Items filtered by date: Friday, 15 March 2019

Kenya’s Commercial Bank of Africa said on Friday its shareholders had accepted a share swap with NIC Group, paving way for its merger.

The two banks first announced their planned merger in January, in which current NIC Group shareholders would own 47 percent of the merged entity and CBA shareholders owning 53 pct.

“As a result of the share exchange transaction, it is proposed that NIC Group will acquire sole control of CBA and its subsidiaries,” CBA said in a statement published in Kenyan newspapers.

 

Reuters

Published in Bank & Finance
Friday, 15 March 2019 14:19

Zimbabwe inflation hits 59.39%

Zimbabwe’s inflation rose to a new 10-year high of 59.39 per cent year-on-year in February from 56.9 per cent in January, the statistics agency Zimstats said on Friday.
 
Zimstats said in Harare that the inflation was pushed by increases in the price of basic goods.
 
On a monthly basis, prices increased by 1.67 per cent in February, compared to 10.75 per cent in the previous month.
 
Zimbabwe’s Central Bank Governor, John Mangudya had said on Monday that annual inflation rate should fall to between 10 and 15 per cent by the end of the year.
 
However, economists said the figure could be higher due to price pressures from the exchange rate and a drought.
Published in News Economy

Approximately 1 200 jobs at Standard Bank will be impacted as the financial services provider embarks on a new banking delivery model.

According to a statement issued by Standard Bank on Thursday afternoon, a total of 91 branches will be closed as the bank opts for a digital banking offering for consumers. The vast majority of these branches will be closed by June 2019, the statement read.

"These changes will impact approximately 1200 jobs. However the actual number of employees who will ultimately exit the employ of Standard Bank SA could be lower, as new opportunities will become available in the new operating model," the bank said.

Standard Bank will provide a "comprehensive exit package" for employees.

"We have also set aside funds to assist employees acquire new skills to improve their competitiveness in the labour market, as well as entrepreneurial training and financial assistance," Standard Bank said.

"This has not been an easy decision to make. We recognise that this is a very stressful time for everyone."

The bank has started briefing sessions with employees, which will continue across the provinces in coming weeks.

Published in Bank & Finance
South Africa’s President Cyril Ramaphosa and Zimbabwe’s president Emmerson Mnangagwa arrive for bilateral talks in Harare, Zimbabwe, on Tuesday (March 12 2019). Picture: Philimon Bulawayo/Reuters
President Cyril Ramaphosa said on Tuesday South Africa was ready to help Zimbabwe revive its economy, but within its means, while the two neighbours consider options that could see Harare receiving some financial assistance.
 
A dearth of US dollars in Zimbabwe has fanned shortages of fuel, drugs and food, choking an economy yet to recover from the disastrous rule of Robert Mugabe, who was removed in a coup in 2017.
 
South Africa said in January that it had turned down a request in December from its southern African neighbour for a $1.2 billion (about R17 billion) loan.
 
But in a joint communique issued after a meeting between Rampahosa and Zimbabwe’s president Emmerson Mnangagwa and officials, the two countries said they were looking at increasing a standing credit facility between central banks of the two nations.
 
Under the facility, Zimbabwe can access R100 million from South Africa’s central bank.
 
“Other financing options beyond this are also being explored, for example a facility from South African private banks to the Zimbabwean private sector and guaranteed by the South African government with an appropriate counter-guarantee from the Zimbabwean government,” the communique read.
 
Ramaphosa had earlier told the meeting that Zimbabwe, which also faces a severe drought this year, deserved support from the rest of the world to help reboot its economy.
 
He repeated his previous call for sanctions against Zimbabwe to be lifted.
 
Zimbabwe says US sanctions, which were extended by another year by President Donald Trump last week, throttle its ability to access funding from lenders like the International Monetary Fund and World Bank and raise its political risk profile.
 
“South Africa, Mr President, stands ready to render support to Zimbabwe within our means in your quest for economic renewal,” Ramaphosa said, without giving details on whether this would entail financial help.
 
“We want to see meaningful support being given by international development partners to Zimbabwe because Zimbabwe does deserve the support that the world can give.”
 
South Africa is Zimbabwe’s largest trading partner and home to millions of Zimbabweans who flocked to the country amid an economic meltdown during Mugabe’s rule.
 
Mnangagwa pledged to protect South African businesses operating in Zimbabwe, which range from mining to manufacturing to construction.
 
Published in News Economy
Friday, 15 March 2019 06:32

Eskom needs private money

Not unbundling is not an option. Unbundling will enable the ‘good parts’ to thrive while applying remedies to the ‘bad parts’, writes Thembani Bukula
 
Unbundling Eskom is not necessarily the silver bullet for all the power utility’s woes, but it certainly is the trigger that fires the silver bullet.
 
Indeed, some of the solutions required to the complex and complicated Eskom problems are as simple as maintenance planning and execution, while the funding problems will require somewhat “magical” solutions.
 
THE ESKOM PROBLEMS
 
Eskom’s debt of more than R420 billion mainly arises from the construction of the two coal-fired stations, Medupi and Kusile, and the pumped storage scheme Ingula with interest during construction in excess of R100 billion.
 
More than 20% of its “ageing” and inappropriately maintained generation fleet is unavailable because of breakdowns and ill-considered maintenance planning and execution.
 
Its ability to provide electricity services is further hampered by the shortages or poor quality of coal at some of its power stations, bad designs and/or workmanship in the newly constructed power stations, lack of funds to purchase fuel, bad debt, declining electricity sales, inadequate management and corruption.
 
As a result, Eskom at times is unable to supply the electricity demand of less than 30 000MW in summer, when the installed capacity is in excess of 52 000MW.
 
UNBUNDLING ESKOM
 
Eskom has three distinct businesses – generation, transmission and distribution – so unbundling it along these lines makes business sense.
 
More than 80% of Eskom debt as well as assets are associated with the generation division with less than 20% being from the transmission and distribution divisions.
 
In Eskom’s application for the Regulatory Clearing Account, it is stated that the approved capital expenditure for the transmission and distribution business enhancement was re-allocated to the generation capital expenditure.
 
This implies that the necessary upgrades and improvement of the transmission grid are being compromised by the ever-increasing generation expenditure.
 
It is reasonable to expect that the focus of the Eskom board and management will be on the generation business and less on the transmission and distribution business.
 
Furthermore, the ability of the transmission and distribution businesses to raise funds is negatively affected by the overall Eskom financial position.
 
Unbundling Eskom into generation, transmission and distribution will enable each business to raise funds based on its own balance sheet and allow its management structures to focus on the core business without being overwhelmed by the dire situation of the generation unit.
 
Yes, the R420 billion debt still needs to be repaid by Eskom.
 
WHERE WILL THIS MONEY COME FROM?
 
This is the part that might and will require participation of the private sector. The division of Eskom that incurred the debt is the generation division, which has assets that have been re-evaluated at more than R1 trillion, according to the Eskom Multi-Year Price Determination application for the period 2019/20 to 2021/22.
 
Allowing for private sector participation, in part or in full, will provide the necessary liquidity and capital to reduce or negate the debt. Guaranteed returns in the range of 7% to 9% will attract meaningful participation from the private sector.
 
The transmission division accounts for about R100 billion of the total asset base with a projected capital expenditure budget of up to 8% of the asset value per annum.
 
Participation by the private sector in this part of the business might not be necessary, though in other countries, such as the US, private sector participation in the transmission business is permitted.
 
Assets of the distribution business are estimated to be about R150 billion with less than R10 billion projected capital expenditure requirements a year. New distribution and localised generation technologies, such as solar photovoltaics, wind turbines and storage, will be mostly integrated at the distribution level and hence there is a need to get the distribution infrastructure future-ready.
 
South Africa is already seeing private sector participation in this space in various estates and other gated settlements, where the local distributor only provides the bulk supply to a point and thereafter the distribution as well as reticulation to the consumers is undertaken by the private sector.
 
In many countries (for example, Namibia, Brazil, Peru, Turkey, the US and the UK), private sector participation in the distribution sector has been introduced to enhance the operational efficiency as well as attract investment.
 
SOMETHING MUST GIVE
 
The unbundling announcement by President Cyril Ramaphosa, affirmed that the unbundled Eskom would be housed under Eskom Holdings and would be in turn still be owned by the state.
 
This is in line with the White Paper on Energy of 1998 and makes this unbundling easier to implement as there is no new law to be enacted.
 
Electricity supply industries across the world have been unbundled into different forms, with governments either wholly owning or partly owning the various entities.
 
Private sector participation in the generation sector has already started in South Africa with the Renewable Energy Independent Power Producer Procurement Programme.
 
Efficiencies in funding, construction and delivery on time have already been demonstrated.
 
In Eskom’s case the transmission business is the most ready division to be unbundled and there is already significant work that has been undertaken through the Independent System and Market Operator Bill that was proposed to Parliament three years ago.
 
The distribution business is both politically and structurally complex in that about 50% of the distribution industry is owned and operated by municipalities and the rest by Eskom.
 
It is the most fragmented part of the electricity supply chain with some of the licensed municipalities inadequately positioned to undertake this function due to inappropriate customer categories or mix.
 
There are pockets of excellence in some of the municipalities, mainly the metros, but overall it is an inefficiently structured business for the country. Municipalities derive a significant amount of their revenue and surplus to subsidise other services from electricity sales, hence careful consideration of how this industry should be handled is critical.
 
The last attempt at forming regional electricity distributors was abandoned because it required amendment of the Constitution. But this time around something must give.
 
TO UNBUNDLE OR NOT TO UNBUNDLE
 
Not unbundling Eskom is not an option as its problems cannot be resolved with it unchanged. Unbundling will enable the “good parts” to thrive and facilitate proper management focus on the business at hand, while applying the appropriate remedies on the “bad parts”.
 
Eskom has all the electricity generation capacity to meet the demand in South Africa any time.
 
What is required is operational efficiency and optimal financial management of the utility.
 
It is a reliable, safe and secure electricity supply that is required to grow the economy and create the necessary jobs in South Africa.
 
Unbundling Eskom and allowing private sector participation will facilitate operational efficiency and prudent financial management, as well as offset years of under investment in the generation, transmission and distribution sectors.
 
An unbundled Eskom is more likely to attract investments to fill the funding gaps than today’s Eskom.
 
Offloading part or some of the generation assets will raise the necessary fiscal revenues that can be used to alleviate the debt burden Eskom has created.
 
Published in Engineering
Nigerian President Muhammadu Buhari has given the Nigerian National Petroleum Corporation (NNPC) up till April 30, 2019 to take over the operatorship of the entire Oil Mining Lease (OML)11 from Shell Petroleum Development Company.
 
This directive was contained in a letter from the State House signed by the Chief of Staff to the President, Abba Kyari and addressed to the Group Managing Director of NNPC.
 
The letter dated March 1, 2019, with reference number SH/COS/24/A/8540 stated that NNPC and its flagship oil exploration and production subsidiary, Nigeria Petroleum Development Company (NPDC) confirm the assumption by May 2, 2019.
 
The letter titled, ‘Operatorship of Entire Oil Mining Lease 11,’ read in part, “Kindly note that the President has directed NNPC/NPDC to take over the operatorship, from Shell Petroleum Development Company, of the entire OML 11 not later than 30 April 2019, and ensure smooth re-entry given the delicate situation in Ogoniland.”
 
It noted that the President has “directed NNPC/NPDC to confirm by 2 May 2019, of the assumption of the operatorship.”
 
Located in the southeastern part of the Niger/Delta region, the OML 11 contains 33 oil and gas fields out of which eight are producing as per 2017.
 
Published in Business
The Nigerian stock market has reverted to its losing trend, after the momentary gains recorded on Wednesday, as investors lost N56 billion at the closed of trading on Thursday.
 
The market capitalisation of equities listed on the Nigerian Stock Exchange dropped from N11.694tn on Wednesday to N11.638tn on Thursday.
 
Activity level was mixed as volume traded shed 53.1 per cent to close at 177 million units while value traded appreciated by 13.2 per cent to settle at N2.560bn.
 
The top traded stocks by volume were Zenith Bank (80.8 million units), Sterling Bank Plc (16.8 million units) and First City Monument Bank Plc (12.1 million units), while Zenith Bank (N1.8bn), GTB (N228.2m) and Nestle Nigeria Plc (N109.4m) were the top traded stocks by value.
 
Performance across sectors was mixed as two indices closed on a negative note, two appreciated, while one closed flat.
The industrial goods and banking indices closed in the red, down by 0.5 per cent and 0.4 per cent, respectively, following losses in Dangote Cement, GTB and Zenith Bank.
 
On the other side, the insurance index gained 0.5 per cent due to price appreciation in NEM Insurance Plc and Linkage Assurance Plc, while buying interest in Oando Plc led to a 0.1 per cent uptick in the oil and gas index.
 
Losses in Nestle neutralised the gains recorded in Dangote Flour Mills Plc, causing the consumer goods index to close flat.
Investor sentiment as measured by market breadth (advance/decline ratio) weakened to 0.4x from 0.7x recorded on Wednesday as nine stocks advanced against 20 decliners.
 
Published in Business
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