SA jobless rate soars; Nedbank sheds jobs; Shoprite profit plummets; losses hammer Massmart; Brexit plagues pound

By Jackie Cameron

  • South Africa’s latest unemployment figures make for grim reading. The unemployment rate has jumped in the past three months by about 2% to 29%. This means that one in three working-age people don’t have a job. The statistics office says the jobless rate is the highest in at least 11 years, according to Bloomberg. Bloomberg reports that the lack of economic growth is to blame for the depressingly high unemployment rate South Africa’s Gross Domestic Product hasn’t expanded by more than 2% a year since 2013, but must grow by at least 5% in order to boost job creation. Sectors that have shed jobs include mining and finance, while an increase in the working-age population of 150,000 people has also contributed to the higher unemployment figure.
  • Highlighting the challenges facing South African employers, Nedbank Group has confirmed it is in talks with about 1,500 employees over potential job cuts in retail and business banking to cope with a struggling economy and increased competition. South African lenders are battling to grow revenue faster than costs as they contend with an economy that has shrunk for three of the past five quarters, says Bloomberg. Consumers have been battered by rampant unemployment, rising taxes, fuel prices and utility bills, pushing them to explore cheaper banking alternatives or digital services. Companies aren’t investing amid uncertainty over electricity supply and surging government debt levels, reports the news wire. Nedbank, which employs more than 30,000 people, has also been reducing the floor space used by its branches and increasing the use of automation to lower costs. Nedbank expects the process to be concluded after the final meeting with the labor union Sasbo at the end of this month, adds Bloomberg.
  • And, in another blow to South Africa’s economic recovery, it is reported that Eskom’s losses continue to mount. Although the power utility has been rocked by allegations of corruption and state capture, its top management team blames a net loss after tax of R20.7bn for the 2019 financial year on escalating municipal debt, a lower-than-expected tariff increase granted by the energy price regulator for the 2018/19 financial year, a decline in sales volumes, and an above inflation wage settlement with unions. On Monday, Public Enterprises Minister Pravin Gordhan announced that Eskom chair Jabu Mabuza would take over as the acting CEO of the power utility. Speaking at a briefing at Eskom’s headquarters at Megawatt Park, Mabuza has warned that Eskom’s problems cannot be solved “in isolation or overnight”. Finance Minister Tito Mboweni last week announced a R59bn financial support package for Eskom over two years, says Bloomberg.
  • South Africa’s social grant system has been ransacked by fraudsters, with a staggering 21,000 fraud cases registered by the end of June – and not a single one finalised or resolved, social development minister Lindiwe Zulu said in Parliament on Tuesday. As BusinessLive reports, the South African Post Office is involved in the distribution of social grants, which are paid to about 17.6-million beneficiaries. Total social grant payments in 2019 will amount to R162.6bn worth of taxpayers’ funds.
  • South African supermarket chain Shoprite Holdings on Tuesday warned that full-year earnings are set to fall as much as 20% as forex shortages, local currency weakness and a trading loss outside its home market weigh on profit, reports Reuters. Its share price rose 3% by the end of the day.
  • The Massmart share price plummeted 20% after it released a sales and trading update that took investors by surprise. Among the developments at Massmart that shook its share price: Mass discounters will report a huge trading loss of between R395m and R425m -compared to the June 2018 trading loss of R95m; profits in Game South Africa are below the prior period, but much lower in Game Africa and DionWired; and, compounding this, are higher costs from the SAP IT project.