The rand slid to an eight-month low against the dollar after SA's monthly trade deficit widened more than predicted.]]> |||
Johannesburg - The rand slid to an eight-month low against the dollar after South Africa’s monthly trade deficit widened more than economists predicted.
The nation’s trade shortfall widened to 16.3 billion rand in August, the highest in seven months, from a revised 6.8 billion rand in July, the South African revenue service in Pretoria said today.
The median estimate of 14 economists in a Bloomberg survey was a deficit of 8.7 billion rand.
A slump in exports is adding to pressure on the current-account deficit, undermining the rand at a time when investors’ expectations of Federal Reserve rate increases are weighing on emerging-market currencies.
“It’s a bit of a train smash here for the rand and it’s probably not going to stop soon,” Ion de Vleeschauwer, chief dealer at Bidvest Bank, said by phone from Johannesburg.
“The dollar doesn’t show signs of any weakening at all. Combined with very, very bad local numbers, there’s only really one way this currency’s going to go and that’s weaker, and by lots.”
The rand depreciated 0.3 percent to 11.3157 per dollar by 3:59 pm in Johannesburg, the weakest level since January 31.
It touched a five-year low of 11.3909 on January 30.
Exports dropped by 9.6 percent to 77.2 billion rand in August as shipments of mineral products, which include coal and iron ore, fell by 5.1 billion rand, or 24 percent, and precious metals and stones decreased by 15 percent.
Imports rose by 1.4 percent to 93.5 billion rand.
“South Africa’s trade deficit is likely to remain structurally high over the medium term which suggests that a turnaround in the currency’s fortunes seems unlikely any time soon,” Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities in Johannesburg, said in an e-mail. - Bloomberg News]]>
South Africa's central bank has little policy room to boost demand in the economy and it should keep its focus on taming inflation, Deputy Governor Lesetja Kganyago said.]]> |||
Johannesburg - South Africa's central bank has little policy room to boost demand in the economy and it should keep its focus on taming inflation, Deputy Governor Lesetja Kganyago said on Tuesday.
Likely interest rate increases in the United States would require corresponding policy shifts in South Africa, Kganyago said in a speech prepared for delivery at an investor conference in Cape Town.
The Reserve Bank left interest rates unchanged at 5.75 percent earlier this month, eyeing inflation which has persisted above a 3-6 percent target band, even while it further cut economic growth forecasts for the three years to 2016.
“Confidence in the economy is currently weak, and all else equal, will tend to put upward pressure on inflation rates as households and firms seek price increases as a way to improve their finances,” Kganyago said.
“Today, there is little policy space left to boost demand, and it is surprisingly hard even to specify where we are in the business cycle.”
Africa's most advanced economy needs to be more competitive, partly by ensuring that inflation does not price local goods and services “out of world markets”, Kganyago said.
“Monetary policy must retain and strengthen its focus on inflation,” he said.
“In doing so, we will push the envelope of transparency and clarity wherever possible; to help ensure that inflation expectations do not drift from the target.”
Kganyago has emerged as the front runner to succeed central bank Governor Gill Marcus when her five year term ends on November 8, a Reuters poll showed last week. - Reuters]]>
There was still a long way to go to transform South Africa and this would require everyone working together, Labour Minister Mildred Olifant said.]]> |||
Johannesburg - There was still a long way to go to transform South Africa and this would require everyone working together, Labour Minister Mildred Olifant said on Tuesday.
“I am sure... that you also understand that the revolution to transform this nation is only but just beginning and there is still a long way to go,” she said in a speech prepared for delivery at the Black Management Forum's national conference in Johannesburg..
“To win this revolution we need to stand together and marshal all our forces in pursuit of the radical social and economic transformation. 'All hands on deck' should be the motto in moving the country forward.”
Olifant said the “noises” from people against transformation would become louder and they would use every possible space to articulate their jaundiced views.
“I have also observed... that our intellectuals are very thin in the public domain and they are completely outnumbered by the disciples of doom and gloom.”
Olifant said it was important to find out what was holding back South Africa's economic transformation so that the corrective measures could be decided on.
“We often do not ask questions that take us out of our comfort zones and we have perfected the art of finding someone else to blame,” she said.
Olifant said the single biggest threat to the deepening and consolidation of national transformation was the slow pace and non-committal posture of those that should drive the process.
She said it carried the real risk of people beginning to lose hope.
The BMF was an essential component of the “intelligentsia” that managed the economy of South Africa, she said.
“Management failure in either private sector or public sector, somewhat implies failure on your part,” she said.
“The BMF has, in its 38 years of existence, helped many black people to move up the corporate ladder in their respective organisations.”
Olifant said that of a number of companies that had been subjected to the director general of her department for non-compliance with employment equity, their human capital development divisions and industrial relations divisions were, in most cases, headed by black people who grew up in the BMF tradition.
On August 1, the Amended Employment Equity Act (EEA) introduced at least five fundamental aspects which would change the EEA environment.
These included equal pay for work of equal value; strengthening inspectorate and enforcement; increasing penalties for non-compliance; and giving the director general powers to question the employment equity plans if they were flawed.
The new law gave the Commission for Conciliation, Mediation and Arbitration powers not only to conciliate, but to arbitrate and issue awards on cases relating to unfair discrimination.
Olifant said her department would initiate its own public hearings on the minimum wage.
The dates would be announced soon.
China cut mortgage rates and downpayment levels for some home buyers for the first time since the 2008 global financial crisis, making one of its biggest moves this year to boost an economy increasingly threatened by a sagging housing market.]]> |||
Beijing - China cut mortgage rates and downpayment levels for some home buyers on Tuesday for the first time since the 2008 global financial crisis, making one of its biggest moves this year to boost an economy increasingly threatened by a sagging housing market.
The relaxation of lending rules for home buyers was accompanied by steps to increase financing for cash-strapped developers, which may have problems paying their debts if the property downturn persists, as many economists expect.
Yet some analysts cautioned investors against thinking that the housing market and broader economy were poised to stage a stunning recovery.
A glut of unsold or unoccupied homes and buyers' expectations of further price declines could temper any rebound.
“We're probably talking about some stabilisation at a low level, but it's probably unlikely to drive a rebound in this market,” said Zhu Haibin, an economist at JPMorgan in Hong Kong.
“House prices are probably going to continue to decline, but at a slower pace.”
The housing downturn has weighed on already soft demand in China, dampening consumer confidence and slashing demand for related products from home appliances to glass, cement and steel.
But even if the market only shows signs of bottoming out, it could put a floor under falling global prices for raw materials such as copper and iron ore, helping big commodity producers like Australia.
The news, which came on the eve of the Golden Week holiday, signalled that China's central authorities were serious about preventing further deterioration in the property market, which accounts for about 15 percent of the world's second-biggest economy.
“We will see the market boom with sales during the Golden Week,” said Liu Yuan, the head of research at Centaline, a property consultant, in Shanghai.
“Such good news will make developers adjust their sales strategy overnight,” he said, predicting a 15 percent monthly jump in property sales in October.
Second-home buyers can now get a 30 percent discount on their mortgage rates, an offer previously limited only to first-home buyers, the central bank and the banking regulator said.
Downpayment levels were also cut to 30 percent from 60-70 percent.
Home prices fell for the fourth consecutive month in August while new construction activity continued to slump, leading many analysts to argue that only a cut in mortgage rates could turn things around for the sector and the economy.
Factory output and a broad measure of credit supply in China both skidded unexpectedly to six-year lows this summer.
That fuelled bets that China's leaders would have to further loosen fiscal and monetary policies if they wish to grow the economy by around 7.5 percent this year, as targeted by the government.
“I think the big macro call for China is: will home buyers respond to the signal from the central government that it's time to get back into the market?” said Tim Condon, an economist at ING Bank in Singapore.
To support the housing market, 40 of 46 regional Chinese governments have already abolished housing investment limits that were originally in place to calm frothy home prices.
Yet prices have continued to drop in a record number of cities.
Now authorities have relaxed the rules even further.
In cities without housing investment limits, banks lend to those buying their third homes and who do not have any outstanding unpaid mortgages.
Banks were previously barred from lending to residents who were trying to buy more than two homes in big cities.
“For families that own one home and have paid off their mortgages, banks should treat them as first-home buyers,” the People's Bank of China and the banking regulator said in a joint statement on the central bank's website.
Banks should quicken their disbursements of mortgages and lend to healthy property developers that have commercially viable projects, the regulators said.
Some would-be home buyers have reported long waits for loan applications to be processed by banks which are wary of taking on even more exposure to the weakening sector as bad loans climb.
To pay for the mortgages, the regulators said banks should sell mortgage-backed securities and bonds with longer maturities.
Developers on their part were also encouraged to sell bonds in the interbank market, and a pilot for real estate investment trusts, or REITs, would also be started to broaden financing channels. - Reuters]]>
The number of those out of work in Germany posted a surprise gain in September, the labour office said.]]> |||
Berlin - The number of those out of work in Germany posted a surprise gain in September, with seasonally adjusted unemployment rising by 12,000 from August, the labour office said Tuesday.
The increase pushed the total number of unemployed in Europe's biggest economy to 2.918 million.
Analysts had expected unemployment to drop by 2,000 in August.
The unemployment rate was unchanged at a more-than two decade low of 6.7 per cent.
In seasonally unadjusted terms, unemployment fell by 94,000 to 2.808 million, the labour office said, resulting in the unadjusted rate falling from 6.7 per cent last month to 6.5 per cent in September. - Sapa-dpa]]>
The European Union has set out its case against Apple's sweetheart tax deals with Ireland.]]> |||
Brussels - The European Union on Tuesday set out its case against Apple's sweetheart tax deals with Ireland, saying it believed they breached its rules on receiving state aid and give the US tech giant an unfair advantage.
Brussels released a letter which the EU's competition commissioner sent to the Irish government in June formally giving its reasons for opening an investigation into Dublin's arrangements with Apple.
The letter from Joaquin Almunia said the Irish government's treatment of Apple “appears to constitute state aid” and therefore breaches the 28-member EU's rules on a free internal market.
“The Commission is of the opinion that through those (tax) rulings the Irish authorities confer an advantage on Apple,” the letter said.
“That advantage is obtained every year and on-going, when the annual tax liability is agreed upon by the tax authorities in view of that ruling.”
It asked Ireland to provide further information about the deals, which have benefitted Apple since 1991.
Ireland said on Monday that it was confident there was no breach of state aid rules.
If found at fault, however, Apple would be required to repay potentially billions in restitution. - Sapa-AFP]]>
EBay plans next year to spin off PayPal, its fast-growing payments business.]]> |||
EBay plans next year to spin off PayPal, its fast-growing payments business, giving in to activist investor Carl Icahn's argument for a leaner company better equipped to compete in the competitive mobile payments market.
EBay's shares rose as much as 8 percent after the company said it would spin off PayPal as a publicly traded company in the second half of 2015, a transaction that will be tax-free to shareholders.
EBay chief executive John Donahoe had previously resisted Icahn's proposal, saying PayPal was integral to eBay's business, and vice versa.
Icahn, eBay's sixth-largest shareholder with a 2.48 percent stake as of June 30, backed off from his demand in April.
He also withdrew his two nominees to eBay's board, but in a concession, the company added a 10th independent director.
Several activist investors have stepped up pressure on companies to spin off assets as a way to create value.
B/E Aerospace and JDS Uniphase are among those to have agreed, while others such as Darden Restaurants and EMC are fighting it out.
Donahoe, in an interview with the New York Times, acknowledged that eBay was following Icahn's recommended strategy.
But he contended the company arrived at its conclusion through “a deliberate process” and not by reacting to pressure.
“A thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively,” Donahoe said in a statement.
Icahn could not immediately be reached for comment.
The spinoff will separate the payment business - which contributes a little over 40 percent to eBay's revenue - from its marketplaces and enterprise businesses.
EBay said revenue in its marketplaces and enterprise businesses increased 10 percent to $9.9 billion (R112 billion) in the last four quarters, while PayPal's revenue rose 19 percent to $7.2 billion.
“By separating marketplace and PayPal, it could make marketplace more attractive as an acquisition (target), which is something that investors have been thinking about since Alibaba's IPO,” PiperJaffray analysts wrote.
PayPal faces competition from Google's Google Wallet and a number of other vendors.
Apple also plans to enter the online payments market with its Apple Pay service.
“On PayPal, investors will still contemplate the risk of PayPal directly competing with Apple Pay and Google Wallet, which will likely add some uncertainty to PayPal's standalone valuation,” PiperJaffray analysts said.
After the spinoff, the new eBay will be headed by Devin Wenig, president of eBay marketplaces and former head of the markets division of Thomson Reuters.
PayPal's chief executive after the spinoff will be Dan Schulman, former head of American Express' online and mobile payment business.
“I don't think we would have got Dan if it weren't for having a chief executive opportunity and he is just the right guy at the right time,” Donahoe said on a conference call with analysts.
Donahoe and chief financial officer Bob Swan will oversee the separation and serve on the boards of both companies.
EBay had a market value of $65.36 billion as of Monday.
The company's shares were trading up 7 percent at $56.32 on Tuesday morning.
PayPal was founded in the late 1990s and went public in 2002 and was acquired by eBay soon afterward for $1.5 billion.
Goldman Sachs and Allen are eBay's financial advisers and Wachtell, Lipton, Rosen and Katz is its legal counsel. - Reuters]]>
Africa’s largest stock index rounded off the worst quarter in three years as investors continued to pull out of emerging markets.]]> |||
Johannesburg - Africa’s largest stock index rounded off the worst quarter in three years as investors continued to pull out of emerging markets in anticipation of higher interest rates from the Federal Reserve.
The FTSE/JSE All Share Index fell 0.1 percent to 49,336.31 by the close in Johannesburg, bringing its decline in the three months through September to 3.2 percent, the most since the same period of 2011.
The 14-day relative strength index was 28.9, below the 30 level that may indicate an asset is oversold.
South African stocks joined an emerging-market retreat as Fed policy makers on September 17 raised by 25 basis points their median estimate for where the federal funds rate will be by the end of 2015.
The Fed’s asset-purchase program and interest rates near zero pushed up inflows and valuations on the Johannesburg Stock Exchange.
The 164-member main index trades at a current price-to-earnings ratio of 17.4, compared with 12.6 on the MSCI Emerging Markets Index.
“Excess liquidity is going to be withdrawn out of the market as US interest rates go up sooner than expected,” Wayne McCurrie, a Johannesburg-based money manager at Momentum Asset Management, said by phone today.
The South African market is “well above average valuation levels,” he said.
Foreign investors were net sellers of the country’s shares last week, the second period of outflows, reversing five weeks of net purchases, according to JSE data.
Platinum companies struggling to recover from an industry strike are among the index’s biggest decliners in the third quarter.
Lonmin dropped 21 percent and Anglo American Platinum fell 21 percent.
Ellies Holdings, which makes satellite television equipment, fell 52 percent in the period’s worst performance after saying on July 22 full-year earnings per share fell 67 percent.
South African equities had been poised for a 0.5 percent quarterly advance until the Fed outlook for rates was revised.
The central bank is also cutting purchases of Treasury and mortgage-backed securities, which gave foreign investors more cash for emerging markets.
“Quantitative easing by the US has meant that we’ve had an unprecedented amount of liquidity and that has pushed markets up,” McCurrie said.
“The big worry now is what’s going to happen when this money is withdrawn.” - Bloomberg News]]>
Kenya's gross domestic product was estimated to be 25 percent bigger after the authorities changed the base calculation year.]]> |||
Nairobi - Kenya's gross domestic product was estimated to be 25 percent bigger after the authorities changed the base calculation year to 2009 from 2001, sending the east African nation into the continent's top 10 economies.
Economic output was calculated to be 4.76 trillion shillings (R604 billion) in 2013 after the rebasing, up from 3.8 trillion shillings ($42.6 billion), the minister for devolution and planning, Anne Waiguru, told a news conference on Tuesday.
That takes Kenya up to ninth in Africa's GDP rankings from 12th, above Ghana, Tunisia and Ethiopia but below oil-producing Sudan based on a World Bank table for 2013.
The rebasing exercise means debt levels fall as a proportion of GDP, a closely watched ratio, and could give the government some leeway for more borrowing to help finance its plans to build new transport links and repair creaking infrastructure.
But revising the estimated size of GDP does not change Kenya's ability to repay additional loans nor does it mean it has more income to spend on development in a nation where many people are poor, roads are potholed and power supply is scarce.
“This gives us a little bit of welcome breathing space ... not an opportunity to open the cash register,” said public policy and economic analyst Robert Shaw.
As with other rebasings in Africa, the move takes into account structural and other economic changes, such as new technology, and updates the base year for prices.
Kenya's GDP revision follows the far more dramatic rebasing earlier this year of Nigeria's economy when it changed the base year from 1990 to 2010 and, as a result, vaulted above South Africa to become Africa's biggest economy.
Kenya's rebasing was less pronounced because the gap with 2001 and the new base year of 2009 was shorter.
Changes in assessing agriculture, manufacturing and real estate accounted for most of the GDP rise.
Technology and related fields are now treated as a standalone sector, taking into account a vibrant industry in Kenya, which has pioneered mobile telephone payments systems and exported the idea across Africa and beyond.
The economy could also get a further boost in a few years when commercial oil production is expected to start.
With the rebasing, economic growth was revised to 5.7 percent in 2013, up from the previous estimate of 4.7 percent, a figure that had been below expectations and was partly blamed on a spate of militant attacks and a decline in tourism.
MIDDLE INCOME NATION
“The new numbers are credible and they constitute an important improvement in the economic and statistical knowledge base for Kenya,” Diariétou Gaye, the World Bank's country director for Kenya, said, adding that a World Bank team joined other experts conducting a peer review of the rebasing exercise.
Based on a debt figure of 2.4 billion shillings released in August after Kenya's heavily oversubscribed, maiden Eurobond, the debt-to-GDP ratio falls to about 50 percent from 57 percent previously, according to a Reuters calculation.
But economists said a lower ratio did not mean the government was any better positioned to take out more loans.
“Debt service capacity and export growth, neither of which is expected to be substantially revised, are much more important when it comes to being able to take on more debt,” Razia Khan, London-based Africa economist at Standard Chartered Bank, said before Tuesday's announcement.
With a population of about 44 million people, the new GDP figure implies economic output per capita stands at more than $1,200. That would push Kenya onto the bottom rung of middle income states, according to the World Bank's $1,045 to $12,746 band.
A higher income ranking means it might not benefit from some aid designed for the poorest countries, economists say.
Conversely, investors may be more attracted to a nation with a population that has more cash to spend, although many investors have already factored that into their calculations.
“If you look at the kind of investment flow already attracted by Kenya, the implicit assumption is that investors already treated it as a middle income country,” said Khan.
The new status and a bigger economy have no direct impact on the lives of ordinary Kenyans, who are frustrated by poor roads and services.
“The potholes are still there,” said analyst Shaw. - Reuters]]>
Kenya's economy is expected to grow by between 5.3 and 5.5 percent in 2014, down from the 5.8 percent previously forecast.]]> |||
Nairobi - Kenya's economy is expected to grow by between 5.3 and 5.5 percent in 2014, down from the 5.8 percent previously forecast because of “challenges” in the first half of the year, the finance minister said on Tuesday.
Cabinet secretary for the treasury, Henry Rotich, did not detail those challenges, but the east African economy has suffered a spate of militant attacks in recent months that have scared off tourists, hurting a valuable source of revenues.
On Tuesday, Kenya also announced a change to the base year used to calculate the size of its economy, adding 25 percent to gross domestic product.
In doing so, it also revised up the 2013 growth rate to 5.7 percent from a previous 4.7 percent estimate. - Reuters]]>