Matjila’s dirty laundry; Deutsche closing trading division; Eskom CEO delay; Market movers TSX, ASP, KIO

By Alec Hogg

  • More dirty laundry will be publicly aired today when Dan Matjila, the former chief executive of South Africa’s Public Investment Corporation, takes the stand at the PIC Commission of Inquiry. Bloomberg reports that according to a prepared statement Matjila will assert his ousting was politically motivated. His testimony will share that he was opposed to the use of PIC funds to bail out heavily indebted retail group Edcon, which supports 140 000 jobs through direct employment and supply chains. It will include the reasons why he opposed the bailout, a position not viewed favourably by the PIC’s chairman, its economic development minister and the CEO of Edcon Grant Pattison. Matjila’s statement says he would only support the deal if the proposal by Brian Joffe’s JSE-listed company Long4Life to invest R500m went ahead. A week after Matjila’s ousting the PIC led a R2.7bn rescue of Edcon.  During the last six months,  many of around 70 witnesses have blamed Matjila’s management style and support of dubious deals as the reason for the PIC’s woes.
  • One time global trading powerhouse Deutsche Bank has announced plans to radically shrink its investment bank, the company’s long-time dominant revenue generator. Restructuring plans revealed over the weekend include the closing down of the bank’s global equities sales and trading businesses. Deutsche, which for years was also a major player in London, New York and was dominant in South Africa, is now retreating back to its roots, refocusing on serving European companies and German retail customers. The bank expects to post a loss of more than $3bn for the three months to end June as a result of a restructuring exercise which will see a large number of its 91,000 staff depart. Deutsche, which abandoned a proposed merger with German rival Commerzbank, boasted a share price of over 110 euro ahead of 2008’s Global Financial Crisis. That price bottomed last month at under 6 euro.
  • Bloomberg quotes a source who says Eskom will only name a new acting chief executive at the end of July when incumbent Phakamani Hadebe physically steps down. The new appointment will only be temporary because Hadebe’s surprise resignation left Eskom with insufficient time to follow legislated processes required for a permanent appointment. Hadebe quit in May after just 16 months in the job, quoting “unimaginable demands” which had taken a toll on his health. He was Eskom’s 10th departing CEO in a decade. Treasury’s acting deputy director general Ian Stuart told Bloomberg yesterday that proposals on the table to fix Eskom include a debt swap and the creation of a vehicle to take over some of Eskom’s debt. He added “the likelihood is that more support will be required” than the R69bn injection from taxpayers announced in February’s National Budget.
  • On the JSE Friday, the share price of diamond producer Transhex jumped 12% to 88c after an announcement that a consortium which holds almost 80% of the equity is offering to buy out minority shareholders at 100c a share. Transhex shares had moved up smartly ahead of the announcement, having bottomed at 44c on Monday. Aspen Pharmacare was another big mover, the shares losing almost 5% on Friday after the Durban headquartered multinational disclosed discussions with a potential buyer of its European assets had been terminated. Kumba Iron Ore did worst of the heavyweight stocks, losing over 7%. On July 23, the mining group will release results for the half year to end June. For the session as a whole, the JSE overall index was down half a percent, taken lower by declines of almost 2% in the resources and gold indices.