Major International Business Headlines Brief::: 05 September 2019

Thu Sep 5 04:24:16 CAT 2019

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Major International Business Headlines Brief::: 05 September 2019

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

ü  MTN Nigeria shuts stores after anti-South African attacks

ü  South Africa's rand extends rally to 4-week high, stocks up

ü  S.Africa's ailing Eskom faces emissions violations, could shut plants

ü  Ugandan oil pipeline plan suspended due to collapse of Tullow-Total deal: official

ü  Several Shoprite stores in South Africa, Nigeria and Zambia closed

ü  Ugandan oil pipeline plan suspended due to collapse of Tullow-Total deal: official

ü  Several Shoprite stores in South Africa, Nigeria and Zambia closed

ü  Russia's VTB: Mozambique must restructure loan by year-end

ü  Kenya PMI falls to 52.9 in August

ü  South Africa's private-sector activity contracts again in August -PMI

ü  Pound volatile in further Brexit turmoil

ü  Lego working with shops to avoid Brexit disruption

ü  Ryanair pilots vote for further strikes

ü  UK 'at risk of slipping into recession'

ü  Cathay Pacific chair to retire amid HK protest row

 <mailto:info at bulls.co.zw> 

MTN Nigeria shuts stores after anti-South African attacks

ABUJA (Reuters) - The Nigerian division of South African telecom operator MTN said on Wednesday it will shut all stores and service centres in the country until further notice after its facilities in three cities were attacked.

The facilities were attacked in retaliation after days of riots in South Africa chiefly targeting foreign-owned, including Nigerian, businesses.

“The safety and security of our customers, staff and partners is our primary concern,” MTN Nigeria said in a statement.

“MTN condemns any acts of violence, prejudice and xenophobia.”

The latest wave of unrest in South Africa has raised fears of a recurrence of violence in 2015 aimed at foreigners and in which at least seven people were killed. Before that, some 60 people were killed in a wave of unrest around the country in 2008.

Nigerian President Muhammadu Buhari said on Tuesday he was urgently sending a special envoy to meet with President Cyril Ramaphosa to secure the “safety of (Nigerian citizens’) lives and property”.

Police have yet to pinpoint what triggered the violence, which began on Sunday when protesters armed with makeshift weapons roamed the streets of Pretoria’s business district, pelting shops with rocks and petrol bombs and running off with goods.

Nigeria is MTN’s biggest market, with 58 million users in 2018 and accounts for a third of the South African group’s core profit.

 <mailto:info at bulls.co.zw> 

South Africa's rand extends rally to 4-week high, stocks up

JOHANNESBURG (Reuters) - South Africa’s rand rose to a four-week high on Wednesday backed by a better-than-expected jump in second-quarter growth and improved risk sentiment globally, brushing off concerns over anti-immigrant protests.

South African bank notes featuring images of former South African President Nelson Mandela (R) are displayed next to the American dollar notes in this photo illustration in Johannesburg, file. REUTERS/Siphiwe Sibeko

Stocks gained led by Naspers.

At 1545 GMT the rand was 1.91% firmer at 14.8025 per dollar, its firmest level since Aug. 6, extending the previous session’s rally.

Gross domestic product in the three months to June expanded by 3.1%, after a 3.1% contraction in the first quarter. Economists polled by Reuters had forecast an expansion of 2.4% for the quarter. [nL5N25U2A0]

The positive growth data helped soothe sentiment battered by recent signs of weak activity and concerns that an additional 59 billion rand ($3.9 billion) for state power firm Eskom had made a credit downgrade a near-certainty.

President Cyril Ramaphosa told officials and business leaders on Wednesday that he was committed to quelling attacks on foreigners that have threatened to cast a cloud over an economic forum aimed at boosting intra-African trade.[nL5N25V3KA]

Police have arrested almost 300 people and confirmed at least five deaths after riots in Johannesburg and the capital Pretoria in recent days, when roving groups attacked shops mainly owned by migrants from the rest of Africa.

On the bourse, the broader All-share index rose 0.3% to 54,907 points, while the blue chip Top-40 closed 0.32% up to 49,031 points.

Leading the blue chips was e-commerce giant Naspers, up 2.69% to 3594.00 rand after gains in Hong Kong stocks boosted Tencent, in which Naspers has a stake. [nL3N25V0NC]

“Naspers is such a big component of the JSE and its sibling child Tencent is listed in Hong Kong...People think the worst of the protests in Hong Kong are over. That lifted all the stocks really,” said Greg Davies, a trader at Cratos Capital.

Further gains were restrained by the bullion sector, down 5.09%, with Sibanye-Stillwater down 4.94% to 19.44 and AngloGold Ashanti 5.09% lower at 334.91%.

Bonds also firmed, with the yield of the benchmark paper due in 2026 down 5 basis points to 8.095%.

($1 = 15.2369 rand)

S.Africa's ailing Eskom faces emissions violations, could shut plants

JOHANNESBURG (Reuters) - South Africa’s cash-strapped power utility Eskom could be forced to shut some plants if it fails to reduce emissions, its chief operating officer warned on Wednesday, raising the spectre of further blackouts.

The potential closures, which Jan Oberholzer said could cut a tenth of the state firm’s 45,000 MW production capacity, piles pressure on the government which has had to bail out the debt-ridden company to keep it afloat.

Africa’s biggest public utility supplies over 90% of South Africa’s electricity, relying largely on ageing, heavily polluting coal-fired power stations but does not generate enough cash to meet its debt servicing costs.

It is also responsible for at least a third of the country’s greenhouse gas emissions.

Installing the technology needed to reduce carbon and sulphur emissions would cost 10 times the 26 billion rand the Treasury has earmarked for Eskom in the financial year ending in March 2020, part of a 59-billion-rand two-year package.

That package is on top of a 23 billion rand a year bailout for the next three years.

“If we were to press a button today and solve all theses (emissions) troubles, it would cost us 300 billion rand ($20 billion). But as you know we do not have money,” Eskom’s acting Chief Executive and chairman Jabu Mabuza told reporters.

Eskom has therefore applied to the Department of Environmental Affairs for rolling postponements of its obligations to meet the emissions and air standards.

“If we don’t fix this and reduce our emissions, there’s a risk that we have to shut down some of the power stations,” Oberholzer told a press briefing. “Have we done the work we said we would? No we haven’t.”

Oberholzer did not say when Eskom’s failure to meet emissions requirements might trigger plant closures.

KEEPING THE LIGHTS ON

Ratings agencies regularly cite Eskom as one of the biggest threats to South Africa’s investment-grade credit rating status.

Power cuts - referred to as loadshedding in South Africa - in the first quarter pushed Africa’s most developed economy into a deep contraction.

Though the situation has improved since March due to stable coal supplies and a maintenance overhaul, Mabuza did not rule out further blackouts.

“Whilst we cannot guarantee there will be no loadshedding we are confident we can keep the lights on this summer,” he said.

Eskom’s coal stocks were at 50 days, excluding the Medupi and Kusile power stations, Mabuza said, adding that the company planned to undertake plant maintenance on 5,500 MW of capacity over the next seven months.

Coal stocks were at half of required regulatory levels of 50 days or more at the beginning of the year at most power stations.

Medupi and Kusile, currently under construction and not yet fully operational, are among the largest coal stations in the world but since building started in 2008, both have suffered major breakdowns while costs have escalated.

These setbacks have compounded South Africa’s power shortages and worsened Eskom’s financial crisis.

Costs to complete construction of Medupi and Kusile have ballooned to 145 billion rand and 161 billion, respectively, according to Eskom’s worst-case forecasts on Wednesday.

Meeting emission standards for Medupi alone could add another 80 billion rand to costs.

($1 = 15.2369 rand)

Ugandan oil pipeline plan suspended due to collapse of Tullow-Total deal: official

KAMPALA (Reuters) - Work on a pipeline to export Ugandan oil has been suspended, an industry official said on Wednesday, after Tullow Oil’s plan to sell another stake in the project to France’s Total and China’s CNOOC was called off last week.

“All East African Crude Oil Pipeline (EACOP) activities including tenders have been suspended until further notice because of collapse of the deal,” the official told Reuters on condition of anonymity.

Several Shoprite stores in South Africa, Nigeria and Zambia closed

JOHANNESBURG (Reuters) - South African grocer Shoprite Holdings said on Wednesday several stores in its home market, Nigeria and Zambia were closed and extensive damage had been done to several supermarkets over the past 24 hours.

The shops were attacked after days of riots in South Africa chiefly targeting foreign-owned, including Nigerian, businesses.

Morocco’s trade deficit deepens 4.3% year/year Jan-July

RABAT (Reuters) - Morocco’s trade deficit widened by 4.3% to 122.8 billion dirhams ($12.7 billion) in the first seven months of 2019 compared with the same period last year, the country’s foreign exchange regulator said on Wednesday.

Imports rose 3.7% to 291.1 billion dirhams, outstripping exports of 168.2 billion dirhams, which were 3.3% higher. Energy imports, including gas and oil, dropped 2.1% to 45 billion dirhams, or 15.5% of the total.

The automotive sector accounted for 26.3% of exports at 44.3 billion dirhams, up 2%, the regulator said in a monthly report. The North African country is home to production plants of French carmakers Renault and Peugeot, as well as a number of car part suppliers.

The regulator also said exports of phosphates and byproducts including fertilisers climbed 3% to 30 billion dirhams.

Remittances from Moroccans living abroad, key to Morocco’s hard currency flow, dropped 1% to 37.3 billion dirhams, while foreign direct investment fell 17.3% to 10.5 billion dirhams, the regulator said.

Russia's VTB: Mozambique must restructure loan by year-end

VLADIVOSTOK, Russia (Reuters) - Russian state bank VTB CEO Andrey Kostin said on Wednesday that Mozambique must restructure an outstanding loan by the end of the year or else face the prospect of defaulting on it.

Kostin made the comments on the sidelines of an economic forum in the city of Vladivostok in Russia’ Far East.

Kenya PMI falls to 52.9 in August

NAIROBI (Reuters) - Kenya’s private sector activity dropped in August to its lowest level since May, with cashflow problems hurting performance, a survey showed on Wednesday.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for manufacturing and services fell to 52.9 from 54.1 in July. Any reading above 50 indicates growth. In May, the index stood at 51.3.

The survey showed that activity was affected by cashflow problems, partly arising from a backlog of bills from government departments.

“To ensure inclusivity in economic growth, urgent reforms ought to be conducted on improving accessibility to credit for companies, in addition to a consistent plan by the government to clear arrears owed to the private sector,” said Jibran Qureishi, regional economist for East Africa at Stanbic Bank.

In June, the finance ministry said the government would make it a priority to pay 10.9 billion shillings ($106 million) owed to its suppliers by the end of that month.

Firms complain that the government takes years to settle bills for goods and services supplied to it, mainly due to widespread corruption.

Experts have blamed the delayed payments for causing a jump in bad debts in the banking sector.

The survey showed that a credit squeeze due to a cap on commercial lending rates, in place since late 2016, had also worsened conditions.

The finance ministry proposed to parliament in June that it repeal the cap on lending rates. A similar proposal was shot down in 2018.

In March, a court ruled that the rate cap was unconstitutional, but judges suspended the ruling for 12 months to allow parliament to re-examine the law.

“In fact, the interest-rate-capping law continues to strangle the private sector and if the law remains in place in its current form, it will only add to the plight of the private sector,” Qureishi said.

- Detailed PMI data are only available under licence from IHS Markit and customers need to apply for a licence.

To subscribe to the full data, click on the link below: here

For further information, please phone IHS Markit on +800 6275 4800 or email mailto:economics at ihsmarkit.com

($1 = 103.2000 Kenyan shillings)

South Africa's private-sector activity contracts again in August -PMI

JOHANNESBURG (Reuters) - South African private sector activity remained in contraction for a fourth consecutive month in August as new orders and output fell, albeit at slower rates, a survey showed on Wednesday.

IHS Markit’s Purchasing Managers’ Index (PMI) rose to 49.7 in August from 48.4 in July, remaining below the 50 point mark that separates expansion from decline.

All five sub-indexes in the survey were improved from a month before although three still showed a contraction, with the new orders component falling for the 14th consecutive month, which consequently weighed on output.

“Weak economic sentiment weighed on the private sector again in August,” said David Owen, an economist at IHS Markit.

“Companies noted a further drop in customer turnout, as the disappointment of the first quarter economic growth results continued to dampen spending.”

South African GDP grew more than expected in the second quarter of this year thanks to a recovery in mining and manufacturing, data showed on Tuesday, after a shock contraction in the first quarter. [nL5N25U2A0]

- Detailed PMI data are only available under licence from IHS Markit and customers need to apply for a licence.

Pound volatile in further Brexit turmoil

The pound has made gains on currency markets after Prime Minister Boris Johnson lost his majority in the House of Commons.

Tory MP Phillip Lee's defection to the Liberal Democrats lifted sterling to above $1.20 and €1.10.

Earlier, the pound had touched its lowest level since October 2016 before recovering to erase the day's losses.

Rebel Tories and Labour MPs want to pass a bill to stop the UK leaving the EU on 31 October without a deal.

No 10 has threatened a snap general election on 14 October if MPs succeed in seizing control of Commons business.

Addressing Parliament on Tuesday afternoon, Mr Johnson that if they managed to block a no-deal exit, it would "destroy any chance of negotiating a new deal".--bbc

Lego working with shops to avoid Brexit disruption

The boss of Lego has said the toymaker is working with UK retailers to "make sure they have enough stock" this Christmas in case of a no-deal Brexit.

Niels Christiansen said the Danish firm was not expecting problems but that he was "monitoring the situation" nonetheless.

Prime Minister Boris Johnson has said he wants to take the UK out of the EU on 31 October, with or without a deal.

But some have warned this could cause chaos for British retailers.

Potential risks include delays at ports and higher prices for imported goods caused by further falls in the pound - although others say the claims have been exaggerated.

Lego imports its bricks into the UK from the Czech Republic, Denmark and Hungary, suggesting it could be at risk from new trade barriers.

'Everything awesome' at Lego as sales rise

It also raised wholesale prices by 5% in the UK in 2016 in response to the pound's devaluation after the Brexit referendum.

The firm declined to comment on whether its Christmas pricing might be affected in the case of a no-deal scenario, but Mr Christiansen said the toymaker was unlikely to be "majorly affected" by no deal.

"We have been working with customers to make sure the flow of product won't be disrupted," he said, but declined to specify what those measures might be.

Mr Christiansen made the comments after Lego announced a 4% rise in revenue for the first half of the year to 14.8bn Danish Krone (£1.8bn), although profits fell 16% as it reinvested in its business.

And at a time when rival toymakers are struggling, the family-owned firm said it planned to open 160 new stores this year globally - 16 of them in the UK.

Eighty of the shops will be in China, with the Danish firm on track to have 140 stores in the country by the end of 2019.

Asked if he was concerned about a recent slowdown in China's economy, driven by Beijing's trade war with Washington, Mr Christiansen said he still saw the country as a growth market.

"We have been helped by the fact that we produce our products around the world close to where the demand is, so for China we produce in Asia," he said.

"There are also many Chinese kids that don't know Lego and whose parents don't know Lego, so we see a real opportunity there."

Despite this, the firm has come up against a wave of counterfeit Lego products in China which Mr Christiansen admitted had been challenging.

Plastic waste

Copycat brands have even made their way to the UK, although Mr Christiansen said the Chinese authorities were getting tougher on the practice.

"There have been some court rulings in our favour in China, so we do see an element of progress."

China dismantles '$30m fake Lego gang'

Lego has committed to use only sustainable materials in its core products and packaging by 2030 amid rising concerns about plastic waste.

And last year it launched its first ever Lego products made from polyethylene, a type of plastic derived from sugar cane, to replace materials sourced from fossil fuels.

The products only represent 1-2% of the total amount of plastic produced by Lego - leading some to question how committed the firm was to its 2030 goal.

But Mr Christiansen stressed that Lego bricks were durable, not "single use" plastics and rarely thrown away. "Our bricks are sometimes kept for 40-60 years," he said.

Despite this, he said the firm was investing heavily in finding durable yet sustainable alternatives.

"The safety and durability of blocks is not trivial, and we are looking for the right materials."-BBC

Ryanair pilots vote for further strikes

UK-based Ryanair pilots have voted for seven further days of strikes as part of a row over pay and conditions.

The British Airline Pilots Association (Balpa) said it wanted to settle the dispute, but Ryanair has refused to seek conciliation.

Pilots are currently on strike after also walking out from 22-23 August.

Ryanair said the strikes were "pointless" as the industrial action had not resulted in any flight cancellations.

The next rounds of strikes will be:

18-19 September for 48 hours

21 September for 24 hours

23 September for 24 hours

25 September for 24 hours

27 September for 24 hours

29 September for 24 hours

Balpa said its members want the same kind of agreements that exist in other airlines on pensions, loss of licence insurance, maternity benefits, allowances and pay.

"While this action has considerably disrupted Ryanair, forcing them to engage contractors and bring in foreign crews to run its operation, it has had limited impact on the public's travel plans," said Balpa's general secretary Brian Strutton.

"Ryanair should stop dragging its feet and get back to the negotiating table."

Ryanair said most of its pilots had flown during the strike action in August and early September.

"These latest Balpa strikes are pointless given that during five days of Balpa strikes [on] 22,23 August and 2,3,4 September all Ryanair flights to and from UK airports operated as scheduled - with zero cancellations - thanks to the efforts of over 95% of our UK pilots who flew as rostered and did not support these failed Balpa strikes.

"We again call on Balpa to return to talks as these failed strikes have not achieved anything."

In August Ryanair said job losses were coming following a 21% fall in quarterly profits after higher costs for fuel and staff, and reduced ticket prices.

On 31 July, Ryanair boss Michael O'Leary told staff in a video message the airline has 900 too many pilots and cabin crew members.

He said the two weakest markets are the UK, where there were Brexit uncertainties, and Germany, where Ryanair faced fierce competition on price.--bbc

UK 'at risk of slipping into recession'

The UK is at risk of slipping into recession, according to a closely watched survey of industry managers.

The dominant services sector grew only slightly in August, the purchasing managers' index (PMI) from IHS Markit/CIPS suggests.

"The lack of any meaningful growth... raises the likelihood that the UK economy is slipping into recession," said IHS economist Chris Williamson.

The construction and manufacturing sectors also shrunk in August.

The services sector accounts for 80% of the UK economy.

According to IHS' survey, the sector barely expanded in August, achieving a score of 50.6 - down from 51.4 in July. Anything above 50 marks growth, while a lower number indicates a contraction.

However, the figure including manufacturing and construction was 49.7, the second contraction for the private sector in three months.

IHS Markit said Brexit uncertainty and higher business costs were to blame.

"While the current downturn remains only mild overall, the summer's malaise could intensify as we move into autumn," added Mr Williamson.

UK economy shrinks for the first time since 2012

Factory output 'falls at fastest pace since 2012'

Between April and June the UK's economy contracted for the first time since 2012. A recession occurs when the economy contracts in two consecutive quarters.

According to IHS Markit, UK firms are hiring and taking on new clients at a slower pace as they try to gauge whether the government will quit the European Union without a deal at the end of October.

Service-based firms, which include hotels, restaurants, banks and insurers, are also seeing profit margins squeezed by rising staff wages , fuel costs and utility bills, the survey found.

'Pinch of salt'

This measure also slipped into negative growth in 2016 following the Brexit referendum and in 2012, around the time of the European sovereign debt crisis.

The numbers should be taken with a pinch of salt, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

"PMIs are excessively influenced by business sentiment and have given a misleadingly weak steer during the past 12 months of heightened political uncertainty. Note too that they exclude the retail and government sectors, which still are growing," he said.

He expects a 0.4% gain for the economy in the July to September period, assuming a deal is struck with the EU ahead of the UK's departure.--bbc

Cathay Pacific chair to retire amid HK protest row

Cathay Pacific's chairman John Slosar is to retire from Hong Kong's flagship carrier after 39 years.

It comes weeks after the airline became embroiled in controversy over its response to pro-democracy protests in the territory.

Two executives have quit over the affair so far, including former boss Rupert Hogg.

Cathay told the BBC that Mr Slosar had considered retiring for "some time".

The airline ran into trouble in early August, when Mr Hogg told staff the airline would not stop them from joining the demonstrations sweeping Hong Kong.

However, a week later he changed his stance following intense pressure from the Chinese government and a consumer boycott on the mainland.

Staff were told they could be fired if they "support or participate in illegal protests", and several were dismissed.

It was not enough to stop Mr Hogg being forced to quit over the controversy several days later, along with chief commercial officer Paul Loo.

At the time, Mr Slosar said it was time to put "a new management team in place who can reset confidence". He added that "recent events" had put the airline's "reputation and brand under pressure".

--bbc

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 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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