Business confidence, Sasol plunge; FlySafair wants Mango; Big Four break-up; Musk flies higher than Boeing

By Linda van Tilburg

  • South African business sentiment plunged to the lowest level in more than two decades in the first quarter and could weaken even further as the coronavirus hit the domestic and global economy. The RMB and Stellenbosch University’s Bureau for Economic Research’s gauge fell to 18 from 26 in the three months ending in December. That means more than eight out of every 10 respondents are unhappy with current business conditions. The survey was based on the responses of 1,800 business executives between Feb. 12 and March 2. It was done before the news that the country has slumped into a recession in the fourth quarter and before the impact of the coronavirus on global output and markets intensified.  Bloomberg reports that this means that business sentiment could become even worse and weigh on economic growth. RMB’s chief economist Etienne le Roux told Bloomberg that for a small economy already in recession, the timing of Covid-19 induced global slowdown in growth could not have been worse. South Africa has confirmed six new coronavirus cases after testing more than 600 people which bring the total number to 13.
  • It has been a week of steep drops for some emerging-market stocks, but Sasol has out-plunged its peers battered by a crash in oil prices and concern among investors of a potential looming rights offer as it grapples with a debt burden. Shares in Sasol have lost 66% since the week started, dragging the stock to levels last seen in early 2001. Sasol stocks fell 26.4% on the Johannesburg Stock Exchange yesterday and the All Share Index was down 0.79%. With investors climbing into gold; shares in Gold Fields rose by 2.88% while AngloGold stocks gained 2.75%. AngloPlatinum recovered by 4.38% yesterday. The Rand weakened, dragged down by other emerging market currencies and traded at R16.15 to the dollar by the end of yesterday.
  • FlySafair has expressed interest in buying Mango, the low cost airline of South African Airways should it be put up for sale. FlySafair management has approached SAA’s administrators about a possible acquisition of Mango Airlines, Chief Executive Officer Elmar Conradie told Bloomberg. The business-rescue experts however made it clear their priority was to complete a turnaround plan of the main carrier due at the end of the month, he said. “The only one that makes sense is Mango,” the CEO said, when asked if he would be interested in any future SAA asset sales. The carrier will announce a new Johannesburg-Durban service next week, the CEO said, and is steadily upgrading its fleet from ageing Boeing 737-400 models to more modern 737-800s. The airline sees its capacity increasing by 15% this year.
  • South African regulators are stepping up efforts to break the oligopoly of the country’s top auditing firms after accounting scandals involving two of the Big Four failed to do the job for them. The nation’s largest publicly-traded companies are reluctant to switch to mid-tier firms out of concern they may not be able to handle complex operations often sprawled across Africa or further abroad. That’s spurring smaller firms to scale up and hire teams in anticipation of new rules aimed at dismantling the dominance of PwC, Deloitte, EY and KPMG. The regulator is now developing guidelines on how firms can perform joint audits to upskill mid-tier companies, while also encouraging smaller auditors to combine their operations or cooperate to handle larger mandates. “The greatest challenge facing the industry is the restoration of trust and confidence,” said PwC Chief Executive Officer for Africa, Dion Shango. “Trust has been eroded, and more than ever before, the auditing profession needs to focus on quality, in order to earn that trust back.”
  • And Tesla briefly passed Boeing as the most valuable industrial company in the US closing a gap that was almost $200bn a year ago. The electrical vehicle company’s market capitalisation exceeded Boeing’s by almost $83m in trading in New York yesterday. Shares of Boeing, which have tumbled amid coronavirus concerns and the ongoing grounding of the plane maker’s best-selling 737 Max jetliner, plunged as much as 11% to the lowest intraday trade since July 2017. Tesla shares have surged more than 50% this year following two straight quarters of better-than-expected earnings. On the 13th of March it would a year since Boeing’s 737 Max has been grounded.