Major International Business Headlines Brief::: 29 April 2020

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Major International Business Headlines Brief::: 29 April 2020

 


 

 


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ü  Nigeria seeks $2.36 bln in domestic loans; external markets unfavourable

ü  Kenya's economic growth slowed to 5.4% in 2019: finance minister

ü  Bank of Namibia expects economy to contract by record 6.9% in 2020

ü  South Africa mining firms work together against COVID-19 as mines reopen

ü  Morocco’s economy to contract 6.8% in Q2 due to coronavirus: planning agency

ü  Virtually all Equatorial Guinea oil business on hold: hydrocarbons minister

ü  South Sudan's central bank slashes benchmark rate to 13%

ü  U.S. should avoid phased approach in trade talks with Kenya - Chamber of Commerce

ü  South African rand weaker on rescue package funding worries

ü  South African landlords step up assistance for retail tenants

ü  The Fed's four radical moves to save the economy

ü  Coronavirus hits profits at corporate America

ü  British Airways to cut up to 12,000 jobs as air travel collapse

ü  Jumia: The e-commerce start-up that fell from grace

ü  BP profits dive 66% as coronavirus hits oil demand

 

 

 


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Nigeria seeks $2.36 bln in domestic loans; external markets unfavourable

ABUJA (Reuters) - Nigeria’s President Muhammadu Buhari is seeking approval to borrow 850 billion naira ($2.36 billion) from the domestic capital markets to fund the 2020 budget, according to a request read in the upper house of parliament on Tuesday.

 

Buhari said the debt is needed to replace previously approved external loans, as conditions on international capital markets are “not conducive” to borrowing.

 

Parliament’s upper house - the Senate - had approved foreign borrowings of $22.7 billion before the coronavirus outbreak forced nations worldwide, including Nigeria, into lockdown. [nL8N2AY62T]

 

The shutdowns have decimated global economic growth and slashed oil consumption by roughly a third.

 

Nigeria, Africa’s largest crude producer, has already cut nearly $5 billion from its 2020 budget. The revised version uses a benchmark of $30 per barrel oil, though Brent crude was trading at just under $20 on Tuesday. [nL8N2BB8YK][O/R]

 

Nigeria is also seeking almost $7 billion in emergency loans from multilateral institutions including the International Monetary Fund, the World Bank and the African Development Bank. [nL8N2BU3LY]

 

Tuesday is the first day that lawmakers have conducted a full session since late March, when the capital Abuja went into lockdown.

 

($1 = 360.0000 naira)

 

 

 


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Kenya's economic growth slowed to 5.4% in 2019: finance minister

NAIROBI (Reuters) - Kenya’s economy grew by 5.4% in 2019, down from 6.3% the previous year, partly because of a slowdown in the agricultural, manufacturing and construction sectors, finance minister Ukur Yatani said on Tuesday.

 

Agriculture grew by 3.6% in 2019, compared with 6% in 2018, hit by drought and then excess rain in the East African nation, Yatani told reporters.

 

The finance minister said that manufacturing also declined, growing by 3.2% in 2019 against 4.3% the previous year. The construction sector grew by 6.4%, down from 6.9% in 2018.

 

Kenya’s diversified economy is not dependent on a single commodity or sector and has achieved rapid growth over the past few years, but critics have argued that it has struggled to lift many citizens out of poverty.

 

The telecoms sector grew by 8.8% in 2019, down from 11.3% in 2018, Yatani added.

 

 

 

Bank of Namibia expects economy to contract by record 6.9% in 2020

WINDHOEK (Reuters) - The Bank of Namibia expects the domestic economy to contract by a record 6.9% this year, owing to coronavirus-induced travel restrictions and a nationwide partial lockdown, against a contraction of 1.1% last year.

 

In a statement, the bank said the economy was expected to recover moderately in 2021. Last year’s contraction was caused by a drought and falling output in sectors such as construction and retail, while this year the economic shutdown to tackle COVID-19 has hit tourism and damaged other sectors.

 

The virus has so far only infected 16 people and caused no deaths in the country.

 

 

 

South Africa mining firms work together against COVID-19 as mines reopen

JOHANNESBURG (Reuters) - South African mining companies are setting up shared quarantine facilities for miners testing positive for COVID-19 and are discussing other ways to cooperate, as the vital national industry gradually restarts operations halted since late March.

 

President Cyril Ramaphosa agreed last week to partially ease a national lockdown that temporarily shut all mines, except for some production of coal, the main fuel used for power generation in Africa’s most industrialised nation.

 

All mines can resume activities from May 1 under regulations to ease the lockdown, gradually resuming work in an industry that accounts for 8% of South Africa’s economic output and employs about 500,000 people.

 

The new rules allow coal mines and open cast mines, also known as open pit mines, to resume full operations, while underground mines can only operate at 50% capacity to make it easier to maintain social distancing, the Minerals Council said.

 

Sibanye Stillwater, AngloGold Ashanti, Harmony Gold, Gold Fields have already turned to social media, radio stations and newspapers to offer guidance to employees on how to prevent the coronavirus spreading.

 

Sibanye said it was converting some of its worker hostels in Westrand, the Free State and Rustenburg into quarantine facilities and would make them available to employees of other companies who had been diagnosed with the virus.

 

“We are partnering with AngloGold and Harmony to share hostel facilities,” James Wellsted, Sibanye’s senior vice president of investor relations, told an online media briefing.

 

The briefing was organised by the Minerals Council of South Africa, a group representing the country’s top mining firms.

 

AngloGold Ashanti’s group health vice president, Bafedile Chauke, said mining firms were discussing other ways to work with each other to ensure the health and safety of employees returning to work.

 

AngloGold is already partnering with petrochemicals major Sasol to increase production of sanitisers and has offered to share the cost of manufacturing bulk storage tanks for sanitiser.

 

 

 

Morocco’s economy to contract 6.8% in Q2 due to coronavirus: planning agency

RABAT (Reuters) - Morocco’s planning agency revised downwards on Tuesday its growth forecast for the second quarter to -6.8% year-on-year instead of an earlier estimate of -1.8% as the coronavirus lockdown hit both foreign and domestic demand.

 

First-quarter growth stood at 0.7% compared with a previous projection of 1.1%, the agency said in a statement, citing a drop in cereals output.

 

The coronavirus will cost the Moroccan economy $3 billion in the first half, it said.

 

 

 

Virtually all Equatorial Guinea oil business on hold: hydrocarbons minister

LAGOS (Reuters) - Virtually all oil and gas projects and licensing rounds are on hold in Equatorial Guinea as it braces for an extended oil downturn because of the coronavirus pandemic, the country’s hydrocarbons minister said on Monday.

 

Equatorial Guinea, a tiny west African nation that relies on oil and gas for 90% of state revenue, had already been grappling with falling output and the desire of certain oil majors, such as ExxonMobil, to exit the country.

 

Hydrocarbons minister Gabriel Obiang Lima said the country would offer quick licence extensions and generous leeway on drilling requirements to keep companies afloat during the historic downturn that has sent oil prices to 20-year lows.

 

“The year 2020 and the year 2021 are ‘lost years’,” Obiang Lima said, referring to the oil industry.

 

The latest developments represent a stark reversal for a country that late last year said it would press companies to either drill or drop their licences.

 

The only project likely to continue this year, Obiang Lima said, was a gas backfilling project with Marathon because all the equipment was already in the country.

The flexibility being offered by the government could help Equatorial Guinea’s oil and gas industry to remain attractive to international oil companies, Obiang Lima said

 

“The last thing you want is for any of these companies to go broke,” he said, adding all necessary steps would be taken to save an industry he described as “the goose that lays the golden egg”.

 

Obiang Lima said the government would also roll out new regulations this week that would require international oil companies (IOCs) to award more work to local firms.

 

“This is the time to call the IOCs and say ... every single contract you have, you have to give to local companies,” he said, adding the pandemic was an opportunity for locals to fill the gap left by departed expatriate workers. “And if the local companies cannot do it, you are going to help them.”

 

Next month, the government also plans to launch new legislation targeting the refining and petrochemicals sectors.

 

Equatorial Guinea is also “gradually” cutting production as agreed in an output reduction deal between OPEC and other oil producing states such as Russia, Obiang Lima said.

 

 

 

South Sudan's central bank slashes benchmark rate to 13%

JUBA (Reuters) - South Sudan’s central bank has slashed its benchmark interest rate by 200 basis points to 13% to help the young African economy cope with the effects of the novel coronavirus, its governor said on Monday.

 

“This means commercial banks will find space to reduce the cost of borrowing,” Governor Gamal Abdalla Wani told a news conference in the capital Juba on Monday.

 

The governor said the flow of credit to the private sector had started to decline during the coronavirus outbreak and that the policy easing was aimed at accelerating lending.

 

South Sudan depends almost entirely on oil sales for its public revenues and its economy is also expected to be hit by the recent sharp drop in oil prices.

 

The policy move would help in “restoring confidence, while providing additional liquidity supporting the banking sector to address the fall in demand for credit,” the governor said.

 

South Sudan’s economy is still reeling from the devastation caused by years of civil war between government forces under President Salva Kiir and those allied with vice president Riek Machar.

 

The country has so far recorded only six cases of coronavirus, but neighbours like Uganda, Kenya and Ethiopia, on which it depends for imports, have registered bigger case loads and implemented strict lockdowns.

 

 

 

U.S. should avoid phased approach in trade talks with Kenya - Chamber of Commerce

WASHINGTON (Reuters) - The United States should work to achieve a single, comprehensive agreement with Kenya that removes barriers to trade and investment, instead of pursuing a phased approach, the U.S. Chamber of Commerce said in a document viewed by Reuters.

 

In comments submitted to the U.S. Trade Representative, the Chamber’s U.S.-Africa Business Center said a high-standard agreement that eliminated all tariffs would boost the long-term economic outlook for both countries, and further position Kenya as a model for economic reform across Africa.

 

It said the bilateral negotiations would enhance work by African countries to forge a broader African Continental Free Trade Agreement.

 

U.S. President Donald Trump and Kenyan President Uhuru Kenyatta on Feb. 6 announced the intention to start formal talks on what would be first U.S. bilateral trade deal with a sub-Saharan African country. The Trump administration last month invited comments on negotiating objectives for the talks.

 

Two-way goods trade between the United States and Kenya totaled $1.1 billion in 2019, up 4.9% from 2018.

 

To be effective, negotiators should work out a comprehensive deal that addresses “all issues under negotiation ... rather than seeking agreement on a subset of issues or pursuing a phased approach,” the Chamber said.

 

The U.S. government has recently concluded partial or phased trade agreements with Japan and China, frustrating some U.S. companies that had been pressing for broader agreements on issues such as intellectual property (IP) rights and improved access for their products.

 

The Chamber said the trade talks should focus on achieving a high-standard bilateral agreement that sets a precedent for future U.S. trade deals with other sub-Saharan African nations.

 

It should eliminate all tariffs and address non-tariff barriers for industrial and farm goods, including U.S. tariffs on imports of steel and aluminum from Kenya, while expanding market access for remanufactured goods exports.

 

It also called for commitments to ensure U.S. access to Kenya’`s services market, and address IP rights and enforcement as they relate to patents, copyrights, trademarks, and trade secrets.

 

In addition, the deal should eliminate forced technology transfers, include an investor-state dispute settlement mechanism, and formalize a joint commitment to follow good regulatory practices.

 

To facilitate digital trade, it should spell out a mutual right to transfer and store data across borders for all sectors, prohibit data localization requirements, and ban customs duties and taxes on electronic transmissions.

 

 

 

South African rand weaker on rescue package funding worries

JOHANNESBURG (Reuters) - South Africa’s rand was weaker early on Tuesday, reflecting worries over how the country will fund a 500 billion-rand ($26.5 billion) rescue package for its bruised economy.

 

At 0710 GMT, the rand traded at 18.8650 versus the U.S. dollar, 0.4% weaker than its previous close.

 

The rescue package, announced last week, includes a 200 billion-rand loan-guarantee scheme to encourage bank lending, 50 billion rand to top up social grants and 40 billion rand in unemployment benefits. [nL5N2C93N6]

 

“South Africa remains fiscally vulnerable,” said Thu Lan Nguyen, emerging-market analyst at Commerzbank.

 

She said that despite the government’s approaching international financial institutions like the International Monetary Fund and World Bank it could take weeks for the formalities to be completed and the funds to flow.

 

South Africa’s economy was in bad shape before the coronavirus crisis started. Tith this year’s budget deficit is forecast to reach an 18-year high and loss-making state firms like South African Airways and power utility Eskom are a drain on the public purse. [nL5N2AQ4RC]

 

Since early March, the outlook has deteriorated, with the rand losing close to 20% against the dollar and government bond yields rising.

 

The yield on the 2030 bond was 2 basis points lower on Tuesday at 10.935%, reflecting a slightly stronger price.

 

On the Johannesburg bourse, the Top-40 Index was up around 0.8% in early trade, tracking gains on Asian stock markets.

 

($1 = 18.8388 rand)

 

 

 

South African landlords step up assistance for retail tenants

JOHANNESBURG (Reuters) - South Africa’s landlords have increased and extended temporary rent reductions for retailers whose shops have been closed by the country’s lockdown to tackle the coronavirus pandemic.

 

President Cyril Ramaphosa imposed a 21-day lockdown on March 26, banning all but essential workers from leaving home except to buy food or medicine and closing all non-essential shops. He later extended the lockdown by two weeks to the end of April.

 

While a partial re-opening of clothing and other non-essential stores is planned from May 1, demand is expected to be low as cash-strapped shoppers prioritise food and staple goods.

 

Earlier this month, the Property Industry (PI) group, which gathers together the major representative bodies for South Africa’s real estate industry, announced a package of assistance and relief for the retail sector as proposed by the government.

 

This included rent discounts of 35% to 100% for small to medium-sized enterprises and 15% to 35% for all non-essential retailers for two months.

 

On Tuesday, it said that following the extension to the lockdown it was now offering non-essential, medium-sized to large retailers rent discounts of 60% to 70%, as well as a rent deferments of 40% to 50% for three months from April.

 

Meanwhile, highly-to-moderately affected retailers such as restaurants, hairdressers and movie theatres will be offered 50% to 100% rent discounts and up to 45% rent deferments.

 

“The initiative targets preserving jobs - for retailers, their suppliers and service providers – and to qualify for the relief benefits, retail tenants will need to undertake not to retrench staff during the relief period,” the PI said.

 

The plan follows the publication of government rules allowing landlords and tenants to negotiate lower rents or rent holidays - a move seen as giving state endorsement for further relief measures.

 

Shopping centres are the nexus of South Africa’s consumer-driven economy, accounting for 789 billion rand ($42.41 billion), or about 72%, of annual retail sales, according to the PI.

 

“We need to stand together and find workable solutions that will benefit the country, protect jobs, and sustain our businesses through this challenging time,” PI spokesperson and Chairman of the SA REIT Association Estienne de Klerk said.

 

“We believe what we are offering is balanced and addresses some of the key issues on both sides. It is an equitable way to protect both industries and, very importantly, looks after the drivers of employment creation - the SMMEs (small, medium and micro enterprises).”

 

($1 = 18.6062 rand)

 

 

 

The Fed's four radical moves to save the economy

As policymakers from America's central bank prepare to meet - virtually - this week, they will be looking to see if the extraordinary steps they have taken to confront the world's most severe economic crisis since the Great Depression are working.

 

Since March, the Federal Reserve has pledged to pump more than $4tn (£3.2tn) into the financial system, slashing interest rates, relaxing banking rules, and dramatically expanding its lending.

 

The Fed's moves, which have increased its balance sheet by more than $2.2tn so far, have been replicated to some degree by many other central banks, including the Bank of England.

 

The responses, which typically complement massive new government spending packages, are an effort to keep money flowing despite the near-freeze on business activity during the pandemic.

 

"They've taken basically what they did in the global financial crisis and now it's on steroids," says Frederic Mishkin, a professor of banking and financial institutions at Columbia Business School.

 

1. The Fed rushed dollars to foreign countries and financial firms

The financial system was under strain this spring, as investors pulled funds out of a collapsing stock market, companies tapped credit lines in anticipation of lockdown losses and people in other countries looked to hold dollars for stability.

 

Responding to the rush, the Fed used emergency powers to advance funds to major financial institutions. It also made it easier for foreign central banks to exchange their own currencies for dollars through so-called "swap lines".

 

The Fed was able to respond quickly, since it had developed the programmes during the 2007-2009 financial crisis, says Alan Blinder, professor of economics and public affairs at Princeton University. But at that time, the Fed was trying to shield the wider economy from risky bank behaviour, whereas now the Fed is working to protect the financial system from the bigger economic crisis.

 

"That's not because they care about the bankers," Prof Blinder says. "It's because if the financial system started to implode, which it had started to do, that's going to reverberate back onto the real economy and make things that much worse."

 

The Fed will offer loans to companies outside of the financial sector

2. The Fed offered to buy debt from big companies

But the Fed has gone beyond simply shoring up the financial system.

 

Fearing a wave of bankruptcies, as shutdowns create holes in company budgets and worried banks refuse to lend, the Fed in March said it would work directly with big companies on loans and bond offerings. It pledged up to $100bn to the effort, and within weeks had expanded its potential commitment to $750bn.

 

It has also said it would buy up to $100bn of other kinds of debt, including credit card debt, car financing loans, student loans, commercial mortgages and "leveraged" loans. The list is so extensive, some financial industry commentators on Twitter joked the bank would be buying baseball cards next.

 

The US Treasury is backing the programmes with $85bn - a sign that unlike most of its actions in 2008, the Fed is worried about losses.

 

Others have warned the bank's actions could encourage future risky borrowing. "Markets work best when participants have a healthy fear of loss," Oaktree Capital Management co-founder Howard Marks wrote. "It shouldn't be the role of the Fed or the government to eradicate it."

 

Many economists say those kinds of fears are overblown, given the unique nature of the current coronavirus-triggered crisis - which has created cash-flow problems even for firms on a solid financial footing.

 

"I think this is such a large external shock, that I think it is appropriate for the central bank to come in to provide liquidity and try to prevent some of the costs [to society]," says economist Nellie Liang, a senior fellow at the Brookings Institution and a former director of financial stability at the Fed.

 

Businesses have overwhelmed America's rescue programme

3. The Fed is also lending to small businesses directly

The Fed has announced it would launch its own "Main Street" lending operation, dedicating up to $600bn to fund low-cost four-year loans worth $1m-$25m for mid-sized firms - something it has never done before. The Treasury Department has put $75bn to the plans, which were announced after the government's small business aid programme was overwhelmed by demand.

 

"It's a big step for the Fed, but I think this crisis is unusual," says Ms Liang. "The issues are not just market liquidity they're also liquidity for smaller firms that don't often have access to the market so to the extent that the Fed can provide some support here, it seems important."

 

But, she adds: "The Fed has to think really carefully about how to design the Main Street programme to help borrowers and not just increase their debt load."

 

Indeed, many of the current economic problems can't be solved by lending, Prof Blinder warns, pointing to the need for the government to increase spending on items like healthcare and unemployment benefits.

 

"Will these activities help the economy weather the storm? The answer is yes, but the operative word in that sentence is help - the Fed cannot do this by itself," he says.

 

A police officer hands out unemployment benefit applications in a car park in Florida

4. The Fed is also helping local governments.

The increased costs of healthcare and social programmes, combined with plunging tax revenue, have created huge problems for local governments. Ordinarily, they could borrow money by issuing bonds. But that market seized up earlier this year, as the enormity of the crisis made investors wary about repayment.

 

So, the Fed said it would buy up to $500bn in new bonds issued by states, cities and counties of a certain size - something else it has never done before. The Treasury Department is backing the effort with $35bn.

 

The Fed's promise alone has appeared to re-set demand and help bring down the cost of borrowing, says Michael Belsky, executive director of the Center for Municipal Finance at Chicago University's Harris School of Public Policy. "This is a godsend," he says. "For the most part, I think it's a very creative and appropriate thing to be doing."

 

But the Fed must guard against creating the expectation that it will be there to backstop cash-strapped local governments in the future, encouraging imbalanced budgets even in ordinary times, says Frederic Mishkin, professor of banking and financial institutions at Columbia Business School.

 

"Although providing fiscal stimulus was the right thing to do, they've got to make very clear how unusual this is," he says.

 

After all, the Fed has had difficulty dialling back its activity after the 2008 financial crisis. While many hope the current economic shock will be short-lived, the powers the Fed has assumed may well prove long-lasting.--BBC

 

 

 

Coronavirus hits profits at corporate America

Some of America's biggest companies are offering investors a peek into how they are faring amid coronavirus shutdowns - and for many, the picture isn't pretty.

 

US carmaker Ford lost $2bn (£1.6bn) in the first three months of the year, as sales dropped 15%.

 

Starbucks saw sales fall 10% - and 50% in China, where lockdown measures in place for most of the quarter.

 

Profits at Google-parent Alphabet held up, and food firms benefited as people stocked up, especially on treats.

 

On Tuesday, Mondelez, owner of Cadbury, Oreo and Triscuits, said quarterly sales surged 15% in North America, helping to lift overall revenue almost 3%.

 

"We saw a significant increase in consumer demand for snacks in developed markets, particularly in North America, which more than offset a more challenging environment in several emerging markets," chief executive Dirk Van de Put said.

 

However, the company, like dozens of others, withdrew its financial guidance for the year, citing uncertainty surrounding the virus.

 

BP profits dive 66% as coronavirus hits oil demand

Coronavirus: HSBC puts 35,000 job cuts on hold

The snapshot provided by firms sharing quarterly results with investors echoes the concerns being voiced by hundreds of companies across the US.

 

Profits at S&P 500 firms reporting so far have fallen by more than 15% on average, according to FactSet. If that figure holds, it would mark the biggest year-on-year decline in the index since the financial crisis in 2009.

 

Google slowdown

Starbucks on Tuesday warned investors that the pain will deepen and persist through the second half of the year. About half of its stores are closed in the US, and more than 75% in Canada, Japan and the UK.

 

However, the company said its experience in China gave it confidence that the disruption would be temporary. Nearly all of its more than 4,000 stores in China have already re-opened, albeit in modified fashion, and the firm predicted sales there would have returned to prior year levels by the end of September.

 

"We are confident that Starbucks will emerge from this global crisis even stronger than before," said chief executive Kevin Johnson.

 

At Google's parent company, Alphabet, advertising spending held up better than expected in the first three months of the year, rising 13% year-on-year. The firm also said it had seen significant increase in time spent on YouTube, demand for its cloud services, Chromebooks and educational software.

 

However, the firm warned it had seen a "significant and sudden slowdown" in ad spending March, calling it a "tale of two quarters" as businesses slashed their marketing budgets.

 

The report offered some of the first definitive information about how digital advertising is faring amid the coronavirus shutdowns. Facebook, its main rival in online ad spending, is due to release its results on Wednesday.--BBC

 

 

 

British Airways to cut up to 12,000 jobs as air travel collapses

British Airways is set to cut up to 12,000 jobs from its 42,000-strong workforce due to a collapse in business because of the coronavirus pandemic.

 

The airline's parent company, IAG, said it needed to impose a "restructuring and redundancy programme" until demand for air travel returns to 2019 levels.

 

The pilots' union Balpa said it was "devastated" at the news and vowed to fight "every single" job cut.

 

IAG also owns Spanish airline Iberia and Ireland's Aer Lingus.

 

In a statement, IAG said: "The proposals remain subject to consultation, but it is likely that they will affect most of British Airways' employees and may result in the redundancy of up to 12,000 of them."

 

The company said it will take several years for air travel to return to pre-virus levels, a warning that has been echoed by airlines across the world.

 

Alongside IAG's statement, BA chief executive Alex Cruz wrote in a letter to staff: "In the last few weeks, the outlook for the aviation industry has worsened further and we must take action now. We are a strong, well-managed business that has faced into, and overcome, many crises in our hundred-year history.

 

"We must overcome this crisis ourselves, too. There is no government bailout standing by for BA and we cannot expect the taxpayer to offset salaries indefinitely... We will see some airlines go out of business."

 

About 4,500 pilots and 16,000 cabin crew work for BA, which has already put almost 23,000 staff on furlough.

 

Balpa's general secretary Brian Strutton said: "This has come as a bolt out of the blue from an airline that said it was wealthy enough to weather the Covid storm and declined any government support.

 

"Balpa does not accept that a case has been made for these job losses and we will be fighting to save every single one."

 

Global impact

Also on Tuesday, IAG revealed the impact of the virus outbreak on group revenues. In the first three months of 2020 revenues fell 13% to €4.6bn (£4bn). Worse is to come warned Stephen Gunning, IAG's chief financial officer.

 

Airlines across the world have warned they face a fight for survival.

 

In the UK, EasyJet has laid off its 4,000 UK-based cabin crew for two months. And Sir Richard Branson has appealed to the government to help bail out his Virgin Atlantic airline with a loan thought to be up to £500m.

 

Elsewhere, Qantas has put 20,000 staff on leave, while Air Canada has done the same for about 15,200 employees. Norwegian Air has said it could run out of cash by mid-May. At American Airlines, about 4,800 pilots have agreed to take short-term leave on reduced pay and more than 700 are taking early retirement.

 

We know the aviation industry is in the throes of an unprecedented crisis. But the announcement from IAG is chilling nonetheless - and not only because of the number of jobs at stake. That's because the company is saying explicitly that it expects the recovery in the industry to be a very slow one, with passenger demand not reaching 2019 levels for "several years".

 

The airline can survive on its financial reserves for the moment - and take advantage of the government's job retention scheme to furlough employees for a short period. Government support of this kind is very short term. With a quick recovery it might be enough to save a large number of jobs.

 

Yet the prospect of that happening is deeply uncertain. It's not clear when countries will remove travel restrictions, under what conditions people will be able to fly - or even if they'll want to.

 

IAG has now made it clear it's expecting the industry to look very different in future to what was the norm until just a few weeks ago, and is taking action accordingly. But unions will disagree, and the company may find itself accused of over-reacting - or even of taking advantage of the crisis in order to reduce its cost base.--BBC

 

 

 

Jumia: The e-commerce start-up that fell from grace

A year after its debut on the New York Stock Exchange, e-commerce start-up Jumia has shut down in three African states, struggled to turn a profit and got dumped by its original owners, writes former BBC Africa Business editor Larry Madowo.

 

The two CEOs of Jumia announced earlier this month that they were taking a 25% pay cut to support the online retailer manage costs during the coronavirus pandemic.

 

In 2019, the duo and the company's chief financial officer collectively earned $5.3m (£4.27m) in base salaries and one-time bonuses. But Jumia's losses rose 34% to $246m, the eighth straight year without profits.

 

A silver lining arrived with lockdowns that shut down much economic activity but led to a surge in online shopping. Before the rush, the African online retailer had ended last year with 6.1 million active consumers on its websites, up from 4 million previously.

 

Africa pride

As the virus spread, Jumia expanded grocery and sanitary offerings, introduced contactless delivery options and promoted cashless payments. It also started selling essential items in South Africa using its fashion retail subsidiary Zando's infrastructure.

 

The two Frenchmen who run Jumia as co-CEOs, Jeremy Hodara and Sacha Poignonnec, reduced their salaries just days before the first anniversary of its initial public offering (IPO) on the New York Stock Exchange (NYSE).

 

Online retailer Jumia:

Founded in 2012

 

Key markets:Nigeria, Egypt and Kenya

 

Main shareholder:South Africa-based mobile phone giant MTN

 

High points: April 2019 listing in New York; share price reaching $49.77

 

Low points:fraud claims; share price sinking to $2.15 in August 2019

 

Big promise:Will be profitable by 2022, a decade after launch

 

When it listed last April, Juliet Anammah walked up to the security check-in tent outside the world's most famous stock trading venue.

 

Another woman standing nearby snapped a photo of a large banner draped over the front of the iconic building emblazoned with the Jumia logo reading: "The 1st African tech start-up to be listed on the NYSE."

 

"I've worked on Wall Street for 25 years and I've never seen an African banner there," she told Ms Annamah, then the firm's country CEO in Nigeria.

 

Spectacular decline

Jumia is a three-headed online giant: a marketplace with one billion annual visits largely dominated by third-party sellers, a logistics arm that handles shipments and deliveries, and a payments platform.

 

Ms Anammah led her colleagues in ringing the bell above the trading floor of the stock exchange at exactly 09:30 on 12 April 2019.

 

"There was no champagne later to celebrate. We're still a start-up," she remembered recently at her office Lagos.

 

 

Jumia listed at $14.50 a share, valuing the company at $1.1bn. Just four days later, its stock hit $49.77, raising its value to an African startup record of $3.8bn.

 

It would not last. Within a few weeks, Jumia's stock suffered a spectacular decline, weighed down by allegations of fraud and concealed losses, a scathing report by a notorious short-seller, embarrassing fraud lawsuits in New York courts and a public relations disaster over its identity.

 

The share price sunk to an all-time low of $2.15 last August and has not budged.

 

The company exited three of its 14 country markets - Rwanda, Tanzania and Cameroon - in quick succession and tried to chart a path to profitability.

 

Tumultuous year

A week before its first birthday on the stock market, its original owner, German technology investor Rocket Internet, dumped its entire 11% stake, further knocking the wind off Jumia's sails.

 

"Jumia's first year on the NYSE is a proper reflection of the value of the company," says Rebecca Enonchong, a Cameroonian tech entrepreneur and a critic of the firm.

 

"The hubris of the IPO has led way to the reality of a bad business model. The stock price, hovering under $3, is a reflection of that."

 

Jumia's IPO was billed as a coming of age story for the continent's nascent start-ups, but it arrived on Wall Street just as the market's patience for unprofitable unicorns started wearing out.

 

The American e-commerce giant Amazon, to which it is often compared, took six years to become profitable, but eight years after its launch, Jumia is still struggling.

 

'Impossible to work'

That bad news capped a tumultuous year for the company, praised and derided as "the Amazon of Africa".

 

"Their business is still fundamentally broken, they have no way out," says Olumide Olusanya, an early competitor of Jumia's in Lagos.

 

The entrepreneur, who went into business after quitting his job as a doctor, thinks it is burning too much cash too fast in a low-margin market.

 

"It is practically impossible to work. I don't envy the guy running the business."

 

In 2019, Jumia's fulfilment expenses were $1.6m higher than gross profit. That means Jumia paid more to ship and deliver to buyers than it earned.

 

Dr Olusanya suggests the main reason Jumia listed on the NYSE was to allow its investors to cash out.

 

"They collected money. After several years, you're thinking of how to return the money to them. If I had an outlet, I would also do the same," he says.

 

Mr Hodara scoffs at that, saying that the company needed to raise money.

 

"This is called capital markets for a reason," he responded in an interview in New York recently.

 

"It was the right time and the right place to list to bring the business to the next level, bring more visibility and give access to a new set of shareholders and investors," he added.

 

Identity row

But Jumia's public claim to African-ness is tenuous because its headquarters are in Berlin, Germany, its Technology and Product Team in Porto, Portugal, and its senior leadership in Dubai in the United Arab Emirates (UAE).

 

Critics see it as an exploitative Western company that conveniently co-opted an African identity to extract as much value as possible and profit off the continent.

 

Mr Poignonnec, the co-CEO, ignited a major storm when he claimed in a post-listing interview on pay television station CNBC that Jumia's engineering team is based in Portugal because Africa lacks the talent.

 

"The reality is that in Africa there are not enough developers. We know that. And we need to collectively address that," he said last April.

 

And Mr Hodara, answering the now obligatory questions regarding its distributed workforce, says: "We have our tech team in Portugal because this is where we have a good set-up with hundreds and hundreds of developers all in one place so very practical because we're on the same time zone."

 

"We are one among many companies to have a few people in Dubai because of ease of travel. There is no African city that is as connected to the rest of Africa as Dubai," adds Mr Hodara.

 

Jumia's country leaders insist that it is an African company and the majority of its employees are in fact African.

 

"For me, it's about who was this company set up to serve?" says Ms Annamah, who is now chairwoman of Jumia Nigeria.

 

"It's completely African, look here, these are all Africans here," she says, pointing to the large open workspace outside her office.

 

But the leadership at country and group levels was mostly made up of Westerners, some of whom were completely new to Africa.

 

"The truth is that the people at the top are definitely not African in any shape or form," admits Akua Nyame-Mensah, a former managing director of Jumia Classifieds in Ghana and Nigeria.

 

"But that's not a bad thing. There are a lot of companies on the continent that are doing amazing things and have an impact that are not led by Africans."

 

She is now an executive coach and strategic adviser but still holds Jumia stock options.

 

'Put Africa on the map'

For Mr Hodara, a German base made sense because a European corporate structure could attract funding from investors more easily than an African one.

 

"What matters is where our consumers and sellers are," he says.

 

"Personally, I want the company to be here in 50, 100 years to continue to be part of the life of our consumers and sellers every day, make them successful and make more money. We want to build a lasting business."

 

However, Ms Enonchong does not see a profitable future for Jumia.

 

"Their real founders, that is Rocket Internet, don't see one either apparently, since they sold all their shares."

 

Dr Olusanya expresses a similar view, but credits it with making history in Africa's internet landscape.

 

"They put Africa on the map. Nobody ever thought that you could build a business in five to six years that could get listed on the NYSE," he says.--BBC

 

 

 

BP profits dive 66% as coronavirus hits oil demand

BP's first quarter profit has dived by two thirds after the global coronavirus crisis hit demand for oil.

 

The oil giant warned it was facing an "exceptional level of uncertainty" after a sharp reduction in the need for its products.

 

Lockdowns around the world have been keeping people inside, slashing demand for oil.

 

It has sent prices to 20-year lows, with US oil turning negative briefly for the first time ever last week.

 

BP said that underlying replacement cost profit, its definition of net income, was $800m (£645m) in the first three months of 2020 - down from $2.4bn a year earlier.

 

However, it said it would keep paying shareholders a dividend.

 

"Our industry has been hit by supply and demand shocks on a scale never seen before, but that is no excuse to turn inward," said new chief executive Bernard Looney.

 

"We are focusing our efforts on protecting our people, supporting our communities and strengthening our finances."

 

Analysis, Andrew Walker, international business correspondent:

 

This is one of the industries most exposed to the impact of the coronavirus. We are not filling our cars (or we are at least doing it much less often) and airlines aren't refuelling their planes.

 

There is also, as the company noted, "exceptional uncertainty'" about the outlook for demand for these products. The accounts show an overall loss in the quarter, which largely reflected the dramatic fall in oil prices. The loss on the value of BP's inventories was $3.7bn (£3bn).

 

That is a one-off factor and on the company's preferred "underlying" measure of earnings it did make a much-reduced profit. It was by any measure a tough period for the business. Even though the financial environment is challenging, the company decided to go ahead with paying a dividend to its shareholders.

 

That decision has been criticised by environmental campaigners, such as Greenpeace, who say BP should prioritise investing in clean renewable energy.

 

Despite the challenging conditions, Mr Looney said the oil giant was still committed to its goal of cutting net carbon emissions to zero by 2050.

 

But Neil Wilson, chief market analyst at Markets.com, said: "If BP wants to go green and be 'carbon neutral' by 2050, it's going to require higher oil prices to do it. Oil will pay for the shift away from oil."

 

Brent crude oil, the international benchmark, currently costs about $19 a barrel, down from around $70 in early January. US oil is trading at just $11 a barrel.

 

Prices were already volatile before the pandemic due to in-fighting between producers over output - although earlier this month Opec countries and allies agreed a record deal to slash global production by about 10%.

 

However, many analysts say the cuts will not be enough to revive the market.

 

Elsewhere, the UK's oil and gas industry has warned that 30,000 jobs could be lost as a result of the coronavirus pandemic and lower oil prices.

 

Trade body Oil and Gas UK said many member firms would struggle to survive the effects of the pandemic, which has caused large parts of the global economy to shut down.

 

The predicted UK job losses represent about one in five of the 151,000 people employed directly or indirectly by the sector.

 

But campaign group Friends of the Earth Scotland said any government support must be conditional on the industry adopting more ambitious climate goals and not returning to "business as usual".--BBC

 

 

 

 


 

 


 

INVESTORS DIARY 2020

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


Bindura Nickel Corporation

 

 

 


Padenga Holdings

 

 

 


Delta Corporation

 

 

 


Meikles Limited

 

 

 


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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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