Take-home pay index paints a gloomy picture
CAPE TOWN - The BankServAfrica Take-Home Pay Index was a shocker because it indicated that a fifth of all employed people in South Africa didn’t get a salary in June, which probably meant they were retrenched.
South Africa is not like some Western countries where people are retrenched, can rely on state aid for a while, and then can look forward to being rehired again quite quickly once demand picks up in the economy.
South Africa’s labour policies are based on an antithetical premise that employees need to be protected from their employers, so reducing staff is a difficult, last resort-like process.
In South Africa unemployment has been rising steadily, and has been really accelerated by the Covid-19 lockdown.
Other bad news for local markets was the digging up of government corruption in South Africa’s Covid-19 response, the country’s rising infection rate, the steepest drop in US gross domestic product in the second quarter since the Second World War (-32.9percent), and continually rising Covid-19 cases in that country.
So it was no surprise then that global paper and pulp group Sappi’s share price continued to fall on Friday - it was 2.31percent lower at R24.92 Friday morning.
The price had fallen 17.5percent from a R29.30 close on Wednesday, after it also reported a $73million (R1.2billion) quarterly loss on Thursday. Advertising and newsprint usage, key drivers of the sale of the groups products, all fell dramatically during the various lockdowns globally, and demand has only started to improve gradually.
Also declining sharply last week was the share price of steelmaker ArcelorMittal SA. Its share price was up 16percent to 29cents on Friday morning, but over a week the price nonetheless represented a decline of 42percent.
Its interim results to June reported last week were nor pretty - the loss more than doubled to R2.61bn, some of its furnaces are idling due to low demand, and borrowings are about double they were a year ago.
A further threat to de-industrialisation in this country was the sharp deepening of losses also at Stefanutti Stocks Holdings, one of the few remaining large construction groups on the JSE capable of doing mega projects.
The company has raised funds for a substantial restructuring to restore profitability, and its plans have been thoroughly vetted by a range of stakeholders, but in my view, the company should focus on securing more overseas work while the hiatus in infrastructure spending persists locally.
The share price was untraded at only 26cents on Friday, after falling by a quarter over a week. The share was trading at R5.49 five years ago, so this is probably not a stock for investors seeking a defensive portfolio.
The resilience of AEECI’s diverse global chemical sales and business shone through this week, because while it also lost money during its second quarter due to Covid-19 lockdowns, it still managed to pay an interim dividend.
The share price was 0.58percent lower at R85.60 on Friday, but over a week the price had risen 11percent. Its price:earnings ratio of 8.4 is a little below the market but in line with other global chemical groups. And considering its earnings record over 5years, and the relatively flat trendline of its share price over the same period, this might be one share to consider for the defensive portfolio, at present.
One of the biggest share price movers on Friday was Vivo Energy. Its share price increased 12.9percent to R17 by midday Friday.