By Linda van Tilburg
- Growing problems at South Africa’s state-owned enterprises are pushing major companies towards bankruptcy and subjecting the country to rolling blackouts that are choking growth. That is according to the Wall Street Journal which reports that the SOEs are putting the country’s economy on a cliff’s edge. Head of Capital Markets Research at Intellidex, Peter Montalto told publication that the SOEs are gluing sentiment to the floor. Patience of investors appeared to be thinning and it quoted a young civil engineer from Soweto who said that power cuts were weighing on his business and testing his family’s long support for the ANC. The Chief Executive of the South African Chamber of Commerce and Industry, Alan Mukoki said Eskom remained the biggest risk facing the economy and that the ability to make a dent on unemployment and to stop the economy from going into a recession would become a mammoth task. Eurasia Group’s Darius Jonker said the state-owned companies were reaching a tipping point and said SAA is the best example of a company that was no longer a financially viable business, but Eskom could follow if a sustainable debt restructuring proposal was not found.
- Shootings in Johannesburg left two people dead and 16 injured, marring the city’s New Year celebrations and highlighting a crime problem that’s one of the government’s biggest challenges. Two people died and six were injured when the occupants of a car fired on Poppy’s restaurant in Melville. Two hours later, 11 people were injured by gunshots that police believe were fired from a highway overpass into a crowd at a public celebration at Mary Fitzgerald Square in the city centre. While gun violence in South Africa’s biggest city is common, with five people killed in a single attack at a tavern in Soweto township in December, the location of the latest shootings has illustrated just how prevalent the problem is. South Africa has the continent’s highest murder rate with an average of more than 50 people killed each day.
- The Johannesburg Stock Exchange started the year on a strong footing with the All Share Index rising 1.11%, the Top 40 shares moved up by 1.22% with Richemont gaining 3.2% and Naspers rising by just over 2%. Local stocks were boosted by optimism over the US-China trade deal and looser policy from China’s central bank. It follows after US President Donald Trump said that Phase 1 of the trade deal would be signed on 15 January. The Rand however lost ground as the US dollar after having strengthened to R13.94 in morning trade it weakened to R14.10 by the close of day.
- In other market news from overseas, Tesla rallied as Canaccord Genuity raised the projected share price by more than $100 and said that the trend towards electric vehicles would only accelerate in 2020. The average price target is about $302 according to Bloomberg data, but Canaccord raised it to $515. Shares of Tesla rose as much as 2.3% in morning trade. Tesla stocks may be expected to go up, but Boeing’s numbers have been questioned by Return on Assets Managed specialist Ted Black who says there is a major problem in Boeing’s books when you look at cashflow. Black questioned the metrics used by Boeing bosses and said a rosy picture had been painted with delayed costs and expected future profits, which would not be credible for much longer.
- The competition for a piece of the South African food delivery pie is heating up with Uber Eats trying to get a share of the market by going local. Reuters reports that the company got off to a tricky start in South Africa as its initial focus was on high-end restaurants, but it is now targeting traditional, local fare and since launching in Soweto in 2019 has been dispatching dishes like stewed tripe, caterpillars, cow’s heels and sheep’s head. Another company after the online food delivery industry worth R10.49bn in South Africa in 2019, according to figures by Statista and growth estimated at 14% annually, is Mr D which boasts 700,000 monthly users, and processed R1.5bn in food orders in 2019. They will soon be joined by Bolt which is launching its food delivery service in South Africa early in 2020. Reuters says it is a potential boon for black communities where unemployment is rife.
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