Major International Business Headlines Brief::: 15 July 2020

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Major International Business Headlines Brief::: 15 July 2020

 


 

 


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ü  Turkey's Karpowership signs 5-year power deal with Sierra Leone

ü  Crisis-hit Moroccans join 'informal economy' as job market shrinks

ü  South Africa's TFG to raise 3.95 bln rand to cut debt

ü  Botswana expects smaller economic contraction in 2020 than previous
forecast

ü  South Africa's economy to shrink 6.9% in 2020 - S&P Global Ratings

ü  Big US banks set aside $28bn in downturn warning

ü  South African Airways creditors approve rescue plan

ü  Huawei 5G kit must be removed from UK by 2027

ü  South Africa's Sun International to issue 127 mln shares in rights offer

ü  Oatly raises $200m from celebrity backers including Oprah and Jay-Z

ü  Virgin Atlantic finalises £1.2bn rescue deal

ü  UK faces ‘explosive’ debt levels

ü  UK economy rebounds more slowly than expected

ü  Asia's 'shining star' suffers biggest ever slump

 

 

 

 

 

 

 

 


 <mailto:info at bulls.co.zw> 

 


Turkey's Karpowership signs 5-year power deal with Sierra Leone

JOHANNESBURG (Reuters) - Karpowership, one of the world’s largest operators
of floating power plants, has agreed a 5-year dealbu to provide electricity
to Sierra Leone’s state power utility, the Turkish company said on Tuesday.

 

Karpowership - part of the Karadeniz Energy Group - already supplies around
80% of the West African nation’s electricity via two powerships anchored off
the capital Freetown under a contract signed in 2018.

 

The vessels are dual-fuel powered using either heavy fuel oil or liquefied
natural gas (LNG).

 

The new agreement will add 5 megawatts (MW) to current production.
Karpowership will generate an average of 63 MW during the dry season and 23
MW during the wet season for Sierra Leone’s Electricity Distribution and
Supply Authority.

 

Karpowership did not release financial details of the deal.

 

With an electrification rate of just 5%, Sierra Leone’s current generation
capacity falls well short of the needs of its 7 million citizens. Prolonged
blackouts are common even in the capital and urban areas.

 

Karpowership currently provides around 4,100 MW of power from its fleet of
ships, mainly in eight African nations but also in Cuba, across the Middle
East and Asia.

 

 

 

 


 <mailto:info at bulls.co.zw> 

 


 

Crisis-hit Moroccans join 'informal economy' as job market shrinks

RABAT (Reuters) - The coronavirus crisis is expected to expand Morocco’s
informal economy of people who work for cash, reducing tax revenue and
leaving many without social protection, the head of the state planning
agency and economists said.

 

More than a third of Moroccan workers are already in the informal economy,
doing manual or domestic labour, driving taxis or selling in the streets,
accounting for 14% of gross domestic product, according to the agency.

 

However, the crisis is expected to expand this informal economy as people
lose their jobs in companies and consumers seek the cheaper goods and
services provided by workers who are not registered with the state’s pension
fund.

 

Morocco, with 16,047 coronavirus cases, last month allowed cafes,
restaurants and other services to resume activity at half capacity except in
provinces where infections remain high. Last week, it extended an emergency
decree giving local authorities leeway in taking restrictive measures until
Aug. 10.

 

Unemployment is expected to surge to a rate of 14.8% in 2020 from about 9.2%
before the pandemic, the agency said.

 

Fatima Hamdane, 53, who lost her job as a worker at a car parts
manufacturing plant in Casablanca, said she would work as a cleaner even if
her employer did not pay social security duties. She has diabetes and has
already skipped medical checks because of her hard financial situation.

 

“I knocked on many doors, but couldn’t find a job,” she said. “Most have
rejected me because of my age.”

 

Ahmed Lahlimi, the planning agency chief, told Reuters that while the number
of people moving into the informal economy was expected to grow, the agency
did not have any updated figures estimating the extent of the problem.

 

The informal economy already costs the state 34 billion dirhams ($3.4
billion) in annual tax losses, Finance Minister Mohamed Benchaaboun said.

 

Morocco’s fiscal deficit stood at $2.3 billion at the end of May with
revenue down and spending up because of the crisis. It is expected to widen
to 7.5% of gross domestic product in 2020 from 4.1% last year while the
economy is expected to shrink by 5%, according to the government’s reviewed
budget.

 

The Confederation of Moroccan Enterprises, a business group, says the
informal economy puts 2.9 million jobs at risk in formal companies by
undercutting their costs. In May, it recommended offering tax incentives to
make more companies register officially.

 

“In the past, the state has tolerated the informal economy in times of
social tensions such as during the 2011 pro-democracy protests,” said Rachid
Awraz, of the Moroccan Institute for Policy Analysis.

 

But, in the long run, it leaves workers without social protection and prey
to poverty in addition to its low added value for the economy, he said.

 

Labour Minister Mohamed Amekraz did not answer Reuters requests for comment.

 

 

 

South Africa's TFG to raise 3.95 bln rand to cut debt

(Reuters) - The Foschini Group (TFG) said on Tuesday it was looking to raise
up to 3.95 billion rand ($235.35 million) through a rights offer to cut its
debt, as the South African retailer faces challenges in its core markets.

 

“The board of directors and management of TFG believe it is prudent and
necessary to reduce TFG’s financial indebtedness now by way of the rights
offer,” the company said in a statement.

 

TFG on Monday announced its plan to acquire certain stores and selected
assets of Jet from Edcon’s administrators.

 

($1 = 16.7833 rand)

 

 

 

Botswana expects smaller economic contraction in 2020 than previous forecast

GABORONE (Reuters) - Botswana expects its economy to shrink by 8.9% in 2020,
less severe than its previous forecast for a 13.3% contraction, boosted by
better than expected mining output and a shorter lockdown, the central bank
said on Tuesday.

 

“The ministry of finance now sees a lower economic contraction in 2020. The
first number was based on an assumption of a longer lockdown and larger
contraction in mining activities,” said Tshokologo Kganetsano, director of
research and financial stability at the central bank.

 

 

 

South Africa's economy to shrink 6.9% in 2020 - S&P Global Ratings

JOHANNESBURG (Reuters) - South Africa’s economy will contract by more than
initially projected, likely shrinking 6.9% in 2020 compared to an earlier
forecast of a 4.5% contraction, ratings agency S&P Global Ratings said on
Monday in a report.

 

South Africa has the highest number of confirmed coronavirus cases in
Africa, with more than 270,000 infections, and 4,000 deaths, and is now
recording the fourth-largest daily increase in new cases worldwide at more
than 12,000 per day.

 

“The pandemic situation in the country has worsened since our previous
macroeconomic update, leading to a further hit to confidence, which was
already low before the pandemic, amid lack of growth and concerns about the
fiscal trajectory,” the firm said.

 

S&P along with the other two main ratings firms, Moody’s and Fitch, already
rate the country’s debt at below investment status, or junk. S&P cut its
rating one notch to the third tier of non-investment grade, BB-, in April,
with a stable outlook.

 

S&P’s growth forecast is however more optimistic than National Treasury’s
prediction of a 7.2% contraction this year. Treasury predicts debt to gross
domestic product will breach 80% as government borrows more to fund its
response to the pandemic.

 

To cushion the economic blow of the pandemic on the economy, President Cyril
Ramaphosa announced a 500 billion rand ($28.86 billion) relief package in
April, equivalent to 10% of South Africa’s GDP.

 

“The sizeable fiscal package will only partially mitigate the economic toll,
but coupled with lower revenues, will lead to a significant increase in
government debt, further impairing public finances,” the ratings agency
said.

 

 

 

Big US banks set aside $28bn in downturn warning

Three of the biggest US banks have set aside almost $28bn (£22.3bn) amid
concerns about customers defaulting on loans due to the pandemic.

 

The decision helped to push Wells Fargo to its first quarterly loss since
the financial crisis and weighed on the financials of other banks.

 

JP Morgan Chase profits roughly halved, while Citigroup's plunged 73%.

 

The firms' executives warned of a painful economic downturn ahead, despite
recent positive data.

 

JPMorgan said it expected the US unemployment rate to remain at nearly 11%
at the end of the year, compared to the 6.6% it forecast in April. The bank
said it had set aside more than $10bn for losses, including nearly $9bn to
build its reserves.

 

"We have prepared and reserved for something worse than our base case,"
chief financial officer Jennifer Piepszak said.

 

'Significant deterioration'

Citigroup, which has set aside about $7.8bn to cover potential losses, said
it expected customers to default on nearly 3.9% of its loans, up from 1.8%
in 2019.

 

"We are in a completely unpredictable environment... The pandemic has a grip
on the economy, and it doesn't seem likely to loosen until vaccines are
widely available," Citigroup chief executive Michael Corbat said on an
earnings call.

 

At both Citigroup and JP Morgan Chase, increased trading activity helped
offset a slowdown in consumer spending.

 

JP Morgan revenues rose 15% year-on-year to $33bn, with profits of nearly
$4.7bn. Citi posted a net income of $1.3bn on revenue of almost $19.8bn, up
5%.

 

But Wells Fargo, which does not have a big investment banking business,
swung to a $2.4bn loss in the quarter, compared to $6.2bn profit in the same
period in 2019. The firm set aside $9.5bn to cover potential
coronavirus-related losses, including $8.4bn in reserves.

 

"Our view of the length and severity of the economic downturn has
deteriorated significantly from the assumptions used last quarter," chief
executive Charlie Scharf said.

 

It said it suffered loan losses of $1.1bn in the three months to July, up
from $204m in the previous quarter, driven by hits to commercial property
firms and oil and gas companies.--BBC

 

 

 

South African Airways creditors approve rescue plan

JOHANNESBURG (Reuters) - South African Airways (SAA) creditors approved a
rescue plan for the struggling airline on Tuesday that requires at least 10
billion rand ($596 million) in new funding, throwing the ball into the
government’s court to come up with the cash.

 

State-owned SAA, which last made a profit in 2011, entered bankruptcy
protection in December and suspended commercial passenger flights in March
when the government imposed one of the world’s strictest lockdowns to
contain the new coronavirus.

 

Fierce wrangling between the airline’s administrators, the government and
trade unions has complicated rescue efforts, which delayed the publication
of a restructuring plan until last month.

 

That plan envisages scaling back the airline’s fleet and shedding jobs
before gradually ramping up operations as the disruption caused by COVID-19
eases.

 

Administrator Siviwe Dongwana told a creditor meeting the plan had been
approved by 86% of voting interests.

 

“It is an important step forward for the airline and provides much-needed
certainty towards a restructured SAA,” he added in a statement.

 

Dongwana said the Department of Public Enterprises (DPE), the ministry
responsible for SAA, had said it would give the administrators a letter with
a funding commitment on Wednesday, in time for a deadline stipulated in the
rescue plan.

 

The DPE told Reuters last week it was on track to make the funding
commitment.

 

It is not yet clear where funding will come from, after the finance minister
allocated no new money to SAA in an emergency budget. The government says it
has been talking to investors and potential partners, but has given few
details.

 

The DPE’s acting director-general, Kgathatso Tlhakudi, told the creditor
meeting the government should announce preferred strategic equity partners
soon for SAA Group and its business units. He added an interim board of
directors for the new SAA would be revealed soon.

 

($1 = 16.7755 rand)

 

 

 

Huawei 5G kit must be removed from UK by 2027

The UK's mobile providers are being banned from buying new Huawei 5G
equipment after 31 December, and they must also remove all the Chinese
firm's 5G kit from their networks by 2027.

 

Digital Secretary Oliver Dowden told the House of Commons of the decision.

 

It follows sanctions imposed by Washington, which claims the firm poses a
national security threat - something Huawei denies.

 

Mr Dowden said the move would delay the country's 5G rollout by a year.

 

The technology promises faster internet speeds and the capacity to support
more wireless devices, which should be a boon to everything from mobile
gaming to higher-quality video streams, and even in time driverless cars
that talk to each other. 5G connections are already available in dozens of
UK cities and towns, but coverage can be sparse.

 

Mr Dowden added that the cumulative cost of the moves when coupled with
earlier restrictions announced against Huawei would be up to £2bn.

 

"This has not been an easy decision, but it is the right one for the UK
telecoms networks, for our national security and our economy, both now and
indeed in the long run," he said.

 

 

Because the US sanctions only affect future equipment, the government has
been advised there is no security justification for removing 2G, 3G and 4G
equipment supplied by Huawei.

 

However, when swapping out the company's masts, networks are likely to
switch to a different vendor to provide the earlier-generation services.

 

Huawei said the move was "bad news for anyone in the UK with a mobile phone"
and threatened to "move Britain into the digital slow lane, push up bills
and deepen the digital divide."

 

The action, however, does not affect Huawei's ability to sell its
smartphones to consumers or how they will run.

 

China's ambassador to the UK said the decision was "disappointing and
wrong".

 

"It has become questionable whether the UK can provide an open, fair and
non-discriminatory business environment for companies from other countries,"
tweeted Liu Xiaoming.

 

But US Secretary of State Mike Pompeo welcomed the news, saying: "The UK
joins a growing list of countries from around the world that are standing up
for their national security by prohibiting the use of untrusted, high-risk
vendors."

 

Broadband switch

New restrictions will also apply to use of the company's broadband kit.

 

Operators are being told they should "transition away" from purchasing new
Huawei equipment for use in full-fibre networks, ideally within the next two
years.

 

Mr Dowden said the government would "embark on a short technical
consultation" with industry leaders about this.

 

He explained that the UK needed to avoid becoming dependent on Nokia - which
is currently the only other supplier used for some equipment - and he wanted
to avoid "unnecessary delays" to the government's gigabit-for-all by 2025
pledge.

 

BT's Openreach division told the BBC it had in fact recently struck a deal
to buy full-fibre network kit from a new supplier - the US firm Adtran - but
first deliveries would only start in 2021.

 

Chip concerns

The UK last reviewed Huawei's role in its telecoms infrastructure in
January, when it was decided to let the firm remain a supplier but
introduced a cap on its market share.

 

But in May the US introduced new sanctions designed to disrupt Huawei's
ability to get its own chips manufactured. The Trump administration claims
that Huawei provides a gateway for China to spy on and potentially attack
countries that use its equipment, suggestions the company strongly rejects.

 

The sanctions led security officials to conclude they could no longer assure
the security of its products if the company had to start sourcing chips from
third-parties for use in its equipment.

 

The minister cited a review carried out by GCHQ's National Cyber Security
Centre as being the motivation for the changes.

 

NCSC has said Huawei products adapted to use third-party chips would be
"likely to suffer more security and reliability problems".

 

But other political considerations are also likely to have also come into
play, including the UK's desire to strike a trade deal with the US, and
growing tensions with China over its handling of the coronavirus outbreak
and its treatment of Hong Kong.

 

Some backbench Tory MPs had pressed for a shorter time-span for its removal,
in particular there had been calls for the 5G ban to come into effect before
the next election in May 2024.

 

However, Mr Dowden said that "the shorter we make the timetable for removal,
the greater the risk of actual disruption to mobile phone networks".

 

BT and Vodafone had warned that customers could face mobile blackouts if
they were forced to remove all of Huawei's 5G kit in less time.

 

Labour's shadow technology minister Chi Onwurah said the government was
incapable of sorting "this mess out on their own".

 

It had "refused to face reality" and been "incomprehensively negligent" in
allowing matters to get to this point, she added, and a taskforce of experts
now needed to be created.

 

Hopes on the part of government that this decision may put the Huawei issue
to bed may be optimistic.

 

The reason that we are here again despite a decision in January is because
one of the key players - the US - played a new card in the form of
sanctions.

 

And there is still time between now and legislation coming to parliament in
Autumn for others to do the same - whether Conservative backbenchers or
Beijing.

 

In the long run, many countries will be watching carefully how China reacts.

 

Will it feel it needs to punish the UK in order to discourage others from
following its lead on 5G? Or will it want to avoid being seen as a bully and
prefer to try and influence the decision more subtly? Whatever the case, the
Huawei story in the UK is not over yet.

 

Chairman resigns

Huawei says it employs about 1,600 people in the UK and claims to be one of
Britain's largest sources of investment from China.

 

The firm - whose shares are not publicly traded - does not provide a
regional breakdown of its earnings. But on Monday, it announced a 13% rise
in sales for the first half of 2020 compared to the same period in 2019,
totalling 454bn yuan ($64.8bn; £51.3bn).

 

The UK will have accounted for a fraction of that. The firm's UK chief
recently noted that Huawei had only deployed a total of 20,000 5G base
stations - the radio receiver/transmitter equipment fitted to a mast - in
the UK so far. By contrast it expects to deliver a total of 500,000 globally
this year.

 

Even so, what the firm fears and Washington hopes is that other countries
will now follow Westminster's lead with bans of their own.

 

Despite there seeming little chance of a U-turn, Huawei said it was still
urging UK ministers to reconsider.

 

"We will conduct a detailed review of what today's announcement means for
our business here and will work with the UK government to explain how we can
continue to contribute to a better connected Britain," spokesman Ed Brewster
said.

 

Shortly before the announcement Sky News revealed that Lord Browne, Huawei's
UK chairman and the ex-chief executive of BP, would be leaving the Chinese
company before his term had expired. It said he had given his notice a few
days ago and would formally step down in September.

 

Lord Browne had led efforts to improve the company's image in the UK and had
tried to prevent a ban.

 

"He has been central to our commitment here dating back 20 years, and we
thank him for his valuable contribution," said Huawei, confirming the
report.

 

Industry reaction

BT is set to be the telecoms operator most affected by the decision given it
runs both the EE mobile network and Openreach, which provides fixed-line
infrastructure to individual internet providers.

 

"We need to further analyse the details and implications of this decision
before taking a view of potential costs and impacts," it said.

 

The move should, however, benefit Nokia and Ericsson, which are the two
other main 5G kit vendors.

 

"We have the capacity and expertise to replace all of the Huawei equipment
in the UK's networks at scale and speed... with minimal impact on the people
using our customers' networks," said Nokia.

 

Ericsson added: "Today's decision removes the uncertainty that was slowing
down investment decisions around the deployment of 5G in the UK... and we
stand ready to work with the UK operators to meet their timetable."

 

However, both firms manufacture some of their 5G equipment in China, which
has also caused concern in Washington.

 

In June, the US Department of Defense published a list of 20 companies it
claimed had close ties to the Chinese military.

 

It included Panda Electronics - the firm with which Ericsson jointly runs a
manufacturing facility in the Chinese city of Nanjing.

 

"A lot of companies assemble equipment or have some type of manufacturing in
China," Ericsson's head of corporate communications Peter Olofsson told the
BBC, when asked about this.

 

"Our trade compliance people have looked at this [list] and they concluded
that it's not something that has an impact on Ericsson or our operations."

 

Ultimately Huawei believes that this was a political decision and not a
business one.

 

And if the political winds change, then Huawei's fortunes may too.

 

My understanding is that a longer time frame for the removal of its 5G kit
from UK networks was a relatively desirable outcome for Huawei.

 

So even though no new Huawei UK equipment can be bought by UK mobile
carriers after the end of this year, the fact that the UK has until 2027 to
remove Huawei's 5G kit from all of its network could be seen as a potential
positive.

 

A new US administration in November could markedly change Washington's
position on Huawei.

 

So for Huawei, playing the long game makes sense.

 

And one thing that was crystal clear to me from meeting Ren Zhengfei, the
company's founder is that he's a fighter.

 

Ren Zhengfei told the BBC: 'If the lights go out in the West, the East will
still shine. And if the North is dark, then there is still the South.'

Nothing he has said indicates he is willing to give up.

 

For now though, the immediate impact of the UK decision will be seen as a
signal that Washington's campaign on Huawei has worked.

 

And the Chinese firm will not want that replicated in other countries around
the world.--BBC

 

 

 

South Africa's Sun International to issue 127 mln shares in rights offer

JOHANNESBURG (Reuters) - South Africa’s Sun International will tap
shareholders for funds at 9.44 rand a share in a 1.2 billion rand ($71.48
million) rights issue, the hotel and casino owner said on Tuesday.

 

The owner of Sun City resort will use the rights issue funds to improve its
short to medium-term liquidity and strengthen its balance sheet as the
coronavirus restrictions hit its operations.

 

The company will offer 127 million shares at 9.44 rand each, representing a
25% discount, it said in a statement.

 

($1 = 16.7877 rand)

 

 

 

Oatly raises $200m from celebrity backers including Oprah and Jay-Z

Oatly, the Swedish company credited with convincing the masses of oat milk's
merit, has proven its value to the investment world as well.

 

The firm on Tuesday said a group including investment giant Blackstone Group
and celebrities Oprah Winfrey, Jay-Z and Natalie Portman bought a stake in
the company for $200m (£160m).

 

The move is a sign of growing interest in milk made with plant alternatives.

 

Oatly said the money would be used to expand and build new production
plants.

 

Founded in the 1990s, Oatly entered the US market four years ago and the
product proved so popular it created shortages.

 

Oatly announced its first factory in the US in 2018 and plans to open a
second this year, part of a wider effort to add plants close to its
customers. The firm's products are available at 50,000 locations across 20
countries.

 

"We chose to partner with Blackstone Group because of their tremendous
resources and unique reach," said chief executive Toni Petersson. "Our new
partners' commitment to supporting us and furthering our mission is a clear
indication of where the world is heading, which is in a new, more
sustainable direction."

 

 

Sales of oat milk are expected to increase rapidly in coming years, as
increased dairy allergies and concerns about dairy's environmental impact
push shoppers to look for alternatives.

 

About 41% of US households purchased vegan milk last year, according to a
report by the Good Food Institute and Plant Based Food Association.

 

The $200m investment announced on Tuesday represents about a 10% stake
Oatly, putting the firm's value at about $2bn, the Wall Street Journal
reported. Other investors in the group include former Starbucks chief Howard
Schultz.

 

Prior Oatly investors include Belgium-based Verlinvest and China Resources,
a state-owned company.

 

In the announcement, Jon Korngold, global head of Blackstone Growth, called
Oatly "a premier global brand... with significant runway for continued
growth to meet consumer demand". Blackstone has also emphasised its interest
in sustainable investments.

 

'Quarter of Britons' drinking plant-based milks

Which vegan milks are best for the planet?

Oatly reportedly had about $200m in sales last year and hopes to double that
by 2021. It has expanded its products from milk, to ice cream and yogurt and
is eyeing growth in China.

 

But the company faces increased competition, as firms such as PepsiCo's
Quaker Oats and dairy giant HP Hood launch their own brands. New milk
alternatives, made from products like peas, have also gained in popularity
among consumers.

 

In the US, dairy companies, which have lost ground to the alternatives, have
also attacked plant-based rivals over the sector's nutritional claims.--BBC

 

 

 

Virgin Atlantic finalises £1.2bn rescue deal

Troubled airline Virgin Atlantic has finalised a rescue deal worth £1.2bn
that should protect thousands of jobs.

 

Sir Richard Branson's Virgin Group will inject £200m, with additional funds
provided by investors and creditors.

 

The billionaire Virgin boss had a request for government money rejected,
leaving the airline in a race against time to secure new investment.

 

Virgin Atlantic is cutting 3,500 staff, but the airline said the remaining
6,500 jobs should be secure.

 

The deal includes funding from US hedge fund Davidson Kempner Capital
Management, and the postponement of about £450m in payments to creditors.
Virgin Group owns 51% of the airline, with the rest held by US carrier Delta
Air Lines.

 

Virgin Atlantic said the refinancing covered the next five years and paved
the way for it to rebuild its balance sheet and return to profitability in
2022.

 

"We have taken painful measures, but we have accomplished what many thought
impossible," said chief executive Shai Weiss. "The last six months have been
the toughest we have faced in our 36-year history."

 

As with other airlines, the Covid-19 outbreak plunged Virgin Atlantic into a
crisis as air travel dried up. Virgin grounded most of its fleet for months,
but is due to resume some services next week.

 

The company had initially hoped the government would step in with up to
£500m in bailout loans, but ministers made it clear taxpayers' money could
only be considered once all other options had been exhausted.

 

Sir Richard even offered to mortgage his Caribbean holiday island, Necker,
in return for new investment, although this was no longer necessary. Virgin
Group raised money for the investment from the sale of some shares in the
Virgin Galactic space tourism company.

 

The investment plan still needs formal approval from Virgin Atlantic's
creditors under a court-sanctioned process.

 

In May, the airline announced 3,500 job cuts and the closure of its base at
Gatwick airport. Although the restructuring and investment plans protect the
remaining jobs, it does not change the need to re-shape the size of the
business, Virgin Atlantic said.

 

Virgin Atlantic calls this a "solvent recapitalisation". But the question
is, will it be enough to secure the company's long-term future?

 

There is some new money here - an extra £200m in cash from the Virgin Group
and loans worth £170m from Davidson Kempner. But a large part of the package
is made up of deferring or waiving existing liabilities.

 

This was probably the best the company could do in the circumstances, after
the government made it clear targeted state aid would only be considered as
a last resort, after private-sector options had been exhausted.

 

But it doesn't seem to give the company much of a war chest to absorb future
shocks. It is due to resume flights next week - and managers will be
desperate for demand to pick up, and quickly.

 

Virgin Atlantic has already taken drastic action to cut costs, shedding more
than 3,500 staff and closing its base at London Gatwick. There's no doubt it
will be a much leaner operation in future.

 

This deal does at least keep the airline flying, but navigating its way
through the stormy skies facing the industry for the foreseeable future will
still be a huge challenge.

 

Virgin insiders say the company has wargamed the worst-case scenario, which
is a failure of transatlantic flights to recover, and it still reckons this
deal will be enough to keep Virgin in the air.

 

On Tuesday, Delta Air Lines wrote down the value of its stake in Virgin
Atlantic, taking a $200m (£160m) charge. The giant US airline also reported
an adjusted pre-tax loss of $3.9bn, saying it was burning through cash at a
rate of $27m per day.

 

Ed Bastian, Delta's chief executive officer said. "Given the combined
effects of the pandemic and associated financial impact on the global
economy, we continue to believe that it will be more than two years before
we see a sustainable recovery."

 

Last month, Mr Bastian told the BBC: "We're not planning on injecting
additional capital into Virgin. We're supporting them in doing everything we
can, helping them through a restructuring, hopefully to avoid an in-court
process, and I'm still optimistic, cautiously optimistic that we'll be able
to get there."

 

Aviation firms have been battered by the coronavirus crisis. On Tuesday,
Ryanair said it would cut 1,000 flights between Ireland and the UK in August
and September because of Irish quarantine restrictions which had "suppressed
demand".

 

"Air travel between Ireland and the UK is being badly damaged by this
ineffective 14-day quarantine," a spokesperson said. "This means 100,000
fewer visitors from the UK travelling to regional airports in Cork, Shannon,
Knock and Kerry during the peak months of the tourism season."--BBC

 

 

 

UK faces ‘explosive’ debt levels

The UK must raise taxes or cut spending to steer the country away from an
"explosive" debt path, the government's spending watchdog has warned.

 

The Office for Budget Responsibility (OBR) said the economy was on course to
shrink by 12.4% in 2020, with borrowing set to rise to a peacetime high.

 

This would mark the biggest economic decline in 300 years.

 

Official data showed the economy grew by 1.8% in May, a month after
suffering the biggest contraction on record.

 

The OBR said the coronavirus pandemic had "materially altered" the outlook
for the public finances.

 

It said the government would need to re-impose austerity measures to fix
some of the permanent damage caused by the crisis, as well as pay for the
costs of an ageing population.

 

Growing debt pile

The OBR said the government was on course to borrow £372bn this year to pay
for the shortfall between tax revenues and public spending.

 

This includes extra borrowing to pay for the chancellor's £30bn package
unveiled last week to protect jobs and boost the economy, and will push the
UK's total debt pile to 104.1% of gross domestic product (GDP).

 

What is GDP and why does it matter?

Without more tax rises or spending cuts, UK debt would start to dwarf the
size of the economy, growing to more than 400% of GDP in 50 years' time.

 

Its Fiscal Sustainability Report said: "In almost any conceivable world
there would be a need at some point to raise tax revenues and/or reduce
spending (as a share of national income) to put the public finances on a
sustainable path."

 

Robert Chote, the OBR's outgoing chairman, said calls for more spending on
the National Health Service (NHS), or a bigger benefits bill if unemployment
remains, could create "several additional sources of pressure on public
spending".

 

He also said taking away a temporary £20-a-week boost received by seven
million families on universal and working tax credits would be difficult.

 

Slower recovery

The fiscal watchdog warned that economy would not get back to its pre-crisis
size until the end of 2022, while unemployment was likely to rise to a
record 12% by the end of this year, falling back to 10.1% in 2021.

 

The OBR's central projection assumes a slower recovery than the watchdog
outlined in April, with a coronavirus vaccine found in about a year.

 

The watchdog said an "early vaccine or effective treatment would allow most
activities to resume much as they were before the virus", allowing the
economy to recover more quickly, with no "enduring economic scarring".

 

However, the OBR's most pessimistic scenario, where no vaccine is found and
social distancing measures continue "indefinitely", would lead to a
"significant" loss of business investment.

 

In this worst case scenario, unemployment would rise to four million, up
from 1.3 million in 2019, while the UK's high streets would be left
permanently scarred as shoppers stay away.

 

"The virus is likely to have significant effects on people's expectations
and behaviour", the OBR said.

 

It added that a "substantial rise in business indebtedness" would "weigh on
investment and innovation and to result in more business insolvencies".

 

As coronavirus has battered the UK economy, a raft of businesses have
announced closures and thousands of workers are set to lose their jobs.

 

This is despite the government having pumped billions of pounds into schemes
to support workers' wages and loan guarantees for business.

 

Tough choices

With the UK's debt pile set to grow substantially, Mr Chote said
policymakers faced tough choices.

 

"In practice, no government could allow net debt to persist for long on
these explosive paths, as it would find it hard to finance its mounting
deficits," he said.

 

He said getting the UK's debt share back down to around 75% of GDP would
require tax rises or spending cuts of about £60bn in today's money every
decade for the next 50 years.

 

This equates to around half the austerity imposed on the UK after the
financial crisis.

 

Andy King, an official at the OBR, noted that this would mean either
reducing the quality of UK healthcare or raising taxes significantly.

 

He said that while the question of how realistic decades of austerity was
"not one for us", he added: "Saying that it would be difficult is certainly
true".--BBC

 

 

 

UK economy rebounds more slowly than expected

The UK's economy rebounded more slowly than expected in May, growing just
1.8% from the previous month, as the gradual easing of lockdown had a modest
impact.

 

Manufacturing and house building showed signs of recovery in May as some
firms saw staff return to work.

 

But the Office for National Statistics said the economy was "in the
doldrums".

 

As a result of big contractions in previous months, the UK economy is now
24.5% smaller than it was in February, the ONS added.

 

What do the experts make of the latest figures?

The return to economic growth in May was described as "disappointing" by
economists, who had expected an expansion of 5% or more.

 

UK 'faces tax rises or spending cuts'

What is a recession?

The increase came after a fall of 6.9% in March and a record 20.4% decline
in April.

 

In the three months to May, the economy shrank by 19.1% compared with the
previous three-month period, the ONS said.

 

"The economy was still a quarter smaller in May than in February, before the
full effects of the pandemic struck," said Jonathan Athow, deputy national
statistician for economic statistics at the ONS.

 

"In the important services sector, we saw some pick-up in retail, which saw
record online sales. However, with lockdown restrictions remaining in place,
many other services remained in the doldrums, with a number of areas seeing
further declines."

 

Are things going to get better now?

Mr Athow told the BBC's Today programme that there could be signs of
improvement in next month's release of figures.

 

"Some of the survey data we're seeing suggests that as more of the economy
reopened and as some of the restrictions were eased, we did see stronger
performance in June, but it's really early," he said.

 

"You've got one month of firm data and some indicators suggesting June might
be stronger, but there's a long road to go here and we're still trying to
figure out what the best data is to understand the overall picture."

 

 

Which parts of the economy returned to growth?

May's modest month-on-month expansion came as sectors such as manufacturing,
construction, DIY retailers and garden centres were allowed to reopen.

 

Manufacturing grew by more than 8% during the month, as did construction.

 

What is GDP?

Gross domestic product (GDP) is the sum (measured in pounds) of the value of
goods and services produced in the economy.

 

But the measurement most people focus on is the percentage change - the
growth of the country's economy over a period of time, typically a quarter
(three months) or a year. It's been used since the 1940s.

 

It's the main way of determining the health of the UK economy.

 

What is GDP and why does it matter?

What's the political reaction?

"Today's figures underline the scale of the challenge we face," said
Chancellor Rishi Sunak.

 

The 'whatever it takes' chancellor

"I know people are worried about the security of their jobs and incomes.
That's why I set out our Plan for Jobs last week, following the PM's new
deal for Britain, to protect, support and create jobs as we safely reopen
our economy.

 

"Our clear plan invests up to £30bn in significant and targeted support to
put people's livelihoods at the centre of our national renewal as we emerge
through the other side of this crisis."

 

Can the economy get back on track?

A quarter of the economy's output was lost under lockdown in March and
April, and May's figures show even firms who are back in business may be
struggling to get on track.

 

It's one thing being allowed to open the doors again (and some firms remain
mothballed); another to be confident you can do so safely. And then there's
the biggest hurdle of all, ensuring customers are willing and able to spend
again.

 

As job losses mount, it clear that even some firms who qualify for
government help are faltering. Some won't have made it as far.

 

The Bank of England's own chief economist is among those who've voiced hopes
for a "V-shaped" recovery - a swift and full bounce back in activity.

 

But history tells us that economies can take years to make up lost ground
after a slump. The blow from this crisis was felt within days, convalescence
may be tougher. And in the meantime, the livelihoods of many may feel the
strain.

 

What are the chances of a speedy recovery?

The British Chambers of Commerce said May's "modest rally" in economic
growth did little to alter "the UK's historically downbeat growth
trajectory".

 

"The pick-up in output in May is more likely to reflect the partial release
of pent-up demand as restrictions began to loosen rather than evidence of a
genuine recovery," said the BCC's head of economics, Suren Thiru.

 

"While UK economic output may grow further in the short term as restrictions
ease, this may dissipate as the economic scarring caused by the pandemic
starts to bite, particularly as government support winds down."

 

Thomas Pugh, UK economist at Capital Economics, said the data showed the
recovery was "maybe not so V-shaped after all" - a reference to remarks last
month by Bank of England economist Andy Haldane, who said the UK was on
track for a quick recovery.

 

He said May's figure was "a disappointing first step on the road to
recovery" and suggested that "hopes of a rapid rebound from the lockdown are
wide of the mark".

 

"Indeed, the path to full economic recovery will probably be much longer
than most people anticipate," he added.--BBC

 

 

 

Asia's 'shining star' suffers biggest ever slump

Singapore’s economy plunged into recession in the last quarter as an
extended lockdown hit businesses and retail spending.

 

Economic growth in the city state shrank by 41.2% compared to the previous
quarter, the country's biggest contraction on record.

 

Authorities forecast it will be Singapore's worst recession since
independence from Malaysia in 1965.

 

The figures reveal the severity of the virus-driven downturn faced globally.

 

Official data showed Singapore's second quarter gross domestic product (GDP)
shrank 12.6% on a year-on-year basis.

 

As one of first countries to release growth data for the period in which
many economies were in lockdown, the numbers from Singapore provide a
glimpse of how the ongoing pandemic could affect economies around the world.

 

The worse-than-expected figures followed a first quarter year-on-year GDP
fall of 2.2% and quarter-on-quarter drop of 10.6%.

 

The deepening downturn also indicates that the pandemic may have impacted
Singapore's economy harder than many of its Asian counterparts.

 

The slump in global trade has hit the country's export-reliant
manufacturers, while the construction industry activity stalled and
retailers have seen sales fall at a record pace.

 

In contrast Japan’s GDP is seen shrinking by around 20% in the second
quarter from the previous three months, while data this week may show that
the Chinese economy has now returned to growth.

 

The data out of Singapore puts more pressure on the country's ruling
People’s Action Party, which last week saw its weakest general election
performance since independence 55 years ago.

 

The government has already pledged about $67bn (£53bn), or nearly 20% of
Singapore's GDP, in stimulus measures to support struggling businesses and
households.

 

Singapore started to ease its lockdown measures, known as the Circuit
Breaker locally, on 1 June.

 

The city state entered phase two of reopening its economy on 19 June, which
allows most shops and restaurants to resume business although social
distancing rules remain in place.--BBC

 

 

 


 

 


 

INVESTORS DIARY 2020

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


GB Holdings

AGM

Cernol Chemicals Boardroom, Willowvale

15 July 2020 | 11:30am

 


TSL

AGM

virtual

15 July 2020 | 12pm

 


BAT

AGM

Cresta Lodge, Msasa

16 July 2020 | 10am

 


African Sun

AGM

Virtual

16 July 2020 | 12pm

 


Masimba

AGM

Virtual

21 July 2020 | 12pm

 


Proplastics

AGM

Virtual

23 July 2020 | 10am

 


NMB

AGM

Virtual

28 July 2020 | 10am

 


FMP

AGM

Ground Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale

29 July 2020 | 9:30am

 


FML

AGM

Ground Floor, First Mutual Park, 100 Borrowdale Road, Borrowdale

29 July 2020 | 11:30am

 


ZBFH

AGM

Board Room, 21 Natal Road, Avondale

30 July 2020 | 10:30am

 


OK Zimbabwe

AGM

Virtual

30 July 2020 | 3pm

 


ZHL

AGM

virtual

31 July 2020 |

 


Delta

AGM

Virtual, Head Office, Northridge Close, Borrowdale

31 July 2020 | 12:30pm

 


Zimbabwe

National Heroes Day

Zimbabwe

10  August 2020

 


Zimbabwe

Defence Forces’ Day

Zimbabwe

11  August 2020

 


CBZ

AGM

Virtual

14  August 2020 | 6pm

 


 

 

 

 

 


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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Bulls n Bears 

 

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