Tag: investors

By Londiwe Buthelezi for Fin24

The Land Bank, which last week defaulted on some of its R738-million debt due to mature before the end of April, says it plans to approach its funders to negotiate waiving its current and anticipated defaults, and ask them to help it deal with its liquidity problems instead.

The state-owned lender, which funds emerging, and commercial farmers, said on Monday it is approaching stakeholders to raise up to R5 billion to meet its medium-term liquidity requirements.

“The Land Bank does not have sufficient liquidity to enable the Land Bank to meet its short-term interest and capital repayments across all its funders unless the Land Bank is able to secure sufficient bridge funding. Certain funders have or will be approached to participate in the provision of bridge funding to the Land Bank,” it said in a statement.

This comes after the struggling bank failed to prevent a default on certain of its debt obligations last Thursday, which triggered a cross default on other bonds.

On Monday, the state lender said that in order to continue with its operations, it will ask its funders to defer for one year all the debt repayment and interest that is due within the next six months. It will also ask them to waive current defaults and anticipated defaults for debt due within that six months period.

The bank said it has asked the commercial bank with the largest exposure to it to coordinate all the commercial banks it owes into a group. It has also asked the Association for Savings and Investments SA to coordinate bond notes holders.

Bloomberg reported on Friday that funders of the agricultural bank were willing to help the state-owned lender recover from the loan default if government gives a commitment to pitch in too.

National Treasury, meanwhile, said last Monday it was considering recapitalization and further guarantees for the bank.

“Assistance in the form of recapitalisation and further guarantees is under consideration and would have to be accompanied by balance sheet optimisation of the Land Bank to correct the structural liquidity risk embedded in the balance sheet,” said Treasury in response to Fin24’s questions on April 20.

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.”

By Ann Crotty for Business Day

Shareholder activists are gunning for fashion retailer Truworths in a bid to force changes to its board and executive management, which, 24 years after the country’s first democratic elections, continues to be dominated by white men.

Transformation in the retail sector, which does not rely on government for licences or for business, has lagged sectors such as mining and financial services.

With two black women on its 11-member board, of which one was appointed in February, and only two women and no blacks among its 19 divisional directors, Truworths falls short of even the low levels of transformation in the retail sector. In the mining sector, 50% of directors must be black, of which 20% must be black women.

Shares in the retail sector have been hit by weak economic conditions, which have knocked consumer spending. The general retailers index is down 18.1% since the start of 2018, lagging the all share index, which has shed 12.27%. Truworths is down nearly 14%. This has added to calls for board and management changes.

Bishop Jo Seoka, chairman of Active Shareholder, which advises nongovernmental organisations how to vote their shares, said the Truworths board was dominated by white men who had been directors for a worryingly long time.

“They seem to treat these as lifetime appointments; it’s amazing that they don’t realise that this looks like the quintessential old boys’ club.”

‘Lack of transformation’

Active is voting against two of the five directors who are up for re-election at the retail group’s annual general meeting on Wednesday.

It is voting against former Truworths executive Tony Taylor (71), who is described as an independent nonexecutive director, although he has served on the board for 19 years. “His reappointment is opposed on the grounds of the lack of transformation, the lack of independence and the fact that younger directors are not being introduced,” said Active in its proxy statement.

It said it was also voting against recently appointed Hans Hawinkels because it believed it was not appropriate for the board to appoint another white man in his late 60s.

In his chairman’s statement, Hilton Saven, who has been on the board for 15 years and is deemed independent, described the Truworths board as “strong, well balanced and diverse in its composition, expertise and opinions.”

Chief operations officer David Pfaff said the board was unaware of shareholder concerns, and that the board would “like to engage with them.” He said the group was already close to its own target of 30% women and 30% black directors.

Shane Watkins, chief investment officer at All Weather Capital, said the “demographics of the board and of the executive management team is completely detached from the demographic of their core customer.”

Although All Weather Capital did not hold Truworths shares, Watkins said he would attend the annual general meeting to engage with the management about the lack of transformation. Analysts from All Weather Capital, whose executive chairman John Oliphant chairs the Code for Responsible Investing in SA, are represented at most annual general meetings as part of their strategy to champion governance and empowerment issues, he said.

Active is also voting against proposed fee increases for non- executive directors.

Average director fees have increased 210% since 2008, compared with an increase in profit before tax of 108% over the same period.

Directors’ fees have also increased at a much higher rate than employee wages.

By Bryan Smith for Coin Insider 

Eran Eyal, a South African-educated technology entrepreneur who now lives in the US, is facing criminal charges in the New York for allegedly stealing more than US$600 000 from investors.

According to a new release from New York Attorney General Barbara Underwood, South African Eran Eyal – former CEO of Springleap and incumbent CEO of Shopin – has formally been charged with fraudulently soliciting investors, making false representations, and for computer crimes during his tenure with the former company.

Underwood’s statement outlines that Eyal allegedly stole as much as $600,000 USD from investors by ‘fraudulently soliciting investors’ to ‘purchase convertible notes through false representations of his company.’

In a statement to the press, Underwood outlined that “As we allege, this massive securities fraud scheme bilked investors out of hundreds of thousands of dollars… Defrauding New Yorkers through false representations and fabrications about a business will not be tolerated by my office – and we’ll continue to do what it takes to root out and prosecute securities fraud.”

Springleap – a global crowdsourcing company – has now been alleged to have made false representations about its management team and pool of professionals, and fabricated the existence of several senior staff members and an Advisory Board.

Further, Underwood’s office cites that Springleap’s community of over 180,000 creative professionals was fabricated by means of hiring a ‘freelance computer hacker to web-scrape computer data from a legitimate online portfolio website in order to obtain pedigree information for creative professionals to falsely inflate his existing list’.

In cryptocurrency circles, Eyal serves as the CEO and founder of Shopin – a platform touting itself as the “world’s first decentralized shopper profile built on the blockchain.”

Shopin concluded its private pre-sale on January 27th this year, reportedly raising as much as $10 million USD. The platform claims to have raked in $32.5 million USD through its public pre-sale on March 30th, and apparently concluded its token generation event with a total of $42.5 million USD.

Eyal faces no charges for his activities or role with Shopin.

As Underwood’s office outlines, Eyal presently faces three counts of Grand Larceny in the Second Degree, one count of Grand Larceny in the Third Degree, one count of Unlawful Duplication of Computer Related Material in the First Degree, one count of Criminal Possession of Computer Related Material), one count of Scheme to Defraud in the First Degree, and four counts of Securities Fraud under the Martin Act. If convicted, Eyal would face between five to fifteen years in prison.

Eyal has not made public comment since the announcement of his indictment, while Shopin itself has not issued public word on the charges laid against its CEO at press time.

Six key events troubling investors

South Africans wanting to protect or grow their investments should pay close attention to six key events in the short term that are likely to have an impact on investors’ sentiment, according to Sanlam’s Alwyn van der Merwe.

Van der Merwe, who is director of investments at Sanlam Private Wealth, said on Monday investors live in uncertain times and should respect the risk associated with macro uncertainty.

“We are experiencing a lot of events that some people call Black Swan events, as they are tough to forecast,” he told Fin24.

“In the last 18 months, we have seen the collapse in the oil price, the rise in nationalism, Brexit, Donald Trump, and a coup attempt in Turkey. All these things have a major impact on the mood of investors.”

South Africa’s financial markets operate within a low-growth environment as well as what some commenters believe is the end of the post-Apartheid era, which has given rise to political instability and social unrest.

Yet, the local equity market has not been as volatile on average as could expected in such times, but has tracked sideways, according to Van der Merwe.

Going forward, he said investors should pay special attention to the below key events. He then offers ways to protect investor wealth if these events should occur.

The key events are:

1. Mini Budget: Finance Minister Pravin Gordhan will table Treasury’s mini budget on Wednesday. The market will look for fiscal discipline and business-friendly policies, said Van der Merwe.

2. Prexit: The exit of Pravin Gordhan as Finance minister would be a negative for investor confidence, said Van der Merwe. Gordhan’s role hangs in the balance ahead of his November 2 court appearance on controversial charges of fraud relating to the early retirement of a Sars executive.

Leaders from across the spectrum – including the ANC – have voiced concern over the charges, which they believe are politically motivated.

“We would have a negative equity market response, government bond yields are likely to kick higher and it is likely put the current rand strength in reverse,” said Van der Merwe.

3. Ratings downgrade: Standard & Poor’s official review on December 2 could see the country’s sovereign credit rating downgraded to junk status, as it is currently only one level above the non-investment grade. S&P warned early this year that political strife could affect its rating.

“Although many commentators are of the opinion that this event is ’priced’ in, expect a negative knee-jerk reaction if SA foreign debt rating is downwardly adjusted” said Van der Merwe.

4. US presidential elections: The mere fact that Donald Trump is the Republican nominee is of great concern, said Van der Merwe. The market does not favour Trump in the slightest, as he brings uncertainty and unorthodox behaviour. If the dissatisfied American electorate succeed in their protest against the political system by electing Trump, markets around the world would quake.

5. Brexit negotiations: Global markets will constantly react to the UK’s process of exiting the European Union. Van der Merwe said investors should constantly be vigilant how this process unfolds.

6. Global monetary policy: Low interest rates in the US, will gradually start increasing. Currently South Africa is a beneficiary for the international hunt for yield. That is likely to change when investors respond to higher rates globally. “Interest rates can’t remain artificially low forever,” said Van der Merwe. “You will see the first salvo from US.”

Taking into consideration these key events, Van der Merwe offered two guidelines that will help investors navigate these possible bumps.

1. Diversification: Make sure your portfolio is properly diversified, both geographically and through asset classes. Geographically, ensure you are invested in South Africa and offshore. With asset classes, don’t have all your investment in one class and ensure you have a mix of asset classes that matches your risk profile.

2. Long term investment horizon: One thing that protects your money is if you buy assets at the rightvalue or price. You must believe that the business you invest in will be in existence in the future and be careful where the market is overly optimistic. The focus should be on shares that offer value, yet the business models must stand the test of time.

By Matthew le Cordeur for Fin24

 

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