09 Apr

Biggest South Africa Cement Maker PPC Eyes Growth Post Turmoil

PPC Ltd. is weighing expansion into new markets as South Africa’s biggest cement maker seeks to draw a line under a tumultuous two years that included an emergency rights issue and takeover interest from competitors.

Since taking the top job in July, Chief Executive Officer Johann Claassen has reviewed the company’s operations and balance sheet, with a particular focus on boosting liquidity and extending debt maturity, he said in an interview in Bloomberg’s Johannesburg office. “We had to steady the ship and make it sustainable,” he said. “Now we need to get a new pipeline of projects.”

New investment would follow a 12 billion rand ($995 million) outlay on five plants in the past half decade, which took PPC into countries including Ethiopia and the Democratic Republic of Congo from its South African base. All are now in operation and generating cash, said Claassen, 58, allowing the company to consider new facilities.

East Africa is a particularly fast-growing region, while an abundance of projects in Ivory Coast implies a high demand for cement in the West African country, Mokate Ramafoko, PPC’s head of Africa operations, said in the same interview.

While he and Claassen declined to identify specific markets PPC will expand into, Ramafoko said Kenya had a shortage of cement clinker plants and Uganda also looked promising, with new projects coming up.

The plan marks a step change in the strategy of PPC, which raised 4 billion rand from shareholders in 2016 to service debt after S&P Global Ratings cut its credit rating to junk.

That came during a perfect storm of heavy investment in new projects and slowing economic growth and falling prices in its home market, which accounts for about 70 percent of sales.

Looking ahead, the company sees the potential for growth, both at home and internationally, as it seeks to repay shareholders for the faith shown during the rights issue.

To read the full article, click here.

05 Apr

Trump’s Trade War Could Hit South African Rand Through Oil Price

The path ahead looks challenging for South Africa’s rand, if oil prices are anything to go by.

Concern that U.S. President Donald Trump’s measures will trigger a trade war may hamper global growth and weaken demand for oil, according to Mehul Daya, a strategist at Nedbank in Johannesburg.

“Oil leads the rand,” Daya said. “Sixty percent of the movement in the rand can be explained by changes in the oil price since 1990.”

Talk of tit-for-tat tariffs has already hit the rand and other South African assets. The currency led emerging-market losses Wednesday and was down 0.8 percent to 11.9065 per U.S. dollar as of 2:43 p.m. in Johannesburg. The yield on rand-denominated bonds due December 2026 jumped seven basis points to 8.09 percent. Johannesburg’s equity benchmark tumbled 2.3 percent as escalating tensions between the U.S. and China dragged emerging markets lower.

“It’s all due to those trade wars and a lot of uncertainty,” said Marius Grobler, a trader at Unum Capital. “Investors are seeing a lot of fear on the market.”

Since 2016, oil has recovered from about $28 to $68 a barrel. That’s supported the rand, strengthening it to below 12 per dollar from more than 16, according to Nedbank.

Read the full article at Bloomberg Markets


25 Jan

Rand Cracks 12 per Dollar First Time Since ’15 as Optimism Grows

South Africa’s rand traded below 12 per dollar on Wednesday for the first time since May 2015, extending a rally sparked by an improving domestic political environment and supported by global risk-on sentiment and the greenback’s retreat.

The currency advanced as much as 0.9 percent to 11.9265 per dollar, and traded 0.7 percent stronger at 11.9462 by 11:52 a.m. in Johannesburg. That brings gains in the past three months to 15 percent, the most out of 31 major currencies tracked by Bloomberg.

The yield on rand-denominated government bonds due December 2026 fell four basis points to 8.32 percent, the lowest since March.

The election of Cyril Ramaphosa as head of the ruling African National Congress in December, setting him on a path to take over from President Jacob Zuma, has fueled optimism South Africa may avert further credit-rating downgrades as the new leadership takes steps to root out corruption and stimulate the ailing economy. Inflows into the nation’s stocks market are running at record levels.

“Investors are loving us at the moment,” said Phillip Pearce, a trader at TreasuryOne Ltd. in Johannesburg. “The dollar is taking a pounding and global markets are still on the hunt for yield. There’s not a lot of risk going now. South Africa seems like a good bet.”

The rand could appreciate to as low as 11.50 per dollar if Zuma is removed from office, Pearce said. The probability of the rand reaching that level this quarter rose to 49 percent on Wednesday, from 19 percent a month ago, according to Bloomberg’s forecast model based on prices of options to buy or sell the currency.

‘Better Space’

South Africa is in a “much better space” now than when previous credit-rating actions took place, and can avert further downgrades this year as lawmakers assert their authority to hold the executive to account, South Africa’s central-bank governor, Lesetja Kganyago, said on Wednesday.

To read the full article, click here.

24 Jan

Steinhoff Finds $1.1 Billion Under the Mattress. Is It Enough?

Steinhoff International Holdings NV’s quest for cash has yielded about $1.1 billion from asset sales as the embattled retailer struggles to stay afloat. The question is whether the relatively small steps it’s taken can forestall more radical ones.

Since revelations last month of accounting irregularities, Steinhoff sold the company jet, shed stakeholdings and sought to refinance debt to free up funds. It even ended its sponsorship of the rugby team at Stellenbosch University, the alma mater of former Chief Executive Officer Markus Jooste.

“Scrambling around to find relatively small amounts of money points to the extent of the problems,” said Charles Allen, a London-based analyst at Bloomberg Intelligence.

In its largest move so far, the company on Monday sold 7.1 billion rand ($590 million) of stock in South African financial-services firm PSG Group Ltd. Steinhoff, which snapped up French furniture retailer Conforama, British discount chain Poundland and Mattress Firm of the U.S. in the past decade, may have little choice but to begin unwinding that buying spree, said Syd Vianello, an independent retail analyst in Johannesburg.

“Selling smaller assets that are not essential to its operations is part of its strategy,” said Vianello, an accountant by training who has followed the industry for about 30 years. “But I don’t think it will stop there. Banks will want their money and want it quickly, so there will be big sales forced on them.”

Steinhoff shares have fallen 84 percent since Dec. 5, the day it announced the discovery of the accounting problems and the departure of Jooste as CEO.

Seven weeks on, investors are still in the dark about the scope of the irregularities. Since hiring auditor PwC to investigate, Steinhoff has said it may have to restate earnings going back to at least 2015. Questions over the accounts and the company’s sprawling operations are complicating efforts to estimate its cash needs.

To read the full article, click here.

28 Dec

Rand Extends Comeback as Traders Anticipate Ramaphosa Presidency

It’s taken South Africa’s rand exactly nine months — and a new ruling-party leader — to claw back the losses it suffered after President Jacob Zuma unexpectedly fired Finance Minister Pravin Gordhan in March.

The rand gained as much as 1.8 percent on Wednesday to 12.2889, erasing its losses since Gordhan’s dismissal and the highest since July 2015. Gordhan’s dismissal sent the currency plunging 11 percent in two weeks and sparked a credit-rating downgrade to junk.

The rand has rallied more than 6 percent since Cyril Ramaphosa, who has pledged to revive the struggling economy and stamp out corruption, was elected leader of the African National Congress on Dec. 18. That set the billionaire businessman on a path to take over from Zuma as the country’s president. Investors are betting that may happen sooner than 2019, when his term expires, according to Legal & General Investment Management Ltd.

“The market is positively surprised by the increasing amount of support that Mr. Ramaphosa is rallying behind him,” Simon Quijano-Evans, an emerging-market strategist at Legal & General, said by email. “He is likely to continue doing so, increasing speculation about another no-confidence motion in the presidency in 2018.”

Members of the ANC’s newly elected executive committee will meet Zuma to advise him to step down in favor of Ramaphosa, Johannesburg’s City Press reported on Dec. 24, citing unidentified people. Ramaphosa beat Nkosazana Dlamini-Zuma, who was backed by the president, to the top ANC position in a closely contested vote.

Flows into South African stocks and bonds have soared since the vote. Foreigners bought a net 6.4 billion rand ($516 million) of debt and 13.4 billion rand of equities in the week ending Dec. 22, according to JSE Ltd. data.

Source: https://www.bloomberg.com/news/articles/2017-12-27/rand-extends-comeback-as-traders-warm-to-ramaphosa-presidency

20 Dec

Rand’s Ramaphosa Rally May Run Out of Steam

The South African rand’s surge lasted only as long as it took Cyril Ramaphosa to get himself to the top of the nation’s ruling party.

Now that he has, the currency’s world-beating rally is losing steam, and derivatives markets suggest it’s vulnerable to a renewed selloff.

The rand has climbed 13 percent against the dollar since hitting a one-year low on Nov. 13, as investors bet that Ramaphosa would defeat his rival, Nkosazana Dlamini-Zuma, to take over the African National Congress and put himself in prime position to succeed Jacob Zuma as president in 2019.

The nation’s stocks and bonds rose on Tuesday, the day after Ramaphosa’s win, and extended gains on Wednesday. But the rand traded sideways, suggesting investors want to see improvements to South Africa’s long-term prospects before increasing their exposure to an economy that’s barely growing and at risk of having its debt downgraded further into junk territory.

“The market has got ahead of itself as the victory of Ramaphosa does not spell the end of South Africa’s issues,” Guillaume Tresca, an emerging market strategist at Credit Agricole CIB in Paris, said Tuesday. “It’s facing a turbulent period in the near future, which will make its assets vulnerable. Moreover, the medium- to long-term outlook is still not positive for the rand.”

Tresca recommended shorting the currency against the dollar and targeting a 6.4 percent drop to 13.61. The rand retreated 0.2 percent to 12.7273 per dollar by 11:03 a.m. in Johannesburg.

To read the full article, click here.

25 Jul

South Africa’s rand steadies, stocks set to open flat

JOHANNESBURG, July 25  – South Africa’s rand steadied early on Tuesday after falling the previous day, having failed to break through technical resistance at around 12.8500 against the dollar.

* At 0645 GMT, the rand traded at 12.9600 per dollar, unchanged from its overnight close.

* Stocks were set to open flat at 0700 GMT, with the JSE securities exchange’s Top-40 futures index largely unchanged.

* In fixed income, the yield on the benchmark government bond due in 2026 fell 3.8 basis points to 8.507 percent.

[via Reuters]

19 Jul

South Africa’s rand weakens ahead of CPI, retail data

South Africa‘s rand weakened against the U.S. dollar early on Wednesday as investors awaited consumer price inflation and retail sales data due later in the day.

* At 0645 GMT, the rand traded at 12.9450 per dollar, 0.41 percent weaker than its overnight close.

* Statistics South Africa is due to release June CPI figures at 0800 GMT and May retail sales numbers at 1100 GMT.

* “A lower CPI print will make the South African Reserve Bank rate decision difficult tomorrow, especially because growth is weak and the exchange rate is also much stronger than at the last Monetary Policy Committee meeting,” Rand Merchant Bank analyst Isaah Mhlanga wrote in a note.

* South Africa’s Reserve Bank is expected to leave interest rates unchanged at 7 percent on Thursday, but economists expect a dovish statement as the central bank gets closer to its easing cycle.

* Stocks were set to open higher at 0700 GMT, with the JSE securities exchange’s Top-40 futures index up 0.6 percent. (Reporting by Olivia Kumwenda-Mtambo; Editing by Ed Stoddard).

[via Reuters Africa]

30 Jun

South Africa’s rand weaker as demand for emerging currencies wanes

JOHANNESBURG, June 30 (Reuters) – South Africa’s rand weakened further in early trade on Friday as a breach of key technical levels triggered short selling by offshore investors weary of local politics and betting the U.S. economy is on the mend and set for higher interest rates.

* By 0650 GMT the rand had weakened 0.23 percent to 13.0450 per dollar, compared to a close of 13.0150 overnight in New York.

* Better than expected estimates of economic growth in the United States in the previous session chipped away at the rand’s carry trade attraction, with higher yields in U.S. 10 bonds signalling an imminent move away from emerging currencies.

* Possible re-emergence of political noise as the ruling African National Congress begins its week-long policy conference also put the brakes on the rand.

* “Above the 13.00 we initially saw local exporter interest which kept it capped but once the local market called it a day New York pushed the rand as high as 13.0850 in what looked like a typical New York short squeeze,” said Nedbank Capital analyst Reezwana Sumad.

* South Africa publishes May trade data at 12000 GMT.

* Local bonds also suffered, with the yield on the benchmark government issue due in 2026 up 8 basis points to 8.785 percent, a 1-1/2 month high.

* Stocks were set to open lower at 0700 GMT, with the JSE securities exchange’s Top-40 futures index down 0.42 percent. (Reporting by Mfuneko Toyana, editing by Ed Osmond)

More: Reuters Africa