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South African unemployment hits record high, dents ratings hopes

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

By Mfuneko Toyana

PRETORIA (Reuters) – South Africa’s unemployment hit its highest level on record in the first quarter, official data showed on Monday, clouding the country’s efforts to convince the major ratings agencies not to downgrade its credit.

Moody’s late on Friday left its rating unchanged, giving the rand currency a lift on Monday morning in reaction. Finance Minister Pravin Gordhan said he aimed to show the other big ratings agencies that the country was on the right economic track ahead of their own reviews in the coming weeks.

But the statistics agency dealt Gordhan’s hopes a blow later on Monday when it said unemployment had risen to 26.7 percent in the first quarter – the highest level since the labour force survey began in 2008.

The rand dropped sharply on the news and was down more than 2 percent against the dollar late in the afternoon.

South Africa, one of the world’s biggest metals producers, has been hit by a slide in commodities prices which has come on top of widespread labour unrest in the mining industry.

President Jacob Zuma said the economy should be able to “weather the storm” as he unveiled initiatives aimed at accelerating growth including a private and public sector fund for small businesses after meeting business and labour leaders on Monday evening.

“We remain optimistic that we will be able to weather the storm, especially if we continue working together in this manner,” Zuma said in a late night television broadcast.

Earlier Gordhan warned against complacency after Moody’s appeared to give Africa’s most industrialised economy some breathing space.

Hastily reappointed as finance minister in December after Zuma rattled investors by inexplicably replacing his predecessor with a little-known politician, Gordhan warned that a global downturn meant South Africa was on its own in tackling its economic woes.

“We can’t be positive. All we can do is work as hard as we can to convince people out there that we are a country that is capable of solving its problems,” Gordhan told reporters at a public finance management conference in Johannesburg.

“We need to find new and innovative ways to search for new engines of growth, to find new ways of igniting growth and creating the jobs that our people desperately require,” he said.

The wobbly economy has raised the stakes ahead of local elections on Aug. 3 which analysts say will be the sternest political test that the ruling African National Congress has faced since coming to power in 1994.

“Today’s employment figures are very grim, but tell us little that we didn’t already know about South Africa’s troubled labour market. The political impacts may be more significant,” said Africa analyst at Capital Economics John Ashbourne.

Gordhan plans to hold meetings with Fitch and Standard & Poors in the next couple of weeks after Moody’s had said the country was “likely approaching a turning point after several years of falling growth.”

Moody’s left its rating of South Africa’s debt at Baa2, two levels above sub-investment grade, citing risks to implementation of structural and fiscal reforms.

The Treasury in February forecast tepid growth for Africa’s most industrialised economy of just 0.9 percent in 2016 from a previous forecast of 1.7 percent and compared with estimated growth of 1.3 percent in 2015.

(Additional reporting by Stella Mapenzauswa in Johannesburg; Writing by James Macharia; Editing by Ed Stoddard and Hugh Lawson)

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SABMiller, Coke agree concessions with South Africa over bottling merger

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

JOHANNESBURG (Reuters) – SABMiller and Coca-Cola have agreed concessions with the South African government to win approval for a deal to combine their soft-drink operations, the companies said on Wednesday.

The concessions, agreed with the South African Ministry of Economic Development, include a three-year freeze on layoffs and the companies investing 800 million rand ($54 million) to support small South African businesses.

SABMiller, which is in the process of the being taken over by larger rival Anheuser-Busch InBev, agreed in November to team up with Coke to create Africa’s largest soft drinks bottler, Coca Cola Beverages Africa.

The business will have annual sales of $2.9 billion and ambitions to corner the fast-growing market on the continent.

The all-equity deal was given a preliminary approval in December by South Africa’s Competition Commission, which said it could go ahead on several conditions including Coca-Cola Beverages Africa limiting jobs cuts to 250 and making sure it buys cans, glass, sugar and crates from local suppliers.

The Commission investigates deals for any antitrust issues and recommends remedies to the Competition Tribunal, which makes a final ruling. A Tribunal hearing on the proposed deal is due to start next Monday.

South Africa has a history of taking its time over approving deals, partly because regulators have a public interest mandate to safeguard jobs in addition to an antitrust mandate to protect competition.

“I am very happy that we have reached this agreement and hope we now have a clear path to the conclusion of this transaction,” said SABMiller Chief Executive Officer Alan Clark.

Coca-Cola Beverages Africa will account for 40 percent of all Coke volumes sold in Africa, serving 12 southern and eastern African countries. It will be headquartered in South Africa, its largest market.

The deal would also hand Coke an extra 20 brands, including sparkling soft drink Appletiser, whose fruit juice concentrate is sourced from South African producers.

Coca-Cola and SABMiller agreed to maintain and grow Appletiser production operations to serve the domestic market and use as a base from which to export elsewhere in the world.

The Gutsche family, Coke’s South African bottling partner, will also be a shareholder in the Coca-Cola Beverages Africa.

($1 = 14.6759 rand)

(Reporting by Tiisetso Motsoeneng; Editing by Mark Potter)

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South Africa’s petrol pump price to increase in May

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

JOHANNESBURG (Reuters) – The retail price of petrol in South Africa will increase by nearly 1 percent from May 4, while the price of wholesale diesel will largely remain steady, the energy department said on Monday.

The price of petrol will increase by 12 cents to 12.74 rand per litre in the commercial hub of Gauteng province, while diesel will go down by 1 cents to 10.52 rand per litre, the department said in a statement.

 

(Reporting by Olivia Kumwenda-Mtambo; Editing by Alison Williams)

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Atlas Mara says funding in place for Barclays’ Africa bid

26 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

By Lawrence White

LONDON (Reuters) – Atlas Mara, the African investment vehicle of former Barclays boss Bob Diamond, has held discussions with investors with a view to making a bid for Barclays’ African business, it said on Tuesday.

Atlas said such an acquisition would help it accelerate its strategy to build a major financial firm across sub-Saharan Africa and that it had already lined up funding for an offer, without elaborating on what form the financing would take.

“The consortium has committed, long-term strategic investors, the funding is in place,” Diamond said on a conference call.

Atlas Mara’s equity at the end of 2015 was $625 million, while Barclays Africa has a market value of $8.47 billion, causing some analysts to question whether they can muster the financial fire power to make a serious offer.

“I am very skeptical that they can pull it off quite frankly,” said Zoran Milojevic, a director at Auerbach Grayson, a New York brokerage specialising in emerging and frontier markets.

“However, if this were to happen, they would certainly jump a lot of hurdles, and join the proper playing field in African banking.”

Private equity group Carlyle is one member of the consortium, a source familiar with the matter told Reuters this week following media reports of the U.S. fund’s interest.

Barclays said this year it would sell down its 62 percent stake in Barclays Africa to focus on other divisions. While its business is mainly in South Africa, it has operations in Botswana, Ghana, Kenya, Mauritius, Mozambique and Seychelles.

Atlas said there was no certainty a transaction would be completed but if discussions with investors resulted in more substantive negotiations with Barclays, Diamond and co-founder Ashish J. Thakkar would recuse themselves from the talks.

Shares in Barclays Africa rose 1.2 percent by 1445 GMT while shares in Atlas Mara were up 4.9 percent, but remain down 18 percent so far this year amid a dim outlook for African banking.

“We share your pain, our money is where our mouth is,” Diamond told investors on Tuesday in reference to his and other senior executives’ investments in Atlas’s declining shares.

Founded in 2013, Atlas made four acquisitions in 2014 and now has operations in Botswana, Mozambique, Zambia, Zimbabwe, Rwanda, Tanzania and Nigeria.

But some of those countries have felt the brunt of the global slump in commodity prices, which has sapped government budgets and caused the likes of Zambia and Mozambique to turn to the International Monetary Fund for support. [nL5N17H32A]

Atlas Mara earlier on Tuesday reported profit before tax of $19.2 million for 2015, compared with a pretax loss of $58 million in 2014.

(Additional reporting by Andrew MacAskill and Karin Strohecker; editing by Sinead Cruise and David Clarke)

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South African supermarket chain Pick n Pay to expand into Nigeria

26 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South African supermarket operator Pick n Pay plans to expand into Nigeria next year through a partnership with a local conglomerate, as it seeks to reduce its reliance on its home market, it said on Tuesday.

Pick n Pay already operates in Botswana, Zimbabwe and Namibia and plans to open new stores in Ghana next year. Like many other South African companies it wants to expand further across the continent amid sluggish economic growth at home.

The retailer, which reported a 26 percent jump in annual earnings on Tuesday, said it would take a 51 percent stake in a Nigerian joint venture with conglomerate A.G. Leventis, which runs a food business. It did not disclose the size of the investment.

“We are not suddenly going to explode onto the scene in Nigeria next year but we are going to start the process of looking at all those things,” Pick n Pay’s CEO Richard Brasher told a results briefing, adding that he was aware of tough trading conditions in Nigeria and would not expand hastily.

Nigeria is Africa’s biggest economy but some South African companies that expanded into the west African country, including Dairy products maker Clover Industries and fashion retailer Truworths, have either pulled out or scaled down due to a scarcity of hard currency to import spare parts and raw materials.

Brasher said Pick n Pay was taking a long-term view of Africa’s most populous nation.

“If you’re in the retail business and you are an African business its hard to ignore Nigeria,” he told Reuters.

Gryphon Asset Management analyst Reuben Beelders said he backed Pick n Pay’s conservative approach to Nigeria.

“People have realised that Africa is not just going to be a pot of gold at the end of the road, it’s a lot of graft and it’s going to need long-term investment rather than something that happens quickly,” Cape Town-based Beelders said.

Pick n Pay has lost ground in South Africa to rivals such as market leader Shoprite, after failing to invest in new stores. But Brasher, a former UK head of Tesco who took over in January 2013, is implementing a plan to win back market share.

Pick n Pay said headline earnings per share (EPS) rose 26.4 percent from a year earlier to 224.04 cents in the year to the end of February, helped by cost-cutting measures. Headline EPS, a measure that excludes certain one-off items, is the profit figure most widely used in South Africa.

The company declared a final dividend of 125.20 cents per share, bringing the year’s total payout to 149.40 cents, 26.5 percent higher than the previous year.

Shares in Pick n Pay, which are up nearly 30 percent over the last year, inched up 0.58 percent to 69.89 rand by 1215 GMT.

 

(By Zandi Shabalala. Editing by James Macharia and Susan Fenton)

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South Africa could extend talks on proposed empowerment rules

22 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa could extend consultations on a draft law opposed by mining companies that say the move to redress imbalances of the nation’s past apartheid rule would impose unfair conditions over black ownership.

Mining minister Mosebenzi Zwane announced the potential extension at a business briefing on Friday and later said that talks with the industry over the proposed changes to the Mining Charter would take place next Monday and Tuesday.

The new draft of the charter says that companies must be at least 26 percent black-owned at all times, even if some of the black shareholders choose to sell out.

Mining companies argue that after they have complied with the 26 percent black empowerment rule it shouldn’t be their responsibility to monitor the ownership balance continually.

A 30-day consultation period started when the draft law was published last Friday, but the mining industry has said this is not long enough.

“Should it be necessary for us to go beyond 30 days that call will be made as the necessity arises,” Zwane said. “Rather than us complaining about time, let’s engage.”

The news about next week’s talks was announced by Zwane at AngloGold Ashanti’s TauTona mine west of Johannesburg, where he said: “It (the draft law) is just a proposal, which is why we are saying ‘come, let’s talk’.”

The Chamber of Mines, which represents companies such as Anglo American and Glencore, said it was not consulted about the proposed changes and that the draft law comes at a difficult time for commodity producers contending with depressed prices and rising costs.

“We are saying it’s a tough time and, for us to regulate and go through these processes right now, the industry is taking strain,” the chamber’s president Mike Teke told Reuters.

AngloGold CEO Srinivasan Venkatakrishnan, meanwhile, said that judgment should be reserved until after “robust engagements and discussions” have been completed.

“We have high expectations,” he said of the talks.

Failure to meet the empowerment targets could result in mining permits or rights being revoked.

“This draft seems to me like all stick and no carrot for the industry,” said one fund manager at a large South African firm. “The whole situation adds another layer of confusion.”

A court process is under way to clarify the “once-empowered, always-empowered” principle and could have an impact on the draft bill.

Zwane said that investors should not be concerned by the bill because the process will be transparent and inclusive.

“I don’t foresee a situation where investors should be scared of people practising their democratic right to engage,” he told Reuters. “Let’s get real with the issues, let’s talk.”

 

(By Zandi Shabalala. Additional reporting by Ed Stoddard; Editing by James Macharia and David Goodman)

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South Africa expects jump in maize imports due to drought – minister

21 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

CAPE TOWN (Reuters) – With two weeks left in the current marketing season, drought-hit South Africa has imported 1.732 million tonnes of yellow maize and 72,000 tonnes of white maize in line with expectations, the agriculture minister said on Thursday.

The country will significantly increase imports in the next season when 2.4 million tonnes of yellow maize and 1.9 million tonnes of white maize will be shipped to its shores, Agriculture Minister Senzeni Zokwana told parliament.

(Reporting by Wendell Roelf; Editing by James Macharia)

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Dubai Islamic Bank aims to open in Kenya before year-end: sources

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

DUBAI/NAIROBI (Reuters) – Dubai Islamic Bank (DIB) plans to be operating in Kenya before the end of 2016, despite the Kenyan authorities’ moratorium on issuing new banking licences, according to sources familiar with the matter.

The largest Islamic bank in the United Arab Emirates will start operating at a time when Kenyan banks have come under closer scrutiny from the regulator because of increasing bad debts, prompting officials and analysts to conclude the sector is ripe for consolidation.

Three medium-sized and small banks have been taken over by the regulator since August last year, with the latest, Chase Bank Kenya, taken over earlier this month after a run on deposits.

In November the central bank placed a moratorium on the licensing of new commercial banks in an attempt to bring stability to an industry that has more than 40 banks.

But DIB had been in talks with the regulator before then, meaning a decision on its licence would not be affected by the moratorium, the sources said.

DIB is now awaiting the final go-ahead from Kenya’s central bank, said the sources, as it has already been granted outline approval for a commercial banking licence having planned to open in Kenya last year, only to find the process had taken longer than expected.

In a statement the central bank said on Monday it was processing an application for a banking licence from DIB Bank Kenya, without elaborating.

A separate source at the central bank said DIB was one of a couple of banks expected to start operations in the country this year.

No one at DIB responded to a request for comment.

DIB has already recruited staff for its Kenyan operation, which will initially comprise three branches offering consumer, corporate and treasury services, the sources said.

Kenya will not be DIB’s first foray overseas. It holds stakes in banks in Pakistan, Sudan, Jordan, Bosnia and late last year raised its stake in Bank Panin Syariah, the Indonesian sharia-compliant lender, to 39.6 percent, according to a presentation on the bank’s website.

It would become the third Islamic lender to operate in Kenya, where Muslims account for about 10 percent of the population of some 44 million.

 

(By Tom Arnold and Duncan Miriri. Editing by Greg Mahlich)

 

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South Africa’s dollar bond oversubscribed despite political cloud

8 April 2016 Comments (0) Africa, Business, Latest Updates from Reuters

JOHANNESBURG (Reuters) – South Africa has successfully issued a dollar bond overseas to help finance its medium-term foreign currency commitments, the Treasury said on Friday, touting this as a sign of investor confidence despite political upheaval.

Finance Minister Pravin Gordhan has been anxious to reassure investors about continuity in fiscal policy after President Jacob Zuma changed finance ministers twice in less than a week in December, triggering a panic run on the rand.

On Friday, the Treasury said its $1.25 billion 10-year bond, with a coupon of 4.875 percent, had been more than two times oversubscribed, mostly by investors based in Europe and the United States.

“The South African government sees the success of the transaction as an expression of investor confidence in the country’s sound macro-economic policy framework and prudent fiscal management,” it said.

Zuma, who has been dogged by controversy over the past decade, is under mounting pressure to quit after the Constitutional Court found he flouted the law by not heeding a directive to make payments for upgrades to his personal home.

Ratings agencies, most recently Standard & Poor’s, have warned they might downgrade South Africa if political issues divert the government’s attention from properly implementing policy.

S&P and Fitch both rate South African credit just one notch above junk, while Moody’s is two notches over sub-investment grade.

Analysts said South Africa had benefited from a general rise in demand for high-yielding emerging market assets after the U.S. Federal Open Market Committee (FOMC) signalled it might be a while before U.S. rates rise.

“There was clearly a window here for them to issue after the FOMC reprice and before a wall of downgrades from the ratings agencies,” Nomura analyst Peter Attard Montalto said.

“They have significant forex deposits already so they can probably wait until next year for the next issuance.”

The rand extended gains against the dollar after the Treasury’s statement, climbing to a session high of 15.0155, up 1.5 percent for Thursday’s close.

Government bond prices also rose, sending the yield on the benchmark bond due in 2026 down 8.5 basis points to 9.19 percent.

The Treasury said the new foreign bond formed part of South Africa’s 2016/17 financing programme and would partly finance foreign currency commitments of $6.4 billion over the medium term.

The coupon for the bond represents a spread of 335 basis points (bps) above the 10-year U.S. Treasury benchmark, which analysts said was in line with South Africa’s current funding rate.

“I don’t think it’s too expensive,” said Rand Merchant Bank trader Gordon Kerr.

The price compares to initial thoughts of plus 350 bps and guidance of plus 335 bps, plus or minus 5 bps.

“There is always demand for our paper and there will always be demand for EM in general because of the nice yields that it provides,” Rand Merchant Bank trader Gordon Kerr said.

 

(By Stella Mapenzauswa. Additional reporting by Olivia Kumwenda-Mtambo in Johannesburg and Claire Milhench in London)

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