Major International Business Headlines Brief::: 14 February 2021

[Bulls n Bears]

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Major International Business Headlines Brief::: 14 February 2021

 


 

 


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ü  Robinhood CEO admits communications shortcomings, ahead of House testimony

ü  Clear crypto rules urgently needed as major companies embrace asset: SEC official

ü  Investors eye shares of hotels, cruise lines as U.S. vaccinations pick up

ü  Clubhouse says reviewing data protection practices after report points to flaws

ü  Tesla to set up electric car manufacturing unit in southern India

ü  Daimler recalls 1.29 million U.S. vehicles for software issue

ü  ByteDance explores sale of Indian TikTok assets to rival firm Glance: Bloomberg

ü  Vivendi plans to distribute 60% of UMG capital to shareholders, list it by year-end

ü  Kenya: Avoid the Ostrich Effect to Grow Your Money

ü  Ethiopia: Agency Creates Some 870,000 Jobs

ü  Nigeria: Minimum Wage - Imo, Rivers Begin Implementation

ü  Nigeria: FG Floats N1trn Firm to Tackle Infrastructure Deficit

ü  Namibia: The End - Air Namibia Shutdown to Cost Billions

ü  Africa Mulls Taxing Big Tech

 

 

 


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Robinhood CEO admits communications shortcomings, ahead of House testimony

NEW YORK (Reuters) - Robinhood, the trading app popular with young investors, could have better explained why it restricted the buying of heavily shorted stocks caught up in the social media-fueled trading frenzy around GameStop Corp, said the company’s chief executive officer.

 

“No doubt we could have communicated this a little bit better to customers,” CEO Vlad Tenev said late Friday on the All-In Podcast, the hosts of which include Chamath Palihapitiya, who had strongly criticized Robinhood over the trading restrictions, and Jason Calacanis, a Robinhood investor.

 

Tenev’s comments came ahead of his scheduled Feb. 18 U.S. House Financial Services Committee testimony about the trading turmoil and Robinhood’s role in it. The CEOs of Citadel Securities, Melvin Capital and Reddit will also testify.

 

Robinhood did not respond to a request for comment.

 

Robinhood outraged many of its customers when on Jan. 28 it restricted the buying of 13 heavily shorted stocks that had been driven to record highs, including GameStop, whose shares had surged more than 1,600%.

 

The moves were due in part to retail investors coordinating on sites like Reddit’s WallStreetBets to drive prices higher and force hedge funds like Melvin to unwind their bearish positions. Several other brokers also restricted trading in the shares.

 

Tenev said the restrictions were necessary due to a large increase in deposit requirements by a post-trade regulator, but that was not spelled out in automated emails sent to Robinhood customers early on Jan. 28.

 

“As soon as those emails went out, the conspiracy theories started coming, so my phone was blowing up with, ‘how could you do this, how could you be on the side of the hedge funds,’” he said.

 

“We probably could have offered more detail into that with the foresight that maybe customers would think that a hedge fund forced us to do it,” he later said.

 

 

 

Clear crypto rules urgently needed as major companies embrace asset: SEC official

WASHINGTON (Reuters) - A clear cryptocurrency regulatory regime is urgently needed as major companies like Tesla Inc, BNY Mellon Corp and Mastercard Inc embrace the alternative asset class, a top Securities and Exchange Commission (SEC) official said.

 

Hester Peirce, a Republican commissioner at the agency, also told Reuters in an interview that it was too soon to draw policy conclusions from a “Reddit Rally” in GameStop Corp and other stocks, but it was “wonderful” that a new generation of investors was able to participate in the market.

 

Dubbed by crypto enthusiasts as the “Crypto Mom” due to her supportive stance on the asset class, Peirce has long advocated for regulators to create clear rules that would allow crypto assets to thrive without fear of breaking the law.

 

“It’s not only that there have been calls for clarity for some time and that a new administration brings the chance to take a fresh look, but it also is a moment where it seems others in the marketplace are also taking a fresh look,” she said.

 

Bitcoin hit record highs this month after electric car-maker Tesla said it had invested $1.5 billion in the cryptocurrency and BNY Mellon said it would help clients hold, transfer, and issue digital assets. Mastercard also said it would open up its network to some cryptocurrencies.

 

“That adds to the urgency of us taking some sort of action in this area to provide more clarity,” said Peirce.

 

The market was plunged into crisis last month when Reddit users trading on low-cost retail platforms banded together to drive up the prices of GameStop and other stocks, squeezing hedge funds that had bet against those shares.

 

The resulting volatility triggered massive margin calls from “clearing” houses that guarantee trades, prompting several retail platforms to suspend buying in the affected securities.

 

The incident sparked outrage among lawmakers on both sides of the aisle. Vlad Tenev, CEO of trading app Robinhood, Ken Griffin, CEO of hedge fund Citadel LLC and others involved in the saga will testify before Congress on Thursday.

 

The SEC is examining the “gamut” of issues including market volatility, the role of retail brokers, and how the post-trade market functioned, said Peirce.

 

“To see new investors participating in the markets is a good thing and of course we want them to be educated and skeptical,” she said, adding that a wide range of market participants could actually help improve price formation.

 

 

 

Investors eye shares of hotels, cruise lines as U.S. vaccinations pick up

NEW YORK (Reuters) - Investors are watching next week’s earnings reports from hotels, cruise lines and other businesses that have been hard hit by COVID-19 for indications of which companies could be the first to bounce back when the pandemic recedes.

 

For nearly a year, money managers have largely looked past earnings in the travel and leisure sector, where coronavirus-fueled lockdowns and travel restrictions battered companies’ businesses and crushed their stock prices: shares of Marriott and Norwegian Cruise Lines, for example, are down 12% or more in the last year, compared to a nearly 17% gain for the S&P 500 through Friday afternoon.

 

Next week’s numbers, however, may offer clues on which companies are in the best financial health and would benefit the most from economic reopening, while also allowing investors to better gauge where companies should be valued.

 

“The results across the board are going to be bad, but it’s really going to be about who is coming back,” said Adam Trivison, a portfolio manager at Gabelli Funds.

 

The focus on travel and leisure companies comes as investors more broadly gauge the effectiveness of the U.S. vaccination effort and the degree to which it will help the economy get back on track.

 

The White House announced Feb. 2 that it will start shipping vaccines directly to retail pharmacies alongside regular shipments to states, increasing weekly supplies of shots to 11.5 million. Approximately 10.5% of the U.S. population through Feb. 11 had received at least one of the two shots required for full vaccination, according to estimates by the Centers for Disease Control and Prevention.

 

Will Hilkert, portfolio manager of the Fidelity Select Leisure fund, said that earnings results over the next two quarters will serve as a gut check for investors who had bet on the leisure sector as a play on the economy reopening.

 

“Over the next six to nine months you’re going to get a chance to make sure that what you think the world is going to look like after the pandemic is being matched by company fundamentals,” he said.

 

Hilton Worldwide Holdings Inc and Hyatt Hotels Corp are expected to release their results on Feb. 17, followed by Marriott, Norwegian Cruise Lines and TripAdvisor on Feb. 18.

 

Trivison, of Gabelli Funds, said he will be keeping an eye on hotel bookings in the group meeting business, which he expects to offer clues on the scale of employee travel in the week ahead. Business travelers typically make up 25% of a hotel chain’s customers, though that number may be higher in destinations such as Orlando and Las Vegas.

 

Historically high valuations in the hospitality sector may give some potential investors a pause before buying at current levels, said Daniel Kane, a portfolio manager at Artisan Partners who bought shares of Marriott while its stock was tumbling last March and April.

 

Most stocks in the hospitality sector are now trading based on estimates of their 2023 results, pushing their current valuations well above their long-term averages, said Robin Farley, an analyst at UBS.

 

Marriott, for example, trades at a trailing price to earnings multiple of 240.7, while Hilton is currently unprofitable but trades at 515.7 its current fiscal year’s full year earnings, according to Refinitiv data.

 

Cruise lines, meanwhile, are not expected to become widely profitable again until 2022, when most international travel restrictions should be eased. Norwegian, for instance, trades at 35.2 times its 2022 estimated earnings, while Royal Caribbean trades at 40.4 times its 2022 estimated earnings, according to Refinitiv. Marriott was trading at a trailing P/E of about 16 before widespread economic restrictions were put in place in March.

 

Chris Terry, a portfolio manager with Hodges Funds, has been paring back a position in Norwegian after shares of the company rallied following the vaccine approvals. He is now watching for the company to show incremental improvement in its upcoming earnings report to confirm that business is rebounding.

 

“Going back a year ago, quarterly earnings were basically irrelevant,” he said. “Now we want to see that there’s progress on the timetable to get revenues back to where they were in a meaningful way.”

 

 

 

Clubhouse says reviewing data protection practices after report points to flaws

SHANGHAI (Reuters) - U.S. audio app Clubhouse said it is reviewing its data protection practices, after a report by the Stanford Internet Observatory said it contained security flaws that left users’ data vulnerable to access by the Chinese government.

 

The app said in a response to the study, published by the research group at Stanford University, that while it had opted not to make the app available in China, some people had found a workaround to download the app which meant the conversations they were a part of could be transmitted via Chinese servers.

 

"With the help of researchers at the Stanford Internet Observatory, we have identified a few areas where we can further strengthen our data protection," the company said in a statement published here by the research group on Friday.

 

“Over the next 72 hours, we are rolling out changes to add additional encryption and blocks to prevent Clubhouse clients from ever transmitting pings to Chinese servers. We also plan to engage an external data security firm to review and validate these changes.”

 

Clubhouse did not immediately respond to a request from Reuters for further comment on Saturday.

 

Launched in early 2020, the app saw global user numbers soar earlier this month after Tesla CEO Elon Musk and Robinhood CEO Vlad Tenev held a surprise discussion on the platform.

 

Masses of new users joined from mainland China, taking part in discussions on topics that included sensitive issues such as Xinjiang detention camps and Hong Kong’s National Security Law. But their access to the app was blocked last week, triggering frustration and fears of government surveillance.

 

The Stanford Internet Observatory said that it had confirmed that Chinese tech firm Agora Inc supplied back-end infrastructure to Clubhouse, and that Agora would likely have access to users’ raw audio, potentially providing access to the Chinese government.

 

It also said it observed room metadata relayed to servers it believed were hosted in China and audio to servers managed by Chinese entities. It added, however, that it believed the Chinese government would not be able to access the data if the audio was stored in the United States.

 

An Agora spokesman said the company had no comment on any relationship with Clubhouse, but that Agora does not have access to or store personal data, and does not route through China voice or video traffic generated from users outside China, including U.S. users. Agora provides software that allows customers “to build their security and privacy infrastructure in a way that is both compliant and relevant to their end-users,” the spokesman wrote in an e-mail.

 

The Cyberspace Administration of China, which regulates the country’s internet, did not respond to calls for comment made during China’s Lunar New Year holiday.

 

“SIO chose to disclose these security issues because they are both relatively easy to uncover and because they pose immediate security risks to Clubhouse’s millions of users, particularly those in China,” the report said.

 

Data analytics firm Sensor Tower said the app, which is only available on Apple’s iPhone, had about 3.6 million users worldwide as of Feb.2, with 1.1 million registered in the prior six days.

 

 

 

Tesla to set up electric car manufacturing unit in southern India

BENGALURU (Reuters) - Billionaire Elon Musk’s Tesla Inc will set up an electric-car manufacturing unit in the southern Indian state of Karnataka, according to a government document seen by Reuters on Saturday.

 

“The U.S. firm Tesla will be opening an electric car manufacturing unit in Karnataka,” the state government said in a brief statement.

 

The statement was part of a broader document outlining the highlights of India’s budget to its people in the local language of Kannada.

 

Last month, the electric carmaker incorporated Tesla Motors India and Energy Private Limited with its registered office in the city of Bengaluru in Karnataka, a hub for global technology companies.

 

State Chief Minister B.S. Yediyurappa had then said in a tweet, which was subsequently deleted, that Tesla would start its operations in India with an R&D unit in Bengaluru.

 

It was not immediately clear if the Saturday statement was referring to the same unit.

 

Tesla and the office of Karnataka state chief minister did not immediately respond to Reuters’ request for comments.

 

Musk has tweeted several times about the company’s impending foray into India. In December, the Tesla CEO confirmed in an exchange on Twitter that Tesla will launch in the country in 2021.

 

India has been keen to reduce its oil dependence and cut down on pollution, but its efforts to promote electric vehicles have been stymied by a lack of investment in manufacturing and infrastructure such as charging stations.

 

To boost investment, India plans to offer $4.6 billion in incentives to companies setting up advanced battery manufacturing facilities, Reuters reported last year.

 

 

 

Daimler recalls 1.29 million U.S. vehicles for software issue

WASHINGTON (Reuters) - Daimler AG’s U.S. unit Mercedes-Benz USA said Saturday it is recalling 1.29 million vehicles sold since 2016 because software may fail to communicate correct vehicle location in the event of a crash.

 

The recall covers some 2016-2021 model year CLA-Class, GLA-Class, GLE-Class, GLS-Class, SLC-Class, A-Class, GT-Class, C-Class, E-Class, S-Class, CLS-Class, SL-Class, B-Class, GLB-Class, GLC-Class, and G-Class vehicles, according to a filing with the National Highway Traffic Safety Administration.

 

The German automaker plans to issue a software update that will be installed by dealers or over-the-air.

 

Mercedes-Benz USA said Saturday it is neither aware of any case of material damage nor personal injury in connection with the issue.

 

The automaker said “a temporary collapse of the communication module’s power supply caused by a crash might lead to the vehicle’s position during a potential emergency call being incorrect.” Mercedes-Benz added that “other functions of the automatic and manual emergency call function remain fully operational.”

 

Mercedes-Benz in Europe in October 2019 launched an investigation based on a report from the Mercedes-Benz eCall center of a single instance in the European market where the automatic eCall system relayed an inaccurate vehicle position.

 

After a lengthy investigation reviewing various software combinations of the communication module, the company’s research showed additional similar events where the vehicle position transmitted was incorrect.

 

 

 

ByteDance explores sale of Indian TikTok assets to rival firm Glance: Bloomberg

TOKYO (Reuters) - China’s ByteDance is said to be exploring the sale of the India operations of TikTok to rival unicorn Glance, Bloomberg News reported on Saturday.

 

The discussions, initiated by Japan's SoftBank Group Corp, are private, early and complex, the report bloom.bg/3pgJdsi said, citing people familiar with the matter.

 

Glance’s parent, mobile advertising technology firm InMobi, also owns short-video app Roposo that has gained in popularity after TikTok was banned by the Indian government in July last year.

 

SoftBank is a backer of InMobi Pte as well as TikTok’s Chinese parent, ByteDance, the report added.

 

Softbank, ByteDance and InMobi, did not immediately respond to Reuters request for a comment.

 

Last month, ByteDance reduced its 2,000-plus India team and said in a company memo that it’s unsure of resuming operations in India.

 

The move came after India decided to retain its ban on TikTok and 58 other Chinese apps following responses from the companies on issues such as compliance and privacy.

 

According to the report, the Indian government will insist that user data and technology of TikTok stay within its borders if the talks progress.

 

 

Vivendi plans to distribute 60% of UMG capital to shareholders, list it by year-end

PARIS (Reuters) - Vivendi said on Saturday it planned to distribute 60% of Universal Music’s capital to investors, subject to shareholder approval, and aimed to list its most-prized asset, home to singers such as Lady Gaga and Taylor Swift, by the end of the year.

 

The plan to list Universal represents part of a process launched by Vivendi’s top shareholder French billionaire Vincent Bollore to cash in on the music industry’s revival.

 

“Vivendi’s leading institutional shareholders have been pressing for a number of years for a split or the distribution of Universal Music Group (UMG) to reduce Vivendi’s conglomerate discount,” Vivendi said in a statement.

 

The French conglomerate said the distribution would take the form of a special dividend.

 

UMG, a holding company currently being incorporated in the Netherlands, will apply for a listing on Euronext in Amsterdam.

 

The transaction has received a favorable response from the consortium led by China’s tech group Tencent, which now controls 20% of UMG, having bought the stake in two successive waves that valued UMG at 30 billion euros ($36.35 billion), Vivendi said.

 

Vivendi said it would hold an extraordinary shareholders meeting on March 29 to modify the company’s by-laws and make the distribution possible.

 

In addition, Vivendi will propose to distribute a 0.60 euros per share dividend for its 2020 fiscal year at a shareholders meeting scheduled for June 22.

 

($1 = 0.8252 euros)

 

 

Kenya: Avoid the Ostrich Effect to Grow Your Money

Bernard Nyaga Njogu is the Head of Sales at Scope Markets Kenya, a non-dealing Online Foreign Exchange Broker licensed and regulated by the Capital Markets Authority (CMA).

 

Online trading is a new market in Kenya. I am privileged to have been part of the team that pioneered this new industry. Providing a platform where clients can get good returns on investment has been deeply satisfying. My journey has not just been about wooing clients. I research, educate customers and offer reliable customer support.

 

I had problems managing money in my early life. I would spend more than save. Many people, and especially those starting off their careers, have difficulties managing money, saving, investing, and spending. There is also a deficiency in the way people view money. Money is not an item you can just pick up on the ground. If it were, get rich quick schemes would not be the scams they are today. You must work smart and break sweat to eke out a coin. Pressure makes diamonds.

Avoid the 'Ostrich Effect' if you want to grow your money. Follow a lifestyle that allows you to save and invest. A good example is when you do not want to check your account balance after a night out with your drinking buddies or after a shopping spree because you overspent.

 

What would you choose between business and employment? First, you need to determine the value you will get from either. You will need to know yourself and be honest about your capabilities. Don't just stick with business when it is least suited for you. There are other multiple forms of employment and passive income activities that can give you more money and the satisfaction of delivering value to other people.

I save with a goal in mind. This is more of investing than just putting money away. In the financial markets today, there are multiple opportunities you can invest in that will give you good returns. These include precious metals and exchange traded funds (ETFs). Avoid the temptation to budget like John or Jane.

 

Be brave to take risks in life and diversify your investments. Have a mentor to walk with you. There are career mistakes that I would have avoided with the wisdom of someone who has traveled the road before me. When dealing with your finances, don't wait to learn from your own mistakes. Observe other investors and learn. Don't be greedy when investing. Have a proper strategy for managing risks.

 

Continuous self-development, discipline and resilience are the secret to career success. What you know today will not be sufficient tomorrow. I was fond of numbers and complex mathematical equations. This led me to pursue actuarial science at the university. This career line then evolved into a passion for financial markets. Then, I pursued a master's degree in Business Management and acquired professional certificates in financial investment from the Chartered Institute for Securities and Investments (CISI).-Nation.

 

 

 

Ethiopia: Agency Creates Some 870,000 Jobs

The Federal Urban and Job Creation and Food Security Agency said that some 870,000 jobs have been created during the first half of the current budget year through coordinated and consolidated efforts of all stakeholders in the sector.

 

Approached by The Ethiopian Herald, Agency Director-General Gebremeskel Challa noted that the performance is surpassed of the plan by 70,000 jobs. The harmonized support and monitoring Jobs Creation Commission (JCC) has provided to the Agency is constituted the major factor for the success.

 

As to him, 61 percent of the created jobs are permanent one, and about 600 thousand have been created through the formal recruitment process by the agency in collaboration with different public and private organizations.

Additionally, the agency is making different studies in a partnership with different institutes; including the JCC and the National Bank of Ethiopia in order to assure the success of the sector through creating sufficient job opportunities for the entire community nationwide.

 

"Unless the government gives due attention for the sector, different political, economic and social challenges would be happened in the country. Therefore, as a federal level, we are working exhaustively in order to reduce number of jobless citizens, particularly the urban youth."

 

Meanwhile it was recalled that JCC Commissioner Nigussu Tilahun affirmed creating job for the citizenry is government's top priority in a joint discussion forum on the commission's six-month plan performance review held Arba Minch town of the South Nations, Nationalities and Peoples' Regional State this week,

Noting that the commission has created 2.4 million job opportunities from its plan of 3 million in the last fiscal year, Nigussu indicated that the plan requires more diligent works to attaint it in the current fiscal year.

 

He also explained that the commission has made a lot of tasks in order to overcome challenges the COVID-19 pandemic has posed in efforts to create more jobs to the youth. The commission has made different tax reduction and postponements, financial support and other different assistances for micro enterprises.

 

The commissioner also stated that his office is targeting on enterprises to create a substantial job opportunity for the ever-widening younger generation.

 

According to the data obtained from the JCC, there are more than 1.6 million licensed enterprises are currently operating in the country. In January 2020 alone, about 18,800 licenses have been granted, it was stated.-Ethiopian Herald.

 

 

 

Nigeria: Minimum Wage - Imo, Rivers Begin Implementation

Owerri/Rivers — Imo and Rivers States yesterday said they have commenced payment of the N30,000 minumum wage to their workers.

 

In Imo, state commissioner for Information and Strategy, Declan Emelumba, confirmed this in a statement to newsmen in Owerri.

 

He said that the step was taken in fulfillment of the agreement it entered with the organized labour in the state.

 

According to the government "With this development, the least paid worker on the employ of the government will be going home with N30,000 monthly."

 

Pointing out that, "Government was keeping its own side of the bargain with the organised labour through the payment of the new minimum wage.

"Any worker who has not received his or her January salary must have missed returning the personal identification form as earlier requested by government.

 

"Government had demanded that all public servants complete the personal identification form to ensure that they are captured in the financial data base of the state, even as the government "Directed those who have not done so to comply with the laid down procedures."

 

He also urged pensioners to follow suit as the government was working hard to ensure that all genuine pensioners are captured and paid, just as he called "Workers to reciprocate the gesture of the Governor by refraining from acts of sabotage and willful disobedience to constituted authorities."

 

Rivers State Government said it has commenced full implementation of the National Minimum Wage of N30,000 with effect from January this year.

 

In Rivers, Secretary to the State Government (SSG), Tammy Danagogo, following a Friday meeting with Labour in Port Harcourt also disclosed that the state has commenced full implementation of the minimum wage. He said that a tripartite Committee has also agreed to address sundry labour issues pending in the state.-Vanguard.

 

 

 

Nigeria: FG Floats N1trn Firm to Tackle Infrastructure Deficit

President Muhammadu Buhari has approved the establishment of Infra-Co, a Public-Private Partnership-styled infrastructure company with an initial seed capital of N1 trillion, to tackle Nigeria's growing infrastructure deficit.

 

Already, Vice President Yemi Osinbajo has been saddled with the responsibility of heading a Steering Committee to facilitate the take-off of the company.

 

Osinbajo's Media Assistant, Laolu Akande, in a statement yesterday said with time, Infra-Co would grow to N15 trillion in assets and capital and that it would be one of the premier infrastructure finance entities in Africa to be wholly dedicated to Nigeria's infrastructure development.

The entity, he further stressed, had been developed with concept from the National Economic Council (NEC) and the Central Bank of Nigeria (CBN).

 

According to him, the initial seed capital for the entity will come from the CBN, the Nigerian Sovereign Investment Authority, NSIA, and the Africa Finance Corporation.

 

Akande stated: "The board of Infra-Co will be chaired by the Central Bank Governor and include the Managing Director of the Nigerian Sovereign Investment Authority, President of the Africa Finance Corporation, as well as representatives of the Nigerian Governors Forum, and the Ministry of Finance, Budget and National Planning. The Board will also have three independent directors from the private sector.

 

"To address Nigeria's infrastructure deficit, the Buhari administration continues to explore innovative options, including through financing initiatives such as the Presidential Infrastructure Development Fund (PIDF), designed to cater for the second Niger Bridge, the Abuja-Kaduna-Zaria-Kano Expressway, and other projects.

 

"There is also the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme which is being used for the funding of the Bodo-Bonny Bridges and Road (with the Nigeria Liquefied Natural Gas, NLNG), and the Apapa-Oshodi-Oworonshoki Expressway (with Dangote Group), among others.

 

"Infra-Co will finance public asset development, rehabilitation and reconstruction, as well as invest in cutting edge infrastructure projects for roads, rail, power and other key sectors."-This Day.

 

 

Namibia: The End - Air Namibia Shutdown to Cost Billions

The government will spend around N$300 million to pay salaries of Air Namibia employees who will stay at home while the 74-year-old airline is shut down.

 

The closure of the national airline marks the end of an institution that has gobbled up N$11 billion in government bailouts over the past two decades.

 

Sources told The Namibian that Air Namibia's monthly wage bill is between N$25 million and N$30 million.

 

Air Namibia has been on death row for the past three years, but its fall from grace was reinforced this week when the Cabinet was briefed that last year's decision to liquidate the airline will prevail.

 

Ministers have reportedly been debating on whether the Cabinet should stick to the liquidation decision.

 

"The answer to that is that liquidation still stands," a source familiar with the Cabinet discussion said.

The national airline's troubles have been long-coming.

 

And they involve politicians and executives who often used Air Namibia as a cash cow.

 

President Hage Geingob has for years supported the airline.

 

In October 1999, Geingob - as prime minister- welcomed Air Namibia's brand new Boeing 747-400, which cost around N$700 million.

 

That deal was clouded with allegations of bribery and signalled continued support from the government.

 

In fact, the government agreed to pay an additional N$2 billion to Air Namibia from 2001 to 2002.

 

NAIL IN THE COFFIN

 

Minister of finance Iipumbu Shiimi said the Cabinet has decided that it is in the best interest of the country to file for voluntary liquidation.

 

He said the airline has not been profitable since its inception.

Speaking at a press conference yesterday, Shiimi said the government spent billions of dollars to support the airline, but cannot keep sustaining it at the expense of other pertinent issues, such as economic growth and social services.

 

"It must be noted that the government considered all other options . . ," he said.

 

Shiimi said the liquidation of the airline would cost N$2 billion.

 

He said liquidation costs are not always the responsibility of the shareholder, but funds may be generated by selling the company's assets.

 

Air Namibia's assets at book value stood at N$981 million as at August 2020, while the airline's liabilities stood at N$3 billion over the review period.

 

Shiimi said the government has committed to paying employees' salaries for 12 months.

 

It will also consult the temporary board on the winding up of operations.

"That includes the schedule of payments to the employees and the protection of assets," Shiimi said.

 

Shiimi denied information that the government wants to close Air Namibia to advance another airline.

 

'SOARING DEBTS'

 

He said: "This information is totally misleading and devoid of any truth. The history of Air Namibia is well known and the government can no longer carry this burden, given Air Namibia's soaring debts."

 

Minister of public enterprises Leon Jooste said the government explored various options to avoid liquidation, but all options proved to be futile.

 

He said the government has to date spent N$11 billion on the struggling airline.

 

Jooste corroborated Shiimi's sentiments on the government not promoting the growth of another airline, but said the liquidation decision was already in the pipeline.

 

"The discussions that we have had leading up to the conclusion we have reached, were done quite a considerable time ago already. So, there were obviously a number of issues that needed to be resolved. One of them had been a very complicated issue of the lease agreements we have on the two Airbus aircraft, and the fact that they are fully backed by a government guarantee," Jooste said.

 

One of the issues Jooste mentioned was the fact that the airline was losing more money when operational than when operations ceased.

 

He said the airline lost N$111 million monthly during the Covid-19-imposed lockdown, compared to N$119 million monthly when operating.

 

"They were actually losing less than when they were operating because the business model is so flawed. When the minister says all options were explored, we mean all options," Jooste said.

 

NEW DIRECTORS

 

The minister was queried about the new board and said he appointed it to assist with the liquidation process.

 

He appointed businessman James Cummings, lawyer Norman Tjombe and Hilda Basson-Namundjebo as board members of Air Namibia last week. This was, however, rejected.

 

Two government officials were instead appointed.

 

Meanwhile, the two ministers said it was deemed as best for the new interim board members to be from both the finance and public enterprises ministries.

 

The two new directors are Martin Ashikoto, from the finance ministry, and Tjiuee Kaura, from the public enterprises ministry.

 

DIVIDED NATION

 

Air Namibia's demise has divided opinion.

 

Rally for Democracy and Progress leader Mike Kavekotora says he supports the decision by the Cabinet to liquidate and close down Air Namibia.

 

Kavekotora is one of the members of parliament who have been calling for the closing down of parastatals that have been "technically insolvent for years".

 

"We don't need to be emotional about it. We currently have an airline which is basically a bottomless pit. It has been a liability. The money we have been pumping into Air Namibia as a nation went into billions and billions of dollars. This is money that could have been used for other pertinent issues such as education and health," Kavekotora said.

 

"I only hope that the decision to liquidate Air Namibia is not politically motivated to the benefit of the politically connected people as we have been hearing in the papers," he said.

 

Kavekotora said he does not support the narrative of maintaining a national airline for the sake of it.

 

"I am not buying into that argument of just wanting to see the Namibian flag on an airline. That is nonsense ... If something does not work, you just have to kill it. And this applies to many technically insolvent state-owned enterprises," he said.

 

Institute for Public Policy Research director Graham Hopwood also supports the Cabinet's decision.

 

He said: "Air Namibia has not produced any audited financial statements over the years. You can't run a business like that and expect it to continue ... it is very sad, but it is inevitable that it has to happen."

 

Popular Democratic Movement parliamentarian Nico Smit says although the decision has far-reaching effects on its more than 600 employees and their beneficiaries it was the right decision, since the airline has been running at a loss.

 

"It is a difficult situation but it all comes down to the mismanagement of Air Namibia from day one. If the business is not making profit, it is very unwise to continue with it," he said.

 

A former minister of works and transport, Helmut Angula, described the planned liquidation as "horrible news".

 

"We are at the mercy of capitalists who are killing the national airline to appease bookkeepers. Everything is done at the stroke of a pen."

 

He asked what would happen to specialised employees such as pilots in a local industry that lacks other airlines.

 

"Will they become farmers like me? What will happen to the technology which took us years to acquire?" he asked.

 

Angula said talks of establishing another airline shouldn't be entertained.

 

"People are no longer thinking well. Countries that killed their national airlines are struggling to bring them back. All the successful airlines in the world are indirectly or directly supported by the government," he said.

 

Former prime minister Nahas Angula was shocked to hear that the government has decided to shut down Air Namibia.

 

"I was not aware. This is news to me. Everything appears to be failing in this country. I am sorry about the workers who now have to go into the streets," he said.

 

PROMISES IN THE DARK

 

Between 2003 and 2009, the government splashed about N$2 billion on Air Namibia to turn its fortunes around. Not much was achieved.

 

In 2011, Air Namibia's management formulated another five-year turnaround strategy and convinced the government that it would lead to the airline breaking even.

 

The government chipped in with N$1,6 billion. From that turnaround a bit of success was achieved, according to its former acting managing director Rene Gsponer.

 

At the time, Gsponer said Air Namibia averaged N$188 million between July and October 2014.

 

He said Air Namibia made a record high of N$205 million in October 2014, making it the first time in history that the airline broke even and made a profit in four consecutive months.

 

However, that success was shortlived as Air Namibia was soon back to its begging ways.

 

In the 2015/16 financial year the government allocated N$579,8 million to Air Namibia.

 

The budget was then increased to N$722,4 million in the 2016/17 financial year.

 

The government allocated another N$629,6 million for the 2017/18 financial year.

 

A N$740 million subsidy for the airline was also budgeted for in 2018/19.

 

A further assistance of N$676 million was budgeted for in 2019/20, while N$698 million was allocated in 2020/21.-Namibian.

 

 

 

Africa Mulls Taxing Big Tech

US tech giants -- such as Amazon, Google and Facebook -- pay minimal taxes abroad, despite making billions in profits. African user countries no longer want to miss out on the revenue and are discussing digital taxes.

 

Despite the global economic crisis caused by COVID-19, US tech companies, such as Amazon and Microsoft, are making big sales -- including in developing countries. Therein lies a problem. Most of these companies based abroad pay hardly any taxes in the countries that use their digital services.

 

African countries could benefit from increased tax revenues to strengthen their ailing economies and improve their health care systems, especially during the pandemic.

Africa is losing massive revenue, according to a tax report by British nongovernmental organization ActionAid International. It states that 20 countries in the global south -- including 12 countries in sub-Saharan Africa -- could be missing out on up to $2.8 billion (€2.3 billion) in tax revenue from some of the three big tech companies alone: Facebook, Microsoft, and Google's parent company, Alphabet.

 

Africa's archaic tax regulations

 

David Archer, the spokesman for ActionAid, cites outdated global tax regulations that allow big companies to shift their profits to tax havens and a lack of a worldwide agreement that obliges every country to be transparent regarding taxes.

 

The Organization for Economic Cooperation and Development (OECD) has been working on an international tax plan, but negotiations have stalled. Archer thinks the OECD is the biggest hurdle. "It's a club of rich nations that don't care that much about the needs of developing countries," Archer said, adding, "proposals and processes are often delayed."

Mustapha Ndajiwo, founder of the African Centre for Tax and Governance (ACTG) in Nigeria, doesn't necessarily find certain OECD approaches wrong. "African countries have taken their steps to reduce tax leakage." For example, they tax transactions and electronic transfers.

 

Nigeria's digital tax

 

Nigeria is trying to counter tax avoidance by tech companies on two fronts, according to Ndajiwo. First, an indirect value-added tax (VAT) on digital services has been enshrined in the Finance Act since 2019.

 

When a Nigerian pays for their order on Amazon, the VAT goes into the government's pockets, Ndajiwo said. A second approach would require foreign companies not based in Nigeria to pay taxes on profits they make from digital services. Ndajiwo called this taxation of profits "the main problem." According to him, this rather complex regulation, which Abuja introduced a year ago, is not easy to implement.

 

That still doesn't fix the profit shifting to tax havens, he said. Even with the simple, indirect tax payment for digital services, there's a problem. "Companies can immediately pass the taxes on to the consumer," Ndajiwo said. That happened in the UK in 2020 when they introduced a digital tax. And it could happen in Kenya, too, said the tax expert.

 

Kenya: digital tax at the wrong time?

 

Kenya enacted a 1.5% tax on all digital services in 2021, regardless of where a company is based. This was intended to cover global players, such as cab competitor Uber and streaming service Netflix. According to local media reports, Kenya hopes to collect the equivalent of about €38 million as early as the first half of 2021.

 

"This taxation comes at the wrong time," Nimmo Elmi told DW. Like her colleague Ndajiwo, she works at ACTG -- but with a focus on Kenya. "Many businesses are already suffering badly from the economic downturn caused by COVID-19, and they are now expected to pay additional taxes." Elmi called for making a distinction in taxing foreign and Kenyan businesses.

 

Africa fears retaliatory tariffs from the US

 

The South African-based African Tax Administration Forum (ATAF) is offering help with the introduction of a digital tax. It already has 38 members from all African regions, to whom it provides technical assistance on tax issues. ATAF also works with the African Union in this effort.

 

"From discussions with our members, we know that some other African countries are considering introducing a digital service tax," said ATAF's executive director Logan Wort. In addition to Kenya, Zimbabwe has already introduced such a tax. "However, some members have concerns about possible US retaliation against them," Logan told DW. "That could lead to the imposition of tariffs on exports from those countries to the US."

 

Such concerns are well-founded. In 2019, the US announced punitive tariffs against France after it wanted to introduce a digital tax. However, the new US administration under Joe Biden recently agreed that tech companies should pay a more significant share of their revenues in the countries where they operate. A minimum corporate tax is also under discussion, according to a signal from the US.

 

France received this positively. Paris hopes for an international agreement before the end of the first half of 2021, according to Finance Minister Bruno Le Maire.

 

In Africa, skepticism still prevails -- Logan Wort said: "As long as our countries are waiting for a global, consensus-based solution, they should act as a bloc and resist possible US retaliatory tariffs." Nigeria expert Mustapha Ndajiwo also argues for countries to work better together.-Chrispin Mwakideu.

 

 

 

 

 


 


 


Invest Wisely!

Bulls n Bears 

 

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INVESTORS DIARY 2021

 


Company

Event

Venue

Date & Time

 


 

 

 

 

 


 

 

 

 

 


Companies under Cautionary

 

 

 


 

 

 

 


ART

PPC

Dairibord

 


Starafrica

Fidelity

Turnall

 


Medtech

Zimre

Nampak Zimbabwe

 


 

 

 

 


 <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.

 


 

 


(c) 2021 Web: <http://www.bullszimbabwe.com>  www.bullszimbabwe.com Email:  <mailto:info at bulls.co.zw> info at bulls.co.zw Tel: +263 4 2927658 Cell: +263 77 344 1674

 


 

 

 

 

 

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