By Ferial Haffajee for Fin24

Eskom and government have started planning for Stage 5 and Stage 6 load shedding, according to officials who say that there is a race against time to ensure that a national blackout and grid collapse does not happen.

Stage 5 and Stage 6 load shedding imply shedding 5000 MW and 6000 MW respectively.

For businesses and residential consumers, it means more frequent cuts of the same duration, depending on where you live and who supplies your power.

Eskom’s website also contains load shedding schedules up to Stage 8 but has not implemented stages beyond Stage 4.

At the first major briefing to explain the fourth day of Stage 4 power cuts, Minister of Public Enterprises Pravin Gordhan said that the government and Eskom were determined not to go beyond Stage 4 load shedding where 4000 MW has to be shed in long and regular blackouts to business and residential consumers.

But it is now clear that there is planning to Stage 5 and Stage 6 in order to ensure that there is no national blackout.

“It will be a huge struggle to overcome this crisis,” said Gordhan.

An extensive briefing by Eskom executives and the Department of Public Enterprises on Tuesday has made it clear that the national power supply is more precarious than previously understood. South Africa has bought all available diesel on the high seas (to run emergency power), maintenance of power plants is in crisis because boiler tubes are bursting at eight units across three power stations and there is a planned strike early in April.

What does this mean for you?

Load shedding is here to stay and possibly at extended lengths now being experienced across the country. In addition, Eskom is in dispute with the National Energy Regulator with SA (Nersa) on its calculation of the Regulatory Clearing Account and it wants to be able to implement higher tariff increases.

Nersa gave Eskom much lower additional tariff clearances than it requested, but these already added four percentage points to the allowable tariff of just above 9% for 2019/20. Is there light? A little.

On Thursday, a ship with diesel stocks will dock and this supply will ease the crisis; in 10 days, the government will report back with a deeper diagnosis of South Africa’s power woes.

All that government could really offer on Tuesday is that there will be better communication of the crisis with the public and an effort to design blocks of blackouts friendlier to life and the economy.

“We are very far from a point of total black-out. The system operators main task is to defend and protect the grid,” said Eskom chairperson Jabu Mabuza in a briefing designed to shed light after four days of load-shedding which has left the economy teetering and the nation seething.

“We don’t want to remain in a vicious cycle where load-shedding shifts to other crises (like a water crisis because plants go down in power cuts). We are committed to rebuilding the energy supply and energy confidence,” said Gordhan. One of the reasons for the latest power crisis is that it takes too long to buy the parts Eskom needs to maintain its power station fleet, said Mabuza.

The government will be going to the National Treasury to seek an opt-out of strict procurement laws to provide for emergency and faster purchasing.

“We are talking to the Treasury, to the Auditor-General to design processes very quickly to enable Eskom to be more responsive. (But we will) make sure no malfeasance is allowed during that process. People will try to take the gap. We will make sure it doesn’t happen,” said Gordhan who earlier revealed that 3000 staff at Eskom are doing business with the utility.

An estimated 1000 of the moonlighters have been identified.

Staff trading with Eskom is a conflict of interest which has driven up prices and is one factor in the debt pile that Eskom is carrying.

Mabuza also disputed a growing narrative by former executives of Eskom who use social media to disseminate a view that independent power producers (IPP’s) of renewable energy are responsible for the utility’s financial woes and for load-shedding.

“The board has asked me to say it is not appropriate to keep quiet about the IPP’s. In the revenue determination of what is allowable, there’s a budget of R30bn for IPP’s. In so far as Eskom is concerned, what we buy on IPP’s we recoup from the tariff. We are neutral as far as Eskom is concerned – we pass it onto the consumer. If we spend more than R30bn we get it back through the RCA (the regulatory clearing account). We have many problems at Eskom; IPP’s are not the cause of our problems,” said Mabuza.

“We fully understand that frustration and we want to apologise. At the same time, I want to appeal for understanding [in terms of] the nature of the challenges,” said Gordhan who did not give a deadline of when the deep and long load-shedding will stop.

He appealed for understanding from the country and said that South Africans should conserve as much electricity as possible. Eskom will reintroduce its programme of buying spare capacity from industrial users who may not need all the energy they are producing at private power stations.

South Africa has 48000 megawatts of installed energy but it only currently has 28 000 megawatts available daily, causing the gaping deficit that leads to ricocheting power cuts.

There are three senior fix-it teams working on the problem, said Gordhan. A presidential task team has presented one report to Cabinet; the Eskom board and management have presented their own 9-point turnaround plan and there is a team of between 12 and 14 private sector engineers combing through the Eskom power stations to present their own diagnostic report of what is going wrong.

Asked if too many cooks did not spoil the broth and whether government risked throwing structures at the problem, Gordhan said the power crisis needed more rather than fewer eyes on the problem or the risk of groupthink (where people begin to think alike and no longer question each other’s assumptions or points of view) was high.

“There is an eagerness and determination to get to the bottom of what the problems are. To answer the question: ‘How long will load-shedding last’? We will come back to you in 10 to 14 days. We have no magic formula. There is no magic wand to say load-shedding is over. It will be a huge struggle to overcome this crisis. We want to give the public as much information as possible,” said Gordhan.

In the parking lot of the hotel in which the briefing was held, a generator droned loudly. Rosebank in Johannesburg faced Stage 4 load-shedding for the entire period of the briefing – a graphic display of the crisis being described.

Shock as Sun City’s value plummets

By Siseko Njobeni for Business Live

The tough economy is behind the shock decline in Sun City’s value.

Sun International has for the first time reduced the value of Sun City as a struggling economy brought pressure on the iconic resort and casino.

The R306m reduction in value to R2bn comes after the company spent R1bn on refurbishments at the Sun City complex in 2016.

The drop in the resort’s value attests to the difficulties facing SA’s leisure and retail sectors due to increased competition, sluggish economic growth and reduced discretionary consumer spending.

Massmart confident it can turn Game around

Source: CNBC Africa

Massmart had a tough financial year, reporting a decline in headline earnings per share by 31.7 cents.

The biggest contributor to the company’s decline were Game, Dionwired and Hi-Tech.

Investors have been surprised by the extent of the decline.

According to Massmart CEO, Guy Hayward, the company’s sales are an accurate depiction of the general state of the South African economy.

“We are also disappointed in our profit growth, which is down 16%,” he says.

Food and Game are already 22% of total sales, and 2018 saw a move to Johannesburg and the restructuring of management and support roles.

“We are confident that we are doing the right things and that customers will respond to us in 2019,” Hayward says.

Turning Game around

Game will be kept very relevant to customers. The R20-billion business has up to 40% market share in many places; in fact, the company sees one in three TVs sold through it.
Going forward, Game will need to drive down costs and manage selling prices better.
“We need to make sure we offer customers wonderful merchandise that is very well priced. We need to shout about it; we need to make sure they know what they can buy in Game. We need to offer exciting products – maybe exclusive deals we have that no one else has, and we need to make sure our food is very well priced,” Hayward concludes.

 

By David A Graham for The Atlantic

Christmastime is when the pens in my house get their biggest workout of the year. Like many Americans above grammar-school age, I seldom write by hand anymore, outside of barely legible grocery lists. But the end of the year brings out a slew of opportunities for penmanship, adding notes to holiday cards to old friends, addressing them, and then doing the same with thank-you notes after Christmas. And given how little I write in the other 11 months of the year, that means there are a lot of errors, which in turn spur a new connection with another old friend: Wite-Out.

The sticky, white fluid and its chief rival, Liquid Paper, are peculiar anachronisms, throwbacks to the era of big hair, big cars, and big office stationery budgets. They were designed to help workers correct errors they made on typewriters, without having to retype documents from the start. But typewriters have disappeared from the modern office, relegated to attics and museums. Even paper is increasingly disappearing from the modern office, as more and more functions are digitized. But correction fluids are not only surviving—they appear to be thriving, with Wite-Out sales climbing nearly 10 percent in 2017, according to the most recent public numbers. It’s a mystery of the digital age.

One sign of the cultural impact of the Wite-Out brand is that, like Kleenex, it has become a generic term. But it wasn’t the first. Liquid Paper dates back to the 1950s, when Bette Nesmith Graham, a struggling divorced mother, took on typing jobs to make money. The problem was that she wasn’t a good typist, and kept making mistakes. So she began experimenting with ways to cover up errors, enlisting her sons to help her. (This creative streak would help one of those sons, Mickey, in his career as an artist—first as a member of the Monkees, and later as a producer of films including Repo Man.) In 1958, she patented Liquid Paper.

There were other products that achieved the same goal, like strips of sticky paper that covered up errors, but Liquid Paper quickly eclipsed them—so much so that it soon drew imitators. In 1965, Tipp-Ex began producing its own fluid in Germany. A year later, George Kloosterhouse and Edwin Johanknecht, searching for a product that wouldn’t show up when a document was photocopied, developed Wite-Out.

It’s difficult for anyone raised in the age of computers to grasp how useful correction fluids must have been when typewriters were a dominant technology in offices and classrooms. Of course, correction fluids are useful for things other than typewriting. In the pre-laser-printer era, it was often easier to correct a document from a dot-matrix printer by hand than to reprint it. Handwritten documents in ink are also more easily Wited-Out than rewritten.

But today, even printer sales are down, casualties of an era when more and more writing is executed on screen and never printed or written out at all. In fact, office supplies as a whole are slumping. According to a report by the analysis firm Technavio, the U.S. stationery and office-supply market is essentially flat, projected to go from $86.4 billion in 2015 to $87.5 billion by 2018. The paper industry has had it especially bad.

Yet correction fluid remains remarkably resilient. As early as 2005, The New York Times pondered the product’s fate with trepidation. Somehow, more than a decade on, it has kept its ground. According to the NPD Group, which tracks marketing data, sales of correction fluid grew 1 percent from 2017 to 2018, though they fell 7 percent the year before. (Correction tapes were flat, while correction pens are fading.) From 2015 to 2016 to 2017, Bic, which makes Wite-Out and Tipp-Ex, reported that correction products increased in share from 5 to 6 to 9 percent of the global stationery market. It’s a little less clear how Liquid Paper is doing. Newell, which owns the brand, doesn’t break out earnings enough to tell, and the company didn’t respond to a request for comment.

Who’s still buying these things? All the best answers are mostly conjecture. AdWeek suggested that sales might be buoyed by artists using fluid like paint. A Bic spokesperson pointed to a series of weird and entertaining interactive YouTube ads for Tipp-Ex in Europe, and said that Wite-Out is launching “colored dispensers that will appeal to younger consumers.”

That sounds faintly ridiculous—what use is a colorful bauble to a digital native?—but there may be something to it. Even as paper sales dip, up-market stationery is one sub-segment that is expected to grow, thanks to a Millennial affection for personalized stationery. Tia Frapolli, president of NPD’s office-supplies practice, pointed to bullet-journaling and hand-lettering as paper-based trends that could breathe some life into correction fluids.

Wite-Out is a strange place for serial-killing Millennials to offer clemency. In part, the attraction to the material is the same as any other hand-made or small-batch product: The physical act of covering up a mistake is imperfect but more satisfying than simply hitting backspace. There’s also a poignancy to a screwed generation gravitating toward Wite-Out.

You can’t erase the past anymore than you can erase a printed typo or written error—but you can paper it over and pretend it didn’t happen.

R5.7bn bailout for e-tolls

By Tom Head for The South African

Gauteng motorists, we’ve got some bad news: e-tolls have been given the kiss of life by the government, who have promised to cover Sanral’s debts.

When the people talk, politicians should listen. However, it would seem there have been some spectacular crossed wires in Gauteng. The much-maligned and financially crippled e-tolls system will now live to fight another day, after Transport Minister Blade Nzimande confirmed Sanral would receive a R5.7 billion bailout.

The roads agency have been plunged into fiscal despair by the ill-conceived tolls, which have failed to bring in the revenue previously forecast. It has left Sanral with debts soaring above R10 billion, but thanks to the deep pockets of the ANC, their money woes have effectively been halved.

Why Sanral have been bailed out
Nzimande explained the decision via a statement on Monday afternoon. He says the bailout is to help ensure that the department can meet “payment terms” with its investors. The move was labelled as a “strategic intervention” to help prop-up the Gauteng Freeway Improvement Project (GFIP).

“As a result of Sanral’s toll network experiencing financial difficulties, and to ensure that Sanral complies to its payment terms to investors, as well as to maintain the toll network across the country, funds were transferred from the non-toll network to the toll network. However, the department is working to resolve the issue of the GFIP speedily.”

E-tolls: Where is the money coming from?
The money has been taken from the Medium-term budget appropriation. It’s important to note that this money was not taken from the Treasury. Instead, money that was set aside for mid-term spending back in October 2018 will now go towards the e-tolls system, which continues to fail upwards.

Despite several promises from local government – including Gauteng Premier David Makhura, who vowed to rid the system from the province – it seems that national structures of the ANC have had the final word.

 

Car licensing fees set to increase

Source: MyBroadband

South Africa’s national licensing transaction fees will increase from R72 to R82, the Department of Transport has announced.

In the Government Gazette published on 8 March, transport minister Blade Nzimande announced the 14% increase in the transaction fees to be paid to the Road Traffic Management Corporation (RTMC).

In terms of The RTMC Act, local registering authorities – licensing centres – must pay a transaction fee for each motorist it processes.

This car licence transaction fee is subsequently passed on to the applicant and added to the annual licence fee.

While this fee is separate from the actual licence fee, the R82 is effectively added to the renewal costs for all motor vehicle licences across the country.

The latest increase follows a R30 increase last year. In February 2018, the fee increased from R42 to R72.

This increase will affect all South African motorists, with the licensing fee differing from province to province – dependent on the size and weight of your vehicle.

In the Western Cape, a motorcyclist can expect to pay R192 for a new licence, while motorists can pay anywhere between R288 to R966.

Comair backtracks, grounds crash-prone plane

By Dineo Faku for IOL

In an about-turn, JSE-listed aviation and travel company Comair late yesterday bowed to public pressure to ground its Boeing 737 MAX 8 aircraft.

Earlier in the day, the company said it would continue flying the aircraft and that its engineers remained “vigilant”.

Wrenelle Stander, the executive director of Comair’s airline division, said in a statement issued on the Stock Exchange News Service after the market had closed, that Comair had decided to remove the 737 MAX from its flight schedule, “although neither regulatory authorities nor the manufacturer has required it to do so.

“While Comair has done extensive preparatory work prior to the introduction of the first 737 MAX into its fleet, and remains confident in the inherent safety of the aircraft, it has decided temporarily not to schedule the aircraft while it consults with other operators, Boeing and technical experts.

“The safety and confidence of our customers and crew is always our priority,” Stander said.

The safety of the aircraft is in question following Sunday’s crash of an Ethiopian Airlines passenger jet bound for Nairobi, Kenya.

The aircraft, carrying passengers from 33 countries, crashed shortly after take-off, killing all 157 people on board. The aircraft is the same model as the aircraft that crashed into the sea off Indonesia in October last year, killing 189 people.

Comair became the first South African carrier to own a 737 MAX 8 when it received delivery of the aircraft last month.

The aircraft was the first of eight 737 MAX 8s that were scheduled to be delivered between 2019 and 2022 as the company embarks on a drive to replace its ageing fleet of long-haul aircraft.

Earlier in the day Comair, which operates British Airways and low-cost carrier kulula.com, had said it would continue to monitor the investigations by the relevant authorities and was in close contact with Boeing and the South African Civil Aviation Authority.

Comair said yesterday that the 737 MAX 8 was one of the most commonly used aircraft in many airlines today and that, by November 2018, 330 737 MAX 8 aircraft were in operation globally.

Consumers took to social media earlier yesterday to say they would stop using Comair after the company said it would not ground its 737 MAX 8 aircraft.

Global regulators acted fast on the news. The Chinese aviation regulator yesterday ordered domestic airlines to ground all 96 of the aircraft that they operate, while Ethiopian airlines followed suit.

SAA spokesperson Tlali Tlali said yesterday that the company and Mango, its low-cost brand, did not operate any B737 MAX 8 aircraft.

“Mango operates B737-800 NG aircraft, a different aircraft generation from the MAX, and these aircraft have been operating for the past 18 years without any major issues,” Tlali said.

For the six months to December, in a year dominated by low economic growth, Comair lifted its revenue to R3.3billion, from R3.1bn in the corresponding period last year.

Comair shares closed 2.11 percent lower at R5.11 on the JSE yesterday.

How Edcon is shrinking its footprint

By Glenda Williamns for Fin Week

Edcon’s current restructuring process includes significant space rationalisation.

JSE-listed real estate investment trust (REIT) Attacq, owner of Mall of Africa, announced that Edcon exposure, (25 499sqm at 31 December 2018, down from 29 262sqm at 30 June 2018) will settle at 22 945sqm of primary gross lettable area (PGLA) by 1 October 2019 for an estimated 3% of the REIT’s effective PGLA. Contractual gross monthly rental at this time will be R3.2m, down from R4.1m at 30 June 2018.

Owner of Sandton City, Liberty Two Degrees’ (L2D), says Edcon currently occupies 5.3% of its current portfolio, which is expected to reduce to 4.3% of gross lettable area (GLA) by 31 December 2019.

Redefine Properties, SA’s second-largest REIT and owner of Centurion Mall, has a hefty retail portfolio that at 31 August 2018 comprised 1.4m sqm of GLA.

The REIT is a significant landlord to Edcon with GLA exposure of 78 760sqm (down from 122 856sqm at August 2018) housing the Edgars and Jet brands.

Redefine’s equity contribution will amount to R54.6m, the REIT says. As a consequence, Redefine will receive 100% of its rental due from Edcon on 56 788sqm representing in force leases for profitable Edcon stores.

Redefine has also agreed to rental reductions up to a maximum amount of R13.8m over a two-year period in respect of leases totaling 21 972sqm.

Other major players in the listed property sector have yet to make their formal announcements on the recapitalisation process.

Some like Hyprop Investments Limited, owner of super-regional mall Canal Walk, have significant exposure to Edcon.

At 31 December 2018 that amounts to 9.4% of GLA (66 781sqm) and 7.6% of gross income.

Speaking at Hyprop’s interim financial results for the six months to December 2018, newly-appointed CEO Morné Wilken says that almost 7 600sqm of Edcon’s total 67 000sqm floorspace has already been taken back and mostly re-tenanted.

Hyprop has, in principle, agreed to support the Edcon restructuring proposal with a reduction in rentals, compensated for by equity participation in Edcon, says Wilken.

“While that will impact distributable earnings in the 2019 and 2020 financial years by 0.8% and 2.3% respectively, it is considered an acceptable limitation of the risk,” he says.

Others like top-performing SA REIT and low-LSM focused Fairvest Property Holdings have insignificant Edcon exposure.

In Fairvest’s case that’s a mere 0.8% and exposure is only to the still well-trading Jet Stores. “That,” CEO Darren Wilder tells finweek “was not by chance, but by strategy.”

Edcon group gets R2.7-billion lifeline

By Lynley Donnelly for Mail & Guardian

The Unemployment Insurance Fund (UIF), debt holders and landlords have all come to the rescue of the troubled Edcon group — which owns Edgars, Jet and CNA — in a deal that proponents say will avert a “jobs massacre” and swathes of mall space being shuttered.

The recapitalization programme will inject R2.7-billion into the company through new cash commitments from the parties and rent reductions by participating landlords, the company said in a statement late on Friday afternoon.

The Southern African Clothing and Textile Workers’ Union (SACTWU), as well as trade federation Cosatu, have hailed the deal.

It will avert a “job’s massacre,” not just at Edcon but in the wider clothing and textile manufacturing industry, said Sactwu’s national industrial policy officer, Etienne Vlok.

The sentiment was echoed by Edcon chief executive Grant Pattison who said the deal was not just about saving Edcon jobs.

According to Sactwu’s research Edcon procures around 45% of its clothing products locall — the most of all the country’s major retailers. The local manufacturing businesses that Edcon supports are also concentrated in geographic areas in rural and peri-urban areas, particularly in KwaZulu-Natal, Vlok said.

Edcon – one of the country’s largest non-food retailers, which occupies around 10% of mall space – has battled to cope with an increasingly tough retail landscape, crowded with both international competitors and increasingly popular online offerings. It has also been labouring under a legacy of debt since it was delisted in a private equity deal by Bain Capital in 2007.

Critics have however argued that public funds should not be used to rescue a poorly performing private company, whose demise began with a highly leveraged private equity deal.

The UIF – whose assets are managed by the Public Investment Corporation – has R156-billion in surpluses. The fund pays out workers in the event of retrenchment or job losses.

But according to Vlok rather than a bad investment, the UIF’s participation was potentially a cost saving for the fund. This was based on the union’s belief that as many as 140 000 jobs could be lost – both directly at Edcon, which employs about 30 000 people, as well as in the wider clothing and textiles manufacturing sector.

In a presentation given to the UIF in January, arguing that it should help fund Edcon, the union calculated that the fund would have paid between R2.95-billion and R3.9-billion to support workers who would have potentially lost their jobs.

The UIF did not immediately respond to questions for comment but according to Edcon’s Pattison, the participating parties all contributed a roughly equal amount in cash, leaving the UIF’s contribution in the order of around R1-billion.

“Edcon is a very large employer of people and we also buy an enormous amount of goods, manufactured here in South Africa,” he said.

“Edcon’s problem is not just one of our staff, its multiplied by a factor of three or four.”

The fund’s mandate does allow it to invest in transactions that have social returns.

In response to questions early last month spokesperson for the fund Makhosonke Buthelezi, told the Mail & Guardian that the fund’s “mandate makes provision for a social responsible investment asset class of 20% of the total portfolio”.

“The intention of this asset class is to sacrifice some financial return for a higher social return,” he said.

“Should the Fund consider [investing] in Edcon in an effort to retain jobs and [prevent] the negative effects it will have on the economy, the decision will be based on a thorough due diligence process and risk impact assessment.”

The potential impact of an Edcon collapse would also have been felt by the property sector – as it occupies around 10% of some of the country’s prime mall space.

As with the UIF, there was commercial sense behind landlords participating in the deal, said Pattison.

“They looked at the potential benefit of helping us survive, albeit in a smaller shape and size,” he said.

In the run up to the deal’s announcement, Edcon was reported to have asked its landlords to reduce its rents by as much as 40%.

Pattison stressed that while most of Edcon’s major landlords had participated in the deal, not all did. There were also a number of landlords who had negotiated different arrangements with the retailer.

“The participating landlords have committed to giving us some cash and for that they get an equity stake,” he said. While some have opted to give Edcon cash upfront, others are providing cash over time – in what could be viewed as a reduced rental. Still other landlords are opting for measures such as releasing Edcon from lease agreements, to enable it to close down poorly performing stores, said Pattison, or helping Edcon renovate stores.

He could not disclose the size of the equity stake different landlords, or that the UIF, would take up. But he stressed that it was “not a particularly large share” and would not entitle them to “some special relationship with the company”.

Petrol up 74c a litre

Source: EWN

The price of petrol at the pump is set to rise by 74 cents a litre from 6 March.

The wholesale diesel price to rise by 91 cents a litre.

The Energy Department’s Robert Maake explains why prices are being increased.

“The main reason for this big increase is mainly the crude oil price. It was much higher during the current review period compared to the previous period. The Brent crude oil was around $34 per barrel while in the previous period it was around $16 per barrel.”

The Automobile Association’s Layton Beard says consumers will be hit hard in the coming months.

“The general fuel levy and the Road Accident Fund levy will be added to the fuel price in April. That is apart from what adjustment is made to the basic fuel price. And obviously, in June, there’s the addition of the carbon tax we have to wait and see on a day-to-day basis how those numbers pan out.”

This is the second consecutive increase in fuel price this year.

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