business. They've got what's called regional brands, sterile focus brands. They've got the group, and then they've got what's called manufacturing. Now, manufacturing actually is what has been underperforming. If you look at the gross margins, that's materially, the lowest gross margin in the business. And Aspen has been communicating that actually they need to get volumes and manufacturing through that division. And as you get volumes in there, actually, then that margin, given what will happen to utilisation, will increase. When we then come back and look at this actual deal, what are they trying to do? Well, they're trying to buy these acquisitions of these Chinese brands for circa R2 billion. That actually is aiding the manufacturing process in terms of actually, if they can get some volumes through and manufacture more, that's going to help. Which is why I think the market liked it and closed it in the positive. But part of that deal also was a disposal of the anaesthetic products in Europe. But that was the smaller portion of the deal. The bigger one was actually the acquisition of Sandoz. 

Motheo: Then looking at Capitec, they've had Sanlam holding hand in terms of the funeral policy business, but they're ready to go at it on their own. Capitec Life Limited, a newly licensed insurer forming part of the Capitec Group, will take over what used to be Sanlam's part of the business when it came to Capitec. 

Siboniso: Yes. So Capitec and Sanlam formed this joint venture a little while back through which they would sell funeral policies. Now in South Africa, actually the funeral policy industry is a highly lucrative industry. We sell a lot of funeral policies in South Africa. And what happened is a few months ago Capitec announced that they've gotten their own insurance license. And so therefore that then precipitated them obviously breaking up then with Sanlam because they've got their own insurance license, then they can actually start an insurance business and they no longer need Sanlam to be a partner. Now this was highly successful, Motheo. This joint venture had 2.4 million policies in force, which covered about 11 million lives in South Africa, and it was about 13% of Capitec's earnings. So actually quite lucrative. But Capitec is saying, hey, we can do this by ourselves, as well as build the insurance arm of our business. And in exchange for that, Capitec will pay Sanlam R1.9 billion. And so that is then the end of that. 

Motheo: How do you think the market will read this Siboniso? Because Sanlam is well into the game when it comes to funeral policy covers and they gave a lot of credibility to capita's business. Now that they're going at it on their own, do you think some investors will expect some volatility? 

Siboniso: No, Motheo, I think if you looked at this particular joint venture and the volumes of sales that they were doing through Capitec channels, actually this was outrageously successful. That in this instance, Capitec's Channels and Capitec’s distribution in its branches proved to be a great selling point. And so the clients, the Capitec clients actually loved this and they bought the product and they bought it in abundance. So it was very fast growing. And so I think Sanlam here is the loser in this particular relationship. And now Capitec, this is why Capitec can step away, because Capitec can say, hey, we can do this ourselves, we've got the license and actually it was our distribution that Sanlam was using and our branches. So I think a big win for Capitec because they're going to continue to roll this out and grow as fast as they were. They've obviously compensated Sanlam for it. So I think this is a good thing. And also if you looked at the last results that Capitec released, insurance is actually starting to contribute a significant portion as part of their earnings as a company. And so you should see that continuing. So I think win for Capitec. Yeah. 

Motheo: Then looking into tomorrow's growth number coming out from stats, say, what's old mutual's reading of South Africa's growth situation at the moment? 

Siboniso: Well, I think we are optimistic about the recovery because whenever you look at growth, you've got to take the context of where you come from, because the number is going to come out, but the numbers about where you're growing from. So if we look at last year, over the last year, we've had quite a material amount of load shedding, and so actually we've seen that. So if you compare to the base that we are coming from, actually the economy doesn't have to do much to show some form of positivity. It's a tough market, though. It's tough out there. And so it's not going to be miraculous, but we are seeing a positive trend, especially heading on towards next year. 

Motheo: All right, that was Siboniso Nxumalo, the Chief Investment Officer at Old Mutual Group, covering the markets with us there.