BIZ NEWS / 31 JANUARY 2020 - 00.00 / LINDA VAN TILBURG
The International Monetary Fund has urged the South African government to speed up reforms to revive the economy. In a report published after the outcome of consultations with the government; the IMF said South Africa should create a conducive environment for private investment.
The Fund projected that the South African economy will grow from 0.4% in 2019 to 0.8% in 2020 and 1.5% in the outer years. The IMF said the “lacklustre growth” is due to the weak performance of state owned enterprises and the government bailouts that are widening the deficit that is already large. The IMF says that weaknesses in public enterprises are resulting in poor service delivery and weighing on the fiscus through bailouts or administrative interventions. In contrast to this; Africa’s economic growth rate is forecast by the African Development Bank to rise to about 4% this year from 3.4% in 2019 driven by infrastructure investments and natural resource exports. East Africa was the fastest growing region.
The Rand was on the back foot yesterday dropping to the lowest level this year. The Rand fell to R14.80 cents to the dollar before clawing back to R14.78 cents at the close of markets in South Africa. The All Share Index on the Johannesburg Stock Exchange rose by 0.39% while Gold Fields had a bumper day with the stock rising more than 7%. MassMart and RCL shares were up by more than 6%. Tiger Brands shares however fell by more than 5%. This is after Lawrence MacDougall retired as CEO and his place was taken by the company’s Chief Financial Officer Noel Doyle.
Embattled South African Airways will cancel local and international flights in the coming period to cut costs and conserve cash. The airline announced that it was consolidating selected scheduled flights where there is low demand in February. SAA said it was committed to accommodating all affected customers on alternative flights operated by the airline and its Star Alliance partners. This is after SAA that is in business rescue managed to secure R3.5bn from the Development Bank of Southern Africa to keep it in the air. Aviation analyst Joachim Vermooten however says SAA cash will only keep it operating for eight months. Vermooten said the carrier is running at a loss of about R500m a month and the situation may deteriorate as it scraps flights and reduces ticket prices to attract wary customers. Vermooten says it would not be possible to get an equity partner in until SAA demonstrated a turnaround level of profitability to enable a reasonable return and he could not see that happening soon.
As the CEO of Eskom, André de Ruyter is ready to reveal plans to fix its operations; the utility has offered yet another reminder of its inability to provide a stable supply of electricity. Eskom resumed controlled blackouts yesterday citing system constraints and depleted emergency resources. The power utility said loadshedding 2 could continue into the weekend. The power utility said it had been using generators originally intended to operate during peak-demand periods to offset the delay to bring some units back online and power cuts may be required to replenish costly diesel supplies and the water used by pumped-storage plants. The CEO De Ruyter will present a ‘state of the system’ today that may shed more light on how he’s going to turn things around at Eskom. Eurasia Group’s Darius Jonker said his focus would be on wanting to reassure stakeholders that his tentative plan would get support and that he was in charge.
MTN has mended its rift with the Nigerian government and has pledged to invest $1.6 billion to expand its operations in the country. The wireless carrier announced the investment after a meeting between senior executives including Chief Executive Officer Rob Shuter and Nigerian President Muhammadu Buhari . Nigeria has always been a major headache for MTN since a shock $5bn fine was handed out to the company which was later reduced to $1bn. MTN has also relaunched its mobile money service in South Africa yesterday more than three years after abandoning a similar offering as it bets on improved technology to attract millions of South Africans who have limited access to banking services.
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