AA warns of ‘catastrophic’ fuel price hike

By Jason Woosey for IOL

The fuel price situation in South Africa is threatening to turn into a full-blown crisis, with unaudited mid-month data from the Central Energy Fund indicating that petrol and diesel could see huge increases in November.

The petrol data is pointing towards a price increase of around R1 a litre, and the diesel situation is even bleaker – with a R1.40 increase looking likely.

Keep in mind, however, that these early predictions are based on unaudited data made available on October 14, and it is possible that the situation could change between now and the end of the month.

South Africans are paying record prices for petrol, and a R1 increase would see the cost of a litre of 95 unleaded petrol rising to around R18.60 at the coast and R19.33 in the inland regions, where 93 unleaded petrol could stretch to about R19.10.

A R1.40 diesel price hike would bring the wholesale price up to around R16.55 at the coast and R17.15 inland, keeping in mind that retail prices will be even higher than that as diesel prices are unregulated.

The predicted increases are as a result of surging international oil prices, with Brent Crude recently surpassing three-year highs. At the time of writing, the commodity was trading at $84.86 (about R1250) a barrel, which is $10 more than it was averaging in September.

The rand has mostly played on our side, spending most of October below the R15 to the dollar mark, and trading at R14.70 at the time of writing, however this has not been enough to offset the rising oil prices.

Unless oil prices soften in the coming months, the fuel price is set to cause more hardship for South Africans, as it affects not only the cost of commuting but also the price of food and other essential items that require transportation. Adding insult to injury is that illuminated paraffin is also looking set for an increase of around R1.40.


ACSA records worst first-half results in history

By Khulekani Magubane for Fin24

Airports Company South Africa (ACSA) says while it saw some recovery from the Covid-19 pandemic in the second half of 2021, global air traffic is unlikely to recover fully until 2025.

ACSA released its annual financial results on Tuesday morning, announcing a net loss of R2.6-billion and negative earnings before interest tax debt and amortisation (ebitda). However, the company managed to unlock funding through preference shares, staff reductions and the disposal of non-core assets, it said.

As a sector that was volatile before the Covid-19 pandemic, aviation has been rocked by the cascade of lockdowns and restrictions on movement that gripped the world last year with the advent of the novel coronavirus.

‘Worst performance in our history’

In ACSA’s case, hard lockdown in the first half of 2020 posed a significant financial threat as travel was only limited to essential services. The company noted a recovery as lockdown levels eased, but with the second wave restrictions escalated again, having a knock-on effect on travel.

ACSA CFO Sphamandla Mthethwa said 2020 and 2021 were difficult years for airport companies globally, as these businesses are estimated to have lost up to $125 billion for the year.

“For us as ACSA it is our worst performance in our history and a second loss. However, the profits that we have made in previous years enabled us to go into the pandemic with a strong balance sheet. As we sit here today, we are in a much stronger position,” said Mthethwa.

Mthethwa said the first half captured in the 2021 financial results were the worst first-half results in ACSA’s history. He said the second half saw the opening of international travel before a second wave triggered a heightening of lockdown restrictions.

“We started the year on hard lockdown and ended in March on adjusted level 3. We had ups and downs that affected aeronautical and non-aeronautical revenues. In the hard lockdown we had no international travel and some limited domestic travel, restricted to business and essential services,” Mthethwa said.

He said lockdown pressure meant that the 21-million departures in the first half of 2019 were down to 4-million in the first half of 2020. However, Mthethwa said, ACSA managed to raise R810-million in long-term debt raised.

“The second half started positive, but we started having difficulties at the end of the year. There is an appreciation for the operating environment. We had supply chain interruptions, capital project delays, regulatory changes, workforce changes and reduced staff numbers,” said Mthethwa.

He said R2.3 billion in preference shares were unlocked as a debt instrument. ACSA also disposed of its Indian investment to raise R260 million and another R3 billion in facilities was used to get ACSA through the first half of the year.

Job cuts

“From a long-term sustainability perspective, we changed KPIs to reflect the forecast and implemented a staff reduction which gave us savings of R300 million, and [we] negotiated to contain capex,” he said.

Mthethwa said ACSA would work on limiting operating expenditure to R3.9 billion. He attributed a 3.3% increase in employee costs to R1.88 billion to a once-off R243 million that was spent on voluntary severance package payments.

“Our total assets came into R31.6 billion and [we] hope to push our gearing up to 65%. Even in our forecast, we don’t anticipate coming close to 65%. We still have a grip on our balance sheet in an environment that is progressively improving,” Mthethwa said.

He said despite the uncertain environment, ACSA finished the year with R2.3 billion in cash, an unqualified audit option from the office of the Auditor General, and would remain a going concern.

ACSA CEO Mpumi Mpofu said the company’s financial position was aided through headcount rationalisation through voluntary severance packages, the disposal of assets in Brazil and India, and the use of preference shares for funding. However, she said, a full recovery will take a long time.

“The overall recovery is being seen in the local market and in the international markets it is still very sluggish. Two scenarios are given. A baseline with 2023 recovery and a long road at 2024. Recovery is being led by domestic traffic and international traffic remains a little behind with recovery expected only in 2024,” said Mpofu.

Mpofu said the picture for domestic air travel looked much more positive with domestic air traffic bouncing back as Covid-19 national lockdown levels eased after the third wave. However, the southern African regions’ recovery has been slower than west Africa and developed economies.

“We saw our network lose 78.2% of passengers, but our traffic indicators show a return to pre-pandemic levels only in 2025. East London and George in terms of domestic numbers are performing better than other airports, with Kimberly and Gqeberha performing well,” Mpofu said.

Mpofu said ACSA would continue implementing its strategy, which includes developing airports, growing its footprint in line with its global and growth strategies, as well as consolidating in advisory services, diversifying revenue and continental growth.

Mthethwa said the Brazilian asset disposal was still in progress and should be finalised by April next year, with the selling price still subject to negotiations.

Mpofu said while ACSA approached government for a guarantee before the pandemic, it was government that indicated that assistance in the form of preference shares would be more a more appropriate to bolster liquidity for the entity.

Source: Supermarket & Retailer

The average middle-class adult in South Africa now belongs to about nine loyalty programmes, and mostly loves using Pick n Pay’s Smart Shopper and Clicks’ Club Card, a new survey shows.

The 2021 survey conducted by BrandMapp and Truth Loyalty found that 80% of the polled consumers mostly use grocery retailer Pick n Pay’s Smart Shopper card. It has shown an increase of 22% since 2019, which was the most significant jump across all retailers in the survey.

During Pick n Pay’s last fiscal year, Smart Shopper’s sales participation increased to 75% from 63%, Melissa Hanley, loyalty and strategic partnerships head at Pick n Pay, said.

“Smart Shopper had its most successful year ever last year, and we believe we achieved this by giving our members what they really needed when they needed it. The intentional strategy of Smart Prices drove massive demand amongst our members, and we consider this a significant gain on our value proposition,” Hanley said.

Pharmacy and beauty chain Clicks’ loyalty programme came in as a very close second at 79%, and was overtaken by the Smart Shopper for the first time in three years.

SAA remains a disaster

Source: MyBroadband

Less than three weeks after taking to the skies again, South African Airways (SAA) is already facing a backlash from staff, cancelled flights, and support problems.

Only days after relaunching flights on 23 September 2021, SAA made significant changes to its new international schedule.

Some flights to Kinshasa and Lusaka were cancelled, and the airline delayed the launch of daily flights to Maputo.

Testing by MyBroadband further revealed that the airline’s support services — specifically its refund department — are not operating.

Calling the SAA’s refunds helpline triggers an automated message, after which the call is disconnected.

A reservations agent told MyBroadband that the SAA Refunds Department had been closed down, and they could not assist with any refunds.

MyBroadband contacted SAA’s communications department for clarity about this issue, but the request for comment went unanswered.

In the latest blow to the airline, SAA workers represented by the South African Cabin Crew Association (SACCA) and Numsa will picket outside the Airways Park office in Kempton Park on Tuesday.

These workers are unhappy about unfair working conditions, including a 35% pay cut and the airline’s bloated management structure.

SACCA President Zazi Sibanyoni-Mugambi said that while their members had to take a 35% pay cut, SAA management has increased their salaries.

She added that employees who have taken voluntary severance packages are being employed again when current SAA employees can fill those positions.

“The biggest concern to us is that we have an SAA CEO who refuses to see the unions,” Sibanyoni-Mugambi said.

To make matters worse, there is no deal yet between the SAA’s new equity partner, Takatso Consortium, and the Department of Public Enterprises (DPE).

The Takatso Consortium is set to take a 51% shareholding in South African Airways and pump billions into the struggling airline.

This deal has not happened yet, which means Takatso is not currently involved in any SAA operations.

Speaking to Moneyweb on 29 September, Takatso CEO Gidon Novick said he naively thought the deal could be done a lot quicker.

Novick dismissed speculation that Takatso’s shareholders — Harith and Global Aviation — withdrew from the process.

“Both are involved. Harith is the key strategic funding partner, and Global and the team at Lift are involved as technical partners. So, it’s very much in play, very much intact,” Novick said.

Novick could, however, not commit to a timeline on when they will make a deal with the DPE.

It means SAA is currently operating without its promised equity partner, it has staff and union challenges, and its customers are faced with uncertainty about flights and support services.

This is familiar territory for South Africans who are tired of funding a failed airline gutted by mismanagement and corruption, and which burned through billions in bailouts.


Numsa workers continue to strike

By Banele Ginindza for IOL

Not an improved offer from employers, the death of a worker on the picket line, nor the woes over the collapse of the collective bargaining system have swayed workers nor employers in the ongoing National Union of Metal Workers (Numsa) organised strike, which continues into this week.

Cracks in the wall emerged over the weekend between employer organisations, with the National Employers Association of South Africa (NEASA) saying they would not be led by the nose through negotiations by Numsa, as they offered a 4.28 percent wage increase against the 8 percent plus Consumer Price Index (CPI) demanded by Numsa.

Employers are counting on a yet undecided Numsa to consult with members on an undisclosed offer tabled late Friday, while violence and intimidation claimed the life of a worker on Friday, while subsidiary stakeholders, including NEASA, decried monopoly of the bargaining table.

“We have an offer above what employers have tabled before. We still have to take it before our members. We cannot disclose details, but it still has to go through our structures. For now, the strike continues,” Numsa’s spokesperson, Phakamile Hluni-Madonsela, said yesterday evening.

This was confirmed by SEIFSA’s CEO Lucio Trentini, who said at the last engagement organised labour was made an offer which the industry recognises still has to go before employee processes.

“This offer is above the normal expectations. Employers embarked on lockouts when Numsa decided to go on strike. We are dealing with half the economy we did in 2014. This strike is costing in the region of R250 to R300 million a day. We are waiting on Numsa to come back to us on the revised offer,” SEIFSA’s CEO Lucio Trentini said last night.

At the height of the industrial action last week, an angry motorist ploughed into a group of protesters in Wadeville, killing one worker, wounding several others, prompting Numsa and Seifsa to convey condolences.

National Employers Association of South Africa (NEASA) CEO Gerhard Papienfus said individual employers had different offers unrecognised by NUMSA, but which formed the bone of contention as levels of capability of employers were different.

“They must have a deal with us. Never again will there be one body dictating for everyone in the steel industry, which hasn’t grown in the last 30 years. We made a 4.28 percent offer. We recommend an increase plus CPI to our members,” Papenfus said.

“Industry can give no more than10 percent. We can’t dictate to each business. Each one has its own challenges,” said Papenfus.


By Thando Kubheka for EWN

The Financial Sector Conduct Authority (FSCA) on Tuesday said it was sitting with over R44 billion worth of unclaimed pensions funds.

The figure has been attributed to around 4.5 million South Africans who have yet to claim.

The regulator said more than R20 billion had been paid to some 600,000 beneficiaries in the past five years.

It said unclaimed pension funds in the country had run into the billions without the rightful beneficiaries coming forward to claim them.

Manager for retirement fund conduct supervision Takalani Lukhaimane cited a number of reasons why the pension funds have not been claimed.

“Beneficiaries would be contributing to a provident fund and would not claiming their money. Some of them would be just not knowing.”

The regulator is calling on South Africans who believe there is money owed to them to contact their offices and to visit their website.


By Edward West for IOL

Commercial property tenants will have the ability to bid for prime office space via AuctionInc’s online auction platform for the first time in South Africa, AuctionInc chief Ari Ben said yesterday.

He said the launch of the platform locally followed the success of a derivative of the concept in the US and Europe to fill large vacancies in prominent office buildings.

The South African leasing market is in a difficult position due to an oversupply of office space and flagging demand from potential tenants.

Rode’s office market survey showed the decentralised vacancy rate for A- and B-grade office space combined rose to 14.8 percent in the fourth quarter of last year, pushing the average for last year to 13.9 percent.

The Covid-19 pandemic exacerbated the decline in demand for office space as tenants opted to work remotely. On a positive note, more businesses were looking to return to an office setting as lockdown restrictions ease. Many businesses were also finding it unrealistic to operate remotely over the long term, said Ben.

“The auction industry has reached a high level of maturity and, for the first time, the leasing industry stands to benefit as a result. It is my view that online lease auctions will become the standard method for landlords and tenants to transact in the near future,” said Ben.

Benefits of auction include increased exposure and focus on the asset, a transparent method of transacting and an efficient method of benchmarking value.

AuctionInc is due to host its inaugural office lease auction on behalf of Redefine Properties from November 8 to 12. More than 10 000m² of prime office space across eight office parks in Bryanston, north of Johannesburg, is scheduled for auction.


Vaccine passport to launch this week

By Xolile Bhengu for IOL

The Department of Health hopes to have the first phase of the digital vaccine passport system implemented by the end of the week.

The passport soft-launched on Tuesday morning for testing.

Health Minister Dr Joe Phaahla made the announcement during the launch of the mobile Covid-19 vaccine site at uMlazi township’s Umlazi Plaza as part of the Vooma Vaccination Weekend.

Phaahla said the pandemic had accelerated plans by the department, as it headed towards a universal healthcare system, to have a more digitised patient system.

“We will keep improving the system to verify that it captures the correct details for every person that has visited a vaccination site.”

The passport could be used to verify being vaccinated and allow access to sport facilities and music events, he said.

He said it was crucial for the department that KZN – which is a tourism-focused province – avoids a possible fourth wave.

He said the government was opting to engage the public about the Covid-19 vaccine instead of enforcing law enforcement for spreading false information about the vaccine.

The Health Department said the 18-34 year age group had not brought in the numbers they had initially hoped for in the vaccine roll-out programme, and the over 60 age group had challenges such as lack of transportation to reach vaccine sites.

It said KZN had only reached 11.1% of the required 70% for herd immunity.

Phaahla said only 13 million people had been fully vaccinated and the country needed more.

The government wants to have 70% of the adult population vaccinated by the end of the year.

He said while the initial uptake of Covid-19 vaccines had been good, a lot of misinformation had led people to become scared.

“Covid-19 forced us to revisit and improve our digital health platforms. The pandemic enabled us to have one health registration system through EVDS to merge both the public and private health system. We still have to discuss how post the pandemic the system could be utilised. It could be converted to an e-health file system, to have a proper medical history verification process through just scanning an ID number,” said Phaahla.

KZN MEC for Health Nomagugu Simelane said uMlazi as the second largest township in the country had been identified as one of the areas where the department needed to focus to ensure that people get vaccinated.

“Initially we were everywhere to drive the vaccine roll-out. But (Phaahla) has asked us to focus our efforts where we can see we have the lowest numbers.

“The private sector has come out to support us. For instance Toyota helped us to set up a vaccine site for its 8 000 employees, with the additional agreement that the site would be made available to the local community as well.

“Other companies that have come to the party are Spar and Hulett. We cannot do this alone and we need partnerships and we are asking even taxi owners to join us,” said Simelane.


What South Africans owe on their credit cards

Source: Supermarket & Retailer

The findings of TransUnion’s Q2 2021 South Africa Industry Insights Report covers a period where unemployment was still rising, but prior to July’s civil unrest and peak in the third wave of Covid-19 cases.

The report shows that a number of the trends, seen immediately after the outbreak of Covid-19 more than a year ago, have continued to advance with some notable exceptions, especially when looking at delinquencies.

Understanding the delinquency picture

Delinquency rates during the pandemic have been influenced by a number of important factors, the credit specialist said. Deferrals, payment holidays and other accommodations by lenders have helped borrowers in need. A decline in new borrowing in the past year since the onset of the pandemic has also shifted the overall ratio of good versus bad debt within lenders’ portfolios.

While a general increase in overall debt has been apparent, the total number of new loans and accounts has decreased as a result of the decline in originations. This means that while the numerator in the delinquency equation (i.e., existing accounts with delinquencies) is rising, the denominator is not growing at the same pace, said TransUnion.

Add in other drivers for which accounts financially distressed consumers choose to repay – e.g., prioritising product utility such as credit card functionality for online payments or car loan payments to ensure you can avoid public transport- and it’s clear that there are often multiple drivers for changes in delinquency levels, the group said.

Typically, delinquencies have often followed wider macroeconomic trends such as GDP growth and changes in unemployment.

In the latest Q2 2021 figures, although there were improvements in most of the major consumer credit categories, unsecured personal loans recorded a significant increase in balance-level delinquencies – bank personal loans were up 260 bps YoY and non-bank personal loans 700 bps.

A higher delinquency rate for non-bank personal loan providers is to be expected as they have historically targeted higher-risk consumers who are more likely to default and will be less resilient to sustained financial hardships, such as those caused by the pandemic.

“Finding and funding resilient consumers becomes even more crucial during challenging economic periods when looking to maintain a healthy portfolio delinquency ratio.

“The key is to fuel new credit growth by finding good consumers, who are likely to perform within lenders’ target thresholds and in return can help maintain a healthy bad-to-good ratio for longer-term lending growth,” said Carmen Williams, director of research and consulting at TransUnion South Africa.

Credit demand in a post-pandemic world

Throughout the pandemic, TransUnion’s data has shown reduced appetite from both consumers (demand) and lenders (supply) for new account openings (as measured by originations), and this continued in Q2 2021.

“However, with the world economy slowly starting to reopen and vaccination programs gaining pace, the future shape of the consumer credit market will depend on a number of important variables,” it said.

Historically, macroeconomic conditions have been an important factor in the pace of credit growth. Equally, consumer sentiment also has a significant bearing. Although the latest IIR data is for Q2 2021, TransUnion also conducted its regular Consumer Pulse Study in August 2021, which was post the civil unrest and the initial peak of wave three Covid-19 infections seen in early July.

This study showed a number of important trends relevant to potential future demand and direction of the market in South Africa, the credit specialist said.

The number of South African consumers anticipating in August that they would apply for new credit or refinance existing credit within the next year was just under a third (31%). Personal loans (43%) and new credit card (35%) applications continued to be top of the list, said TransUnion.

“There continues to be significant turbulence in the South African consumer credit market, with a number of potential new trends emerging, especially in the delinquencies space. Wider economic and political news continues to impact consumer sentiment and outlook, and these will shape the recovery as it continues to emerge,” said Williams.

“Lenders need to constantly monitor for shifts in consumer behaviours and adapt to the changing demand and future preferences of consumers if they are to succeed. There is no doubt the road to recovery will be a bumpy one, but by being informed, lenders will have the best possible chance to compete and succeed.”

Credit card is the only credit product to show high levels of continued origination decline since the beginning of the pandemic (down 23% YoY in Q2 2020, 63.2% YoY in Q3 2020 and 48.6% YoY in Q4 2020 and 42.7% YoY in Q1 2021). This is largely due to lenders implementing tightened credit-granting policies in the midst of economic uncertainty, said the credit specialist.

Lenders remain focused on extending credit to existing customers rather than onboarding new borrowers. Average balances increased by 17.6% and total credit limits increased substantially by 15.2% while new loan amounts increased by only 2.2%.

Outstanding balances for credit cards (up 10.6% YoY) have been driven by consumers’ need to balance household budgets, maintain liquidity, and finance subsistence purchases, especially where incomes have been negatively impacted. However, increases weren’t evenly distributed, and a clear generational divide has emerged.

Younger consumers increased their outstanding credit card balances more than older generations. The Q2 2021 YoY change for Millennials (born 1980-1994) was 9%, compared to 6% for Gen X (1965-1979) and only 3% for Baby Boomers (born 1946-1964).

Younger generations tend to transact more online, and the utility a credit card provides is fundamental to this activity. Credit card account-level delinquencies were down 50 basis points (bps) from their peak in Q2 2020, and in Q2 2021 stood at 12.3%, and were at the same level as Q2 2019.

This improvement provides further evidence that credit cardholders are protective of and value the revolving functionality that this product holds, TransUnion said.

Caxton shows strong growth

Caxton & CTP Publishers & Printers is hardly tapping vibrant niches with its core business in printing and publishing on the one hand and packaging on the other. But these operations are profitable, churn cash flow and are lean and mean. In fact, Caxton’s share price has doubled over a year.

  • As printing and publishing opportunities crimp, Caxton will look at reinforcing and expanding its packaging niche
  • At the end of the financial year to June the printing and publishing operations generated about R2.94bn — or 66% of group revenue — while the packaging (and stationery) hub generated R2.3bn, or 44% of revenue.
  • At operating profit level (after depreciation and amortisation), printing and publishing managed R336m, the packaging segment R275m
  • These operations generated net cash flows of R568m — equivalent to more than 150c a share
  • At the end of the financial year, Caxton was sitting on nearly R2bn of free cash, equivalent to almost 540c a share
  • Nearly 70% of Caxton’s share price is cash
  • During the reporting period, Caxton made an additional R656m investment in listed packaging business Mpact, where it now has an influential 31.6% shareholding
  • Its investment in Mpact is now worth close to R1.4bn, or equivalent to 376c a share
  • Caxton’s cash pile and its investment in Mpact is alone worth over 900c a share
  • Caxton can extend its commanding position in printing and publishing as smaller operations fall by the wayside, and making decent earnings for years to come
  • The packaging niche will be reinforced, and probably supersede the printing and publishing operations as the bigger earnings contributor
  • Caxton’s smaller “sideline” investments have panned out rather well — the group banked a substantial profit on selling its stakes in Octotel and RSAWeb
  • Officially, Caxton sets its NAV at R17 a share, which means the share price now offers a discount of about 53%. That’s a hard NAV number, with only R85m accounted for as a goodwill

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