19 Jan

South Africa Holds Rate as Rand, Inflation Risks Persist

The South African Reserve Bank kept its benchmark lending rate unchanged for a third consecutive meeting as the risks of a credit-rating downgrade persist, muddying the outlook for the rand and inflation.

The central bank’s Monetary Policy Committee maintained the repurchase rate at 6.75 percent Thursday, in line with the estimates by all but seven of the 20 economists surveyed by Bloomberg.

The bank cut the rate for the first time in five years in July to support an economy that entered its second recession in almost a decade in the first quarter of 2017 and has struggled to mount a strong recovery.

Inflation has been inside the target band for eight months and the rand — among the world’s most-volatile currencies — has strengthened since the ruling party elected Deputy President Cyril Ramaphosa as its new leader in December, spurring hope that policy uncertainty and political turbulence will dissipate.

“We do see an improved inflation and growth outlook thanks to a stronger performance in the currency but a lot of risk factors still exist, both on the political front as well as on the credit-ratings front,” said Jeffrey Schultz, BNP Paribas’s senior economist.

S&P Global Ratings and Fitch Ratings Ltd. cut the country’s debt to junk in 2017, and a reduction of rand bonds by Moody’s Investors Service could trigger an exclusion of the country’s rand debt from Citigroup Inc.’s World Government Bond Index.

The effect of this on rand bond yields “could be significant, but the extent to which a universal downgrade is already priced in remains unclear,” Governor Lesetja Kganyago told reporters in the capital, Pretoria. The government’s challenge is to “find ways to finance the deficit in a growth-positive manner, and at the same time convey a credible commitment to structural reforms.”

The bank expects inflation to remain within the target band of 3 percent to 6 percent until at least the end of 2019, reaching a low of 4.4 percent in the first quarter of this year.

To read the full article, click here.

18 Jan

S. Africa’s Companies Regulator Charges KPMG, McKinsey, SAP

South Africa’s Companies and Intellectual Property Commission laid criminal charges against the local units of audit firm KPMG LLP, management consultants McKinsey & Co. and software giant SAP SE.

The cases were opened with the South African Police Service between November and December for contraventions of the country’s Companies Act, the regulator’s spokeswoman, Tshiamo Zebediela, said in an emailed response to questions on Wednesday. The CIPC “has been looking into these companies since July 2017,” she said.

The CIPC is one of the first local regulators to bring criminal complaints against the companies for their dealings with entities linked to the Gupta family, who are friends of President Jacob Zuma and in business with his son, Duduzane.

Zuma and the Guptas have consistently denied any wrongdoing. It comes as the country’s prosecutors move to freeze assets held by McKinsey and a company linked to the Guptas.

“The CIPC engaged with the respective boards of directors of KPMG, McKinsey and SAP regarding the emails that were placed in the public domain,” Zebediela said, “and based on the responses received, took a decision to open criminal cases.”

“No criminal charges have been brought against the firm and KPMG South Africa believes that there is no substance to the allegation,” it said in an emailed response to questions. “We will fully cooperate with any enquiries the police may have.”

Below is a summary of the accusations from the CIPC:

McKinsey: The consultant may have contravened the Companies Act by informing Eskom that Trillian Capital Partners (Pty) Ltd. was acting as subcontractor for a portion of a project when McKinsey had never entered into a formal agreement with Trillian.

McKinsey spokeswoman Bonita Dordel told Johannesburg-based Business Day that the firm was not involved in bribery or corruption for work related to Eskom.

KPMG: The auditor may have failed its own risk management and quality controls when compiling a report for the South African Revenue Service and making legal conclusions that went beyond its mandate and professional expertise.

To read the full article, click here.

18 Jan

S. Africa Moves to Tackle Corruption as Zuma Loses Influence

South African prosecutors moved to freeze the assets of suspected allies of the politically connected Gupta family more than a year after the nation’s top graft ombudsman outlined the depth of state looting in the country.

The National Prosecuting Authority is targeting U.S.-based consultancy McKinsey & Co. and South African financial services firm Trillian Capital Partners Pty Ltd. for what it says was unlawful work for the state power utility.

It’s expected to be the first of many moves to tackle corruption more broadly. Trillian used to be majority-owned by an ally of the Guptas, who were accused by former Public Prosecutor Thuli Madonsela of wielding undue influence over the government to make money.

The three Gupta brothers, who are friends with President Jacob Zuma and in business with one of his sons, are alleged to have used those relationships to win contracts from state companies and influence government appointments. They and the Zumas have denied wrongdoing.

The NPA’s move “is good news, because people were becoming despondent as nothing was being done about corruption in the country,” Madonsela said by phone on Wednesday. “I hope that the bad guys will be taken to task and that people will start thinking twice before engaging in corrupt activities.”

The court filing by the NPA was made just two days before South Africa’s ruling African National Congress elected Cyril Ramaphosa as its new leader, picking him over Zuma’s preferred candidate and ex-wife Nkosazana Dlamini-Zuma.

Ramaphosa, 65, is now on track to become the country’s next leader and has promised to fight corruption as one of his main priorities, helping the rand rally by almost 6 percent against the dollar since his victory. The currency was little changed at 12.3099 per dollar by 7:23 a.m. in Johannesburg on Thursday.

“Ramaphosa has enjoyed a warm welcome by capital markets,” Adrian Saville, chief executive officer of Johannesburg-based Cannon Asset Managers, said on Wednesday. His “point of departure is rooting out corruption and purging the malicious agents of state capture. The steps taken by the NPA are pivotal to restoring the institutional credibility that has been decimated under Zuma’s presidency.”

To read the full article, click here.

15 Jan

H&M Condemns Racism After ‘Monkey’ Ad Sparks Protests in Africa

Hennes & Mauritz AB went into damage-control mode over the weekend after a controversial advertisement sparked protests in South Africa.

The Swedish clothes retailer closed its South African shops after some outlets were trashed in an anti-racism protest against an online ad by H&M, featuring a black child modeling a hoodie with the text “coolest monkey in the jungle.”

“H&M is aware of the recent events inside several of our South African stores,” the company said in a statement on its website. “What matters most to us is the safety of our employees and customers” and “we have temporarily closed our stores in South Africa.”

Read More: H&M Caught in Controversy Over Black Child in ‘Monkey’ Hoodie Ad

 H&M was last week forced to apologize for the image after it caused a social-media storm and prompted Canadian artist The Weeknd to end his collaboration with the Stockholm-based company. H&M, which said it agreed with those who were upset by the image, pulled the garment in question from its stores. Over the weekend, the company took further steps to reject all forms of racial slander.
“We strongly believe that racism and bias in any shape or form, deliberate or accidental, are simply unacceptable,” H&M said. “We stress that our wonderful store staff had nothing to do with our poorly judged product and image.”
To read the full article, click here. 
12 Jan

South African Steinhoff Unit Mulls Early Redemption of Bonds

Steinhoff International Holdings NV said one of its South African units is considering an early redemption of all notes in issue as the global retailer struggles to stay afloat amid an accounting scandal.

Steinhoff Services Ltd.’s redemption of securities issued under a 15 billion-rand ($1.2 billion) bond program will require pricing supplements to be amended and restated, the Frankfurt- and Johannesburg-listed company said in a statement after the market closed on Thursday. The necessary approvals will have to be obtained, Steinhoff said, without giving more detail.

The parent company’s woes began on Dec. 5 when it said it had uncovered accounting irregularities and that Chief Executive Officer Markus Jooste was resigning. Thereafter its bond yields spiked and its share price lost most of its value. Banks started to withdraw lines of credit and regulators from South Africa to Europe began to investigate. The stock fell 3.7 percent to 6.50 rand as of 9:36 a.m. in Johannesburg, extending its decline this week to 26 percent.

To raise liquidity the retailer has started parting with some assets it built up in a two-decade acquisition drive. French retailer Carrefour on Thursday said it acquired a 17 percent stake in Showroomprive from Steinhoff’s Conforama for 79 million euros ($95 million), while last week Steinhoff’s Austrian unit, Leiner Immobilien, sold its flagship store in Vienna for 60 million euros. Other measures to shore up finances include Steinhoff selling its Gulfstream 550 jet, while Jooste has been auctioning his racehorses.

With Steinhoff also having issued debt internationally, the European Central Banksaid earlier this week it had disposed of the company’s securities after they were downgraded to junk.

Pending Lawsuits

Steinhoff Services, the vehicle the retailer uses to sell listed bonds on the Johannesburg Stock Exchange, has 12 notes in issue, according to data compiled by Bloomberg. Those securities amount to a total of 7.6 billion rand in debt. More than half of those sales took place last year with Steinhoff Services having sold 4.83 billion rand of bonds in 2017. It has three notes valued at a total of 1.4 billion rand maturing in 2018.

To read the full article, click here.

11 Jan

Boiling a frog: Ramaphosa’s patient battle for the soul of the ANC

Cyril Ramaphosa’s dramatic election as president of the African National Congress (ANC) last month has raised as many questions as it has answered. Since he defeated rival Nkosazana Dlamini-Zuma at the 18 December party conference, South Africa has effectively had two centres of power: Ramaphosa as ANC president, Jacob Zuma as state president.

There are rumours some members are pushing for President Zuma’s departure before the 2019 elections when he will have to retire. This would pave the way for Ramaphosa to become state president. From there, he could enact reforms, take control of policy matters, and put his stamp on government.

However, with the party so finely balanced between pro-Ramaphosa and pro-Zuma factions, this possibility cannot be counted on and would have to be handled very delicately. The National Executive Committee’s (NEC) top six positions, for instance, are evenly split. Ramaphosa has only a slender majority in the broader NEC and other sub-bodies.

This means that although Ramaphosa has succeeded in the tough feat of becoming ANC president, for now, he will still have to engage in numerous trade-offs with Zuma allies going forward. At the same time, he will also have to manage some surprise policies imposed by the state president ahead of the conference, such as the promise to provide free higher education for the poor.

Also on his plate are a set of radical policies championed by Zuma allies and adopted at the conference. These include increasing the government’s shareholding in the Reserve Bank to 100% and expropriating land without compensation.

This will all add to the already tough challenges of ensuring economic stability, restoring credibility, and overhauling state-owned enterprises. The upcoming 2019 elections add a further sense of urgency.

For the moment, Ramaphosa will have to navigate these hurdles dragged down by almost half the party. However, President Zuma has notably had some of his authority stifled by recent rulings.

To read the full article, click here.

11 Jan

South Africa’s Zuma Retains Office as Ramaphosa Bides His Time

Jacob Zuma remains South Africa’s president for the time being as the new leader of the African National Congress, Cyril Ramaphosa, plans how to bring an end to his scandal-ridden administration without unleashing a major split in the ruling party.

The ANC’s National Executive Committee didn’t discuss the option of forcing Zuma from office at a meeting Wednesday in the southern city of East London, according to three members of the panel who spoke on condition of anonymity. Earlier in the week, three of the NEC’s 86 voting members, who also asked not to be identified, said the matter would be raised.

Ramaphosa, 65, must strike a delicate balance between assuaging the concerns of Zuma supporters and meeting the desire of his own backers for the president’s quick removal. A lack of support from a clear majority in the NEC will limit his scope to convince voters before 2019 elections that he can rebuild the battered economy and clamp down on the alleged graft that’s become synonymous with the Zuma era.

“For Ramaphosa to build on the momentum of his ascendancy to ANC president and boost investor confidence, he will only have a relatively short window to remove Zuma,” said Mike Davies, the founder of political-advisory company Kigoda Consulting. “After that, the Zuma camp will be able to consolidate, and other factors will start to erode recent optimism that his election means significant change.”

Ramaphosa, the nation’s deputy president, was elected ANC leader by a narrow margin last month, warding off a challenge from Nkosazana Dlamini-Zuma, Zuma’s ex-wife and favored successor. A former labor-union activist, businessman and lead negotiator in talks to end apartheid in the 1990s, Ramaphosa may be playing a long game in his bid to remove Zuma.

He could allow Zuma to remain in office while he acts as an effective chief executive, building up support in the party by engineering a comprehensive cabinet reshuffle, while allowing legal cases to catch up with Zuma before removing him in six to nine months, according to Robert Schrire, a political science professor at the University of Cape Town.

To read the full article, click here.

10 Jan

Who’s in Cyril Ramaphosa’s cabinet? Alleged leaked list shows his choices

A document shared only by ANC insiders has found its way into public circulation this week. It reveals Cyril Ramaphosa’s cabinet choices and preferred ministers. It is fair to say the changes would be sweeping, and perhaps even progressive.

As reported by Donwald Pressly of the Cape Messenger, and shared with BizNews.com, the extensive list offers a real glimpse into a changing future for the ruling party.

In fact, Ramaphosa has more freedom in appointing his cabinet members than Zuma has ever had. The 2007 resolution that only made it possible to appoint ANC NEC members in top positions has since been scrapped. This means Cyril is now at liberty to appoint who he wants, and yes, that does include anti-Zuma figures.

Pravin Gordhan could return to government

Returns have been touted for Pravin Gordhan, Derek Hanekom and Blade Nzimande. Gordhan would be back as the Public Enterprises Minister, ousting Lynne Brown. Hanekom is set for a comeback in his beloved Tourism post. Nzimande would regain his Higher Education post, just months after falling victim to Zuma’s axe.

Ramaphosa is not constrained by the divisions in the party. At least, that’s what this so-called ‘leaked list’ tells us. It seems he is not preparing for life with Zuma, but life after Zuma. JZ remains the Head of State, despite stepping down from the ANC Presidency. This is something Cyril is keen resolve imminently.

Cyril Ramaphosa’s cabinet could feature Zuma’s critics

Mondli Gungubela, Bheki Cele and Lindiwe Sisulu are all expected to serve a role in the higher echelons of Ramaphosa’s ANC. This trio are arguably the biggest internal critics of Jacob Zuma, with the exception of Makhosi Khoza before her departure.

Gungubela openly stated he would be voting against Jacob Zuma in the motion of no confidence last August. His seat at the table would be as the Co-operative Governance Minister. Cele, a vocal opponent of the Guptas and Nkosazana Dlamini-Zuma, could be the next State Security Minister if this list is true.

To read the full article, click here.

10 Jan

South Africa’s Zuma Says He’ll Name ‘State Capture’ Commission

South African President Jacob Zuma said he would appoint a commission of inquiry into allegations that the Gupta family was allowed to influence state decisions and that he would abide by a court ruling for the Chief Justice to select its leader.

The High Court in December rejected Zuma’s arguments that he alone can set up the commission and ordered him to pay the cost of the case. While the president has appealed the cost order and the judgment regarding the duties of the president to appoint commissions, he said in a statement on Tuesday he is taking further legal advice on this.

“I am concerned that this matter has occupied the public mind for some time now and deserves urgent attention,” Zuma said. “The allegations that the state has been wrestled out of the hands of its real owners, the people of South Africa, is of paramount importance and are therefore deserving of finality and certainty.”

Zuma’s about-turn comes a day before the new top leadership of the ruling African National Congress meets for the first time on Wednesday. A proposal to order Zuma to step down before his term ends in 2019 will be discussed at the gathering in the city of East London, according to three people who spoke on condition of anonymity. Zuma’s scandal-tainted tenure has eroded support for the ANC and he lost control of the party to his deputy, Cyril Ramaphosa, at an elective conference last month.

‘Political Interference’

Public Protector Thuli Madonsela said in November 2016 that Chief Justice Mogoeng Mogoeng should appoint the head of the inquiry because the president had a conflict of interest. Mogoeng has selected Deputy Chief Justice Raymond Zondo, Zuma said on Tuesday. Zuma didn’t say who the commission’s other members will be.

Madonsela had ordered the inquiry into allegations that the Guptas may have influenced the appointment of cabinet members in Zuma’s administration and received special treatment for a coal business linked to the family and one of the president’s sons. Zuma and the Guptas have denied wrongdoing.

“The commission is a step towards ridding the country of corruption, and must do its work without delay,” Mmusi Maimane, the head of the main opposition Democratic Alliance said in a statement. “It must be properly staffed, fully funded and free from any and all political inference.”

Source: https://www.bloomberg.com/news/articles/2018-01-09/south-africa-s-zuma-says-he-ll-name-state-capture-commission

09 Jan

Zuma to Face Ouster Bid at South African ANC Meeting

South African President Jacob Zuma will face a fresh bid to force him from office when the ruling African National Congress’s top leadership meets this week for the first time since he relinquished control of the party to his deputy Cyril Ramaphosa.

A proposal to order Zuma to step down before his term ends in 2019 will be discussed at a Wednesday meeting of the party’s National Executive Committee in the southern city of East London, according to three members of the panel who spoke on condition of anonymity. Zuma’s scandal-tainted tenure has eroded support for the ANC.

The NEC’s 86 voting members are divided into two loose factions — one that backed Ramaphosa, 65, to take over as party leader at the ANC’s national conference last month and another that’s allied to Zuma and favored his ex-wife Nkosazana Dlamini-Zuma to succeed him.

Ramaphosa won the contest with just 52 percent of the vote, giving him a tenuous hold over the party, and it remains unclear where exactly the balance of power lies within the panel, which usually takes decisions by consensus.

“Given Cyril Ramaphosa’s emphasis on renewing the ANC, doing things afresh, it makes all the sense that the matter should be a priority agenda issue,” Mcebisi Ndletyana, a political science professor at the University of Johannesburg, said by phone.

“If it is raised and the motion is defeated, then that is a serious worry. It would be indicative that he does not have everyone behind him. It would make him a very weak president.”

Graft Charges

The ANC’s former head of intelligence, Zuma, 75, took office in May 2009 just weeks after prosecutors dropped graft charges against him. He’s spent years fighting a bid by opposition parties to have those charges reinstated and fending off allegations that he allowed members of the Gupta family to influence cabinet appointments and the award of state contracts.

To read the full article, click here.

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