Motsoaledi: NHI may reduce medical costs

Aug 12 2011
Sapa


Cape Town - The National Health Insurance (NHI) scheme, unveiled in a green paper on Friday, may be good news for those paying what the document describes as "exorbitant fees" for private health sector services.

"It will actually make the sector more sustainable by making it levy reasonable fees," Health Minister Aaron Motsoaledi said in a statement marking its release.

The green paper pulls no punches on the high cost of private healthcare.

"Over the past decade, private hospital costs have increased by 121% while over the same period, specialist costs have increased by 120%.

"This means that the private healthcare sector will have to accept that the charging of exorbitant fees completely out of proportion to the services provided has to be radically transformed," the document states.

Such overpricing had led to the collapse of many medical schemes over the past decade.

"A number of medical schemes have collapsed, been placed under curatorship, or merged. They have reduced from over 180 in the year 2001, to about 102 in 2009. This was mainly due to overpricing of healthcare."

In an effort to keep their heads above water, many schemes increased their premiums, often at rates higher than CPIX (consumer inflation).

"When this was not successful, the schemes resorted to decreasing members' benefits. This has led to an increasing number of members exhausting their benefits mid-year or towards the end of the year."

The extent of co-payments that scheme members were required to make "confirms that the current system does not provide full cover".

The green paper, accepted by cabinet on Wednesday this week, proposes a phase-in of the NHI over the next 14 years. Once in place, it will cover all South Africans and legal permanent residents.

"Membership to the NHI will be mandatory for all South Africans. Nevertheless, it will be up to the general public to continue with voluntary private medical scheme membership if they choose to.

"Accordingly, medical schemes will continue to exist alongside NHI. However, there will be no tax subsidies for those who choose to continue with medical scheme cover.

"The exact form of services that medical schemes will offer may evolve to include top-up insurance. However, no South African and legal permanent resident can opt out of contributing to NHI even if they retain their medical scheme membership."

Noting that the World Health Organisation (WHO) recommends that countries spend at least 5% of their gross domestic product (GDP) on healthcare, the green paper finds South Africa is not getting the sort of return on its health spending it should be.

It places most of the blame for this on "inequities" between the public and private health sectors.

"South Africa already spends 8.5% of its GDP on health, way above what the WHO recommends. Despite this high expenditure, the health outcomes remain poor when compared to middle-income countries."

According to the Council for Medical Schemes, the private health sector in South Africa covers just 16.2% of the population.

In his statement on Thursday, Motsoaledi said for the NHI scheme to succeed, service in public hospitals had to improve and the cost of private healthcare "tackled equally seriously".

"I cannot overemphasise this, but clearly, without these two, the NHI will not be viable," he said.

Funding of the NHI scheme would include an obligatory levy on salaries. The level of income above which NHI contributions would be compulsory still had to be determined by National Treasury. According to a table at the end of the green paper, the start of compulsory contributions appeared to be at least five years away, if not longer.

According to the document all NHI revenue collection will be done by the SA Revenue Service, including the mandatory contribution.

On the cost of setting up the NHI, it will require R125bn next year, rising to R255bn in 2025.

"Resource requirements... increase from R125bn in 2012, to R214bn in 2020, and R255bn in 2025, if implemented gradually over a 14-year period."

The current health medium-term expenditure framework budget is R101bn. This figure does not include health spending by departments such as defence and correctional services.

Spending on medical scheme contributions was R90bn in 2009, the most recent year for which figures are available.

According to the green paper, the NHI aims to offer benefits "of sufficient range and quality that South Africans have a real choice as to whether to continue medical scheme membership or simply draw on their NHI entitlements".

It says all members will be issued with an NHI card.


Banks to retrench workers

Aug 11 2011

Sapa


Johannesburg - Retrenchments are looming in the home loan departments of two of the four major banks, according to Business Report on Thursday.

Chief executive of First National Bank (FNB) Home Loans, Jan Kleynhans, confirmed that the bank was restructuring its sales department.

"At the moment we have just taken the first steps by advising some 90 people who may be affected. FNB Home Loans has nearly 1 000 employees.

"It is too early to say how many affected staff will ultimately leave FNB. Our first objective is to redeploy people into other positions in the wider banking group," he said.

Absa Group [JSE:ASA] declined to give details, but the deputy group chief executive, Louis von Zeuner, said Absa continued to focus on programmes that enhanced efficiencies and effectiveness by reducing duplication.

The looming cuts follow the slump in the residential property market, which resulted in a contraction in the number and value of home loans approved and granted.

This was highlighted last week by director of home loans at Standard Bank Group [JSE:SBK], Funeka Ntombela, who said the market was worth R350bn in 2006/07 but "if we are lucky" would be worth R120bn this year.

FNB last month confirmed its monthly volume of home loan applications had fallen to 10 000 from between 30 000 and 35 000 at the peak of the property boom in 2006.

Ntombela said Standard Bank continued to manage its costs but neither the group nor home loans was planning any retrenchments.

The managing executive of Nedbank Group [JSE:NED] Retail Secured Lending, Keith Hutchinson, said Nedbank viewed its staff as vital contributors to the bank's success and remained focused on strengthening its relative competitive position.

Panic returns to global markets

Aug 10 2011

Sapa and Reuters


New York - US stocks have plummeted Wednesday, more than wiping out the gains of Tuesday's rebound, with the Dow Jones Industrial Average dropping 4.63%.

The broader S&P 500 fell 4.42%, while the tech-heavy Nasdaq lost 4.09%.

European bank stocks fell on worries that the region's debt problems are getting worse. That pulled down US bank stocks. Financial stocks in the S&P 500 lost more than 7%.

Societe Generale fell more than 21% before the French bank issued a denial that it was in difficulties.

The drop erases Tuesday's big gain following a Federal Reserve pledge to keep rates low. The Fed said it expects the recovery to remain slow.

The rand weakened more than 2.3% against the dollar on Wednesday, ranking among the worst performers in a basket of emerging market currencies as global uncertainty kept investors jittery about high risk assets.

Government bonds rallied during Johannesburg afternoon trade - although they later retreated - as market players priced in a slight chance of an interest rate cut due to a bleak outlook for domestic growth, which is heavily reliant on global demand.

Stocks gave up most of their earlier gains after a plunge in European banks helped trigger a sell-off in local lenders such as Nedbank . Resource stocks, however, held on to their gains despite the turn around in fortunes.

The JSE All Share [JSE:J203], the broadest measure of the Johannesburg Stock Exchange, ended 0.9% higher at 28 658.57 on the day.

The rand plumbed a session low of R7.28/$ and was at R7.359/$ in early evening trade, down 1.8% on Tuesday’s close in New York. This left it in the bottom six of 20 emerging market currencies monitored by Reuters.

The JSE reported a record 230 797 trades on Wednesday valued at R29bn.

South African markets were closed for a public holiday on Tuesday.

The new record is 12% higher than the previous one of 205 784 trades set on June 17 2010


Why SA won’t nationalise mines

Aug 03 2011

Reuters


Johannesburg - Despite mining minister Susan Shabangu’s reluctance to say it, South Africa is not going to nationalise its mines.

Even a cursory glance at the numbers is enough to show that the call from Julius Malema, the silver-tongued leader of the ruling ANC’s Youth League, has its roots in the frustrations and anger of millions of young blacks rather than practical reality.

Since Malema pushed the issue to the fore 18 months ago, several attempts have been made to put a price tag on the state taking over what is the world’s fifth-biggest mining industry despite its poor performance since the end of apartheid in 1994.

All the estimates are more than enough to bankrupt the government.
As a rough guide - and the one put forward by the industry - the market capitalisation of listed mining firms in South Africa, including dual-listed giants such as Anglo American and BHP Billiton, is $270bn, nearly half the value of the Johannesburg stock market and two thirds of South Africa’s gross domestic product.

Even if the government was only to take a 50% controlling stake, that would still imply an outlay of $135bn, roughly equivalent to the entire 2011/2012 budget.

Furthermore, threats to tweak laws in order to expropriate shares for a fraction of their value are rendered empty by international investment guarantees that would almost certainly trigger severe backlashes from South Africa’s trading partners.

“Quite frankly, the figures are irrelevant because the compensation bill will be absolutely staggering,” said Peter Leon, a mining expert at Johannesburg law firm Webber Wentzel.
“Malema’s answer that you just have to amend the constitution is not going to cut any ice because most of these companies are protected by bilateral investment treaties which provide for full market-value compensation.”

Crusade

Despite the compelling numbers stacked up against it, Malema’s crusade has become South Africa’s most talked about topic, eliciting fierce passions on both sides of the fence.

On one side have been advocates of the status quo, who are terrified of the idea of more state control, especially given South Africa’s less-than-stellar history of running public firms.

“If the nationalisation debate grinds on for many more months, there will be fewer new businesses, fewer new jobs, more poverty and less development for decades to come,” Sim Tshabala, CEO of Standard Bank South Africa, wrote last month.

On the other side are the legions of unemployed and poor who have seen little change since white-minority rule ended 17 years ago and for whom the African National Congress’s 56-year-old Freedom Charter - in particular its pledge to transfer “the mineral wealth beneath the soil... to the ownership of the people as a whole” - retains a utopian allure.

This latter group puts the former liberation movement in a bind and helps explain why Shabangu is loath to go beyond the mantra, repeated once again on Tuesday, that “nationalisation is not government policy”.

Increasingly, however, senior ANC officials are acknowledging the damage being done to the country’s reputation as a promising emerging market investment destination.
“We know the harm this acrimonious and reckless debate about nationalisation is doing to investments, to the good image of our country,” public enterprises minister Malusi Gigaba said this week.

Hidden agenda

Some say it is also becoming apparent that Malema’s motives may not be entirely pure, with a chorus of increasingly important figures saying he is a front for vested black business interests rather than some modern-day South African Robin Hood.

In particular, the finger of suspicion falls on affirmative action investors who have hit hard times since buying stakes in mining firms under a black economic empowerment (BEE) drive to redress the imbalances of apartheid.

Many such deals were based on hefty borrowing, which made sense before the collapse of commodity prices and mining shares in 2008 that left dividend revenues well short of debt repayments.

BEE investors pumped more than R100bn into mining-related deals between 2004 and 2008, according to Empowerdex, a consultancy, and those in trouble now want a state bailout, the theory goes.

“The call for nationalisation by elements within the ANC Youth League is to save the black economic empowerment elements in crisis and not to address the interests of the workers and the poor,” Communist party chief and Higher Education Minister Blade Nzimande said last month.

“Ten years from now, they will be calling for privatisation, after the state has inherited the debt.”


Foreign investment in SA dives in 2010

Jul 27 2011

Sapa

Johannesburg - South Africa's share of foreign direct investment (FDI) fell 70% in 2010 from the previous year, according to a United Nations Conference on Trade and Development report released on Tuesday.

South Africa "saw its inflows fall by over 70% to $1.6bn, a level amounting to only one-sixth of the peak recorded in the country in 2008", according to the World Investment Report 2011.

However, Prof Stephen Gelb of the University of Johannesburg cautioned that FDI did not give "the full story", as foreign flows were not just about money.

"It's about the entry into the economy of a bundle of resources," he told reporters.

These included money, skills, business models, management capabilities, and new products and process.

"This is much more important for long-term growth than US dollars."

It was however difficult to measure these benefits across countries, he said.

South Africa ranked tenth in Africa in 2010 in terms of inflows received, and received just under 3% of the African total of FDI. It had dropped from fourth place in 2009, when it received 9% of total inflows to the continent.

Angola was the top-ranked African country, followed by Egypt, Nigeria and Libya.

South Africa's share of FDI in 2010 put it 69th in the world rankings.

To put this in perspective, Chile received $15bn and ranked 19th. Indonesia received $13bn and ranked 20th, Gelb said.

The FDI performance index - which looks at the share of FDI inflows making up gross domestic product (GDP) - puts South Africa 128th in the world, far behind the 85th place it achieved in 2009.

Burkina Faso was ahead of South Africa at 127th, and Italy was in 126th place.

Gelb expected South Africa's performance to improve this year.

"2010 performance for South Africa was possibly an aberration... we're likely to do much better."

According to data from the SA Reserve Bank, South Africa received $707m in FDI in the first quarter of 2011. This was almost half the $1.6bn in FDI received in the whole of 2010.

It was not only South Africa that did badly. Africa's FDI performance in 2010 was "not great", Gelb said.

"Africa did not share in the rise in FDI inflows experienced by other developing economies."

The continent's FDI inflows for 2010 fell 9% from 2009, to $55bn.

In 2010, Africa received 10% of the developing economy inflows and 4% of world inflows.

This compared to 2009 when Africa received 12% of developing economy inflows and five percent of world inflows.

Overall, developing economies did well, attracting 52% of FDI inflows which was the first time they had taken the lion's share from developed countries.

In another global first, emerging economies made up 10 of the top 20 recipients of FDI inflows, with China and Hong Kong leading the way, followed by Brazil.

Outward flows of FDI from developing economies also increased to about one-third of the global total. This was a big increase from 16% in 2009.

"In addition to strong performance in attracting foreign direct investment, developing countries became much more important in terms of sources of FDI flows into other economies," said Gelb.

Most of this was south-south investment, with 70% of the FDI flowing between developing economies.

Global foreign direct investment had not returned to pre-financial crisis levels, although it had shown some recovery.

It rose 5% to $1.24 trillion in 2010, but was still 37% below its 2007 peak.

According to the report, barring any economic shocks, FDI should recover to pre-crisis levels in the next two years.


Business concerned by labour issues

Jul 11 2011 11:50

Sapa


Johannesburg - Businesses are increasingly concerned about labour issues in South Africa, according to a survey of SA Chamber of Commerce and Industry (Sacci) members released on Thursday.

"Members cited the skills shortage and the potential for job creation as most concerning," said Sacci president Chose Choeu in a statement.

He said members were also concerned about proposed labour law amendments and continued calls by trade unions to ban labour brokers even though these issues were now being negotiated at the National Economic Development and Labour Council (Nedlac).

"The strike action currently being experienced as well as strikes that are threatening are also a contributing factor."

Several trade unions, representing about 170 000 workers in the metal and engineering sector, started a countrywide strike on Monday.

On Wednesday, the National Union of Mineworkers said its members in the gold sector were ready to strike, should negotiations with the Chamber of Mines fail to yield results.

The Chemical, Energy, Paper, Printing, Wood and Allied Workers' Union, the National Education, Health and Allied Workers' Union and workers in the finance sector were also threatening to down tools.

"Increased wage and administrative costs associated with significantly above inflation wage demands by unions, will later be passed on to consumers and may have the consequence of reduced employment," said Choeu.

Sacci would hold a meeting on July 13 to discuss labour issues, including the role of Setas in technical skills training, the experiences of other countries in skills development, the job creation objectives of the New Growth Path, youth employment, and the National Planning Commission's diagnostic document.


Little scope for Walmart appeal - experts

10 June 2011 

Reuters

Johannesburg - South Africa has little room to fight its own regulators over the approval of Walmart's R16.5bn bid for control of local retailer Massmart Holdings [JSE:MSM], lawyers said on Wednesday.

The Competition Tribunal approved the US firm's acquisition of Massmart with minimal conditions on Tuesday, prompting three government departments that opposed the deal to warn they could consider an appeal.

But such a legal move is unlikely, said Lulama Mtanga, a director at law firm Bowman Gilfillan.

"All the government departments who opposed the merger cannot take their argument any further," she said. "It is, therefore, the end of the road for these parties."

The departments of economic development, trade and industry, and forestry and fisheries said in a joint statement they would need further study to determine whether the conditions imposed on Walmart - such as a two-year freeze on job cuts - were sufficient to prevent widespread job losses.

"Based on the outcome of the study of the conditions and the responses of Walmart/Massmart, we will decide on the next steps to take. Government reserves its legal options at this stage," the departments said.

Alexis Apostolidis, head of Competition Law at law firm Adams & Adams said the government would first have to prove to a court that it has the right to an appeal.

"If they choose to appeal ... it would be opposed on the basis that they don't have locus standi," he said, referring to the right to address a court on a matter.

Union chance

But South Africa's powerful unions, which also opposed the deal and are considering their own appeals, may have a better chance at legal action, experts said.

"Only the merging parties and trade unions or employees can take a merger on appeal to the Competition Appeal Court," Mtanga said.

Any appeal could delay the deal first announced in September last year and but it is unlikely to put off Walmart's first foray in what should be a bright growth spot on the map, analysts said.

Shares in Massmart (MSM) were up 0.73% at R143.60, holding on to Tuesday's gains when the competition authorities gave the deal a nod and underscoring investors' optimism that deal is near completion.

"Obviously you can never be 100% sure about these things, but the reports that have come out are not enough to suggest that the deal is at risk," Martin Lentsoane, a trader at NEWS Trading said.

"The market is telling you that the deal will go through."

The rand currency extended recent gains to a three week high of R6.7720/$ against the dollar on Wednesday, partly on expectations of foreign currency inflows from the acquisition.

Walmart's head of international operations Doug McMillon said on Tuesday he hoped to finalise the acquisition in the next few weeks.

The deal was a test case for major foreign investment in South Africa, which has the continent's deepest capital markets but where unions are in a coalition with the ANC.

A government appeal could shake investor confidence in South Africa, some analysts have said.

"I struggle to understand or come to terms with government. Are they anti-business?" said David Shapiro, a fund manager at Sasfin Holdings.


Seven Ways to Make Your Customers Love You

03 June 2011



These days, every customer counts.

So why then do companies lose them? Between moving away or passing away and switching to a competitor -- the excuses are many for why customers may jump ship. But the No. 1 reason why customers bail is the feeling of indifference toward a product or service.

To counter this ambivalence, it’s key to make sure your customers feel and perceive that they're wanted and want to stay where they're appreciated. But to make customers love you, you'll have to work even harder. Here are seven ways to win the devotion that makes for loyal customers:

1. Never assume.
You may think you know what customers want. But what if you're wrong? The main reason such a high percentage of new businesses fail is because those companies are trying to create demand where there isn’t any, or they're built around untested or unproven ideas that are hard pressed to attract even a small sampling of customers.  Don’t make the same mistake. Test and start small, and build your product, service or value proposition around the wants, needs and desires of your target customer. Not only will you get a better understanding of customer needs, you’ll be able to identify innovative ways to solve their problems and exceed their expectations.

2. Always deliver.
To win customers back, you need to deliver on time, every time. If a problem arises, inform your customer right away. Explain how you're going to deal with it. Then follow up again -- and again -- to ensure positive results. This also goes for your invoices and any correspondence. You might even create a system to ensure that each task gets completed correctly and is always delivered in a timely fashion.

3. Personalize loyalty programs.
In order to ensure you have a winning loyalty program, you must plan, design and execute it in a systemized way. Plus, you need to show the value of it and continually demonstrate that value to your team. An example of a really big company that does this on a personalized level is Caesars Entertainment, which has mastered the art of customer loyalty programs on a massive scale to drive profit.
For instance, Caesars knows, down to the penny, just how much its top customers are likely to spend at any of its properties, and what types of activities individual customers prefer when they stay -- be it gaming, dining or taking in a show. This knowledge allows the company to issue customized offers that may be more appealing to Caesars’ best patrons.

4. Train your staff.
Here’s where scripting comes in. Use periodic training sessions to help give your team the skills that are necessary to boost your company’s reputation, trust, empathy, flexibility and verbal communication proficiency. This is vital because each customer contact with your team is an opportunity to build your reputation -- or destroy it.

5. Say “Thank You.”
Sounds obvious, but consider this: When was the last time you received a thank-you note from a company you do business with? Or any notice, other than when a payment is due? This simple strategy can really make an impact and says a lot about your company and the value you place on customers.

6. Stay connected.
While the frequency may vary, every customer should receive an off-line “touch” at least once per quarter and, with an email or e-newsletter, even more often. For instance, once a week with an “opt-in” message may do the trick. Over time, you can develop a relationship with your customers, especially if your “touches” are information or educationally-oriented and are designed to add value to their experience with you, rather than just as a mechanism for pushing products or services.

7. Play favorites.
New customers are critical to growth, but you must ensure that current or long-standing customers get VIP treatment as well. Nothing is worse for loyal customers than to see products or services they bought at full price discounted to entice new customers. You can turn this around by offering exclusive loyalty programs, deals or specials geared specifically to your best and most loyal customers.


Don't lose the plot

07 March 2011


THE Finweek marketing manager has taken to calling me the unofficial PR agent for Allon Raiz and Raizcorp, so I promise this will be the last column that mentions either of these two entitities for a while.

For those who don't know, Allon has recently released a book called Lose The Business Plan which is a must-read for any existing or aspiring entrepreneur.

I am not going to bore you with all the details but as the name implies, the book suggests that way too much emphasis is put on a document called The Business Plan. Entrepreneurs find themselves unable to react to circumstances when things don't go according to the plan - which happens all too often.

This has of course been followed up by a number of blog posts from various experts, arguing that business plans are "meaningless" and don't have any value to add.

Many of these bloggers love the angle that business plans don't hold any value - right up until the time they need to bow and scrape for funding.

Don't get me wrong; I've seen the good and the bad of business plans.

Last year I was involved in judging a small and medium enterprise (SME) competition, which required entrepreneurs to submit business plans so they could pitch for funding.

A number of the entrepreneurs were so intimidated by the idea of a plan that they paid outside consultants thousands of rands to put together business plans, detailed cash flows and so on.

The moment the judges started poking at those plans and presentations the entrepreneurs were stuffed. In some presentations we saw the consultants had literally made up figures for the business to get it through the initial phase of the competition.

A plan is useless if it's too complicated for the entrepreneur it is supposed to represent. It certainly becomes meaningless when it over-promises what an entrepreneur can do, and is there essentially to mislead in the hope that somebody will be suckered into dishing out financing.

Remember, funders still back the entrepreneur - not a piece of paper.

Having said that, for all its faults don't knock the business plan.

Arm yourself with knowledge, not a machine gun approach

Earlier this week I sat through a presentation for an SME looking for a R1.2m deal. One of the aspects which really stood out for the organisation they had approached was how much legwork this SME had put into the proposal. It had investigated the market, mentioned competitors and talked about what skills they had.

Funny thing is that when somebody is looking to put R1.2m into the business, this can be a hugely reassuring asset.

One of the major complaints reported by the venture capital (VC) industry in South Africa is that the quality of presentations it receives from entrepreneurs seeking financing is so poor that many of the potential deals end up being rubbished in minutes.

I am reminded of the story one VC told me about a pitch he received from a South African who wanted to start a "new internet". It would be "like the internet but it would be managed out of South Africa" (true story).

When the VC asked how it was going to make money, he asked whether this entrepreneur would be open to pornography on his new internet. Considering that by 2007 the global porn industry was valued at $2.84bn in the US alone and revenue was estimated to be earned at $89 a second, this seemed like a viable question.

The would-be entrepreneur responded by saying that in his new internet, porn would not be allowed and the VC shouldn't be too caught up in the idea of generating revenue from it.

The VC was prepared to at least entertain the idea of a new internet, but when the entrepreneur couldn't show any evidence of work put into identifying revenue channels and what sectors were working, he drew the line.

The business plan is certainly not the be-all or end-all of the path to starting a new business. Heck, most entrepreneurs will tell you that their businesses don't look like what they initially envisioned. But many will tell you that if they had to unpack their businesses now, they'd be able to tell you what works and what doesn't.

I am pretty sure that no cash flow statement which claimed your start-up would be paying you by month three has ever really panned out.

I've said it before in this column and I will say it again. Too often entrepreneurs go in gung-ho, trying a machine gun approach to business which says that you should shoot as many bullets as possible and hope you succeed.

Rather go out there with an idea about where best to focus your attention and energy. If you are armed with this knowledge, better deals and more business will come your way.


- Fin24

 

Gordhan’s budget includes youth wage subsidy in R150bn jobs plan

23 February 2011

 

Gordhan said in his budget speech on Wednesday that the government would allocate R5-billion over three years from April 2012 to encourage employers to take a chance on inexperienced workers.

This was in addition to the R9-billion job creation fund announced by President Jacob Zuma in his state of the nation address 10 days ago and other programmes with a total value of over R150-billion over the next three eyars.

Cosatu has consistently opposed a youth wage subsidy, saying it would create a two-tier labour market and encourage employers to get rid of workers as soon as their subsidy falls away.

Gordhan said 42% of young people between the ages of 18 and 29 did not have any work.

“We must offer young work-seekers real hope where at present there is despair. We need to do things differently,” he said.

The subsidy is expected to apply to about 423 000 young workers, of whom about 178 000 would not have found jobs without it. Each job will cost R28 000.

Buoyed by better-than-expected personal tax collections, Gordhan was able to add R94-billion to the existing plan for government spending over the next three years – an increase of 9.1%.

Stressing the need to save on non-essential spending and to allocate the state’s money to projects that will sustain the economy and grow jobs, he told MPs: “Now is the time to do extraordinary things.”

He announced tax relief to individuals worth a total of R8.1-billion in the year from April, including compensation for inflation and the effect of inflationary wage increases on tax brackets.

But with corporate tax coming in below target, Gordhan was not able to deliver on his February and October 2010 promises for budget deficit reduction.

Government borrowing is set to soar, making the state’s interest bill the fastest-growing expenditure item.

The budget deficit, which is the shortfall between revenue and expenditure that has to be covered by borrowing, is forecast today to come in at 5.3% of GDP for the current financial year. That is the same as Gordhan’s medium term update in October.

But whereas Gordhan had forecast last February that the 2011/12 deficit would be 5%, which he lowered in his October update to 4.6%, he is now saying the figure for the new fiscal year is likely to be 5.3%.

The deficit prediction for 2012/13 has worsened from October’s 3.9% estimate to a new forecast of 4.8%, dropping to 3.8% in the year to March 2014.

Gordhan stressed, however, that the government’s policy would remain focused on fighting inflation, fiscal discipline and stabilising the foreign value of the rand.

Without citing economic growth or job creation, he reaffirmed that the primary mandate of the SA Reserve Bank would be to fight inflation.

“We expect the governor of the Reserve Bank to be vigilant in monitoring inflationary pressures and ensuring that monetary policy is effective in meeting our inflation targets.

“The credibility of monetary policy in achieving our target inflation range, combined with our commitment to fiscal discipline, are important foundations for moderating exchange rate volatility,” he said.

Gordhan included the usual increases in “sin taxes” on cigarettes – 80 cents a pack – and alcohol and added 18 cents in additional taxes to the cost of a litre of petrol.

He also gave notice of his intention to change the rules of gambling. From March next year, the government will take 15% of all winnings over R25 000, including from the national lottery.

But he did find another R24.3-billion to add to planned spending on education over the next three years, with R8.3-billion going to build and repair schools and R9.5-billion to expand further education and training colleges.

He allocated R8-billion to lay the foundations of a National Health Insurance scheme, including R1.2-billion over the next three years to launch a family health system based on local teams of doctors, nurses and community health workers.

He said the number of people on ARV treatment to control HIV/AIDS would rise from 1.2 million this year to 2.6 million by April 2014.

Of R12.8-billion added to planned spending on police, courts and prisons over the next three years, R2.1-billion will be used to increase the police force from 190 000 now to 202 260 by 2014.

Though he said infrastructure spending would remain the central pillar of the economic growth and job creation drives, Gordhan’s budget shows a steady decline in the huge budget for infrastructure ranging from roads to pipelines.

But he did announce plans to help the government spend that money better at national, provincial and local levels.

“The public sector’s record on infrastructure expenditure is not great,” the Treasury said in a statement explaining the need for centralised planning support.

The public sector failed to spend R12.4-billion in the year to 2010 that had been allocated for capital spending and local governments, where the capacity is lowest, left 17 cents of every rand allocated for infrastructure unspent.

Anticipating objections that are likely from Cosatu, the SACP and some sectors of civil society, Gordhan acknowledged that his proposals included hard choices.

“This budget sets us on a path that will be neither easy nor uncontested – hard work and difficult choices lie ahead,” he said.

The government would cut R30-billion in spending on low-priority projects and redirect that money to “frontline service delivery”.

Every department was required to cut its budget by 30 cents for every R100 for the single purpose of adding R6-billion to the National Student Financial Aid Scheme.

StatsSA reported yesterday that economic growth in 2010 was a better than expected at 2.8% of GDP, and Gordhan said he saw real economic growth increasing by 3.4% this year, 4.1% next year and 4.4% in 2013.

One contributor would be an average real growth in exports of 6.5% a year over the medium term while inflation is expected to remain within the 3% to 6% target range.

Gordhan said it was time to take on the banks and drive down their costs.

“I believe it is time to put in place measures that will ensure that banking charges are fairly set, are transparent and do not create undue hardship,” he said.

He said the Treasury would release three discussion papers covering financial sector regulation, the regulation of foreign direct investment and on the prudential framework for institutional investors.

He sounded an alarm about the state’s escalating debt burden and said he would propose a set of guidelines to parliament to ensure that the children of this generation do not have to pay for its profligacy.

“To ensure that our spending on schools, hospitals and roads is not crowded out by an ever-rising interest burden, government debt needs to be managed sustainably. We don’t want an unmanageable increase in expenditure, nor do we want the severe austerity measures some western countries have had to adopt,” he said.

The country’s overall debt level was still moderate by international standards. The interest bill that goes with that debt is the fastest-growing category of government spending and is forecast to rise from R77-billion in 2011-12 to R104-billion in 2013-14.

Also soaring is the cost of public sector wages. Almost R40-billion of the additional R94-billion in spending that Gordhan announced for the three years from April to March 2014 will go to the cost of last year’s public sector wage settlement.

Gordhan said the public sector wage bill had doubled over the past five years to R314-billion and now accounted for R4 of every R10 the government spends.

Spending on land reform and rural development, the last of the government’s five priorities, edges up from R19-billion in the new financial year to R21-billion in 2013-14, including R400-million to support new and inexperienced farmers.

Gordhan said tax revenue in the current financial year was up 12.3% on the previous year, when the global recession was at its height, but the improvement was based mainly on personal taxes. Corporate tax receipts were still below forecast.

The tax collection spotlight will now turn from private to corporate taxpayers with additional measures to counter fraud and a door-to-door drive among informal businesses to ensure that they register for tax and pay if they ought to.

Gordhan said various initiatives to counter tender corruption had already netted or identified almost R6-billion in tender fraud and unpaid taxes on government contracts.

 

House price spurt short-lived

05 August 2010

Johannesburg - JSE-listed wealth management company Liberty Holdings [JSE:LBH] has bounced back, reporting a sharp increase in earnings per share and strong cash flows as its turnaround focus continues.  Interim earnings per share rose to 371.9c compared to a loss of 483c in the previous quarter while group embedded value was up 6.9% to R84.62 versus R79.19. A R1bn loss in the six months to end-June in 2009 turned into a R1.2bn profit for the comparable period this year.

Total assets under management were up 13% to R373bn while the group experienced positive inflows of R11.5bn.  Shareholder distribution per share was maintained at 164c.  "We have clearly outlined our three key focus areas for sustainable growth and value creation:  Firstly, strengthening our insurance business, with specific emphasis on addressing persistency and developing strategies for increased sales productivity. Secondly, achieving excellence in balance sheet and capital management.

"And thirdly, diversification in terms of geography and business line. I am pleased to say that in all three areas we have shown real progress," said chief executive Bruce Hemphill in a conference call to investors on Thursday.  Hemphill told investors that persistency levels - the ability to retain insurance customers - were up and lapse rates, particularly on the risk insurance side were at their "lowest levels in years".

Earnings from the asset management business Stanlib rose 3.8% to R164m.    Steven Braudo, CEO of Liberty Life, told Fin24.com that the life assurance business had managed to make some progress recapturing market share in the broker and independent financial adviser market.
"We are seeing signs of a pick up in support for us from a number of big players in the industry and we have shown our products are competitive," Braudo said.

"The improvement in the half-year result should be seen in the context of some improvement in trading conditions, although the strength and sustainability of the economic recovery remain uncertain. In the second half, our focus will remain on strengthening the insurance business, stabilising Stanlib, effective balance sheet management and growing returns from developing businesses," concluded Hemphill.

- Fin24.com

 

Business Connexion in BEE deal

 

Johannesburg - Business Connexion Group [JSE:BCX] on Thursday announced a deal that will see 30% of the group owned by black economic empowerment partners (BEE).

The transaction involves a proposed share exchange of the Gadlex (Proprietary) Limited shareholding in Business Connexion (Proprietary) Limited for ordinary shares in BCG and cash.

It also sees the proposed creation and issue of a new class of shares in the share capital of BCG to Gadlex Holdings (Proprietary) Limited, key BCG executives and senior management, organisations involved in social and community development and selected women's organisations.

The effective date of the proposed BEE transaction will be 31 August 2010.

- I-Net Bridge

House price spurt short-lived

03 August 2010

Johannesburg – A short-lived growth spurt in house prices has come to an end as the lack of further interest rate relief hit the residential property market.  FNB's July House Price Index, released on Monday, showed the rate of increase in house prices is slowing down.

The index recorded year-on-year house price inflation of 10.6%, down from the previous month's revised 12.4%. On a month-on-month basis the index declined by -0.6%, following a small rise the previous month. The cost of the average house in July was R787 694.   FNB property expert John Loos said residential demand slowed due to the lagging economy and a lack of further interest rate cuts.

"An era of mediocre 'mini-cycles' will probably be with us for a few years to come," said Loos.  Since 2009, house prices have risen by over 11%.  However, according to Loos, the high level of household indebtedness will stunt the sector's growth for the next few years.  "It was this high debt ratio, and significant financial pressure on the household sector during the recession, which curbed the response of aspirant homebuyers to last year's big interest rate cuts and made the recent recovery a mild one," said Loos.

South African households' debt to disposable income ratio is 78.4%.  According to the index, the South African Reserve Bank's (Sarb's) policy is well balanced in that it aims to keep interest rates stable to help households manage high debt levels.  "In short, Sarb is providing little in the way of short-term stimulus for residential property, and looks unlikely to do so in any significant way in the near term," said Loos.

The report also showed the average supply of homes in South Africa remains higher than the demand.

- Fin24.com

 

Investec in R1.3bn share issue

03 August 2010

 

Johannesburg - Investment bank and asset manager Investec [JSE:INL] will raise up to R1.3bn by issuing new shares as it aims to shore up its capital base.  Investec plc [JSE:INP], which is also listed in London, said on Tuesday it plans to issue up to 22 million new shares, with the price and amount to be determined later.

The issue would represent 4.27% of its existing ordinary shares, the company said in a statement.  Based on Monday's closing price of R59.50, the issue could raise up to R1.3bn for the bank. Based on Monday's closing price of its London-listed stock at 503 pence, the issue could raise £110.7m.  However, the group said it would issue shares in both London and Johannesburg, making it difficult to gauge exactly how much it would raise.

The fundraising would allow the bank to preserve a strong tier 1 capital position, CEO Stephen Koseff said in a statement.  Banks around the world have been pushing to boost their the amount and quality of their capital, as regulators demand more "core tier 1" capital to stave off another financial crisis.

Core tier 1 capital, a measure of a bank's financial strength, is usually defined as common shares and retained earnings.  The share issue will be managed by Bank of America Merrill Lynch.

- Reuters

Ten rules for SA exporters

10 June 2010

Johannesburg – The global financial crisis has sped up the sea change in international trade.  Amid the growing urgency for ethical and green compliance and fierce competition from other southern hemisphere countries, SA exporters also have to cope with an implosion in its traditional markets, a strong rand and passive aggressive protectionism.  It is quickly becoming clear that there are a number of new realities for local exporters:

1. Higher non-tariff barriers

As European economies continue to flounder, the European Union is apparently adopting stricter rules on imported products to keep exporters out.   Sandra Baetsen, project manager with the Fresh Produce Exporters Forum, says the EU is constantly raising the game for SA fruit in an effort to protect its own market.   These non-tariff barriers, like minimum specification and residue levels on fruit, are getting stricter every year, agrees Jacques du Preez of Hortgro, the operational industry services arm of the Deciduous Fruit Producers’ Trust.   Other non-tariff cost shocks include a decision by the new UK coalition government to replace an existing air passenger duty with a "per-plane" tax - which will hurt exporters.

2. Electronic data interchange urgency

Exporters (and government) need to hike budgets for electronic data interchange (EDI) – the transfer of electronic documents from the trading partner's computer system to another.  EDI between exporters and government agencies for the phytosanitary (regulations to prevent the introduction or spread of plant pests or pathogens) release of goods has not been established yet and is currently a long, tedious paper trail.

A recent study done by the Commonwealth secretariat showed that SA's competitors in other southern hemisphere countries have invested much more in EDI in the supply chain, says Baetsen. "Their documents are being transferred electronically while we have a lot of manual systems in place still, which make our lead times longer."    The study also underlined other problems the local logistics export chain face, particularly that SA's ports are much more expensive than anywhere else – while local port efficiency lags behind.

"We also one of the few countries where ports are not privatised. On top of that, our shipping rates to Europe are much higher in comparison to those of our South American colleagues. An expensive supply chain doesn't help us either once prices are under pressure," adds Baetsen.

3. Credit conservatism

According to the research by the US International Trade Commission, the global financial crisis led to a shift in trade financing.   "Because of heightened uncertainty and increased counterparty risk, exporters shifted away from risky open accounts towards lower-risk bank-intermediated financing and export credit insurance," the commission reported last year.

Before the crisis in 2008, only 9% of world trade was insured and up to 80% of global trade deals were conducted through open accounts (the importer pays for goods after they are delivered). However, there are indications that more exporters are requiring bank financing from importers which usually involves letters of credit (whereby the bank assumes the non-payment risk) in an effort to reduce risk.

After the world economic crisis security of payment and availability of credit on the importer/buyer side was an issue for local exporters, confirms Du Preez.   "This however seem to have been resolved but the key to being a successful exporter remains long term relationships with buyers."

4. Strong rand

The local currency is one of the biggest challenges local exporters face.  A strong rand is making SA's products much more expensive abroad and few are expecting relief in this regard as the euro – currently trading at four-year lows against the dollar – continues to crumble. This is of particularly concern, given that 30% of all SA exports are Europe-bound.

"Exporters have to remain flexible that when the euro weakens too much, they are able to shift their product to for instance, a dollar market (which is not always easy with a perishable product and the fact that oversupply can lead to poor returns as well)," says Baetsen.  Sybil Rhomberg, managing director of the SA Capital Equipment Export Council, believes that the artificial weakening of the rand by SA authorities should not be encouraged given SA's large international debt burden.

"However, in order to gain international competitiveness I believe that the lowering of input costs and the increase in research and development is the only sustainable route to take. South Africa must increase its research and development spend otherwise it will become a net importer in the future."

5. More regulations, same returns

The export arena is becoming more complex with exporters having to comply with the different rules issued by different retailers, says Baetsen.   "Exporters have to adhere to different supermarkets' specific ethical trade standards and audits, be able to prove traceability of fruit at all times, make sure their carbon footprint is in line with the retailers strategy and make sure they deliver the right fruit in terms of colour, size and taste at the right time."

Instead of getting a financial incentive for all of the above, these rules are the norm now, so the returns for all the efforts are the same, says Baetsen.   "This, as you can imagine, makes it very hard for new businesses or emerging players to enter the export arena."

6. The search for new markets

Due to the economic pressure in SA's traditional markets (UK, Japan and Europe) many exporters have started venturing into other markets like the Middle East, Far East, Russia and Africa.   "From industry's side it is definitely seen as a way of diversifying our dependence on Europe and a way to relieve the pressure in those markets without losing market share," says Du Preez.

The Middle East is an important new destination, with exports of some SA fruits almost tripling in the past three years. The Middle East is now the second biggest market for SA nectarines, for example.   There have also been ongoing efforts to enter China. For fruit exporters, a key breakthrough will be an agreement on a phytosanitary protocol for the importation of South African apples – which may open the doors for other fruit.

The Indian market also holds huge promise for SA food exporters – as it is close to SA, but also in thenorthern hemisphere (which means harvesting seasons differ and imports don't compete with local produce).  "There the restriction is not the phyto issues, but very high tariffs which hampers market development," according to Du Preez. Indonesia, Thailand, Korea, Vietnam, Taiwan are all countries that have potential.  To capitalise on these markets, the old tried and tested method is still the best, advises Rhomberg.

"Undertake focused target market selection utilising realistic acknowledgement of real competitive advantage, find a good agent, support him well, ensure that you visit the country at least twice a year to visit his 'A' type customers, keep local stock either in semi knocked down or completely knocked down state to add some value in the country, advertise in the target market and within about five years you should be making real money from that market."

7. SA's trade agreement impediment

Exporting countries throughout the world are undertaking bilateral relationships in order to leverage better access for their products or services in new markets, says Rhomberg.    "South Africa is extremely tardy in this respect with only three bi-lateral agreements in place. Chile has 24.  South Africa is engaged in a lot of negotiation for future agreements with for instance Brazil and India but nothing nearing a positive conclusion."

Rhomberg also believes government has to step up the Competitive Supplier Development Programme (localise state procurement) in order to ensure the increase in economies-of-scale for the local manufacturing industry since this will also increase global competitiveness - apart from creating jobs.

8. Intellectual property 'partners'

Much has been said about the threat of intellectual property erosion in countries – particularly in the Far East - which have little (or now) protection of patents and may rip off exported products without fear of prosecution.   "We have found the best manner of protecting intellectual property is to find a strong Chinese joint venture partner and undertake some manufacture in China," says Rhomberg. In order to protect the business the Chinese partner will aggressively defend the business against the theft of intellectual property on all fronts including the local market branding.

9. Boosting the SA brand

SA exporters can’t afford to focus on their own brands only – but need to actively promote the “South Africa” brand as it is intrinsically linked to their own brands.  "It is essential for SA to differentiate our products from competitors [particularly Chile, Brazil, Argentina and New Zealand] and to establish a n image and link the SA brand to our fruit in order to increase sale, win market share and increase price, says Du Preez.   Unfortunately, South Africa has to rebuild its reputation as a reliable source of supplying high quality fruit on time after the Transnet strike, he adds.

10. Setting up shop outside SA

"It is senseless to constrain a business to one country where it becomes a victim to the peaks and troughs of its market," says Rhomberg. "Use South Africa as a base but spread your business according to the demands for competitiveness in those markets."    This could include considering semi knock-down or complete knock-down manufacture in the target country - which will reduce the cost of stock, add local value and patriotism for the product or brand.

"Also consider the bi-lateral agreements in place from that country which could enhance your competitiveness in those extra markets that would otherwise have been excluded to your company trading directly from South Africa."

- Fin24.com

 

Productivity to dip during SWC

08 June 2010

 

Johannesburg - Workplace productivity in South Africa is expected to drop over the World Cup, with several matches to be played during office hours, Productivity SA warned on Tuesday.  "Workplace productivity is bound to be affected and employers should be concerned about the issue of employee absenteeism and the resulting productivity loss," senior researcher Motlatsi Gabaocwe said in a statement.

Productivity SA said the international research report Europe Talent found in 2006 that the World Cup could increase employee absenteeism, resulting in lost productivity.  During the European Championship in Portugal in 2004, tens of thousands of Dutch workers phoned in ill with the number of absentees rising 20% on days when the Dutch national side played.

"The actual level of absenteeism is likely to be higher due to post match celebrations or lack of sleep as fans may stay up late until the early hours of the mornings to watch matches," said Productivity SA.  "For business, this could translate into millions of man-hours of lost productivity."

Policy on World Cup-related absence


The economy was gathering momentum after last year's recession, job losses at the start of 2010 and recent strikes, said Productivity SA senior researcher Michael Ade.  "It is imperative that companies maintain and improve on productivity during the month long period of the FIFA 2010 Soccer World Cup tournament," he said.

Companies needed to implement measures which would both minimise the impact of productivity disruptions because of absenteeism and accommodate workers' desire to watch the games.  Productivity SA suggested that companies institute a clear policy on World Cup-related absence and the use of alcohol in the workplace, and encourage staff to take leave or time off to watch matches rather than being present at work but unproductive.

It advised that companies encourage team work and set measurable targets with time off to watch matches for those who met these, encourage business meetings via telephone conferencing or video calls, and encourage lift clubs to avoid traffic congestion and delays to and from work.  It also recommended that companies consider installing television sets in boardrooms or workshops and show selected, popular matches at work to prevent staff leaving the office for hours.

- Sapa

 

03 June 2010  -BUSINESS UPDATE


Life Healthcare delays IPO, drops price

Johannesburg – The listing of hospital group Life Healthcare will be delayed by two days and the offer price reduced while the minimum number of shares on offer has also been scaled down.

The new offer price range has been set for between 1 350c and 1 450c per share, which has been reduced from a range of 1 450c to 1 700c/ share, it was announced on Thursday. Instead of the original 431 million shares offered for sale, Life Healthcare's shareholders have had to settle for selling 354 million of those shares.

Life Healthcare has been struggling with lower-than-expected demand for its scrip, prompting speculation that its listing may be scrapped. A source close to the process told Fin24.com on Wednesday the listing would go ahead, probably with a lower offer price and reduced number of shares available.

"Up to a further 34.8 million shares may be sold by certain of the selling shareholders pursuant to a 30-day option which those shareholders have agreed," said Life Healthcare in a statement.

Life healthcare's stakeholders have also agreed to remove the minimum 41% subscription limit to carry out the listing. While some major shareholders, including Brimstone Investment Corporation and Mvelaphanda Group, will be selling large portions of their holdings, management "has resolved to retain a materially larger portion of its shareholding post the listing".

The listing will now take place on June 10, instead of June 8.

- Fin24.com

 

 

01 June 2010  -BUSINESS UPDATE

 

Youth agency asks for billions more

Pretoria - The National Youth Development Agency will request funding of more than R1bn from the government in the current financial year, its CEO Steven Ngubeni said in Tuesday.  "We'll be fighting for a billion and more," Ngubeni said at the launch of the youth month programme in Pretoria.  After asking for R1bn in the last financial year the agency was given R320m, despite the treasury having recommended R600m.

Amidst budget constraints, Ngubeni said great progress had been made since the merger between the National Youth Commission and Umsobomvu Youth Fund.  Over R26m in loans had been granted to small and medium enterprises. A total of 16 000 young people had been enrolled in the national youth service programme.  Partnerships had been formed with the human settlements ministry in building 76 houses in the Ivory Park informal settlement in Tembisa. These would be officially handed over on June 4.  "Youth development has been placed central to government work," Ngubeni said, adding that the project would help strengthen young people's skills.

- Sapa


04 March 2010  -BUSINESS UPDATE


PRIVATE SECTOR RECESSION OVER

Johannesburg - The South African private sector can be very pleased that it has emerged from the recession with the rest of the world, after having entered it later than most other countries.  All the Sake24 and BoE Private Clients' provincial barometers - which measure activity levels in the private sector economy of four provinces - rose month on month in January as well as on a three-month basis.

The private sector's recession is over, says Mike Schüssler, an economist at Economists.co.za and the compiler of the barometers.  The barometers show clearly that, although activity levels in most sectors are still much lower than those in January last year, over the past three months they have begun to rise in Gauteng, the Western Cape, the Eastern Cape and the Free State.

In January the Gauteng barometer lifted to 127 points.  This is 5.5% below that of January last year, but 5.7% better than in December and 8.5% above that in November.  The Western Cape barometer still shows the biggest decline year on year, 10.7%, while the provincial barometer of the Eastern Cape, which was worst hit by the recession, declined only 4.6% year on year.  It appears that the Eastern Cape, thanks to a revival in the manufacturing sector, is recovering the fastest among the provinces.

The Free State barometer was 6.1% lower than January last year, but 3.4% higher month on month and 4.3% up on a three-month basis.  The Free State's construction index had a great January performance, shooting up 34.4%.  But in the Western Cape and Gauteng construction is still somewhat under the whip, falling 22% and 14.3% year on year. But Schüssler says he expected the construction sector to fall more steeply, since house sales are not brisk.  The Western Cape is the only province that saw economic stress rising year on year in January.  The 5.9% rise is mainly the result of the province's unemployment rate.

Double-dip risk still there

The economic stress index is an indicator of how difficult it is for concerns to do business in the province. There has therefore been some relief for enterprises in the other provinces.  According to Schüssler, there is indeed a risk of a double-dip in the South African economy, but this does not mean that the country should expect another recession this year.  He says that governments worldwide will have to raise interest rates and curtail the extra expenditure of the recession.

They made money more available and also spent more. This will have to turn around.  The reversal could hold back economic recovery somewhat, but the recovery by that time might have sufficient traction.  Schüssler says the "sideshow" currently playing out in Greece and other countries around the Mediterranean - where economies are reeling under massive indebtedness - could also impact South Africa's economic recovery.  He reckons this would have a negative influence on Europe's growth, and Europe is still our biggest trading partner. But a single country's downturn won't pull the rest of the globe down, as evidenced by Dubai.  If more countries develop problems, however, the secondary effect could well ripple outwards.

- Sake24.com

 

WATCHDOG FINGERS OIL COMPANIES

 

The Competition Commission said on Thursday it has referred its findings of price fixing in the supply of bitumen by major oil companies to the Tribunal.  The companies included Chevron SA, Engen, Shell SA, Total SA, Masana Petroleum Solutions, the Southern African Bitumen Association (Sabita), Sasol and Tosas.  "Bitumen is a residual fraction of crude oil... bitumen and modified bitumen products are mainly used in road construction to tar and rehabilitate roads, which is mainly sold to government entities," the Commission said.

The investigation was initiated on January 12 2009, following an application for leniency by Sasol and its subsidiary Tosas."In its application Sasol admitted that together with its subsidiary, Tosas, it had colluded with its competitors and was granted conditional immunity from prosecution provided it co-operates with the Commission in its investigation and prosecution."  The Commission said it had asked the Tribunal to impose an administrative penalty of 10% on each of the firms involved, except for Sasol and Tosas.  "Settlement terms have been agreed in principle with Masana whereby it (Masana) admits guilt and will pay an administrative penalty of R13m.  "The settlement agreement will be referred to the Tribunal for confirmation shortly."

The Commission found that the respondents engaged in collusive conduct from around 2000 until at least December 2009.  "The respondents collectively determined and agreed on pricing principles, including a starting reference price and monthly price adjustment mechanism.  "This was facilitated through meetings convened by Sabita, as well as through correspondence through Sabita and direct communication between oil companies."  The Commission said the conduct resulted in final customers being charged prices which were not competitively determined. "All of the respondents compete in the supply of bitumen and bituminous products.  "They are also suppliers of a range of other petroleum products." Commissioner Shan Ramburuth said the uncovering of the cartel was "another important step in the Commission's work in addressing anti-competitive conduct affecting infrastructure development".

- Sapa

 

IDC'S ABILITY QUESTIONED

Cape Town - Trade unions and businesses question the ability of the Industrial Development Corporation (IDC) and other development funders to support government in its latest Industrial Policy Action Plan (IPAP2).  On Wednesday, during hearings on the Department of Trade & Industry's action plan held by the parliamentary portfolio committee for trade and industry, delegates expressed their concern that development financiers such as the IDC are doing business on the same basis as commercial banks do. An enterprise's risk profile is therefore regarded as crucial.

Cosatu deputy president Zingiswa Losi said the development funders should be restructured to promote a development agenda.  In its submission Cosatu said that the private financial sector's share of the gross domestic product (GDP) had increased 117% between 2004 and 2008.  Despite this, the sector refused to be the catalyst for growth in the manufacturing sector of the economy.

Cosatu is also asking for all development financiers to be united into a single body, the better to assist small and medium enterprises. Furthermore, intervention is needed to ensure that the private financial sector focuses on targeted, labour-intensive industries.  Business Unity South Africa (Busa), whose deputy chief executive Professor Raymond Parsons made its submission, also believes the greatest challenge is to ensure that the IDC helps to make a success of IPAP2.

Busa, too, believes that the institution's current approach is similar to that of commercial banks. The IDC's risk management makes it very difficult for emerging entrepreneurs to access funding from the IDC. Busa therefore supports a review of the IDC's funding model.  The IDC depends on funds allocated to it by the government in the 1950s, and its real lending rate is 6.58%.  But during last week's announcement of the action plan Minister of Economic Development Ebrahim Patel said the government would not be supplementing the IDC's balance sheet.  Tengo Pengena, a Numsa researcher, also requested a direct injection from government for the IDC.

 

ARCELORMITTAL AND KHUMBA DEAL

Johannesburg - ArcelorMittal South Africa slipped up horribly in failing to apply to have its mineral rights in the Sishen iron-ore mine converted. This was an absolutely devastating oversight that could result in the company closing its doors.  On Monday this was the reaction of various players with whom Sake24.com spoke. It was also the clear message in various investment banks' research reports to clients.  On Friday ArcelorMittal SA said Kumba - which operates the Sishen mine - had cancelled an agreement to deliver to it 6.25m tons of ore at cost-plus-3%.

Kumba explained that this was because Arcelor had failed to apply for new-order mineral rights before April 30 2009, and its old-order rights had therefore expired.  In 2001 Arcelor paid R2.8bn for a 21.4% indivisible stake in the mineral rights of the Sishen Iron Ore Company (SIOC). In terms of this agreement it also owns 21.4% in the ore body and SIOC acts as a contract miner for Arcelor. Kumba owns the mineral rights in the remaining 78.6% of SIOC.  The rights of companies that did not apply for new-order mineral rights before April 30 2009 return to the state, and new applications can be made. The act is pretty unambiguous about this, said a legal expert on Monday.

Because the right to a contract of cost-plus-3% goes to the owner of the 21.4% right - which is now apparently the government - Kumba had to cancel the contract with Arcelor when it realised the situation so as to protect its own rights, explained Deutsche Bank.  If it simply continued supplying iron ore to Arcelor, it could be legally assumed that it ratified the cost-plus-3% contract and would experience serious problems if the new holder of the 21.4% right insisted on a similar contract, Deutsche Bank continued.  The department of mineral resources, which will need to play a key role in sorting out the mess, was unable to confirm on Monday that Arcelor's rights had indeed expired or whether a new application had been received.  Although a great deal of uncertainty still exists as to Kumba and ArcelorMittal's legal positions in the matter, analysts are of the opinion that a protracted court case lies ahead and that successful cancellation of the contract could be the kiss of death to Arcelor because of the absolutely devastating impact on its financial performance.

It will have a crushing effect on its earnings and valuation because it would immediately lose its production-cost advantage, pointed out Kagiso analyst Hennie Vermeulen.  This could have serious consequences for local management because the head office in London will certainly not be impressed with this development.  Macquarie First South told clients that the valuation of ArcelorMittal, which on Friday asked the JSE to suspend trading in its shares until it makes a further announcement on Wednesday, could halve and its survival would be in doubt if it had to pay market-related prices for the ore.  There will also be considerable political pressure to resolve the situation. Even if Kumba legally has the upper hand, there could be a flood of political and other pressures from players who could drive matters in a direction other than what could be expected from a legal perspective, said Macquarie.  On Monday Kumba spokesperson Tebello Chabane said that iron-ore sales to Arcelor had continued, but at commercial export-parity prices.  No legal documents attempting to contest Kumba's decision have yet been received from ArcelorMittal.

- Sake24.com

 

01 March 2010  -BUSINESS UPDATE


MTN CEO TO STEP DOWN

Johannesburg - Phuthuma Nhleko is to step down as group president and chief executive of MTN by March 2011, the company said Monday. The board process is underway to appoint a successor.  MTN said Nhleko will not be renewing his long-term contract of employment which ends on June 30 2010.  Nhleko has, however, agreed with the board to continue in his current role up to March 2011. During the remainder of his tenure Nhleko has agreed to particularly focus on achieving certain key objectives including facilitating a seamless transition once his successor has been appointed.

Commenting, Cyril Ramaphosa, chairperson of MTN Group, said: "On behalf of the board, management and staff, I would like to thank Phuthuma for his outstanding vision and leadership over the past eight years.  "Under his tenure, MTN has grown into a leading emerging market success story and expanded to become the number one provider of mobile telecommunications services across Africa and the Middle East.  "Phuthuma's commitment to continue to lead the business until a successor is in place is greatly appreciated and will ensure an effective and smooth process of transition."  The chairperson continued: "Given Phuthuma's knowledge and insights into MTN we have mutually agreed to explore other options for an ongoing association between Phuthuma and the group post his service as president and CEO."

Nhleko said: "I have given this decision very careful consideration. I feel it is the right time to secure the next generation of leadership for the group - and the right time for me personally to start thinking about the next phase of my career.  "Over the coming months, I will continue to focus my full attention on delivering on the group's strategic priorities and on ensuring a thorough handover to my successor."

- I-Net Bridge

 

GORDHAN:  TAX HIKES IN THE NEXT BUDGET

Cape Town - Hardly a day after Finance Minister Pravin Gordhan announced R6.5bn in tax relief, he warned that personal tax rates could rise in his next budget.  This would be necessary if the country failed to produce additional tax revenue from more sources by October this year, he told a breakfast session in Cape Town.  He asked taxpayers to stop begging for tax relief every time there was a problem, and to please leave some money for government.

Government promised to manage it better in future.  Gordhan emphasised that this was no time for massive tax relief.  In the 2009/10 fiscal year government had collected almost R70bn less than budgeted for, owing to the recession, and it had needed to borrow more than R177.7bn to fund its various programmes.  He asked every South African to speak passionately about the economy, and to make it part of daily conversation - like sport.

- Sake24.com

 

FOOD INFLATION STILL A CONCERN

Cape Town - Food inflation which, according to Statistics South Africa's latest announcement, stood at 2.4% in January, is still higher than that in developed countries.  The Reserve Bank's target band for inflation is as 3% to 6%. The most recent report from the National Agricultural Marketing Council (NAMC) says that high inflation is something of the past in most countries - except in Turkey and Tanzania, where it is still 9.4% and 11.3% respectively.  In South Africa prices of agricultural commodities have fallen considerably in the past year, but in rural areas prices of grain products have not, but have instead risen.

The prices of wheat between January 2009 and January 2010 fell 24.58%, maize 22.57% and sunflower seeds 18.49%.  In urban areas in the period under review the price of maize-meal products came down 1.43%, but in rural areas it rose 6.94%. Urban prices of wheat products fell 4.93% whereas rural prices were 1.64% down.  The study also examined the cost of a basket of goods in urban and rural areas.  In January last year people in rural areas paid R9.75 more than urban dwellers for the basket. In January this year the difference between what the two groups of consumers paid for the basket widened to R17.49.

The bigger difference is largely ascribed to the difference in prices of rice, maize meal and sugar.  The percentage of their income that the poorest 30% have to spend on food is 33.4%, while the wealthiest 30% spend only 2.6% of on food.  The NAMC says it monitors supermarket food prices only for the first three weeks of each month because in the fourth week supermarkets generally have specials, distorting price trends.

- Sake24.com

 

APPROVE PRODUCTS FIRST - OMBUD

Johannesburg - The Ombudsman for Financial Services Providers (Fais) has called for financial products to be subject to some form of approval.  In a statement on Thursday, the ombudsman, Charles Pillai, said regulation was needed "to protect members of the lay public from being exploited by market forces motivated by nothing more than greed and irresponsibility".  Pillai said a complaint that came before him regarding the Garek scheme made a compelling case for financial products to be regulated.  "This call is in the interests of investor protection and invariably in the interests of the integrity of the financial services industry.

"To have intermediaries with little or no expertise simply marketing products that have not been sanctioned by some qualified state institution will mean that the public interest will not be served and that consumer protection and the integrity of the financial services industry will continue to be undermined," he said.  Pillai's comments followed a determination in a matter in which the Adolf Jacobus Hare, an engineer from Pretoria, and his wife Christina Elizabeth Hare, demanded that Andre van der Merwe, an authorised financial services provider from Uvongo, Kwa-Zulu Natal, return R40 000 they gave him to invest on their behalf.  Pillai said many people invested in the Garek Scheme and lost millions of rand in the process.  "The complainants said that in December 2004, they met with the respondent, Andre van der Merwe, who had been Mrs Hare's mother's financial adviser.

"The complainants were introduced to MATRIC, and were provided information by respondent on the company and its prospects."  Pillai said they were advised that an imminent listing in three countries was on the cards.  "Upon listing, shares purchased by complainants for R2.50 were projected to reach R20," he said.

Time magazine

This return was compounded by the fact that the structure of the investment was such that they automatically received two shares in Garek for every MATRIC share purchased.  "The complaints said the respondent promoted the company in glowing terms and made much of the fact that he himself had invested in excess of R1m in MATRIC shares."  The assets of the company were reportedly substantial, amounting to some R5.4bn, Pillai said.

The complainants were shown an article in Time magazine which painted the company in a very positive light, supportive of the respondent's claims as to the soundness of the investment.  "In reality, this article was merely promotional material placed in a limited number of copies of Time magazine and the information contained therein was neither endorsed nor verified by Time magazine."  Pillai said no interview was conducted to assess whether the investment was conducive to the Complainants' future financial requirements or their present financial position.  "The challenges that lay ahead for MATRIC/Garek and the risks associated with the investment were never mentioned or discussed."

The respondent advised the complainants that the opportunity to invest apparently expired at the end of December 2004 and as such the complainants were encouraged to "act expeditiously".  As such, and acting on the advice of the respondent, the investment was made, and the application forms completed on December 30 2004 at which point complainants invested R40,000.  Pillai said the promised listing and several future listing dates never materialised.  The complainants said they "were clearly misinformed, offered poor advice and the communication was less than adequate".  His office had asked Van der Merwe to submit a reply to the allegations, taking into account the requirements of the FAIS Act.

- Sapa


17 February 2010  -BUSINESS UPDATE

 

DAVIES- BEE NOT FUNCTIONING

Cape Town - One of the challenges to achieving increased levels of local manufacturing is the resolution of problems relating to black economic empowerment.  This is the view of Rob Davies, Minister of Trade and Industry.  On Tuesday he made preliminary comments on government's new industrial policy to the portfolio committee on trade and industry.

This policy will be tabled in parliament on Wednesday.  Davies says there is a need for much more industrial development through the government's infrastructure programme.  For that reason it is essential to restructure the process of state purchasing so that manufacturing can take place at a local level by, for instance, awarding contracts for the manufacture of capital goods and transport equipment on a long-term basis.

But to achieve this it's important for black economic empowerment to start functioning. The impact to date has been slight, says Davies.  One of the big problems with black economic empowerment is that companies tendering for state contracts profess to be empowerment groups while they are not.  He says there are three types of malpractices. 


One is where a company misrepresents itself as a black company in order to get contracts.  Another way is via the so-called tender entrepreneur. Davies explained that this type of company pursues tenders but, because the tender field is not its area of specialisation, white companies are contracted to do the actual work. The other method is where an empowerment company applies for a tender and then imports the goods instead of manufacturing them locally.

- Sake24.com

 

ICASA TARGETS PRE-PAID RATES


Johannesburg - The Independent Communications Authority of SA (Icasa) hinted on Tuesday it could take on cellphone operators on "astronomical" pay-as-you-go rates.  The regulator's chairperson Paris Mashile told parliament's portfolio committee on communications there was an urgent need for competition in the pay-as-you-go market, which was used mainly by the poor. "This is an area we have got to delve into and find out what we have to do to make it competitive, in terms of the prices coming down."

The prices paid by the poorest of the poor were astronomical, he said. Mashile was briefing the committee after Icasa's approval of a cut in the rate charged by the three main cellphone operators to connect calls between networks. Vodacom, MTN and Cell C last month filed an agreement with Icasa proposing a cut in the peak interconnection rate from R1.25 to 89c on March 1. Icasa rejected the plan because it would have forced it to agree to a fixed gradual reduction over three years.

The operators later submitted revised agreements without the "glide path". With the approval of those proposals, the peak rate will fall on March 1, as initially planned. Cellphone operators have complained that the rate cuts may lead to job cuts. Mashile said if the cell companies operated efficiently, there would be no need "to cry foul that Icasa is responsible for the destruction of jobs". "They have gained a lot," he said. "The 3G spectrum they have got - all over the world that spectrum was auctioned. In SA that was given to them without an auction. They were subject to social obligations. "This whole thing of a loss of R300 million they must consider as less licence fees as well as that important 3G asset that belongs to the public."

"We are conscious that fact jobs have to be created," he added. "Jobs must be sustained but not at expense of poor consumers." But MPs said the rate cute were only benefiting wealthier part of the population and not the poor. "Those who are running business out of cellphones are going to pocket more," ANC MP Eric Kholwane said. "The cost of communication to the poor remains the same. There is no reduction." Icasa is due to release draft regulations on wholesale call terminations in March. It will hold public hearings in May and publish final regulations by June.

- Fin24.com

 

 

02 February 2010  -BUSINESS UPDATE

E-TV SHOWS SABC HOW IT'S DONE

Cape Town - Television broadcaster e-tv played a starring role for empowerment group Hosken Consolidated Investments in the six months to end-September 2009.   Results released on Friday showed that HCI's media unit - which mainly comprises e-tv - managed a 19% hike in operating profits to R331m, even though revenue only grew 2.7% to R766m.   The performance from e-tv, which has recently extended its core free-to-air offering with subscription channels, stands in stark contrast to the tatty financial position of state broadcaster SABC.

The pre-tax profit donation of R289m from e-tv represented over 33% of HCI's pre-tax profits for the interim period.   HCI CEO Johnny Copelyn said 64% held e-tv saw a continued rise in adspend during the interim period.   He said recently launched subscription channel eNews passed breakeven point and was expected to make its first contributions to profits during the second half of the year.   Copelyn reckoned e-tv's expansion into four channels - eTV, eNews, eAfricaTV and eAfrica News - was significant.

He said recently eAfrica News had been launched as a three-hour per day block, but would be developed into a 24-hour continental news channel.   The continued strong performance by e-tv, which also has Remgro/Venfin as a major shareholder, has caught the attention of market watchers.   Recently Finweek24.com, commenting on e-tv's additional broadcast platforms, asked whether a JSE listing was not in the offing to fund expansion plans.

More bright spots Aside from e-tv, there were a few more bright spots for HCI.   The group's investments in limited Payout Machine Gaming (R31m) and Golden Arrow Bus Services (R70m) increased their contributions at operating profit level.   HCI's mainstay gaming investments (via Tsogo Sun and to a lesser extent Gold Reef Resorts and Century Casinos) showed an small increase in operating profits to R773m, but this was offset by a marked drop in profits from hotels (which plunged to R239m from R366m last year).

HCI's biggest bruises came from its automotive engineering interests (a loss of R22m) and the Khusela coal venture (a loss of R7m). HCI's natural gas investment in the US and its 70% stake in clothing and textile group Seardel realised pre-tax losses of R42m and R51m respectively.   Overall HCI's earnings before interest, tax, depreciation and amortisation for the interim period dropped 6% to R1.45bn, while group pre-tax profits dropped 9% to R863m.

- Fin24.com

 

SA DEBTS BATTLE TO CONTINUE

 

Cape Town - More than 100 000 people were summoned for debt in November.   This was 7.6% more than in November 2008, according to Statistics South Africa.   Investec economist Kgotso Radira says there has been a slowdown in the rising number of summonses, compared with their steep growth earlier in 2009.   Debt judgments against individuals and enterprises are however still increasing sharply, in November swelling 19% to 64 254 - and these were mostly against individuals.

The value of the debts for which judgments were passed increased by 24% to R649.2m.   The quarter to end-November saw single-digit growth compared with double-digit in previous quarters.   Radira says this could be the result of consumers aggressively curtailing their spending to repay debt.   But levels of indebtedness remain very high. They represent 79% of disposable income, which means that 79c of every rand of disposable income goes to pay off debt, says André Snyman, chief executive of Consumer Assist, a debt counsellor.

Radira does not believe that bad debts have peaked, despite the slowdown. Small bonuses and minimal salary increases probably resulted in households incurring even more debt over the festive season.   He expects a further increase in the summonsing of individuals in the next six months.   Households' money affairs continue to look bad and the prospects of salary increases and bonuses in 2010 are not good, while more job losses could take place.

In November 13 683 organisations were summonsed for debt - 12% more than in 2008.   He said businesses' profits came under serious pressure in the past year, leading to higher defaults, especially among smaller companies with very limited budgets.   Banks' restriction of credit facilities to businesses also had an impact.

- Sake24.com

 

FACTORY PRICES SHOWING GROWTH

Johannesburg - South Africa's producer price index (PPI) registered growth of +0.7% year-on-year (y/y) in December from -1.2% y/y in November, Statistics South Africa (Stats SA) data on Thursday showed.   PPI was also shown to have dropped -0.1% in 2009 from the 14.2% of 2008.   The PPI increased 0.7% on a monthly basis after November's monthly increase of 0.8%.   The PPI was expected to increase at 0.1% y/y according to a survey of 12 leading economists by I-Net Bridge, with forecasts ranging from -0.7% to +0.8% y/y.

Exports were at -6.1% y/y from -11.9% in November.   Imports were at -3.5% y/y from -5.7% the month before.   Stats SA attributed the higher rate in December compared with November to increases in mining and quarrying (-0.7% to +3.6%), and petroleum and coal (-15.8 to 0.0%).   These were counteracted by a decrease in electricity (+20.9 to +19.1).   The jump into double digits in October 2006 was the first double-digit increase since December 2002.

The annual PPI in 2008 increased to 14.2% from a revised 10.9% (10%) seen in 2007 and from 7.7% in 2006. The annual average for PPI in 2005 was 3.1%. PPI was at an average of 0.6% in 2004, 1.7% in 2003 and 14.2% in 2002.   The 2004 average was the lowest since 1959, when there was no change in producer prices. The lowest annual consumer inflation in the post-1945 period was also in 1959 at 1.1%.   New weightings were introduced in the January 2008 data, but with no backdating. The new weightings now also make it difficult to use PPI as a leading indicator of CPI.

Economists said that the PPI figures show that the recession is coming to an end.   Annabel Bishop, economist at Investec, said, "Prices at the factory gate inflated by 0.7y/y in December, after falling by 1.2% y/y in November. This is consistent with base effects and the drawing to the close of SA's recession.   "The ascent in the PPI will likely be particularly sharp this year, coming out close to 2.0% y/y in January and moving to above 6% by the end of 2010, not least due to higher electricity tariffs.

'Rate cut will be beneficial'

"Today's figure is unlikely to change the Sarb's [South African Reserve Bank's] inflation outlook and hence monetary policy stance.   "However, an additional interest rate cut would be beneficial (50 basis points in March), not least to boost confidence, but CPI inflation will run above target in the second half of this year if 35% plus electricity tariffs are imposed, and this is likely curbing the MPC's [Monetary Policy Committee's] hand."

Nedbank's Carmen Altenkirch said, "Higher commodity prices, particularly of metals and oil, were the two main factors that caused producer inflation to return for the first time since April 2009.   "Commodity prices have risen by 40% since this time last year, according to an index published by the Economist. However, SA has been partially insulated from this due to the continued strength of the rand.   "Producer inflation is expected to remain relatively subdued during 2010. Weak global and domestic demand for capital goods and industrial materials, due to low levels of investment and construction spending, will contain price increases going forward.

"Eskom's proposed 35% tariff increase and a weaker rand pose the biggest risk to the outlook this year."   Mike Schüssler of Economists.co.za said: "It is the first time in eight months that the PPI is positive. I think it was expected and shows inflationary pressures are slowly coming back.   "It's nothing to worry about at this stage, but we can expect increases in the PPI to continue."

- I-Net Bridge

 

SA CONSUMERS HIT ROCK BOTTOM

 

Johannesburg - The findings of the MasterCard Worldwide Index of Consumer Confidence for South Africa point to the lowest consumer confidence levels recorded since 2004.   In January 2010 the index fell to 59.8 points, down from 67.3 six months ago and 78.7 a year ago.   The index score is calculated with zero as the most pessimistic, 100 as most optimistic and 50 as neutral. It is based on a survey which measures consumer confidence based on expectations over the next six months of the economy, employment, stock market, regular income and quality of life.

According to Roelof Botha, and independent economic adviser, the decline in the score to its lowest level since inception is not surprising when viewed against the background of South Africa's recent recession.   "Although the country managed to return to positive real GDP[gross domestic product] growth in the third quarter of 2009, it will take at least another quarter for some sectors of economic activity to fully recover," he said.

Anthony West, general manager of MasterCard Worldwide's Africa business, said with about a million jobs lost in SA over the past year and the SA National Treasury announcing a budget deficit of 7.6% of GDP in the 2009/10 fiscal year, consumers and businesses seem to have been hit harder by the global economic turmoil than first anticipated.   However, even though SA's score fell year-on-year and from the score rated in July 2009, the sub-indices were still slightly positive with expectations of regular income being the highest (66.8), followed by stock market expectations, economy and quality of life.

Jozi more upbeat than Durbs

The stock market indicator saw a big rise from 53.7 in the second half of 2009 to 62.6 in 2010.   Botha explained that the increase in the stock market indicator is closely correlated to trends in the JSE's All-share index. "The percentage improvement in the indicator over the past six months amounts to 17%, compared to increase in the JSE Alsi of 13% and 22% during the three months and the six months preceding the month of the survey, respectively," he said.

Employment came in 3.7 points over the neutral level.   The survey also shows in what it described as "an interesting turn of events" that Johannesburg has ousted Durban as South Africa's most confident city, with a positive score of 70.6. Durban's score has plummeted 39.2 points to 50.4, while Cape Town experienced a decline of 9.6 points to 57.1.

Botha said that a plausible explanation for the divergence between the three cities covered by the survey is the toll that the recent recession has taken on tourism.   Foreign visitors and Gauteng residents contribute significantly to both Durban and Cape Town's tourism sectors.   In Africa, Nigeria is by far the most optimistic market surveyed, coming in with a score of 89.4, while Kenya's score is pessimistic at 47.9.

- Fin24.com

 

 

 

 

 

 

28 January 2010  -BUSINESS UPDATE

 

 

JSE TRACKS WORLD MARKET

Johannesburg - The JSE tracked global markets, opening firmer on Thursday, boosted by a recovery in resources stocks.  At 09:13 the JSE all share index was up 0.81%, with resources adding 0.95%, platinum miners advancing 1% and gold miners firming 0.37%. Banks and financials were up 0.51% and 0.56% respectively, while industrials moved 0.76% higher.  The rand was bid at R7.56 to the dollar from R7.62 when the JSE closed on Wednesday. Gold was quoted at $1 089.39 a troy ounce from $1 096.38 at the JSE's last close, and platinum was at $1 513.50/oz, from $1 523.50/oz at the bourse's previous close.

A local equity trader said local markets were tracking world markets, with local resources and industrials particularly firm.  "Everything is hunky dory again. Obama spoke his book well last night and on the local bourse, resources and industrials are looking good. The rand continues to surprise - now it looks like it wants to move firmer. But it has been a fairly quiet start," he said.  Dow Jones Newswires reports European stock markets, backed by higher Wall Street futures, are likely to see a strong opening on Thursday after US President Barack Obama provided more clarity on his economic policies in a speech overnight.

Armando Guglielmetti, senior strategist at InvestNews.ch in Switzerland, looks for financial issues to lead the expected relief rally.  Significant uncertainties still cloud the outlook over the longer term, however.

Ben Bernanke's fat"We've been proponents of the 'more shoes to drop' thesis for some time now, even as we remain constructive on global economic recovery and the recovery of the global capital markets," said John Stoltzfus at Ticonderoga Securities. "The world simply cannot emerge from the worst financial crisis in modern history effortlessly. It's a real grunter and it hurts plenty."  Dealers said investors have become more nervous since it emerged several weeks ago that China wants to rein in its booming economy, which up to now has largely led the recovery from the worst global slump since the 1930s.  Uncertainty over the future of US Federal Reserve chairperson Ben Bernanke has added to uncertainty, with a second-term vote due later this week, dealers said.

Wall Street futures are higher on Thursday, after US stocks rose on Wednesday as the Federal Reserve kept interest rates near zero, Boeing reported a bigger-than-expected fourth-quarter profit, and Apple introduced its highly anticipated tablet. However, a forecast from Caterpillar weighed, keeping the gains in check.  "The (Fed's) statement actually had a fairly positive tone to it," said Mikel Keifer, an investment strategist for Jurika, Mills & Keifer. "They could have just basically repeated the last statement but they didn't; they came out with a little more optimistic tone."

The statement helped reduce some of the uncertainty that has been hurting the market recently, Keifer said.  "We still are in a pretty fragile economy but it's going in the right direction," he said.  President Obama said in his speech he would veto financial reform legislation that he doesn't deem tough enough, his strongest language yet on the proposed rewrite of the rules governing Wall Street. The Dow closed up 41.87 points.  Asian stock markets are broadly higher following a modest rise on Wall Street. Hong Kong's Hang Seng was last 1.48 higher, China's Shanghai Composite was up 0.2% and Japan's Nikkei 225 closed up 1.58%.

- I-Net Bridge

 

ANGLO "WILL CREATE 25 000 JOBS"

Johannesburg - Resources giant Anglo American (AGL) on Wednesday unveiled a new enterprise development venture that is expected to create 25 000 new jobs in up to 1 500 new businesses across South Africa over the next seven years.   The group said in a statement that the commitment is a pledge to the Business Call to Action (BCtA) - a global initiative that challenges companies to apply their core business expertise, technology and innovative spirit to tackle poverty, promote growth in developing countries and contribute to the attainment of the Millennium Development Goals (MDGs).   Anglo American is the first company from the extractive industry to have a project accepted by the BCtA.

The group's commitment to the BCtA is to establish 12 enterprise development hubs in high unemployment areas in South Africa, within the ongoing Anglo Zimele initiative.   "This venture is expected to create 25 000 new jobs in up to 1 500 new businesses across South Africa over the next seven years," Anglo American said.   The group said it would provide financing for small business start-up funds targeting the most vulnerable segments of society, in addition to providing mentoring and access to supply chain opportunities.

Looking to the future, Anglo American would also seek to further increase its enterprise development activities in Chile and Brazil.   "We are delighted that the expansion of Anglo American's long-established Anglo Zimele programme has been recognised by the Business Call to Action and we are continuing to review further opportunities to grow this successful and enormously valuable community programme," said Anglo American chief executive Cynthia Carroll.   The MDGs are eight goals that respond to the world's main development challenges to be reached by 2015.

They were adopted by 189 world leaders at the Millennium Summit in 2000 and represent a global commitment to promote poverty reduction, education, maternal health and gender equality and aim to combat child mortality, AIDS and other diseases.   Since 2008, 19 companies have developed business initiatives that contribute to the attainment of the MDGs.   "Long term economic growth is vital to the fight against global poverty and business investment is vital to building economic growth," said Helen Clark, Administrator of the United Nations Development Programme (UNDP).

- I-Net Bridge

 

SANLAM, DISCOVERY ON THE SPOTLIGHT

Johannesburg - A possible special dividend from Sanlam and uncertainty about Discovery's life insurance business are two issues that will keep insurance industry analysts intrigued in coming weeks.   Analysts at Credit Suisse Standard Securities have flagged Sanlam and Discovery as two firms to watch in the short term.   Although the group maintains its neutral recommendation on Sanlam for 2010, it has pencilled in a one-year price target of 2 700c a share for the firm - 17% above the present price of 2 294c.

Also, it believes shareholders could score should Sanlam decide to release some of its R3.1bn excess capital. A reason for supporting this notion is that asset prices have risen significantly in the second half of 2009, lowering the opportunity for a major acquisition.   By holding excess capital on its balance sheet, Sanlam would produce lower returns for shareholders than if the capital was either distributed or invested.   Also, according to Credit Suisse Standard, there are moves afoot to release additional excess capital from Sanlam Employee Benefits (up to R1.5bn) and Botswana Life operations (up to R750m).

'Underperforming' Discovery

Credit Suisse Standard has adopted a bearish outlook on Discovery Holdings, lowering its recommendation for the financial services group to "underperform".   It cautioned that policy lapses could cloud the earnings outlook of Discovery Life, which is now the biggest earnings contributor to the group, as will an acceleration of losses from the UK operations. Another concern for Credit Suisse Standard was that Discovery's 2.1% forward dividend yield remained "unattractive".

An increase in lapsed policies has been a headache for Discovery's rival Liberty Holdings, which has seen sales of its life and risk insurance products under pressure over the last 12 months. Much of this has been driven by a sharp increase in unemployment.   At close of trade on Tuesday, Discovery shares were down 0.22% to 3 185 cents per share. Sanlam was up 0.57% at 2 290c/share.

- Fin24.com

 

15 January 2010  -BUSINESS UPDATE

 

Downturn shoves mergers aside

Johannesburg - Mergers and acquisitions (M&A) in South Africa dropped 61% in 2009, independent M&A intelligence service Mergermarket said on Friday.  2009 saw a total of 85 deals valued at $6.8bn in South Africa, a decrease of 61% by value and 42% by volume from 2008.  In 2008, there were 146 deals with a total value of $17.4bn.  Only two mega-deals were recorded in 2009 compared to seven in 2009.  There was also a drop in total deal value from $9.3bn to $2.2bn.  2009 saw South Africa's lowest M&A activity by value since 2003 and by volume since 2005.

"This was exacerbated by the collapse of the proposed $24bn tie-up between telecom giants MTN in South Africa and Bharti Airtel in India due to regulatory concerns," Mergermarket said in a statement.  The most active industry by value for the full year in South Africa was again the energy, mining and utilities sector, with a total value of $2 billion and 12 announced deals, representing 30% of the market by value and 14 percent by volume.  Mergermarket said the financial services industry saw the most transactions, with 21% of overall deal announcements.  "South Africa's outbound M&A activity took place mainly on its home continent with 47% of all acquisitions having Africa-based targets, though this accounted for only 16% of outbound investment."

Investments in European targets accounted for 60% of total outbound M&A and represented 41% of acquisitions by South African companies.  According to Mergermarket, UBS Investment Bank took the lead in the financial adviser value tables advising on four deals with a total value of $2.7bn.  The Swiss bank was followed by Goldman Sachs, which advised on three deals with a value of $1.9bn.  "Both firms jumped four spots from their 2008 rankings.  "Deutsche Bank and Deloitte jumped ten and 34 places respectively from 2008 rankings, claiming third and fourth position," Mergermarket said.

It said South Africa's Standard Bank, which advised on seven deals with a total value of $906m, topped the financial adviser volume table, an improvement of three places from 2008.  In the legal advisor league tables, South African law firm Edward Nathan Sonnenbergs ranked first by value and third by volume, having advised on 18 transactions with a total value of $2.7bn.  DLA Cliffe Dekker Hofmeyer followed with 20 deals worth $1.5bn.  "Werksmans maintained its status as the most active firm in the region with 22 deals valued at $981m.   Looking ahead, Mergermarket said it expected 2010 to be " a tough one" for the local M&A scene.  "Increasing unemployment figures have taken a substantial number of paying customers out of the economy affecting sectors such as retail and manufacturing.

- Sapa

 

STANDARD BANK ALSO EYES NIGERIAN BANK

Lagos - South Africa's Standard Bank has expressed an interest in buying one of the nine Nigerian banks rescued by the West African country's central bank last year, the head of Standard's Nigerian unit said on Thursday.   Nigeria's central bank asked for potential bidders to register their interest in the troubled banks by mid-December to test the appetite for acquisitions as the regulator looks to reshape Nigeria's banking landscape.  The regulator has not published the names of the interested parties.  "I can confirm that we registered interest with the central bank to buy one of the Nigerian banks," said Chris Newson, chief executive officer of Stanbic IBTC, a subsidiary of Standard Bank.  "We think there is a more opportunity in Nigeria and so we are exploring either organic or acquisitive growth," he added.

Standard Bank joins South Africa's FirstRand as the only other foreign company to publicly disclose its interest in buying troubled Nigerian banks. Nigeria's Fidelity Bank said in November it was also a potential bidder.  Nigeria's central bank has injected about 600 billion naira into the banking system since mid-August, after its auditors found nine institutions had built up bad loans that left them too weakly capitalised to sustain their operations.  It injected 400 billion naira into Afribank, Finbank, Intercontinental Bank, Oceanic Bank and Union Bank on August 14 and sacked their top management after the first round of the audit.

Two months later it said it was providing 200 billion naira to four more banks - Bank PHB, Equitorial Trust Bank, Spring Bank and Wema Bank - also judged to be facing a grave liquidity crisis.  The regulator has said the businesses will be run as going concerns until new investors can be found to recapitalise them and that its preferred option is for them to be bought out.

 

SAB BEE DEAL DONE IN GOOD FAITH

Cape Town - There was no cynicism or deviousness about SABMiller's broad based black economic empowerment (BBBEE) transaction, which was approved by shareholders at a meeting in London on Wednesday.   This was the view of group chairperson Meyer Kahn, who was responding to questions raised by shareholder activist Theo Botha at the shareholders' meeting.   Kahn argued if the BBBEE scheme did not work to the benefit of all its participants then it would have failed SAB Limited and as well SABMiller plc.   "So there is no cynicism or deviousness about this. We want the participants to benefit enormously on the basis that they are our family in the beer business in South Africa."

Kahn stressed that if BBBEE participants benefited very well over the next 10 years there was no reason why SABMiller plc shareholders would not benefit enormously in line with empowerment shareholders.   "This (the BBBEE deal) is done in good faith. It's been well researched. It's an exciting venture. It's the first time in South Africa that many hundreds of thousands of people could benefit from our efforts in the beer business..."

Botha asked whether the valuation of the BBBEE transaction - worth some R7.3bn - was fair and reasonable based on "the limited information provided" in the circular to shareholders.  SABMiller CFO Malcolm Wyman pointed out there was an issue price and also a sale price which were set in terms of a formula.   "Therefore you need to look at both of those in determining the fair and reasonable nature of the scheme." Wyman believed SABMiller had set a consistent methodology to determine the (earnings) multiple and that this represented fair value to both SABMiller and the participants in the BBBEE deal.

Different multiples

But Botha argued SABMiller was valuing the BBBEE transaction based on the multiple of SABMiller. He asked: "Surely when new shareholders are coming in and they are buying a minority stake in SAB South Africa - surely that multiple should be a lot lower than the multiple we are using for SABMiller?"   Wyman refuted this. "I don't think you can make that statement off-hand, because it depends upon the outlook for each of the companies over a ten year period between the acquisition and the sale."

Wyman also pointed out that when a shareholder bought shares on the market that shareholder would not know what the multiple would be when the shares were sold in future.   "This is in fact a very transparent way for shareholders coming in at the moment to understand how the shares are being priced when they get the shares, and how the shares are being priced when they sell the shares." Botha also wanted to know why it took SABMiller so long to pitch an empowerment transaction - noting that some listed companies had gone through two or three BEE transactions already and that SABMiller derived a substantial portion of its profits from black consumers in SA.   Kahn said the concept of black economic empowerment had been under examination by a host of commentators - not all of which had been very happy with the way that BEE has been implemented in the past ten years.

He added that the structures that many companies used for BEE had placed the participants under the water. "I am delighted to tell you that the structure we eventually implemented, after years of research and consultation, requires no outside finance, no risks to its participants and immediate enhancement by virtue of the fact that they will receive dividends from year one. So rather late than never, but correctly so."

Kahn reckoned SABMiller's empowerment scheme was superb. "Most impartial observers have said that this is the broad -based black economic empowerment scheme that South Africa needs to apply into the future".

- Fin24.com

Shiseido to buy US cosmetics firm

Tokyo - Japanese cosmetics giant Shiseido has agreed to acquire San Francisco-based Bare Escentuals for $1.7bn.  Shiseido will offer to buy all outstanding shares of the company for $18.20 a share, which represents a 43% premium over Bare Escentuals' closing price on the Nasdaq on Thursday.

Bare Escentuals will operate as a separate division of Shiseido under its current leadership, Shiseido says. The 34-year-old company is known for its bareMinerals cosmetics brand sold in US department stores and specialty retailers.  "Together with Shiseido, we look forward to bringing our mineral-based beauty products to even more women worldwide," says Bare Escentuals CEO Leslie Blodgett.  Shiseido wants to expand its global reach and President Shinzo Maeda says the purchase represents an important step.

- AP

 

 

12 January 2010  -BUSINESS UPDATE

 

CITYGROUP: BUY NEDBANK

Johannesburg - Citigroup has issued a "buy" recommendation for Nedbank, but now only rates FirstRand as a "hold". This follows the run in banking shares in the second half of 2009, when Nedbank ended the year at R124/share, 31% up from the beginning of the year. Together with Investec, Nedbank showed the strongest growth among local banks, but at a price:earnings multiple (p:e) of 9.4 it is rated the weakest of the big four - Absa, First National Bank (FNB) in the FirstRand stable, Nedbank and Standard Bank.

A "buy" recommendation implies that value is seen in the share, while a "hold" recommendation can indicate that growth is over for now, before a new upward trend begins. According to Citi, South African banks are over the worst in terms of impairments, but still not entirely over the hump. It considers that bad debts probably reached a peak at R38bn in 2009, but 2010 could still bring unpleasant surprises. A decline to R26.6bn is expected only in 2011. The banks' mountain of bad debts is putting a damper on further credit growth. Although the banks have relaxed their stricter lending criteria, particularly in terms of home loans, consumers - judging from private credit extension figures - are unwilling to borrow on a large scale while household debt remains high.

Citi believes that when credit extension revives, earnings growth could surprise on the upside. Current share prices do not therefore reflect the true potential value that could still be unlocked. Average earnings growth will run to 20.6% this year and could rise to 32% in 2011. According to Citi, these forecasts could be conservative. Nedbank and FirstRand have been two seriously undervalued shares after their sharp declines in March 2009 in response to the global financial crisis and local recessionary conditions. Absa, at a p:e of 10.1, remains the most undervalued local bank after Nedbank.

The markets are waiting for a series of senior appointments to be made under the leadership of Maria Ramos. The question is whether Absa's current bad debts represent the peak of the current cycle. All four of the big banks' p:e ratios are significantly below the current 17.6 average of the JSE's all-share index.

- Sake24.com

VODACOM MAY PULL OUT OF DRC

Johannesburg - Vodacom's joint venture partner in the DRC, Congolese Wireless Networks (CWN), has confirmed it would sue the cellphone giant over allegations of fraud and forgery - a crisis described by an analyst as enough to see the JSE-listed firm quit the central African country. CWN, which holds 49% of Vodacom Congo, said over the weekend it lodged a lawsuit against Vodacom International - the business vehicle driving the Vodacom Group's African expansion - with the public prosecutor in Kinshasa. This followed a dispute over the partners' respective funding responsibilities, with CWN claiming Vodacom Congo had to overpay the Vodacom Group up to $180m. Vodacom International holds the remaining 51% stake in Vodacom Congo.

CWN said negotiations for the recovery of the $180m were conducted in bad faith and that it expected the case to be heard before a tribunal in January or February. Spiwe Chireka, telecommunications industry analyst for Frost & Sullivan, said it is difficult to tell which party is right. "I suspect there's not a comprehensive corporate framework or legislature in the country [DRC], hence companies can get away with things for a long time," she said. "Vodacom has been in the Congo for eight years. I'm not sure why CWN would allow this to continue for so long without doing anything about it."

Chireka said there is a real possibility of the case ending in Vodacom pulling out of the DRC . "If they don't reach some amicable agreement, I think a forced sale of Vodacom Congo is entirely possible. It's highly unlikely that they'd sell at full market value, however," she said. Alieu Conteh, chairperson of both Vodacom Congo and CWN, said in a statement at the weekend that Vodacom International has provided investment via its 51% shareholding of Vodacom Congo on "uncommercial terms". "Despite a track record of successful growth over the eight years since the joint venture was established, Vodacom Congo has never made a profit and has needed regularly injections of additional loan capital to fund its expansion," the statement read.

Vodacom 'in a tight corner'

"CWN claims that these loan facilities have been provided by Vodacom International on manifestly uncommercial terms and conditions which have resulted in overpayment by Vodacom Congo to [or through] Vodacom International of up to $180m," it continued. "In the main, the loans take the form of a revolving credit facility which places Vodacom Congo in a cycle of perpetual dependence. "Were it not for these unwarranted costs, Vodacom Congo, which is the country's largest mobile phone network with 4.3 million subscribers, would long ago have moved into profitability."

Bob Collymore, chief officer of Vodacom Group corporate affairs, said the group will defend any legal action taken in the DRC. "We have been entirely open in our dealings with CWN and have acted in good faith to ensure the viability and growth of Vodacom Congo," he said, adding CWN has explicitly approved the terms of the funding agreement that are now being disputed.

According to Chireka, the dispute is another setback for Vodacom's expansion plans in Africa. She said if DRC legislation is not concrete enough the case could be escalated to the International Court of Arbitration, but it remains to be seen if Vodacom is willing to go through with such a lengthy process. "Vodacom is in a tight corner," she said. "With the cost of business escalating, Vodacom might have to leave the Congo, but this has a negative effect on its African expansion plans. "Africa is proving to be difficult for Vodacom, with highly penetrated markets in some of the countries it operates in and stiff competition in others such as Tanzania, where there are 11 licensed operators."

- Fin24.com

 

GEYSER SUBSIDIES MAY DOUBLE

 

Cape Town - On Wednesday Eskom will announce details of a dramatic adjustment to its subsidy programme for solar water heaters in an effort to encourage their distribution. It would appear that in some cases the subsidies will more than double. According to a statement by the Solahart solar water heater supplier, the subsidy on its 300-litre unit has been increased from R4 918 to R12 097.

Solahart says this follows a memorandum sent by Cedric Worthmann, Eskom's solar water heater programme manager, to approved suppliers participating in the subsidy programme. Andrew Etzinger, head of demand-side management at Eskom, confirmed that the utility had amended its solar water heater subsidy programme to promote greater buy-in. He was unable to say exactly how much larger the subsidies would be, but confirmed that they would come into effect on Monday. The methodology by which the subsidy for each specific model on the approved suppliers' lists is calculated has been revised. In the two years that it has existed, the programme has been unable to attract the numbers initially hoped for by Eskom.

- Sake24.com

 

 

SARS ERRORS HIT TAXPAYERS

 

 

Pretoria - The year had scarcely begun when taxpayers were again queueing to resolve errors in their 2009 returns. The problems relate to returns that were completed at the offices of the South African Revenue Service (Sars). In September last year Johan Snyman of Pretoria handed his return in the Sars office in Pretoria East. He has a copy of the submitted return as proof. He received a huge shock when he was informed that the Sars system had no record of his return.

Sars spokesperson Malerato Sekha says such instances are rare and generally related to postal submissions. But it seems that people who enlisted the aid of Sars have also experienced problems. Taxpayers have complained of receiving incorrect assessments. Expenses for medical and retirement-annuity contributions, for example, have not been taken into account. One taxpayer said that he had made at least three visits to the Sars office, and had to resubmit all his original documents. According to Sars it is impossible to determine how many people have had to re-submit their returns.

With 2008's submission there were similar problems and more than 24 000 taxpayers countrywide had to re-submit their returns. Problems were also experienced with scanning the original documents electronically into the system. Sekha says that in 2008 fewer than 1% of all returns submitted were re-submitted. More than one million taxpayers failed to meet the end of November deadline for electronic submission. According to Sekha this however includes provisional taxpayers who have until February 28 2010.

If these are excluded, 700 000 returns are still outstanding. Because of the holidays at this stage it is not known how many of this number have been submitted, says Sekha. The Sars 2008/09 annual report indicates that there are 5.5m individual taxpayers, 1.8m companies and more than 392 000 trusts. Since April last year R11.4bn has been paid out to 1.7m individuals. Another 929 000 individuals' refunds, worth almost R5bn, are currently being processed.

- Sake24.com

 

 

 

07 January 2010  -BUSINESS UPDATE

 

 

RIVALRY MAY BEEF UP BANKING

 

Johannesburg - Competition between banks may be burgeoning this year as new leadership takes over and fresh products are launched. At least, this is the theory touted by market commentators, who argue that tough trading conditions and leadership changes at Nedbank, FirstRand and Absa are indications that the sector may become more competitive overall.

As interest rates have probably reached the lowest end of the present cycle, with data showing that private sector credit demand is on the decrease, banks would have to fight harder to attract borrowers this year. Absa and First National Bank launched new products in the low-cost banking market in the last two months to make them more competitive against the likes of Capitec. In turn, rumours are doing the rounds that Capitec may be about to launch a technology-driven small business banking offering which would up the stakes in this key segment of the market.

"It would make sense for Capitec to move into the small business sector, as that is where the margins are," said an analyst in an interview with Fin24.com. "Entrepreneurs' bank" Sasfin has also bolstered its own war chest with a $10m investment from the International Finance Corporation in exchange for shares. With Sasfin growing its infrastructure with a new head-office and expanding its staff from 542 to 573, increased competition can be expected around small businesses. After a brief attempt in 2009 to raise its profile, Grindrod Bank has gone back to quietly facilitating property transactions and corporate finance deals. However, with the big Grindrod balance sheet behind it and the stated intention of growing its retail offering, it may become more visible again.

'Not convinced'

The same could be said for Bidvest Bank. Primarily a foreign exchange dealer, it is also quietly expanding its workforce and retail footprint. If it receives a boost from the 2010 World Cup and foreign tourists, as management is expecting, it may provide an outlet for other banking operations.  Someone who does not believe 2010 will offer more benefits to banking clients is Graeme Macpherson from Justmoney.co.za. "The big four banks tend to be rather stolid, slow-moving behemoths," he said. "There isn't a culture in South Africa of changing your bank to get a better deal like the 'rate tarts' in the United Kingdom. "Our best guess would be that Capitec will continue with rapid and aggressive expansion in this market, but the big four will be sitting back on their existing customer bases, extracting further fees from them."

- Fin24.com

 

GOOGLE PHONE TO BYPASS SA

Johannesburg - The Nexus One smartphone, unveiled by Google and its partner HTC on Tuesday, will not available in South Africa. Leaf, the exclusive distributor of HTC products in South Africa, has confirmed there are no plans to launch the device locally and is uncertain if there ever will be. At launch, only users in the US, UK, Singapore and Hong Kong will be able to order the device. It will retail for $529 (about R3 800) or as part of a two-year contract. Google said in a statement it plans to "add more operator partners in the US and internationally", but could not comment on plans for South Africa. The device runs the Android operating system which was developed by Google and the Open Handset Alliance.

Unlike other Android-based smartphones from HTC and other vendors, Google is accounting for the hardware and will sell the Nexus One on its website. The Nexus One marks Google's debut in consumer hardware. The search giant is also working on a tablet computer device with HTC that will be launched later in 2010. "Nexus One is the first in what we expect to be a series of products, which we will bring to market with our operator and hardware partners," said the company.

"Our plan is to bring these devices to more countries for more consumers to enjoy," it said.

- Fin24.com

 

BUSINESS CONFIDENCE LOSES VIGOUR

Johannesburg - Business confidence lost momentum in December, the SA Chamber of Commerce and Industry (Sacci) said on Thursday. Business confidence retracted by 0.6 index points to 83.5 in December 2009, according to Sacci's Business Confidence Index (BCI). "After the BCI reached its highest level of 2009 of 85.5 in September, it appears to have lost momentum and has moved laterally since then," Sacci said in a statement.

The annual average of 82.8 for 2009 was the lowest annual figure for the BCI since the 81.9 of 2002. "The volatility of the BCI around the average of 82.8 for 2009 indicated uncertainty and tentativeness in the business environment." Sacci said that on an average annual basis, only two sub-indices - the rand exchange rate and consumer inflation - had made a positive impact on business confidence in 2009 compared to 2008. The other 11 sub-indices on average negatively affected business confidence in 2009.

From month-to-month, seven of the BCI sub-indices had a positive impact on the BCI in December 2009 compared to eight in November 2009. "It appears that all the sub-indices except real retail sales have moved beyond their lower turning points," Sacci said. The volatlity of business confidence in 2009 followed the difficulty experienced in the local economy in finding a comfortable recovery. "Although the third quarter GDP data confirmed that the technical recession had ended, many of the consequences of the recession still pervade the local economy." Sacci said although the markets had factored in a more brisk recovery, both the global and local economies were struggling to recover from the impact that the substantial disruption of the international financial system had on the real economy broadly and on global trade in particular.

"Locally, public sector management challenges and looming administrative price adjustments contribute to uncertainty in the economy and in business confidence," Sacci said. "The recovery in business confidence will only be led by evidence of real macroeconomic improvements." Sacci said it was optimistic that the economy would register a positive real growth rate of two percent or more in 2010. "Public sector activities may remain counter cyclical for the most of 2010 with administrative prices under strong surveillance. "With monetary policy remaining at its current neutral/positive stance, gradual recovery in other economic indicators and the prospect of a successful Soccer World Cup, business confidence is likely to seek a higher average for 2010 than in 2009."

- Sapa

 

 

 

 

 

 

 

 

 

04 January 2010  -BUSINESS UPDATE


ABI seeks help from Cosatu, CCMA

Johannesburg - Soft drinks company ABI said on Sunday that it will be appealing to Cosatu and the Commission for Conciliation, Mediation and Arbitration (CCMA) to intervene in the wage labour dispute between itself and the Food and Allied Workers Union (Fawu). The company said in a statement that two high level interventions will take place in the upcoming week in an attempt to halt violence and intimidation that have permeated the ongoing strike currently under way at some ABI depots.

On Monday, the company is expected to issue a formal request to the Congress of South African Trade Unions (Cosatu) to intervene. This will be followed by a meeting at the CCMA on Tuesday. ABI said it will go into discussions with Fawu at the CCMA meeting to get the union to adhere to strike rules and halt violence and intimidation tactics.

The meeting follows ABI's accusations against Fawu of unfair strike action, which included petrol bombing delivery vehicles and intimidation of non-striking employees. These also included intimidating anonymous calls to employees' families and the stoning of ABI and private vehicles. "We are appalled by this behaviour and our appeal to Fawu to ensure its members respect the law has had little apparent affect," said ABI managing director, John Ustas.

"We have now been granted legal protection by the courts and have increased our security precautions to ensure that non-striking employees are free to enjoy their right to work and to support their families," he said. Hundreds of ABI employees downed tools in demanding a 9.5% wage increase, but the company responded with an offer of 8.3%. "We and our customers have both suffered during South Africa's largest recession." "The soft drinks business has been 'soft' over this period as a result of rising costs and, given the harsh economic circumstances, we reiterate that our offer is more than fair," Ustas said.

- Sapa

 

'Google phone' to debut soon

Washington - Google is expected to ring in the new year by unveiling its own smartphone on Tuesday, the Nexus One, in a bid to expand its powerful web brand in the booming mobile arena. The internet search and advertising giant has already gained a foothold in the market with its Android mobile operating system, featured in a number of phones starting with T-Mobile's G1 in October 2008 and more recently with the Droid from Motorola.

But the Nexus One, designed by Taiwanese handset maker HTC, represents a significant departure in that Google is expected to sell the Google-branded phone directly to consumers who will not be tied to any one cellular carrier. Apple's popular iPhone, for example, is available exclusively in the United States through AT&T, but buyers of the "Google phone" will reportedly have their choice of wireless carriers.

Technology blog Gizmodo, citing leaked documents, said the Nexus One will cost $530 dollars "unlocked" - meaning it isn't tied to a specific carrier - or $180 with a two-year service agreement with T-Mobile, a subsidiary of Germany's Deutsche Telekom AG. Google has been coy about any plans to jump headfirst into the fast-growing smartphone market, dropping hints but not confirming its intentions outright. Agence France-Presse and other media outlets have been invited to a press event on Tuesday at Google headquarters in Mountain View, California, billed only as an "Android press gathering".

"With the launch of the first Android-powered device just over a year ago, we've seen how a powerful, open platform can spur mobile product innovation," the invitation said. "And this is just the beginning of what's possible." Google provided no further details about the event, whose timing appears to be an attempt to upstage the Consumer Electronics Show, the annual technology extravaganza which opens in Las Vegas on January 7.

Among the hints dropped by Google was a blog post last month in which the company said employees were testing a mobile product internally in an exercise known in the industry as "dogfooding". Google's plunge into the smartphone market has drawn a mixed reaction. "It looks like Google is moving to see if they can do the Apple thing," said analyst Rob Enderle, of Enderle Group in Silicon Valley, in a reference to the iPhone, which has enjoyed phenomenal success since it was introduced in 2007.

Pointing to Google's $750m acquisition of mobile advertising company AdMob in November, a number of analysts said Google hopes to replicate its web advertising success in the mobile space. Not all are convinced by the wisdom of the move. "For Google to go into the business of selling phones just doesn't make a whole lot of sense," Gartner analyst Van Baker said. "Just coming out with a high-end phone really doesn't buy you much," Baker said. "You'd be hard pressed to come up with enough revenue from pushing ads to pay for the phone service."

Ovum research fellow Jonathan Yarmis said Google will have to walk a fine line between marketing its own smartphone and being a supportive partner for the growing number of firms making their own handsets based on Android. Although Android's share of the US smartphone market is relatively small, it has doubled in the past year to 3.5% in October, according to comScore, and Gartner predicts Android-based smartphones will capture 14% of the global market by the year 2012.

- AFP

 

CHEAPER OIL GONE

 

New York - Oil have finished the year above $79 a barrel, climbing a whopping 78% in 2009 and notching the biggest annual gain in a decade. The market roared back from depressed levels seen at the end of 2008 that came as the global economic crisis sapped demand. US crude for February delivery settled up 8 cents at $79.36 a barrel, compared with a close of $44.60 on December 31 2008. London Brent crude fell 10 cents on Thursday to settle at $77.93.

This year's rise in US oil futures is the sharpest annual percentage gain since 1999, when output cuts by producers helped revive prices from lows near $10 a barrel. Oil on Thursday was still almost half the all-time high of $147.27 hit in July 2008. After sliding to a five-year low under $33 at the end of 2008, oil prices staged a steady climb to a high of $82 in October this year. The annual average 2009 price was $62, broadly in line with analysts' predictions at the end of 2008 of $58.48.

Crude was supported on Thursday by data from the U.S. Energy Information Administration (EIA) that showed declines in crude oil stockpiles last week, boosting expectations of demand recovery in the world's largest energy user. "Momentum seems to run out near $80 as market participants ponder the conundrum of whether or not a sustainable recovery is actually underway," Mike Fitzpatrick, vice president at MF Global in New York, said in a note. Oil's rise of nearly 80% this year was part of a broad-based rally across commodities and equities as investment returned to markets drained by the global economic recession.

"While it was nominally a very strong year for commodities, it was a relative weak year for passive investors," said Olivier Jakob, oil analyst at Petromatrix. Next year, analysts expected oil prices to consolidate this year's gains as demand continues its gradual recovery.

'Transition' in 2010

"We expect 2010 to be a year of transition between the demand concerns of 2009 and the supply concerns of 2011, with in addition geopolitical developments having a heightened importance," Barclays Capital said in a research note. US crude stockpiles fell by 1.5 million barrels in the week to December 25, just off an expected 2 million-barrel decline, while gasoline inventories showed a surprise decline, data from the EIA showed on Wednesday.

Crude inventories have slid by 19.5 million barrels in the past four weeks, eroding the excess supply to 50.1 million barrels, although stocks were still far above normal levels. There were signs on Thursday that crude oil supplies from some areas were on the rise as OPEC output hit a 2009 high in December, led by increases in Nigeria and smaller rises elsewhere, a Reuters survey showed.

- Reuters

 

STOCK ARE TOPS FOR 2010

 

Johannesburg - Most South African portfolio managers believe equities will be 2010's top-performing asset class, saying that numerous international stimulus strategies have succeeded in fixing the ailing global economy.

This is according to Jeremy Gardiner, director at Investec Asset Management, who attended a weekend portfolio managers' conference in Cape Town. He said on Monday that other common predictions for 2010 include the outperformance of emerging markets compared to their developed counterparts, while low interest rates would continue to detract from the attractiveness of cash. "Although emerging markets are going to see better growth than the developed world, they have run very hard on a relative basis," Gardiner said. "Better value may be found in global equities, which have suffered 10 years' worth of poor performance. In particular, global multinationals with exposure to emerging markets will benefit."

The expectation for inflation is that it should reach a low of about 4.5% by June and then remain within the target band (3% to 6%) for the rest of 2010. As for the gold price, Gardiner said moderate inflation, an oversold dollar and global economic recovery should slow gold's rise. Still, the metal will remain a good hedge asset against unforeseen economic obstacles.

Lurking risks

Cash has gone from being king to "trash", as central banks are likely to keep rates lower for longer. While current rand strength was seen as unsustainable, investors were warned not to expect too much weakness either. According to Gardiner, the sweet spot in the fixed interest space is corporate bonds. "In summary, then, for 2010 benign inflation coupled with interest rates staying lower for longer and reasonable growth will be good for asset prices," Gardiner said. "Asset prices are neither expensive nor cheap, so significant asset price growth going forward is therefore not expected. However, equity returns should be positive and certainly better than cash.

"Therefore, equities remain the place to be, but more through lack of choice than anything else." Gardiner warned one of the biggest risks to these forecasts is a so-called V-shaped recovery. This will cause interest rates to rise prematurely and rapidly, putting a further burden on over-indebted consumers and governments.

"There may be an interim correction; however, waiting for the correction has risks. Have a strategy and stick to it. Leave market timing up to the professionals."

- Fin24.com

 

 

23 December 2009  -BUSINESS UPDATE

New Companies Law Finally Coming

Johannesburg - The new Companies Act will definitely not come into force before March next year. On Tuesday the Department of Trade and Industry published for public comment the act's long-awaited draft regulations. According to MacDonald Netshitenzhe, director of commercial law and policy at the department, the public will be able to comment on the regulations until March 1, after which the remarks will be processed.

The Companies Act, which was signed on April 9 in 2008, was expected to come into force by July 2010, but some experts were hoping to see this sooner. Although the regulations were officially published on Tuesday, they are still at the Government Printing Works and, according to Netshitenzhe, will be available on the department's website only after Christmas. According to Nicolaas van Wyk, chief director of the Independent Review Research Centre, the regulations set out the way in which many of the act's provisions need to be implemented. He said that everyone already knew, for instance, that in future only companies regarded as having public interest would be audited. The regulations explain what will replace an audit in many cases.

The draft regulations provide, inter alia, for members of professional bodies who are members of the International Federation of Accountants (Ifac) to execute independent reviews of private companies which are not in the public interest. According to Van Wyk this will solve the problem of the shortage of auditors as other qualified accountants can now perform the task as long as their professional organisations are members of Ifac. Companies that are subject to independent review will be classified according to size (turnover, the value of assets and the number of workers), he explains.

Close corporations (CCs) that comply with the requirements of size, turnover and type of activity may still be subject to audit if the Department of Trade and Industry finds that the public has an interest in those CCs. Van Wyk says these organisations should take note of the change, since many people set up CCs specifically with a view to minimal accountability and because of the minimal reporting requirements.

- Sake24.com

 

Pyramid scheme hits Cape

 

Johannesburg - Investors in a pyramid scheme being operated in the southern Cape are running the risk of losing a large portion of their money. An investigation commissioned by the Registrar of Banks into the activities of Minne Opleiding/Trading has found that almost 700 investors invested at least R200m in the entity.

The money was ostensibly raised for training and dealing in foreign exchange. It now appears to be nothing more than a pyramid scheme with money being raised in contravention of the Banks Act. In November the Registrar of Banks ordered Minne Opleiding/Trading and Graeme Minne, who was operating the scheme, to refund investors and cease taking deposits from them.

From the initial investigation it appears that Minne had raised R200m, but the investigation is continuing and the amount could be larger. Investors were enlisted for Minne Opleiding/Trading with promises of 48% and 65% interest. This interest was indeed paid to investors, but the investigating team found that the entities' activities were not nearly profitable enough to justify the payments.

According to the inspectors, Minne said that money from "Investor B" was used to repay "nvestor A". The inspectors are currently drawing up an inventory of all available assets, and it appears unlikely that investors will receive their full investment back. At most, they can hope for a percentage of the original capital amount, but at this stage how much is unknown.

- Sake24.com

 

'Hawkers must stay put in 2010'

Polokwane - The Congress of South African Trade Unions in Limpopo has demanded that hawkers not be removed from their places of trade during the 2010 Fifa World Cup. Limpopo secretary Dan Sebabi said Cosatu, along with other lobby groups and the South African Municipal Workers Union, were busy organising hawkers in Polokwane to ensure that their strategic place in the city's economic activities was not undermined during the soccer spectacle next year.

"We have already had several preparatory meetings with hawkers and our partners, and we will be officially launching the initiative early next year. "However, we want to register our deep concern that the local municipality in Mookgophong (formerly Naboomspruit) has instructed hawkers in the town to vacate the spaces that they have been using for decades," said Sebabi. He said most of these hawkers were the only breadwinners in their families and some had even taken out loans to purchase the goods they were selling, most of which were perishables.

"The mayor and municipal manager of Mookgophong must reverse this decision and urgently find better ways of handling the matter," Sebabi said. Acting municipal manager Frans Modise confirmed on Tuesday it had instructed the hawkers to move.

"Most of these hawkers were stationed in front of private shops and the owners have been complaining to the municipality. On a positive side, though, we have embarked on a project to build vegetable and fruit stalls around Mookgophong and the tender has already been advertised," said Modise. He said the tender closed on December 28 and would be awarded before the end of January. "The hawkers have been moved to other places for now until the new stalls are completed. We wish Cosatu could have consulted us before accusing the municipality of being unfair to hawkers," he said.

African Eye

 

'Copenhagen' coming to SA

Cape Town - In two years' time "Copenhagen" will take place in South Africa, when the United Nations 17th Framework Convention on Climate Change meets. In an appendix to the agreement concluded in Copenhagen over the weekend it is confirmed that the next summit will be held in Mexico at the end of the November 2010, and the next - from November 28 to December 9 the following year - in South Africa. According to the appendix, a formal host-country agreement with South Africa still needs to be finalised.

This will be a critical conference because it will take place just before 2012, when the existing climate agreement in terms of the Kyoto Protocol expires. Meanwhile, on Tuesday European carbon credits for delivery in December 2010 were 2% up to €12.70 per ton on London's Climate Exchange, after Monday's 8.3% decline in reaction to the weak agreement achieved in Copenhagen, as reported by the Bloomberg financial news service.

According to analysts, carbon credits could again recover to €13 as the Copenhagen agreement has not altered the current demand and supply situation in the carbon market. Environmental activists could now, according to a report in the Vancouver Sun, shift their focus to Canada which is to host the G8 and G20 conferences in 2010.

The weak Copenhagen agreement will hamper the attempts of United States legislators to get through legislation that will establish a carbon-exchange market in the country because China cannot yet be forced to curtail its greenhouse gas emissions, reports Reuters.

- Sake24.com

 

 

 


22 December 2009  -BUSINESS UPDATE

 

BIG SHOPPING CENTRE IN LIMPOPO

Johannesburg - Lephalale in Limpopo will soon receive an enormous economic injection in the shape of the new R600m regional shopping centre.

The 42 000m² centre will be developed by Silverleaf Developers on a 12ha site in Onverwacht in the Greater Lephalale region. This is a joint venture between Moolman Group (with a 40% interest), Uniqon Wonings (with 40%) and Flanagan & Gerard Property Development and Investment (with 20%).

Patrick Flanagan of Flanagan & Gerard says it will be the first major centre in the area and will offer national retailers the opportunity to broaden their exposure. Letting has already started and the centre is drawing interest from both national and local tenants.

Lephalale is a huge municipality covering an area of 19 605km².

This Bushveld town's economy is driven by investment in the mining and energy sectors. It is the home of Exxaro's Grootgeluk Mine, which supplies coal to the Matimba power station outside the town and will also provide coal to the Medupi power station, which is under construction.

Construction of the centre will begin in the middle of next year and it is expected to open its doors in September 2011.

FIN24


CHINA TARGETING 8% GROWTH

Beijing - China's government is targeting 8% growth next year as the global economy recovers, the country's industry minister said on Monday.

"Based on the economic growth target of about 8%, set by the central government, we aim for industrial output growth at about 11%," said Li Yizhong in a webcast on his ministry's site.

Li's comment was the first indication of Beijing's 2010 growth target, a figure that usually is released after the start of the year. The annual target has been set at 8% for several years, though growth has exceeded that.

Forecasts by private sector economists for China's economic growth next year range from 9% to 11.9%, well above the government target.

China's economy expanded 7.7% for the first nine months this year, helped by the government's 4 trillion yuan ($586bn) stimulus package.

A government report this month said full-year growth is forecast at 8.3%. The World Bank is forecasting 8.4%.

Li said the world's economic recovery is still fragile and Chinese exports this year should be 17 percent below 2008 levels.

China's leaders vowed at an annual planning meeting this month to keep economic stimulus and easy credit policies in place.

China's industrial production in the first 11 months of this year rose 10.3% from the same period last year. Growth in November alone was 19.2% over a year earlier.

- Sapa


Sacci worries about Eskom hikes

Johannesburg - The South African Chamber of Commerce and Industry (Sacci) on Monday expressed concern over the potentially negative impact that implementation of a 35% year-on-year tariff increase Eskom had applied for would have on the South African economy.

In its comments on the Multi-Year tariff increase that Eskom submitted to the National Energy Regulator of South Africa (Nersa), Sacci referred to the weighting of electricity in the consumer price index (CPI) of 1.87%.

"Assuming that municipalities pass on the full increase and adjust their own portion similarly there would be a pass through effect, where producers and retailers are forced to raise prices in response to higher cost bases.

"Sacci estimates that inflation is likely to be around 0.3% higher, pushing CPI to above the 3% to 6% target range," it said.

The chamber argued that it would reduce personal disposable incomes and therefore household consumption spending, before ultimately feeding through to GDP.

Disposable income would also be reduced through higher than otherwise interest rates and lower employment," Sacci said.

"Apart from the direct impact of lower consumer spending the hikes would also negatively impact on GDP by reducing competitiveness and capital formation.

"In Sacci's estimate the overall direct loss to GDP would be around R150bn. The lower GDP and failing companies implies lower employment levels, with job losses approaching 500 000," it said.

Sacci proposed a number of suggestions relating to actions that the National Treasury could take, to interim pricing proposals and build, operate and transfer (BOT) projects, and a charter to improve governance.

"Sacci recommends that Eskom be granted an increase to tide it over 2010 with the implementation of a multi-year price determination (MYPD) being postponed until 2011. This will make it possible for stakeholder engagements to take place during 2010 with the objective of negotiating a secure and financially viable future for the industry without the concomitant adverse impacts on the economy that the current proposals will have," it said.

The group also proposed that before Nersa makes its decision, a workshop of stakeholders takes place where alternative solutions be tabled and debated and which could be followed by in depth consideration of any proposals.

- I-Net Bridge

 

 

 



21 December 2009  -BUSINESS UPDATE

 

Cheques to become obsolete

 

Johannesburg - After the United Kingdom announced earlier this week that cheques would be completely phased out by 2018, the Banking Association of South Africa (Basa) said it was inevitable that the country would follow suit.   Cheque usage has been in decline for a number of years in South Africa. Stuart Grobler, Basa senior general manager of banking and financial services, said once the economies of scale for the use of cheques disappear, it won't be profitable to keep the system in place.

"If the decline in cheque use continues, it's inevitable at some stage that volume versus costs becomes adverse," Grobler said.   Head of corporate communications at First National Bank Virginia Magapatona said electronic banking methods are becoming the norm.

"We have noted a growing preference for electronic transfers among our customers, due largely to the convenience, security and low cost of these transactions," she said. The use of online banking has increased by 20% during the past 12 months.   Newcomer Capitec has never offered its customers cheque facilities.   "Cheques were always an upmarket and never a mass market product," said Grobler. However, upmarket bank Investec also does not provide cheque services.

Hardcore users cling to familiar ways.  Among the many disadvantages of the cheque system is that it can be used to perpetuate fraud.   "Cheques have risks because they are pieces of paper that can be intercepted and altered," said Grobler.  He said there was a fairly big increase in cheque fraud of late.

Still, there is a loyal group of loyal cheque users, like the elderly, which distrusts electronic banking.  Countries which follow the UK banking system - like South Africa, Canada, Australia and New Zealand - will be watching what happens there and may take similar decisions soon.  "We've had better alternatives to cheques, but there is still a loyal customer base despite the additional costs," said Grobler.

- Fin24.com

 

 

Johannesburg - Defensive stocks such as British American Tobacco (BAT), MTN and Adcock Ingram remain popular choices with asset managers in 2010, with little interest in small cap companies. Said Alwyn van der Merwe of Sanlam Private Investments (SPI): "Even though we expect equities to be slightly less robust next year, they are still likely to find support in the low interest rate environment and high cash holdings, both locally and internationally."   His recommendations were for British American Tobacco, MTN, Steinhoff International, Lewis, Northam and Sasol. The firm also said it liked South African banks African Bank Investments Limited (Abil), Standard Bank and Investec.

Commenting on furniture manufacturer Steinhoff, Van der Merwe told clients: "With its growth prospects into Eastern Europe and a potential UK listing to unlock value in the future. It is a share to watch in 2010."   Not all agree on Steinhoff's prospects, however. Value investors including managers at Investec, Rand Merchant Bank (RMB) and PSG were net sellers of the stock in the third quarter of 2009.   Stockbroker BOE picked industrial powerhouse Bidvest, telecommunications firm MTN, listed beverage play Capevin, Impala Platinum, financial services firm RMH and pharmaceutical firm Aspen.

Other stocks included were retailer Woolworths Holdings, information technology firms Pinnacle Micro and EOH. BOE told clients: "Given the strong market position of MTN in most markets, and a forward focus on cost reduction, this should allow for an improvement in margins. We expect that the company will re-rate relative to its emerging market wireless competitors."

 

Johannesburg - The International Air Transport Association (Iata) says not only is the King Shaka Airport near Durban unnecessary, but airlines and passengers who will not use the airport are expected to subsidise it.  This is because Acsa hopes to increase its tariffs by 133% at all its South African airports from April 2010 - inter alia to pay for the construction of the airport.  Jeff Poole, Iata director for operating expenditure, fuel and taxes, says airlines had not asked for the new airport at La Mercy, 50km from Durban.  Moreover, he points out, only one or two international airlines fly to Durban. Now all those flying to South Africa have to help pay for the new airport they won't even use.

Poole reckons had there been a healthy business plan for the airport, it would not have been necessary to hike airport tariffs to such a degree.  "But a proper business plan has never been drawn up to show that La Mercy makes financial sense. If there is one, we have certainly never seen it."  Moreover, he continues, if Acsa claims it is building the airport because volumes are increasing, then costs should come down. Or, he comments, perhaps he misunderstands the principle of economies of scale.  Poole says the real cost of the new airport, which would originally have been R3.1bn, is closer to R7bn.

 

Johannesburg - The ongoing container crisis in KwaZulu-Natal may hamper the World Cup preparations.  Hundreds of trailer trucks that carry high-cube containers with some goods for the coming World Cup soccer tournament are stranded in the province, because the containers are a mere 300mm too high, according to the country's transport regulations.   The containers hold, among other things, marketing goods and equipment for the soccer teams and international media. These items have already landed in the Durban harbour by ship, says Gavin Kelly, spokesperson for the Road Freight Association (RFA).

It is hoped that the situation will draw the attention of the national authority and government which, at this stage, have failed to react to a request sent by the RFA to President Jacob Zuma's office, the Minister of Trade and Industry, and the Minister of Transport to salvage the situation.  A planned meeting between the national Department of Transport and the KwaZulu-Natal Department of Transport for Friday has meanwhile been postponed to January.   This haulage crisis started after the KwaZulu-Natal Department of Transport on November 29 began to put into effect legislation prohibiting transportation of these containers.

Trucks carrying the containers have since been impounded and fined up to R10 000. According to the Cape Town Regional Chamber of Trade and Industry, truck drivers with these containers have also on occasion been fined in the Cape.   A moratorium was previously placed on the legislative provision restricting the travelling height of trucks to 4.3m.   The height of a trailer truck with a high-cube container is 4.6m, and South Africa has no trucks low enough to transport the containers within the legal height limit.  Five million cube containers have been transported on South Africa's national roads in the past decade.   At least 50% of all containers coming to the country's ports are high-cube containers, which are international standard ISO containers.

 

MARKET INDICATORS:

ALS: 27 399, R/USD 7.66, R/EUR 10.98, R/GBP 12.36, GOLD USD 1 113.00, OIL USD 74.18

 

 

 

11 December 2009  -BUSINESS UPDATE

 

Johannesburg - The average deposit for a house, as a percentage of its purchase price, is currently 15.7% (R132 831), compared with an 18.7% (R148 554) deposit in November 2008. This transpires from the latest oobarometer for November and is largely owing to banks' improved appetite for lending - with 100% mortgage loans available again - as well as favourable prospects for the property market.

Johannesburg - About 114 foreigners are working on Transnet's new fuel pipeline being built between Durban and Gauteng, the minister of public enterprises replied to a question in parliament. The foreigners come mainly from France, Britain, Ireland, Peru, Spain and Italy. According to the minister, they work for the project's main contractor, the French group Spiecapag, which specialises in the accelerated construction of overland pipelines.

Shanghai - China has overtaken the US as the world's biggest market for automobiles, the first time any other country has bought more vehicles than the nation that produced Henry Ford, the Cadillac and the minivan. Now that the Chinese buy more cars and trucks than Americans, the shift could produce ripples for the environment, petrol prices and even the kinds of cars carmakers design. More than 12.7 million cars and trucks will be sold in China this year, up 44% from the previous year and surpassing the 10.3 million forecast in the US, according to J.D. Power and Associates.

MARKET INDICATORS:

ALS: 27120, R/USD 7.48, R/EUR 11.04, R/GBP 12.19, OIL USD 72.75

 

 

10 December 2009  -BUSINESS UPDATE

Cape Town - News Cafe has spread its wings to India, putting beef on the menu despite that country's reverence for cows. India's first News Cafe opened its doors in Delhi last month. The intention is to establish a franchise in Hyderabad in January and one in Mumbai by March. This will be only the beginning of the franchise group's foray into India. Alan van der Westhuizen, the head of News Cafe's restaurant division, said the group had also investigated expansion opportunities in China but had been unable to find a partner there.

India's economy grew 7.9% in the July-September period, the fastest pace in six quarters, bolstered by government stimulus measures and rising industrial production, figures showed on Monday.  The upsurge suggests that Asia's third largest economy could be emerging faster from the global slowdown than many expected, despite agriculture being hit by drought. The upswing is likely to encourage the central bank to proceed with gradual monetary tightening.   Economists had expected the economy to grow 6.3% from a year earlier after growth of 6.1% in the April-June quarter. The benchmark Sensex index was up 1.6% in mid-afternoon trade, to 16 901.8 points.

Liberty Holdings on Thursday confirmed the appointment of Thabo Dloti as chief executive of the group's asset management businesses, Stanlib and Liberty Properties as well as for Liberty Corporate Benefits and Group Risk.  The appointment is with effect from March 2010. Previously Dloti was CEO of Old Mutual Investment Group South Africa (Omigsa), a position he held since August 2004 where he was responsible for a portfolio of 15 asset management businesses.

Johannesburg - The total number of civil summonses issued for debt has increased, Statistics SA said on Thursday. For the three months ended October 2009 the number of summonses increased by 9.1% compared with the three months ended October 2008, the Pretoria-based agency said. There was also a 3.6% increase between October 2008 and October 2009. The major contributors to the increase for the three months ended October 2009 compared with the three months ended October 2008 were civil summonses issued in respect of money lent (3.3 percentage points), promissory notes and other acknowledgements of debt (3.0 percentage points - this category includes credit card debt) and "other debts" (2.0 percentage points.

MARKET UPDATE

All Share  26,679.66  -0.19
Top 40  24,183.24  -0.21
Resource 20  49,394.88  -0.21
Industrial 25  20,866.58  -0.11
Financial 15  7,129.72  -0.24
ZAR/USD 7.59  0.04
ZAR/EUR 11.16  0.05
ZAR/GBP 12.32  0.03

 

 

 

08 December 2009  -Business Update


-Brewery giant SABMiller's amended broad-based economic empowerment deal will cost the group a whopping R2.1bn to implement, after it increased the original size of the transaction from R6bn to R7.3bn. Originally announced on July 1, the transaction will put 8.45% of the company's local subsidiary SAB under black ownership through the issue of new shares to SAB employees, black-owned licensed liquor stores, black-owned retailers of SAB's soft drink division ABI and the broader community through the newly-created SAB Foundation.

-First National Bank has embarked on restructuring its branch network to allow it to offer comprehensive banking services (including cash and cheque deposits) 24 hours a day to its customers. "FNB is comprehensively re-engineering its branch network. We have called this multi-year project 'One and Done'. The project gives expression to our vision of industry leading service levels and customer convenience," said CEO of Branch Banking at FNB, Barry de Witt.

-The use of smart phones is a growing security threat in companies and without the proper technology, education and policies in place these little devices will leave firms vulnerable to cyber attacks. "In the future, mobile phones will become a key security threat in the enterprise space," said vice-president (corporate business) of IT security firm Kaspersky Lab, Keith Maskell. "Companies should create a strategy for self-defence in this unregulated environment and they should constantly review these strategies. Almost every month there are changes in the threat landscape and the products available to protect themselves." A mobile virus targets cellphones in the same way traditional computer viruses target computers. Often cellphone viruses are created to obtain information from the user without being detected.
These viruses are able to spread through Bluetooth, browsing the net on your cellphone or getting onto the cellphone "mailing list" of phishing companies.
ALS: 26837, R/USD 7.50, R/EUR 11.09, R/GBP 12.22, OIL USD 75.35

 

 

 

07 December 2009 -Business Update

BUSINESS UPDATE: KwaZulu-Natal attracts the biggest number of local tourists, who spend more than a quarter of the country's total holiday expenditure in the province, according to Statistics SA's domestic tourism survey for 2008.

South Africa is apparently still on the buying lists of big-ticket international propert...
y investors, with the historic De Goede Hoop homestead on the Boschendal wine estate in the heart of the Cape winelands snapped up by a foreigner for R23.5m on Monday.

South African diversified financial services company PSG Group said it will launch a mandatory offer to acquire all the Capitec Bank shares it does not own.

MARKET UPDATE: ALSI 27144, R/$7.41, €11.00, £12.20, GOLD 1157, OIL € 77.11

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