Economy & Business News - 29 April 2024

29 Apr 2024

ECONOMY & BUSINESS

• Standard Bank, according to the South African Reserve Bank (SARB), dominates almost a quarter of South Africa’s R11 trillion banking sector, followed by FirstRand, Absa and Nedbank. The Reserve Bank revealed that, at the end of 2023, the banking sector had R5.1 trillion in advances and R5.7 trillion in deposits. Standard Bank has a 24.9% market share of these advances in the banking sector. It is followed by FirstRand (21.9%), Absa (21.8%), and Nedbank (16.5%). Denker Capital banking analyst Kokkie Kooyman told Business Day TV that a bank needs three things to do well in South Africa, all of which Standard Bank has achieved. He said the most important factor needed is good management and skills in employees like bankers who can effectively assist clients. Secondly, a bank needs a big balance sheet, particularly if a bank deals with corporate clients. In addition to a big balance sheet, a bank needs deposits. (Sources)

• The country desperately needs business-friendly policies, says Froneman. Neal Froneman, CEO of gold and platinum mining giant Sibanye-Stillwater, says the recently announced redundancies — the third big jobs cut in a year — are the result of plunging commodity prices and years of misgovernment “coming home to roost”. “A government that has lost control of Transnet, forcing us to truck at prohibitive cost our chrome ore, a bulk commodity which should go on rail. A government whose mismanagement of Eskom has seen one of our biggest costs, electricity, escalate by a ridiculous 12%, 14%, 15%. “And of course we’re all plagued with crime and having to spend a fortune on security because we can’t rely on the SAPS. All of these things come home to roost, eventually.” “A government that has lost control of Transnet, forcing us to truck at prohibitive cost our chrome ore, a bulk commodity which should go on rail. A government whose mismanagement of Eskom has seen one of our biggest costs, electricity, escalate by a ridiculous 12%, 14%, 15%. . Meanwhile he believes the industry in South Africa is facing an existential threat, and not just because the department of mineral resources & energy is taking forever to introduce a new mining cadastre system to rescue applications for mining and exploration licences from the chaos they’ve been mired in for years. He doesn't think a new cadastre system on its own will make much of a difference. “You can introduce new systems but if investors are going to be constantly threatened with expropriation without compensation and nationalisation of mines, they’re just not going to invest, it doesn't matter what systems you put in place. “If we don't get the investment climate right, if we don't get government respecting business, respecting people willing to invest money and put it at risk, they're not going to do it,” Froneman says. “Investment is on strike despite the president claiming all this investment is coming into the country. Most of it is companies investing in ensuring they can provide power for themselves through renewable energy and can lower their carbon footprint. It’s not the capital investment in fixed assets and growth of the industry that will create jobs.” The government’s narrative and policies are not investor-friendly, he says. (Source)

• At Impala Platinum (Implats) nearly 4,000 jobs are on the line as the platinum sector continues to labour under subdued prices that have seen widespread job cuts across the sector, one of the biggest employers in the mining industry in SA. Implats, which said it had begun consulting with labour, in a process that could see it let go of 3,900 workers — or 9% of workers at its Rustenburg, Impala Bafokeng and Marula operations. The mining house said the process will also result in a 30% reduction in head office costs. (Source)

• Creditors cannot sue directors. In a landmark judgement, the Supreme Court of Appeal said creditors could not sue directors of a company directly. Instead, companies themselves should be the focus of the claim, not directors in their individual capacities. The case stemmed from a claim that a R41 million debt owed to the Revenue Service was because of the reckless or negligent conduct of a clearing company directors. (Source)

• Positive outlook for population growth. BlackRock, the world's largest asset management company with about $10 trillion assets under management, says South Africa’s growing working-age population gives it a competitive advantage over its Group of 20 (G20) peers grappling with shrinking populations, making the country ripe to attract higher levels of investment. It anticipates that South Africa, alongside India and Saudi Arabia, will have the highest working-age population growth rates in the G20 over the next 10 years, as per UN population projections. (Source)

• Consumers under severe pressure. According to FinMark Trust’s annual FinScope Consumer SA report for 2023, nearly half of South African adults are struggling to afford food and electricity, highlighting the pressing financial challenges consumers are facing. The report states 40% of adults are resorting to borrowing money to buy food and 20 million adults have gone without electricity because they could not afford it in the past 12 months. (Source)

• The Anglo American board has unanimously rejected global mining giant BHP's "opportunistic" proposed all-share takeover offer of the company valuing it at about R740 billion. The board said in a statement on Friday morning that the proposal, which was conditional on Anglo first spinning off its South African platinum and iron ore assets, Anglo American Platinum and Kumba Iron Ore, "undervalues Anglo American and its future prospects". (Source)

• BHP’s bid for Anglo American, minus its key South African assets Kumba and Anglo American Platinum (Amplats), is already being dubbed the biggest mining buyout offer in a decade. Load shedding and Transnet’s creaky rail network have hobbled production, especially for Kumba’s iron ore exports. Though that’s just part of it. “Unfortunately, SA has been uninvestible since 2004, when the Mineral and Petroleum Resources Development Act [MPRDA] came into being, and all the add-ons that followed,” says Peter Major, analyst with Modern Corporate Solutions. A stifling regulatory environment, onerous Black Economic Empowerment (BEE) requirements and the unpredictability of running large and complex operations during load shedding and declining rail capacity – notwithstanding recent improvements in both areas – have placed SA on a “no-go” list for most large mining groups. It’s simply too difficult for mining houses to achieve a competitive rate of return on assets in SA, given the unpredictability of operating in a country where so many factors are beyond their control. (Source)

• Employee share ownership plans (ESOPs) or worker share ownership programmes have enjoyed several successes in South Africa, especially gaining traction in the past five years, and this needs to continue and be bolstered to reach more people and contribute to the country’s economic growth. Presenting figures during the inaugural Worker Share Ownership Conference that showed the impact of worker ownership schemes, Trade, Industry and Competition Minister Ebrahim Patel informed that there are 125 ESOPs. He highlighted that ESOPs were spreading across the economy and were not merely being limited to large companies. He informed that the number of workers in ESOPs was 551 000. (Source)