Tag: debt

FNB is hit by a big increase in bad debts

The country’s largest banking group by market capitalisation says it has experienced “a material slowdown” in its South African operations since the beginning of 2020.

FirstRand released its interim financial results showing that its businesses collectively grew normalised earnings by 5% in the six months to December:

  • FNB South Africa grew its earnings by 5%
  • More customers deposited more money
  • FNB experience a R910-million increase in the bank’s credit impairment charge
  • FNB card impairments increased by 77% to R270 million as advances grew by 21%
  • Non-performing loans (NPLs) in card business increased by a 84%
  • FNB’s personal loans business also recorded a 47% increase in impairment charges to R300-million
  • The residential mortgage book saw its credit loss ratio increase to 22 basis points as NPLs increased by of 12%
  • FNB commercial NPLs increased by 47%

“Looking forward to the second half of the year, the group is of the view that the South African macroeconomic environment will continue to deteriorate, probably at a faster rate than in the first half,” FirstRand said.

The group said as the coronavirus outbreak is expected to result in supply chain disruptions, while the weak economy will leave consumers will less disposable income and job losses, companies will be under pressure.

“FirstRand has already experienced a material slowdown in its domestic business since the beginning of 2020. Given the expected pressures on top line the group appreciates the need for ongoing cost efficiencies, balanced with continued investment in sustainable growth strategies,” read FirstRand’s statement.

By Botho Molosankwe for IOL

Eskom has hit back at allegations made against it by organisers of the Soweto Shutdown who claimed that the power utility’s bullying tendencies were the reason they had taken to the streets.

The Electricity Crisis Movement had planned to paralyse Soweto on Tuesday saying Eskom treats them terribly compared to people living in areas such as Sandton.

While the power utility is battling financially, everything was blamed on the Soweto debt and as result, the area was load shed longer and frequently compared to other areas, said the Movement’s Trevor Ngwane.

“Eskom’s problems did not start with the Soweto debt although every cent and billion counts. Eskom, just like many State-Owned Enterprises, has problems with corruption and mismanagement but they’re using Soweto debt as a fig leaf cover up.

“Another thing is that if a substation explodes or needs maintenance, they don’t send someone to repair it on the grounds that Soweto residents are not paying.

“It is a myopic strategy to let infrastructure go into disrepair; it’s the shortsightedness and arrogance of Eskom. Soweto people are not paying because they are poor,” he said.

However, the power utility came out guns blazing, saying Soweto currently owes Eskom R18-billion despite the fact that they scrapped the township’s debt twice in the past with an agreement that customers will start paying.

That, however, has not yielded the desired results hence the huge debt, Eskom said.

“We have however agreed to park the debt for those customers on split pre-paid meters on condition that they are loyal in purchasing electricity from Eskom vendors and not bypassing the meters for a period of 36 months.”

Eskom also said the government also provides free electricity to indigent people but that was a process administered by municipalities who uses their own criteria to identify deserving customers.

“In the case of Soweto, the City of Johannesburg administers this process. Customers are encouraged to partake so they can benefit as this will alleviate pressure.”

Ngwane also accused Eskom of loadshedding Soweto frequently and longer than other areas as a form of punishment for their debt, something that the power utility denies.

According to Eskom, load shedding follows a schedule on the power utility’s website. However, sometimes power outages occur due to network faults, vandalism and theft of infrastructure outside load shedding, the power utility said.

Eskom also said they have over the years tried to disconnect those who are not paying but that became unsafe for their staff as some residents resisted that effort.

“We have customers who are honouring their payments on monthly basis however most are not.

“In some cases, those that we managed to disconnect simply reconnected themselves and unfortunately this meant they had to be billed for their consumption and since it was not paid, it also accumulated interest.

“Eskom is however still disconnecting all customers found to have bypassed and bridged meters as well as illegal connections.

“It is to be noted that there has been numerous interventions supported by the Department of Public Enterprises in the past yielding no positive results on the growing debt. We are currently converting post-paid meters to prepaid as mentioned above in order to stop the debt from growing further.”

The Shutdown of Soweto that the Movement had planned on Tuesday in response to their displeasure with Eskom, however, failed to take off.

In one instance, the South African Police Services and Joburg Metro Police fired rubber bullets and teargas to disperse a group of about 30 protesters who were trying to block an intersection in Orlando.

Soweto blames non-payment on 1992 accord

Source: 702

Soweto residents have embarked on a protest over electricity cuts by Eskom. The residents blockaded roads and set fire to tyres on Monday morning, causing traffic delays in the area.

The power utility cut off power in Soweto after the municipalities failed to settle their debts. Eskom says it is owed more than R18-billion by the residents.

Soweto residents’ representative King Sibiya says they need a breakdown of the debt from Eskom.

“This is the question we are asking Eskom – if they say we are owing R18-billion, can they Eskom break it down for us?” he said on Twitter.
“Firstly in Soweto, we have plus-minus six malls which are using electricity more than anything, we also have Baragwanath Hospital which is a national hospital, police stations etc.”

Sibiya says they requested a meeting with Eskom but the power utility told them they need the debts to be paid.

Later Eskom conducted an audit on certain parts of the area.

“What we are being charged are estimations, Eskom doesn’t come to our houses and conduct meter readings,” says Sibiya. “In 1992 we signed an accord that the people of Soweto will pay a flat rate of R33.80.”

Meanwhile, Eskom senior manager of customer services in Gauteng Daphne Mokwena says they are not targetting Soweto in particular, but rather residents that are not paying for electricity.

“We are not privy to the 1992 document they are talking about. We have requested via our legal representatives to see the documents but we are still waiting for it. If I haven’t seen it, it does not exist,” she stated.

Responding to meter reading statement, Mokwena says they have been chased out of Soweto when their technicians go there.

She adds when that happens they use the previous meter reading to estimate the following bill.

By Jan Cronje for Fin24

Mobile operator Cell C has defaulted on an interest payment on a $184m loan (about R2.7bn at current exchange rates) which was due in December 2019, according to a notice from its key shareholder Blue Label Telecoms Limited.

In a statement to shareholders on Tuesday, Blue Label said Cell C had also defaulted on interest and capital repayments related to the respective bilateral loan facilities between Cell C and Nedbank Limited, China Development Bank Corporation, Development Bank of Southern Africa Limited and Industrial and Commercial Bank of China Limited, which were due in January 2020.

Blue Label’s share price plunged by almost 12%.

“Currently, none of the bilateral loan facilities have been accelerated as noteholders are aware and support that Cell C is committed to resolving the situation by agreeing to restructuring terms with its lenders while it also continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness,” Blue Label said.

In a brief separate media statement, Cell C said that the suspension of payments was part of wider Cell C initiatives to “improve liquidity and to restructure the company’s balance sheet”.

“Cell C continues to work proactively with all stakeholders to improve its liquidity, debt profile and long-term competitiveness as part of its turnaround strategy,” it said.

By Khulekani Magubane for Fin24

Overdue debt owed to Eskom by municipalities increased by some R1.2bn in September to R26.4bn by the end of October, Parliament’s Standing Committee on Public Accounts heard from the inter-ministerial task team aimed at resolving the debt owed to the power utility.

The meeting took place on Tuesday morning in Parliament, along with the top 20 debtors who account for 79% of the total debt. Of these, the top 20 municipalities who owe Eskom money account for 67% of the overall council debt.

Since the inter-ministerial task team was established in 2017, it has met with Eskom at least 40 times, but the debt to Eskom has grown by R16bn.

Scopa, for its part, has decried the lack of progress in reducing the debt owed to the already troubled utility. The last time the committee met to discuss the matter, none of the ministers in the task team showed up. This prompted Scopa to admonish the ministers, especially Minister of Cooperative Governance and Traditional Affairs Nkosazana Dlamini-Zuma, who chairs the task team.

Executive manager at the Department of Cooperative Governance and Traditional Affairs (Cogta) Kevin Naidoo told Scopa that out of a total of 48 valid payment arrangements that Eskom had with municipalities, only 11 were being fully honoured as of October.

Growing debt, fewer payments

“The top 20 payment levels have dropped from a peak of 91% in March 2016 to 31.3% in October 2019, with virtually no payment towards the current accounts over the last 7 months,” said Naidoo.

Among the top defaulting debtors, Maluti a Phofung Local Municipality in the Free State owes a total debt of R4.5bn, R4.4bn of which is overdue.

Emalahleni Local Municipality in Mpumalanga owes a total debt of R3.3bn, R3.1bn of which is overdue. Matjhabeng Local Municipality’s total debt stands a tR2.7bn, of which R2.6bn is overdue.

Eskom chair Jabu Mabuza said despite having over 40 meetings with the inter-ministerial task team, the debt has only grown, meaning that leadership “either misdiagnosed the problems or mis-prescribed the solution”.

“If one looks at this trend, by the end of the financial year, this debt will be at R30bn and this time next year, the debt would be at R35bn. That’s where the direction is heading,” said Mabuza.

Scopa chair Mkhuleko Hlengwa said he and the rest of the committee members were growing weary of meeting over the same issue, only to find with each meeting that the debt crisis had gotten worse than it was before.

By Jan Cronje and Khulekani Magubane for Fin24

Centlec, the Free State utility that provides electricity to customers in the Mangaung Metropolitan Municipality, which includes Bloemfontein, says it will meet with Eskom on Thursday to discuss the paying of its debts.

On Monday Eskom warned that it would interrupt daytime power to three Free State municipalities from December 3 unless they paid their debts or entered into payment plans. They are the Mangaung Metropolitan Municipality, the Mafube local municipality and the Mantsopa local municipality.

In a statement, Centlec spokesperson Lele Mamatu said “everything possible will be done to keep the lights on”.

“Our view is that this matter could have been better handled without causing panic to our customer in general however we are hopeful there’s still a room to can find each other.”

Mamatu said that Centlec has a “good track record of managing its electricity account with Eskom”.

Subscribe to Fin24’s newsletter here
Eskom, which has a group debt burden of about R450bn, acknowledged on Monday that “indefinitely” stopping the provision of electricity to the three municipalities would cause “undue hardships on consumers”.

It said that, if it cannot enter into agreements with the municipalities, it would withhold electricity for 16 hours per day between 06:00 and 20:00 on weekdays and weekends from December 3, but provide electricity overnight for eight hours.

As of September 2019, Eskom was owed R25.1bn by municipalities countrywide. The warning to the three municipalities comes after National Treasury in November imposed the recovery of billions of rand of municipal debt as one of 28 conditions that Eskom must adhere to in return for a R59bn lifeline. President Cyril Ramaphosa signed the bill granting Eskom the funds last week.

Retrenchments loom at SAA

Source: eNCA

South African Airways (SAA) has informed its more than 5,000 employees that it’s restructuring. It is estimated that about 944 staff will be affected – nearly 20% of the workforce.

The national carrier has had its fair share of financial turbulence.

But in the mid-term budget, Finance Minister Tito Mboweni announced that the state would pay off the airline’s R9.2-billion debt over the next three years.

The airline has incurred over R28-billion in cumulative losses over the past 13 years.

By Renee Bonorchis and Colleen Goko for Fin24

Investors are prepared for the worst as the day of reckoning looms for Eskom, the state-owned power utility seen by Goldman Sachs Group Inc as the biggest threat to the country’s economy.

Yields on benchmark South African government notes are at their highest in three weeks, trumped only by junk-rated Nigeria, Turkey and Lebanon among 29 major emerging markets. Rand-denominated sovereign debt has lost 3% for dollar investors this half, the worst performance after Colombia and Argentina. Foreigners have dumped a net R25 billion of the country’s bonds this year, cutting their holdings to 37% of the total, from 43% less than 18 months ago.

The rand has weakened 4.6% in the half to date, and is among the five worst-performing developing-nation currencies versus the dollar. Speculative long-rand contracts retreated to the lowest level in more than three months last week, Commodity Futures Trading Commission data show. When it comes to the cost of insuring South Africa’s debt against default, only Turkey and Argentina are more expensive.

Eskom, which supplies about 95% of the country’s power, has R450-billion of debt and is surviving on state bailouts after massive cost overruns at two partially completed coal-fired power plants. The country endured four days of controlled blackouts last week to prevent total collapse of the grid. Power shortages and policy uncertainty have damped economic growth and plunged business confidence to multi-decade lows as investors await the government’s turnaround plan for the utility.

“These outages threaten South Africa’s fragile growth profile,” Siobhan Redford, a Johannesburg-based analyst at Firstrand, said in a client note. “Clarity and certainty on plans for Eskom – both in terms of financing needs and returning to a more sustainable power generation profile – are vital in boosting the confidence of both domestic and offshore investors.”

South Africa will “soon” announce the appointment of a permanent chief executive officer for the utility and “shortly” release a special paper on the path the CEO and a strengthened board should take, President Cyril Ramaphosa said in a statement on Monday, in which he described Eskom’s financial situation as “untenable.”

“The sheer scale of Eskom’s debt is daunting,” Ramaphosa said. “Further bailouts are putting pressure on an already constrained fiscus.”

The bailouts will probably widen South Africa’s budget deficit to the biggest since the financial crisis, threatening the country’s last remaining investment-grade credit rating at Moody’s Investors Service, according to a Bloomberg survey of economists. Moody’s is scheduled to review the assessment on Nov. 1, days after the mid-term budget is presented to lawmakers.

A risk premium was priced in to the rand and local debt partly due to weak economic fundamentals and uncertainty on the future of Eskom, the medium-term budget policy statement and the credit assessment from Moody’s, said Elna Moolman, a Johannesburg-based economist at Standard Bank Group Ltd.

Last week, the government published its latest Integrated Resource Plan, which maps out the energy mix for the next decade. It includes a switch to more green energy as the country, which sources most of its electricity from coal, faces pressure to meet emissions-reduction targets.

South Africa will develop a framework to take aging coal-fired plants out of service, Ramaphosa said. While this will present challenges for communities and workers where fossil fuel-powered energy generation takes place, “it also presents opportunities for those affected to have access to technologies that are more cost-effective and better for human health.”

Will China Mobile buy a struggling Cell C?

According to a recent report by ITWeb, struggling telco Cell C is in possible buy-out talks with China Mobile.

It is rumoured negotiations are underway, and the company told ITWeb that it “is willing to talk to anyone wanting to stabilise the company”.

China Mobile has been pursuing expansion in Africa for some time. A year ago, the world’s largest carrier opened its South African office in Johannesburg.

However, Cell C CEO Douglas Craigie Stevenson reported told ITWeb that Cell C is not considering a merger.

Summary of the situation

  • Last month Cell C reported a loss of R8-billion
  • Top bosses have reiterated that the company is open to any potential buyers
  • Blue Label Telecoms, who owns 45% of the telco, says they do not know whether their shareholding will be maintained or reduced
  • Other Cell C shareholders include 3C Telecommunications with 30%; Net1, which owns 15%; while 10% is held by Cell C management and staff
  • Reasons for Cell C’s debt include freezing jobs, declining revenue, debt management challenges and three downgrades by rating agency Standard & Poor

 

Source: Supermarket & Retailer

South Africans are truly struggling financially and are prioritising their monthly debt repayments as they battle to make ends meet.

This is according to Debt Rescue CEO, Neil Roets, who said that consumers typically prioritise debt repayments for their homes and cars as these are assets that they do not want to lose to repossession.

However, these repayments also usually have the highest instalment amounts, so keeping them up to date just adds to the financial burdens embattled consumers are already facing, he said.

Roets added that consumers are cutting down on a number of purchases to keep up on their expenses.

“We have seen a lot of belt-tightening happening over the past year, so consumers have started cutting down on many expenses,” he said.

“Most luxury expenses have been foregone, and purchases such as dining out and takeouts are no longer part of budgets, to keep up with debt repayments and put food on the table.

Consumers typically prioritise debt repayments for their homes and cars as these are assets that they do not want to lose to repossession.

However, these repayments also usually have the highest instalment amounts, so keeping them up to date just adds to the financial burdens embattled consumers are already facing, he said.

Roets added that consumers are cutting down on a number of purchases to keep up on their expenses.

“We have seen a lot of belt-tightening happening over the past year, so consumers have started cutting down on many expenses,” he said.

“Most luxury expenses have been foregone, and purchases such as dining out and takeouts are no longer part of budgets, to keep up with debt repayments and put food on the table.

“Many consumers are resorting to credit in the form of store cards, credit cards or payday loans to put food on the table.”

Roets said this was of great concern as it shows that South Africans are taking on debt to cover day-to-day expenses.

“Day-to-day expenses that consumers are taking debt for includes food, clothing, electricity and fuel for transport,” he said.

“But there are cases where people are taking up debt to repay other debt, or a new payday loan shortly after the previous one was repaid, placing them in an even larger debt spiral.”

  • 1
  • 2
  • 5

Follow us on social media: 

               

View our magazine archives: 

                       


My Office News Ⓒ 2017 - Designed by A Collective


SUBSCRIBE TO OUR NEWSLETTER
Top