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Article posted  by: White Nation  financial correspondent Cape Town May 31 2017





LOCAL retailers are starting to have a horrid time as Jacob Zuma’s missteps start to pummel the economy. Just yesterday, food business Taste Holdings recorded a core Ebitda loss of R20.8m while last week, furniture retailer Lewis Group posted a 35.6% decline in headline earnings.

Today, Mr Price – a previous darling of the market – reported its first-ever profit drop in 16 years as it posted a 10.4% fall in diluted headline earnings for the year. The company blames cabinet reshuffles, subsequent junk downgrades and “a lack of faith in the current political leadership’s ability to set high standards of governance and deliver inclusive growth” as part of the problem. Hard times are upon us.

Meanwhile, BizNews and  partners Ince need to apologize for a blank email newsletter that went out yesterday – the gremlin has been ironed out. Retail giant Edcon is reviewing whether to keep some stores open, as their leases expire. Edgars, Jet, CNA and Boardmans are among the chains in the Edcon stable. Edcon CEO Bernie Brooks said on Monday that the domestic market was being affected by retail cannibalization, whereby the opening of new stores draws customers away from existing outlets. Although the new stores generally did well, it could reduce overall sales. Edcon has already closed more than 25 outlets, including Edgars, Jet and Boardmans stores.

BMW AG is set to extend production halts in Germany to China and South Africa on Monday as the luxury-car maker grapples with a shortage of steering parts. The most important market news of the day. Get our markets daily newsletter. Production at the factories in Shenyang and Rosslyn is likely to stop for a day, while its plant in Leipzig, Germany, is expected to be partially shuttered, spokesman Michael Rebstock said. The Leipzig site has been closed since Friday, and another facility in Munich was affected last week as an unidentified Italian car-parts supplier has been unable to make the required deliveries, magazine Focus reported earlier Sunday.

BMW’s profitability dropped in the first quarter, as an aging production lineup led the company to offer incentives to accelerate sales. The Munich-based car maker delivered 5.2 percent more cars in the first quarter than a year earlier, compared with a 16 percent jump at Mercedes, which last year outsold its luxury brand rival for the first time in a decade. “We can’t say at this point when the production halts will be over,” Rebstock said, adding that the company would decide on further production stoppages caused by the supply shortage as needed. He described the likely financial damage as “manageable” but “not yet quantifiable,” noting that the company’s 1-Series through 4-Series models are all affected. “A task force is working constantly to solve the issue,” Rebstock said.

BMW has two plants in the the northeastern Chinese city of Shenyang with local partner Brilliance China Automotive Holdings Ltd. producing models including the 3-Series and 5-Series sedans. Brilliance China slid 0.3 percent as of 2:27 p.m. in Hong Kong trading, compared with a 0.2 percent gain in the benchmark Hang Seng Index.(Link)

Empowerment group Grand Parade Investments (GPI) – which is rolling out the Burger King franchise in SA — has cancelled its premium-priced order for a huge helping of Spur Corporation shares. Last month, GPI – which already owns a 10% stake in Spur — detailed plans to acquire up to 19.46-million shares in the restaurant and fast-food conglomerate from institutional asset manager Coronation Fund Managers.

Roamers already have it that Toyota SA also are thinking of closing shop as did Chevrolet did. The biggest Industry in S.A. are striking today in KZN against Toyota SA. The reason you will not believe: The purpose of this Taxi strike is to protest against the price they are paying for Toyota Quantums.

The SA National Taxi Council (Santaco) in KwaZulu-Natal on Wednesday threatened to shut the country down if Toyota – the manufacturers of the Toyota Quantum minibus preferred by government – didn’t respond to their grievances within the next seven days. The taxi operators brought traffic to a standstill on major Durban routes and surrounding areas on Wednesday morning while on their way to a Toyota plant in Prospecton, Isipingo. They were protesting “over the escalating cost of the Toyota Quantum since it was introduced in the country 10 years ago”. When it was introduced, it was at a fully imported price of R220 000. It is now however locally produced at R450 000 before interest which the industry feels is too expensive, Santaco said.

According to the organisation’s calculations, one Toyota Quantum costs more than R1m when the deposit, interest rate, instalments, premiums and insurance have been considered. Santaco KZN chair Boy Zondi told News24 that they want Toyota to decrease the minibus price to R350 000.We also demand that Toyota stops supplying SA Taxi Finance with Toyota Quantums because of the high interest rate they charge us,” he said, adding that they suspect that banks, Toyota and SA Taxi Finance are colluding to cheat taxi operators. Zondi said they gave the minibus manufacturer seven days to respond to their grievances. “If they don’t respond, we will shut down the whole of South Africa,” he threatened. Minibus taxis began operating shortly after Santaco handed over their memorandum to a Toyota representative.

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The striking thugs are demanding discounted prices from Toyota and are causing mayhem. They’ve barricaded employees inside the Toyota Factory and are behaving like hooligans on the N2... What a joke considering they don’t even pay Tax… Next they’ll demand subsidised fuel, maintenance plans and Insurance.. WTF.. why don’t they do what the rest of us do.. buy a cheaper brand... There are Nissans, Cam’s, Renaults, Hyundai and many other mini busses.

Nothing captures the waning confidence in South Africa than the following graph which shows direct investment by SA companies abroad. Last year it hit roughly R70 billion on a rolling four month cumulative basis up to September 2016. Back in 2012 it was zero.



So what’s going on here?

Old Mutual Multi-Managers chief investment strategist Dave Mohr says the outflow of capital reflects ongoing nervousness over the domestic economy. A year ago, power outages, the “three finance ministers in a week” fiasco, and the threat of a credit downgrade to junk were among the issues that pushed the rand past R17 to the US dollar at one point.

Since then the rand has come back strongly, but corporate SA continues to vote with its feet, moving money abroad as fast as possible. Corporate owners are planning for the long term, spreading their assets outside of the country. The real motivation for this is the expectation of persistently low domestic growth – expected to be a shade over 1% in 2017. Money moves where the growth is, and that is outside of SA. The UK has been a particularly popular destination for companies such as Truworths, Brait, Woolworths and Steinhoff, all of which made UK acquisitions in recent years. 

The exodus of capital from SA continues a trend that commenced two decades ago. Fifteen of the biggest companies on the JSE now earn more than half their revenue offshore. These include MTN, Bidvest, Steinhoff, Naspers, British American Tobacco, Glencore and BHP Billiton. It is clear that the strength of the rand last year did little to halt the exodus of capital.  The threat of a downgrade will linger, but we can avoid it if we tighten the budget as expected and our growth surprises on the upside. With growth expectations extremely low it will not be difficult to surprise on the upside. Recent good rains and an expected fall in inflation could be the triggers for such an upside surprise.”

Mohr expects the rand to hold its ground this year, after strong gains in 2016. The fact that the rand recovered some of its losses last year is small comfort for importers who have seen a near halving in currency value against the US dollar since 2011. The second graph shows the JSE All Share index in rand and US dollar terms. In dollar terms, the JSE is unchanged since 2009, and has been declining steadily since 2014. The JSE All Share index is up 12% in rand terms over the 12 months to date, but is up 40% in US dollars, thanks in large part to a 20% improvement in the rand-US dollar exchange rate over the period. This made it one of the strongest performing burses in the world last year in US dollar terms.


Unemployment in SA is at its highest level since September 2003. The economy added 144,000 jobs during the first quarter but this was offset by the number of job-seekers surging by 433,000 people. The unemployment rate of 27.7% in the first quarter was up 1.2 percentage points from the fourth quarter of 2016. “The gap in reaching the 2030 National Development Plan target of 24-million employed people is now 7.8-million,” statistician-general Pali Lehohla said at the release of Statistics SA’s Quarterly Labour Force Survey on Thursday.

Growth in employment was seen in all industries except agriculture, trade and services. Employment was boosted by growth in the manufacturing sector, which added 62,000 jobs, and in the finance and other business services categories, which added 49,000 employees. Mining added 26,000 jobs. The youth unemployment rate rose by 1.6 percentage points to 38.6%, with 58% of unemployed people aged between 15 and 34. “It’s very important, that the unemployment in these two age groups — of 15-24 and 25-35 — has increased. Once they’re unemployed for a period of time, things are getting harder and harder for them to get jobs,” said Lehohla.

Unemployment was high, at 33.1%, among people who had less than a matric, 5.4 percentage points higher than the national average. Unemployment among graduates remained at 7.3%. Unemployment increased and remained unchanged in all the provinces except the Northern Cape which decreased. Of the people who did not have work, 9.3-million wanted work in the first quarter; while those who wanted work but did not look for work increased by 391,000 people. The expanded unemployment rate was 36.4%. Officially 6.2-million people were unemployed, of whom 29.8% were female — which Lehohla referred to as “the feminisation of unemployment”. (Link)