A new money remittance company, Mama Money, has been launched to help immigrants in South Africa speedily send money back home using cellphones and the internet.]]> |||
Harare - A new money remittance company, Mama Money, has been launched to help immigrants in South Africa speedily send money back home using cellphones and the internet.
The company has been established under a partnership arrangement with Old Mutual Zimbabwe’s banking arm, CABS. The Cape Town-based Mama Money will initially target Zimbabwe and subsequently expand to cover other countries in the region.
The cross-border remittance industry is thriving, with experts urging regulators and central banks on the continent to allow mobile money companies to process transactions.
The Posts and Telecommunications Regulatory Authority of Zimbabwe said in a report last week that the total number of transactions carried out using mobile money platforms in Zimbabwe increased by 35.8 percent to $296.8 million (R3.4 billion) during the quarter to the end of September.
The Reserve Bank of Zimbabwe said in a separate report that the total value of mobile- and internet-based transactions in the southern African country had, however, declined from $479.70m last October to $279.52m in November.
Mama Money says there are about 1.9 million Zimbabweans staying in South Africa and that they are facing problems in sending money back home, hence it has decided to grab this opportunity.
While other money transfer companies charge commissions of up to 15 percent for money transfers across borders, Mama Money said it would charge a flat commission of 5 percent for remittances from South Africa to Zimbabwe and promised there would be no hidden costs.
Remittance costs using informal channels such as bus and taxi drivers, haulage companies and travelling relatives are also significantly higher.
“By simply registering through a Mama Money agent, customers are able to send money online using their cellphone to relatives’ mobile wallet accounts. With 1.9 million Zimbabweans living in South Africa, the first phase for Mama Money is to focus on South Africa – Zimbabwe remittance corridor,” said Mathieu Coquillon, the co-founder of Mama Money.
CABS already runs the Textacash mobile money service in Zimbabwe.
The service has over 300 000 subscribers and competes against Telecash, run by Telecel Zimbabwe and EcoCash, operated by Econet Wireless among other mobile money platforms in Zimbabwe.
Coquillon said international remittances form the sole lifeline for a migrant’s family. “International remittance is the single biggest financial flow into Africa, exceeding foreign investment and official development assistance (international aid),” he added.
South Africa offers better employment opportunities for Zimbabwean immigrants seeking greener pastures and running away from harsh economic conditions.
“Governments in sub-Saharan Africa have come to realise that mobile money is key to improving the region’s financial inclusion,” said Lehlohonolo Mokenela, an information and communication technologies analyst at Frost & Sullivan.]]>
Audacity doesn’t come easily to the European Central Bank (ECB).]]> |||
Audacity doesn’t come easily to the European Central Bank (ECB).
Its president, Mario Draghi, finally announced a long-awaited programme of quantitative easing (QE) on Thursday.
The numbers were bigger than expected, which is good, but the details were shrouded in complexity, which is a pity.
Draghi said that the central bank would buy e60 billion (R794.5bn) a month of public and private euro-area bonds until September next year.
Outright sovereign QE – that is, the purchase of government debt – will begin at last.
The implied increase in the central bank’s balance sheet, more than e1 trillion, is more than ECB officials had previously indicated.
Draghi was frank, too, about why the ECB was acting.
He went into some detail about the increase in deflationary pressure that the new QE programme is intended to confront.
That was the right combination: a clear understanding of the nature of the problem and sufficient resolve to attack it.
Unfortunately, Draghi then undid some of the benefit by piling on needless complications.
These will lessen the programme’s impact on inflation expectations – the main channel through which QE is supposed to work.
Draghi said the asset purchases “are intended to be carried out until end-September 2016 and will in any case be conducted until we see a sustained adjustment in the path of inflation”.
Is that a promise to buy e60bn of assets a month for as long as it takes to raise inflation?
If not, is it at least a promise to buy e60bn a month until September of next year? Maybe it’s neither.
An “intention” is not a commitment.
And if the programme was going to be sustained until it raised the inflation rate to the ECB’s target of close to 2 percent, why mention a date at all?
Asked to clarify, Draghi would not elaborate. Every word in the statement had been carefully chosen, he said.
No doubt – and therein lies the problem.
The wording was chosen to allow supporters and opponents of QE on the ECB’s governing council to express some measure of agreement.
The ambiguity is deliberate, and it makes the programme less forceful.
Another complication may prove to be even more damaging.
Draghi said that 80 percent of the asset purchases would not be subject to risk-sharing.
In other words, they would be held on the balance sheets of national central banks – German government debt at the Bundesbank, Greek government debt at the Greek central bank, and so on.
Presumably, in case of default, national governments rather than the euro system as a whole would be on the hook.
On the face of it, this arrangement – which Germany has reportedly insisted upon – is simply inconsistent with the idea of a single European currency run by a single central bank.
It actually seems to envisage a possible break-up of the euro area.
Planting the seed of this idea in the minds of investors is remarkably irresponsible.
Draghi is doubtless aware, and tried to undo the damage with a few more carefully chosen words.
He said the governing council had agreed unanimously that the policy he was announcing was indeed monetary policy, not fiscal policy – that is, well within the purview of a central bank, not a national government.
(This interpretation also avoids a possible legal obstacle and offers some reassurance to German sceptics).
The move, Draghi added, should not be seen as an inducement to expand budget deficits.
That is all very well – but if it is monetary policy, why place the assets in the respective national central banks, which is a fiscal arrangement?
For the moment, the contradictions and confusions do not matter much.
The surprising scale of the programme is the main thing. Inflation expectations, according to a standard measure, inched up a bit after Draghi had spoken; the euro fell and so did bond yields, all as intended.
After long and unforgivable delays, the ECB has finally done it.
What a shame that, even now, it will be QE with European characteristics. – Bloomberg]]>
Microsoft chief executive Satya Nadella needed to show the world the role of Windows in the future.]]> |||
Seattle - Microsoft chief executive Satya Nadella needed to show the world the role of Windows in the future. He sure took the future part seriously.
At a preview of its Windows 10 operating system, the software maker unveiled a version called Windows Holographic, along with a headset with glasses called HoloLens that will let users see holograms while it tracks a user’s voice, motion and surroundings.
The company also showed HoloStudio, software for creating holograms, then 3-D printing and sharing them.
Microsoft said it’s working with Nasa’s Jet Propulsion Laboratory at the California Institute of Technology on the holographic technology, and the lab would use it for Mars exploration starting in July.
“It’s a huge surprise and certainly a risk trying to bring this sort of technology down to consumers,” said Michael Silver, an analyst at Gartner, who attended Wednesday’s demonstration.
“But this is Microsoft finally showing some vision, which has been lacking for a long, long time.”
The world’s largest software maker is the latest company to join the push into augmented and virtual reality.
Qualcomm and Intel are among companies that in the past year have demonstrated technology aimed at enabling computers, tablets and phones to show users a picture of the world overlaid with digital images and information.
Facebook made a $2 billion (R23bn) bet on virtual reality last year with its purchase of Oculus.
The HoloLens consists of dark glasses with a silver band that goes around the user’s head.
It features a new chip designed by Microsoft that processes the wearer’s voice, gestures and information from the headset’s surroundings.
Using Microsoft’s new holographic tools, architects could walk around their designs while clients are viewing it remotely, said Alex Kipman, a technical fellow in Microsoft’s operating system group.
A surgeon could learn a procedure without ever picking up a scalpel.
“In software, nothing is impossible,” Kipman said.
“Holographic computing enabled by Windows 10 is here.”
Kipman said Microsoft has been building the holographic technology for years, hidden in plain sight in the bowels of the company’s visitor centre in Redmond, Washington.
The HoloLens glasses would be available “in the Windows 10 time frame”, he said.
For controls, the user’s gaze replaces the cursor, and a tap in the air with a raised index finger equals a mouse click.
Microsoft showed a demo in which an employee wore the headset and created a quad-copter design while clicking and tapping in the air.
A screen showed what she could see in front of her.
A concept video also showed how holographs can be used for creating work-project models and for playing Minecraft, a video game where players build virtual worlds.
In a press demonstration of the Minecraft app, users could blast through a room’s walls and coffee tables to reveal lava and caves behind and underneath.
The app being used by Nasa takes the images sent back by the Mars Curiosity Rover and stitches them into a holographic space where the user can explore, pin points of interest and direct the rover’s high-resolution camera.
Scientific experiments can be planned in the virtual space with another scientist, who appears as a gold figure that resembles a holographic Oscar statuette.
A Skype video-conferencing app lets a tablet user, for example, conduct a call in which they draw instructions and demonstrations into another user’s holographic space.
Microsoft showed off the app by teaching reporters wearing the HoloLens how to install a light switch.
Augmented reality differs from virtual reality in that AR projects virtual images on to pictures or video of the real world.
Virtual reality is completely computer-generated.
Examples of the kind of things technology companies expect to become commonplace through augmented reality in the future include customers taking a picture of a sofa in a store, then seeing how it looks overlaid on an image of their living room, and getting driving directions in the form of arrows and signs that appear to be on the road.
On the virtual reality side, social network Facebook acquired start-up Oculus for its headset that immerses people in the virtual experience.
Facebook chief executive Mark Zuckerberg has said virtual reality can be the next major method for communicating and interacting with the world, after mobile devices.
Google, which has run into challenges promoting its glass-connected eyewear to consumers, has made some other efforts towards letting devices interact with their surroundings.
Last year, Google introduced an effort dubbed Project Tango to advance 3D technology, using mobile gear to show off its potential. The internet search giant also invested in Magic Leap, a start-up specialising in computing and graphics that simulate reality.
Microsoft chief marketing officer Chris Capossela said the company’s approach was different from something like Google Glass.
“The scenarios we’re looking at are more in the home and in the workplace,” he said.
Microsoft will see what kinds of applications developers write for the holographic tools, though the focus isn’t on social and outdoor scenarios, where Glass was focused.
Kipman started work on the holographic technology right after he wrapped up work on the last version of Microsoft’s Kinect motion-capture device three or four years ago, and started initially with a team of tens of engineers, Windows Chief Terry Myerson said.
In the past six months, much of the entire Windows team of thousands have been working on the holographic efforts, he said.
“It’s the best device in its class that I’ve seen outside of military and medical-grade devices,” said Brian Blau, another Gartner analyst at the event who tried the device. – Dina Bass for Bloomberg]]>
The listed property sector is expected to achieve a significantly lower total return this year than the 26.6 percent achieved last year.]]> |||
The listed property sector is expected to achieve a significantly lower total return this year than the 26.6 percent achieved last year in terms of the South African listed property index.
The sector outperformed other asset classes last year, with South African equities and bonds delivering returns of about 10 percent and cash (of) 5.90 percent.
Naeem Tilley, who heads up listed property at Avior Capital Markets, said that South African listed property had also comfortably outperformed all three other assets classes over 10, five and three years and last year was the sixth time in the past 10 years the sector had outperformed equities, bonds and cash.
Stan Garrun, the managing director of Investment Property Databank South Africa, believed this year will be tough for the sector.
Garrun attributed this to the sluggish economy, property rentals being under pressure and vacancies remaining sticky with no signs yet of any turnaround, while retail sales were expected to “take a hit”.
Interest rates were on the way down and inflation could soften but the fundamentals would “take the cream off the top” of the performance of the sector, he said.
Garran did not believe that the listed property sector would have as good a year this year as last year, largely because of the economic fundamentals.
Anton de Goede, an analyst at Coronation Fund Managers, said that the listed property sector would be supported this year by lower longer-term interest rates and lower inflation.
Laurence Rapp, the chairman of the SA Real Estate Investment Trust Association, said despite a tough operating environment, listed property exceeded market expectations last year to produce capital returns of 18.59 percent and income returns of 8.05 percent.
Keillen Ndlovu, the head of listed property funds at Stanlib, attributed listed property’s strong overall performance to better-than-expected results, with income growth largely boosted by counters with some offshore earnings and the benefit of a weaker rand, and local property fundamentals remaining fairly good despite a weaker South African economy.
Ndlovu said that since 1994, the average income growth from the listed property sector had never been negative.
“As a result, listed property has a weaker relationship compared to equities. Listed property has a stronger relationship with bonds, mainly due to the stable nature of the income.
“Yet listed property will outperform bonds over time because listed property provides growing income whereas bonds do not,” he said.
Ndlovu believed income will be a bigger component of listed property’s total returns this year and Stanlib foresaw income growth of about 8.5 percent over the next 12 months, resulting in a forward yield of 6.9 percent for listed property.
He said this was below 10-year bond yields of 7.6 percent and cash of 7.1 percent, but listed property provided the benefit of a growing income stream in comparison to cash and bonds.
Ndlovu expected listed property to deliver a total gain over the next 12 months of between 5 percent and 11.5 percent in Stanlib’s base and bull-case assumptions.
But Ndlovu admitted that based on Stanlib’s bear case this may deteriorate to minus 1 percent if bond yields weakened to more than 8.5 percent from the current 7.6 percent level.
Ian Anderson, the chief investment officer at Grindrod Asset Management, said companies in South Africa’s listed property sector also raised a record R33 billion more new equity capital last year than in the previous year through a combination of initial public offerings, issues of shares for cash to fund growth and dividend reinvestment plans. Ndlovu estimated that the listed property sector raised about R40bn in capital last year compared to R18bn in 2013, making it a record year.
“Virtually all equity raisings were oversubscribed. This indicates the huge appetite for listed property stocks,” he said.
Ndlovu anticipated a slowdown this year in the amount of equity raised and the number of new listings and mergers.
Curwin Rittles of Catalyst Fund Managers said the direct real estate fundamentals would remain challenging over the next 12 months and South African publicly traded real estate companies were likely to continue to deliver inflation-type income distribution growth.
“This will largely be driven by annual rental escalations and support from offshore earnings,” he said.
Neil Stuart-Findlay, a portfolio manager at Investec Asset Management, said overall the benign inflation and interest rate outlook for this year created support for yield-oriented asset classes, including bonds and listed real estate.
He said the listed property sector offered the additional benefit of a fairly predictable, growing income stream through contractual lease escalations.
“Whereas a part of 2014’s distribution growth was generated by debt restructuring and exchange rate gains, growth in the year ahead is likely to be slightly lower but largely organically driven,” he said.
Stuart-Findlay said distributions were still forecast to grow in excess of 8 percent, well ahead of inflation.]]>
Corporate chief executives (CEs) tend to be pretty smart, sophisticated people.]]> |||
Corporate chief executives (CEs) tend to be pretty smart, sophisticated people. Talk to them about the particulars of their companies, their industries or maybe their hobbies and many of them can be downright fascinating.
Get a bunch of them from different industries and parts of the world together to talk about their common concerns, though, and the result is almost inevitably fatuous. This explains a lot about last week’s World Economic Forum in Switzerland. Davos gets picked on for this inanity, but it’s really just that it’s bigger and more public than most CE gatherings. These are simply the kinds of noises CEs make when herded together.
One major reason for this, I think, is that top executives, especially when you gather them from around the world, don’t have all that much in common.
Yeah, they’re mostly men, and in Europe and North America they’re mostly white men, but get a big enough group together and you’ll encounter widely varying backgrounds, interests, goals and attitudes. What they all share is mainly just this: They’re very well off. Their jobs are very challenging.
They can’t really sit around and talk about the first, especially not in public. So CEs tend to go on and on about the second. About how fast-moving everything is these days, how much uncertainty their businesses face and how many different groups (“stakeholders” is the term of art) are clamouring for their attention.
These are all real challenges, but they’re also vast, shifting and hard to pin down. Every once in a while somebody – an academic, a journalist, maybe even a business person – comes up with something interesting to say about one of them. It always turns out to be of limited applicability, though, because the world is too complex and dynamic to be captured in a single theory.
For busy big company CEs, then, conversation on these topics tends to be a mix of the occasional profound insight, a lot of home truths, a lot of buzz words and a generous helping of nonsense. That’s probably true of conversations in most groups.
Because these CEs are especially wealthy and powerful people, though, their conversations get a lot of attention. What’s more, a whole industry has grown up to jot down and analyse their utterances, however dubious their value.
This brings me to “The CEO Report”, published last week – timed to coincide with Davos, of course – by the executive search firm Heidrick & Struggles and Oxford’s Said Business School.
I don’t have anything against Heidrick & Struggles and I like the Said Business School, but this document, based on interviews with more than 150 CEs, feels like a compendium of everything that is wrong with CE-speak and its consultant-speak offshoot.
The report’s sub-title is “Embracing the Paradoxes of Leadership and the Power of Doubt”, and, according to the people at Heidrick, the study is supposed to “point to the capabilities that will enable today’s leaders – and tomorrow’s – to prepare for, and thrive in, a business environment marked by uncertainty and change”. Just what might those capabilities be?
Anticipating how, when, and why different contexts may interact to disrupt an organisation requires leaders to develop “ripple intelligence”, as well as the ability to harness doubt more effectively in order to improve decision-making.
Moreover, as business conditions change, CEs must learn to balance authenticity and adaptability in order to motivate their organisations to action without squandering the trust they have worked so hard to build.
I’m pretty sure that no actual information was conveyed by that last paragraph. It’s a little like the adults in Peanuts cartoon talking, except that the sounds are produced not by a trombonist but by consultants and business scholars.
Every once in a while little bits of humanity and intelligence do peek through in the report: “There is this mantra at the moment that change is faster than it’s ever been and therefore these kinds of issues are going to be greater,” one CE is quoted as saying. “I don’t really buy that.”
Then it’s time to ignore such utterances and get back to making unsupported assertions about the speed of change and synthesising the absence of thought on what to do about it. How else, for example, does one explain a chart like this, which is intended to give CE readers “a more granular understanding of change”.
It doesn’t get any clearer with the accompanying explanation, I promise. There are many more such visual head-scratchers in the 36-page report. I thought about including several more here, but that felt like overkill (my personal favourites, in case you want to explore the report on your own, are Figures 7, 9 and 12). Plus, near the end of the report, I stumbled across a chart that was actually interesting.
This is interesting because it treats CEs as objects of study rather than fonts of wisdom. That kind of research can be really valuable.
But again, CEs are wealthy, powerful and busy people. They’re generally not going to want to spend their time being test subjects for somebody else’s research. So instead of getting to understand them better, we have to listen to them talk.]]>
Swaziland’s government monopoly on broadcast media will merge its radio and television operations by the end of the year.]]> |||
Mbabane - Swaziland’s government monopoly on broadcast media will merge its radio and television operations by the end of the year.
This is according to King Mswati’s Minister of Information, Communications and Technology, Dumisani Ndlangamandla.
Ndlangamandla floated government plans in the Times of Swaziland last week to combine state-owned radio, the Swaziland Broadcasting and Information Service (SBIS) and Swazi TV, as a cost-cutting measure.
However, the government control over news and other programming heard by listeners and seen by viewers will continue in the landlocked kingdom of 1.2 million people.
“Regulations governing the operations of the new entity, which will combine SBIS and Swazi TV, are being drawn up,” a source within the Communications Ministry said.
The merger will replace separate radio and TV administrative teams with a single management unit to run the country’s broadcast media, freeing King Mswati to use the country’s treasury money for other purposes.
Swaziland does not permit non-government broadcast media. A foreign-owned Christian radio station has been licensed in Manzini, but does not broadcast news or current events.
SBIS broadcasts 24 hours of radio programming daily on its siSwati channel and 18 hours of programming daily on its English channel.
With 90 percent of Swazis receiving their news from radio, King Mswati’s government jealously guards its broadcasting monopoly. Rules for broadcast content ban labour unions and pro-democracy groups from the airwaves.
News coverage may not include events that have not been sanctioned by the government.
Labour strikes, pro-democracy demonstrations, criticism of King Mswati and matters considered embarrassing to the government are not seen or heard by Swazi radio listeners or television viewers.
“Most Swazis do not have access to international media, and the domestic media is controlled by the king, who personally owns one of the country’s two newspapers. With the exception of a (radio) station devoted to religious programmes, radio and television are government departments under the king’s control.
South African newspapers entering Swaziland are carefully screened. If an edition contained information that was unfavourable to the king or the government, the government purchased and destroyed all copies, Freedom House, a Washington-based human rights group, reported.
Ndlangamandla said that the new national media conglomerate would have a commercial component, suggesting that part of the operation would be privatised.
But media analysts say any potential investor would be discouraged by the lack of profit generated by Swaziland’s broadcast media houses.
Radio is the sole source of information for rural people, where 70 percent of Swazis live.]]>
Forget the NHS, tax cuts or TV debates. The way to win British hearts is through their stomachs.]]> |||
London - Forget the National Health Service, tax cuts or TV debates.
The way to win British hearts at the next election is through their stomachs.
When David Cameron told a hip youth radio station last week he would like to take world leaders to lunch at south African chain Nando’s – rather than a Harvester or a Gordon Ramsay restaurant – he knew what he was talking about.
Not only has he visited a Bristol outlet of Nando’s – the fast-food chicken chain that is spreading across the country like wildfire – but he also knows that the restaurant crosses class, political and ethnic divisions.
Whoever gets the Nando’s vote at the election will sweep the nation.
There are 333 Nando’s outlets in Britain; 1 000 in all, in 35 countries.
The main markets for Nando’s are Britain, Australia and South Africa.
But Nando’s is big in America, too.
When US President Barack Obama spoke at the University of Cape Town in 2013, he said of the South African chain: “In America, we see the reach of your culture – we’ve got a Nando’s a couple of blocks from the White House.”
What is the special ingredient that explains the chain’s extraordinary success?
The literal answer is its peri-peri sauce.
The ingredients are a secret combination of hot chilli pepper, lemon, garlic, herbs and spices.
The restaurant’s chickens – fresh, never frozen – are trimmed of fat, marinated overnight, and regularly basted with the peri-peri sauce while being flame-grilled.
It is not just the peri-peri sauce, though.
When it opened in Britain in 1992, Nando’s hit the sweet spot of High Street dining through a combination of luck and hard-headed analysis of how to make money in the unpredictable restaurant trade.
Nando’s is a little more expensive than McDonald’s or KFC, but healthier, and far cheaper than any fancy restaurant.
Four boneless, flame-grilled chicken thighs plus rice and salad – yours for £7.30 (R125).
On top of that, you get much more of a restaurant feel than the usual fast-food chains.
A waiter shows you to your table; you order at the counter; the waiter brings you your food, with China plates and proper knives and forks.
Service is extremely quick – crucial in our I-want-it-now culture; handy, too, for harassed parents with demanding children.
“Fast-casual dining” is the buzz word of the modern restaurant business, and Nando’s has nailed the trend.
There is variety on the menu: you can choose how spicy you want your chicken, from plain to extra-hot.
And there are other dishes: veggie burgers, steak rolls, mushroom and halloumi dishes and different salads.
But on the whole, the only big choices customers make are the size and type of the chicken portion – quarters, halves, wholes, butterfly breasts, thighs, legs, wings, chicken livers and chicken burgers – and what sauce they want.
Some outlets are franchised; others owned by the company.
So it is largely chicken, chicken and more chicken. And that leads to low overheads, a simple supply line and no food thrown away.
– Daily Mail]]>
Consolidation in the form of store closures and a reduction in store openings is expected to take place in the furniture retail sector.]]> |||
Further consolidation in the form of store closures and a reduction in store openings is expected to take place in the furniture retail sector this year.
This sector took a plunge last year as a result of the lack of disposable income and highly indebted consumers.
Retail analysts said last week that the year 2014 proved to be a turning point for the furniture retail industry due to the collapse of the country’s oldest furniture business, Ellerines.
The trend was likely to carry on into 2015.
Ellerines went under business rescue after its parent company, African Bank, went bankrupt.
It sold its furniture brands and closed some of its stores.
These included 63 Bears Furnitures which were sold to the Lewis Group for R93.7 million, while Dial-a-Bed was sold to CoriCraft.
It also has a R400m indicative offer for stores outside South Africa from an undisclosed buyer.
Early this year, it was reported that Ellerines was in talks to sell its two brands Wetherlys and Geen & Richards.
JD Group – which owns brands such as Joshua Doore, Russels, Price and Pride and Barnetts among others – has restructured these brands into clusters.
The group, of which 86 percent is owned by Steinhoff International, sold its loss-making consumer- finance business to a BNP Paribas unit for R4.6 billion cash.
Lewis was the only furniture retailer which was able to survive the credit storm.
Mark Hodgson, an analyst at Avior Capital Markets, said there was still going to be net closures of stores as a final Ellerines wind down happened. He believed that the industry was likely to experience some further consolidation.
“I think we might see about 5 percent of stores’ consolidation, however, it was hard to put an exact number as we wait for Ellerines to wind down.
Hodgson said the JD Group might also close some of its stores as part of its brand rationalisation.
“Lewis will be more about opening smaller stores and not growing net space. Between Ellerines and JD Group stores, we are likely to see some store reduction.”
He added that the furniture retail sector was not only over-traded, but was also dependent on the credit being granted by the likes of African Bank and other unsecured credit lenders.
“This trend kind of justified the rate at which new stores were opened.”
Hodgson said Shoprite’s furniture division, which includes OK Furnitures and House & Home stores, was likely to be a beneficiary as it was less impacted by the shrinkage of stores in the industry.
“They certainly will be gaining market share in the process,” Reuben Beelders, a portfolio manager at Gryphon Asset Management, said, adding that a few unusual events had occurred over the past few months, including a significant drop in the oil price.
“This is definitely going to be a benefit to consumers as they will have more disposable income in their pockets.”
However, Beelders was not sure if consumers would be buying furniture with that extra cash.
He added that the impact that the collapse of Ellerines was going to have was that the group would take a lot of access capacity on the supply side, which might be good for remaining operators such as Lewis and the Shoprite group furniture division.
“However, prices may remain firm, which is not good for the customers.”
Beelders believed that consumers are not yet over the credit hump.
“I still think people are fairly highly indebted, the one thing that has changed is that we do seem to be heading into an environment where there is not going to be a lot more interest (rate) hikes.”
South Africa, however, faces a risk of a weaker currency, which might force the Reserve Bank to hike interest rates.
The other factor was that the country was experiencing a weak economic growth.
“While people have jobs and are able to afford furniture, I am not sure if it is going to be their first choice.”
Beelders said he did not see an environment where discretionary goods were going to pick up in sales. – Nompumelelo Magwaza]]>
This year holds good fortune for fashion retailers such as Mr Price and Foschini.]]> |||
This year holds good fortune for fashion retailers such as Mr Price and Foschini, meanwhile the country’s largest retailer Edcon might have to make a painstaking decision about its future, equity analysts said last week.
Mr Price will continue to be the darling of the market this year, with Foschini following close-by.
Foschini’s decision to sell its financial services book RCS to the French personal loan firm BNP Paribas has put the retailer on a higher pedestal.
South African fashion retailers, especially those which are credit-dependent, had it tough last year as highly indebted consumers struggled to pay off their clothing accounts.
Retailers and banks also took it upon themselves to introduce much stricter criteria for consumers applying for store accounts which led to a decline in the store accounts’ approval rate.
Wayne McCurrie, the senior portfolio manager at Momentum Asset Management, said this trend would continue into this year.
“It is not that the people do not want to borrow more, but the retailers have become more cautious in giving out credit.”
Ron Klipin, the portfolio manager at Cratos Wealth, said Foschini was likely to become a market favourite this year as it had managed to sell its RCS book to BNP Paribas Personal Finance.
“They are therefore not impacted by a growth in bad debts and can focus on running their business quite effectively.”
Foschini’s recent acquisition of the UK-based company Phase Eight showed that the company was now going the geographical diversification route and looking for growth offshore.
“From a local perspective there should be more disposable income arising from the falling petrol price, and consumers will be able to spend more on clothing,” Klipin said.
In terms of cash-sales attractiveness, Mr Price leads the pack but it also appears to be fully priced in the short term.
However, Foschini had now become a good bet and was still attractively priced, Klipin added.
He said Woolworths should not be left out as it had a good merchandise selection and a short turnaround time for new merchandise offerings.
“The diversity of brands including Witchery, Country Road, and Trenery enables Woolworths to encompass a broad spectrum of LSMs (Living Standards Measure), which is an attractive feature.”
Speaking of Edcon, Klipin said if one looked at Edcon’s Ebitda (earnings before interest, tax, depreciation and amortisation) numbers, Edcon was still profitable.
However, it was weighed down by a massive debt overhang, which remains a major challenge.
“On top of that they are losing market share to Woolworths and Foschini and other retailers.”
McCurrie said Edcon was bought by a private company, Bain Capital at a wrong time, which was not dissimilar to African Bank buying Ellerines at the wrong time.
“Edcon is heavily geared and very short of positive cash flow to service their debt,” McCurrie said.
He believed that it was inevitable that some of Edcon’s debt would be converted into equity.
“I do not think they can continue with these very high levels of debt.
“Some of the debt suppliers will have to convert the debt into equity so that they can drop their interest rate which will strengthen their balance sheet. I also think there needs to be some restructuring which might include selling something or closing some of its unprofitable stores. They cannot carry on like this,” McCurrie added.
Meanwhile, Truworths was taking some flak from the indebtedness of consumers, Klipin said.]]>
Consumer credit health might be stabilising for the first time in three years.]]> |||
Consumer credit health might be stabilising for the first time in three years.
However, this did not signal a positive turnaround as macro-economic factors continued to prevent improvement to the financial situation of consumers, the credit information company TransUnion said last week.
The release of its consumer index showed an increase from a revised 49.9 points in the third quarter to 50.1 points in the forth quarter of last year, which was above the break-even level for the first time in nearly three years.
Despite this, TransUnion said household cash flows remained under pressure, despite a nominal improvement as a result of softer inflation pressure and fuel-price relief.
“While fuel-price relief is important for consumers, it should be noted that the job market remains weak and that a weak currency not only offsets a large portion of the international oil price decline, but also raised the price of many imported products and equipment,” TransUnion said.
“While lower petrol and diesel prices by themselves could provide a form of tax relief to households and firms, acute electricity shortages mean that the impact and related costs of load shedding will partly offset this,” Geoff Miller, the chief executive of TransUnion, said.
The TransUnion consumer index measures aggregate consumer loan repayment records and tracks use of revolving consumer credit facilities to detect distressed borrowing.
“While the figures show the index rising above 50 for the first time in several years, factors such as inflation, ongoing strikes, a weak job market and an unstable rand are mitigating any financial improvement,” Miller pointed out.
He added that as a result, TransUnion had seen only marginal movement in a shallow trajectory, “indicating continued uncertainty in the consumer credit industry”.
Currently, households are using just over 50 percent of their credit limits, up from 40 percent in 2007.
Revolving credit utilisation rose at a rate of about 2.7 percent year on year in the fourth quarter, driven by both credit card and revolving store cards.
Overall, the household cash flow indicator showed budgets remained relatively fragile and highly vulnerable to currency, interest rate and product price swings, Miller said.
The Credit Bureau Monitor has reported that, for the quarter to September, of the 22.50 million credit-active consumers, 10.05 million, which is 44.7 percent, have impaired records and were struggling to service their debt.
He said lower inflation early this year might well help this more positive trend continue for a while longer.
The index also showed that consumer borrowing and repayment behaviour was mixed.
The decline in the year-on-year rate of new consumer loan defaults halted in the fourth quarter, suggesting that the recent phase of improving repayment may be over.
Repayment behaviour was improving fastest in the personal loans, furniture and appliances. However, vehicle impairments were up by nearly 12 percent year on year, followed by non-clothing revolving store cards up nearly 8 percent year on year.]]>