Edcon sale closer; CR to axe public sector jobs; SAA

By Jackie Cameron

• President Cyril Ramaphosa has warned that job cuts loom at public sector entities. The government is preparing a radical change to the budget to fix an economy battered by Covid-19. This comes as the government works on fixing the economy, which was already struggling before Covid-19 containment led to business shutdowns. In his weekly newsletter to the nation, he said: “The economic hardship that has been forced on a number of companies in the private sector will be forced on a number of entities in the public sector as well.” He said that the government also has plans to create jobs at scale through “the delivery of sustainable and fit-for-purpose infrastructure”. You can read his full letter on BizNews.com.
• Bond investors worry that borrowing R1bn a day won’t be enough to plug SA’s fiscal deficit – which could be the widest since world war one. Debt levels will exceed 100% of gross domestic product in 2025 and rise to almost 114% before the end of the decade, according to government projections, reports Bloomberg. Finance Minister Tito Mboweni warned of deep spending cuts when he presents the adjusted budget on Wednesday, but investors are also concerned about an increase in borrowing, it notes. “While weekly debt sales – now totaling R7.5bn in nominal and inflation-linked securities – remain oversubscribed, the local market doesn’t have infinite capacity to absorb fresh issuance, according to Anchor Capital.”
• SAA’s business rescue plan is under attack from SA Airlink, a privately owned competitor of SAA, and labour unions. The government is fighting back, with Department of Public Enterprises officials slamming the move to force SAA into liquidation as “disturbing”.
• A court decision paves the way for the administrators to finalise the sales process for Edcon by the end of June. There are reportedly 15 interested parties. A court application brought by a group of creditors of South African retailer Edcon to stop the adoption of a proposed restructuring plan for the company has been rejected by the court as non-admissible, the administrators said on Monday. Reuters reports that the total amount owed to Edcon’s creditors is approximately R8bn. Edcon entered bankruptcy protect in April.
• City Lodge Hotels says it aims to raise up to R1.2bn via a rights issue to stave off a cash crunch, reports Reuters. The money raised will help pay debt, meet other obligations and generate working capital to plug a cash flow shortfall. At the weekend, Tsogo Sun announced it would take over three Marriott hotels, which faced closure. Covid-19 containment brought the global hospitality industry to a standstill.
• The worst performer on the Johannesburg Stock Exchange at the close of the trading day on Monday was Telkom, which lost about 8% of its value on news it has suspended dividends for three years.