You're listening to Strictly Business Podcast with Lindsay Williams.
Today on this 91 Cash Talk podcast, we're joined by Tsitsi
Etendimatika, Client Director at 91 in Cape Town.
Now, Tsitsi, I'm going to start with the big picture.
I'd like someone to paint a picture for me.
The South African Reserve Bank, ASAB, recently left the repo rate unchanged at
7.5%.
How has that affected corporate...
cash strategies, especially as I sort of get the feeling that certain Treasury
departments might
have been anticipating a cut?
That was very optimistic if they were, but the decision to maintain the rates at 7.5%
reflects that the Reserve Bank is being very cautious.
And that's a good idea,
given what we've seen coming out of the US and given globally how uncertain things
are.
Most importantly for us here in South Africa.
our domestic challenges around the government of national unity.
So for corporate treasurers, this stability of the rates actually offers
opportunity to reassess cash
management strategies, also balancing between maintaining liquidity and seeking
higher yields.
This is a very good time for short-term investment vehicles and money market funds
to remain attractive for corporate
treasurers.
Well, what about inflation now, Titi?
Because the inflation rate in the United States.
Surprised on the downside from 2.8% to 2.4%.
In South Africa, obviously, we're influenced by global inflation, but we
have our own domestic issues as well.
And with the RAND blowing out as risk-off came to the fore since the Trump tariff
situation,
is there a risk to the upside?
And also, with that global certainty in play,
how should corporate treasurers think about adapting their cash strategies in
this kind of uncertain environment?
That's a fantastic question.
So one of the things that we are saying right now is anyone who claims an answer
is lying.
There's absolutely no one who has any idea what's going on or what Mr.
Trump will do.
But what we do know is this environment is marked by potential inflationary pressures
and expectations.
And what I would say for corporate treasurers is the ability to be flexible
and to think about diversification.
And what does that mean?
We think.
This means segmenting your cash holdings,
thinking about allocating portions to money market funds for immediate access,
and then thinking about the stickier cash where you can allocate to income funds for
longer term investment gains,
which will allow you to optimize your returns while managing your risks.
OK, I was going to talk about money market.
Money market funds are often seen as a safe bet, in brackets, boring by some
people.
But at the moment, they are particularly attractive.
Is that the case?
How do they support?
operational liquidity within a treasury department?
So we love to be boring.
This is a good time to be boring.
It also helps our clients have less gray hairs.
So these funds are tailored for investments who have primary investment
objectives of capital preservations.
Your investors who are looking for liquidity and looking for diversification,
but still achieving returns in excess of short-term bank rates.
So this is your investor who...
doesn't want to just park their money in a bank deposit.
These funds really are designed for short-term investment and also just giving
you that lower volatility,
which will allow you to actually get some sleep at night.
Yeah, which we all need.
You mentioned segmenting cash by time horizon.
What are the benefits and risks, on the other side,
of diversifying cash investments into instruments like money market funds, which
you've just spoken of,
or Steffi Plus-type products?
So segmenting your cash allows you to have that tailored approach where you still get
your liquidity,
you still meet your return objectives, but you get that extra bump up in your return,
right?
So the fantastic thing here is you get everything that you get with money market
funds,
but you've got the higher yield.
So you're going up the yield curve a little bit, taking on a little bit more
risk.
But as I said, you get that extra 50 to 60 basis points.
over and above what you would get on your money market funds.
And these funds are also really great in that you get a bit more enhancement around
your TENA.
So you're getting a bit of a longer instrument than what you would normally
get in your money market funds and also gives you that
diversity of instruments that is slightly more than what you would have in your
traditional money market funds.
Let's talk about bank deposits now, because I think there was a film where
some chap said, I work for my money,
I want my money to work for me.
And that really means that if you see a big chunk of money sitting in a bank
deposit, you think of opportunity costs,
where could that money be going?
What's the opportunity cost of keeping too much cash parked in that instrument?
And how can diversification help in that matter?
So holding all your excess cash in banks, is a missed opportunity.
It's one that we really think, particularly in this stable or declining
interest rate environment, isn't ideal.
So what we would say is diversify your holdings and your instruments by going
into the funds that I've
explained about, your money market funds or your Steffi Plus type funds.
This is to give you that ability to enhance the yields and also spread the
risk across various instruments and
issuers.
So this is all about diversification and just reducing the impact of any single
underperforming asset within
your portfolio.
Finally, the easiest question of the six that I'm about to ask you.
How do you see the cash investments landscape evolving over the rest of the
year?
I mean, these days, it's the rest of the day with the amount of inputs there are
into the investment equation.
And what are the key trends that corporates should be?
aware of?
And again, it's very, very difficult because the landscape changes so, so
regularly.
Absolutely.
So what we're seeing is definitely going ahead.
We anticipate that the cash investment landscape is likely to be influenced by
multiple factors.
This includes the potential interest rate changes, inflation trends, and the global
economic conditions.
So keeping all that in mind, corporates need to monitor what's going on in the
landscape.
and we're also paid to do that.
So fortunately, the corporate treasurers can just trust us to do the monitoring,
make sure that we keep them informed around policy shifts,
around also emphasizing their flexibility and thinking around their cash allocation
and how they want to
be nimble around, do you put it in your liquidity bucket or do you put it in your
longer term bucket
where we can get them that extra yield that we were talking about?
But being robust.
is so important in this trying time.
Yes, trying indeed.
Siti, thank you very much for your time.
Siti Hattendi-Matika is Client Director at 91 in Cape Town.
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