US warning on EWC; Keen response on emergency power; Mining royalties; Burger King; Inflation

By Linda van Tilburg

  • US Secretary of State Mike Pompeo says the South African government’s plan to expropriate land without compensation would be disastrous for the economy. Pompeo told reporters in the Ethiopian capital, Addis Ababa that the policy proposal is an example of centralised planning that has failed in other African states like Zimbabwe, Tanzania and Ethiopia. African economies need “strong rule of law, respect for property rights, regulation that encourages investment” for inclusive and sustainable economic growth, Pompeo said. The rand has proved sensitive to White House comments on the issue in the past. It slumped in 2018 after President Donald Trump asked the Secretary of State to closely study the South African land and farm seizures and expropriations. This wasn’t the case yesterday; the rand gained for the time this week, advancing to R14.93 to the dollar before falling back to R14.98 at the end of the trading day in Johannesburg.
  • South Africa’s inflation rate rose to a seven-month high in January driven by higher fuel prices. Consumer-price growth quickened to 4.5% from 4% in December according to Statistics South Africa which was lower than the 4.6% that economists expected. The increase is unlikely to put pressure on the central bank to pursue tight monetary policy. Inflation was driven by increases in fuel price in January with gasoline 15% higher than it was in the same month last year. Annual core inflations, which excludes the prices of food, non-alcoholic drinks, fuel and electricity slowed to 3.7%.
  • The Department of Mineral Resources and Energy has received hundreds of responses to a call for 3,000 megawatts of emergency power that it estimates could be brought online within two years. That is after it put out a request for information in December to gather solutions for power generation in the midst of outages that are slowing economic growth. There were 481 responses that included options for gas, coal, renewables and nuclear, Minister Gwede Mantashe told Parliament yesterday. The original request asked for short-term power-supply options of as much as 3,000 megawatts within a year but analysis by the department “also suggests that longer-term contracting is required to ensure prices do not negatively affect the current tariffs.” The National Energy Regulator of South Africa also received 132 applications for a total capacity of 59 megawatts of generation for own use, according to Mantashe. The licensing requirements for this category have been removed in an effort to reduce South Africa’s power supply deficit.
  • Mantashe also commented on possible funding for the sovereign wealth fund that President Cyril Ramaphosa proposed in his speech of the nation address. He said all the mining companies pay royalties to the state which could be used to start the sovereign wealth fund. The state collected almost R8bn in royalties from mining houses in 2018. However, the royalties which are meant to develop communities, have not been spared from plunder with Corruption Watch previously highlighting that their management has been characterised by corruption and maladministration rendering the system mostly ineffective. ​Meanwhile mining companies registered robust gains on the Johannesburg yesterday with Gold Fields and Harmony Gold gaining more than 9%, Northam Platinum up 8% and Anglo Platinum rose by 6,72%. Steinhoff International closed 10% lower.
  • The new owners of Burger King, Emerging Capital Partners (ECP) wants to double the number of its South African stores in the next five years. It follows after the makers of the Whopper burger, Grand Parade Investments has agreed to sell its Burger King chain to ECP as it looks to spin off businesses and return cash to investors. Shares of Grand Parade climbed the most since 25 October gaining more than 9% after the company announced the R664-million- sale to the Washington-based pan-African private-equity firm. Grand Parade, which also owns casinos and a stake in South African Spur steakhouse is looking to sell its remaining businesses in the next few years. Once it’s sold its assets, the Cape Town-based leisure company plans to delist from Johannesburg’s stock exchange.