Major International Business Headlines Brief::: 17 April 2018

Tue Apr 17 07:23:56 CAT 2018

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Major International Business Headlines Brief::: 17 April 2018

 <http://www.mbca.co.zw/> 

*  Zimbabwe March inflation at 2.68 percent y/y: Zimstats

*  Zimbabwe's tax revenue up 29 percent to $1.1 billion in Q1

*  KPMG South Africa reviewing work done by its partners

*  S.African utility Eskom asks to recover $5.5 bln via higher tariffs

*  South Africa's glass maker Consol IPO may raise up to $415 mln

*  South African rand slightly stronger on hopes Syria attack a one-off

*  Angolan inflation slows to 20.9 pct y/y in March: stats office

*  AngloGold Ashanti's CEO quits to take top job at Vedanta Resources

*  Egypt aims to raise tobacco tax revenues by $402 mln in 2018-19 budget

*  Kenyan shilling strengthens on horticulture inflows

*  China's first quarter growth beats expectations at 6.8%

*  Pound's strong run continues with push above $1.43

*  China's ZTE 'poses risk to UK security'

*  Whitbread shares soar as activist investor builds stake

*  Shire sells cancer treatment business for $2.4bn

 <mailto:info at bulls.co.zw> 

Zimbabwe March inflation at 2.68 percent y/y: Zimstats

HARARE (Reuters) - Zimbabwe’s consumer price inflation eased to 2.68 percent year-on-year in March from 2.98 percent in February, data from the national statistics agency showed on Monday.

On a month-on-month basis, prices fell by 0.25 percent in March after a 0.08 percent increase the previous month, Zimstats said.

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Zimbabwe's tax revenue up 29 percent to $1.1 billion in Q1

HARARE (Reuters) - Zimbabwe’s tax revenue rose 29 percent to $1.1 billion during the first quarter of the year, the tax agency said on Monday, citing better tax compliance and an improving business environment under new President Emmerson Mnangagwa.

The southern African nation has not been able to access foreign funding since 1999 when it defaulted on its debt, hobbling the economy and making tax collections crucial to financing the government budget.

“Gross and net revenue collections were above last year’s levels for the same period, an indication of an improving operating environment for business and effective enforcement,” Zimbabwe Revenue Authority chairperson Willia Bonyongwe said in a statement.

Bonyongwe did not give projections for 2018 but the agency collected $3.98 billion last year.

Mnangagwa, whose biggest challenge is to revive the economy, came to power in November after a defacto army coup that forced 94-year-old Robert Mugabe to resign.

Mnangagwa has promised to protect foreign investment in Zimbabwe and has watered down some of Mugabe’s policies, including the black economic empowerment law that forced foreign-owned firms to sell majority shares to locals.

KPMG South Africa reviewing work done by its partners

JOHANNESBURG (Reuters) - KPMG South Africa is reviewing work done by its partners in the wake of the resignation of two partners who faced disciplinary charges, its chief executive said on Sunday, another setback for the firm whose work is under scrutiny by authorities.

CEO Nhlamulo Dlomu said the resignation of partners Sipho Malaba and Dumi Tshuma on Friday after facing disciplinary charges over failure to disclose financial interests in VBS Mutual Bank, is a reminder of how much more needs to be done to “reaffirm the public’s trust in KPMG”.

She said the charges stemmed from the partners giving misleading information on loans they had from VBS.

Small lender VBS was in March placed under curatorship by the South African Reserve Bank because of liquidity issues.

“We will look at the last two years. We’re looking at at least 200 files and looking at big, medium size and smaller clients,” Dlomu told reporters.

“In essence what we’re doing is we’re opening ourselves up to proper and detailed scrutiny.”

KPMG sacked its South African leadership in September last year after it found work done for companies owned by the Gupta family, a trio of businessmen with close ties to former President Jacob Zuma, “fell considerably short” of its standards. The Guptas have consistently denied wrong-doing.

The latest review will be in addition to other internal and external reviews that have been carried out since last September to date.

“The purpose of this new program is to assess the commitment to quality and professionalism of our engagement teams,” KPMG said in a statement.

The company also said it has started an expanded process of integrity and background checks of all partners and their spouses, which will be coordinated by KPMG International.

Additional non-executives on the board will be appointed to ensure independent scrutiny, it said.

South Africa’s companies registry office said in January it was pursuing criminal complaints against KPMG, as well as SAP and McKinsey, on suspicion that business they conducted with the Guptas broke the companies act.

A number of companies have since dropped KPMG as their auditor. Dlomu said clients who have dropped the firm are less than 10 percent of KPMG’s client book.

S.African utility Eskom asks to recover $5.5 bln via higher tariffs

JOHANNESBURG (Reuters) - South African state utility Eskom is seeking to recover 66.6 billion rand ($5.5 billion) of costs incurred over the past three years through higher tariffs, saying it sold less electricity than forecast because of an economic downturn.

Eskom, which supplies around 95 percent of South Africa’s electricity, is battling to stabilise its finances under new management after narrowly averting a liquidity crunch this year.

The power firm was at the heart of corruption scandals surrounding ousted President Jacob Zuma and is regularly cited by ratings agencies as a threat to the country’s creditworthiness.

Public hearings began on Monday on whether the National Energy Regulator of South Africa (Nersa) should allow Eskom to recover the 66.6 billion rand of costs through electricity tariff increases.

Eskom said it had spent more and earned less than Nersa had predicted when the regulator determined the path of electricity prices for the 2014/15, 2015/16 and 2016/17 financial years.

Eskom cited sluggish economic growth, commodity price changes and lower investor confidence over those years.

Calib Cassim, Eskom’s acting chief financial officer, said the firm was aware it would probably only be able to recover the costs it had incurred gradually, if its application to Nersa was successful.

Nersa is scheduled to make a decision on Eskom’s application on June 21.

($1 = 12.0750 rand)

South Africa's glass maker Consol IPO may raise up to $415 mln

JOHANNESBURG (Reuters) - South African glass bottle maker Consol aims to raise up to $415 million via an initial public offering (IPO), it said on Monday, returning the firm to public markets after more than a decade in the hands of private equity groups

The flotation, pencilled in for April 30, comes amid growing confidence among investors and business leaders that President Cyril Ramaphosa will follow through on promises to revive the economy and bring policy certainty.

Consol, bought out for 6.1 billion rand in 2007 by private equity investors led by Brait, said it would sell 761 million shares, or 34.2 percent stake, at between 1.50 rand and 6.50 rand each, raising between 1.1 billion rand and 5 billion rand ($415 million) and values the company at as much as 14.3 billion rand.

Including the greenshoe option, or an over-allotment, of as much as 114.1 million shares to underwriters, the IPO could raise as much as 5.7 billion rand, Consol said.

Brait’s stock has been hammered by concerns about its biggest shareholder Christo Wiese and the performance of its British retailer New Look. The South African tycoon is tallying up losses from a share price crash in Steinhoff, a retailer in the throes of an accounting scandal.

Consol, which counts blue chips such as Anheuser-Busch InBev, Diageo and Heineken among its customers, said the listing would allow shareholders to cash in on their 11-year investment in the company and raise money to pay down debt, which includes 4.7 billion rand in loans from shareholders.

The company, which also operates in Kenya and Nigeria, reported a 1.6 billion rand ($134 million) in core earnings in the year to June 30, 2017 on revenue of 6.1 billion rand.

Goldman Sachs and BofA Merrill Lynch are working on the listing, along with South African banks RMB and Standard Bank, who will market the deal to domestic investors.

($1 = 12.0729 rand)

South African rand slightly stronger on hopes Syria attack a one-off

JOHANNESBURG (Reuters) - South Africa’s rand was slightly stronger early on Monday as global investors hoped that U.S.-led strikes on Syria would not escalate into a wider conflict.

At 0628 GMT, the rand traded at 12.0700 versus the dollar, around 0.1 percent stronger than its close on Friday.

The rand was volatile last week, see-sawing over global trade war fears and tensions between the United States and Russia over Syria. Domestic factors receded.

On Monday U.S. stock futures firmed and oil prices fell on relief that the attack on Syria had been limited in scale.

Analysts at NKC Research said they expected the South African currency to trade in a range of 11.90 to 12.15 to the dollar on Monday.

Government bonds were little changed early on Monday, with the yield on the benchmark instrument due in 2026 down 1 basis point to 8.075 percent.

Angolan inflation slows to 20.9 pct y/y in March: stats office

UANDA (Reuters) - Angolan inflation declined to 20.9 percent in March from 21.47 percent in the previous month, the statistics office said.

Month-on-month inflation quickened to 1.44 percent from 1.26 percent in February, the statistics office added.

AngloGold Ashanti's CEO quits to take top job at Vedanta Resources

(Reuters) - AngloGold Ashanti said on Monday its Chief Executive Officer Srinivasan Venkatakrishnan was resigning to take the top job at mining conglomerate Vedanta Resources Plc.

Venkatakrishnan will remain in his current role until Aug. 30 and a search for a new CEO is underway, AngloGold said.

Egypt aims to raise tobacco tax revenues by $402 mln in 2018-19 budget

CAIRO (Reuters) - Egypt aims to raise its revenues from taxes imposed on tobacco by 7.072 billion Egyptian pounds ($402 million) in the 2018-19 draft budget, a government document said.

The country is targeting around 58.524 billion Egyptian pounds ($3.33 billion) in revenues from tobacco taxes, according to a document released by the Finance Ministry to the parliament on Sunday.

The government is expecting revenues of 51.452 billion Egyptian pounds ($2.93 billion) from the tobacco taxes this financial year, which ends in June.

Egypt has been increasing taxes and cutting subsidies to narrow its budget deficit as part of economic reforms tied to a $12 billion International Monetary Fund progamme aimed at boosting the economy.

($1 = 17.5700 Egyptian pounds)

Kenyan shilling strengthens on horticulture inflows

NAIROBI (Reuters) - The Kenyan shilling strengthened against the dollar on Monday due to inflows from horticulture exports amid thin demand from importers, traders said.

At 0842 GMT, commercial banks quoted the shilling at 100.55/75 per dollar, compared with 100.75/95 at Friday’s close.

China's first quarter growth beats expectations at 6.8%

China's economy grew 6.8% between January to March according to official data, slightly beating forecasts for the period.

The growth rate compares expansion with the same three months in the previous year.

The latest GDP figures are also above Beijing's 2018 annual growth target of "around 6.5%".

The data shows resilience in the world's second largest economy, helped by strong consumer demand.

But concerns about China's economy - including rising debt levels - remain.

The government has been fighting to contain ballooning debt and a housing bubble without hurting growth.

Amy Zhuang, China economist at Nordea Bank in Singapore described the first quarter growth figures as "solid" but also said there are signs that the positive momentum is weakening, likely due to the cooling housing market.

The growth figures come amid concerns about China's outlook for exports which has been clouded by rising tensions with the United States, its largest trading partner.

Chinese growth data through 2018 will be closely watched for any impact of tariffs proposed by the US.

Are we on the brink of a US-China trade war?

Many China watchers advise caution with China's official GDP numbers.

Julian Evans-Prtichard, senior China economist at Capital Economics said the official figures "need to be taken with a grain of salt as they have been implausibly stable in recent years".

"While we don't think China's economy is expanding as rapidly as the official figures claim, there is broader evidence to suggest that a recovery in industry did prevent growth from slipping too much last quarter."--BBC

Pound's strong run continues with push above $1.43

The pound has continued its recent strong run against the dollar pushing firmly above $1.43.

It is the seventh session in a row that the pound has made gains against the US currency.

The strong run means that, among the G10 group of rich nations, the UK has the best-performing currency this year.

Traders say the prospect of higher UK interest rates has made the pound more attractive while the dollar has been hit by fears of trade disputes.

The pound started the week with a gain of almost a cent to $1.4323, while against the euro it was 0.2% higher at €1.1569.

Following the vote to leave the European Union in June 2016 the pound sank, hitting $1.2068 in January of last year.

Since then it has made a comeback.

Jane Foley, a currency strategist at Rabobank, said the recent strong run can be dated back to September 2017 when it became clear the Bank of England was ready to raise interest rates.

In November, the Bank increased the cost of borrowing for the first time in a decade - from 0.25% to 0.5%.

And in February the pound's momentum was maintained when the Bank hinted at an accelerated pace of interest rate increases.

Most analysts expect it to raise interest rates again in May.

According to Ms Foley, any indication about what happens to interest rates after that is the key to the pound's next move.

Some clues may come from some important economic data this week.

On Tuesday the latest UK unemployment and wage data is released and Wednesday brings the latest inflation figures.

Data watch

Ms Foley said Tuesday's data on earnings growth should be the "most interesting", as weak wage growth has been one reason why the Bank of England has been slow to raise rates.

If the data remains weak then the Bank may not feel pressure to make another rate increase after May, she said.

Another big factor governing the pound's progress is the progress of Brexit talks. Trade negotiations start again this week and will be closely monitored.

If those talks go badly then the pound could be undermined.--BBC

China's ZTE 'poses risk to UK security'

The UK's cyber-defence watchdog has confirmed it has blacklisted one of China's leading state-owned companies.

The National Cyber Security Centre (NCSC) has written to UK telecoms providers warning them that the use of ZTE's equipment and services could pose a national security risk.

The move coincides with a US government ban preventing American businesses from selling components to the Shenzhen-based company.

ZTE has yet to respond.

"It is entirely appropriate and part of NCSC's duty to highlight potential risks to the UK's national security and provide advice based on our technical expertise," said a statement from Dr Ian Levy, the organisation's technical director.

"NCSC assess that the national security risks arising from the use of ZTE equipment or services within the context of the existing UK telecommunications infrastructure cannot be mitigated."

BT formed a research and development partnership with ZTE in 2011, and has also distributed modems manufactured by the Chinese firm.

"ZTE is just one of many research partners with which BT is engaged," a spokeswoman for the British firm told the BBC.

"Such projects focus on the future uses of networks and technologies and do not necessarily result in the commercial deployment of the research partner's kit in our network.

She added that BT had "a robust testing regime in place" to ensure its network remained secure.

'Finite resources'

In 2012, the US House Intelligence Committee warned that both ZTE and another Chinese firm, Huawei, posed a security threat.

Dr Levy also referenced ZTE's rival in a letter sent to the UK telecoms sector, according to the Financial Times.

"The UK telecommunications network already contains a significant amount of equipment supplied by Huawei, also a Chinese equipment manufacturer," he wrote.

"Adding in new equipment and services from another Chinese supplier would render our existing mitigations ineffective."

The NCSC's parent organisation, GCHQ, already carries out its own checks on Huawei's equipment.

A spokesman for Huawei declined to comment.

"What you're seeing here is that the UK government has finite resources," commented Alan Woodward, a former consultant to GCHQ.

"We could end up in a situation where the checks and balances needed to protect our security are insufficient, and effectively overwhelmed.

"Using yet more equipment sourced from China could mean that we open ourselves up to an unacceptable risk."

Sanctions buster

The US's action against ZTE stems from the fact the firm sold on US hardware and software to an Iranian telecoms carrier, in breach of sanctions imposed by Washington.

ZTE pleaded guilty to the offence last year and paid a $890m (£621m) penalty.

At the time the firm also promised to dismiss four senior workers and discipline 35 others. But it acknowledged in March that while it had fired the four managers, it had failed to keep the second part of its promise.

"We can't trust what they are telling us is truthful," a unnamed US official told the Reuters news agency.

"And in international commerce, truth is pretty important."

The Verge highlighted that the ban on US companies selling ZTE further components means the Chinese firm will be unable to continue using Qualcomm's Snapdragon processors in its smartphones for up to seven years.--BBC

Whitbread shares soar as activist investor builds stake

Shares in Whitbread jumped more than 7% after it emerged that an activist investor has built a stake to become its largest shareholder.

Elliott Advisors confirmed at the weekend that it now holds a stake of more than 6% in the company.

According to reports, Elliott Advisors wants Whitbread to be split into its Costa Coffee chain and its Premier Inn business.

A spokeswoman for Whitbread declined to comment.

Shares ended the day 7.2% higher at £42.18, valuing the company at £7.7bn.

The hedge fund not afraid of a fight

Elliott Advisors is the second activist investor to build a substantial shareholding in Whitbread, which also owns Beefeater and Brewers Fayre brands as well as restaurants Thyme, Bar + Block and Table Table.

US hedge fund Sachem Head has a 3.4% stake and has pressed management to consider breaking up the business, as well as a sale and leaseback of its Premier Inn hotel properties.

Whitbread's chief executive, Alison Brittain, said earlier this year: "We remain entirely open-minded about the structure of the business and are fully committed to reviewing it on a regular basis at the board level."

Alpesh Patel, chief executive of Praefinium Partners, the investment company, said he did not think a break up of Whitbread was inevitable.

He told the Today programme: "[Elliott] don't necessarily want the properties to be sold the way that more aggressive activists do, they just want two separate companies so they can value hotels alongside, say Hilton, and Costa alongside say the likes of Greggs and they think that will create shareholder value."

Elliott Advisors buys shares in companies to agitate for change and, it claims, create value for shareholders.

Recently, it backed Melrose's £8.1bn hostile takeover of engineering group GKN.

It is also pressing BHP Billiton to get rid of the mining giant's dual listing structure.

Elliott Advisors, which has a 5% shareholding in BHP Billiton, said in a letter to the board that unifying its structure to list its shares solely in Australia would create $22bn (£15.4bn) in shareholder value,--BBC

Shire sells cancer treatment business for $2.4bn

Pharmaceutical giant Shire is raising $2.4bn (£1.7bn) by selling its cancer treatment unit to France's Servier.

The sale comes just weeks after Japan's Takeda Pharmaceutical said it was considering a takeover bid for Shire.

Shire says the sale of the oncology business was initiated in December and is unrelated to the possibility of a takeover bid.

The company said it may also sell other assets that it judges as not central to its business.

"While the oncology business has delivered high growth and profitability, we have concluded that it is not core to Shire's longer-term strategy," said Shire's chief executive Flemming Ornskov.

"We will continue to evaluate our portfolio for opportunities to unlock further value and sharpen our focus on rare disease leadership with selective disposals of non-strategic assets," he added.

Shire specialises in developing treatments for rare diseases. The company was founded in the UK and still has a large base in Basingstoke, but relocated its corporate headquarters to Dublin in 2008.

Takeda confirms bid interest in Shire

Under UK rules governing takeovers, Takeda has until 25 April to launch a bid for Shire.

It has been reported that Takeda's boss is meeting some of Shire's biggest shareholders this week to discuss a possible takeover offer.

Investors will be keen to know how Takeda intends to fund the takeover of Shire which has a bigger market value.

Not-for-profit

France's Servier is controlled by a not-for-profit foundation and invests all of its profits into drug development.

It also allocates a quarter of its sales to research and development.

Its group president, Olivier Laureau, said the deal will help its ambition to become a leading organisation in cancer treatments and also gives it access to the US market.--BBC

INVESTORS DIARY 2018

Company

Event

Venue

Date & Time

Zimbabwe

Independence Day

Zimbabwe

18/04/2018

Workers’ Day

01/05/2018

Africa Day

25/05/2018

Zimbabwe

Heroes’ Day

Zimbabwe

13/08/2018

Zimbabwe

Defence Forces Day

Zimbabwe

14/08/2018

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DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of Faith Capital (Pvt) Ltd for general information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy or subscribe for any securities. The information contained in this report has been compiled from sources believed to be reliable, but no representation or warranty is made or guarantee given as to its accuracy or completeness. All opinions expressed and recommendations made are subject to change without notice. Securities or financial instruments mentioned herein may not be suitable for all investors. Securities of emerging and mid-size growth companies typically involve a higher degree of risk and more volatility than the securities of more established companies. Neither Faith Capital nor any other member of Bulls ‘n Bears nor any other person, accepts any liability whatsoever for any loss howsoever arising from any use of this report or its contents or otherwise arising in connection therewith. Recipients of this report shall be solely responsible for making their own independent investigation into the business, financial condition and future prospects of any companies referred to in this report. Other  Indices quoted herein are for guideline purposes only and sourced from third parties.

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