Amplats shines; Denel can’t pay staff; Zimbabwe currency anger; Gold keeps running; Brexit to nail Ireland

By Jackie Cameron 

  • On the JSE, mining stocks were the big movers upwards, with Angloplat, Implats and Sibanye all gaining about 5%. A rise in platinum prices has improved prospects for these companies. As Reuters reports, Anglo American Platinum (Amplats) said on Tuesday it expected its half-year earnings to rise by at least 80%, helped by an increased metals price and one-off impairments that weighed on results in the same period a year earlier. Amplats said headline earnings for the six months ending June 30 were expected to be R2.69 billion ($188 million) more than the R3.363 billion earnings reported in the same period a year ago. Amplats is expected to report its half-year results in July.
  • Gold prices surged to a five-year high on Tuesday, extending gains for a sixth straight session, on the back of expectations of monetary easing by the U.S. Federal Reserve and a subdued dollar, reports Reuters. “Brewing tensions between the United States and Iran helped prop up the price of gold, which is often picked as a hedge against risk during political and economic uncertainties,” says the news wire. “Spot gold rose nearly 1% to $1,432.42 per ounce as of 10:03 a.m. EDT (1403 GMT). Prices had touched $1,438.63 in the session, a level last seen in May 2013. U.S. gold futures gained 1.3% to $1,436.00 per ounce. “Once these uptrends start, they don’t come to an end overnight. It feeds on itself, and that means you could have a new trading range,” George Gero, managing director at RBC Wealth Management, is quoted as saying. He expects gold to trade between $1,375 and $1,450 in the short term.
  • South Africa’s state-owned enterprises are in deep trouble following years of corruption and mismanagement. While power utility Eskom and national airline SAA have been in the spotlight, arms manufacturer Denel is also struggling. This month it will not be able to pay its staff full salaries. The 15% cut to wages highlights the severity of the financial crisis at Denel, which makes ammunition, missiles and armoured vehicles for the South African armed forces and customers in Africa, the Gulf and Europe, say analysts. The company has been working on a turnaround plan with the government, but it has so far failed to secure the significant cash injection it wanted, says Reuters. “Regrettably, employees will receive 85% of the salary obligation for June,” the memo signed by Chief Executive Danie du Toit said. “Management are working tirelessly to ensure that the delayed portion of the salaries will be reimbursed as soon as possible.” Denel confirmed in a statement that it had decided to only pay 85% of June salaries for now. Denel, which struggled to pay salaries to some staff in September last year, has offered severance packages to staff.
  • Mass protests loom in Harare, where the government has banned the use of foreign currencies. Zimbabweans have been trading in currencies on a black market to survive in the dysfunctional economy. Zimbabwe’s largest labour body, the Zimbabwe Congress of Trade Unions (ZCTU), on Tuesday threatened protests over the government ban on the use of foreign currencies and make the interim currency the sole legal tender, according to Reuters. President Emmerson Mnangagwa’s government said the move on Monday to abandon a multi-currency system was an important step towards removing economic imbalances. “If the government does not reverse this ruinous policy immediately and announce U.S. dollar salary payments, we will immediately mobilise workers for mass action,” the union’s president Peter Mutasa told a news conference. “The ZCTU has not moved from its position that the short-term solution is to dollarise and, as such, we are going into the tripartite negotiating forum (with government and business) to demand U.S. dollar salary payments,” Mutasa added. In January, the ZCTU led nationwide protests against a 150% fuel price increase, triggering a violent crackdown by the army and police, which left at least 12 people dead, says Reuters. In February, Zimbabwe introduced the RTGS dollar as a transitional unit before relaunching the Zimbabwean dollar.
  • Ireland has warned that it will run a budget deficit of up to 1.5% if the UK exits the European Union (EU) with a “no-deal Brexit”. Ireland presented two budget strategies for 2020 on Tuesday, a preferred option that would see its budget surplus grow if its neighbour Britain leaves the EU in an orderly way, and a no-deal Brexit scenario forecasting a deficit to absorb the shock, says Reuters. In London, former British Prime Minister Gordon Brown has warned the future of the union between England, Scotland, Wales and Northern Ireland is “more at risk” than at any time in 300 years. The ex-prime minister said the United Kingdom risked “unravelling” due to Brexit and the “narrow nationalism” of the Conservative and SNP governments. In a speech in London, he urged the “patriotic majority” to speak up against their values being “hijacked”, reports the BBC. Brexit supporters have dismissed claims it could hasten Scottish independence. Scotland voted overwhelmingly to stay in the EU in the 2016 referendum, as did Northern Ireland, while Wales and England voted to leave, says the Broadcaster.
  • Late on Tuesday, the Rand was trading at R14.33 to the dollar, R18.19 to the British pound and R16.30 to the Euro.