SAA bankruptcy protection; Loadshedding strikes back; Trump’s impeachment; Glencore and bribes

By Linda van Tilburg

  • Glencore is being investigated for bribery by UK authorities, deepening the legal troubles that threaten the world’s biggest commodities trader. The company’s shares fell as much as 8.6% to a three-year low in London, while on the Johannesburg Stock Exchange, the fall was more than 5%. The move by the Serious Fraud Office adds to ongoing corruption probes that Glencore is facing in the US and Brazil, which have scared investors and shaken the company over the past two years. The new probe also ramps up pressure on Glencore’s billionaire Chief Executive Officer Ivan Glasenberg. He told investors earlier this week to prepare for more leadership changes and hinted that his own departure may come sooner than previously anticipated.
  • A decision to place South African Airways into bankruptcy protection is no guarantee the airline will be able to keep operating – that’s if the experience of other financially distressed companies is anything to go by. The government announced late Wednesday that the state-owned carrier should be put into so-called business rescue, in effect passing responsibility for a recovery plan to an independent administrator. The Chief Executive Officer of the Turnaround Management Association Bruce Berry said the yet-to-be-appointed lead administrator will have to navigate a minefield of competing interests. The government, labour unions, staff and creditors will all need to agree on a turnaround plan for the business rescue to work which will be a very complex process. Berry did not expect to see a plan for the next two to three months.
  • South African business confidence remained close to a three-decade low in November as companies continue to await decisive action by the government to revive the economy. A sentiment index compiled by the South African Chamber of Commerce and Industry rose to 92.7 from 91.7 in the previous month.  While President Cyril Ramaphosa has pledged to revive the economy, gross domestic product has now contracted for four of the seven quarters since he came to power and the chamber said there are structural bottlenecks that have to be removed before economic growth can reach its potential. Low business confidence, the Chamber said continued to weigh on fixed investment spending as private sector companies are wary to commit large sums of money to projects.
  • South Africa’s current-account deficit narrowed less than forecast in the third quarter as outflows to foreign shareholders increased. The shortfall on the current account, the broadest measure of trade in goods and services, shrank to 3.7% of gross domestic product from a revised 4.1% in the previous period, the Reserve Bank said in a report released yesterday. Bloomberg reports that the main driver of the bigger-than-expected gap was a surge in the shortfall on the nation’s primary-income account, which reflects outflows due to dividends and interest payments to foreign shareholders. Naspers Ltd., South Africa’s biggest company by market capitalisation, listed its internet business in Amsterdam in September. The trade account swung back to a surplus of R41.1bn ($2.8bn) as the rand value of exports increased in the quarter. The rand was down 0.6% trading at R14.68 on lingering economic weakness highlighted by the country’s current account deficit and business confidence data.
  • South Africa was hit by power cuts yesterday after a number of generating units broke down. Eskom said late yesterday that the electricity system was severely constrained, and that Stage 2 rotational load shedding would have to be implemented to protect the power system from a total collapse. Eskom said the severe supply constraint being experienced has come about due to high levels of unplanned breakdowns that have exceeded the 10,500MW limit. Customers were advised to check loadshedding schedules on the Eskom or municipal websites.
  • President Donald Trump tweeted yesterday morning that if the Democrats were going to impeach him, they should “do it now, fast, so we can have a fair trial in the Senate” and he got what he wished for. Soon after that the Speaker of the US House of Representatives, Nancy Pelosi announced that she has directed a House committee to draft articles of impeachment against Trump over his effort to pressure Ukraine to investigate a political rival. Reuters reports that if the Democratic-led House passes articles of impeachment as expected, that would lead to a trial in the Senate on whether to convict Trump of those charges and remove him from office. Republicans control the Senate and have shown little support for Trump’s removal.