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
South African investors' belief that the country is permanently in some kind of pre-Armageddon has probably cost them trillions of rand over the past twenty years. The number of failed global expansions is ratcheting up and investors whose bias remains largely negative toward local assets are bearing the cost.
 
Retired FirstRand founder Laurie Dippenaar had a rule that whenever an executive came up with an idea for global expansion, the first question he would ask was: “Who on your team wants to go and live there?”
 
South African shareholders have paid the price for those kinds of international strategies for years as large corporations sought to diversify their earnings streams away from the country. And no doubt, some executives also saw it as a cushy way to move countries at someone else’s expense.
 
There have been some great success stories: SABMiller, Bidvest, Nando's, Naspers and Investec Asset Management among them.
 
But a growing number of South African companies' international expansions are coming unstuck. 
 
The list of disasters and missteps is growing.
The latest to join the list is Mediclinic. Its share price this week was pulverised by a warning that its profits are going to be lower, primarily as a result of - yes, you guessed it - challenges in its international operations. 
 
It blamed an anticipated 10% earnings decline on “customary seasonality” in Switzerland and the Middle East but also highlighted that its Swiss operations were coming to terms with regulatory changes and that was causing unforeseen complexity.
 
On top of that, fewer pneumonia and bronchitis cases in South Africa this year hit its domestic business. Sometimes good news can also be bad news.
 
Competitor Netcare this year finally chucked in the towel in the UK. Its strategy of picking up overflows from that country’s heavily burdened National Health Service didn’t make provision for austerity and cutbacks brought about by the global financial crisis and, more recently, Brexit. That, coupled with eye-watering property rental agreements, made it untenable to remain.
 
Famous Brands seems eager to extricate itself from its R2bn Gourmet Burger Kitchen deal and has written off a large part of its value in its accounts.
 
Old Mutual has just concluded its conscious uncoupling - they prefer the term “managed separation” - and brought its primary listing back to Johannesburg after squandering billions in value by overpaying for businesses across the globe
 
While the US market devoured one of the founders of the SA unit trust industry, Sage, Discovery saw the light in time. After ratcheting up a billion rand in losses, it rethought its global strategy.
 
CEO Adrian Gore is uncomfortable with any assertion that the firm's 25% stake in China’s Ping An Health, a division of the world's biggest insurance company, could be its Tencent.
 
And Tencent itself is finally proving to be a bit of a drag on Naspers. The latter peaked at over R4,000 a share in the hype cycle that nothing could ever go wrong for the firm in which it bought a 46% stake in 2003 for $200m.
 
Regulatory changes in the Chinese gaming industry are leading to some concerns about future profits. Yet despite the pull back, this is one expansion that has delivered considerable returns for investors.
 
Still, why not all global expansions out of South Africa have been disastrous, few have achieved their strategic objectives and returned real value to investors.
 
Investors need to be more circumspect about the real intentions of management teams when they spend their money on global jollies.
 
Bruce Whitfield is a multi-platform award winning financial journalist and broadcaster.
The South African economy is in the midst of its longest business cycle downturn in more than 73 years, according to the Reserve Bank, and things aren't looking particularly favourable right now either.
 
The adverse business climate has impacted the stock market too this year, seeing listed companies declining year-to-date on the whole. 
 
According to analysis done by Corion Capital, a boutique hedge fund manager, 60% of listed counters had depreciated by the end of September, with more than a third slumping in excess of 15%. Only 16% of the stocks in the All Share Index gained more than 15% this year to end-September.
 
Topping the list of poor performers are Tiger Brands, off more than 40%, two healthcare companies, Aspen and Mediclinic, MTN, and Woolworths.
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
And the sharp sell-off has continued into October, with only the Resource Index managing to gain ground last week and the Banks Index hardest hit, losing 7%.
 
Garreth Montano, a director of Corion Capital, puts the bout of negativity swamping investor sentiment this year down to:
 
- Low GDP growth. South Africa has unfortunately missed out on a resurgence in the world economy and has been left well behind in terms of GDP growth. The reasons behind the sluggish performance of the domestic economy can be debated at length, but many view the Zuma era as a large contributor to the underperformance of SOEs, heightened corruption, lack of job creation and lack of investor confidence in attracting foreign direct investment.
 
- The land debate and mining charter have further dented prospects of new investment, which would aid growth as well as assist in creating new jobs. All of which are dearly needed.
 
- Many commentators believe that president Ramaphosa’s hands are tied until general elections, and the righting of the ship and benefits to the economy will start gaining momentum once there is more clarity around the land issue and elections are behind us.
 
To add to these internal challenges, emerging markets, as a whole, have had a difficult 2018, being largely led down by the crises in Turkey and Argentina. Trade wars have also had a negative effect, creating concerns about a drag on emerging markets exports due to potential for tariff impositions by the US, Montano says.
 
Locally the negative sentiment towards broader emerging markets has played out in large outflows fromn our bond market, as well as foreigners selling off equities, says Montano. Last week almost R6bn alone was taken out of South Africa by foreign investors.
 
These disinvestments have also played out in currency markets, driving the rand dramatically lower to more than R15 to the dollar at stages compared with its peak of almost R11.50 in February this year.
 
 
Source: Business Insider
The South African economy is in the midst of its longest business cycle downturn in more than 73 years, according to the Reserve Bank, and things aren't looking particularly favourable right now either.
 
The adverse business climate has impacted the stock market too this year, seeing listed companies declining year-to-date on the whole. 
 
According to analysis done by Corion Capital, a boutique hedge fund manager, 60% of listed counters had depreciated by the end of September, with more than a third slumping in excess of 15%. Only 16% of the stocks in the All Share Index gained more than 15% this year to end-September.
 
Topping the list of poor performers are Tiger Brands, off more than 40%, two healthcare companies, Aspen and Mediclinic, MTN, and Woolworths.
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
 
Performance of the top 40 JSE shares. Tiger Brands and Aspen were the biggest losers, while Sasol and BHP Billiton were the top performers. (Corion Capital)
 
And the sharp sell-off has continued into October, with only the Resource Index managing to gain ground last week and the Banks Index hardest hit, losing 7%.
 
Garreth Montano, a director of Corion Capital, puts the bout of negativity swamping investor sentiment this year down to:
 
- Low GDP growth. South Africa has unfortunately missed out on a resurgence in the world economy and has been left well behind in terms of GDP growth. The reasons behind the sluggish performance of the domestic economy can be debated at length, but many view the Zuma era as a large contributor to the underperformance of SOEs, heightened corruption, lack of job creation and lack of investor confidence in attracting foreign direct investment.
 
- The land debate and mining charter have further dented prospects of new investment, which would aid growth as well as assist in creating new jobs. All of which are dearly needed.
 
- Many commentators believe that president Ramaphosa’s hands are tied until general elections, and the righting of the ship and benefits to the economy will start gaining momentum once there is more clarity around the land issue and elections are behind us.
 
To add to these internal challenges, emerging markets, as a whole, have had a difficult 2018, being largely led down by the crises in Turkey and Argentina. Trade wars have also had a negative effect, creating concerns about a drag on emerging markets exports due to potential for tariff impositions by the US, Montano says.
 
Locally the negative sentiment towards broader emerging markets has played out in large outflows fromn our bond market, as well as foreigners selling off equities, says Montano. Last week almost R6bn alone was taken out of South Africa by foreign investors.
 
These disinvestments have also played out in currency markets, driving the rand dramatically lower to more than R15 to the dollar at stages compared with its peak of almost R11.50 in February this year.
 
 
Source: Business Insider
Argentina's citrus-growing regions were affected by frost at the end of winter, high temperatures in summer, plus excessive rain that delayed harvest for about a month. The combination affected both quality and total output.
 
South Africa, on the other hand, had improved weather conditions the two main citrus-growing provinces, the Eastern Cape and Limpopo. An increase in planted area also helped.
 
The Eastern Cape and Limpopo account for 80% of South Africa's lemon and lime production, and increases there helped offset lower production in the drought-hit Western Cape.
 
But the European party for South African exporters may already be over, says Eddy Kreukniet of Exsa Europe
 
"We've now entered the final weeks of the season and the market it decreasing with the entry of Turkish and Spanish citrus."
 
Growers who, during this period, did not plant a mix of products, might be headed into a difficult year, warns Kreukniet.
 
 
Source: Business Insider
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