Molefe must pay; Eskom wants debt transfer; Business confidence drops; Glencore stutters, gold glitters

By Linda van Tilburg

  • Former Eskom CEO Brian Molefe has lost his Constitutional Court case over the R30m pension he received from the power utility. This is after the Pretoria High Court and the Supreme Court of Appeal ruled that Molefe had enriched himself unlawfully from the Eskom Pension Fund.  The Solidarity labour union says they will institute immediate action to collect the cost order and to ensure that the money is paid back.
  • Eskom wants the majority of its R440bn of debt transferred to the South African government. The struggling utility told investors in a London road show that it can only sustain R150bn of debt. This figure is derived from an assessment that it can sustain debt of five times EBITDA. Eskom executives told analysts that the utility is hoping for resolutions to some of its problems and progress on a plan to split into three units after the National Treasury’s mid-term budget in October.
  • Meanwhile Moody’s has said that Eskom urgently needs to action a turnaround plan, or it will collapse under mounting debt. Moody’s says the company’s operational and financial performance has deteriorated, indicating the extent of the challenges facing Eskom in meeting its debt obligations. It went on to say that cash injections through 2021 can do no more than stabilise Eskom’s debt burden, pending development of a longer-term solution for the company. The Rand weakened to R15.11 against the greenback after the Moody’s report but managed to clawback to R15.07 at the end of the day.
  • South African business confidence fell in July to 92 from 93.3, the lowest level in four months as concerns over political uncertainty and state companies’ finances outweighed the positive effects of lower interest rates and higher commodity prices. That is according to the South African Chamber of Commerce and Industry. The chamber says business sentiment is affected by indications that the ruling party is divided “on policy, political and factional lines which has a direct impact on the government’s efficiency and effectiveness in implementing its policies and managing the fiscus.”
  • Glencore’s first-half earnings fell by a third and the commodities giant says it is closing one of its largest copper and cobalt mines. As one of the world’s largest producers of cobalt, Glencore was expected to benefit from a revolution in electric vehicles as the metal is a key component in batteries. But the demand for the current biggest user of this metal, cobalt-heavy consumer electronics like laptops and tablets, has waned, while supply has increased, leading to a 58% fall in cobalt’s price in the first half of 2019. The company’s share price was down 1.71% in late morning trade in Europe and on the JSE Glencore shares dropped by 2.19%.
  • Mining shares were however buoyed by a higher gold price breaching $1,500/dollar, its highest level in six years on the back of global uncertainty. Mining shares gained 4.45% and Anglo Platinum had an even better day with shares rising by almost 6%. ALTRON registered a 7% drop while the JSE All Share Index ended the day 0.30% higher.