South Africa moved to Level 1 lockdown on 21 September, after President Cyril Ramaphosa announced an easing of restrictions as Covid-19 cases continue to decline.

Among these it was announced that, from 1 October, travel in and out of South Africa will be allowed again under strict conditions.

According to StatsSA, nearly 16.5-million tourists visit South Africa each year. In 2019 alone, this employed 1.5-million people and contributed R425.8-billion to the economy.

Tourism Minister Mmamoloko Kubayi-Ngubane has said that the sector is ready to welcome an increase in activity for both domestic and international tourists.

The restrictions, which have yet to be published, will limit travel to and from certain countries that have high infection rates. This will be updated based on the latest scientific data.

However, South Africa’s move to Level 1 has coincided with the northern hemisphere’s approaching winter – and many countries are seeing a rise in cases, resulting in increased lockdown measures.

According to News24, the 10 leading countries for overseas tourists in South Africa are:

  1. United Kingdom
  2. USA
  3. Germany
  4. France
  5. Netherlands
  6. Australia
  7. China
  8. India
  9. Canada
  10. Italy

The UK Prime Minister, Boris Johnson, just yesterday announced increased lockdown measures, including a return to work-from-home; a 10pm closure time for pubs, bars and restaurants; stricter rules around face coverings in public; and strict fines for lack of compliance.

In mainland Europe, France has reported 10 569 new cases; Italy saw close to 1 000 new infections; and Germany reported 1 345 new cases Sunday, and a further 922 cases Monday. As a result, European countries are likely to impose more restrictions on public life in the coming days.

While Americans are, at this point, allowed to travel, the lack of stringent measures at a federal level has resulted in many countries putting tourists from the States on a blacklist.

Australia’s borders remain closed, although it is slowly opening domestic borders. India is also opening domestic borders, but international borders are not yet open.

China opened its international borders to select countries, which at the moment are Canada, Thailand, Cambodia, Pakistan, Greece, Denmark, Austria and Sweden. This list is expected to change according to the situations in each country.

It has also been noted that domestic tourism is on the rise across the globe as people explore their own backyards, rather than risking quarantine or last minute cancellations. A loss of income due to lockdown and an increase in furlough, retrenchments and unemployment has decreased disposable income – all of which will have a negative impact on tourism.

New South African airline will launch this year

By Bradley Prior for MyBroadband

South Africans have been invited to come up with a name for South Africa’s newest airline, which is expected to start flying by the end of the year.

The airline, which is a partnership between Kulula founder Gidon Novick and Global Aviation, is inspired by innovative tech-driven companies such as Uber.

“Similar to the way Uber has transformed the point-to-point mobility, there is a huge opportunity for the airline industry to rethink its relationship with passengers and be more customer-obsessed,” said Novick.

“The pandemic has created a unique opportunity to start an airline that is not only dramatically more efficient but also inventive and creative by tapping into the unique talent that our country offers.”

South Africans can visit brandnewairline.co.za to submit their suggestions and vote on their preferred name for the airline.

The new airline is being launched despite other established airlines facing significant troubles – both SAA and Comair are currently in the midst of business rescue proceedings.

However, Novick sees an opportunity brought about by the COVID-19 pandemic to re-look the traditional airline model – including a focus on technology.

“Technology has the ability to facilitate a seamless, efficient, and engaging relationship with our future customers,” said Novick.

Additionally, Novick noted that the pandemic has brought about the opportunity to acquire the important assets for an airline – including planes, facilities, and employees – at an affordable price.

By improving efficiency and cutting costs, Novick believes the airline can make major inroads into the airline industry.

Cost-cutting measures will include purchasing or leasing used aircraft to save money.

These aircraft will predominantly be narrow-body, single-aisle aircraft that seat about 180 people – such as the Boeing 737 and the Airbus A320.

Additionally, Novick said that it is “absolutely key” that the airline stays away from debt, and has confirmed that it will be funded through private capital instead.

This is because his experience in the industry showed him just how much damage debt can cause.

Strategy
This new airline will start off with flights between OR Tambo International Airport and Cape Town International Airport, and envisions that its first flight will take place in December 2020.

While this is a strong route for business travel, Novick does not believe that business travel will continue to be as strong as it was before the lockdown.

Instead, the new airline’s focus is on leisure travel, and it will leverage South Africa’s potential as a tourist destination.

Source: TPN

The percentage of total tenants that were recorded as being in good standing with their landlords dropped sharply in the second quarter of 2020.

From 81.52% of tenants being in good standing in the first quarter, the percentage declined to 73.5% in the second quarter, a decline of eight percentage points.

Those tenants that paid on time amounted to 59.48% of total tenants in the second quarter, down from 64.84% in the previous quarter.

“This all translates into quarterly increases in the percentage of tenants ‘partially paying’ or not paying at all,” TPN said. “Interestingly, though, is that the percentage paying late remained on the decline in the second quarter.”

From 11.57% in the first quarter, the percentage of tenants making a partial payment jumped to 15.28%. The percentage who did not pay also rose from 6.92% to 11.22% over the same second quarters.

However, the percentage paying late declined from 16.68% to 14.02% after having been on decline from a few preceding quarters.

TPN said that the sharp weakening in tenant performance is strongly related to the Covid-19 lockdowns, the most severe lockdown months being in April and May.

“These widespread business shutdowns likely saw many tenants lose either part or all of their income, especially amongst those employees with more flexible remuneration arrangements, for example casual labour and those that are commission-based,” it said.

In addition, the tenant population went into the lockdown period already under some heightened financial pressure, caused by a long term stagnation in South Africa’s economy, its economic growth having broadly slowed from around 2011/12 to 2019, the group said.

By the second half of 2019 and early-2020, the country was already in mild recession even without any lockdowns.

“Economic stagnation had been taking its toll on tenants, and we had already seen a multi-year decline in the percentage of tenants in good standing, from a decade high of 85.95% back in 2014 to 81.52% in the 1st quarter of 2020, prior to the lockdown.”

Mall owner braces for lower rentals

By Londiwe Buthelezi for News24

The owner of Canal Walk, Rosebank Mall and Hyde Park Corner is bracing itself for lower rental rates when tenants’ leases come up for renewal. This comes at a time when landlords are already bleeding from loss of tenants who have been forced to close their shops during the lockdown, leaving malls half-empty.

“While the rate of new Covid-19 infections is declining, we remain wary of the possibility of a second wave and the long-term effects of the pandemic on what was already a weak local economy. We anticipate further negative rent reversions, although at a lower level than in the last two financial years,” wrote the property company in its results announcement on Monday evening.

Hyprop Investments published its financial results for the year ended on 30 June and called 2020 a year that will be recorded in history as “one of the toughest years”. The property group said Covid-19 reduced its distributable income by R434 million in the year ended in June, while the value of its property portfolio across the globe tanked by R4 billion. Almost all the erosion in Hyprop’s property values happened in SA where the combined portfolio was down R3.9 billion.

Commercial property values in SA have been falling because of rental discounts landlords were forced to offer their tenants, as well as lower property income forecast in future. Hyprop also had big tenants like Edcon and Dion Wired closing shop this year.

The company said it successfully reduced its exposure to Edcon from 59 000 square metres to 50 000 square metres. It was able to secure three new Checkers FreshX stores as anchor tenants at The Glen, Rosebank Mall and Woodlands. It said that the space vacated by the Dion Wired had been let to new tenants at Somerset Mall, Hyde Park Corner and Canal Walk, which will now have a flagship PEP store while it was previously dominated by high-end fashion retailers.

Hyprop saw retail vacancies in its malls increase from 0.8% in June 2019 to 2.4% by 30 June 2020. The company also said that its rental revisions declined by 14.5% in the first three months of the lockdown. This means that Hyprop had to accept much lower rental rates on leases that expired during the lockdown. Before the lockdown, its retail rental revisions were already down 13.1% for the eight months ended February 2020. But Hyprop was able to retain 91% of tenants whose leases had expired, and for other tenants, it was able to increase annual rental rates by 7.1%.

“Notwithstanding the relaxation of lockdown conditions post 30 June 2020, rental rates remain under pressure as tenants look to rebuild their businesses. We will continue to assist key tenants, where appropriate, to ensure we have functional malls and acceptable occupancy levels,” wrote the company in its results booklet.

Hyprop said it is looking at introducing of storage facilities and collection points for online retailers among other things to attract new tenants.

Eskom caught lying about load-shedding

Source: MyBroadband

Eskom has admitted to exceeding stage 4 load-shedding limits, which energy advisor Ted Blom said shows the power utility is lying about which stage they have implemented.

This year, South Africa experienced the worst load-shedding it has ever seen, with 49 days of blackouts to date.

According to Eskom’s announcements, load-shedding peaked at stage 4, but Blom highlighted that the power utility exceeded stage 4 in September.

Official information shared by Eskom showed load-shedding of 5 359MW on Wednesday 2 September and 5 642MW on Thursday 3 September.

This far exceeds stage 4 load-shedding, which “allows for up to 4 000MW of the national load to be shed”.

Eskom spokesperson Sikonathi Mantshantsha denied accusations that Eskom is deliberately deceiving the public on which load-shedding stages it is implementing.

He confirmed the accuracy of the load-shedding statistics published on 2 and 3 September but said load curtailment should also be taken into consideration.

“Once Eskom declares Stage 4 load-shedding, it can request any major industrial customer to curtail up to 20% of load,” Mantshantsha said.

“This amounts to 1 200MW of demand that must be curtailed by industrial customers as part of the licenced load curtailment in terms.”

“Load-shedding is what Eskom sheds from the public, and that is what Eskom announced at Stage 4 on Thursday.”

However, when pushed on the amount of load-shedding which truly happened on Thursday, Mantshantsha said “Eskom did shed 4,400MW on the day in question”.

This equates to stage 5 load-shedding based on Eskom’s own definitions. Mantshantsha, however, would not answer the question on whether the power utility implemented stage 5 load-shedding.

It is not clear why Eskom refused to admit it implemented stage 5 load-shedding, as this could cause confusion among consumers.

Blom accused Eskom of being deceitful in its answers and trying to downplay the severity of load-shedding in South Africa.

Eskom’s load-shedding stage definitions
Eskom explains the different load-shedding stages on its website and in the documentation it provides to the public and municipalities.

Here are the current load-shedding definitions for Stage 1 to Stage 8:

Stage 1 allows for up to 1,000 MW of the national load to be shed.
Stage 2 allows for up to 2,000 MW of the national load to be shed.
Stage 3 allows for up to 3,000 MW of the national load to be shed.
Stage 4 allows for up to 4,000 MW of the national load to be shed.
Stage 5 allows for up to 5,000 MW of the national load to be shed.
Stage 6 allows for up to 6,000 MW of the national load to be shed.
Stage 7 allows for up to 7,000 MW of the national load to be shed.
Stage 8 allows for up to 8,000 MW of the national load to be shed.

According to these definitions, and after taking 1,200MW load curtailment into account, stage 5 load-shedding was implemented on 2 September and 3 September.

The table below provides an overview of the load-shedding implemented in the beginning of September.

Blom said there is a “massive difference between being forced to shed 4,000MW (13%) of total demand and 6,000MW (20%)”.

“If the power utility is short of 20% of the economy’s need it is a national disaster and requires an immediate intervention,” he said.

According to Blom, Eskom has lied to the public on load-shedding days this year and on the level of load-shedding.

He added that Eskom is also not telling the truth on how long the reconditioning program will take and the level of reconditioning done during lockdown level 5.

“In short, the public has branded Eskom as pathological liars with many examples over the last decade,” said Blom.

Blom said Eskom’s leadership should take extra precautions to ensure they are “100% factually correct and stop playing cat and mouse with the public”.

By Tom Head for The South African

The Matjhabeng Municipality in Free State has agreed to hand over 139 farms belonging to the administrative region, to act as a security on their R3.4-billion Eskom bill.

The serial defaulter has run up a tab of more than R3.4-billion in unpaid electricity bills over the years. Eskom put their foot down earlier in 2020, severely limiting the supply of energy for the municipality. However, it seems both parties have come to an agreement, and the total cost of the land is believed to be worth R2.5 billion.

This doesn’t clear all of the debt, but it marks a significant – if unusual – agreement between both parties. The deal was facilitated by the Free State High Court, and the title deeds will be signed over to Eskom while Matjhabeng remains in arrears. It is not yet clear what the power utility intends to do with these farms, should the debt stay in place.

The firm issued a statement on the matter earlier on Tuesday, confirming the details of their “land shedding” exchange. They state that all defaulting municipalities still owe them R31-billion, which remains a “threat to sustainability” for Eskom.

“In its ongoing efforts to recover more than R3.4 billion in unpaid debts owed by the Matjhabeng Municipality, the administrative body has agreed to hand over to Eskom 139 farms belong to the municipality, as a security on the debt. The farms are worth approximately R2.5 billion, and the title deeds will be endorsed in favour of Eskom.

“This will remain in place while the debt is unsettled. The order has been made by the High Court in Free State. This step on the part of Eskom is the result of repeated failures by Matjhabeng Municipality to adhere to its payment requirements. The total outstanding municipal debt [for all municipalities] of R31-billion threatens our sustainability.”

 

Source: FNB

The sustained reduction of interest rates and relaxation of lockdown levels is providing a significant boost to the recovery of average income and cash flow among salaried middle-class consumers who hold full-time or formal employment. This is according to FNB insights based on the income trends among its Retail and Private Banking customers who earn a monthly gross income of between R10 000 to R60 000.

The Bank states that the financial position of the average middle-income customer is now approximately on par with levels recorded in February 2020, before the implementation of the national lockdown. Additionally, spend patterns of consumers are showing recovery with most categories like groceries and entertainment back to normal except categories like travel that are still significantly lower due to the travel bans instituted during lockdown. In contrast, average income among informally employed and self-employed consumers continues to lag, as a result, this income group may take longer to regain their usual average income levels.

Chief Executive of FNB Retail and Private Banking, Raj Makanjee says: “The lockdown has been the toughest experience for consumers, emotionally and financially. However, the income recovery and improving cash flow among middle-income consumers bodes well for the economy as middle-class consumers have significant spending power. The timely adjustment of interest rates has been instrumental in cushioning consumers who are servicing debt against severe financial difficulty. Similarly, our Cashflow Relief measures have allowed our customers who earned partial or no income during lockdown levels 4 and 5, to manage the impact of this difficult period on their finances,” he says.

According to FNB, the average income of consumers who are employed by SMEs (employing less than 10 people) was impacted the most over the course of lockdown. The Bank estimates that one in two of people employed by these SME businesses have seen a drop of at least 15% in average income. However, only one in five of those employed by larger companies (1000 employees or more) experienced an average income drop of 15% or more.

While the current income recovery trend is encouraging, the Bank is aware that consumers continue to face difficulties as COVID-19 is still part of our everyday reality. As a result, it continues to avail its resources and platform to help customers with money management across its Retail and Private Banking areas. FNB has also initiated money management conversations and interventions to help its customers in making smarter decisions about their finances, find practical ways to free up cash flow in this period and educating customers on their finances to ultimately enable them to make informed decisions.

“By having these meaningful conversations, we gain better understanding of our customers’ situations and have greater insight to practically assist them with freeing up cash flow. Specific spending solutions across our customers’ credit, essential and lifestyle spending are assessed for each customer to determine how best we can assist them, furthermore, we are helping customers to align their spending to the things that are important to them in order to achieve their financial goals.

Additionally, our eBucks Rewards continues to provide real help and timely relief to customers during this period. We’ve also expanded our eBucks benefits for seniors to offer extra support to our senior customers. In the coming weeks, we expect to introduce more platform-based tools to give customers even more control over their budgets” adds Makanjee.

According to an article recently published by BusinessTech, the South African Local Government Association (SALGA) is considering a number of new measures to improve municipal revenue collection across the country.

Auditing outcomes under the current local government administration, now in its third year, have regressed.

Over the three-year period, the audit outcomes of 76 municipalities regressed, while only 31 improved. Only 11% of the 257 municipalities getting clean audits.

The suggested measures include:

  • Working with the South African Revenue Services (SARS) to withhold tax refunds for non-payment of utility bills. The municipality will be paid first before a refund is deposited to the tax payer’s account
  • Write-offs of the ever-increasing household debts to municipalities, including the introduction of a national bill for the writing off of these household debts in exchange for the installation of prepaid water and electricity metres
  • Amending schedule 2 section 10 of the Municipal System Act so all state employees are required to be up-to-date on municipal bills, and not just municipal councillors and employees
  • The establishment of a District Revenue Collection Agency to achieve better collection efficiencies and free up municipal personnel to focus on more pressing service deliver efforts
  • Amending the procurement regulations to make it compulsory for any potential service provider to produce a municipal services rates compliance certificate, prior to being awarded a government contract.
  • Resolving municipal and customer debts to Eskom
  • Bringing together preventative controls to improve the financial state of municipalities

By Mfuneko Toyana for Reuters

Africa’s most industrialised nation has been hit hard by the COVID-19 pandemic, recording the seventh-largest number of cases worldwide, although it has seen fewer deaths than some other badly affected countries.

Analysts polled by Reuters had predicted a 47.3% contraction because of the lockdown restrictions, which were among the harshest in the world.

“This is the first time in history that the South African economy has contracted for four straight quarters,” Statistician-General Risenga Maluleke told a news conference.

The rand fell roughly 1% against the dollar on the dismal data to trade at 16.9325 per dollar.

Joe de Beer, another top official at Statistics South Africa, said that after adjusting for inflation the economy was roughly the same size in the April-June quarter as in the first quarter of 2007.

Most sectors declined steeply except for agriculture, which grew 15.1% in the second quarter from January-March, helped by fruit and nut exports, and better-than-average winter rainfall.

Mining declined 73.1%, manufacturing 74.9% and construction 76.6%. Gross domestic product (GDP) for the whole economy shrank 17.1% from the same period in 2019.

Jeff Schultz, economist at BNP Paribas, said the global impact of the pandemic coupled with the recent return of power cuts by ailing state utility Eskom would hamper any economic recovery.

“It will take a very long time to get to pre-pandemic levels,” he said.

The government expects a GDP decline of at least 7% in 2020, a worrying prediction in a country where unemployment was at around 30% before COVID-19.

Pamela Mutandwa, 37, who runs a roadside vegetable stand in Pretoria, said times were hard. “It was really difficult during lockdown. There were no people buying and I struggled. When I opened in 2009 there were more customers.”

Tlouama Abrama, 31, a petrol attendant, said he was disappointed by the government’s economic policies. “They should be doing more to revive the factories around here so people can get jobs. Their policies are not working.”

Shoprite reports record sales

Source: Shoprite Holdings

South Africa’s largest retailer, Shoprite, has reported a healthy rise in its key market for the 52 weeks to 28 June 2020, despite significant Covid-19 lockdown restrictions impacting the group.

Highlights of the results include:

  • Sale of merchandise increased by 6.4% to a record R156.9 billion;
  • Excluding the impact of hyperinflation, trading profit increased by 10.4% to R8.3 billion;
  • Diluted headline earnings per share (DHEPS) increased by 2.5% to 765.8 cents;
  • Adjusted DHEPS increased by 16.6% to 717.5 cents;
  • Full year dividend, in line with Group policy of 2x DHEPS cover, increased by 20.1% to 383 cents;
  • Net cash position improved by R6.4 billion to R10.0 billion (2019: R3.6 billion);
  • Net borrowings declined by R6.1 billion to R2.0 billion (2019: R8.1 billion); and
  • A total of 147 stores comprising 101 corporate and 46 franchise stores were opened. 

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