Wiese wins Shoprite battle; consumer sentiment plunges; Moody’s hits Eskom; Dischem, Telkom

By Jackie Cameron

  • Christo Wiese, the retail magnate who saw his billions evaporate as the Steinhoff share price plunged amid a financial scandal that erupted in late 2017, has clung to his position of power at supermarket multinational Shoprite. Bloomberg reports that Shoprite Holdings reappointed Christo Wiese as chairman even after ordinary shareholders resoundingly voted against his re-election as a non-executive director. Holders of more than 61% of the shares opposed his reappointment, Africa’s biggest grocer said Monday after its annual general meeting in Cape Town. The former billionaire only secured another term thanks to his own superior voting rights. Shoprite, says Bloomberg, attempted to curb Wiese’s voting power earlier this year with the chairman’s support, but was forced to scrap the plan after investors objected to the likely R3.3bn ($224m) compensation cost. The grocer has also faced shareholder opposition to its executive pay and held extra meetings to discuss the policy. The rebellion against Wiese came after Shoprite reported an improvement in South Africa sales, while struggling in markets elsewhere on the continent. The shares gained as much as 3.4% early Tuesday in Johannesburg. They had lost 29% this year before today.
  • South Africans are feeling very glum about the economy – and that’s official. The FNB consumer sentiment index slumped deep into negative territory during the third quarter of 2019, the bank’s economists report. The FNB consumer sentiment index slumped deep into negative territory during the third quarter of 2019, the bank’s economists report. High income earners are particularly depressed and worried about their own finances, while low income earners appear to be a bit more optimistic about what the future holds for them, financially. The FNB/BER Consumer Confidence Index (CCI) plunged from +5 index points during the second quarter of 2019 to -7 during the third quarter.[1] Consumer sentiment initially rocketed to a historic high of +26 at the height of Ramaphoria in the first quarter of 2018, but then started to backpedal shortly afterwards. A breakdown of the CCI according to household income group shows that consumer sentiment deteriorated significantly across all income groups, but especially so among high-income consumers. High-income consumers (earning more than R14 000 per month) not only turned pessimistic about the outlook for the economy and the appropriateness of the present time to buy durable goods, but they are also becoming increasingly concerned about the outlook for their own household finances.
  • In a blow for Eskom, Moody’s pushed the state power firm’s credit rating deeper into sub-investment territory on Tuesday, saying a government plan to reorganise the cash-strapped South African firm would be hard to implement without explicit support from the cabinet. Reuters reports that Moody’s cut Eskom’s long-term corporate family rating, or unguaranteed debt, to six notches below the investment grade level, with a negative outlook. The rating firm also cut the rating on the power company’s zero coupon eurobonds. The agency on Friday kept South Africa’s sovereign debt at the lowest rung of investment grade, but revised the outlook on that rating to “negative”. Moody’s has criticised Eskom plans to fix the utility and says weak corporate governance and political sensitivity around Eskom’s tariffs and its high employment levels would compound the constraints on the turnaround plan.
  • In response, Eskom says it is disappointed with the Moody’s decision but that it is working to resolve its challenges. The National Union of Mineworkers (NUM), which supported Ramaphosa’s campaign for the ruling party presidency in 2017, has threatened to cause more power cuts over the government’s decision to forge ahead with the plan to break up Eskom.
  • Looking at the JSE, the best performer on Tuesday was Dischem, climbing nearly 7% as news emerged that Coronation Fund Managers had acquired a beneficial interest in the securities of the company. As required in terms of section 122(3)(a) of the Companies Act, Dischem has filed the required notice with the Takeover Regulation Panel, the company said in a statement on Sens. Leading the losers down was Telkom, with its share price plunging nearly 8% on the news that its interim results will disappoint investors. In a statement on Sens, Telkom says its earnings per share are expected to be about 30% to 40% lower than the corresponding period last year.
  • The worst may be over for the world economy’s deepest slowdown in a decade, says Bloomberg. A wave of interest-rate cuts by central banks including the Federal Reserve and mounting hopes of a US-China trade deal are buoying confidence in financial markets just as key economic indicators show signs of stabilization after recent declines.