Stage 6 loadshedding; Prasa follows SAA; Ramaphosa’s tough love; Zim can’t pay SAA; Prosus and Just Eat

By Linda van Tilburg

  • Eskom intensified rolling blackouts to a record, signalling a deepening crisis at the debt-ridden utility and raising the risk of a second recession in South Africa. Eskom has moved to stage 6 loadshedding which means it will cut 6,000 megawatts from the national grid after a technical problem at the Medupi power station that affected generation supply. It is the biggest cut yet. The CEO of Pan-African Investments and Research Services, Iraj Abedian told Bloomberg it meant the economy was heading for a recession as there’s no way that hot on the heels of the previous quarter’s negative growth in GDP and this type of material disruption to businesses, that the economy can register positive growth. The chief economist at the Efficient Group, Dawie Roodt said December is the least damaging time to have loadshedding as the economy is geared towards the service industry with construction work and factory activity set to slow down for the holiday break.
  • The Passenger and Rail Agency has been put under administration and its interim board has been dissolved. This was announced by Transport Minister Fikile Mbalula days after South African Airways was forced into business rescue. Bongisizwe Mpondo has been appointed as the administrator. Mpondo has previously served as a non-executive board member of SAA. Mbalula said that most of the irregular financial conduct disclosed in the group’s financial statements was caused by non-compliance with supply chain management prescripts and payments ‘where the value derived could not be justified’. Prasa’s financial mess is linked to corruption in the renewal of its rolling stock fleet. Reuters reports that Prasa will not be sheltered from creditors while it is under administration.
  • President Cyril Ramaphosa said in his weekly statement that placing state utilities under administration was not his preferred option for fixing them, nor would it be advisable in other circumstances. Ramaphosa said he was determined to take drastic steps if needed to prevent floundering state-owned companies from failing. He said the decision to place SAA into business rescue was the only way to secure its survival. The President said he would not allow any of ‘these strategic entities to fail’ and would take all the necessary steps to restore them to health.
  • SAA may only get 5% of the $60m owed to the airline by Zimbabwe. Zimbabwe’s central bank’s Monetary Policy Committee plans to ‘reject the majority of debts’ owed to institutions, a move it hopes will save its much needed foreign currency. A Committee member, Eddie Cross said it would be asking creditors to ‘take a haircut’. The country is unable to pay for adequate fuel and wheat imports. The World Food Programme has warned that Zimbabwe will need as much as $293m in aid to tackle a chronic food shortage.
  • Prosus raised its bid for UK food delivery firm Just Eat as it tries to win over investors and beat off an offer from rival Prosus said in a statement that it had increased its cash offer to 740 pence per share, valuing Just Eat at about £5.1bn. Just Eat’s management has been encouraging investors to vote for Takeaway’s all-share deal, which would give them scale and access to Takeaway’s technology, arguing that Prosus’ offer undervalued the company even as a slide in Takeaway’s share price pushed down the value of its all-stock offer.