A multimillion-rand tender with the City of Johannesburg (COJ) – that had the potential to be one of the good stories of government’s vision to empower black women – has gone sour and the city is being sued R8 million for not honouring the contract.
 
Faithfulness Business Enterprise was awarded a contract to supply and deliver protective footwear for members of the metro police department – JMPD – valued at R23.760 million over three years in 2014.
 
In accordance with the tender, the company subsequently spent millions of rands and hired more staff to deliver on its contractual obligations.
 
However, the city placed only a single order for R660 000 in December 2014 and then placed orders with other suppliers, leaving the company with a mountain of costs and no orders.
 
Two years into the contract and a single order later, the city applied to the Johannesburg High Court, seeking to terminate the service level agreement on the basis that the tender process was flawed and that there were a number of irregularities.
 
However, none of the alleged irregularities was related to the company or because of its influence.
 
The court dismissed with costs of the city’s application in February last year and upheld the service level agreement as binding and valid.
 
But the city still did not place any orders with the company.
 
The company took the city to court to recoup its losses, which it initially estimated at R17 million, but after being audited amounted to R8.666 million.
 
In a letter of demand sent to the city, the company said it had suffered damages amounting to more than R17 million in respect of rental expenditure incurred in leasing premises suitable for the storage and sorting of the contracted quantities of footwear; salaries and wages of staff who were employed to ensure the capacity to meet the future orders; stationery and printing costs; vehicle costs, office equipment; and loss of profits.
 
Speaking to City Press, Selina Siganga, ownerof Faithfulness Business Enterprise, said the tender had left her worse off and had paralysed her business.
 
“Because of that contract, the banks increased the overdrafts and now I have to deal with them. I have had to lay off people I had employed and had to negotiate with them not to take me to the Commission for Conciliation, Mediation and Arbitration because I was paying their salaries but not getting orders.
 
“This government always says it wants to support black woman in business and wants employment [to create jobs] but it is killing us,” she said.
 
Spokesperson for the city Nthatisi Modingoane opted not to comment on the matter.
 
“The matter is before the courts and thus the city will wait for the court process,” Modingoane said.
 
 
Source: City Express
South Africa’s Competition Commission said on Thursday it had charged retailer Shoprite and its subsidiary Computicket with anti-competitive behaviour, and recommended a fine.
 
The commission said Shoprite and the event ticket seller had signed exclusive agreements that gave Computicket the ability to discriminate between large and small customers on prices.
 
The commission said the discrimination had forced third parties to engage with Computicket, excluding its competitors.
 
“The Commission has asked the Tribunal to impose an administrative penalty of 10 per cent of Computicket and Shoprite Checkers annual turnover,” the commission said in a statement in Johannesburg.
 
Shoprite was not immediately available to comment.
 
As a result, shares in the country’s biggest supermarket chain fell more than 4 per cent after the announcement, but had recovered to 183 rand, a decline of 1.84 per cent in early trading.
 
The case marks the second time the commission has referred Computicket to the Competition Tribunal, with a decision on similar charges.
 
This is the first time that Shoprite has been added as a respondent to the charges.
 
 
Source: PmNews
In truth, the currency started from a very low base: the Nenegate crisis in 2015.
Its performance this year has not been stellar, but most experts expect it to remain below R15/$ in 2019.
Over the past three years, the rand has been the world's strongest major currency against the dollar.
 
The rand has strengthened by almost 6.3% against the dollar since mid-December 2015, according to data compiled by the independent analyst Johann Biermann. By comparison, the Mexican peso weakened by more than 16% and the Turkish lira lost an almighty 79% of its value. The UK pound fell almost 20% over the past three years as Brexit fears wreaked havoc.
 
Only the Russian rouble, which gained by 6% over this time,  the euro (+3%) and the yen (+6.2%) could keep up with the rand.
 
It is of course worth noting that three years ago the rand was in a very bad state amid the Nenegate crisis.
 
On December 9th 2015, former president Jacob Zuma fired then finance minister Nhlanhla Nene, replacing him with back-bencher Des van Rooyen. 
 
"After all is said and done, the rand has been one of the strongest currencies over the last three years - obviously benefiting from the low base created by Nenegate," Biermann said this week. "Still, not many would've predicted that the rand would outperform these majors in years to come."
 
Unfortunately, 2018 has been tough on the local currency: the rand has lost a painful 14.5% of its value against the dollar - on par with the rouble (-15%) and the Brazilian real (-17%). Even traditionally stable currencies - including the Australian dollar (-8%) and the euro (-6%) - took a hit.
 
The rand/dollar rate over the past five years. (So
The dollar/rand rate over the past five years. (Source: XE)
But most currency experts are not expecting the rand to take a massive hit in 2019.
 
The currency is expected to end 2019 between R12 to R15 a dollar, according to almost 70% of the 160 South African-based bankers, CEOs, CFOs, corporate treasurers as well as foreign exchange and hedge fund executives polled at the Bloomberg Foreign Exchange Summit last week. 
 
The rand will probably trade near R13.40 to the dollar by the end of next year, Standard Bank economist Elna Moolman said, according to a press report.
 
"The expectation is partly based on a dollar story, but also on the assumption that we will see political and policy improvements to support a stronger currency."  
 
Moolman said the next big local events that could influence the rand are the Budget in February, the response from Moody’s (the only agency that has not yet rated South Africa as "junk") and then the natonal elections, expected in May 2019.
 
If the US economy weakens and/or the equity markets fall apart, which means that the Fed won’t hike interest rates by as much as expected, the rand may benefit, according to Biermann.
 
“Also, sentiment towards emerging markets has been very negative in 2018. If it starts to turn, the rand will get a boost."
 
But there are risks – chief among them, Eskom’s R100 billion debt burden.
 
“If government took over the debt, our credit rating will be further downgraded – which will be negative for the rand.”
 
Ratings agencies have also been clear that further slippage in terms of property rights could prompt downgrades, Biermann said. 
 
 
Source: Bloomberg news 
Marlboro cigarette maker Altria's $1.8 billion investment in the cannabis producer Cronos is a win-win, according to an analyst. 
 
"Cronos provides Altria a unique entry into cannabis and we do not think Altria is taking on outsized risk while entering a new high-growth category," Vivien Azer, an analyst at Cowen, said in a note out on Monday.
 
Cronos has a relatively smaller cultivation capacity than most of the other major Canadian cannabis producers, but a higher efficient operating line, Azer says. While Cronos's revenue over the last 12 months - $12 million sales  - ranked only the sixth among major Canadian marijuana producers, its gross margin ranked second.
 
"Cronos has been judicious with capital, and has embraced an asset light model that does not prioritise cultivation (consistent with tobacco)," Azer noted. "Their business model is less capital focused and more reliant on sourcing cannabis from local farmers, similar to tobacco companies."
 
Moreover, Cronos' focus on rare cannabinoids is a point of differentiation for Altria, Azer said.
 
"While the potential uses of cannabinoids are vast, Cronos believes the key to successfully bringing cannabinoid-based products to market is in creating reliable, consistent and scalable production of a full spectrum of the ~100 cannabinoids, not just THC and CBD," which are the two primary cannabinoids that occur naturally in the Cannabis, she added.
 
Azer believes Cronos can leverage Altria's expertise to create value-added form factors while focusing on ingredient composition without reliance on a massive cultivation infrastructure.
 
Azer has an "outperform" rating and a $74 price target for Altria - a 40% premium to where shares are trading on Monday.
 
Altria was down 24% this year.
 
 
Source: Business linking
Local licence holder for Starbucks in South Africa, Taste Holdings, has halted any plans to open more outlets of the US coffee chain as it struggles to make ends meet.
 
Taste, which also owns the jeweller Arthur Kaplan and Domino's Pizza, suffered operating losses of R87 million in the six months to end-August, with sales down 3%.
 
The group said that while the store network of twelve Starbucks outlets is profitable at a sales level, it's not producing the required return on its investment.
 
Setting up a new Starbucks store in South Africa costs between R5 million to R8 million, the group previously said. This is very expensive, says Simon Brown, founder and director of investment website JustOneLap.com. Brown estimates that the actual cost could now be higher than previously stated - perhaps even reaching R20 million. 
 
Hitesh Patel, director of new business at Starbucks competitor Vida e Caffè, says the average cost of setting up one of its stores is only around R1.5 million.
 
That is is less than a third of the minimum cost of a new Starbucks outlet.
 
Taste has a 25-year licence deal to operate Starbucks stores in SA - and have to pay royalties to the US brand, which are proving to be costly, says Michael Treherne, retail analyst at the fund manager Vestact. 
 
Due to the royalties and expensive store set-up costs, Treherne says Starbucks South Africa has had to resort to premium pricing - which is not at all good during a recession. 
 
The difference between food prices is more pronounced. We could find a muffin at a Vida e Caffe outlet in Johannesburg for under R20, while the cheapest muffin at a Starbucks was R32.
 
 
Source: News24
While MTN saw strong subscriber growth outside SA, it lost 834,000 prepaid customers in South Africa from June to September of this year.
The company is losing customers to cheaper pre-paid options, including Telkom's R100 per gigabyte offer, says one analyst.
But MTN's revenue from pre-paid continued to climb, despite its declining subscriber base.
MTN released its quarterly update for the three months to end-September on Monday. The update showed strong overall growth in subscriber numbers.
 
Across all its markets, subscribers increased by 2.5 million to 225.4 million. 
 
But while MTN saw strong subscriber and revenue growth from its markets outside of South Africa (revenue from Ghana and Nigeria grew by 23% and 17% respectively), the update confirms that the company is losing local prepaid customers at a rapid rate. 
 
While the number of MTN contract subscribers increased by 120,000 to 5.7 million in this period, the mobile network lost 824,000 prepaid subscribers. It now has 23.7 million pre-paid subscribers. 
 
The company lost a total of 1.5 million subscribers in South Africa in the year to September 2018. 
 
Ruhan du Plessis, a telecommunication analyst at Avior Capital Markets, says increasingly competitive pricing is putting pressure on MTN. 
 
Telkom, which is now offering a gigabyte for R100, has been particularly aggressive, and now offers significantly cheaper data packages compared to MTN, says Du Plessis. Also, newcomer Rain is offering R50 per GB of data.
 
"The challenging economic environment in SA has made customers more and more price sensitive. Given how easy it is to switch between operators these days, clients will move to cheaper alternatives to navigate turbulent times," says Du Plessis.
 
MTN extracted more revenue out of its remaining prepaid customers, though. Revenue from its prepaid service rose R2.8 million to R77.5 million despite the fall in subscribers.
 
 
Source: Business Insider
JOHANNESBURG - President Cyril Ramaphosa says the money pledged at the Investment Conference will translate directly to more jobs in the sectors that contributed.
 
President Cyril Ramaphosa declared the conference an overwhelming success that will yield thousands of jobs for the people of South Africa.
 
At the end of the conference on Friday, Ramaphosa announced a combined amount of R290 billion in investments In South Africa.
 
Over 1,000 local and international investors attended the conference at the Sandton Convention Centre.
 
Anglo American, the Brics Development Bank and automotive traders were the big contributors, investing R71 billion, R29 billion and R40 billion, respectively. Vodacom announced R50 billion in investment.
 
President Ramaphosa says prominent among these announcements are the themes of beneficiation, innovation and entrepreneurship.
 
“The number of new jobs and people who will be employed is going to be phenomenal and unprecedented in the history of our country.”
 
He says the country has battled with bringing in investment to generate growth.
 
 
Source: News24
South Africa packed 16.4 million cartons of grapefruit for export, end-of-season numbers show, an all-time record that will help keep it the top global supplier.
But SA's dominance has a lot to do with other countries cutting back on grapefruit growing because it has not been profitable in recent years.
A reduction in American marketing spend has seen grapefruit's popularity fall in Japan, but Chinese consumption is more than making up for that.
 
In the 2018 year South African growers packed an all-time record of 16.4 million cartons of 17kgs each of grapefruit for export, end-of-season numbers from the Citrus Growers Association (CGA) show.
 
That will easily be enough to keep SA ranked as the top exporter of grapefruit in the world, and essentially the only southern hemisphere supplier for high-demand markets in Europe and the East.
 
But that record could still come back to haunt the farmers responsible for the bumper crop.
 
"It could be that some fruit that should have stayed at home were exported."
 
The price reconciliation for the exported fruit will only be available late in the year, but early indications are the grapefruit prices were down around 27% in Europe compared to an average of the last three years, and there are reports of even more depressed prices.
 
And grapefruit wasn't exactly been a huge profit spinner to begin with.
 
"Grapefruit as a commodity went through many years of negative returns," says Chadwick. "For quite a few years it has been a marginal if not risky crop to grow."
 
While farmers in the likes of Argentina and Swaziland pulled out grapefruit in favour of crops with better returns, a surprisingly large number of South Africans stuck with it, in part because grapefruit are harvested early enough to not interfere with the harvesting and packing of oranges and other citrus.
 
In 2018 that translated into 70,000 tonnes of grapefruit exports to the Netherlands, the usual top buyer of SA's exports, an increase of 11% over 2017. Japan, last year's second-biggest importer, was easily overtaken for the number two slot as exports to China more than doubled to 51,000 tonnes.
 
In some eastern markets, particularly South Korea, South Africa has benefited from big marketing drives by growers in Florida keen to popularise grapefruit, Chadwick said. Such investments have been dwindling of late, and that shows in markets such as Japan, but for the time being at least the Chinese appetite is masking such declines.
 
Now the question is whether South African growers exported smaller fruit than they arguably should have to feed that demand, so pushing down prices and final profits across the board.
 
That's the problem with having a hemisphere – and a growing season – pretty much all to yourself, said Chadwick.
 
"If the market is bad, we have only ourselves to blame; nobody else is playing."
 
 
Source: Business Insider
Naspers is planning to increase its stake in Indian online food-delivery business Swiggy as the startup plots its third fund-raising round of the year, according to people familiar with the matter.
 
Africa’s largest company by market value has indicated that it intends to support a financing that could raise more than $600 million, Swiggy’s biggest to date, according to the people. There’s also an opportunity to buy stakes from investors such as Bessemer Venture Partners, they said, asking not to be identified as the information isn’t public.
 
Tencent, the Chinese internet giant in which Naspers owns a 31% stake, is also planning to invest in the fundraising, according to one of the people.
 
Naspers declined to comment. Swiggy, Tencent and Bessemer didn’t immediately respond to emails seeking comment. The story was first reported by VC Capital website.
 
Swiggy’s value has risen to more than $2 billion after Cape Town-based Naspers led two previous funding rounds to become the firm’s biggest shareholder, according to the people. Naspers had a 22% stake as of the end of March. The company hasn’t made a final decision on whether to take part in the latest financing and may yet opt against it, one of the people said.
 
Naspers has targeted India for investments as the company seeks to replicate a blockbuster early bet on Tencent. The company made a $1.6 billion profit from the sale of its 11% stake in Indian e-commerce startup Flipkart earlier this year, and also has shares in travel business MakeMyTrip and classifieds business OLX.
 
Food delivery has been a favorite industry of Naspers, with assets including Germany’s Delivery Hero AG and iFood in Brazil. The company plans to invest in another Indian food company called Hungerbox, a tech-enabled corporate catering company, said one of the people.
 
Naspers shares have fallen 22% this year, valuing the company at 1.2 trillion rand ($83 billion), as a record slump in Tencent’s share price dragged down its South African investor. Naspers fell 4.% in Johannesburg on Tuesday.
 
 
Source: The Routers
So far this year, tax collections seem to be much stronger than expected, which may mean that South Africans will be spared big tax hikes in February’s Budget, says PricewaterhouseCoopers (PwC).
In recent years, government earned much less tax than it expected: the tax shortfall in its budget reached R49 billion last year.
 
This resulted in massive tax hikes over the past two years. In the Budget this year, South Africans were hit with an estimated R36 billion in new taxes.
 
“For the first time in a number of years it is looking likely that further significant tax increases may not be required in the February Budget, something that the government would want to avoid in an election year,” says Kyle Mandy, tax policy leader at PwC.
 
“The good news is that revenue collections for 2018/19 are looking surprisingly good (compared to forecasts) based on the data available to the end of August, despite the economy being in a technical recession,” says Mandy.
 
As at the end of August, total gross tax income was up 11.2% compared to a forecast increase of 10.6%, suggesting collections are on track to exceed the budget revenue forecast in the year ending March 2019.
 
This is largely due to strong VAT income, which grew by 19.5% by August, compared to the budgeted growth of 16.8% for the year, said PwC.
 
VAT was hiked from 14% to 15% in February. Import VAT, which is growing at almost 15% - almost double the forecast growth – is also contributing. And income from the fuel levy, which currently represents some R3.37/litre of the inland petrol price of R17.08, is supporting tax income. 
 
Personal income tax, the single largest source of tax revenue, is looking on track to meet the forecast. Mandy says that this is due in part to the higher-than-budgeted public service wage agreement, which will add R7 billion to the government budget.
 
“This is not a reason to celebrate as it will be net negative for the budget balance unless steps are taken to keep expenditure within the expenditure ceiling set out in the Budget.”
 
It is clear that companies are struggling: by August, corporate income tax was up only 2.8% compared to a forecast of 6.5%.
 
“The big question is what the outlook looks like for the rest of the financial year. Unfortunately, it is difficult to see much in the way of upside, but plenty in the way of downside risks to the forecasts,” Mandy warns.
 
Risks to tax income:
Personal income tax should remain stable for the rest of the year, but corporate income tax could come under more pressure as company profits suffer.
 
Tax income could be hurt even more if government announces in the mini-budget next week that white bread, sanitary products, school uniforms and nappies will be VAT-free from now on. An expert panel has recommended that these products should be free from VAT.  This could shave off up to R6 billion in tax income.
 
 
Source: Business Insider
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