Major International Business Headlines Brief::: 07 May 2020

Thu May 7 08:00:59 CAT 2020

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Major International Business Headlines Brief::: 07 May 2020

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ü  Harmony plans to issue $200 mln worth of shares for AngloGold deal

ü  Coronavirus lockdown pushes South African PMI to record low in April

ü  World Bank debars Chinese electrical equipment firm over fraud on Zambia project

ü  Kenya business conditions worsen in April due to COVID-19 -PMI

ü  Assore chrome mine in S.Africa shuts after worker diagnosed with COVID-19

ü  South Africa's auto industry ambitions threatened by coronavirus

ü  StanChart Kenya restructures 6% of loan book due to coronavirus

ü  Nigeria's government expects economy to contract by 3.4% in 2020

ü  Nigeria amending 2020 budget assuming oil at $20 per barrel -finance minister

ü  Uber axes 3,700 staff as trips drop in lockdowns

ü  Boom time for bikes as virus changes lifestyles

ü  Small fashion brands in Asia hit by coronavirus impact

ü  Debenhams to close five stores after lockdown ends

ü  EU facing 'deep and uneven recession'

ü  Qatar Airways warns of 'substantial' job losses

 <mailto:info at bulls.co.zw> 

Harmony plans to issue $200 mln worth of shares for AngloGold deal

(Reuters) - Harmony Gold Mining Company Ltd said on Wednesday it planned to raise up to $200 million via a share issue to fund part of its purchase of AngloGold Ashanti’s last remaining assets in South Africa.

AngloGold said in February it would sell the assets, including Mponeng mine the world’s deepest gold mine, for about $300 million to Harmony turning it into the country’s largest gold producer.

Harmony said the fundraising would allow the company to benefit from balance sheet flexibility and optionality given the current uncertainty caused by the COVID-19 pandemic.

Shares in Harmony fell 6% to 66.59 rand by 1357 GMT after the company said it was seeking authority to issue the ordinary shares for cash.

 Shares in other gold miners listed on the Johannesburg Stock exchange were up around 3%.

Harmony also said it had withdrawn its annual production guidance for the financial year as it does not have clarity on the ramp-up of production from its mines after a coronavirus lockdown.

Mining operations were halted as South Africa went into a five-week lockdown to curb the spread of the coronavirus.

>From May 1, mines have been allowed to start operations with 50% of their workforce.

“Due to the impact of COVID-19 and the continued uncertainty as to when our mines will be allowed to return to full production, we have decided to withdraw our annual production guidance,” Harmony Gold said in a statement.

It had earlier forecast production of 1.4 million ounces of gold for the fiscal year ending June 30.

It had produced 990,681 ounces in the nine months that ended March 31, the company said.

 <mailto:info at bulls.co.zw> 

Coronavirus lockdown pushes South African PMI to record low in April

JOHANNESBURG (Reuters) - South African private sector activity fell to a new record low in April, a business survey showed on Wednesday, as company closures due to a nationwide coronavirus lockdown led to a collapse in demand.

Markit’s Purchasing Managers’ Index (PMI) tumbled to 35.1 in April from 44.5 in March, its lowest level since the survey began in 2011. The figure was below the 50 level that separates expansion from contraction for the 12th month in a row.

Africa’s most developed economy is now in its sixth week of a strict lockdown aimed at curbing the spread of COVID-19, the respiratory disease caused by the novel virus, which has infected more than 6,000 South Africans and killed 123.

While the lockdown has been partially eased since Friday, allowing some sectors to operate under specific conditions, the economy, which is already in recession, is still expected to take a massive hit.

The National Treasury said on Monday that gross domestic product could contract by as much as 12% in 2020, with manufacturing, mining and services likely to be the worst affected sectors.

“The plunge in the South Africa PMI was testament to the impact that the nationwide lockdown has had on the economy,” said David Owen, an economist at IHS Markit.

“With the lockdown in place, many firms simply shut down operations, rather than partially reducing output,” Owen added.

“As such, the magnitude of the collapse in economic activity could be even more cataclysmic than the index suggests, with jobs and revenues set to suffer greatly as well.”

Output declined at its sharpest rate on record, while new orders also fell due to export and supply chain restrictions. The survey also found that firms had drastically cut their workforces, raising the risk unemployment will top the 40% mark.

World Bank debars Chinese electrical equipment firm over fraud on Zambia project

WASHINGTON (Reuters) - The World Bank on Wednesday said China-based Liaoning-EFACEC Electrical Equipment Company Limited (LEEEC) would be ineligible to participate in Bank-funded projects for 20 months due to fraudulent practices in connection with a project in Zambia.

The debarment is part of a settlement agreement under which the company acknowledges responsibility for failing to disclose a conflict of interest and other “sanctionable practices”, and agrees to carry out remedial actions.

The case involves the Lusaka Transmission and Distribution Rehabilitation Project in Zambia, which was designed to increase the capacity and improve the reliability of the electricity transmission and distribution system in Lusaka, Zambia.

Kenya business conditions worsen in April due to COVID-19 -PMI

NAIROBI (Reuters) - Kenya’s private sector activity declined sharply in April as businesses reeled from the impact of the coronavirus, a survey showed on Wednesday.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for manufacturing and services tumbled to 34.8 in April from 37.5 in March. Readings below 50.0 indicate a contraction.

“It’s safe to say that, at least with anecdotal evidence available so far, the epicentre of the COVID-19 impact on economic activity will be in the second quarter of this year,” said Jibran Qureishi, economist for East Africa at Stanbic Bank.

Demand at home and in export markets slumped as consumers stayed indoors to avoid catching the virus and because of government measures to contain its spread.

“Output, new orders, exports and employment, all reached record lows,” Markit and Stanbic said.

The East African nation has so far confirmed 490 cases of COVID-19, the respiratory disease caused by the novel coronavirus, and the government has imposed restrictions including a dusk-to-dawn curfew, to curb its spread.

The government expects the economy to grow by as little as 1% this year, compared with a pre-pandemic forecast of about 6%, due to the impact of the disease.

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

Assore chrome mine in S.Africa shuts after worker diagnosed with COVID-19

JOHANNESBURG (Reuters) - South Africa’s Assore suspended production at a chrome mine this week after an employee tested positive for COVID-19, the company said on Wednesday, highlighting the challenge mining firms face as they start operations again as a lockdown eases.

The worker was screened last week as part of Dwarsrivier Chrome Mine’s return to work protocols and was tested after showing COVID-19 symptoms, an Assore spokesman said.

Work at the mine, which produced 1.55 million tonnes of chrome ore in the last financial year, was suspended on Monday after the worker’s test proved positive a day earlier.

The suspension was a precautionary measure and the mine would “resume operations once management has successfully completed an audit,” the spokesman wrote in an email.

The worker had been in self-isolation for a week and other employees who were in close contact with him would remain in self-quarantine until their test results were known, he said.

The National Union of Mineworkers of South Africa (NUMSA) criticised Assore on Tuesday for not informing the union about the case until Monday. The union has criticised the resumption of mining, saying workers cannot maintain social distancing in mines.

Most mines in South Africa, the world’s biggest producer of chrome ore platinum, and manganese, temporarily shut when the government imposed a lockdown on March 27 to halt the spread of the coronavirus.

The government said on April 16 that mines could operate at 50% capacity, although mines producing coal to fire power plants have been allowed to operate throughout the crisis. A phased reopening of other parts of the economy began on May 1.

South Africa's auto industry ambitions threatened by coronavirus

JOHANNESBURG (Reuters) - The expansion of South Africa’s auto industry is central to the government’s economic development strategy but the coronavirus crisis has forced carmakers into survival mode and could push ambitious growth plans out of reach.

Industry officials say the government needs to defer some tax payments for the auto industry and relax the criteria for investment incentives and allowances, or the pandemic could deal the sector a permanent blow.

Before the crisis, the government had crafted a plan to supercharge the sector to help revive the country’s struggling economy and form a beachhead for expansion within Africa, the world’s last major untapped market for new cars. [nL8N21S590]

But a five-week lockdown has brought a manufacturing and retail industry that accounts for almost 7% of South Africa’s gross domestic product and 30% of its manufacturing output to a virtual standstill.

“Those plans will be impacted massively,” said Mike Mabasa, chief executive of the National Association of Automobile Manufacturers of South Africa (NAAMSA). “Particularly for the short to medium term, that plan is completely out of the window.”

South Africa has put its so-called automotive masterplan at the heart of attempts to revive growth through industrialisation after years of stagnation and to bring unemployment down from almost 30%.

The plan aims to boost growth and create jobs by more than doubling the industry’s annual production to 1.4 million vehicles by 2035 and raising the proportion of auto components made locally to 60% from 39%.

The new scheme comes after a series of auto industry development plans and will be supported by investment and tax incentives that have been in place in some form for years.

They include a tax-free cash grant starting at 20% of the value of qualifying investments, rising to 25% for component makers, and a tax perk related to vehicle production, known as the vehicle assembly allowance.

SCANT RESPONSE

Mabasa said NAAMSA has asked the government to relax the minimum plant production capacity threshold of 50,000 cars a year needed for the investment incentive as carmakers believe it’s too stringent given the fallout from the crisis.

As part of series of requests on behalf of the industry, NAAMSA has also asked the government to use 2019 production numbers and targets for 2020’s vehicle assembly allowance, as output is likely to take a major hit this year.

The sector had some relief with the easing of the country’s lockdown on May 1 as it allowed auto manufacturers to return to 50% capacity. But it has had scant response from the government to its calls for specific financial help, besides requests for more information.

The Department of Trade and Industry did not respond to requests for comment.

Most of South Africa’s automakers referred Reuters to NAAMSA for comment.

NAAMSA represents 41 firms - including BMW, Ford, Mercedes-Benz, Isuzu, Nissan, Toyota and Volkswagen (VOWG_p.DE) - which make some 600,000 vehicles a year in South Africa and export about 65% of them.

Mercedes-Benz South Africa said it was not possible to predict the impact of COVID-19 on the 2035 industry targets.

“We have constructive relationships with our key stakeholders in suppliers and the government, and are confident that we will be able to find solutions to maintain the competitiveness of the automotive manufacturing sector,” its corporate affairs manager, Thato Mntambo, told Reuters.

SMALL FIRMS VULNERABLE

NAAMSA’s Mabasa warned that if carmakers struggle for liquidity in the crisis they may be unable to fulfil export orders, worth $9 billion a year across the industry. Local component makers focused on autos could also suffer badly.

Industry officials said the damage could be permanent and open the way for upcoming rivals such as Morocco and more established centres like Thailand to steal market share.

Andrew Kirby, chief executive of Toyota South Africa, said last month that the risk to the country’s role in global auto industry supply chains stemmed mostly from the vulnerability of its smaller component manufacturers.

If either vehicle makers or parts manufacturers cannot deliver their products, international customers will rapidly take their business elsewhere, industry officials said.

Renai Moothilal, executive director of the National Association of Automotive Component and Allied Manufacturers, said there was a strong possibility smaller firms would not survive and that would be disastrous for the government’s drive to boost local output and double employment in the sector.

He said levers the government could pull included levy waivers and support for utility and wage bills, but without help it was not hard to see how an industry that has already lost much of its business case might contract rather than expand.

“Once global companies move export contracts, and invest in tools of production in another destination, the costs sunk into that move make it improbable that they would want to bring it back to South Africa,” Moothilal said.

HITTING RESET BUTTON

NAAMSA’s Mabasa said the overseas headquarters of some local component manufacturers had already indicated they could shift production to divisions outside South Africa.

About 90% of the business of one local supplier, SP Metal Forgings (SPF), is in the automotive sector. Chief executive Ken Manners said the initial three-week lockdown alone had probably cost it 12% to 15% of annual turnover.

Another local component supplier, Pressure Die Castings (PDC), said it was expecting to lose 15% of its turnover for at least three months from the start of the lockdown.

“If we were only in (auto) manufacturing, we probably would have closed the company,” said Graham Smith, managing director of PDC, which supplies components to several industries.

The car sector will benefit from some economy-wide tax measures already announced, such as deferred payments on a carbon tax, but the demands on South Africa’s strained public finances are huge, with many key industries in trouble.

With the country’s debt rating now firmly in junk territory and an economic contraction inevitable, there are questions over how it will even pay for measures already announced.

Meanwhile, the risk of a return to a more expansive lockdown looms and demand for vehicles at home and abroad has plummeted.

IHS Markit senior analyst Walt Madeira said car production will fall too. It forecasts global light vehicle sales will drop to 69.6 million units this year from 89.7 million in 2019, with a 20% decline in South Africa. (tmsnrt.rs/2WbOIfb)

And any change of tack by carmakers at the top of the production pyramid will ripple through the industry.

“It’s like pushing a big reset button and nobody is quite sure what that means,” SPF’s Manners said. “It’s very worrying in terms of what our businesses are going to look like in six months.”

StanChart Kenya restructures 6% of loan book due to coronavirus

NAIROBI (Reuters) - Standard Chartered Bank Kenya has adjusted the terms of more than 8 billion shillings ($75.4 million) of its loans to individuals and businesses - about 6% of the total - to help them weather the impact of COVID-19, it said on Wednesday.

Lenders in the East African nation have so far restructured 81.7 billion shillings in loans since the central bank allowed them to offer relief to distressed borrowers on March 18, the central bank said last week.

StanChart Kenya’s Chief Executive Kariuki Ngari said some borrowers whose businesses or earnings have been hit by the pandemic were struggling with cash flows, creating the need for them to restructure their loan repayments.

Under a deal unveiled by lenders and the central bank, struggling individuals and firms can take a three-month repayment holiday, lengthen the tenure of their loans, or opt to just pay the interest for a period of time.

The relief also applies to credit card debt and mortgages, said StanChart Kenya, which is controlled by Standard Chartered Plc and is one of the top lenders in the country.

Nearly a third of the restructured loans for the entire banking industry belong to the tourism sector, which has ground to a halt in the wake of the pandemic, the central bank said.

Other sectors which have been affected include building and construction, trade, and manufacturing, as well as small and medium enterprises.

The central bank also gave lenders some flexibility in terms of classifying loans whose borrowers’ ability to repay them on time has been hindered by the pandemic.

($1 = 106.1500 Kenyan shillings)

Nigeria's government expects economy to contract by 3.4% in 2020

LAGOS (Reuters) - Nigeria’s economy is projected to contract by 3.4%, government officials said on Tuesday, as dwindling oil revenues and the new coronavirus forced the country to cut budget plans for a second time to assume a lower petroleum price of $20 per barrel.

The West African country, which emerged from a recession in 2017, was already contending with low growth of around 2% before oil prices plummeted. Africa’s top oil exporter relies on crude oil sales for around 90% of foreign exchange earnings and more than half of government revenue.

With global oil prices plunging, Finance Minister Zainab Ahmed said in March that this year’s record 10.59 trillion naira ($29.42 billion) budget would be cut by about 15%.

At the time, she said the initial assumed oil price of $57 per barrel would be reduced to a worst case scenario of $30 per barrel.

But on Tuesday, she said that benchmark would again have to be revised down.

“We are in the process of an amendment that is bringing down the revenue indicator to $20 per barrel,” Ahmed said in a web conference about the impact of low oil prices on the country.

Budget revisions need to be approved by lawmakers before being signed into law by the president.

Ahmed also said Nigerian oil and gas projects will be “delivered much later than originally planned” due to upstream budget cuts.

Nigeria’s economy has been battered by low oil prices following a dispute between Russia and Saudi Arabia.

It also plans to cut oil production to 1.7 million barrels per day (mbpd), from the 2.1 mbpd initially proposed in the budget, under an agreement brokered by the Organization of the Petroleum Exporting Countries (OPEC).

Ben Akabueze, budget office director general, said oil revenues were expected to fall by more than 80%. He said the government had revised its projections and expected the economy to contract by 3.4% this year compared with its previous expectation that it would grow by 2.9%.

Nigeria would speed up marginal field licensing and oil mining licence renewals to try to raise revenues, Akabueze said.

The government officials on the call discussed the issue of Nigeria’s debt servicing costs, a week after the country shelved plans to borrow 850 billion naira ($2.36 billion) from international markets and instead tap domestic markets to finance the budget.

The finance minister said Nigeria is in talks to defer debt service obligations to “2021 and beyond”.

“It’s not debt forgiveness, it’s just rescheduling of our obligations,” said Ahmed, with regards to talks with lenders.

She did not provide details of the lenders with whom talks were held. Ahmed said Nigeria was spending around 58% to 60% of revenues to service debt, which was responsible for the request.

And the budget office director general said debt servicing costs were expected to rise by 200 billion naira in 2020.

The impact of low oil prices has been compounded by shockwaves caused by the new coronavirus pandemic.

Africa’s most populous country recorded its first confirmed coronavirus case in late February. There have been 2,802 recorded cases and 93 deaths out of 200 million inhabitants.

Lockdown restrictions were eased on Monday in Lagos, the country’s economic hub, and the capital, Abuja. It marked the reopening of the economy after more than four weeks of lockdowns - despite the number of confirmed cases having roughly doubled in the last week.

($1 = 360.0000 naira)

Nigeria amending 2020 budget assuming oil at $20 per barrel -finance minister

LAGOS (Reuters) - Nigeria’s government is amending its 2020 budget to assume an oil price of $20 per barrel, Finance Minister Zainab Ahmed said on Tuesday.

Nigeria’s economy, which emerged from a recession in 2017, was already contending with low growth of around 2% before oil prices plummeted. Africa’s top oil exporter relies on crude sales for around 90% of foreign exchange earnings and more than half of government revenue.

Global crude oil prices have plummeted in the last few months. In March, the finance minister said the budget would be cut and the initial assumed oil price of $57 per barrel would be reduced.

“We are in the process of an amendment that is bringing down the revenue indicator to $20 per barrel,” said Ahmed in a web conference about the impact of low oil prices on the country.

Ahmed also said Nigerian oil and gas projects will be “delivered much later than originally planned” due to upstream budget cuts.

Nigeria’s economy has been battered by low oil prices following a dispute between Russia and Saudi Arabia, as well as the impact of the new coronavirus pandemic.

Africa’s most populous country recorded its first confirmed coronavirus case in late February. There have been 2,802 recorded cases and 93 deaths out of 200 million inhabitants.

Uber axes 3,700 staff as trips drop in lockdowns

Uber has announced plans to cut 3,700 full-time staff - about 14% of its workforce - as business plunges following pandemic shutdowns.

Chief executive Dara Khosrowshahi will also waive his base salary - set at $1m (£809,690) in 2019 - through to the year end.

The announcements come a day ahead of the firm's quarterly results.

Even before the pandemic, Uber was struggling to balance its books, making a loss of $8.5bn in 2019.

Uber said the reductions will come from its customer support and recruiting teams, and would result in $20m in severance pay and other costs.

Executives in March warned the firm had seen demand for its taxi services fall by more than 60% in coronavirus hotspots, though they said ordering via its Uber Eats food delivery service had increased.

"Since we don't know how long a recovery will take, we are taking steps to bring our costs in line with the size of our business today," the firm said in a statement on Wednesday.

Uber's business is heavily reliant on big cities, including some that have been most affected by the pandemic.

Last year, four metro areas in the US, including New York and San Francisco, and London accounted for 23% of the money spent on the platform.

Record job losses

Analyst Dan Ives of Wedbush Securities called the job cuts "painful but necessary", noting that both Uber and smaller rival Lyft face long-term difficulties as more people work from home and avoid taxis for fear of infection.

"Uber and Lyft face Herculean-like challenges looking ahead as the new reality will likely change the business models of these companies [and competitors] for the foreseeable future," he wrote in a note.

On Wednesday, Lyft said it had seen a decline of more than 70% in trips on its platform as the US started to implement shutdown orders. It said it was taking aggressive cost-cutting steps to help the business survive.

The firm last week announced plans to axe about 17% of its workforce or almost 1,000 employees, furlough another 300 people and reduce executive pay.

"We face a new reality," said co-founder Logan Green. "We expect that rider demand for our platform will be down for the foreseeable future."

The reductions are a sign that the impact from the shutdowns is continuing to ripple out into the US economy, with economists now bracing for a prolonged slowdown rather than a quick rebound.

On Wednesday, payrolls processor ADP reported that private employers in the US cut a record 20.2 million jobs last month - more than double the jobs lost in the aftermath of the 2008 financial crisis.

"Job losses of this scale are unprecedented," said Ahu Yildirmaz, co-head of the ADP Research Institute.--BBC

Boom time for bikes as virus changes lifestyles

Fear of catching coronavirus on public transport has helped lead to a boom in cycle-to-work schemes.

The schemes saw a 200% increase in bicycle orders from people working for emergency services.

Demand for more mobility and exercise amid lifestyle changes imposed by the lockdown has also boosted bike sales across the UK.

"Very strong" bicycle sales at bike and car parts chain Halfords this week saw its shares soar by 23%..

Some bike stores are battling to meet demand. Broadrib Cycles in Bicester normally despatches 20-30 bikes a week, but manager Stuart Taylor says the shop is currently selling 50 bikes every day - and seeing a commensurate rise in demand for servicing.

"It's just gone crazy," he told the BBC. "People are dragging bikes out of sheds and garages and finding they need new tyres and cables.

"We normally take in bikes for repair and servicing and deal with them for next day [pick-up]. Now we're booking services for two weeks [ahead]."

Coronavirus: How will you commute to work after lockdown?

Coronavirus: Tube numbers to be 'severely restricted'

At Lunar Cycles repair shop in north London, the mechanic says trade was booming, then ended the call to avoid upsetting the socially-distanced queue outside.

Andrew Hassard from Mango Bikes in Ballyclare, Northern Ireland, said: "The bicycle industry is having a boom. People are saying 'I'm getting back on a bike after 15-20 years - I'm going to use it during lockdown - then commute on it as well,' to avoid public transport."

A recent poll for the consultants SYSTRA suggested 61% of Britons are nervous of taking public transport post-lockdown.

Adrian Warren who runs an alliance of cycle schemes, told the BBC: "This past six weeks, we have seen the biggest experiment in transport policy this country has even known. It's clear the default option is cycling."

More cycling infrastructure

Cycle schemes allow employees to claim a tax credit on bikes they buy at work.

But rusty cyclists may be nervous on busy roads, so the pressure group Cycling UK has commissioned research showing how 100 "pop-up" lanes in 10 English cities could make cycling and walking easier.

It maps UK cities which have created extra cycle lines during the crisis, in many cases taking over one car lane on a dual carriageway.

The Cycling UK research from Leeds looks at English cities with a high cycling potential and has identified 99.2 miles of streets and roads in London, Birmingham, Manchester, Leeds, Liverpool, Bristol, Leicester, Sheffield, Newcastle and Cambridge which could benefit from temporary walking and cycling infrastructure.

Cities round the world have been freeing space for people on foot and bikes, in response to the coronavirus lockdown.

In Germany, expanded cycle lanes have been marked by removable tape and mobile signs.

Paris is rolling out 650 kilometres of cycleways, including a number of pop-up "corona cycleways".

Some cities, like Milan, are making the changes permanent.

The Scottish government has announced £10m of funding for councils to provide temporary space on the roads this way, and Cycling UK is urging ministers in Westminster to follow suit.

In London, the walking and cycling commissioner, Will Norman, told the Online magazine BikeBiz that the capital's public transport capacity is running at a fifth of pre-crisis levels, meaning post-lockdown up to eight million journeys a day will need to be made by other means.

UK Transport Secretary Grant Shapps has in fact said that he favours getting people out of their cars, overall.

Mr Shapps told Sky News that he sees cycling and walking as part of the solution.

"Active transport can keep people off public transport and get people to work under their own steam - and that can be a very important part of this [the nation's post-lockdown] recovery as well," he said.

Not everyone is in favour: The libertarian group the Alliance of British Drivers has strongly opposed removing road space from motorists. But Edmund King, president of the AA, said he didn't oppose the transfer of road space to cycles "where appropriate".--BBC

Small fashion brands in Asia hit by coronavirus impact

For Nurul Zulkifli, founder of the Malaysian-based clothing brand Mimpi Kita, now should be the busiest and most profitable time of the year.

In the run up to the Muslim celebration of Eid, her Islamic clothing is usually big business as she sells up to 90% of the year's sales at this time.

"It's something like Christmas where you buy a lot of stuff - the shopping time of the year," she said.

But with the coronavirus pandemic, she says her sales have dropped by half. She puts this down to lockdowns, firstly in China, which disrupted her supply chain, then in Malaysia and the UK.

Her stores across Malaysia were forced to close, as were her stockists in London's trendy Notting Hill.

"Not everyone in Malaysia really shops online. Some people like to try it on, so we're lacking on that."

Ms Zulkifli says layoffs and uncertainty mean customers have also been unwilling to spend: "People don't know whether or not we're going to celebrate this Eid."

The coronavirus pandemic is having a major impact on fashion brands, large and small, worldwide.

A recent report by consultants McKinsey & Company forecast that revenues for the global fashion industry will drop by up to 30% this year, with that figure coming in at 40% for the luxury end of the market.

It also predicted that if lockdowns persist for up to three months, more than 80% of brands will be in distress across Europe and North America.

Many small fashion labels will feel the pain of this acutely as they don't have the cash or investors to ride out the storm.

One of these is Singapore-based label Esse, which has faced similar challenges to Mimpi Kita.

Esse, which specialises in sustainable, eco-conscious fashion, had launched in New Zealand in February with a number of pop ups and events. It was off to a good start but now, with lockdowns and deliveries of non-essential items banned in New Zealand, both markets have all but dried up.

Esse's founder Alicia Tsi says: "There are a lot more important things on people's minds than shopping and fashion. That has definitely impacted people and how they're choosing to spend their money."

Mimpi Kita and Esse have switched their social media strategies towards creating uplifting, positive content rather than focusing on sales.

Changing their clothing range is more challenging. Esse is looking to team up with a bed linen company, to use their leftover material to make clothing for staying at home.

For Mimpi Kita though, which has already spent most of its budget for the year, they don't have the resources to make anything else. They have moved their factories towards producing PPE with hopes the business can hang on until lockdowns are lifted.

"If the sales stay like this - actually I'm not sure what will happen for us. But we will try our best," said Ms Zulkifli.--BBC

Debenhams to close five stores after lockdown ends

Debenhams has confirmed that another five stores will not be re-opening after lockdown restrictions are lifted.

The department store chain has struck deals with landlords to keep most of its 142 stores open, after it fell into administration for the second time.

But five more stores will not reopen when the government lifts coronavirus restrictions on non-essential shops.

It's understood the retailer has been unable to agree new terms with shopping centre owner Hammerson.

The Debenhams stores affected are in the Bullring in Birmingham, The Oracle in Reading, Centrale in Croydon, Highcross in Leicester, and Silverburn in Glasgow.

The BBC understands that around 1,000 jobs will be affected, including concession staff.

Debenhams said in a statement: "We can confirm that despite our best efforts, we have been unable to agree terms with Hammerson on our five stores in its shopping centres, and so they will not be reopening.

"We continue to engage in constructive talks with our landlords and have agreed terms on the vast majority of our stores, which we look forward to reopening when government restrictions allow".

Debenhams strikes deals to rescue most stores

Coronavirus: Debenhams set to appoint administrators

When Debenhams first collapsed in April last year, it agreed a company voluntary arrangement (CVA) with its landlords to cut costs in order to save the business.

Under the agreement, the retailer would close 22 stores in 2020 and 28 stores in 2021.

Last month, Debenhams still had 142 stores but it was forced to appoint administrators again to protect the business from its creditors as coronavirus forced it to temporarily shut its stores.

It then accelerated negotiations with landlords to agree new terms and conditions, including a five month rent and service charge holiday.

More store closures

Debenhams has managed to strike deals on 120 stores. But over the course of the last few weeks, it's emerged a number of stores would close permanently once the government lifts restrictions on non-essential shops.

A total of 15 stores are now set for closure, including the five outlets in Hammerson shopping centres.

The BBC has approached Hammerson for comment.

The retailer's Warrington store had been earmarked to shut but this has now been given a last minute reprieve.

However, the future of five major Debenhams stores in Wales is still in doubt, unless the Welsh government reverses a decision on business rates relief.

Debenhams is still in discussions with the remaining seven stores in its estate.

The retailer is still trading online "normally" while its shops are closed.

Like many other non essential retailers, it has furloughed the majority of its staff who are being paid under the government's coronavirus job retention scheme which pays 80% of a worker's salary up to £2,500 a month.--BBC

EU facing 'deep and uneven recession'

The European Union faces a deep and uneven recession, according to a new forecast from the EU's Commission.

The bloc's executive arm predicts a recovery in 2021 but warns that the uncertainty is exceptionally high.

The Commission predicts a decline in economic activity this year of 7.5%, and slightly more than that for the eurozone.

It warns the outcome could be worse if the pandemic turns out to be longer or more severe than currently envisaged.

European and other governments are intentionally blocking economic activity to contain the virus, so a sharp downturn is inevitable.

That said, the Commission's forecasts do put some rather stark numbers on the extent of the damage the EU can expect to sustain.

'Great Depression'

The Commission describes the downturn as a recession of historic proportions. Paolo Gentiloni, the Commissioner for the Economy called it "a shock without precedent since the Great Depression".

The impact will be uneven, Mr Gentiloni said, conditioned by how quickly the lockdowns can be lifted and by the importance of services such as tourism in the national economies.

The forecasts for specific countries do indeed point to an especially severe impact in some that that are popular tourist destinations.

The deepest predicted contraction of all is for Greece. At 9.7% that would be more than the worst in single year during the financial crisis, although the country did have a succession of bad years that added up to a much larger decline than is likely in 2020.

Spain and Italy are also forecast to have declines in excess of 9%. The revisions to the forecasts for two other Mediterranean countries- Malta and Cyprus - were also relatively large.

Severe

Inevitably, such an extensive impact on economic activity will mean job losses.

The Commission says that policies such as short-time working schemes, job subsidies and support to businesses should help to limit the damage to employment, but the impact on the labour market will nonetheless be severe.

The report predicts an increase in unemployment in every EU state. That said, the predicted highs are not as bad as they were in the aftermath of the financial crisis.

The two worst for predictions for this year are unemployment rates of 19.9% for Greece and 18.9% for Spain. Those figures are annual averages so there would be peaks during the year that are significantly higher.

But those annual figures are still well below the equivalent levels, which were in the high twenties, that the two countries suffered as a result of the following the financial crisis.

Trade threat

It will be harder, the Commission says, for young people to get their first jobs.

The growth predicted for 2021 at 6.1% is less than the contraction the Commission envisages for this year. It would therefore be 2022 at the earliest when the EU economy gets back to the level of activity it experienced last year.

The report also notes that unsuccessful trade negotiations with the UK could further impede any recovery:

"The threat of tariffs [on traded goods] following the end of the transition period between the EU and United Kingdom could also dampen growth, albeit to a lesser extent in the EU than in the UK."--BBC

Qatar Airways warns of 'substantial' job losses

Qatar Airways has warned its employees of "substantial" redundancies as it struggles with a collapse in demand.

Its chief executive Akbar Al Baker wrote to staff warning of the job losses, although he did not say how many were under threat.

Qatar Airways said it needed to "act decisively to protect the future of the business".

The airline industry is facing one of its toughest ever periods, with many carriers on the brink of collapse.

"The truth is, we simply cannot sustain the current staff numbers and will need to make a substantial number of jobs redundant - inclusive of cabin crew," Mr Al Baker wrote in an internal memo.

The state-owned airline employs more than 45,000 people and has a fleet of more than 240 planes. In February, Qatar Airways increased its stake in British Airways owner IAG to 25% as part of its strategy to invest in other carriers.

"The unparalleled impact on our industry has caused significant challenges for all airlines and we must act decisively to protect the future of our business," a Qatar Airways spokesman said.

"As a result, Qatar Airways can confirm that the airline will make a number of roles redundant due to the impact of Covid-19."

Airline trade body, the International Air Transport Association (IATA), warned last month that air traffic in the Middle East and North Africa would plummet by more than half this year.

IATA also warned that most airlines would struggle to make a profit if social distancing measures were introduced, such as keeping middle seats empty.

On Tuesday, Virgin Atlantic said it would be cutting 3,000 jobs and quitting its operations at Gatwick airport.--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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