Major International Business Headlines Brief::: 25 November 2019

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Major International Business Headlines Brief::: 25 November 2019

 


 

 


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*  Cybertruck: Tesla truck gets 150,000 orders despite launch gaffe

*  National Grid and SSE move offshore over Labour plans

*  Farm troubles raise risk for Trump in trade talks

*  'Freehold charges cost us our dream home'

*  S&P downgrades South Africa's outlook to negative

*  South Africa blocks arms sales to Saudi and UAE in inspection row

*  South African Airways inks deal to end eight-day strike

*  Telecoms group Orange completes sale of Orange Niger arm to Zamani

*  First-half profit at S.Africa's Naspers almost halves

*  Nigeria's economy grew in Q3 after oil output rose to three year high

*  Bond fund exodus from S.Africa well underway as credit rating teeters

*  Tiger Brands' annual earnings drop 17% on tepid recovery at meat unit

 

 


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Cybertruck: Tesla truck gets 150,000 orders despite launch gaffe

Tesla has received almost 150,000 orders for its new pickup truck, boss Elon
Musk has said, despite an embarrassing hiccup at its launch.

 

Mr Musk was caught out on stage when the windows of the Cybertruck shattered
during a demonstration supposed to show their durability.

 

Tesla shares dived 6.1% after the event on Thursday and several bad reviews.

 

With its distinct angular design, the electric truck was greeted with cheers
but also bemusement.

 

But on Saturday Mr Musk tweeted: "146k Cybertruck orders so far, with 42%
choosing dual, 41% tri & 17% single motor".

 

The demand had come despite "no advertising & no paid endorsement" for the
truck, he said.

 

No date has been given for the Cybertruck's release, but analysts said it
would not be ready before the end of 2021 at the earliest.

 

Tesla's new pickup truck smashed during demo

The industrial-looking vehicle is covered in stainless steel alloy and will
be able to go from 0 to 100km/h (62 mph) in about three seconds, Mr Musk
said in his presentation in Hawthorne, California.

 

However, some analysts are concerned about the futuristic design, with
Jessica Caldwell of Edmunds' vehicle marketplace saying: "It looks like a
truck version of the DeLorean from Back To The Future."

 

The launch event's "fail" happened during a segment displaying how the
truck's stainless steel exterior, and metal windows, could withstand bullets
and sledgehammers.

 

Tesla's head of design, Franz von Holzhausen, proceeded to throw a metal
ball at the front left window, causing it to smash.

 

He repeated the move on the rear left window and the same thing happened. Mr
Musk was heard to swear before joking: "Room for improvement."

 

On Friday Tesla's share price dived by 6%, slashing Mr Musk's personal net
worth by $768m (£598m) in a single day, according to Forbes.

 

The pickup market represents a significant opportunity for Tesla as it
improves its battery technology, meaning carrying heavier loads over long
distances is now practical.

 

According to vehicle marketplace Edmunds, large trucks have accounted for
14.4% of new vehicle sales in the US up until October, compared to 12.6% in
2015.--bbc

 

 

 

 

 

 

 

 

 

 

 


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National Grid and SSE move offshore over Labour plans

Two top energy firms say they have moved ownership of their UK operations
overseas to protect themselves from Labour's nationalisation plans.

 

In recent months, National Grid has opened offshore holding companies in
Hong Kong and Luxembourg, while SSE has incorporated in Switzerland.

 

As first reported in the Sunday Times, it would not stop them being taken
over but could protect investors.

 

Labour said the "rip-off" move showed the grid needed to be in public hands.

 

In its election manifesto, the party promised a radical plan to
renationalise Britain's rail, mail, water and energy networks, along with
broadband.

 

But energy companies have criticised the plan, with SSE and National Grid
among those running ads on Facebook warning of the potential costs.

 

Labour has previously said its plans would be cost neutral, help decarbonise
the economy faster and create jobs.

 

But there are fears that it would try to renationalise the companies at a
discount, compared to their current market value.

 

Critics warn this would hit shareholders, including pension funds, who would
be compensated with government bonds.

 

'Highly detrimental'

National Grid runs the electricity transmission network in England and
Wales, as well as the main gas transmission pipelines. It has a market value
of £31bn.

 

"Labour's proposals for state ownership of National Grid would be highly
detrimental to millions of ordinary people who either hold shares in the
company or through their pension funds - which include several local
authority pension funds," a spokeswoman said.

 

"To protect their holdings, and in line with our legal fiduciary duty to our
shareholders, we have established holding companies in Luxembourg and Hong
Kong. This has no financial benefit to the company and does not affect its
day-to-day operations," she added.

 

Labour vows to 'transform' UK at manifesto launch

Election ads: Energy group attacks Labour plans

How much could Labour's nationalisation plan cost?

SSE said it had moved its electricity distribution business - which supplies
3.7 million homes in Scotland and England - to a Swiss holding company. It
has also moved its Scottish transmission network business.

 

The firm, which has a market value of £13.6bn, said Switzerland was party to
the Energy Charter Treaty which offered better shareholder protection.

 

"[This is] an additional safeguard, which SSE does not believe would be
required in practice, should SSE's electricity networks businesses and
interests... become the subject of proposed legislation for
nationalisation," a spokesman said.

 

"In practice, SSE expects that precedent, the principle of fairness and the
need to secure future investor confidence in the UK economy means it should
be possible to secure fair value from nationalisation."

 

According to the Sunday Times, water company Anglian and Yorkshire has also
set up an offshore holding company. Severn Trent is said to be considering a
similar move.

 

In a statement Labour said: "The UK's energy networks are vital strategic
infrastructure on which we all rely. You cannot boil a kettle, heat your
home or run a business without the grid.

 

"The idea that private owners, who have been ripping off the public, would
move offshore in an attempt to prolong the rip-off illustrates just why we
need the grid back in public hands."--bbc

 

 

 

Farm troubles raise risk for Trump in trade talks

When Derek Sande returned from college almost a decade ago to run his
family's 10,000-acre farm in Montana, the industry was feeling flush.

 

But falling prices and a string of natural disasters have pummelled farmers
in recent years, with the US-China trade war delivering a final punch.

 

This autumn, Sande Farms declared bankruptcy.

 

The filing was a first for his family, which has worked the land in
America's northwest plains for at least four generations. But Mr Sande is
hardly alone in his predicament.

 

Across the country, farm bankruptcies have surged 24% since September 2018,
a few months after US trade disputes with China and other countries led to
higher tariffs on key farm goods including soyabeans, cotton and dairy,
according to analysis by the American Farm Bureau Federation.

 

In the US, bankruptcy provides an opportunity to reorganise debt with the
aim to continue operating. But outside of court, the trends are also
troubling, with debt at record levels, late payments rising and the number
of farms continuing to fall.

 

A quick guide to the US-China trade war

Trade war: US-China trade battle in charts

The distress is a potential problem for US President Donald Trump, who won
the White House with strong backing from farming states and is up for
re-election next year.

 

While polls suggest support for the president among farmers remains strong,
the situation is not without risk.

 

Approval has proven sensitive to shifts in US trade talks - in particular
with China. Exports of US agricultural products to China have dropped by
more than half since the start of the fight.

 

The wave of bankruptcies has also hit especially hard in politically
important states such as Wisconsin and Pennsylvania - which supported Mr
Trump in 2016 by narrow margins.

 

In Wisconsin, a hub of dairy production, the number of bankruptcies is
higher than any other state and the total number of farms has fallen 10% as
families sell or go out of business, says Kevin Bernhardt, farm management
specialist at the Center for Dairy Profitability at the University of
Wisconsin-Extension.

 

So far, farmers have been willing to give the president the benefit of the
doubt, but "whether that patience is going to last until next November, I'm
not certain," he says.

 

Lost ground

At a press conference last month, Mr Trump promised farmers that relief was
on its way, in the form of a "phase one" deal with China, which would commit
to more than double its purchases of US agricultural goods, to potentially
$50bn a year.

 

But a signing date has yet to be announced and reports suggest Chinese
leaders have baulked at such a concrete commitment. Even within the White
House, it's not clear if there's support for a deal without Chinese
concessions on issues such as intellectual property theft, which triggered
the fight.

 

For farmers like Mr Sande, any deal may be too little, too late.

 

"To me, it looks like we're going to be lucky to get back to where we were
pre-tariff," he says. "So is that going to make up the ground that we've
lost?"

 

The US exported nearly $20bn (£15bn) worth of agricultural products to China
in 2017. That figure fell to $9.1bn last year, after China imposed
retaliatory tariffs of up to 25% on a range of US goods, including apples,
soybeans, ginseng and cotton.

 

Some products have fared better than expected. Pork exports, for example,
have held up, after a devastating outbreak of disease at Chinese pig farms.

 

That hasn't helped Mr Sande, whose crops include soybeans, wheat and
chickpeas. These crops are among the US exports to China that have dropped
precipitously, as Chinese buyers head to Brazil and other countries for
alternative suppliers.

 

Nationwide, the pain is nowhere near as severe as it was during America's
1980s farm crisis, when thousands of farms went under. About 600 farms have
entered bankruptcy proceedings in the 12 months to September out of roughly
two million across the country, according to the Farm Bureau.

 

But the trade disputes have worsened longstanding strains, after five years
of sliding prices triggered by a global boom in production.

 

"There's just no margin," Mr Sande says.

 

The White House has announced some $28bn in aid for farmers affected by the
tariffs and Mr Trump recently promoted plans for another round of payments
on Twitter.

 

The administration, worried about the 2020 campaign, is actually
over-compensating many farmers for their losses, says Vincent Smith, a
professor of agriculture at Montana State University and visiting scholar at
conservative think tank the American Enterprise Institute, who has studied
the programmes.

 

"Many commentators appear puzzled why rural support among the farm sector
appears to have remained high but... there is a ready explanation for the
paradox," he says.

 

Almost 40% of farm profits this year are expected to come from federal
assistance, including the trade programme, according to the American Farm
Bureau.

 

But the payments have stirred controversy as the biggest, richest farms -
including some foreign-owned firms - collect a majority of the relief. Lobby
groups also maintain farmers want markets, not subsidies.

 

Mr Sande, who received some aid, called it "a nice gesture". "However, it
really does not make up for a lot of it."

 

US-China trade war: 'We're all paying for this'

US to give farmers $12bn trade war bailout

Congress, responding to the stress, recently made farms with debts of up to
$10m eligible to use the specialised farm bankruptcy process - more than
doubling the former limit.

 

Mr Sande says he is hopeful that he will be able to reorganise his debts
quickly and refocus on farming.

 

But even if Mr Trump secures a deal with China, low prices are likely to
linger, since the fight has spurred other countries to boost their
production, warns John Newton, chief economist for the American Farm Bureau,
an industry lobby group.

 

"Once you expand soybean acres in South America or expand cotton acres in
South America or expand pork production in Europe, those don't turn off with
a switch," he says. "It's just going to be that much more competitive."--bbc

 

 

 

'Freehold charges cost us our dream home'

Peter Kirby and Jen Tweedle, with children Amelia and Zac, say they've been
told their house could be unsellable

"To be honest we were absolutely devastated by it. You would never buy a
house without being able to sell it again".

 

Jen Tweedle is talking about the moment she and her fiancé Peter realised
why their house sale fell through over the summer.

 

Their buyers couldn't get a mortgage after discovering Jen and Peter's
new-build, freehold property was subject to an estate rentcharge.

 

Peter said: "We lost the sale and our dream house... and that was very
disappointing."

 

What is an estate rentcharge?

An estate rentcharge can be imposed when private developers build housing
estates that the local authority won't "adopt", meaning councils won't pay
for the upkeep of public spaces or roads on that estate, or pay for things
such as street lighting.

 

When that's the case developers - or once any building works are finished,
residential management companies - establish the charge to pay those bills.

 

But some residents have criticised this process, saying they have very
little control over the charges and that there's not enough transparency
about exactly what they're paying for.

 

In addition to this, crucially, if homeowners fall 40 days behind on their
payments, the law on estate rentcharges allows developers, or management
companies, to take possession of a property to ensure they get the money
they're owed.

 

Although this is extremely rare, the fact that the legal right exists can
put potential buyers off and leave mortgage providers unwilling to lend on
properties subject to rentcharges.

 

However, the Home Builders Federation says rentcharges are the fairest way
to make sure communal areas are paid for and maintained.

 

'Unsellable'

In Peter and Jen's case, their potential buyers couldn't get a mortgage
agreed because the home was subject to an estate rentcharge.

 

"We bought our house [in Oxfordshire] back in July 2016 and we were informed
by the estate agent there'd be a service charge which, coming from London,
we weren't worried about," Peter says.

 

"Basically we weren't told by our solicitor or by our estate agents what an
estate rentcharge actually meant in terms of the law", Jen adds.

 

She's also unhappy at how they were treated by the developers, their
solicitors and estate agent, and how they didn't even find out their
rentcharge might be a problem until they tried to sell.

 

"The sudden surprise of it all, the fact that the term 'your house is
unsellable' was thrown at us... you would never buy a house to not be able
to sell it again."

 

For now, Peter and Jen have taken their home off the market and will look
again in the new year.

 

"We have to be resigned to the fact that this problem may reappear.

 

"Probably about £2,500 has already been paid out and we still need to pay
solicitors another £1,500 hoping they will be able to sell our house, we
don't know.

 

"Maybe our house is unsellable."

 

'Fleecehold' homes: A scandal in waiting?

Call for reform

Beth Rudolph, a director of the Conveyancing Association, says the failure
of house sales due to estate rentcharges is becoming more common.

 

"Just yesterday a developer refused to vary the terms of a rentcharge that
the lender had confirmed was not acceptable to them because of the risks to
themselves and the borrower," she says.

 

"We need the government to intervene to change the law so that someone
cannot effectively lose thousands of pounds because they forgot to pay a £6
rentcharge.

 

"We would absolutely expect that any rentcharge owner should be able to
recover arrears of payments in the normal debt collection way, but not to be
able to grant a long lease or possess the property."

 

'Fairest way'

Andrew Whitaker from the Home Builders Federation says because of cuts to
local authority budgets many local councils just don't have the money to
adopt estates like they would have in the past.

 

"As part of a development we [developers] build places - not just homes. So
things like parks, shared spaces, roads," he says.

 

"In the past we used to hand all of this to the local authority and they'd
maintain it in the future. Because of cuts and local authority budgets being
strained they are less keen to do this.

 

"They still need maintaining and the fairest way to do this is to establish
an estate rentcharge."--bbc

 

 

 

S&P downgrades South Africa's outlook to negative

(Reuters) - S&P Global on Friday downgraded bit.ly/2D8LTm3 its outlook for
South Africa's credit rating to negative, citing weak pace of economic
growth, mounting government debt burden and liabilities related to the
country's energy utility, Eskom.

 

The downgrade significantly increases the probability of a downgrade in the
sovereign rating of Africa’s most industrialized economy.

 

South Africa is already ranked at sub-investment grade by both S&P and Fitch
Ratings, while the last of the three main ratings firms, Moody’s, has left
it teetering on the edge of “junk” status.

 

“The negative outlook indicates that South Africa’s debt metrics are rapidly
worsening as a result of the country’s low GDP growth and high fiscal
deficits,” S&P said.

 

 

The outlook has become increasingly bleak. Many had hoped the arrival of
President Cyril Ramaphosa, who took over from scandal-hit Jacob Zuma in
February 2018, could kick-start growth, but he has instead struggled with
the scale of the challenge.

 

S&P and Fitch moved South Africa’s debt to sub-investment level in 2017,
though the reprieve from Moody’s means the country has so far not endured
the spike in borrowing costs typically sparked by a downgrade from all three
agencies.

 

 

 

South Africa blocks arms sales to Saudi and UAE in inspection row

JOHANNESBURG (Reuters) - South Africa is blocking arms sales to countries
including Saudi Arabia and the UAE in an inspections dispute, endangering
billions of dollars of business and thousands of jobs in its struggling
defence sector, according to industry officials.

 

The dispute centres on a clause in export documents that requires foreign
customers to pledge not to transfer weapons to third parties and to allow
South African officials to inspect their facilities to verify compliance,
according to the four officials as well as letters obtained by Reuters.

 

Officials at major South African defence groups Denel and Rheinmetall Denel
Munition (RDM) said the dispute was holding up their exports, as did a third
big defence company which asked not to be named. RDM said some of its
exports to the Middle East had not been approved since March.

 

Saudi Arabia and the United Arab Emirates, which account for at least a
third of South Africa’s arms exports and are engaged in a war in Yemen, have
rejected the inspections which they consider a violation of their
sovereignty, the sources said.

 

Oman and Algeria have also refused inspections and seen their imports from
South Africa blocked, the industry officials added.

 

Government officials in Saudi Arabia, the UAE, Oman and Algeria did not
respond to emails and phone calls from Reuters seeking comment, nor did
their embassies in South Africa.

 

Asked about the inspection clause issue, Ezra Jele, South Africa’s director
for conventional arms control in the defence ministry, said that authorities
considered criteria including human rights, regional conflict, risk of
diversion, U.N. Security Council resolutions and national interest when
evaluating applications for export permits.

 

He did not comment on specific cases.

 

The Aerospace, Maritime and Defence Industries Association of South Africa
(AMD) says the dispute could threaten the sector’s survival.

 

“We’ve got one clause that’s disabling us from exporting 25 billion rand
($1.7 billion) worth of value today, right now,” Simphiwe Hamilton, the head
of the AMD, told Reuters.

 

The industry body estimates the export blocks put an additional 50 to 60
billion rand in future business at risk and could cause the loss of up to
9,000 jobs at defence firms and supporting industries.

 

YEMENI CONFLICT

Since democratic rule was established in 1994, South Africa has sought to
reform its defence industry – once a pillar of the racist apartheid regime –
by making export approvals subject to human rights considerations.

 

Saudi Arabia is leading an alliance of Arab states, including the UAE, to
try to restore the government of Yemeni President Abd-Rabbu Mansour Hadi,
who was ousted from the capital Sanaa by the Iran-aligned Houthis in 2015.

 

In February, Amnesty International accused the UAE of diverting arms
supplied by Western and other states to militias accused of war crimes in
Yemen. In the same month, a CNN investigation said Saudi Arabia and the UAE
had transferred American weapons to Yemeni fighters, breaking the terms of
their arms sales with the United States.

 

The UAE did not respond to the Amnesty allegations. The Saudi military
coalition did not respond to CNN’s allegations, but a senior UAE official
denied it violated end-user agreements.

 

The South African defence industry has become increasingly reliant on
exports, which have grown more than 12-fold since 1990 as domestic defence
spending has declined.

 

Exports now make up the bulk of revenues for major defence companies
including Denel, Paramount Group, Hensoldt South Africa and RDM, which is a
joint venture between Denel and German industrial giant Rheinmetall.

 

Saudi Arabia and the UAE alone represented a third of South Africa’s 4.7
billion rand of authorised arms exports in 2018, according to data compiled
by the National Conventional Arms Control Committee (NCACC), a group of
ministers and deputy ministers that approves the exports.

 

‘ENCROACHING ON SOVEREIGNTY’

Requiring buyers not to transfer weapons to third parties is common practice
in the international arms trade, stipulated in export documents known as
end-user certificates. Requiring inspections, though uncommon, is not
unheard of. Germany, for instance, requires them for small arms sales to
certain countries.

 

The industry officials told Reuters that South Africa had long included a
clause in its end-user certificates requiring on-site visits, though it was
rarely acted upon.

 

 

 

 

Clients regularly amended or deleted the clause, which was included in an
annex, and the NCACC still granted export permits, they said. But in 2017,
arms control officials moved the clause to the front page of the
certificates, and some countries refused to sign them, according to the
officials.

 

The clause requires customers to grant “access and permission to South
African Government Authority’s representative(s)” to verify they are in
compliance with South Africa’s defence export regulations.

 

“This is what’s making some of these countries uncomfortable,” Hamilton
said. “You are encroaching on their sovereignty, and they cannot allow
that.”

 

An NCACC official, who was not authorised to speak publicly, would not
comment on the reason for the new format, and industry officials said they
had not been told.

 

Matters did not come to a head until this year because arms contracts are
often signed years before the anticipated delivery date, the company
officials said.

 

JOB LOSSES ON ‘MASSIVE SCALE’

Some companies have already indicated that they will need to cut more than
500 employees if they can’t export their products soon, trade union
Solidarity said.

 

On July 3, Solidarity and other unions wrote to Public Enterprises Minister
Pravin Gordhan stating that failure to resolve the impasse would lead to
“job losses on a massive and irreversible scale”.

 

“Customers in the UAE have already begun firing trials with China, India as
well as Serbia with the intention to replace RDM as a preferred supplier of
ammunition,” said the letter seen by Reuters.

 

Three weeks later, Norbert Schulze, RDM’s CEO at the time, wrote to the
NCACC urging it to take action.

 

In his Aug. 5 response, also seen by Reuters, NCACC chairman Jackson Mthembu
said the body would not grant an exception.

 

“The NCACC is aware of the possible loss of jobs occasioned by the inability
to export in the time being. However, as your organisation would appreciate,
compliance with regulations sometimes produces negative impact,” he wrote.

 

 

 

 

The government is encouraging defence companies to avoid an over-reliance on
the Gulf, the NCACC official told Reuters.

 

But building up business in new markets would take time.

 

“It’s not like selling Coca-Cola. It can take 5-7 years to go into new
markets,” one defence company official said. “I don’t think the politicians
are aware how serious this is.”

 

($1 = 14.7662 rand)

 

 

 

 

South African Airways inks deal to end eight-day strike

JOHANNESBURG (Reuters) - South African Airways (SAA) signed a wage deal with
trade unions on Friday to end an eight-day strike that brought the
cash-strapped state airline to the brink of collapse.

 

SAA said it would restore its flight schedule to normal over the weekend and
promised to delay talks with unions on job cuts until the end of January.

 

Three of SAA’s largest trade unions agreed to a 5.9% pay rise for the
financial year that began in April, with the first salary increase in
February 2020 and back payments in March and April if the airline has
sufficient funds.

 

That was a similar deal to the one offered before two of the unions launched
a strike on Nov. 15, making it a victory for SAA and government officials
trying to curb steep financial losses at the airline. Some airline staff had
returned to work during the strike as they were not paid while out on
industrial action.

 

The South African Cabin Crew Association (SACCA) and the National Union of
Metalworkers of South Africa (NUMSA), the unions that led the strike, had
pushed for an 8% salary increase.

 

Workers belonging to another union, the National Transport Movement, which
didn’t participate in the strike, will receive the same 5.9% increase.

 

“We are therefore pleased to announce that we are calling off all strike
action at SAA and SAAT (South African Airways Technical) with immediate
effect, due to the fact that we have settled on a wage offer,” the unions
said in a statement.

 

SAA said it would operate a near normal flight schedule on Saturday and a
full schedule on Sunday.

 

 

 

 

The strike had cost the airline about 50 million rand ($3.41 million) a day.

 

South African President Cyril Ramaphosa has made turning around ailing state
companies such as SAA a priority as he tries to revive economic growth and
steady the country’s public finances after a ruinous decade under his
predecessor, Jacob Zuma.

 

He has found it hard to make much headway, given fierce opposition from
unions and a broad cross-section of society that is deeply suspicious of
moves that could weaken the hand of the state in the economy.

 

But there have been some signs recently that officials are starting to take
a tougher line on loss-making state entities.

 

Public Enterprises Minister Pravin Gordhan said this week that the
government could provide no more financial support to SAA, after more than
20 billion rand ($1.4 billion) of bailouts in the past three years.

 

SAA has pleaded for the government to sanction more state guarantees to
allow it to unlock new bank loans, but so far those guarantees haven’t been
forthcoming.

 

Earlier this month SAA said it could cut almost 20% of its 5,000 employees.

 

Investors and ratings agencies want to see evidence that the government is
serious about tackling runaway spending.

 

S&P Global Ratings, one of two agencies to have South Africa’s debt in
sub-investment grade, is due to publish a rating review later on Friday.

 

($1 = 14.6633 rand)

 

 

 

 

Telecoms group Orange completes sale of Orange Niger arm to Zamani

PARIS (Reuters) - Orange, France’s biggest telecoms company, said it had
completed the sale of its Orange Niger division to the Zamani Com SAS
company, for an undisclosed value.

 

Orange’s operations in Niger have been hit by difficult market conditions
and tax disputes with the Niger government.

 

Orange added in a statement on Friday that Africa and the Middle East
nevertheless remained a key area for the company.

 

 

First-half profit at S.Africa's Naspers almost halves

JOHANNESBURG (Reuters) - South African e-commerce giant Naspers reported a
48% slump in half-year profit on Friday, at the better end of its guidance
range after a previously-flagged drop in gains on investments at China’s
Tencent.

 

Founded more than 100 years ago, Naspers has transformed itself from a
newspaper publisher into an empire worth almost $70 billion, with its 31%
stake in Tencent the jewel in its crown.

 

Naspers said earlier this week its profits could fall by up to 53.6% after a
reduction in fair value gains on investments held by Tencent from $1.4
billion in 2018 to $400 million this year.

 

Headline earnings per share, the main profit measure in South Africa, fell
to 326 cents from a revised 624 cents a year earlier, but Naspers said the
performance of its main businesses was promising.

 

“The progress of our core segments, which are growing fast and scaling well,
gives us confidence in our ability to continue identifying opportunities to
unlock significant value,” its statement said.

 

Its shares were up 1.4% by 1327 GMT.

 

Naspers said core profits from continuing operations rose 8% to $1.7
billion, largely thanks to improving profitability at Tencent and its more
established e-commerce businesses.

 

A hefty discount between Naspers’ own value and that of its stake in Tencent
prompted the company to spin off its internet assets and list them
separately in Amsterdam earlier this year, in a company called Prosus.

 

 

Core headline earnings from continuing operations also stood at $1.7 billion
at Prosus, a 7% increase.

 

In its payments and fintech business, Naspers said the core payment service
provider business had reached profitability.

 

 

 

Nigeria's economy grew in Q3 after oil output rose to three year high

ABUJA (Reuters) - Nigeria’s economic growth rose to an annual rate of 2.28%
in the three months to the end of September after the production of its main
export commodity, crude oil, rose to a more than three year high, the
statistics office said on Friday.

 

The economy, Africa’s largest, expanded by 0.17% in the previous quarter and
0.47% in the same period a year earlier. The country has struggled to shake
off the effects of a 2016 recession that ended the following year.

 

Growth rates in Nigeria have been bouncing back this year, though from a low
base, after the oil sector, which accounts for around two-thirds of
government revenue and 90% of foreign exchange, shrugged off its negative
performance in the first quarter.

 

Crude production in the third quarter stood at 2.04 million barrels per day,
its highest since the first quarter of 2016, the statistics office said.

 

Friday’s data release comes ahead of the central bank’s announcement of its
main interest rate on Tuesday and days after the statistics office said
annual inflation was at a 17-month high in October.

 

Nigeria recorded the highest quarterly growth in September since the last
quarter of 2018 as the oil sector rose 6.49%. The non-oil sector rose 1.85%
during the period.

 

Razia Khan, chief economist for Africa and the Middle East at Standard
Chartered, welcomed the oil sector performance but added that it raises
concerns that Nigeria could come under more pressure to adhere to its OPEC
quota.

 

The non-oil sector is showing signs of recovery but is inadequate for
Nigeria’s potential, Khan said.

 

 

 

 

“Given the hoped-for faster passage of the 2020 budget, and efforts to boost
private sector credit, we expect more of a recovery to emerge all-round in
2020,” Khan said.

 

The central bank has been trying to boost growth by forcing commercial banks
to lend to stimulate the economy but it has also kept benchmark interest
rates high and liquidity tight in a bid to support the currency and wade off
inflation.

 

The central bank has forecast growth of 3% for 2019 while the IMF expects
the year to finish off at 2.3%.

 

 

Bond fund exodus from S.Africa well underway as credit rating teeters

LONDON/JOHANNESBURG (Reuters) - South Africa’s struggle to safeguard its
last investment grade credit rating has failed to convince the most
credit-sensitive global investors and many active fund managers have already
voted with their feet.

 

The precarious credit rating of the continent’s most industrialised nation
was put back in play once again last month after the government issued a
bleak mid-term budget statement that slashed the growth forecast and showed
government debt racing to more than 70% of gross domestic product by 2023.

 

Days after, Moody’s kept South Africa teetering on the brink of junk by
confirming its ‘Baa3’ rating - the lowest rung of investment grade - but
revising the outlook to “negative”, opening a 12-18 month window in which a
downgrade could be delivered. Fitch and S&P Global Ratings already relegated
South Africa to “junk” in 2017.

 

Data shows many funds have not been prepared to wait for the final shoe to
drop and have been jettisoning South African debt over the past few years
regardless.

 

“It’s holding on by a whisker (to investment-grade status),” said Salman
Ahmed, chief investment strategist at Lombard Odier. “But from a fiscal
point of view it’s definitely not investment grade.”

 

Allocations to South Africa by global fixed income fund managers with an
investment grade mandate have tumbled from 13.5% of assets under management
five years ago to just 2.3% at the end of September - the latest available
data, according to flow tracker EPFR.

 

The sample, derived by EPFR from mutual fund filings tracking $35 trillion
in assets under management, shows that much of the draw down happened in
2015 when many emerging markets came under pressure from a sharp commodity
price tumble.

 

However, the percentage of allocations by active funds nearly halved again
in the summer of 2017 after a Fitch downgrade to junk and a negative outlook
by Moody’s - which it rescinded months later.

 

Many expect the latest dire budget prediction could accelerate outflows of
foreign money from the $155 billion government bond market.

 

“It was a slow burn deterioration, and the budget was clearly not great,”
said Ray Jian at Amundi. “They are kicking (the can) down the road, but from
a market perspective nobody wants to wait until February for the details -
it is a case of selling the bonds first and looking at the budget later.”

 

 

 

 

Finance minister Tito Mboweni will present the full fiscal picture at the
budget statement in February.

 

The situation looked different a decade ago, when Moody’s admitted the
country to its coveted club of A rated - or upper investment grade -
sovereigns. In 2012, South Africa joined the benchmark local-currency World
Government Bond Index (WGBI).

 

Yet fast forward through years of stalled reform, economic policy missteps
and a failure to tackle the burden of loss-making state-owned enterprises -
the spectre of losing more money comes at a difficult time.

 

Nedbank estimates that outflows of foreign money - both active and passive -
from South African bond markets totalled $2.1 billion year-to-date.

 

The move by active investors is seen as a precursor to forced selling that
would be triggered by an WGBI eviction in the wake of a Moody’s downgrade.
Estimates of forced selling range between $750 million to over $5 billion,
according to Nedbank and Goldman Sachs.

 

Funds tracking the WGBI are estimated to have $172 billion under management
while South Africa’s weighting in the benchmark at just under 0.5% has
barely budged over the past five years.

 

As a result of the problems, South Africa is forced to borrow at one of the
highest real rates for any investment grade credit. Its with 10-year bonds
yield more than 8% with inflation running at less than half that.

 

Yet for many, the risk is still too high.

 

“We are underweight South Africa compared to other emerging markets,” said
Georg Schuh, CIO for EMEA at the German asset management firm DWS. “The
situation is really quite fragile there.”

 

($1 = 14.7619 rand)

 

 

 

Tiger Brands' annual earnings drop 17% on tepid recovery at meat unit

JOHANNESBURG (Reuters) - South Africa’s Tiger Brands posted a 17% drop in
its annual earnings on Friday, dented by ongoing margin compression across
the grains portfolio, lower sales in export markets and
slower-than-anticipated recovery of its processed meat business.

 

The country’s leading food producer, with brands such as Jungle Oats and
Tastic rice, said its headline earnings per share (HEPS) from continuing
operations in the year ended Sept. 30 dropped to 1,349 cents from 1,633
cents last year.

 

HEPS is the main profit measure in South Africa and strips out certain
one-off items.

 

Full-year revenue from its Value Added Meat Products (VAMP) business, which
was temporarily closed last year following the world’s largest ever
listeriosis outbreak, dived 39% to 654 million rand ($44.48 million), while
the company also incurred an operating loss of 547 million rand.

 

Listeriosis is a disease which causes flu-like symptoms, nausea, diarrhea
and infection of the blood stream and brain.

 

“Although there was steady improvement in VAMP’s performance since the
reopening of the manufacturing facilities, the second-half performance was
below expectations,” it said in a statement.

 

The company is facing a class action lawsuit over its role in the
listeriosis outbreak that killed more than 200 people in South Africa and
was traced back to a factory run by Tiger Brands-owned Enterprise Foods.

 

The South African food producer said it filed its plea in August in response
to the class action summons received earlier this year, and will “continue
to conduct its defence in a responsible manner while remaining committed to
the matter being resolved as soon as possible.”

 

The group is exploring the sale of its processed meats business after an
internal review had concluded it was “not an ideal fit” within the
portfolio.

 

In the grains portfolio, revenue increased by 4% to 13.2 billion rand,
reflecting price inflation of 6%, while overall volume declined by 2%, Tiger
Brands said.

 

 

 

 

“Price inflation was insufficient to offset the impact of higher input
costs, with operating income declining by 24% to 1.4 billion rand,” the food
producer said.

 

The operating margin there consequently reduced to 10.9% from 14.8%.

 

($1 = 14.7033 rand)

 

 

 

 

 

 

 


 

 


 

INVESTORS DIARY 2019

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


Bindura Nickel Corporation

 

 

 


Padenga Holdings

 

 

 


Delta Corporation

 

 

 


Meikles Limited

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

 


DISCLAIMER: This report has been prepared by Bulls ‘n Bears, a division of
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been compiled from sources believed to be reliable, but no representation or
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opinions expressed and recommendations made are subject to change without
notice. Securities or financial instruments mentioned herein may not be
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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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