A man cycles past Airbus Group NV A340, left, and A330-200 aircraft operated by South African Airways at OR Tambo International airport in Johannesburg, South Africa. Photographer: Waldo Swiegers/Bloomberg
A man cycles past Airbus Group NV A340, left, and A330-200 aircraft operated by South African Airways at OR Tambo International airport in Johannesburg, South Africa. Photographer: Waldo Swiegers/Bloomberg

SAA: Unions fight for jobs, bankers back away; Eskom blamed for unemployment; Zim hunger; coronavirus

Bloomberg reports that two South African trade unions have filed an urgent labour court application over planned job cuts at embattled SAA.
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By Jackie Cameron*

  • South African Airways continues to teeter on the brink of collapse as unions fight to preserve jobs and bankers warn that no funding will be available until the government delivers a clear plan. Bloomberg reports that two South African trade unions have filed an urgent labour court application over planned job cuts at embattled South African Airways (SAA), a spokeswoman for the National Union of Metalworkers of South Africa said on Tuesday. Analysts told Bloomberg the layoffs will be key to reviving the fortunes of SAA, which is fighting for its survival after being placed under a form of bankruptcy protection in December. Squabbling between South Africa's government and the state-owned airline's bankruptcy administrator is threatening its chances of survival, Investec's chief executive officer said. "If the business-rescue practitioners recommend one route, the government wants a different route, which plan would the funders be required to support?" Investec CEO Fani Titi told Bloomberg in an interview on Monday. "Until there is a clear plan, supported by all stakeholders and properly funded, I think SAA is in trouble." Mike Brown, the CEO of Nedbank Group agrees, and notes that government indecisiveness stretches beyond SAA.
  • Eskom woes are filtering into economic data, with analysts linking widespread power cuts in December to the loss of hundreds of thousands of jobs. South Africa's power cuts hurt the economy in the fourth quarter, and two data points on Tuesday showed just how bad it was. Production by South African manufacturers fell the most in five-and-a-half years in December, says Bloomberg. And for the first time in at least 11 years, the unemployment rate didn't fall in the fourth quarter. Eskom, generator of about 95% of the nation's electricity, implemented the widest blackouts yet in December to prevent the grid from collapsing. That weighed on business confidence, adding to the negative sentiment about the utility's finances that's already made investors nervous. Power cuts are also feeding into a decline in manufacturing output.
  • The Zimbabwe government has warned of severe food shortages, blaming a drought for the lack of maize, a staple. Zimbabwe's government is scrambling to increase corn imports as more than 40% of the population don't have access to enough food after the worst drought in four decades halved the harvest, reports Bloomberg. Strategic grain reserves have dropped to just a month's supply, far below the 500,000-ton minimum reserves required. Finance Minister Mthuli Ncube said 110,000 tons of corn, a staple, is needed monthly to "ensure that no one goes hungry," the Sunday Mail newspaper reported Feb. 9.
  • Travellers are panicking about coronavirus but widespread fear has not translated into suppressed equities. Analysts give three reasons why investors may have nothing to fear from the nasty virus that has claimed at least 1,000 lives and has infected more than 40,000 people. Oil is down, gold is up. Rates are flashing warnings. But someone forgot to tell stocks, says Bloomberg. "The S&P 500 Index hit a record high on Tuesday, and global equities are near their mid-January peak, shrugging off the extent of a coronavirus-fueled economic slowdown and ongoing geopolitical tensions." SMBC Nikko's chief equity strategist, Masashi Akutsu, says Bloomberg, wrote in a note Friday that three things are keeping stocks resilient: the coronavirus not having morphed into a stronger strain, the historical precedent of a steep rebound in Chinese economic indicators after the 2003 SARS outbreak, and market expectations that the Federal Reserve stands ready to make quick rate cuts if there are unforeseen developments.

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