Impact of Covid-19 on TIP One

Name of Issuer Transformational Investment Portfolio One Limited
Country of Incorporation Republic of South Africa
Registration Number 2017/458073/06
ISIN Number ZAEZ00000042
Share Code ZXTIP

Impact of Covid-19 on TIP One

For most of the last twelve months, the Johannesburg Stock Exchange (“JSE”) All Share Index has been trading around the 56 000 index level. It is currently trading at about 40 000, a decline of 28% since the start of the Covid-19 crisis. As we are building a portfolio of BEE schemes that are invested into shares on the JSE, the performance of these shares on the JSE is a critical underpin to the long term returns we wish to give our shareholders.

While we had no foresight about the Covid-19 Virus nor its impact, we are cautious and conservative in our investment approach when investing into BEE schemes. As a result, we are still in the process of assessing our first investment opportunities and we have not executed any transactions. The result is twofold:

  • •TIP One is not currently invested in any BEE Schemes and our balance sheet has not been impacted by the recent market sell-off;
  • •The investments we are looking to make are now much cheaper, making them even more compelling from a future return’s perspective.

But what about the future?

We cannot claim to have any special insights into how the coming months will play out, but we can use history as a guide. In the last sixty years, the JSE has been impacted by one major crisis and crash almost each decade (and many minor falls), and these have been followed by extended periods of a rising market:

  • •1960 Sharpeville massacre (JSE fell 32% but rose 563% from 1961 to 1969)
  • •1969 Crash (JSE fell 60% but rose 266% from 1972 to 1974)
  • •1974 to 1976 Oil crisis and Soweto uprising (JSE fell 29% but rose 1700% from 1977 to 1987 although high inflation also exaggerated returns)
  • •1987 Global crash (JSE fell 45.9% but rose 510% from 1988 to 1998)
  • •1998 Emerging market crisis (JSE fell 43.8% but rose 707% from 1999 to 2008)
  • •2008 Global financial crisis (JSE fell 44.6% but rose 320% from 2009 to 2020)

(Source: Powerstocks research 2008; Global policy response to each crisis is getting better, with, for example, a global depression been avoided after the 2008 crisis. History indicates that markets, economies and human resilience prevail and that assets acquired after market corrections typically perform very well.

How are we responding

We must not dismiss the tragic human impact of the virus, nor its impact on our economy or investment markets, but in times of high uncertainty, the best long term investment opportunities often present themselves. We will be looking to capitalise on these opportunities.

We will therefore continue our approach of seeking out well-structured BEE schemes, that are invested in attractive underlying listed companies that have good long term prospects, and then seek to buy into these schemes at compelling prices. Crucially we will also take our time with a very considered and careful approach.

Please direct any queries you may have to Geoff Blount or Lemao Ditodi.

Dr Vuyo Mahlati
Chairman, TIP One
23 March 2020