News / Industry

Monday 17 - 21 July 2017

CORPORATE NEWS

Capco announced on Friday that it managed to raise its first-half net rental income as a result of a positive performance at Covent Garden estate‚ which is located in London. The value of the estate rose 1.5% to EUR2.4bn in the six months to June on a like-for-like basis‚ with the estimated rental value increasing 2.85% to EUR98.8m.

Anglo American’s new projects in diamonds‚ iron ore and coal underpinned a sound set of production data for the first half of its financial year, setting the diversified miner up to meet or exceed some targets for the full year. In a production update on Thursday‚ the miner said it had increased output at all its divisions apart from copper and nickel‚ which had small declines for the six months to end-June.

ArcelorMittal SA’s share price on the JSE plummeted on Thursday after SA’s biggest steel producer flagged a widening in its first-half headline loss. The SA unit of the Luxembourg-based ArcelorMittal blamed the poor performance on higher costs of raw materials‚ mostly coal and iron ore‚ as well as unspecified impairments and a stronger rand. The share price dropped as much as 6% to below R5 a share after the company said its headline loss per share in the six months to June was expected to be between R1.43 and R1.52‚ a widening drop of between 218% and 238% from the corresponding period a year ago.

Competition Tribunal said the Competition Commission was required to consult further with interested parties in the proposed Dow and DuPont merger. This came after the commission recommended the approval earlier in July‚ albeit with conditions‚ of the proposed merger between DowDuPont‚ Dow Chemical Company‚ and EI DuPont de Nemours and Company. DowDuPont intended to buy Dow Chemical Company and DuPont. Dow’s activities in SA include the distribution of sunflower seeds‚ agrochemicals‚ material science products and food texturisers.

South32’s share price fell 3.4% to R28.57 on Thursday morning after its June quarter production report showed declines in nearly all of the minerals it produces.  The mining group unbundled from BHP in 2015 and reported a 27% drop in silver production‚ a 24% drop in lead production‚ a 19% drop in metallurgical coal production and an 11% drop in zinc production from the prior financial year.

JSE publicly censured African Dawn Capital for misstating its financial results for the year to February 2014‚ which later led to it restating those results. JSE announced via Sens on Thursday that the restatements had a material effect on the financial results. The loss per share increased by 22% from 3.37c to 4.11c‚ while HEPS increased by 57.5% from 2.61c to 4.11c.' This represented a breach of the JSE’s listing requirements and a failure to observe the 'highest standards of care when disseminating information in the market place'.

Vodacom announced on Thursday that revenue growth in its home market helped the operator offset declines in the rest of Africa during the June quarter. The group’s revenue for the three months grew 3.9% to R20.7bn‚ boosted by South African revenue growth of 7.8% to R16.65bn offsetting an 8.2% decline to R4.24bn in revenue outside of SA. Attracting more South African prepaid customers helped Vodacom compensate for declining average revenue per user.

Redefine International said on Wednesday it would increase its interest in the UK-based International Hotel Properties from 17.24% to 50%. The deal‚ which will be settled in shares‚ would result in IHL being delisted from the JSE and the Euro MTF market of the Luxembourg Stock Exchange. Redefine said the IHL portfolio comprised nine UK hotels valued at GBP104.35m‚ which would complement Redefine International’s hotels portfolio. The acquired hotel portfolio would comprise 19% of Redefine’s gross assets‚ up from 16% as of February 2017.

Steinhoff said on Tuesday it had successfully debuted in the euro bond market‚ placing a senior‚ unsecured‚ fixed-rate corporate bond with an aggregate principal amount of EUR800m. The company said it intended to use the net proceeds from the issuance of the bond primarily to repay existing financial indebtedness‚ and for general corporate purposes. The bond‚ which will bear an annual coupon of 1.875%‚ will be admitted to trading on the regulated market of the Luxembourg Stock Exchange.

Moody’s said on Tuesday that it had assigned a first-time rating to Barclays Africa Group’s long-term and short-term foreign currency debt at one notch below investment grade‚ or Ba1. This is in line with the South African sovereign credit rating‚ as banks cannot be rated above the sovereign. Barclays Africa’s local currency rating remained investment grade at Aa3. Barclays Africa can no longer use the credit rating of its former parent‚ Barclays Plc‚ after the British bank completed a sell-down of its stake in the African banking group in June to just below 15%. This means it is no longer a shareholder of reference and so would not be on the hook if Barclays Africa ever required additional capital.

Share price of Anglo American Platinum falls 4.7% to R303.20 on Tuesday morning after it warned shareholders it expected to report on July 24 an up to 67% drop in HEPS for the six months to end-June. The miner said it expected a basic loss per share as low as R5.20 from the matching period’s basic earnings per share of R5.88. The swing into a basic loss per share was mainly due to impairments totaling R2.2bn. These included writing down of loans to Atlatsa‚ along with loans to the Bakgatla Ba-Kgafela Community to finance their investment in Union mine. These impairments dragged headline earnings down R300m.

Rockwell Diamonds on Tuesday delivered a set of quarterly results showing how distressed the alluvial diamond miner was and the difficulties it was undergoing to bring its new Wouterspan mining project into full production. In its May quarter‚ Rockwell‚ which is listed in Johannesburg and Toronto‚ showed current liabilities of C$19m against current assets of C$4.26m. The company’s cash dwindled to CAD285‚000 from CAD1.7m in the May quarter a year earlier.

Pam Golding Properties partnered Henley & Partners to provide buyers seeking international property assets with a view about acquiring dual residence or citizenship. The companies said the strategic alliance came at a time when increasing numbers of affluent locals‚ including families‚ are looking to hedge their bets overseas. Pam Golding said on Monday this was being offered as an end-to-end service.

Oando confirmed reports that it was under investigation by the Nigerian Securities and Exchange Commission. Oando’s JSE-listed shares rarely trade‚ and no shares changed hands after the announcement on Monday morning‚ leaving the price at 25c. The complaint to the SEC related to Oando’s acquisition of US oil group Conoco Phillips’s Nigerian assets in 2014 for $1.65bn. Foreign investors who have seen the value of their Oando shares plunge to a tenth of the 2014 peak petitioned Nigeria’s SEC to investigate.

Formal discussions on a potential merger between PPC and AfriSam were continuing on Monday. PPC’s share price gained 0.63% to R4.80 in midmorning trade after the cautionary announcement. PPC and AfriSam announced in February they had restarted talks to potentially merge their operations‚ nearly two years after previous talks were abandoned. The companies said the merger would allow them to compete in a market dominated by multinational and regional players.

Lonmin’s share price rose 9% to R12.19 on Monday morning after it reported a profitable June quarter. Although average platinum group metal prices rose in dollars from the matching period in 2016‚ the stronger rand caused this to drop in rand terms (down 3% to R11‚506/oz). Lonmin’s average unit cost was R11‚278/oz‚ which was 4.7% lower than the previous quarter but 6.4% higher than the previous year.

 

ECONOMIC NEWS

Tax analysts said on Thursday that if the estimated 50‚000 South African workers in the Middle East were brought into the tax base‚ the revenue could be considerable‚ bearing in mind the present local 45% marginal rate‚ or even at an average 35% rate. This was after it was reported that SARS was planning to significantly increase tax revenue by scrapping the 183-day exemption on foreign employment income.

Reserve Bank surprised markets with an interest rate cut on Thursday. While most economists were expecting the bank to move towards a cut‚ it was not expected to come quite so soon. Bank governor Lesetja Kganyago highlighted an improving inflation outlook and deteriorating growth — though there were risks to the inflation outlook. He said despite a degree of volatility‚ the rand exchange rate has been relatively resilient in the face of expected monetary policy tightening in some advanced economies‚ as well as domestic political risks and uncertainties.

DA was to lay criminal charges against Eskom’s CFO‚ Anoj Singh‚ as the party believed he may have played a pivotal role in the Guptas’ capture of Eskom. The party's spokesperson on public enterprises Natasha Mazzone said on Thursday Singh has been linked to a range of corruption scandals and dodgy deals at Eskom which must be fully investigated. These included the award of R495m in contracts to Trillian as a sub-contractor of McKinsey; an arbitration settlement of R577m reduced from R2.1bn for Gupta-owned Tegeta Exploration and Resources; giving Tegeta a R1.6bn guarantee to purchase Optimum Coal‚ even if it wasn’t used; and the upfront coal contract payment to Tegeta.

SA’s retail sector not only confounded economists who had expected a contraction in May‚ but growth accelerated from April‚ despite the economy being in recession. According to a report issued by the Statistics SA on Wednesday‚ retail trade sales increased by 1.7% from a year earlier‚ to R63.7bn in May‚ after growing 1.5% to R60.6bn in April 2017. The retail sector is an important indicator of consumer spending which drives growth in the economy. FNB and Investec economists had predicted a contraction in the sector.

Postponement of Eskom’s financial results was triggered by the firm’s auditors raising a qualified audit opinion on the accounts.The utility's acting chairman Zethembe Khoza said Eskom had to postpone the presentation until such time as it was able to sort out the matter. Eskom’s accounts showed the utility incurred a R3bn irregular expenditure bill‚ which may have triggered some of the covenants on Eskom’s debt. The results announcement was pushed back by a week while Eskom engaged in negotiations with some of its lenders‚ notably the Development Bank of Southern Africa and US lender Citibank.

Salba criticised the government’s inadequate socioeconomic impact assessment of the draft Liquor Amendment Bill because of its failure to quantify the effect on jobs and the economy on Wednesday. The bill was due to be discussed the following day by the social partners in the National Economic Development and Labour Council  but Salba spokesperson Sibani Mngadi said 'the vagueness of the impact study submitted by the Department of Trade and Industry limits the ability of Nedlac social partners to engage meaningfully with the proposed amendments to the Liquor Act.

Inflation continued to ease and on Wednesday‚ it indicated that the Reserve Bank may make interest rate cuts later this year. Annual change in the CPI saw a marginal decrease of 0.3 a percentage point to 5.1% in June compared with 5.4% in May 2017. The CPI measured changes in the price of consumer goods and services purchased by households in urban areas.

Suspended SABC CFO James Aguma’s legal representative argued on Tuesday that additional charges brought against his client at his disciplinary hearing were pure victimisation. Aguma was suspended in May by the SABC’s interim board after being accused of providing false information under oath during the disciplinary proceedings brought against former COO‚ Hlaudi Motsoeneng. He has also been accused of tender irregularities and fruitless and wasteful expenditure during his tenure. Aguma’s lawyer‚ Osborne Molatudi‚ argued that this would be an unfair hearing as his client was not given proper communication about the intention of the additional charges.

Public advocacy groups, Section27‚ the Helen Suzman Foundation and Save SA, on Tuesday took joint action over the probe into the conduct of controversial PR firm Bell Pottinger‚ which has been accused of fuelling racial tensions in SA on behalf of the Gupta family. The groups noted Bell Pottinger’s 'unequivocal and absolute apology' of last week‚ in relation to the work it had undertaken over the past year for the Gupta-owned Oakbay‚ and the fact that it has commissioned an international law firm to review the work done.

Social Development Minister Bathabile Dlamini refused to answer questions on Sassa CEO‚ Thokozani Magwaza’s departure on Tuesday, a day after her department announced the termination of his contract. On being questioned about Magwaza’s departure‚ Dlamini accused journalists of harassing her. Magwaza was due to testify against Dlamini in a public inquiry about her role in the Sassa social grants payments debacle.

Black Sash said it was concerned that the departure of Sassa CEO Thokozani Magwaza might affect the agency’s ability to fulfill the mandate set by the Constitutional Court. This was after the Department of Social Development announced that Social Development Minister Bathabile Dlamini and Magwaza had reached an agreement for him to leave. The court has given Sassa one year to prepare itself to take over the social grants system from the current service provider‚ CPS‚ whose contract was extended for a further year to allow for this. Magwaza was driving the takeover process.

BMI Research warns on Tuesday that allowing the Post Office‚ via the Postbank‚ to extend credit is likely to make it yet another state-owned enterprise in need of a hefty bail-out. This followed government's recent decision to step up its activity in the banking market by expanding the Post Office’s licence to allow its Postbank subsidiary to offer credit. Historically‚ Postbank was only permitted to offer savings accounts‚ not make loans. Although SA scores highly on measures of basic financial inclusion‚ with 70.3% of the population having access to a bank account‚ only 12.1% of the population accessed credit through a financial institution as of 2014 data.

The work contract of Sassa CEO Thokozani Magwaza has been terminated‚ the Department of Social Development said on Monday. The department said Minister Bathabile Dlamini and Magwaza agreed to the termination‚ after a consultative process led by the head of legal services‚ Advocate Nkosinathi Dladla‚ in terms of the provisions of his contract of employment. Magwaza’s leaving Sassa came amid reports that his life was under threat. He was due to testify against Dlamini in a public inquiry about her role in the Sassa pension payment debacle.

DA was on Monday expected to lay charges of money laundering and corruption against the South African component of global software giant‚ SAP, and Gupta-affiliated company CAD House‚ following allegations that kickbacks changed hands between the two companies in exchange for a R100m Transnet contract. SAP has denied the allegations which emerged from leaked Gupta-linked e-mails. According to reports‚ SAP Africa promised to pay a 10% 'commission' to CAD House‚ which is majority owned by the Gupta family’s Sahara Systems‚ if it secured contracts with Transnet. CAD House‚ a 3-D printing company‚ is owned by President Jacob Zuma’s son‚ Duduzane‚ and businesses linked to Sahara.

NUM said it was shocked and disappointed by the suspension of the implementation of the new Mining Charter as agreed between the Chamber of Mines and the Department of Mineral Resources on Monday. This was after the chamber announced the suspension would last until judgment is handed down by the High Court on its urgent application for the implementation of the charter to be suspended pending the outcome of a court application for it to be reviewed and set aside. NUM said Mineral Resources Minister Mosebenzi Zwane seemed to have 'buckled under pressure in court and conceded in the suspension of the charter and thus delayed the meaningful inclusion of employees and communities in this exploitative industry'.

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