The world is changing fast and to keep up you need local knowledge with global context.
By Jackie Cameron
Today’s Biznews Flash Briefing:
- South Africans are reeling from the news that the economy shrunk in the first quarter of this year. Analysts have blamed Eskom power cuts for hammering manufacturing, mining and agricultural output. Kevin Lings, chief economist at Stanlib Asset Management, told Bloomberg that “Eskom has a grip on the South African economy that is unlikely to be seen anywhere else in the world…Eskom powers all tiers of the economy…and so when it cannot supply electricity, all sectors suffer,” he said. Gross Domestic Product slumped an annualised 3.2% in the first three months of this year after expanding by 1.4% in the last three months of 2018.
- Eskom has more than $30bn in debt and is believed to be the biggest threat to the economy, according to Goldman Sachs, but it isn’t the only state-owned enterprise dragging down the South African economy. At least seven state companies are, as public enterprises minister Pravin Gordhan put it in February, “either on their knees or touching carpet”. This is a major challenge for the new government, and so far there are no great ideas on how to fix the problems. As BizNews reports, South Africa’s Reserve Bank Governor Lesetja Kganyago says the bank won’t bail out any of the companies, not even Eskom – because doing so will fuel inflation.
- Former Rand Daily Mail editor Raymond Louw has died, shortly after his wife Jean. Louw was 91. President Cyril Ramaphosa was among the first to offer his condolences. He said, in a statement: “With the passing of Mr Louw the country has lost a brave and principled journalist and a champion of press freedom. Throughout his illustrious career he reminded us of the critical importance of media freedom to the health of our democracy.” This pro-media freedom stance is in sharp contrast to the attitude towards the media in the Jacob Zuma era, with the country’s former president involved in a dirty campaign to discredit independent journalists. Global PR firm Bell Pottinger was paid hundreds of thousands of rands to develop the campaign.
- Barloworld’s Khula Sizwe public offer closed on Tuesday after being oversubscribed. The funding target of R164m for the black economic empowerment scheme was reached, with more than 50,000 applications received. Because it was oversubscribed not all applicants will receive the number of shares for which they applied, says the company. Barloworld’s BEE public offer is a property-based scheme not related to the Barloworld share price. The funds raised in the offer will be used to buy a stake of about 30% of certain Barloworld properties.
- The big movers on the JSE on Tuesday were Goldfields, which jumped more than 6%, and Massmart, which dropped more than 4%.
- Making global headlines: US President Donald Trump stirred up controversy in the UK, where he indicated that Britain’s National Health Service would be fair game in trade negotiations with the US after Brexit – but he later backtracked. He was also very forward about his favourites to take over from Prime Minister Theresa May, reminding the world of his fondness for Boris Johnson – who is as divisive in the UK as Trump is in the US.
- Grabbing as many headlines in the UK as Trump was Neil Woodford, an asset manager described as Britain’s answer to Warren Buffett. The UK’s rock star fund manager has found himself at the centre of a crisis. Woodford attracted more than £10bn in assets under management two years ago on the back of superior investment returns. But there was a run on his flagship fund, prompting him to suspend trading until further notice. That move has spooked big investors, who have pulled other investments from Woodford. Sparking the exodus of investors is that Woodford has experienced a colossal run of bad luck recently, with a number of struggling companies in his portfolio.
- Late on Tuesday, the rand was trading at around R14.85 to the US dollar, and R18.85 to the British pound, while R16.70 was buying one euro.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.