By Mfuneko Toyana

PRETORIA (Reuters) – South Africa’s unemployment rate dipped slightly in April-June from the previous quarter’s record high but 26.6 percent of the labour force — more than 5.6 million people — remained without work.

A quarterly labour force survey published by the statistics office on Thursday showed a small decline in the jobless rate from 26.7 percent in the first quarter.

Statistics South Africa said that equated to 5.634 million people compared with 5.723 million who were out of work in the January-March quarter. Unemployment is now the largest driver of poverty in South Africa, the statistics office said.

The number of people without jobs increased by 403,000, or 1.6 percent, from a year earlier.

“Indications are that we are in a quite difficult economic situation,” said Statistician-General Pali Lehohla. “There are a huge number of job losses.”

Africa’s most advanced economy — though no longer its biggest — is on the brink of recession after contracting 1.2 percent in the first quarter as manufacturing and mining activity shrank.

“It’s a reflection of a weak economic climate,” said Nedbank economist Johannes Khoza.

“We didn’t expect much of an improvement in employment given the weak business and consumer confidence lately. A recession is still very likely.”

The central bank said last week it expected zero growth in 2016.

Under an expanded definition of unemployment which includes people who have stopped looking for work, the jobless rate rose to 36.4 percent in the second quarter, from 36.3 percent in the first three months of 2016, Statistics South Africa said.

The largest quarterly employment losses were seen in the public administration and social services sector, where 127,000 jobs were shed. Some 44,000 jobs were lost in agriculture due to a decline in the growing of crops and animal husbandry, with significant losses also seen in the transport sector.

“The high rate of unemployment contributes to much of the social tension and anguish experienced in South Africa on a daily basis, especially among the youth,” Stanlib chief economist Kevin Lings said.

South Africa’s financial hub of Gauteng, which includes the city of Johannesburg and the capital Pretoria, both set to be hotly contested in upcoming elections, had the country’s second-highest rate of unemployment at 29.5 percent.

(Editing by Catherine Evans)

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NAIROBI (Reuters) – Inflation in Kenya is under control despite a food price-driven rise in June and pressure from recent increases in the fuel tax, the governor of the central bank said on Tuesday, a day after the bank left interest rates unchanged.

The year-on-year rate of inflation rose to 5.80 percent in June from 5 percent in May, as prices of food items went up. The retail prices of fuel went up on July 15, ushering in more pressure on the rate.

“The MPC (Monetary Policy Committee)was quite comfortable with the dynamics,” Governor Patrick Njoroge told a news conference.

Policymakers left the benchmark lending rate unchanged at 10.50 percent on Monday saying the pressure on inflation was temporary.

Njoroge said there was ample liquidity in the banking sector, adding that it was also starting to be distributed more evenly among the country’s 42 lenders.

The governor, who has in the past said liquidity in the sector was concentrated among a handful of large lenders, said on Tuesday mid-sized banks were getting more liquidity as their larger counterparts saw a reduction in recent months.

Two mid-sized banks and a smaller lender were shut down in the nine months to April this year, raising concerns about the health of the banking sector.

He said Britain’s vote to leave the EU last month could have implications for the Kenyan economy in the medium term as foreign investors take a wait-and-see attitude.

Britain is an important source of investments for the East African nation, whose exporters are also fretting about the impact of Brexit on a trade deal between the East African Community and the EU that is supposed to be signed by October.

Tanzania has said it may not sign the deal, deepening the anxiety among Kenyan officials and exporters.

(Reporting by Duncan Miriri)

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By James Davey and Zandi Shabalala

LONDON/JOHANNESBURG (Reuters) – South African retailer Steinhoff has agreed to pay nearly $800 million for British-based discount chain Poundland after two previous attempts to expand in Europe fell through this year.

The $23 billion company, which sells beds and cupboards to less affluent shoppers in Europe, southern Africa and Asia, is keen to grow its European business when consumers are turning to cheaper chains and its home market is also struggling.

Steinhoff already owns the Bensons Beds and Harvey’s furniture chains in Britain. The Poundland deal is third time lucky after it failed to secure Britain’s Home Retail, which owns Argos, and was also unsuccessful in a bid for Darty in France.

It is the biggest takeover of a listed British company since a vote on June 23 to leave the European Union, a decision which has prompted concern that Britain may fall into recession.

The fall in the value of the pound is making British assets cheaper for foreign buyers.

Steinhoff, in which South African billionaire Christo Wiese is the largest shareholder, has a reputation for buying underperforming companies that can benefit from its wide global network to source goods at lower prices.

It will pay 220 pence per share plus 2 pence in dividends, valuing the Poundland at 597 million pounds ($791 million).

The price is a premium of 39 percent to Poundland’s share price on June 13 — the day before Steinhoff first bought Poundland shares. It had since built up a 23.6 percent stake.

Shares in Poundland surged 12.6 percent to 220.7 pence by 1050 GMT.

Momentum Wealth head Wayne McCurrie questioned the price the Johannesburg-based company plans to pay for Poundland, which as its name suggests sells every item at a single price of a pound at its UK stores.

“Steinhoff is paying quite a big premium,” McCurrie said. “This might be a bit negative for Steinhoff in the next year or two as the British economy tries to find its new home.”

Poundland listed at 300 pence in 2014. But its shares have lost 42 percent of their value over the last year, hit by subdued trading, adverse currency moves and the distraction of integrating the 99p Stores chain it bought for 55 million pounds.

It has also faced pressure as British supermarkets fight a price war spurred by the growth of German discounters Aldi and Lidl.

COMPLEMENTARY FIT

Buying Poundland would give Steinhoff more than 900 shops in Britain, Ireland and Spain.

“Steinhoff is developing a fast-growing, price-led retail business across the UK and the rest of Europe. Poundland would be a complementary fit to this growth story,” said Steinhoff Chief Executive Markus Jooste.

The deal gives Poundland shareholders a return on their investment without having to await the benefits of a turnaround strategy.

“The Poundland Board believes that (Steinhoff’s) all-cash offer presents Poundland shareholders with an opportunity to realise their shareholding at a certain and attractive price,” Chairman Darren Shapland said.

Jim McCarthy, who stepped down this month after 10 years as chief executive, is in line for a 22 million pound payment for his stake.

Steinhoff’s further expansion in Europe, where it already makes more than 70 percent of its sales, would reduce its reliance on a shaky home market where its furniture unit JD Group is cutting jobs and closing branches because of weak demand.

($1 = 0.7547 pounds)

($1 = 0.9043 euros)

(Editing by Keith Weir)

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JOHANNESBURG (Reuters) – South Africa’s rand recovered some its losses against the dollar after falling heavily on Friday as Britons voted to quit the European Union, stunning emerging markets currencies.

Stocks also suffered, but gold shares soared in tandem with the metal’s price which surged 8 percent to its highest in more than two years as demand for safe havens assets like bullion and silver rose after the shock vote to leave the EU.

Investors fear Brexit could spark anti-establishment movements in other European countries, some of which have seen decline in traditional political parties.

South African President Jacob Zuma said local banks and financial institutions could withstand the Brexit shock, as they did during the 2008/09 global financial crisis.

Finance Minister Pravin Gordhan said Treasury and the central bank would take measures to deal with any Brexit shocks to Africa’s most industrialised country, which has strong trade ties with the EU.

By 1200 GMT, the rand was 4.52 percent weaker at 15.0510 per dollar after tumbling more than 8 percent in early trade to a three-week trough of 15.6800. The rand closed at 14.4400 in the previous session.

Implied volatility on the rand jumped 16 percent to six-month highs in an already highly traded session.

Capilis Asset Managers head of forex Giacomo Bonavera said the rand decline was over done. “The sellers will come back in and bring the price back down,” he said.

Government bonds also weakened, with the yield on the benchmark instrument due in 2026 adding 25 basis points to 9.13 percent, having jumped as much as 28.5 basis points earlier.

On the bourse, the JSE securities exchange’s Top-40 blue chip index dropped 4 percent to 45,502 points, while the broader All-Share index slumped 3.7 percent to 51,579 points in line with global weakening of equities due to Brexit.

Most shares were in the red with exception of gold miners.

The biggest losers were real estate firms Capital & Counties Properties and Intu Properties, who both have interests in the United Kingdom, and fell 17 percent and 14 percent respectively.

Financial services firm Old Mutual, which has a primary listing in London, and food services firm Bidcorp, which makes nearly half its sales in Britain, fell 7 percent.

Anglogold topped the gainers on the bluechip index, soaring as much as 14.54 percent to 267 rand, while Sibanye Gold, Goldfields and Harmony also shone on the wider index, each rising more than 16 percent.

(Reporting by Mfuneko Toyana; Editing by James Macharia)

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By Chijioke Ohuocha and Oludare Mayowa

LAGOS (Reuters) – Nigeria’s naira slumped 30 percent against the dollar on Monday after the central bank removed its currency peg in an effort to alleviate the chronic foreign currency shortages choking growth in Africa’s biggest economy.

The central bank sold $530 million for 280 naira per dollar at a special auction and later sold a further $86.5 million directly on the interbank market at 281 to 285 naira, traders said.

Monday’s rate was notably weaker than the 197 peg the central bank had maintained for 16 months before abandoning it last week in a bid to alleviate chronic forex shortages and stop the economy from sliding into recession.

The naira had traded just twice by midday, before the central bank held its special auction to clear a backlog of hard currency orders. Less than $1 million had changed hands, prompting an extension of the trading day to 5 p.m. (1600 GMT), dealers said.

Black market currency dealers were quoting the naira at 325 to 345 naira to the dollar, up to 10 percent stronger than on Friday, on expectations more hard currency liquidity on the interbank market would reduce demand on the street.

The central bank has said it may inject foreign exchange into the interbank market to increase liquidity and reduce a backlog of $4 billion backlog of demand, which could take four weeks to clear.

“We suspect that the best way to talk about the new exchange rate regime is still as a managed float, but a managed float that is responsive to market forces,” Citi analysts said in a note. “The new structure does provide a platform for the CBN (central bank) to easily step further away from the market.”

Non-deliverable forwards – contracts used to bet on future exchange rate moves – priced the naira at 302 per dollar in one month’s time. They initially weakened to a record 310 to the dollar.

The two-month contract < NGN2MNDFOR=> saw the naira at 313 per dollar in August. One year down the line < NGN1YNDFOR=> the naira was priced at 355.

Nigeria’s central bank is “reasonably optimistic” the naira will settle around 250 to the dollar after an initial period of weakness following a flotation, the bank’s governor said in a June 3 letter to President Muhammadu Buhari [L8N19836T].

ECONOMIC DOWNTURN

Foreign investors and economists had called for a naira devaluation for months as the shortages of foreign exchange undermined economic growth and led to widespread capital flight.

The central bank said last week it would abandon the peg in a “managed float”. The median forecast from 10 analysts surveyed by Reuters had suggested the naira might trade on Monday at as much as 300 naira per dollar.

Nigeria’s economy, which contracted by 0.4 percent in the first quarter, faces its worst crisis in decades as a result of the decline in oil prices since 2014 and last year’s introduction of the currency peg.

With the naira expected to fall sharply, Nigerian products will become relatively cheap and imports more expensive. That should stimulate the domestic economy, but it is also likely to light a fire under already rising inflation.

“The new system should reduce the shortage of FX in the economy and – in the long run – reduce strains in the balance of payments by discouraging imports and boosting export competitiveness,” said John Ashbourne of Capital Economics.

“But the new system certainly does not mark the end of Nigeria’s economic problems.”

The OPEC oil exporter had resisted devaluing the naira for more than a year, while other major oil producers, including Russia, Kazakhstan and Angola, allowed their currencies to fall after crude prices collapsed.

(Additional reporting by Oludare Mayowa, Ulf Laessing, Karin Strohecker, Sujata Rao and Joe Brock; Writing by Joe Brock and Ulf Laessing; Editing by Larry King)

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By Mfuneko Toyana

PRETORIA (Reuters) – South Africa’s current account deficit widened in the first quarter of 2016 as exports of platinum and coal slumped as miners cut production after global commodities prices tumbled, the central bank said on Tuesday.

The wider deficit, a sharp contraction in growth and the weakness of the currency led analysts to predict the bank would begin raising interest rates again after a pause at its last policy meeting in May.

The current account deficit widened to 5 percent of GDP in the first quarter from a revised shortfall of 4.6 percent in the final quarter of 2015, the central bank said.

Economists surveyed by Reuters had expected a 4.25 percent gap For the first quarter.

“We expect that this will force the South African Reserve Bank to hike its key interest rate, even in the face of very weak economic growth,” analysts at research house Capital Economics said in a note.

The central bank has raised lending rates by 200 basis points to 7 percent since over the past two years in a bid to keep inflation within its target band of 3 to 6 percent.

Lending rates in South Africa now sit at levels as high as during the 2008/9 financial crisis, and with more hikes in the offing as the worst drought in decades stokes inflation, a consumer-led growth recovery now looks unlikely.

In its June quarterly bulletin, the central bank said spending growth slowed by 1.3 percent in the first quarter as consumers cut down on purchases of big ticket items due to rising interest rates.

“One of the explanations for this rather sharp decline is that previously people were still buying, preempting that prices would go up quite a bit,” said head of economic reviews and statistics at the central bank Johan van den Heever.

The rand is down nearly 25 percent against the dollar since the second quarter of 2015, and fell more than 1 percent after the current account data.

Van den Heever said the bank saw a reversal in the moderation of inflation as climbing food prices and the higher cost of fuel were exacerbated by the weak rand.

“That’s kind of the double whammy of drought conditions, forcing us to import rather than export maize, at the same time as the weakish exchange rate is pushing up the prices of food.”

Headline inflation slowed to 6.2 percent in April from a peak of 7 percent in February.

Economists at Nedbank Capital said the data made the central bank’s policy choices difficult despite the breathing space provided by a delay in rate hikes in the United States.

“Much will depend on the rand as the year progresses. For now we anticipate one more hike of 25 basis points in the second half of the year,” the economists said in a note.

(Editing by James Macharia and Angus MacSwan)

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