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South Africa’s Telkom agrees performance-based pay deal with unions

7 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African fixed line telecoms network operator Telkom has reached a performance-based pay deal with two of it three largest labour unions while agreeing not to cut jobs for two years, the company said on Tuesday.

Telkom, reported a 15 percent rise in full-year profits on Monday after completing a three-year restructuring as it adapts the business to slowing revenue from fixed-line telephony and a sharp increase in data traffic.

The firm said on Tuesday it had signed a deal with Solidarity and the South African Communications Union to implement a performance-based remuneration scheme for both individual employees and teams. A third union, the Communications Workers Union, has agreed in principle, Telkom said.

“The agreement covers Telkom’s 11,000 unionised employees, out of a total headcount of just over 13,500 at the end of March 2016,” Telkom said in a statement.

As part of the deal, Telkom committed to no compulsory job cuts for the next two years and limiting outsourcing moves to less than 1,000 employees over the same period.

Telkom, in which the government owns a stake of about 40 percent, said it would not be offering any employee an annual increase in pay this year but was willing to pay workers more if they reached certain targets.

“The company is offering employees the opportunity to earn up to 12 percent more each month should they meet and exceed sales and customer service targets,” Telkom said.

 

(Reporting by TJ Strydom; Editing by James Macharia, Greg Mahlich)

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Herman Heunis: the tech entrepreneur who stepped away from the limelight

7 June 2016 Comments (0) Africa, Featured, Leaders

Herman Heunis

What’s next for Herman Heunis, the man who created “Africa’s Facebook”?

Herman Heunis is the man who created MXit, which was at one point Africa’s most subscribed to social media platform. Born in Namibia, Heunis grew up in a rural community where his parents ran a sheep farm, but Heunis was drawn to technology as a young man. Having moved to South Africa, Heunis attended Stellenbosch University in 1977 and 3 years later began his career in computer programming.

It was not until 1990 that Heunis launched the first of his own businesses, when he created an ICT consultancy firm. This was followed in 1998 by the launch of Swist Group Technologies, an information and communication technology company which specialized in software development. This entrepreneurial spirit would eventually lead to the formation of MXit.

The MXit explosion

MXit was launched in 2005 as an instant messaging service in Stellenbosch, and it took a rapid hold within the youth of South Africa. By 2013, MXit had a larger user base in South Africa than Facebook, with 45 million registered users in the country. This user base was growing by 60,000 new registered members per day, and 750 million daily messages were being sent across the MXit network.

MXit had originally been created as a mobile game, but it struggled to find sponsors, and the gaming angle was eventually removed. Heunis explained the evolution of the MXit service saying, “An integral part of the game was communication between players. After several metamorphoses we dropped the game idea and focused only on the communication part – that worked extremely well.”

The MXit application on iPhone

The MXit application on iPhone

When MXit was launched the entire team consisted of Heunis and 7 employees, but the rapid growth of the service attracted attention and further investment. Only 2 years into its existence, MXit received major investment from the Internet giant Naspers. What had been an 8 person company grew to employing 150 people as MXit looked to expand its reach far beyond the confines of South Africa.

Through innovative viral marketing, Heunis secured 500,000 users in Indonesia, and while the core of MXit’s users was still in South Africa, the platform was being used in more than 120 countries by 2011. The speed of MXit’s success and growth was impressive, but Heunis does not like to take all the credit, saying, “Timing was perfect and I had a fantastic team. The word ‘failure’ was never an option.”

Selling up and moving on

At the height of MXit’s popularity, Heunis made a shock decision, and decided to sell the company. Stepping down from his CEO position at the end of 2011, Heunis completed the sale of his company in 2012 to Alan Knott-Craig Jr. The decision was evidently a difficult one to make as Heunis said, “Selling a company that you have started is traumatic. Fact of the matter was, I was extremely tired and burned out, and staying on as CEO was not in the interest of the company.”

Knott-Craig Jr’s company, World of Avatar, did not grow MXit as Heunis might have hoped to see. In fact, in 2015 MXit was closed down, and Heunis expressed his disappointment on Twitter. Heunis tweeted that he regretted being too burnt out to continue at the helm in 2011, but that he truly believes that MXit had “all the ingredients to become a major success story.”

Heunis has said that his motto is “You are the captain of your ship,” and it appears that without its captain, MXit experienced a rapid decline after its sale to World of Avatar. As numbers dwindled the reversal of the company’s fortunes could not be stopped, and what had been Africa’s largest social media network ceased to exist.

Since departing from MXit, Heunis has stayed away from the limelight, and thrown himself into various hobbies including endurance bike races such as the Absa Cape Epic.

While MXit’s sale has ensured that Heunis need never work again, it was never money that motivated him anyway. Heunis has said, “For a true entrepreneur, the satisfaction of creating outweighs the money rewards.”

With that in mind, it would be too soon to say that we have seen the last of Heunis as an entrepreneur, but he says he has no immediate plans to return to the world of technology.

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Fitch may keep South Africa rating but cut outlook, analysts say

6 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Ratings agency Fitch is likely to affirm South Africa’s investment grade credit rating this week but may lower its outlook to negative, analysts said, as Africa’s most industrialised economy grapples with slow growth.

South Africa has dodged downgrades from S&P Global Ratings and Moody’s, taking some pressure off President Jacob Zuma ahead of elections in August and giving policymakers more time to implement reforms to boost GDP growth.

Fitch, which rates South Africa one step above speculative grade with a stable outlook, has not said when it will publish its review. The Treasury has said it expects the review on June 8.

“We expect Fitch to affirm the rating at BBB- but change the outlook to negative, bringing them in line with S&P,” Rand Merchant Bank analyst John Cairns said.

“The announcement will be a small negative and will not fully offset the positive news from S&P.”

Three other analysts Reuters spoke to expected much the same result.

S&P said on Friday it was sticking to its BBB- rating on South Africa, one notch above non-investment grade. But it warned that its negative outlook reflected the potential adverse consequences of low GDP growth. Last month, Moody’s kept its rating at Baa2.

The rand and government bonds jumped after the S&P review, with the currency trading 0.3 percent firmer, while the benchmark bond due in 2026 and the country’s dollar-denominated bonds firmed.

Rating agencies had warned of possible cuts to South Africa’s credit standing after Zuma rattled investors by changing finance ministers twice in less than a week in December, triggering a cross-asset selloff.

In its last review, released on Dec. 4, before Zuma swapped his finance ministers, Fitch had said it expected South Africa’s economy to grow by 1.7 percent this year.

But the economy has taken a turn for the worse after scandals surrounding Zuma and a severe drought that has hit agricultural output and worsened inflation.

The Treasury currently expects GDP growth of less than 1 percent this year.

Zuma has faced calls to resign following a Constitutional Court ruling in March that he had erred by refusing to refund the state for renovation work on his house paid for by the taxpayer.

“There is always a chance that they (Fitch) change the ‘stable’ outlook on their BBB- rating to ‘negative’, although this is not a given just yet,” said Standard Chartered’s head of Africa research, Razia Khan.

“Having just downgraded South Africa and assigned the stable outlook to the rating last December, they too could give it another six months or longer before changing the outlook.”

Analysts say a downgrade to “junk” status could be on the cards later this year if policy measures did not turn around an ailing economy.

“Fitch’s decision to hold the rating outlook at stable or to adjust the outlook to negative has valid arguments on both sides, and will therefore be a very close call,” NKC African Economics’ Hanns Spangenberg said.

“However, given the deterioration in South Africa’s economic growth outlook, as well as an uptick in political risk over the last few months, our view is that the correct decision for Fitch would be to adjust South Africa’s rating outlook to negative.”

 

(By Olivia Kumwenda-Mtambo. Editing by James Macharia and Hugh Lawson)

 

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Sasol warns U.S cracker could cost $11 bln, expects lower returns

6 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s Sasol on Monday raised its forecast for the cost of its U.S. ethane cracker by 26 percent to as much as $11 billion due to construction delays and also flagged lower expected returns from it.

The Lake Charles Chemicals Project in the state of Louisiana which includes a cracker will produce 1.5 million tonnes of ethylene a year for use in plastics and chemicals.

Shares in Sasol, which had previously forecast its cost at $8.9 billion, where down by more than 5 percent as of 0730 GMT.

The petrochemicals maker said in a statement that higher-than-expected rainfall had contributed to delays in the project.

It also said costs had been boosted by higher labour costs, building materials and bid contract prices.

The world’s biggest maker of motor fuel from coal said it now expected lower returns due to “changes in long-term price assumptions and the higher capital estimates”.

Returns will be down by as much as the company’s lower long-term price assumptions, Sasol said.

Lower oil prices have forced the company, which makes 40 percent of its revenue from the fuel, to lower its dividend, delay major projects and cut jobs.

The cracker will be funded by existing loans and cash flow without breaching Sasol’s gearing targets. Sasol has already spent $4.5 billion on the project which is about 40 percent complete.

Sasol also warned that full-year headline earnings per share, a popular measure of profit, would fall by 10 to 30 percent due to low oil prices and an impairment charge on operations in Canada.

“The volatile macroeconomic environment, in particular lower crude oil prices, has had a significant impact on earnings,” Sasol said.

 

(Reporting by Zandi Shabalala; editing by Jason Neely)

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Higher South African rates leave households saddled with crushing debt

3 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Rate increases by South Africa’s central bank have left at least 10 million people crippled by debt in a country where many people buy on credit.

The result may be a further slowdown in South Africa’s slumping economy, which is now expected to grow just 0.9 percent in 2016. That would only aggravate the problem for those struggling with debt.

South Africa’s unemployment rate is already at a record high of nearly 27 percent. Food prices are soaring as a drought afflicts southern Africa.

Consequently, many households are borrowing to put food on the table. But inflation exceeds the central bank’s target of 3 to 6 percent, leading it to raise interest rates by 200 basis points in the past two years.

Inflation slowed to 6.2 percent in April, but commercial banks have raised their lending rates. Home loans now average around 10.5 percent, up from a low of 8.5 percent in 2012.

“Almost 75 percent of the income of the average household in South Africa is spent towards credit providers, to pay debt, so at the end of the day they don’t have enough money left to pay for their living expenses,” said Neil Roets, chief executive of Debt Rescue, a local company that helps clients manage debt.

“It’s had a devastating effect on consumers, especially because of the fact that a lot of consumers already find themselves in a situation where they are over-indebted,” he said, referring to the rising rates.

Industry officials say about 47 percent of the consumers that buy on credit are in debt arrears. About 10 million people, or a fifth of South Africa’s 52 million people, buy on credit.

The TransUnion South Africa consumer credit index, a gauge of consumer credit health, fell to a three-year low in the first quarter of this year. Debt defaults, defined by three months of arrears, rose 1.8 percent year-on-year during the quarter, after shrinking 5.3 percent in the fourth quarter of 2015.

Analysts said South Africans are still paying the price for unbridled lending that fuelled a consumer frenzy. That helped the economy grow an average 5 percent a year in the five years before 2009, when a recession wiped out nearly a million jobs.

Households are now reluctant to take up new debt. Private sector credit grew in April at its slowest rate since late 2013, central bank data showed.

Retailers are feeling the pinch across the board, with consumer demand for non-essential goods in particular dropping. New vehicle sales fell 10.3 percent in May from the same month last year, the sixth consecutive contraction.

“Both consumer and business confidence is unlikely to improve significantly in the short term, given the poor economic outlook and the poor job market,” Nedbank analysts Johannes Khosa and Dennis Dykes said in a note.

“Credit growth is likely to remain contained in the months ahead as the economic environment remains weak.”

 

(By Stella Mapenzauswa. Editing by James Macharia, Larry King)

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South Africa’s Imperial Holdings buys Britain’s Palletways

1 June 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African logistics group Imperial Holdings will buy a British express delivery service for 3.8 billion rand ($242.26 million) to continue its expansion beyond its home market, the firm said on Wednesday.

Imperial said it will acquire all of Palletways Group, which delivers small consignments of palletised freight to 20 European countries, from private equity firm Phoenix Equity Partners Limited.

“The acquisition of Palletways is in line with Imperial’s stated strategic intent to expand its presence beyond South Africa through the acquisition of asset light logistics businesses,” Imperial said in a statement.

Imperial, which sells imported vehicles and runs a car rental agency in South Africa, has sold assets it considers non-core, including a short-term insurance unit as its aims to make the firm’s business less vulnerable to swings in the value of its home market’s volatile rand currency.

“Palletways’ business model and geographic reach will be complementary to our existing services and networks in the logistics sector,” said Chief Executive Mark Lamberti.

Palletways has annual sales of 3.1 billion rand and its management will invest alongside Imperial to acquire a 4 percent stake in the business, Imperial said.

The deal is conditional on its approval by European antitrust authorities.

Shares in Imperial were up 3.1 percent at 144.34 rand by 1038 GMT, outperforming a 0.66 percent decline in the Johannesburg Securities Exchange’s All-share index.

($1 = 15.6859 rand)

 

(Reporting by TJ Strydom; editing by Susan Thomas)

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Bidvest foods spin-off Bidcorp valued at $5 bil in market debut

30 May 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa’s Bidvest listed its food services business as Bid Corporation (Bidcorp) on the Johannesburg Securities Exchange on Monday, with the shares opening trade at 270 rand to value the company at around 90 billion rand ($5 billion).

Bidcorp, which supplies pubs, restaurants and hotels in Europe, South America and Asia, is the largest primary listing on the JSE since Vodacom in 2009, the stock exchange said.

Bidvest, whose business also spans pharmaceuticals, car showrooms and shipping, announced in February it planned to spin off and separately list its food business, its biggest division, in South Africa. It had previously said the business should be separated because its value was not reflected in the company’s share price.

Plans to list the food business in London were abandoned in 2014 and private equity buyout bids for it were rejected three years earlier

The separation will position the food business for a new phase of both internal and acquisitive growth, said Bidcorp Chief Executive Bernard Berson before he opened trading in Johannesburg by blowing a ceremonial kudu horn.

Bidvest shares dropped 68 percent as Bidcorp started trading, settling around 118.42 rand by 1213 GMT to value what remains of Bidvest at around 38 billion rand, while Bidcorp had risen to 280.84 rand.

The listing splits the group into what is more or less a South African corporation in Bidvest and global food player in Bidcorp, Cratos Capital senior trader Ron Klipin told Reuters.

“It’s certainly unlocking some short-term value for Bidvest shareholders,” said Avior Capital Market analyst Mark Hodgson.

($1 = 15.7968 rand)

 

(Reporting by Zimasa Mpemnyama and TJ Strydom; Editing by Greg Mahlich)

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Christo Wiese, 74 year old billionaire, as driven as ever

30 May 2016 Comments (0) Africa, Featured, Leaders

Christo Wiese

The South African billionaire, Christo Wiese, continues to grow his business, with a commitment to long held principles.

Christo Wiese is one of the richest men in Africa, with a fortune valued at $6.5 billion, but despite being 74 years old, he is working as hard as ever.

In the summer of 2015, Wiese bought the British gym chain, Virgin Active, for $1 billion from Richard Branson’s Virgin group. Not finished with his British spending spree, Wiese also snapped up the high street fashion giant New Look Clothes for $1.23 billion. While evidently eager to expand, what is the business ethos of Mr. Wiese, and how did he become such a prosperous figure?

A family of entrepreneurs

Christo Wiese was born in a small town called Upington to parents who had nothing like the resources he enjoys today, but who did have the entrepreneurial spirit which has governed his life. Wiese’s parents were a huge influence on his attitude to business, and he is on record as saying, “I’ve had mentors in business, people from whom I have learnt a lot, but at the end of the day, my greatest inspiration came from my parents.”

These parents bought a share in a small retail outlet called Pep Stores in 1965, and although Christo had trained as a lawyer, he decided to join the family business. As the business grew, Wiese had brief forays into politics and the diamond industry, but returned to the original Pep Stores Company as its executive chairman in 1981. The following year, he changed the name to Pepkor, and the company began its rapid, extensive growth.

Ethics and necessity

Two of the key areas that have helped Wiese grow his brands (while finding widespread support in his home country) are the ethics behind his companies, and his focus on providing affordable products. In a nation where the ugly memory of Apartheid casts its shadow over much of recent history, Wiese’s business ethics are quite telling.

During the height of the Apartheid regime, Wiese broke the law by refusing to have racially segregated bathrooms at his offices and factories. His policies of inclusion rather than segregation have continued to be a hallmark of his employment record.

In 2013, he spoke to South African media saying, “We employ over 150,000 people who are very representative of the demographics of South Africa. We have people from different backgrounds, religious affiliations, race groups and countries, and they all work together to make the business work.”

Perhaps the key to his success has come from investing in products that people need, such as affordable clothing. This tied in with his ethical stance on Apartheid, as in the early days of Pepkor, low priced clothing was sold in poor rural areas, where most black people were able to buy new clothes for their families for the first time.

Continuing to expand

Alongside his recent British acquisitions, Wiese is the major shareholder in African retail giant Shoprite, has a 20% holding of the huge furniture company Steinhoff, and is the majority shareholder in private equity firm Brait. However, Wiese is focused on developing his trade across Africa, as he continues to promote trade and opportunities in his home continent.

As well as providing extensive training programs for potential entrepreneurs, Wiese is determined to open up more markets for African producers, and to make his homeland a greater part of his company’s trade. Wiese said, “Today, 80% of the fresh produce we sell in Zambia comes from Zambian farmers, because we created a market for them…Our African business is still only 15% of our overall business. In the next 10 or 20 years we believe that it will be more than 50% of our businesses.”

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South Africa needs to “reduce noise” in its political system: Treasury official

27 May 2016 Comments (0) Africa, Latest Updates from Reuters, Politics

JOHANNESBURG (Reuters) – South Africa has to reduce the “noise” in its politics in order to attract investment and improve confidence, a senior Treasury official said on Friday.

“We have got to reduce the amount of noise in our political system, especially as it pertains to various policies that are under consideration so that we can improve confidence and make our country an attractive investment destination,” Director General Lungisa Fuzile said at a conference in Johannesburg.

Africa’s most industrialised country has been gripped by political upheavals ranging from a failed impeachment attempt against President Jacob Zuma for breaching the constitution to media reports that he is at “war” with Finance Minister Pravin Gordhan in the past few weeks.

 

(Reporting by Mfuneko Toyana; Writing by Nqobile Dludla; Editing by James Macharia)

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South Africa’s AMCU union launches strike at Sibanye’s Kroondal mine

27 May 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – Workers began an indefinite strike at Sibanye Gold’s Kroondal platinum mine in South Africa on Friday to demand transport because they were being attacked after working night shifts, their union said.

“The company doesn’t want to provide transport for its employees and these are basic conditions of employment,” Joseph Mathunjwa, president of South Africa’s Association of Mineworkers and Construction Union (AMCU) told Reuters.

AMCU is the main union at the Kroondal mine located in the Rustenburg platinum belt and has about 7,000 workers.

Sibanye’s spokesman James Wellsted said the gold and platinum producer would seek a court order to stop the strike because it was negatively affecting output.

“With metal prices being low for AMCU to now go on strike over issues that are being dealt with is irresponsible. This poses a threat of to the viability of the mine,” he said.

AMCU led a record and sometimes violent five-month wage strike at three major platinum producers in 2014.

Unions and platinum companies are expected to start wage talks in the next few weeks.

Sibanye acquired the Kroondal mine when it bought Aquarius Platinum in October last year for $295 million.

 

 

(Reporting by Zandi Shabalala; Editing by James Macharia)

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