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Shoprite's weak sales could indicate that Pick n Pay may be taking market share, an analyst believes. 
Shoprite posted turnover growth of only 3.3%, to R145.6 billion, on Wednesday morning.
Its share price was slaughtered on Wednesday.
Shoprite’s weak sales performance could indicate that the long-suffering Pick n Pay may be taking some of its market share, an analyst said on Wednesday.
 
Earlier on Wednesday, Shoprite reported a trading update for the year to end-June. Turnover rose only 3.3%, to R145.6 billion.
 
Gryphon research analyst and portfolio manager Casparus Treurnicht said the update shows that the past six months were clearly horrible for Shoprite.
 
The group previously reported turnover of 7.4% for the first half of the year, which means that turnover must have lost considerable momentum over the last six months.
 
By comparison, Pick n Pay’s South African sales grew by 8.0% in the three months to end-February. 
 
After bleeding customers in recent years, Pick n Pay has reduced its labour force by a tenth and streamlined operations. It has also invested in logistics and new stores, and within six months, over R1 billion had been extended to new Pick n Pay credit card holders. And in the past year, Pick n Pay invested R500 million in price cuts to become more competitive. 
 
"I believe Shoprite took some strain due to Pick and Pay getting more competitive but just as important, Shoprite suffering from a much weaker than expected economy," says Treurnicht. 
 
The trading environment is extremely tough, as is evident from Statistics SA latest retail sales number, also released on Wednesday: retail sales rose only 1.9% in the year to May.
 
Shoprite also faced hard times in some of its African markets. Its latest trading update had to account for the effect of hyperinflation in Angola. 
 
By late afternoon, Shoprite’s share price was down more than 5% to R208.89, though it recovered slightly to above R211. Treurnicht thinks that the share, which is still trading at a price-earnings ratio of more than 20 times, is still expensive.
 
“I think we’ll see the retail sector sell off in general but also Pick n Pay starting to outperform Shoprite. Pick n Pay grew sales between 5% and 5.5% consistently over each half for the last two years. It seems [Pick n Pay CEO Richard] Brasher has a clearly-defined strategy.”
 
 
Credit: Fin24

SBV is offering a R1 million reward for information on a cash-in-transit heist that left two guards dead in Tsolo, Eastern Cape, on Friday.

It said in a statement that it took exception to loss of life and was offering the reward for information that would lead to the successful arrest and conviction of those involved.

Police spokesperson Brigadier Vishnu Naidoo previously told News24 that the guards were loading money at an ATM machine near a supermarket when a group of armed men pounced on them.

Naidoo said the suspects fled with an undisclosed amount of money in a hijacked van.

 

SBV said two of its guards were killed. The driver of the van was unharmed.

Counselling was being offered to those affected.

The company was also offering R100 000 rewards for information on heists that took place in Pietermaritzburg and Hammanskraal on Monday.

Security company Fidelity said on Saturday that despite figures indicating a reduction in cash-in-transit incidents during the month of June, it could be a different story for July.

"This week alone, there have been four cross pavement incidents and three vehicle attacks – one of these occurred in the Eastern Cape and two in Bloemfontein which is worrying as the crime could simply be dispersing into other areas," said Wahl Bartmann, CEO of Fidelity Security Group, in a statement.

Police officials on Friday welcomed the reduction of cash-in-transit robberies in the June figures, saying the implementation of the South African Police Service's nationwide stabilisation programme was paying off.

"These robberies have been reduced significantly by 61% in the month of June 2018, compared to the month of May 2018," Police Minister Bheki Cele and national police commissioner General Khehla John Sitole said in a joint statement.

More than 40 suspects had been arrested since June 4, 2018.

"Four of these suspects rank among the top 20 of identified suspects wanted for similar crimes," the statement read.

Cele and Sitole noted that despite the reduction in incidents, there had been several robberies and attempted robberies on cash-in-transit vehicles in the past week.

 

Source: News24

Domestic sales figures in June 1028 have exceeded industry expectations but export sales continue to disappoint, reports Naamsa.

Vehicles sales by the numbers

New vehicle sales at 46 678 units show an improvement of 1346 vehicles (3.0%) from the 45332 vehicles sold in June 2017.

Overall, export vehicle sales at 26 790 vehicles reflect a decline of 4805 units (-15.2%) compared to the 31 595 vehicles exported in June last year.

Industry break down

Overall, out of the total reported Industry sales of 46 678 vehicles, an estimated 38 498 units or 82.5% represent dealer sales, an estimated 11.0% represent sales to the vehicle rental Industry, 3.7% to industry corporate fleets and 2.8% to government.

Car sales

The new car market in June 2018 at 29886 units registered a marginal improvement of 1261 cars or a gain of 4.4% compared to the 28 625 new cars sold in June 2017. Naamsa said: "On the back of fleeting replenishment the car rental industry contribution had recovered substantially by 15.1% during the month."

Bakkie market

Domestic sales of new light commercial vehicles, bakkies and mini buses, at 14261 units, declined during June, 2018 by 58 units or 0.4% compared to the 14 319 light commercial vehicles sold during the corresponding month last year.

Naamsa comments on June sales

Naamsa said: "The improvement in domestic sales, particularly new car sales, was encouraging given recent weak economic growth and investment numbers. It appeared that the new car market had been supported by improved business and consumer confidence.

"However, the decline in the leading indicator of the Reserve Bank over the past two months – suggested a challenging economic environment going forward. Normally new vehicle sales during the second half of a calendar year tended to show improvement on first half sales and this reinforced NAAMSA’s expectations of a modest annual improvement in 2018 domestic sales volumes compared to 2017.

The SA car market future

The organisation said: "Naamsa continued to project growth in export sales over the balance of the year. However, the industry’s export performance was likely to be affected by current protectionist policies in the United States which had increased the risk of a global trade war and this could impact on international trade flows, including vehicle exports."

Cape Town - The South African Human Rights Commission has said that economic challenges that prompted the VAT and fuel levy hikes announced in the budget could have been averted if the government had earlier demonstrated better management of the economy and clamped down on corruption. 
 
“Public and private sector corruption, according to the Auditor General, a fellow Chapter 9 Institution, costs the nation billions on an annual basis,” it said.
 
The commission, a national institution established to uphold constitutional democracy and human rights, said it believed a “significant portion” of the economic challenges facing SA could have been avoided had the state “demonstrated better management of the economy and demonstrated an intolerance toward corruption, inefficiency and maladministration”. 
 
In his maiden budget delivered on Wednesday, Finance Minister Malusi Gigaba announced that VAT would increase by one percentage point from 14% to 15%. 
 
The current zero-rating on foods including maize meal, brown bread, dried beans and rice would remain, and “limit the impact on the poorest households”. 
 
The SAHRC said it was “deeply concerned” that the VAT rate would go up, saying it was a tax that impacts the poor the most.
 
According to the budget, it is expected to bring in R22.9bn in additional revenue in the 2018/19 financial year. 
 
“Further, the SAHRC is also concerned with the increase in the fuel price through the introduction of a 52 cents per litre fuel levy,” it said. “This increase in fuel price particularly impacts on the poor as it affects the price of public transport and the price of goods as the vast majority of goods sold to the public are transported on the road.”
 
The commission also acknowledged that the budget was a “complex and difficult balancing act”, saying it was “fully aware” of the difficulties in limiting expenditure while collecting revenue through taxes and stimulating economic growth. 
 
Going up  
 
Gigaba had argued that the government was doing all it could to reduce the impact of the VAT hike on poor households, noting that the state was also boosting social grants payments and increasing the bottom three tax brackets.
 
He said plans to spend R57bn over three years on fee-free tertiary education for students with a family income below R350 000 per annum was another “important step forward in breaking the cycle of poverty and confronting youth unemployment”.
 
“Labour statistics show that unemployment is lowest for tertiary graduates,” he said.“Higher and further education and training is being made accessible to the children of workers and the poor.”
 
Source:News24
JOHANNESBURG - Old Mutual Plc returned to its South African roots on Tuesday when it listed its $11 billion African financial services business in Johannesburg, a move which largely completes a major overhaul of the company.
The 173-year old group has been disentangling its conglomerate structure created after a series of acquisitions since it moved its headquarters and primary listing to London in 1999.
Chief Executive Bruce Hemphill set the break-up in motion in 2016, saying the company’s four main businesses — a U.S. asset manager, a British wealth manager, an African financial services division and a South African bank — would achieve higher investor ratings as separate entities.
Old Mutual Plc’s African financial services business, Old Mutual Ltd, listed roughly 5 billion shares on Tuesday. They traded at 29.39 rand each during the session, valuing the company at roughly 145 billion rand ($10.7 billion).
Old Mutual Ltd, now the parent to what is left of Old Mutual plc, will also have a standard listing in London, and secondary listings on the stock exchanges of Malawi, Namibia, and Zimbabwe.
Hundreds of Old Mutual Ltd’s employees, blowing green vuzuzelas and beating drums, danced through the streets of Johannesburg ahead of the listing.
“What’s most exciting about our listing as an independent, standalone entity is that it enables us to unlock shareholder value and create a business with a strong strategic focus on sub-Saharan Africa,” Old Mutual Ltd’s chief executive Peter Moyo said.
MUTUAL AID
Old Mutual, which traces its roots back to the mid-19th as South Africa’s first mutual aid society with 166 members, has already sold its U.S. asset management business and on Monday separately listed its U.K wealth arm, renamed Quilter.
 
The break-up is part of a growing global trend for conglomerates to hive off bits of their businesses, sometimes in response to pressure from activist investors.
 
General Electric said earlier on Tuesday it would spin out its healthcare business and sell its stake in oil firm Baker Hughes, leaving the U.S. company focused on jet engines, power plants and renewable energy
 
“The nice thing about this Old Mutual break up is that you now have a vehicle that’s purely emerging market, if you want to buy that, and another vehicle that’s purely UK,” Michael Treherne, a portfolio manager at Vestact, said.
 
Later this year, Old Mutual’s African business will spin off part of its 53 percent interest in South Africa’s fourth largest lender, Nedbank.
 
Old Mutual, which will retain a roughly 20 percent stake in Nedbank, bought into the bank in 1986 when it was forced by apartheid South Africa’s strict capital controls into being a major shareholder in several local companies.
 
The company’s head office in London will be wound down this year. It has been cutting staff in London since it first announced the demerger two years ago. Staff numbers in London are expected to fall to around 40 this year from 120, Old Mutual has said. 
- REUTERS 
In 2014, the South African government announced a new direction in housing policy. The aim was to phase out smaller low cost housing projects of a few hundred units and focus exclusively on megaprojects – new settlements made of multitudes of housing units combined with a host of social amenities.
 
Given the uneven access to housing that resulted from apartheid, housing delivery has been a major focus of since 1994. Government’s 20 year review - 1994 to 2014 - reported that 3.7 million subsidised housing opportunities were created, undoubtedly a remarkable achievement.
 
Nevertheless in 2014 the then Minister of Human Settlements, Lindiwe Sisulu, became extremely concerned that house production had been falling. And, a backlog of 2.3 million families remained. The Minister favoured megaprojects (also referred to as catalytic projects) as a way of getting delivery back on track.
 
Large human settlement projects weren’t entirely new to South Africa. Several were already at an advanced stage of construction in 2014. What was new in this announcement was the idea that all housing would be delivered exclusively through the construction of megaprojects across the country. From 2014 to 2017, the Department of Human Settlements developed a list of 48 catalytic projects which was finalised last year.
 
In a recently published academic paper we argue that the policy was underdeveloped. The megaprojects approach moved swiftly from announcement, to discussion documents and frameworks, to the creation of lists of large scale projects. Most of this process occurred behind closed doors, with little consultation. And there has been little space to examine the limitations of the megaprojects approach – as well as the merits of alternatives, such as smaller urban infill projects.
 
Nevertheless the paper attempts to account for the uptake of the megaprojects idea within the human settlements sector, and understand the motivations and agendas of those who promoted it.
 
Rationales for megaprojects:
 
In a broad sense megaprojects are glamorous because they are much more visible and impressive than diffuse small-scale projects. As a result, politicians can brand their delivery more effectively. Megaprojects convey a sense of decisive action in which the state can flex its muscle in big hit interventions.
 
South Africa is focusing on new megaprojects to address its housing gap but it’s being urged to look within existing cities. Shutterstock
More specifically, champions of the megaprojects approach believed that large scale projects could deliver more houses quicker. When announcing the policy in 2014, the then minister of human settlements, Lindiwe Sisulu, stated that megaprojects would help deliver 1.5 million units by 2019.
 
Some advocates of the megaprojects approach, notably the Gauteng provincial government, were particularly attracted to the idea of creating whole new “post-apartheid cities” which could meet the “live, work and play” needs internally. Starting afresh with new settlements would be a way of designing urban spaces to avoid the inequalities and inefficiencies that beset existing cities. They would also bring major projects to poor areas that had little else to drive any significant economic growth.
 
Megaprojects were also intended to solve a variety of governance problems. In particular, it was extremely difficult to manage the 11 000 human settlement projects that were at various stages across the country. Consolidating these into just a few dozen projects was a way of focusing government’s attention and reducing administrative burdens and costs.
 
The megaprojects approach also seemed to be a way of managing the division of work and some of the tensions between different spheres of government and various departments. With some local authorities having taken on more responsibility for housing projects, national and provincial government considered megaprojects to be a way of bringing housing under more centralised management.
 
Concerns:
 
Some critics are less concerned about the scale of the projects than the fact that they could be poorly located. That’s largely because better located land is more expensive. In addition, there isn’t a great deal of well-located land that is large enough to accommodate new settlements of this scale.
 
The history of attempting to construct new towns shows how difficult it is to create new urban centres with enough jobs for the people who live there. There is a fear that megaprojects will be no different and once the construction jobs run out, residents would have to bear the cost of travelling long distances to jobs outside the settlement.
 
Megaprojects on the urban periphery are also counter to the plans expressed in a wide variety of policy documents to curb urban sprawl and densify existing cities. Peripheral locations also have other challenges. If new projects are located far from sewage, water, electricity and roads then these would have to be laid out great financial and environmental costs.
 
Other concerns have focused more directly on the huge scale of new projects. Big projects take many years to get off the ground, and so delivery can sometimes be suspended for a long time.
 
Towards a balanced policy:
 
In a recent parliamentary address, the new Minister of Human Settlements Noma-Indiya Mfeketo stated that catalytic projects “worth more than half a Trillion Rand” had been initiated. Yet she also announced that the budget had suffered a “massive cut” as a result of the fiscal challenges facing the state.
 
We believe that the moment should allow for some reflection on the now four year old megaprojects direction. This reflection should consider whether all housing should be delivered in megaprojects as originally intended by this policy, or whether a range of project sizes should be encouraged to facilitate, in particular, urban infill projects within existing urban areas.
 
Planned megaprojects should be evaluated with respect to their location, total cost to the state and long term sustainability. While some are reasonably accessible, others are peripheral, with marginal economic opportunities at best. South Africa cannot afford to construct housing in spaces that have few economic prospects and limited benefits for urban residents and the country.
JOHANNESBURG - South African markets are pricing in the possibility of an interest rate hike this year as the rand falls, even though economists say this is unlikely as inflation expectations have not breached the upper end of the central bank’s target range.
 
South Africa’s rand has slumped nearly 9 percent against the dollar year to date, hurt by global risk-off sentiment and poor domestic economic data. It fell to a 7-month low last week.
 
Capital Economics senior emerging markets economist John Ashbourne said the currency fall has raised speculation that South African policymakers would follow some emerging market countries that have started raising interest rates.
 
Some have moved as a pick-up in their economy or other factors push up inflation, while others are being forced to act to steady their currencies.
 
South Africa’s forward rate agreements are implying a 25 basis-point hike in interest rates by the end of the year.
 
But a Reuters poll found last week that economists expect the South African Reserve Bank to keep its repo rate unchanged at 6.5 percent until 2020.
 
“We think that markets are getting ahead of themselves by pricing in rate hikes in South Africa... We do not think that this is likely,” Ashbourne said in a note.
 
“Policymakers have explicitly said that they will not react to currency moves until they see a lasting effect on domestic inflation. And the pass-through between currency moves and inflation is weaker in South Africa than in many other EMs.”
 
The central bank said in May it would maintain its vigilance to ensure inflation remained within the 3 to 6 percent target range, and would adjust the policy stance should the need arise.
 
The bank currently forecast CPI to average 5.1 percent in fourth quarter 2018, and 5.2 percent in the last quarters of 2019 and 2020. The next interest rates decision and inflation forecasts are due on July 19.
 
South Africa’s consumer price inflation slowed to 4.4 percent year-on-year in May as the rise in food prices eased.
 
“A weaker currency makes (the central bank) more fearful but it depends on how it impacts inflation twelve months out,” Citi economist Gina Schoeman said.
 
“We don’t think we will see rate hikes in 2018. It doesn’t mean there is no risk of it, and the market is correct to price for that.”
 
Schoeman said rate hikes over the past five years happened when the inflation forecast for twelve months out had breached 6 percent and stayed above that for two or three quarters.
 
“So it has to not only breach 6 percent, it has to also breach it for a sustainable amount of time. If it is not doing that, then we don’t have a risk of interest rate hikes,” she said.
 
Mexico’s central bank raised its benchmark interest on Thursday in a bid to counteract the effects of a peso slump and keep a downward inflation trend on track.
 
Argentina, Turkey, India and Indonesia are among the other countries hiking rates.
 
-Reuters 
The SA Bureau of Standards (SABS) has been strongly criticised by business, which says the entity is losing the country at least R4 billion a year in exports in the manufacturing and engineering sectors alone.
 
This comes after years of businesses complaining about a lack of testing by the SABS, resulting in manufacturers losing contracts because they are unable to obtain the SABS mark timeously, or they have been unable to renew 2 600 permits to use the mark.
 
Trade and Industry Minister Rob Davies is assessing representations from the SABS board on why he should not go ahead with his intention to put the entity under administration for not performing to its mandate. The SABS falls under Davies’ department.
 
Steel and Engineering Industries Federation of Southern Africa economist Marique Kruger said the lack of testing and certification by the SABS within the required time frames was a concern, as certification was often needed for products to be sold locally and internationally.
 
Kruger said trade deals being delayed or cancelled due to a lack of testing hit smaller businesses the hardest and caused a loss of billions in exports a year in the manufacturing and engineering sectors.
 
“The impact on the domestic production value chain is also huge,” she said.
 
Director at GAP Holdings, Theuns van Aardt, said manufacturers in the solar water heating industry were “tearing their hair out” because they “cannot get a system approved by the SABS”.
 
He said the piping, pump and valve industries were similarly affected, and were “being put at massive risk”.
 
Business development manager Carolien van der Horst of the SA Capital Equipment Export Council said the SABS was also failing to audit the local content of products supplied in government contracts as stipulated in government’s Industrial Policy Action Plan.
 
Van der Horst said this resulted in companies possibly supplying imported products when servicing tenders from state entities. However, she said it seemed that no one wanted to pay for the SABS to conduct these audits.
 
SABS CEO Boni Mehlomakulu hit back at industry and the department of trade and industry this week, saying she was fulfilling her mandate according to policy that was implemented in 2005.
 
She said the issues affecting industry were inherent in the policy, which emerged from the 2004 National Economic Development and Labour Council (Nedlac) report, titled Modernising the South African Technical Infrastructure.
 
Informed by a department of trade and industry position paper in part authored by Lionel October, who was then the department’s deputy director-general, Nedlac agreed that the SABS should split into a commercial testing and certification entity, and its statutory standards setting body should be funded by government.
 
Previously, the SABS was the only testing entity, and business wanted policy changed to allow private testing laboratories to be able to compete with the SABS.
 
She said that, to protect the SABS from litigation where products had failed on the market as only select components had been tested, partial testing – up until then a norm – had been stopped in 2015, which elicited an outcry from industry.
 
There were also expectations that the SABS maintain 32 laboratories established in the 1970s – which Davies has said would take R1.6 billion to upgrade – and conduct the full array of tests for all compulsory standards, contrary to its commercial mandate.
 
Mehlomakulu added that there were certain companies that required a test once a year, and the SABS was expected to maintain the facilities and retain the expertise to conduct those tests, yet it was still required to be profitable.
 
She said she felt the department was not supporting its own policy: “For me, what’s unfair is the fact that no one wants to own the policy position, no one wants to talk about it.”
 
When questioned about the SABS’ R44 million loss in the 2016/17 financial year, she said the department pulled R55 million from its budget at short notice, so the loss was budgeted for and the SABS’ commercial arm was having to fund its statutory entity.
 
Mehlomakulu said the backlog of expired permits had been dealt with and she had developed a corporate plan to approach private funders to raise the capital to upgrade infrastructure because previous requests to Treasury had been turned down.
 
Regarding the auditing of local content to comply with recommendations in the Industrial Policy Action Plan, she said government entities saw it as another auditor-general activity and complained that the SABS was too expensive, while on the verification of local content on Transnet’s 1 064 locomotive purchase, the SABS “was blocked, totally blocked”.
 
“They would rather give the work to a private company because there aren’t all of these rules for transparency, reporting and all of that.”
 
Asked whether she believed private companies were getting paid off to produce compliant audits, she said: “I’ve seen it.”
 
Source: News24
Inflation eased to 4.4% for May compared to 4.5% in April, despite the implementation of a VAT hike implemented in April.
 
This is according to Statistics South Africa (StatsSA), which on Wednesday released the consumer price index figures for May. The index increased 0.2% month-on-month.
 
The market consensus was for CPI to accelerate to 4.6%, and in a market update on Wednesday RMB economist Isaah Mhlanga had projected an increase to 4.8% having considered the VAT pass-through.
 
Mhlanga also expected the fuel price and weak rand to impact inflation. “The oil price and a weak rand have had a huge impact (on inflation), but the second-round effects will only be visible in the months to come and they are difficult to quantify and separate from the first-round effects,” said Mhlanga.
 
He expects the current account deficit data due on Thursday to be a “shock to the currency”, RMB projects it to be 5% of GDP.
 
By 10:23 the rand was trading 0.44% firmer from the previous close at R13.68/$. 
 
Contributors to May's inflation include food and non-alcoholic beverages which increased 3.4% year-on-year. Inflation for restaurants and hotels increased by 5% year-on-year.
 
Transport contributed to the month-on-month inflation, the index increased 1.2%.
 
In May the CPI for goods increased by 3.5% year-on-year, unchanged from April. The CPI for services increased by 5.3% year-on-year, also unchanged from April
 
South: Fin24
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