Source: IOL 

Edcon Holdings said on Thursday that it will be closing three of their chains: Boardmans, Red Square and La Senza lingerie.

This is the latest strategy to save the company after dwindling sales and profits.

By shutting down the other chains they hope to attract more customers to their flagship Edgars stores.

The decision to shut down certain chains comes from the newly appointed CEO Grant Pattison who took over the position fro Bernie Brookes. Edcon is South Africa’s largest non-food retailer.

The Johannesburg company has had a hard time staying afloat amid weak consumer spending and economic growth and in 2016, the company had to be taken over by banks and bank holders to stop it from collapsing.

Under Pattison’s plan, Edgars will cut down on more than 1 300 stores’ footprints as well as reduce floor space by 17% over the next five years to increase profitability.

They will also be focusing on Edgars mainly, which sells most of the of the items that are available in the stores that are being shut down.

Other stores that have made the cut include CNA and Jet.

Pattison said that he thinks that the company can turn. He said, “The quicker we can do this, the better”.

Debt

The urgency to make changes comes after Edcon retail sales dropped by 9,4% in three months through December 23 while adjusted earnings before tax, taxes depreciation and amortisation declining by 25%.

The owners of Edcon Holdings are Frank Templeton Sanford C. Bernstein & Co. LLC and Harvard University Pension Fund. They took over when Edcon was struggling under foreign-currency debt that was used to finance the takeover by Bain Capital Private Equity LP in 2007.

The 89-year-old company also employs 14 000 permanent a significant number in a country where more than 1 in 4 people are unemployed.

At the of last year, the company’s net debt was R4,2 billion. Some of the other attempts to revive the company include increasing the workforce, decreasing prices and bringing in international brands.

Edcon said earlier this year that they were in talks with creditors about refinancing debt to strengthen the balance sheet. Edcon also has liquidity facilities and credit facilities that will be maturing towards the end of 2018.

By Roxanne Henderson and Antony Sguazzin for Business Day

The Reserve Bank has written to the National Credit Regulator requesting a probe of loan-origination fees charged by Capitec, according to a person familiar with the matter.

The referral came after the issue was raised in a report by short-seller Viceroy Research in January, said the person, asking not to be identified because the matter is private.

The investigation is ongoing, the person said.

On Tuesday, Capitec shares were trading down 1.9% at R870.89 at 9.05am on the JSE.

Capitec chief financial officer Andre du Plessis said he was unaware of the central bank’s referral, or of an investigation by the Johannesburg-based credit watchdog.

In the report, Viceroy said Capitec’s income was boosted by excessive fees on its multiloan product, which carried a monthly charge for allowing a previously vetted customer to extend their facility by answering some questions.

While Capitec said it terminated the product in 2016 — after rules introduced by the NCR meant it was no longer viable — Viceroy said the lender rebranded it and that Capitec’s methods risk over-indebting consumers.

Capitec denied this, saying Viceroy did not understand how the product or its processes work.

The NCR had previously probed the multiloan facility and was satisfied with the fees and interest charged, Capitec said on February 8.

‘Very active’

Both the Johannesburg-based NCR and Pretoria-based central bank declined to comment.

The central bank monitors lenders for their compliance with rules ranging from their operations and capital levels to staffing and money laundering, with the ability to fine companies or revoke their licenses. The NCR can also administer financial penalties on lenders which violate the National Credit Act, legislation aimed at protecting consumers from becoming over-indebted.

Officials from the central bank and the NCR told MPs in March that many of the allegations made by Viceroy were not new and that not all of them were accurate.

“The Reserve Bank is very active in doing ongoing reviews at all the banks,” said Du Plessis, speaking more broadly on the regulator’s oversight. “If anything bothers them, they actually contact us or ask that we report on something. That happens on an ongoing basis.”

On Friday, Capitec announced it had reached an agreement with Summit Financial Partners, which was challenging the lender in court and before the NCR on behalf of six complainants.

The cases, which mostly centred on Capitec’s now defunct multiloan facility, were withdrawn.

Capitec’s stock has declined 19% this year, more than any of the other lenders on the six-member FTSE/JSE Africa banks index, which is down 5.6%.

By Adam Liptak and Michael D. Shear for The New York Times

The Supreme Court on Tuesday upheld President Trump’s ban on travel from mostly-Muslim nations, delivering a robust endorsement of Trump’s power to control the flow of immigration into America at a time of political upheaval about the treatment of migrants at the Mexican border.

In a 5-to-4 vote, the court’s conservatives said the president’s statutory power over immigration was not undermined by his history of incendiary statements about the dangers he said Muslims pose to Americans.

Trump, who has battled court challenges to the travel ban since the first days of his administration, hailed the decision to uphold his third version of an executive order as a “tremendous victory” and promised to continue using his office to defend the country against terrorism and extremism.

“This ruling is also a moment of profound vindication following months of hysterical commentary from the media and Democratic politicians who refuse to do what it takes to secure our border and our country,” the president said in a statement issued by the White House soon after the ruling.

The vindication came even as Trump is reeling from weeks of controversy over his decision to impose “zero tolerance” at America’s southern border, leading to politically searing images of children being separated from their parents as families cross into the United States without proper documentation.

Trump and his advisers have long argued that presidents are given vast authority to reshape the way America controls its borders. The president’s attempts to do that began with the travel ban and continues today with his demand for an end to “catch and release” of illegal immigrants.

“We want strong borders and we want no crime,” Trump said Monday. “Strong borders. We want no crime.”

Writing for the majority, Chief Justice John G. Roberts Jr. said that Trump had ample statutory authority to make national security judgments in the realm of immigration. And he rejected a constitutional challenge to Trump’s latest executive order on the matter, his third, this one issued as a proclamation in September.

But the court’s liberals decried the decision. In a passionate and searing dissent from the bench, Justice Sonia Sotomayor said the decision was no better than Korematsu v. United States, the 1944 decision that endorsed the detention of Japanese-Americans during World War II.

By upholding the travel ban, she said, the court “merely replaces one gravely wrong decision with another.”

The countries affected include:

  • Iran
  • Iraq
  • Syria
  • Libya
  • Yemen
  • Somalia
  • Sudan

Caxton Central / Southern Courier

The National Union of Mineworkers (NUM) is planning a total electricity shut down on Thursday 14 June to protest against the 0% salary increases of Eskom employees. Here’s what you need to know.

South Africans might experience a day of no power because of strike action set to take place against Eskom for not increasing the salaries of their workers this year.

1. Eskom announced 0% salary increases for their staff
In January this year, troubled state utility company Eskom appointed a new board of directors to help resolve their leadership crisis. President Cyril Ramaphosa appointed former Finance Minister Pravin Gordhan as Public Enterprises Minister in February to be in charge of state enterprises like Eskom. This week the power utility announced a 0% increase in wages and earmarked 10 000 jobs to be slashed.

Allan Gray has pointed out the real problem at Eskom – a productivity meltdown. In 2003 #Eskom employed 32,000 people. Today that number stands at around 47600, up almost 50%. Eskom’s electricity production is roughly the same as it was in 2003. So 50% more people, a massive wage bill and the same amount of output.

2. NUM released a statement calling for a national shutdown
NUM released a statement saying that they were “disgusted by the brutal arrogance shown by the black majority led by Eskom”. They called for a national shutdown of electricity supply. The action is set to occur on national, regional and branch level. NUM and National Union of Metalworkers of South Africa (NUMSA) held a joint briefing earlier today to this effect.

3. NUM launched a response to Eskom in a series of tweets
One of the questions raised was “why should workers’ pay for the sins of management? It’s a fact that Eskom managers drove the SOE to the brink of financial ruin through rampant looting, corruption and mismanagement.” They said Eskom senior managers are responsible for the financial crisis at the SOE – “if jobs are to be cut they should start by cutting down the BLOATED executive which is made up of approx 500 people!”.

4. Eskom has contingency measures against Thursday’s strike
Eskom released a statement that they have measures in place to mitigate against the planned industrial action. They assured people that they will ensure the security of power supply should the strike happen.

5. People have taken to their social media to respond to the announcement
There’s been a generally mixed response to the Eskom announcement with some people claiming it is wrong to not increase the staff salaries in the wake of VAT increases and rising petrol prices. Others, however, believe Eskom workers have unrealistic demands.

By Sam Rutherford for Gizmodo; and Angela Monaghan for The Guardian

Despite the prevalence of credit cards and payment services like Venmo and Apple Pay, when things go wrong, cash is still king.

Europe and the UK got a really good reminder of that after a network crash on 1 June prevented millions of Visa credit and debit card holders from making any transactions.

Things got even worse when some MasterCard and American Express cards started getting declined after transactions were rerouted through Visa’s IT network.

All told, this issue created a pretty big headache for a lot of Europeans who found that when trying to buy tickets for a train or bus ride home after work, the cards in the wallets had suddenly reverted to being useless pieces of plastic.

In addition to many gas and railway stations, other major outlets including Mark’s and Spencer’s and Sainsbury’s were unable to accept payments from Visa cards, with The Guardian reporting that after learning about the issue, “some customers were simply dumping their shopping at the tills”.

Apparently people with Visa debit cards were still able to withdraw cash from ATMs.

Visa UK first tweeted out a statement regarding “service disruptions” shortly before 6pm London time, after problems first started around 2:30pm. This was later followed up by an announcement from UK Finance, the trade association that represents payment firms in Britain:

Visa is currently experiencing a service disruption which is preventing some Visa transactions in Europe from being processed. It is investigating the cause and acting as quickly as possible to resolve the situation. Visa is working with banks, building societies, merchant acquirers and card providers to return to a normal service and will provide regular updates.

Meanwhile, MPs are demanding answers from Visa, who were down for half a day after a “hardware failure”.

“A third of all spending in the UK is processed by Visa. It’s deeply worrying, therefore, that such a vital part of the country’s payment infrastructure can fail so catastrophically,” Nicky Morgan, the chairwoman of the Treasury select committee, said.

“The consequences were sudden and severe. Many consumers and businesses were left stranded on Friday, unable to make or accept payments, with chaos reported in shops.”

A committee has been formed, and is seeking answers on a number of issues, including whether or not cardholders or shopkeepers will be entitled to compensation, and what steps Visa will take to prevent a similar system failure in the future.

Source: Fin24 

FNB Life has identified over R160-million worth of unclaimed policies on its books, it said in a statement on Tuesday.

The bank has, therefore, started an initiative to proactively identify customers who have not submitted claims in the past. It wants to track down nominated beneficiaries, family members or the next of kin.

The bank will do this by proactively accessing and analysing data from the Department of Home affairs to identify potential beneficiaries and pay out what is due to them.

To date, over R5m has been paid across different products to nominated beneficiaries who had no idea that the policies existed before they were traced. The highest claim identified was R3.6m for life cover and R100 000 for funeral cover.

Lee Bromfield, CEO of FNB Life, says it is concerning and unfair that consumers who have spent their hard-earned cash paying insurance premiums have to lose out on claims due to insurers not being able to contact their loved ones or beneficiaries not being aware of the policies.

Here are a few of these reasons:

1. Failure to submit a valid claim

2. Inability to contact beneficiaries due to incomplete, missing, outdated or inaccurate information.

3. Consumers who have multiple policies with different insurers find it challenging to maintain and keep all beneficiaries informed about the policy.

It is also essential that policy-holders actively inform all their beneficiaries and family members whenever they take out cover.

By Scott Duke Kominers for Bloomberg 

How much is your privacy on Facebook worth?

This question has seen renewed attention following the revelation that political analysis firm Cambridge Analytica, hired by the Trump election campaign, gained access to the private information of more than 50 million users. One of the possible responses that’s generated some discussion is the creation of a paid tier that’s free of ads and data sharing. 1 Such an option would likely be socially beneficial and have considerable public appeal. But my guess is that it would be pretty expensive, too.

Let’s start with some rough calculations. Facebook’s annual ad revenue was about $40 billion in 2017, with 2.13 billion monthly active users. That means the average user is worth roughly $20 in ads to Facebook a year. That’s probably already a lot more than many users would pay for privacy on the social network.

But the price also depends on who would choose to pay for greater privacy. And it’s likely that many of the users who would opt for more protection could be worth more than $20 each to the company.

Why’s that? First, the value of keeping your data private increases with the amount of data you provide on the platform; by the same token, the more data you give Facebook, the better it can advertise to you. Similarly, you might find privacy especially valuable if there’s something unusual or unique about you that makes you especially easy to target.

The people who can afford a paid tier are on average wealthier; that too makes them more valuable to advertisers. And some of them already have browser ad blockers, so it’s hard to reach them via other channels.

To make up for those sorts of customers opting out of data sharing, Facebook would have to charge a lot more than the average of $20 just to break even. A back-of-the-envelope estimate based on the Pareto principle — 80 percent of the ad revenue coming from 20 percent of users — suggests that if mostly high-value users purchase privacy, then Facebook would need to charge closer to $80 a year.

That’s much more than even high estimates of the value most people attach to having access to Facebook. And it’s still a substantial underestimate of the likely price. According to Facebook’s annual report, the company’s 239 million North American users are responsible for a bit less than half of ad revenue; applying the Pareto principle to them would suggest annual privacy prices in the range of $325 a person.

If price alone were the question, Facebook might indeed want to charge huge amounts for enhanced privacy. The users who buy out won’t all be the most valuable users, and it would be pretty lucrative if the company could sustainably charge some customers much more for privacy than the annual ad revenue they generate. But that’s unlikely to work out in the long run.

Putting a high price on privacy would make it clear just how much Facebook’s user data is worth. We’d probably see increased calls to share that value by giving users a portion of revenues. The consumer-led drive for increased privacy would likely accelerate, too, prompting a growing number of users to leave the platform (assuming they can’t afford or are unwilling to pay for greater privacy).

A user exodus plus enhanced scrutiny of data practices would quickly eat away at the profits from offering the paid tier, making the whole thing a losing proposition.

Facebook must have run the numbers on this already, using much better information than we have here. The idea of a paid tier isn’t new; if Facebook hasn’t offered such an option, the company probably thinks it would be a money-loser. So if we want Facebook users to have control over how their data is shared, we may need outside pressure. The company isn’t likely to provide the option on its own.

It’s also worth noting that advertising and data sharing don’t have to be completely coupled. Facebook could enhance privacy directly by adopting data protection strategies based on privacy science, as Apple, Google, and the Census have in some of their applications.

By Hanna Ziady for Business Live

Capitec, the lender that indelibly disrupted SA’s banking sector, entered the insurance market with the launch of Capitec Insure on Monday.

It will dip its toes in the water with a funeral plan underwritten by Sanlam-owned Centriq Life Insurance Company.

“We know what our banking clients are paying to other providers and we are coming in well below the competition with more cover,” Francois Viviers, executive of marketing and communications at Capitec, told Business Day on Monday.

The vast majority of the bank’s clients had funeral policies with other providers. It would target these customers initially before launching marketing campaigns, Viviers said.

Capitec, which obtained its banking licence in 2001, now boasts nearly 10-million customers. About 46% of these are primary banking clients, who not only have loans with the bank but make regular deposits into their Capitec accounts, mainly salaries.

It now has 289,000 active credit cards in issue, launching that product at the beginning of 2017 to target wealthier customers. Its credit card product had a book value of R2bn at the end of February — about 4.2% of Capitec’s total loan book.

The funeral insurance market in SA is reportedly worth more than $500m in annual premiums. The Financial Services Conduct Authority could not confirm this figure at the time of publication.

Funeral insurance was a “good opportunity” for Capitec, as it had been very lucrative for large life insurers such as MMI and Sanlam, said Renier de Bruyn, investment analyst at Sanlam Private Wealth.

“Margins are high, which means Capitec can charge less and still be profitable,” he said.

There were 15-million funeral insurance policies in circulation covering 19-million adults, Viviers said.

“Based on our research, we estimate the average policy in the market to cover a main life, spouse, two children and one extended family member costs between R175 and R295.

“Capitec provides the equivalent cover at approximately R140 in branch and R124 on our banking app,” he said.

Policies start from R25 a month, through the Capitec app and R40 a month when applying in branch.

Funeral cover ranges from R10,000 to R100,000.

The product would be accessible via the Capitec banking app, where customers could change their cover amounts depending on monthly affordability, Viviers said.

The funeral plan featured cover for up to 21 dependants, including the policyholder.

Other features include a doubling of the funeral payout if a life assured died in an accident and a six-month premium waiver if the policyholder died for the remaining life assureds.

In addition, there was a voluntary policy pause for up to six months, with no premiums payable and no cover.

Capitec hoped to launch other insurance products in the long term, Viviers said.

Also on Monday, international short-selling outfit Viceroy Research published a letter containing questions for Capitec’s audit committee.

These relate to alleged changes in Capitec’s provisioning policy and the nature of internal consolidation.

A scathing Viceroy report in February torpedoed the share price and prompted a back-and-forth debate between Capitec and Viceroy.

Capitec CEO Gerrie Fourie said at the time that the Viceroy report was “riddled with inaccuracies”.

The share price did not react to the Viceroy letter on Monday.

By Sipho Masondo for City Press

Fears are mounting that up to 15 municipalities across the country could collapse because they are not likely to recover their R1.5bn investments at VBS Mutual Bank.

Their exposure to VBS was “too large compared to their operating revenue”, according to a Treasury document sent to the affected municipalities last week.

The SA Reserve Bank (Sarb) placed VBS under administration in March, following a liquidity crisis. VBS’s main source of cash was illegal short-term municipal deposits which it used to fund long-term loans to clients.

Senior Treasury officials fear that some of the municipalities – based in Limpopo, North West, Gauteng and Mpumalanga – could collapse. This would force their provincial governments to place them under administration.

The Treasury report reveals that the 15 councils are unlikely to recover their R1.5bn total investment.

“The payout to municipalities is highly uncertain,” the document reads. Its authors point out that Sarb is likely to prioritise retail depositors and not bail municipalities out.

“In line with the mandate of protecting the most vulnerable, the restructuring will focus on the depositors. At this stage, the ordinary depositors will get back almost all their deposits,” reads the document.

Sarb has already approved a restructuring that would benefit rural retail depositors, funeral insurance collectives, stokvels “and other vulnerable groups”.

“There may be little left for municipalities, which deposited illegally. It is a general principle that no bailouts are provided to municipalities,” the Treasury document says.

A senior Treasury executive said there were concerns that because of their “reckless investments” at VBS, some of the municipalities may no longer be financially viable.

“Some of their finances are in tatters, and they may need to be placed under administration,” the executive said.

Salaries in jeopardy

The official cited the example of Giyani, which invested R158m of its R302m operating revenue in VBS.

“How does a municipality without half of its operating revenue survive?” the official said.

The newly established Lim 345 Municipality, in the Thohoyandou area, had invested R122m of its R344m operating revenue in VBS. Greater Tubatse in Sekhukhune had put R210m, or 38%, of its R548m operating revenue in the bank.

Another Treasury executive said this money was part of municipalities’ annual budgets and not extra money that the councils could function without.

“Unfortunately, they have lost all that money and it is only a matter of time before you hear that some of them are not able to pay salaries. I’ve heard that one of them nearly didn’t pay salaries in November last year,” he said.

An executive member of the SA Local Government Association said it was “almost a foregone conclusion that some of these municipalities will crash”.

“We are losing sleep over the issue. The money was strictly for operational issues, not reckless investments,” said the official.

Fictitious deposits, untraceable lending

The Treasury report reveals that about R900m is missing at VBS.

“This money appears to have disappeared due to fictitious deposits and untraced lending. There is evidence of large, unrecoverable loans to directors and related parties. There is some evidence that VBS paid a lawyer a ‘commission’ when municipalities deposited money with the bank. It is not, at this stage, evident if this commission was passed on to municipal managers.”

The report says the bank’s business model was “ill-fated and doomed to fail”.

“VBS made long-term loans, knowing that their primary funding was short-term in nature and lumpy. Hence the business model is almost certainly designed to generate liquidity problems when a few municipalities withdraw their funds to spend on budgeted programmes,” the report reads.

Law was broken

Treasury says VBS actively flouted the law by focusing on municipal deposits, which made up almost 75% of all its deposits. Despite being aware of the restrictions on accepting municipal deposits, the bank continued to accept more. This continued even after it started talking to Treasury about phasing out its past municipal deposits, in order to comply with the Municipal Finance Management Act.

The Mahikeng, Greater Tubatse, Ruth Segomotsi Mompati and Elias Motsoaledi municipalities appear to have been enticed by the high returns the bank promised and disregarded the act.

Curator’s ‘extortionate’ fees

Two VBS senior managers accused the bank’s curator, Anoosh Rooplal, employed by auditing firm SizweNtsalubaGobodo, of charging “exorbitant and extortionate” fees. He sent the bank a bill of R2.6m for three weeks of work.

Sarb appointed Rooplal when it placed VBS under administration in the middle of March.

Rooplal sent the bank his invoice on March 31. The bank paid three days later.

One of the managers said: “If you invoice R2.6m in three weeks, how much will you be paid every month? How much will Anoosh and SizweNtsalubaGobodo be paid by the time the bank is back on its feet? It all looks exorbitant and extortionate.”

Another manager lamented the fact that while depositors could not access their money, the curator was being paid handsomely.

“It simply just doesn’t make any sense to me,” the manager said.

The curator’s spokesperson, Louise Brugman, said Sarb had approved the remuneration and fee structure for the curatorship upfront.

She said that, as per normal governance practice, the curator was required to regularly update Sarb on fees, related activities and the bank’s financial position.

“As further irregularities have been uncovered within the bank, additional experts have been required to assist to restore the bank, all of which is reported and explained to Sarb,” she said.

By Siseko Njobeni for Business Report; by Carin Smith for Fin24

The Congress of South African Trade Unions yesterday urged the National Energy Regulator of South Africa (Nersa) to reject Eskom’s application to recoup R666,6-billion, saying such a move was unaffordable, unreasonable and unjustifiable.

If the Regulatory Clearing Account (RCA) application – which covers the 2014/15, 2015/16 and 2016/17 financial years – is approved, Eskom would claw back the billions of rand through higher tariffs.

According to various organisations, the R66bn could lead to a 30% increase in tariffs.

South African consumers have reached a price ceiling in terms of electricity tariff hikes, according to the Southern African Faith Communities’ Environment Institute (Safcei). Kim Kruvshaar, an independent sustainability auditor, represented Safcei at public hearings by the National Energy Regulator of South Africa (Nersa) in Cape Town on Tuesday.
“We don’t believe Eskom is an efficient electricity provider. Its business model is out of sync with global trends,” Kruvshaar told the Nersa panel.

Public hearings

The RCA is a backward-looking mechanism that seeks to reconcile what Nersa awarded Eskom on the basis of what was forecast in the Multi-Year Price Determination (MYPD) and what materialised, as reflected in the utility’s financial statements.

In a presentation at Nersa’s public hearings on the application in Cape Town yesterday, Cosatu said higher tariffs were not the solution to Eskom’s problems. It said higher tariffs affected key sectors such as mining, inflation and economic competitiveness. It said Eskom had failed to come clean on state capture and to take serious action against maladministration and corruption.

The trade union federation said Eskom should institute comprehensive forensic and criminal investigation “with dismissals, arrests, asset seizures and prosecutions”.

Speaking at the hearing, Eskom interim chief executive Phakamani Hadebe said Eskom’s sustainability depended on a sound regulatory environment that was aligned with existing Nersa rules and other legislative requirements.

“We therefore rely on Nersa to review our application in line with the MYPD3 methodology, which is a globally accepted regulatory principle that reconciles variances between the
projected and actual revenue and costs that Eskom incurred for certain elements. “It is also worth noting that we based our application on the decision already taken by Nersa on our first RCA application for 2013/14.

“We have spent the money in the implementation of our mandate of providing electricity to South Africans by raising debt as it was not included in the revenue decision and need to repay those loans accordingly in order to ensure credibility with our lenders.”

Hadebe said Eskom’s application only covered costs that were incurred efficiently and prudently.

Recovery

He said Eskom was on a path of recovery on governance. The Eskom board – appointed in January – was preoccupied with the power utility’s operational and financial stability. “Continued focus and effort will be placed in combating corruption and pursuing justice within the legal framework. We also welcome various investigative interventions that are under way to get to the bottom of recent acts of fraud and corruption, and we are in the process of claiming back money owing to Eskom, including money that was fraudulently paid to McKinsey and Trillian,” said Hadebe.

Agri Western Cape said electricity costs had risen significantly since 2008. The federation of farming organisations said Eskom’s RCA should be vetted by auditors.

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