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South African assets sink after police summon finance minister

24 August 2016 Comments (0) Economy, Latest Updates from Reuters, Politics Like

By Joe Brock and Mfuneko Toyana

JOHANNESBURG (Reuters) – South African assets slumped on Wednesday after an elite police unit summoned Finance Minister Pravin Gordhan over an investigation into a suspected rogue spy unit in the tax service, fuelling speculation that there was a plot to oust him.

Gordhan and other former officials at the South African Revenue Service (SARS) must report to the Hawks on Thursday morning in relation to contravention of surveillance regulations, a source close to the matter told Reuters.

The announcement added to investors’ worries about leadership at the finance ministry as Africa’s most developed economy teeters on the edge of recession and credit rating agencies consider downgrading it to “junk” status by year-end.

Shadow finance minister David Maynier urged authorities not to take any more formal steps against Gordhan.

“The arrest of the finance minister would shatter investor confidence, risk a sovereign ratings downgrade and be a disaster for the already fragile zero growth, zero jobs economy in South Africa,” the member of the opposition Democratic Alliance said in a statement.

The Treasury confirmed the Hawks had contacted Gordhan and that he was seeking legal advice, but declined to go into further details.

Gordhan is due to speak at a debate in Cape Town at 7 p.m. (1700 GMT). Hawks spokesman Hangwani Mulaudzi said it did not comment on ongoing investigations.

The rand extended losses after dropping 3 percent the previous session when the news about Gordhan emerged.

Bonds also slumped with the yield on benchmark 2026 issue rising 46 basis points to 8.935 percent. South Africa’s stock market banking index opened almost four percent down.

“PLOT TO OUST GORDHAN”

A Zuma-backed plan to build a fleet of nuclear power plants, at a cost of as much as $60 billion, has been a cause of tension with the Treasury for months and is likely adding to pressure on Gordhan’s position, analysts say.

Russian state-backed companies are the favourites to win the nuclear bid, industry sources say.

“This is all part of a plot to oust Gordhan,” political analyst Prince Mashele said. “Gordhan refuses to sign-off on the Russian nuclear deal.”

Gordhan has refused to be drawn publicly on whether he supports the nuclear project but has said South Africa will only enter agreements it can afford.

Presidency spokesman Bongani Majola did not respond to requests for comment.

Local media reports in May said Gordhan may face arrest on espionage charges for setting up the unit to spy on politicians including President Jacob Zuma.

Zuma has rejected allegations by opposition parties that he has failed to publicly back Gordhan, saying that the law should take its course.

Zuma spooked investors in December by replacing then finance minister Nhlanhla Nene with relatively unknown lawmaker David van Rooyen. After markets tumbled, Zuma demoted van Rooyen and appointed Gordhan, in his second stint in the job.

Nene’s refusal to sign-off on the nuclear deal contributed to his downfall, government sources said at the time.

(Additional reporting by Nqobile Dludla and Ed Stoddard; Editing by Andrew Heavens)

South Africa and ArcelorMittal forge steel pricing agreement

23 August 2016 Comments (0) Business, Economy, Latest Updates from Reuters Like

CAPE TOWN (Reuters) – ArcelorMittal’s South African business and the country’s government have agreed a new pricing model aimed at bolstering the domestic steel sector and reviving the economy.

The company was fined a record 1.5 billion rand ($111 million) on Monday for setting prices at the level consumers would have to pay for imported steel, but Trade and Industry Minister Rob Davies told parliament on Tuesday that it had agreed on a mechanism that would provide transparent pricing based on domestic prices in a number of other countries.

The government of Africa’s most industrialised country formed a team six years ago to find ways to lower domestic steel prices after consumers complained that the European group’s South African subsidiary was charging high prices.

“This has been the concern that we’ve had for a long time, that the price of domestically produced steel has been supplied in the market on the basis of what the import parity price would be,” Davies said.

The local price for flat steel products will now be calculated through a formula using the weighted average of domestic prices in countries such as Germany, the United States and Japan, but excluding China and Russia, Davies said.

In future, when ArcelorMittal South Africa changes its flat steel prices, it will have to use a transparent mechanism based on the forecast basket prices of fabricated metal products, machinery and equipment, as well as vehicle and other transport equipment, Davies added.

“The basket aims to provide a fair price during boom and bust periods,” he said.

ArcelorMittal South Africa officials were not available to comment.

South Africa, which has the only primary steel mill in sub-Saharan Africa, imposed a 10 percent import tariff last year to protect an industry hurt by cheaper Chinese imports.

($1 = 13.4800 rand)

(Reporting by Wendell Roelf; Editing by James Macharia and David Goodman)

Mauritius raises 2016 tourism earnings forecast by 1.8%

19 August 2016 Comments (0) Africa, Business, Latest Updates from Reuters Like

PORT LOUIS (Reuters) – Mauritius said on Friday that tourism revenue in 2016 will be 1.8 percent higher than it had previously forecast, after a surge in visitors during the first half.

Tourism is a valuable source of foreign exchange for the tiny Indian Ocean country known for its luxury spas and beaches.

Earnings from the sector are now expected to reach 56 billion rupees this year, up from an earlier forecast of 55 billion in May, according to Statistics Mauritius, an official body.

Last year, tourism earnings totalled 50.2 billion rupees.

The statistics agency also raised its forecast for 2016 arrivals to 1,250,000 tourists from 1,240,000. Visitors in 2015 numbered 1,151,723.

In the first half of 2016, Mauritius attracted 586,464 tourists, up 9.9 percent from a year earlier.

(Reporting by Jean Paul Arouff; Editing by Aaron Maasho and Dominic Evans)

Beijing Automobile Intl Corp to invest $800 mil in S.African industrial zone

19 August 2016 Comments (0) Africa, Business, Latest Updates from Reuters Like

JOHANNESBURG (Reuters) – Chinese state-owned Beijing Automobile International Corporation (BAIC) has signed a deal to invest 11 billion rand ($823.30 million) in an industrial zone in South Africa’s Eastern Cape province, the operator of the zone said on Thursday.

The deal will see BAIC open an automotive manufacturing plant in the Coega Industrial Development Zone near South Africa’s Nelson Mandela Bay, the Coega Development Corporation said in a statement.

($1 = 13.3608 rand)

(Reporting by TJ Strydom; Editing by Alexandra Hudson)

South Africa’s Truworths posts 12% rise in FY profit

18 August 2016 Comments (0) Africa, Business, Latest Updates from Reuters Like

(Reuters) – South African clothing retailer Truworths International reported a 12 percent increase in full-year profit on Thursday, boosted by cash sales at its British unit Office Holdings, but falling short of estimates.

* Group retail sales for the 52-week period ended 26 June2016 increased by 46.1 percent to 17.0 billion rand ($1 billion)versus comparable period. * Headline and fully diluted headline earnings per share for52 weeks ended June 26 up 12 percent to 667 cents, but short of702 cents estimate by Thomson Reuters Smart Estimates. * Shares in Truworths down 6.7 percent at 85.34 rand by 1450GMT. * Cash sales outpaced sales on in-store credit as Britishfootwear chain Office sells only in cash and new rules in SouthAfrica hamper credit extension. * “Credit retail sales were significantly impacted by theintroduction of new affordability assessment regulations inSeptember 2015, which management estimates resulted in a loss ofbetween 200 million rand to 250 million rand in sales,” thecompany said. * Annual dividend per share up 12 percent. * “We expect the South African trading environment to remainchallenging during the 2017 financial period, with slow economicgrowth and rising inflation putting pressure on consumers,” thecompany said. * The trading environment in United Kingdom is also facedwith uncertainty after decision to withdraw from European Union,but is likely to be less uncertain as more clarity regardingBrexit emerges, the company said.

($1 = 13.3300 rand)

(Reporting by TJ Strydom; Editing by James Macharia)

Ghana says on track to halve budget deficit after IMF deal

18 August 2016 Comments (0) Africa, Latest Updates from Reuters, Politics Like

ACCRA (Reuters) – Ghana is on target to halve its fiscal deficit this year after its $918-million aid deal with the International Monetary Fund, Finance Minister Seth Terkper said on Wednesday.

His comments appeared designed to allay uncertainty over the deal that emerged this month when parliament rejected a key component that was designed to promote fiscal discipline. The following day the government suspended a planned Eurobond issue.

The government issued a bill to eliminate central bank financing of the budget deficit in line with the requirements of the deal but on Aug. 2 parliament passed the bill with an amendment allowing financing of up to 5 percent.

Ghana’s public debt eased to 63 percent of GDP in May from 72 percent at the end of 2015, while consumer inflation dropped to 16.7 percent in July from 19 percent in January, Terkper said, citing the impact of the deal that began in April 2015.

The central bank expects inflation to slow to 8 percent, plus or minus two, by September 2017.

“We are set to halve the deficit from 12 percent in 2012, and we have also started stemming the rate of growth of the public debt,” he told a meeting of private businesses in Accra.

Ghana, which exports cocoa, gold and oil, signed the assistance programme to bring down inflation and the budget deficit and stabilize the currency.

Terkper said the debt stock could rise marginally to 65-66 percent of GDP on planned disbursements towards the end of the year but will remain below 70 percent.

Ghana pulled out of a planned five-year $500 million amortising Eurobond this month because investors demanded a yield higher than the single digits the government had expected.

Terkper led the government finance team on the deal and said his team only suspended pricing of bids.

“We did not call off the 2016 bond …. What we did was to suspend pricing …. We must sometimes hold our nerves when we’re in the capital market to look for the right window before we strike in order to get the best results,” he said.

Ghana will on Thursday begin pumping oil from a second offshore oil field, Tweneboa-Enyenra-Ntomme or TEN, in addition to its flagship Jubilee production which began in late 2010.

(By Kwasi Kpodo. Editing by Matthew Mpoke Bigg)

Three-week South African fuel strike ends as union signs new pay offer

17 August 2016 Comments (0) Africa, Business, Latest Updates from Reuters Like

CAPE TOWN (Reuters) – South Africa’s petroleum industry and striking workers agreed to a new two-year wage deal on Wednesday, ending a three-week strike that caused limited supply disruptions, an official representing employers said.

Around 15,000 striking workers affiliated to Chemical, Energy, Paper, Printing, Wood and Allied Workers union (CEPPWAWU) agreed a 7 percent wage increase this year and an April CPI plus 1.5 percent hike in the second year, said Zimisele Majamane, the deputy chairman of the National Petroleum Employer’s Association.

(Reporting by Wendell Roelf; Editing by James Macharia)

Egypt’s telecom regulator approves revised terms for 4G licences

17 August 2016 Comments (0) Business, Latest Updates from Reuters, Middle East Like

CAIRO (Reuters) – Egypt’s telecoms regulator has approved revised terms for 4G mobile broadband network licences, and said it will send them out to operators on Sunday.

The government offered four 4G telecom licences in June, to Telecom Egypt and to the country’s three mobile services providers – Orange Egypt, Vodafone Egypt and Etisalat – but only Telecom Egypt accepted the terms. The regulator, keen to prioritise existing carriers, decided to revise them.

A senior official at the Telecommunications Ministry told Reuters on Wednesday that the revised terms include additional frequencies but there is no change in the pricing or the condition that 50 percent of the payment for the licences must be made in U.S. dollars.

“The telecom regulator approved the final terms of the 4G licences yesterday,” the official said, adding that companies would have until midday on Sept. 22 to accept them.

The National Telecom Regulatory Authority later issued a statement confirming it approved the final terms and that the companies had until Sept. 22 to accept.

The government, which is grappling with a shortage of hard currency as economic and political turmoil in Egypt in the past few years has deterred foreign investment, has said it hopes to raise 22.3 billion Egyptian pounds ($2.5 bln) in total in licence fees.

(Reporting by Ehab Farouk; Writing by Ola Noureldin; Editing by Greg Mahlich and Susan Fenton)

South African court sets aside Eskom’s electricity tariff hikes

17 August 2016 Comments (0) Africa, Business, Latest Updates from Reuters Like

JOHANNESBURG (Reuters) – A South African court on Tuesday struck down some of the tariff increases granted to Eskom this year, saying the power utility had not followed the correct procedure when applying for a special claw-back, local media reported.

National energy regulator (Nersa) in March allowed Eskom a total tariff hike of 9.4 percent, of which part was an interim increase for running expensive diesel generators to keep the lights on in Africa’s most industrialised economy.

A court in Johannesburg on Tuesday granted the application by business organisations to set the regulator’s decision aside.

Had the interim increase not been granted, the tariffs would have risen by 3.5 percent from April 1, Moneyweb reported.

Eskom would not comment on the court’s decision directly, saying in a statement it would await a decision by the regulator.

(Reporting by TJ Strydom)

Kenya’s finance minister opposes capping of banks’ lending rates

16 August 2016 Comments (0) Africa, Business, Latest Updates from Reuters Like

NAIROBI (Reuters) – Kenya’s Treasury opposes a move by parliament to cap commercial lending rates because other measures being put in place will help bring down borrowing costs over time, the finance minister said on Tuesday.

Parliament passed changes to the banking law two weeks ago to cap commercial interest rates at 400 basis points above the central bank’s policy rate, now 10.5 percent. The changes are awaiting presidential approval.

Henry Rotich, the finance minister, told Reuters his ministry preferred to improve the transmission of monetary policy signals to commercial rates and the creation of a central registry for collateral to cut rates, rather than capping them.

“Our approach in this issue is to deal with the root cause of why interest rates are where they are in Kenya,” he said.

The average lending rate was 18.2 percent last month, compared with 15.8 percent in July last year, the central bank said. The central bank cut its policy rate to 10.5 percent in May, having left it at 11.5 percent since July 2015.

Rotich said they were working to improve the Kenya Banks Reference Rate (KBRR) to ensure banks were pricing loans correctly.

Introduced by the government in 2014 to help rein in high costs of loans by offering a benchmark for banks to price their loans, the KBRR has been criticised widely for failing to help bring down interest rates.

“There is more room for refining the KBRR and banks are working on ensuring that the margins reflect the best pricing of loans,” the minister said without offering details.

He said a law to establish a central registry of collateral would be taken to parliament soon, enabling borrowers to transfer their loans between different banks easily and cutting costs of securing collateral once it is passed.

“We think these measures are going to help to bring down rates over a period of time,” Rotich said.

Kenyan banks have reported rising profits in the last decade, attracting foreign investors. Rotich said the growth of the sector had helped to boost the share of the population with access to formal financial services to 70 percent.

“We don’t want to rock that boat … Anything that reverses that would not be a good way to go,” he said.

The central bank also opposes capping interest rates saying it could restrict lending. It however wants banks to lower their rates.

Rotich said the government’s budget deficit for the fiscal year starting last month would be lower than the 9.3 percent approved by parliament, adding they would also raise money in capital markets abroad to avoid putting pressure on local rates by borrowing too much in the domestic market.

“Our strategy is to diversify our sources of funding so that we don’t borrow heavily domestically,” the minister said.

(By Duncan Miriri, Editing by Richard Balmforth)

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