The National Union of Metalworkers of South Africa reduced its wage demand to 10 percent from 12 percent.]]> |||
Johannesburg - The National Union of Metalworkers of South Africa, the country’s biggest labour group, reduced its wage demand to 10 percent from 12 percent and said it’s willing to end its strike if employers agree to a one-year deal.
“We are ready to end the current strike with a one-year agreement and a 10 percent wage increase,” Numsa’s General Secretary Irvin Jim told reporters today in Johannesburg, declining to explain why the union altered its demand.
“If employers want a three-year agreement, they must meet workers’ demand of double-digit increases. The strike continues and we call on our members to intensify the strike.”
The strike involving more than 220,000 workers in the manufacturing and engineering industry is affecting about 12,000 employers including Nampak, the continent’s biggest can manufacturer, and carmakers such as General Motors and Evraz Highveld Steel.
As the work stoppage enters its third week, the Steel and Engineering Industries Federation of Southern Africa, an employers’ lobby, is offering a three-year package.
“We are discussing solidarity actions to intensify the strike,” Numsa president Andrew Chirwa said during the presentation to reporters.
Numsa’s national strike committee will meet tomorrow, he said. - Bloomberg News]]>
Big Retailers are taking a calculated hit to margins to invest in online grocery operations.]]> |||
Big retailers are taking a calculated hit to margins to invest in online grocery operations, in the hope they can persuade consumers to add more profitable items like clothes and computers to their orders of fruit and vegetables.
Food has been one of the last things to move online as complex logistics for fresh, chilled and frozen items make it an expensive business. Retailers are reluctant to lose the potential for the lucrative impulse buys that occur in-store.
But retailers in Europe and North America are ramping up their online food offer to compete with Amazon.com, which is expected to expand its sale of fresh produce beyond a few trial areas with the aim of complementing its non-food sales – and eating other retailers’ lunch.
“They are trying to hook customers up to brands for their grocery shop and hope they will spend on non-food which is lower headache and higher margin, which will drive profitability,” said Sophie Albizua of retail consultancy eNova Partnership.
“It is notoriously difficult to make money selling groceries online. The reason why people do it and need to do it have nothing to do with profit and nothing to do with groceries,” said Albizua.
Britain has led the way in selling groceries online, with e-commerce already accounting for some 5 percent of food sales.
Other countries like France are now catching up and the Boston Consulting Group predicts the global market will grow to $100 billion (R1 trillion) by 2018 from $36bn last year.
It has taken Tesco, Europe’s second biggest retailer, 17 years to bring its online grocery business close to the industry-leading margins it used to make in its store business.
Tesco made a trading profit of £127 million (R2.3bn) on online grocery sales of £2.5bn last year, equal to an operating margin of 5 percent. That beat the 3.7 percent Tesco reported for the group last year but came in below group margin at or above 6 percent for the previous three years.
Some analysts suggest that Tesco should focus less on investment in costly e-commerce technology and logistics and more on cutting prices if it wants to stop losing market share in Britain to German discounters Aldi and Lidl.
But Tesco says it is not building its online business for the sake of it: The aim rather is to attract more big-spending food shoppers who also buy general goods, which traditionally sell at much higher margins than groceries.
Tesco customers who buy food online as well as in store spend twice as much as those who only shop in store.
Those who also buy general merchandise spend three times as much – although only 4 percent of customers are currently in that last category.
Tesco, which still runs separate operations for online groceries and general merchandise, plans to combine its grocery and general goods deliveries – leveraging the sophisticated logistics network it has built up for food to cut costs for the firm, and offer customers a faster service.
The one-hour delivery slots that Tesco offers seven days a week for grocery orders are unmatched by any other general merchandise retailer, including Amazon, points out Tesco multichannel director Robin Terrell.
“As we start to add additional items or additional products to each of those deliveries, the economics become incredibly compelling for us but also a much more compelling offer for customers,” Terrell said.
It’s a service that make customers take notice, said Helen Merriott, the head of Accenture’s retail practice in Britain.
“If they could combine food and non-food and do that in a really efficient way, using their own supply chain in a joined-up way to get that to the customer when the customer wants it, it would be really powerful,” Merriott said.
British retailer Ocado, on track to make its first annual pretax profit this year since it was founded in 2 000, set up an online pet store last year from which customers order goods alongside their food, and plans a kitchen and homeware online store this year.
Ocado said last week that over 30 percent of its orders now contained at least one non-food item as customers benefit from the firm’s one-hour delivery slots.
Deutsche Bank analysts Niamh McSherry and James Collins predict that general merchandise will grow to 9 percent of Ocado’s sales by 2023 from 3 percent today.
“This is key for the Ocado investment case, namely because it could support the profitability of grocery online retailing and thereby facilitate further penetration of the grocery market,” they said.
Dutch retailer Ahold, which runs US online grocer Peapod as well as sites for groceries and general goods in the Netherlands and Belgium, is another that plans to keep investing in e-commerce despite the hit to profitability.
In the first quarter, online sales for all Ahold’s e-commerce sites grew 20 percent to e362m (R5.2bn), while the group’s underlying operating margin slipped to 4 percent from 4.1 percent a year ago.
Its online grocery businesses have yet to break even but its Bol.com general merchandise site made an unspecified profit last year.
Ahold is using its network of supermarkets as pick-up points for non-food online orders from sister firm Bol.com in the same way that Waitrose in Britain does with partner John Lewis.
Britain’s Asda is also investing in collection points, including in car parks of London tube stations, garnering useful information for its owner Walmart, which is testing online grocery in its home market as part of a bigger plan to integrate e-commerce into its sprawling network of stores.
The world’s biggest retailer, which made $10bn in e-commerce sales of non-food items last year, warns that investment in online will eat into profits this year.
Most of these traditional players are hoping to have established a bulkhead before Amazon expands its “Fresh” service, which is already combining deliveries of groceries and non-food orders in a few trial US cities like its hometown Seattle.
In areas where AmazonFresh is available, trucks are bundling orders of groceries with a pasta meal or fresh fish from local specialty stores Amazon is partnering with, as well as non-food items like digital cameras and games.
“Customers who use our service are not just satisfying one shopping occasion but many shopping occasions,” Doug Herrington, Amazon vice president consumables, told the Consumer Goods Forum industry summit in Paris.
Bernstein Research predicts that AmazonFresh could generate an operating margin as high as 13 percent in denser urban areas once it overcomes logistical challenges to reach scale.
“A roll out of Fresh could have a material positive impact on order frequency, loyalty, and spend in other non-grocery related categories,” Bernstein analysts wrote in a recent report.
Herrington expects the pace of delivery will be his future battleground.
Customers “are going to demand a shorter and shorter window from when you purchase it to when it arrives in your home”, he said. – Emma Thomasson Reuters]]>
Germany’s faltering economy has cast further doubt over the euro zone’s prospects for recovery this year.]]> |||
Germany’s faltering economy has cast further doubt over the euro zone’s prospects for recovery this year, with no other big country strong enough to pick up the slack.
Since late last year, the 18 countries using the euro have been climbing steadily out of a two-year recession.
But just as the bloc appeared to be turning the corner, its star economy, Germany, has fumbled the ball.
To make matters worse, other big states, including the euro zone’s second-largest economy France, show little prospect of a strong rebound.
French industrial production plunged unexpectedly in May, and inflation fell to its lowest level since the financial crisis in 2009.
Adding to the gloom, Italy’s factories also saw a 1.2 percent drop in output in May, the steepest fall in a year and a half.
And while Spain is expecting growth to accelerate to almost 2 percent next year, one in four of Spain’s workforce are out of work after the collapse of a property price bubble.
“Europe is getting more and more Japanese,” Carsten Brzeski with ING said, echoing concerns of others that the region faces permanent slow growth and no price inflation.
“The euro zone is flat lining. I don’t see substantial growth for another year.”
At the start of the year, the picture looked different.
Throughout the first three months, the German economy grew at its strongest rate in three years – 0.8 percent – thanks in part to mild weather lifting construction work.
That made up for stagnation or slowdown in France, Italy and the Netherlands, and prevented the bloc’s overall recovery from stalling.
While Britain, outside the bloc, underlined its robust recovery with the strongest quarterly growth in four years – to end June – the mood is turning in continental Europe’s industrial powerhouse.
German exports, imports, industrial orders, output and retail sales all fell in May compared with a month earlier.
On Thursday, Germany’s economy ministry cautioned about the impact of the crisis in Ukraine on confidence in Germany as it painted a bleak picture of the second quarter.
“After a growth-strong start to the year, the development of the German economy in the second quarter is subdued,” the report said.
Across the whole euro zone, analysts expect growth in the second quarter at around 0.2 percent, quarter on quarter, as seen in the three months to March.
In the boardrooms of Germany’s Mittelstand, the small and medium-sized companies that employ about 70 percent of its workforce, the sense of nervousness is palpable.
“The mood has deteriorated after the strong start to the year,” Mario Ohoven, the head of the BVMW Mittelstand association, said. He blamed the “smouldering” euro zone crisis and Ukraine for crimping companies’ export forecasts.
Martin Wansleben, the managing director of the German Chambers of Industry and Commerce, made a similar assessment.
“The ongoing Ukraine-Russia crisis, the conflicts in the Middle East and the ropey economic activity in emerging markets are choking the export business.”
Both expect an improvement later in the year, as do economists, but few believe Germany’s economic muscle can this time pull its neighbours from the trough.
“The numbers are bumpy,” Jonathan Loynes, the chief European economist at Capital Economics, said.
“I think the economy is growing, but… not strongly enough to sustain a strong economic recovery across the euro zone as a whole.”
There is a wider debate across Europe about whether to shift the policy focus towards spending to lift the economy and away from spending cuts and austerity.
Italy’s Prime Minister Matteo Renzi is leading a drive for greater flexibility in the way European budget rules are applied, whereas Germany wants to keep the focus on thrift.
But for some, that debate glosses over a deeper problem that holds back the euro zone economy – a reluctance to change.
Germany, they say, is stubbornly wedded to its model of manufacturing, while others, including France, are resisting social and economic reforms needed to boost industry.
“Germany should be the locomotive of Europe,” Guntram Wolff of Brussels-based think-tank Bruegel said.
“But the feeling in Germany is that we want to rely on the strength of the last 10 years in manufacturing, and we don’t accept change in the economy. The services sector, for example, is still quite regulated.”
In neighbouring France, the government has struggled to reform its social welfare system and labour model.
President François Hollande is pinning his recovery hopes on plans for almost e40 billion (R583bn) in corporate tax breaks to be phased in over the coming three years.
But the announcement has done little so far to lift business confidence, which has ebbed ever lower in France.
The country’s central bank estimates growth of only 0.2 percent in the second quarter after stalling in the first three months.
Weak business confidence in turn weighs on company investment, which the government is counting on to underpin growth even though consumer spending, currently weak amid high unemployment, is traditionally the main driver.
For captains of industry, such as Christophe de Margerie, the chief executive of French Total, this reluctance to reform is one of the chief problems.
“Why doesn’t it (the economy) take off as fast as we would like?” he said.
“Probably first of all because we were hit by the crisis later than others so there is a delayed impact, but also because our welfare system… sometimes hides how tough times are.” – Reuters]]>
After 19 years working as a cook at Atlantic City’s Showboat Casino, Dave Rose is counting the weeks until he and about 2 000 fellow workers lose their jobs when the casino is shuttered at the end of the summer.]]> |||
After 19 years working as a cook at Atlantic City’s Showboat Casino, Dave Rose is counting the weeks until he and about 2 000 fellow workers lose their jobs when the casino is shuttered at the end of the summer.
The Showboat will be the second major casino to close in this struggling New Jersey shore city this year, a trend that has some tourism officials talking about revamping the ageing gambling Mecca to broaden its appeal beyond bachelor parties and bus loads of retirees, with more family-friendly attractions.
“They’ve been saying that for 10 years,” said Rose, who held out little hope of that strategy working and feared he would have a hard time finding a job that matches the $18.18 (R194.41) an hour he earns at the Showboat.
“There aren’t too many good-paying jobs out there,” he said.
The unemployment rate in the city stood at 10.3 percent in May, among the highest of any major US metropolitan area and above the national rate, which was at 6.3 percent in May, and has since fallen to 6.1 percent last month.
Atlantic City, which once held a lucrative East Coast gambling monopoly, has fallen hard.
Gaming revenue has fallen to $2.8 billion, a little more than half its 2006 peak of $5.2bn.
The decline reflects the opening of new casinos in the north-eastern US in recent years: New York, Pennsylvania, Delaware, Maryland and Connecticut today all have casinos and Massachusetts is in the process of awarding licences.
One of the main questions for officials and workers in Atlantic City is, after Caesars Entertainment pulls the plug on the Showboat on August 31, how many of the city’s remaining 10 casinos will survive.
The Revel casino and resort, which was a centrepiece of New Jersey governor Chris Christie’s effort to bring Las Vegas-quality gambling to Atlantic City’s declining gaming business when it opened in April 2012, last month filed for bankruptcy for the second time in its short history.
The casino, which employs 3 140 workers and is losing $2 million a week even in the peak summer season, is trying to line up a buyer.
If it doesn’t find one in the next few weeks it plans to close.
Christie had provided a $261m tax package to help build Revel after Morgan Stanley, which had begun building the casino, pulled out of the project two years ago and took a $932m loss.
“We still have five or six relatively successful casinos,” John Palmieri, the executive director of New Jersey’s Casino Reinvestment Development Authority, an economic development agency funded by a tax on casinos, said.
“There were 12. Can we support nine? Will that end up dropping to seven or eight? That’s the big question.”
Losing more casinos could punch a big hole in Atlantic City’s budget, which had historically offered generous contracts to public employees and relied on casinos to provide about 80 percent of its tax revenue, Michael Busler, a professor of finance at Richard Stockton College in Galloway in New Jersey, said.
“We aren’t done dropping yet,” Busler said. “What (the mayor) has to do is get spending way down.”
Atlantic City Mayor Don Guardian took office early this year to discover the city ran a $10m budget deficit last year, a number that is on track to rise without budget action.
Almost one in three city residents live below the poverty line, according to US Census Bureau data, more than triple the poverty rate across New Jersey.
In a teleconference on Thursday to brief the media on the city’s efforts to address changing market conditions, Guardian acknowledged the singular focus on gaming had run its course.
“We put all our eggs in one basket,” the mayor said.
“We know that was foolish.”
He voiced optimism about the resilience of the city. “Atlantic City’s revitalisation will not happen overnight,” he said.
“Time is an essential element.”
But just a block off Atlantic City’s boardwalk, the glitz fades quickly.
Busy commercial strips are filled with payday lenders, liquor stores and other businesses targeting low-income consumers.
The city’s crime rate, six times higher than the state average, prompts many visitors not to wander from their hotels or the boardwalk.
A heavy blow to the city’s reputation came in 2010 when a gambler from north New Jersey was car-jacked inside a casino parking garage, stuffed in his trunk and murdered in a rural area.
“It’s like a ghetto,” said Bob Jeannotte, 70, a visitor from East Brunswick, New Jersey, who sat on the boardwalk in early July while his wife slept late.
“You’d think the casinos would help bring the place up.”
Voters opened the door to casinos in 1976, hoping to revitalise the city’s run-down hotels. While money flowed in, it did little to bring up the rest of Atlantic City, as funds from the taxes casinos paid were spent on projects all over the state, Palmieri said.
State law allows property owners to retroactively appeal over the taxable value of their property and the city’s decline has prompted several casino owners to do so, leaving the city to pay refunds on past taxes.
In June, the owner of the Borgata Casino said it had reached a settlement with the city that would bring it a refund of $88.25m for tax payments made from 2011 through last year.
The city had to borrow $143m in fiscal 2013 to cover the cost of the successful tax appeals by Borgata and others.
For all the troubles, there remains a steadfast group of local business people who believe in Atlantic City’s future.
“This town has amenities that can’t be replicated in any other market,” Anthony Catanoso, who owns the Steel Pier boardwalk amusement park, said.
“We are packed with families every night.“
Tourism officials and civic leaders say the future lies in reinventing itself as a family-friendly resort, an approach that Las Vegas tried in the 1990s.
That Nevada city has since returned to its traditional focus on more hedonistic entertainment is captured in its “What Happens Here, Stays Here” slogan.
Local officials see hope in a newly built outlet mall, a Bass Pro Shop currently under construction, and the construction of a new conference centre at one casino.
One hotel operator, St Petersburg, Florida’s TJM Properties has bought into the idea, acquiring the former Atlantic Club Casino, which closed in January, and the Claridge Hotel, which it plans to develop with a 2 787m2 square metre children’s museum.
“We are going after families,” Sherry Amos, a spokeswoman for the hotel, said.
“We want people to take their families to the outlets, and we want them to take their families to the beach.”
The terms of the sale of the former Atlantic Club prohibit the space from housing a casino in the future.
Atlantic City officials note that even as gambling income has declined, the city’s other revenues have picked up.
Taxes on drinks and tickets to shows hit $35.5m last year, up from $26.2m in 2005.
But those tax receipts are dwarfed by the city’s earnings from taxes on gambling and parking, which came to $214m last year, though that is less than half their level a decade ago.
The developments elsewhere in the region have some long-time Atlantic City workers wondering if they would have better luck moving to chase casino jobs in other places rather than counting on a revival at home.
“If this closes, I’ll have to take my children out of the state,” Mike DeVita, a 52-year-old bartender who has worked at the Showboat for 27 years, said.
“It’s the only trade I know.” – Reuters]]>
Brazil has had little time to mourn as it moves into hosting the sixth Brics (Brazil, Russia, India, China and South Africa) heads of state summit this week.]]> |||
In the aftermath of the defeat against Germany in the World Cup, Brazil has had little time to mourn as it moves into hosting the sixth Brics (Brazil, Russia, India, China and South Africa) heads of state summit this week.
Last year’s Durban summit was pivotal for the coalition with a number of initiatives creating an institutional memory through the formation of a raft of formal Brics projects – most notably the Contingency Reserve Arrangement (CRA), the Leaders-Africa Dialogue Forum Retreat, the Business Council and the all-important Development Bank.
The CRA, with an expected initial fund of $100 billion (R1 trillion) – of which South Africa, as the smallest country, is only expected to contribute $5bn – means Brics may not need the support of the International Monetary Fund to make its own loans and so affording member states greater political autonomy.
This may not sit that well with the World Bank, however, which intends to create a Global Infrastructure Facility this year – perhaps out of a sense of competition with the Brics Development Bank and the CRA.
Both of these will institutionalise the collaboration of Brics members and ensure that member countries can forestall short-term liquidity pressures and strengthen financial stability within their ranks, without having to look to other global financial institutions.
This scrambling to close financial and collaborative ranks outside of the Brics nations may alone be proof of the coalition’s success and perceived – and real – power.
The Brics Business Council is chaired by Patrice Motsepe and, at its first meeting last year, there was vigorous discussion about the various ways the Brics group could enhance trade and investment among themselves, such as urging governments to expedite multiple-entry business visas for longer periods and a proposed business travel card, as well as to increase connectivity and harmonise technical standards across countries – the latter being vital for South Africa which ranks so low on the world’s connectivity scale.
Last year’s South African summit was considered a success and the Brazil summit is expected to give meat to many of the structures and considerations it launched.
Following South Africa’s example in including other African countries in last year’s summit, Brazil has invited the heads of other South American countries in a bid to increase co-operation between the Brics and its region.
The Brazil summit will be the first official engagement between a number of new heads, most notably Narendra Modi, fresh from his victory in India’s elections.
He is a charismatic leader with a strong entrepreneurial flare and belief that the best “social upliftment” initiative a government can do for its people, is create employment.
There are over 100 Indian companies active in South Africa and this number is likely to increase, as is the flow of South African companies into India.
The Modi-Chinese President Xi Jinping dynamic will be an interesting one to watch.
This summit could mark the start of a new Indo-China narrative, especially in light of one of the summit’s key agenda points being a decision on the Development Bank head office.
This is still most likely to be Shanghai; though not an initially popular location, as China has the biggest financial clout and is the best-set member state to get the bank quickly realised as a bricks and mortar reality.
Also on the agenda is UN Security Council reform, which remains a thorn in Brazil, India and South Africa’s collective side, as only Russia and China have permanent seats on the council.
With Modi having the overwhelming support of the largest democracy behind him, he is expected to be the most vociferous voice.
However, member states come to this week’s summit from very different vantage points than last year.
It will be Modi’s first multilateral meeting.
President Jacob Zuma will be there as a second-term head of state and will be looking to increase investment and trade, but he comes with significant domestic complexity that includes industrial strikes, unrest and stalled economic growth – as does Brazil.
The Brics nations were always strange bed-fellows.
Member states can learn more from their collective pathways about how to best address economic inequality and sustainable growth than by going it alone.
So there is a great deal at stake at this week’s summit.
The Brics nations have come too far and accomplished too much for it to be anything but a success.
Verachia is an adjunct faculty member and head of the India Africa Business Network at the Gordon Institute of Business Science. Twitter @averachia]]>
The number of defaulting debtors is growing in Greece.]]> |||
Athens - Dimitris Pikrodimitris took out a mortgage four years ago when he was drawing an annual income of 27,000 euros ($36,720).
But the economy quickly sank into a debt crisis, forcing Greeks to tighten their belts and driving the insurance agent's wages down to just 6,500 euros last year.
“I have difficulty even making basic expenses. I haven't paid the loan for the last two years,” Pikrodimitris told AFP.
The number of defaulting debtors like Pikrodimitris is growing in Greece, and experts are warning that the situation could blow up and smash hopes the country can finally emerge from a crippling six-year recession this year.
Greece's central bank said that non-performing loans - loans for which debtors have failed to make payments for more than 90
days - are currently worth 77 billion euros.
“Managing non-performing loans is a key challenge for banks,” Yannis Stournaras, a former finance minister who is now the Bank of Greece chief, told parliament last month.
Repayment has stalled on around 30 percent of mortgages and business loans, and around 50 percent of consumer loans, says Victor Tsiafoutis, a lawyer offering guidance to debtors at Athens-based consumer group Ekpizo.
“This is a bomb that is going to blow (and cause) a breakdown in the bank system,” Tsiafoutis said.
“Imagine a default of 70 billion euros. Who is going to pay this money?”
Greece's central bank said the rate of non-performing loans has risen to 33.5 percent at the end of March from 32 percent last year.
These so-called 'red' loans were mostly responsible for some 600 million euros in combined bank losses in the first quarter of the year, it added.
“The large number of non-performing loans is suppressing the process of economic recovery (and) represents a significant risk for banks,” added George Pagoulatos, a professor of European politics and economy at the Athens university of economics.
“Private sector balance sheets have become very strained,” Rishi Goyal, head of the IMF's Greece unit, told an Economist conference this week.
“Unless the problem is resolved, resources will remain trapped... and this will have negative consequences on growth.”
To protect homeowners from total ruin, Greece has restricted forced auctions of a debtor's primary residence.
But a related backlog of court appeals for bankruptcy protection -100,000 according to some estimates - could take a decade to resolve.
The Bank of Greece recently issued a set of recommendations to banks on how to deal with the issue that included partial debt writedowns, extended loan terms and the acceptance of additional forms of collateral.
But those are only recommendations, and banks have until December to apply them if they agree to.
In the meantime, hard-pressed debtors like 39-year-old Pikrodimitris have received little relief.
When he asked his bank to reschedule his mortgage, he was asked to pay 3,600 euros just to secure a settlement - a sum that is now more than half his annual income.
“I'm trying to avoid foreclosure,” he told AFP.
“When I took the loan, I took a risk and the bank took a risk. Eventually I will lose my home (while) the bank will never lose,” he said.
Tsiafoutis, the consumer group lawyer, said Greeks were “manipulated” by the banks before the crisis to take out loans and over-consume.
A key example, Tsiafoutis said, was mortgages denominated in Swiss francs, which cost some 70,000 consumers in Greece dearly when the save haven currency surged against the euro.
The euro traded at around 1.49 Swiss francs before the crisis, but now stands at just 1.2 francs.
“If a consumer borrowed 100,000 euros, today they might owe 130,000 euros even after paying interest all this period,” the lawyer explained.
“Banks played a very dark role in promoting these type of loans... to people unable to understand what they were signing up to,” he adds.
Even now, commercial lending rates remain exorbitant even though the European Central Bank's benchmark rate is at a record low of 0.15 percent.
The ECB's reference rate has an indirect impact on consumer rates charged by commercial banks.
“(Banks charge) almost 20 percent for credit cards and an average of 15 percent on consumer loans. This should be lowered to 5.0-7.0 percent,” the lawyer argued.
Greek bankers insist they see no immediate threat to the credit system from bad loans.
“This is an exceptionally serious issue, but I think it is manageable,” Michalis Sallas, head of Piraeus Bank, one of the four main lenders, said after a top-level government meeting on Wednesday.
Sallas stressed that “banks have provisions (against bad loans) of over 50 percent, and assets and collateral exceed the remaining amount.
So there is no threat to the banking system.”
Greek banks were recapitalised last year with funds from an EU-IMF bailout, after they were forced to cancel over 100 billion euros in state debt in 2012. - Sapa-AFP]]>
Completion of the R81 million Green Point Athletics Stadium has been delayed for almost a year.]]> |||
Cape Town - Completion of the R81 million Green Point Athletics Stadium has been delayed for almost a year because the city has been forced to cancel the construction contract with Filcon Projects – an embattled construction company which has filed for business rescue.
Construction of the new facility began in January 2012 and was scheduled for completion by the end of last year, costing about R81m.
Mayco member for community services and special projects Belinda Walker said construction of the stadium had not been completed.
“The contractor has failed to complete the contract and the facility is currently not suitable for use. The city was forced to terminate the contract and this process was completed in March this year,” she said.
The stadium was planned to offer terraced seating for 5 500 spectators, of which 3 500 seats would be under cover; with a further 1 500 casual seats on grass banks.
Walker said it was expected that the stadium would be open by the end of this year.
“We will ensure that all outstanding and remedial work is completed as soon as possible. A large portion of the facility is not yet in a condition that can accommodate athletics events, as many of the health and safety aspects of the building are not yet complete,” she said.
“The city will endeavour to have the facility ready by end of year. Certain aspects of the facility are available for use such as the parking area, which is used during events being held in the stadium precinct. There are alternative facilities such as the Blue Downs Stadium which can be accessed by clubs until the stadium is fully functional and rendered safe for use,” she said.
Filcon Projects filed for business rescue in April, resulting in almost R400m in government projects in the Western Cape being cancelled, halted or jeopardised.
Filcon Projects received two multimillion-rand contracts to refurbish council homes in Manenberg and a R67m project to extend two primary schools in Atlantis – both which ran into difficulties and were terminated by the city and provincial government.
Filcon chairman Saul Loggenberg, who was barred in the UK from being a company director until 2024 by the British Insolvency Service, did not respond to e-mail questions yesterday.
Green Point Ratepayers and Residents Association co-chairman Mark Magielse said: “We understand that this was a legal matter with the city and the contractor.
“It is a complete waste of money as the stadium is standing alone with no activity. It is really unfortunate.”
Magielse raised concern that the stadium was incomplete but its outside parking lot was being used.
“This should not be happening,” he said.
The ANC leader in the city council, Tony Ehrenreich, said: “Our view is that there are strong links between the DA councillors in the city council and Filcon Projects. The number of cancelled projects shows a very worrying trend and we would like to see a full investigation on this.
“The city is doing nothing much where this is concerned.” - Cape Times]]>
The maiden budget from India's new right-wing government has promised a return to high growth.]]> |||
New Delhi - The maiden budget from India's new right-wing government has promised a return to high growth - but disappointed some who hoped premier Narendra Modi might use his thumping mandate to unleash radical change.
The Bharatiya Janata Party (BJP) government opted for small steps in last week's budget, in what it called “the beginning of a journey” after winning in May the biggest electoral majority in 30 years.
While some economists felt Finance Minister Arun Jaitley should have been bolder, Deepak Lalwani, head of financial consultancy Lalcap, told AFP it was not “realistic to have 'big bang' reforms so quickly”.
Jaitley pledged faster economic growth, tighter fiscal discipline, greater openness to foreign investment and revamped infrastructure.
But he left intact $43 billion worth of anti-poverty subsidies - raising questions about how he will meet ambitious targets to cut government overspending.
Jaitley's predecessor P. Chidambaram noted acerbically that after criticising the previous left-leaning Congress government's subsidies as “mindless populism”, the new man in the job did not touch them.
“Welcome to the real world,” Chidambaram remarked.
India's hundreds of millions of poor are a vital vote bank, and the BJP and allies have their eyes on state elections this year.
They control just eight out of 29 local governments, and anti-populist moves could alienate voters.
Economists have long argued that India's economic potential will only be unleashed when it curbs subsidies and ends suffocating regulation.
They also advocate relaxing rigid labour protection laws that discourage manufacturers from hiring, and easing complex land acquisition laws to boost industry.
The budget left all these issues off the to-do list, although Jaitley said he hoped a long-awaited national goods and services tax (GST) to increase inter-state commerce would be ready by December.
Brokerage Nomura called the failure to tackle subsidies a “disappointment”.
But others said rather than missing the reform boat, Jaitley is playing a longer game to build consensus in a fractious democracy of 1.25 billion people in which competing business, social and political interests abound.
“Mr Jaitley has presented an admirable budget and he's extended hope of many more reforms,” Ajay Bodke, investment strategy head at brokerage Prabhudas Lilladher, told AFP.
Reducing subsidies at a time when farmers are struggling through a weak monsoon was not an option in this budget, said Bodke.
The government already delivered some bitter pre-budget medicine in the form of a double-digit hike in rail fares.
“Nothing can be done overnight - things take time in India -
but Mr Modi is a free-enterprise person, and so we could have a different India in five years,” said D.H. Pai Panandiker, who heads the RPG Foundation think-tank.
“If he's in power for 10, we may really become a progressive, middle-income nation,” he told AFP.
Still, Jaitley's decision to stick to the last government's goal of cutting the fiscal deficit to a seven-year low of 4.1 percent of GDP has raised eyebrows.
He plans to meet the target through higher tax revenues and quadrupling privatisation proceeds.
But with India mired in its deepest slowdown in a quarter-century - last year's growth of just under five percent is half the rate seen a few years ago - Jaitley might “regret abiding by his predecessor's target”, said Capital Economics analyst Mark Williams.
The government says growth could hit nearly six percent this year and rebound to seven-to-eight percent by 2018, but cautions that the weak monsoon could hit farm output, undermining expansion.
Jaitley's budget plucked some lower-hanging fruit. To draw more outside money, he hiked defence and insurance foreign investment caps to 49 percent from 26 percent and promised to make the corruption-plagued subsidy system “more targeted”.
He announced plans for private-public partnerships to build more roads, rail and other infrastructure to emulate rival China's economic miracle, though analysts fretted about how many investors India will attract.
But change may not just come through budgetary measures, analysts say.
Since defeating the scandal-tainted Congress, Modi - known as ruthlessly efficient when chief minister of the prosperous Gujarat state - has been working to change how India's sprawling, inefficient bureaucracy does business.
He has pursued his “Modinomics” campaign agenda of “maximum governance, minimum government”, consolidating ministries to streamline administration and speed up decision-making.
At the same time, keeping all bases covered, he has been sounding as resolutely populist as the Congress government, saying his greatest goal is to meet the aspirations of the “weakest, poorest” Indians.
The BJP's landslide victory has seen India's shares soar to record highs.
But if growth remains in the doldrums and the government misses its deficit targets, the honeymoon could be over. - Sapa-AFP]]>
Financiers may grumble that the United States is acting like an imperial power in punishing foreign banks for dealings far beyond US territory, but in the end they are more likely to bow to Washington than kick against its dollar muscle.]]> |||
London/Hong Kong - Financiers may grumble that the United States is acting like an imperial power in punishing foreign banks for dealings far beyond US territory, but in the end they are more likely to bow to Washington than kick against its dollar muscle.
Last week, French politicians and business leaders demanded an end to the global dominance of the US currency - and hence of the US banking system - after a New York court fined French bank BNP Paribas $9 billion for doing business in Sudan, Iran and Cuba. Yet despite irritation at the long reach of US sanctions, most bankers see that as wishful thinking.
Instead, major lenders in Europe and Asia are reacting to the steady flow of punishments from the United States by doing ever more to comply with US laws and by cutting business ties in countries Washington dislikes rather than risk its wrath and, in the worst scenario, risk exclusion from the dollar system.
Official regulators outside the United States are starting to look at ways to prevent their own banks and markets from being damaged by the scale of US penalties. But for now, each bank on its own has little choice but to toe Washington's line.
“The demands placed on banks to know their customer's customer, even in countries where such records are not routinely kept, means that banks have little choice but to terminate relationships or risk eye-watering, balance sheet altering fines,” said Anthony Browne, chief executive of the British Bankers' Association (BBA).
The BBA estimates Western banks have cut hundreds of relationships with correspondent banks in emerging markets, hurting businesses, governments and people in poorer countries.
Large commodity traders such as Glencore, Vitol, Trafigura and Mercuria are stepping in to plug the gap in trade finance.
Glencore was chosen last month by the government of Chad to finance its purchase of $1.3 billion of assets being sold by US oil company Chevron.
Meanwhile, far from turning their backs on the United States as a result of the demands of regulators and judges, foreign banks who have fallen foul of US rules are doing everything they can to ensure they can still tap the world's financial epicentre.
BNP has set up a financial security unit in New York to ensure its staff comply with all US sanctions and all of its US dollar flows will ultimately be processed and controlled via its branch in New York, centralising activities that used to be spread across various international offices.
RUSSIA “WAKE-UP CALL”
For all that, there are plenty of bankers with whom the US attitude rankles. Many - privately - sympathise with the senior British banker who was quoted in US legal papers when his bank was fined in 2012 for breaching sanctions on Iran.
In an expletive-charged broadside, the executive was quoted as saying: “You ... Americans! Who are you to tell us, the rest of the world, that we're not going to deal with Iranians?”
Nowadays, bankers are loath to object in public to US requirements, even though privately many believe Washington is using its financial dominance to push its foreign policy agenda and give its own banks the edge over foreign rivals.
“It's the US that people worry about,” said the chief executive of a bank in the United Arab Emirates, the Gulf state that has long been forum for business with sanctions-hit Iran.
“If the US says you must clamp down, you have to do it.”
New York attorney Adam Kaufmann dismissed the idea that the United States was engaging in “financial imperialism” overseas or targeting foreign banks for economic gain. US courts were simply applying laws in respect of the domestic banking system - where foreign banks need some presence if they are to clear payments in dollars, wherever in the world they are made.
“If you're going to use US financial institutions, you have to play by US rules,” said Kaufmann, a former prosecutor involved in numerous sanctions violations cases.
Despite grumbling from European players, US banks have also suffered.
JP Morgan was fined a record $13 billion this year for misleading investors during the housing crisis.
In Russia, where Western sanctions imposed on Moscow over this year's Ukraine crisis have prompted tens of billions of dollars in capital flight, the BNP fine may make international banks even more wary of doing business with Russian customers.
Brian Zimbler, managing partner of US law firm Morgan Lewis's Moscow office called BNP's penalty a “wake-up call”:
“Banks around the world are very scared of the US authorities,” he said.
“They are less likely to want to do deals with any counterparty in Russia unless they know them well.”
British banks Lloyds and HSBC, both of which have been punished by the United States in the past for sanctions violations, last month pulled out of a financing deal involving Russian state-run oil company Rosneft over concerns it could become embroiled in the diplomatic conflict.
FOREIGN REGULATORS' IRKED
Banks' shareholders remain more troubled by the legacy of past failures to follow US policies.
Analysts at Morgan Stanley expect major banks to pay out another $75 billion in the next three years, on top of $210 billow already paid.
But estimates are hard to pin down.
As recently as February, BNP Paribas was setting aside just $1.1 billion to cover its US sanctions settlement.
That was $8 billion off target.
Uncertainty is putting off investors and causing headaches for regulators.
A senior official at the Bank of England said this week that potential fines were making it harder to work out how much capital regulators should tell lenders to hold.
“We have to be very clear that actions are taken which do not undermine the stability of the financial system,” said the central bank's deputy governor Andrew Bailey.
Britain's financial watchdog levied total fines last year equivalent to just 8 percent of the BNP fine alone, according to figures compiled by regulatory think tank JWG Group.
In a bid to try and iron out differences in the way different countries punish corporate wrongdoing, international regulators are carrying out a review of the different penalties to show which ones are the most effective.
“I think people are beginning to realise that it's not healthy to have different approaches,” said David Wright, secretary general of regulators association the International Organization of Securities Commissions (IOSCO).
In Asia, mounting US fines and Washington's determination to impose its rules has prompted regulators to join forces, and, in a marked cultural shift, air their grievances publicly.
“Regulators in some Asian jurisdictions are beginning to recognise that they need to band together, as they won't get very far on their own,” said Mark Austen, chief executive of Hong Kong-based bank trade group the Asia Securities Industry and Financial Markets Association.
“We are seeing a sea change.”
Other big capital markets may some day encroach on US financial hegemony, but probably not any time soon.
At a summit next week in Brazil, leaders of the BRICS - China, India, Russia, Brazil and South Africa - will launch a development bank to be a symbol of their ambitions for global influence.
The currency in which they have chosen to denominate its share capital is a familiar one, however - the US dollar. - Reuters]]>
Although its diplomatic clout is compromised on several fronts, the United States still dictates its economic law around the globe and has even expanded its reach, at the risk of raising hackles.]]> |||
Washington - Although its diplomatic clout is compromised on several fronts, the United States still dictates its economic law around the globe and has even expanded its reach, at the risk of raising hackles.
The case of BNP Paribas is the most spectacular evidence of the trend.
After lengthy negotiations, France's largest bank agreed to pay $8.9 billion and pleaded guilty to moving billions of dollars through the US financial system on behalf of Cuba, Iran, Myanmar and Sudan, all blacklisted by US economic sanctions.
The use of the dollar alone allowed US authorities the right to order a criminal guilty plea and the record penalty on a foreign bank, a source of friction with French officials.
Former French prime minister Michel Rocard railed against “abuse of power” in an op-ed article in Le Monde newspaper, accusing the US of a kind of economic “occupation” based on the extraterritoriality of its laws.
“The sanctions regulations have been enforced more and more aggressively in the past 10 years and their use has been broadened from a response to 9/11 to a larger tool of foreign policy,” Farhad Alavi, a Washington-based lawyer specialised in sanctions, said in an interview.
Another issue has eyebrows furled.
Since the beginning of July, when a sweeping US law against tax evasion took effect, Washington has the right to demand the data of tens of thousands of accounts held by Americans in foreign banks.
Some 70 countries have signed treaties or agreed to cooperate with the US on the Foreign Account Tax Compliance Act (FATCA), but the tax evasion offensive has also been criticised for unilateralism.
“It's not fabulous, unilateralism,” admitted Pascal Saint-Amans, a staunch supporter of FATCA who heads the unit fighting tax havens at the Organisation for Economic Cooperation and Development.
“Lex Americana” also has extended its gavel into Argentina's crucial legal battle over government debt payments.
Deciding a case linked to Argentina's debt default in 2001, a US judge recently ordered Buenos Aires to suspend payment to its creditors unless it pays up on debt held by bond-holders who refused to join others in the 2005-2010 restructuring of the country's defaulted debt.
This order, which is limited to Argentina's bonds issued in New York, could be extended to bonds issued under British law, denominated in euros and with no link to the US.
Worrying about that possibility, investment funds have asked for a clarification from the judge.
“This court should clarify that the injunctions do not apply to the foreign third parties that process payments on the euro bonds,” they said in a motion to the court.
Across these three issues, the Americans are sending a “very clear” message, said former New York Stock Exchange vice president George Ugeux: “Don't mess with us.”
According to this expert, the world's leading economic power still wields “considerable leverage” thanks to the dollar, the world's reserve currency.
Stung by the BNP Paribas affair, French authorities have called on Europe to make progress in advancing the use of the euro.
The head of French oil group Total, Christophe de Margerie, backed up that call, publicly declaring: “Nothing prevents anyone from paying for oil in euros.”
The extension of “Lex Americana,” which still has not reached China, could have negative consequences.
If US regulations become “overly burdensome,” investors will shift financial activities to other financial markets, said Brookings Institution economist Barry Bosworth.
In the US, neither the Treasury Department nor the business community, however, appear to be worrying about an abrupt turn against the greenback.
“It's David against Goliath,” said Ugeux.
“There's no European consensus challenging the United States.”
And, he recalled, “one must not forget that the euro was on the brink of collapsing” not so long ago as the eurozone reeled from the Greek debt crisis. - Sapa-AFP]]>