Govt yields climb; Glencore copper production falls; Eskom’s new restructuring boss; PP, Ramaphosa in court

By Linda van Tilburg

  • South African government yields climbed after the National Treasury said it will increase the amount of debt sold at weekly bond auctions to help fund a bailout of Eskom and counter a tax revenue shortfall. Starting on August 6, the National Treasury will sell R4.53bn of fixed-rate debt per week, up from R3.3bn. Amounts at sales of inflation-linked bonds will rise to R1.04bn from August 16, compared with R76m currently. The amount of the increase has caught some traders by surprise who say that the increase in issuance levels is larger than what was expected. Yields on benchmark securities due in 2026 rose three basis points to 8.34%, while those on generic 10-year securities pierced the key 9% level to trade around the highest level in about a month. The Rand closed at R14.17 to the greenback with the expectation of a rate cut by the US Federal Reserve for the first time since the 2008 credit crunch. (Confirmed the US Fed cut interest rates by a quarter of a percent, pushing the Rand to R14.34 against the greenback)
  • On the JSE, UK property companies with secondary listings in South Africa took a hammering. Shares of Intu Property plunged by 30% following half-year results that came in far below analyst expectations. The company recorded a £830m loss in the six months up to June after turmoil in the UK retail sector prompting it to consider raising fresh equity. Two other UK property companies with a secondary listing on the JSE also took a major hit; Hammerson registered a 9.9% fall, while Capital & Counties Properties dropped by 5.44%. Mining shares were also down with AngloGold falling by more than 5%, while Gold Fields, Kumba Iron Ore and Sibanye Gold down by more than 4%. Winners on the day were Massmart up just under 3%, following yesterday’s fall, Mediclinic shares rose by 2.58% and MTN 2.11%. The All share index fell by 0.80%.
  • Glencore has reported a 2% fall in second-quarter copper production and cut its full-year production guidance for the metal by 1%, citing problems at its copper business in Africa. Cobalt and zinc production during the second quarter rose by 7%. The mining company also reported that total coal production during the second quarter rose 12% to 35 million tons. Chief Executive Ivan Glasenberg said the copper business in Africa didn’t meet expected performance in the first half of the year. He said the company has moved to address challenges at its Katanga mine in the Congo and has brought forward maintenance of the smelter at the Mopani mine – located in Zambia – to the end of 2019.
  • Axed Old Mutual CEO Peter Moyo returned to work yesterday morning after a court ruling that his suspension and dismissal was unlawful. This is despite the fact that Old Mutual said they will appeal the ruling and according to them, Moyo was still barred from work. The impasse continued with frantic discussions between lawyers behind closed doors and Moyo being in the Old Mutual building, but he was not able to do any work. He is expected to file for damages due to a loss of reputation.
  • The new chief restructuring officer at Eskom, Freeman Nomvalo will divide his time between managing the unbundling of the state power utility and his job as head of the South African Institute for Chartered Accountants. Nomvalo who is relatively unknown among economists will be more a process manager than a standalone company executive according to the Department of Public Enterprises. The task of reorganising Eskom is crucial for the company and the country, with Eskom having posted a record R20.7bn loss.
  • Public Protector Busisiwe Mkhwebane’s fitness to hold office will likely be discussed in the Parliamentary Justice and Correctional Service Committee in September after the Democratic Alliance requested her removal. Mkhwebane is squaring up against President Cyril Ramaphosa in the North Gauteng High Court today where she is opposing his application to set her interdict on Pravin Gordhan aside. And judging from the court papers, Mkhwebane is very angry, to put it mildly, that Ramaphosa is choosing Gordhan over her; she says Ramaphosa is constitutionally obliged to support her. That is after she lost her case against Minister Gordhan preventing her remedial orders against him from being implemented. Meanwhile global banking giant HSBC says it has unearthed financial links between Mkhwebane and the Gupta family. She has rejected the report as malicious and defamatory and the DA has also defended her saying it was ‘unfair sensationalism’. More on this story on the Biznews website.