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March 13, 2019

JSE likely to weaken as Brexit uncertainty escalates

The JSE will probably open lower on Wednesday after UK MPs shot down Prime Minister Theresa May’s Brexit plan for the second time, sending Asian stocks lower as uncertainty mounted.

With only 17 days to go before Brexit is meant to happen, May’s plan to withdraw from the EU was heavily rejected by MPs. This raises the risk of a messy no-deal divorce between the UK and the EU.

Focus will now be on whether parliamentarians decide to go that route or ask for an extension to the break-up date.

Hong Kong’s Hang Seng index was 0.6% lower at the lunch break, with Naspers associate Tencent 0.8% down. Japan’s Nikkei 225 index was 1.1% lower, and Australian stocks were 0.4% weaker.

JSE heavyweight BHP Group was 0.5% down in Australia.

The busy reporting season continues for SA’s main bourse on Wednesday, with top-40 constituent Growthpoint Properties scheduled to publish its interim results.

Another top-40 member, RMB Holdings, will also report.

Mpact is due to publish results for the year ended December. It said in February that its headline earnings per share (HEPS) would increase by between 15.5% and 21.6%.

MTN’s shares could react to news that its e-commerce associate, Jumia, has filed for an initial public offering (IPO) in New York. The mobile operator said recently it planned to offload noncore assets, such as Jumia, to raise at least R15bn.

Bloomberg News reported in February that an IPO would value Jumia at about $1.5bn.

Meanwhile, in the wake of May’s Brexit defeat, gold was slightly firmer while the rand was weaker.

Against the dollar, the rand was 0.17% weaker at R14.38/$. Versus the pound it was 0.24% worse at R18.82/£, and against the euro it was 0.12% weaker at R16.23.

Source:https://www.businesslive.co.za/bd/markets/2019-03-13-jse-likely-to-weaken-as-brexit-uncertainty-escalates/

March 13, 2019

Growthpoint warns of little to no growth from SA properties

The real estate investment trust says it will have to rely on its international properties for growth due to deteriorating conditions in the local property sector.

Growthpoint Properties says it will have to rely on its international properties for growth, as it expects “little to no growth” from its SA portfolio due to deteriorating conditions in the local real estate sector.

Most growth in the year to end-June 2019 will come from the real estate investment trust’s (Reit) international investments, Growthpoint said in its interim results on Wednesday.

SA’s property fundamentals “remain weak and are worsening”, which means the local portfolio would probably produce “little to no growth”.

Even the V&A Waterfront, which benefits from local and international tourism, was “not immune to the erosion in the domestic economy, and turnover rentals declined in the first half”.

However, property fundamentals remained strong in Australia, Growthpoint said. The group has a 66% interest in Growthpoint Properties Australia, which owns 59 properties valued at R38.3bn.

Dividend withholding taxes relating to that investment would be lower this financial year, and the group had taken advantage of exchange rate weakness “with favourable hedge rates”.

Further offshore growth would come from Growthpoint’s Central and Eastern European investments, where property fundamentals “are solid”.

Assuming “no further deterioration in the SA business environment”, Growthpoint expected growth in dividends per share for the financial year to end-June 2019 of about 4.5%.

The Reit said distributable income in the first half grew 5.9%, allowing it to increase its interim dividend by 4.5% to 105.8c a share.

The value of the group’s property assets rose 4.3% to R138.7bn.

Vacancy levels in SA rose from 5.2% to 6.5%. In the office sector specifically, vacancies rose to 10.2% from 8.4%.

Growthpoint said the Cape Town water crisis “is now under control”. The V&A Waterfront, which is 50% owned by the group, was building its own desalination plant to take it entirely off the water grid.

Source:https://www.businesslive.co.za/bd/companies/property/2019-03-13-growthpoint-warns-of-little-to-no-growth-from-sa-properties/

March 13, 2019

Diversify energy supply, do more with renewables – Netherlands Ambassador on Eskom

It is important to diversify energy options, as a reliable energy supply is “vital”, Netherlands Ambassador to SA Han Peters told Fin24 on Monday.

Speaking to Fin24 by phone, Peters discussed various issues affecting investor confidence in SA – among these, energy supply. He was previously ambassador to Brazil, before being appointed to his current position in 2018.

At the state of the nation address in February, President Cyril Ramaphosa announced that the state power utility Eskom would be split into three entities, in an effort to ensure security of energy supply.

The entities – responsible for generation, transmission and distribution – will remain state-owned and will fall under the Eskom Holdings parent company, Ramaphosa has said.

Government has since announced the appointment of a technical review team, tasked with reviewing the operations, maintenance and the technical environment at Eskom’s power stations.

The team of 11 have academic, engineering and power system expertise. The team reports to Public Enterprises Minister Pravin Gordhan and to a technical sub-committee of the Eskom board.

“I think it is good that government has a plan for Eskom, and now we will have to see how to implement it,” Peters told Fin24.

“Energy supply is vital for industry, for households, for all of us. It is also good to diversify energy options.

“I think almost any country in the world will have to do that, as we move away from fossil fuels,” Peters said.

Peters referred to the Netherlands, which is heavily reliant on gas for energy. It is also in a process of transitioning to other energy resources, as the areas where natural gas sources are located are experiencing earthquakes.

“There is definitely a need for all of us to do more with renewable energy,” he said.

Labour unions have opposed the introduction of renewable energy to the energy mix, arguing they pose a risk to jobs at coal mines and will make electricity more expensive.

The National Union of Metalworkers of South Africa has blamed tariff hikes granted by the energy regulator to Eskom for the next three years, on the introduction of IPPs.

Gordhan has previously said that government has been consulting with unions and other stakeholders in the energy space to better understand the challenges Eskom is facing and what must be done to turn things around.

Source:https://www.fin24.com/Economy/Eskom/diversify-energy-supply-do-more-with-renewables-netherlands-ambassador-on-eskom-20190313

March 13, 2019

Hundreds of jobs at risk as Absa revamps retail bank

Absa Group is restructuring its South African retail and business banking unit within months of reducing the division’s management team and rolling out a new strategy.

Finance labor union Sasbo was notified to begin consulting staff last week on the potential impact of the move, union representative Philip Landman said by phone Wednesday. About 15 retail-banking executives exited their positions at the Johannesburg-based lender in June, after a similar process was followed to flatten the unit’s top structure.

Discussions between Sasbo, Absa and employees are still in their early stages, with 827 jobs potentially at risk, Landman cited a written notice from the company as saying, adding that 340 people might be employed through the process. “At this point we are trying to figure out if what the bank is saying has merit, and prove that the restructuring is actually unnecessary.”

“It is only once the realignment is complete that the total number of people who have either been appointed to new roles or have left the organisation will be known with certainty,” Absa said in emailed comments. The changes will result in “both new opportunities and redundancies across the business,” it said, adding that the steps aren’t a “retrenchment exercise, but a realignment effort aimed at enabling our new strategy.”

Tepid growth

The shake-up comes as South African lenders contend with slow economic growth and a consumer base battered by tax hikes and rising fuel and utility expenses. A stubborn unemployment rate of about 27 percent and declining business confidence is also curbing demand for loans, forcing banks to bring their costs down.

Retail and business banking accounts for more than half of Absa’s profit and is at the center of a group-wide push to grow revenue faster than its competitors after the lender’s former UK-based parent, Barclays, sold down its controlling stake to below 15%.

The division’s chief executive officer, Arrie Rautenbach, who was appointed about a year ago, is focusing on boosting mortgage lending, lowering costs and expanding the number of products sold to its clients. Rautenbach is implementing his strategy as South Africa’s banking sector becomes increasingly competitive with one new rival, TymeBank, launching in February and two more are expected to follow this year.

Source:https://www.fin24.com/Companies/Financial-Services/hundreds-of-jobs-at-risk-as-absa-revamps-retail-bank-20190307

March 13, 2019

Group Five collapse signals SA construction demise

South Africa’s construction industry is being demolished.

After 45 years of trading on Johannesburg’s stock exchange, Group Five’s stock was suspended on Tuesday after the company filed for bankruptcy protection, making it the fifth local builder to enter business rescue in less than a year.

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From a peak market value of R8.2bn in 2007, it was worth less than R100m when the shares stopped trading.

While the construction industry is notoriously cyclical, the current mix of a depressed South African economy, high levels of national debt and low infrastructure spending is proving toxic as contracts dry up. At risk are thousands of jobs – including 8 000 at Group Five alone – in a country with an unemployment rate of above 27%.

“Those construction companies that are South Africa orientated have gone from bad to worse in the past 12 months,” Marc Ter Mors, the head of equity research at Johannesburg-based SBG Securities, said by phone. “In South Africa, volumes are low, pricing is under pressure and companies are taking on more risk to win contracts, so margins are thin and that hits cash flow. There are no real segments to hide in.”

Volatile markets

Group Five’s history demonstrates the group’s resilience in “several extremely volatile markets,” the company still says on its website. Even so, it has “for some time been experiencing cash flow difficulties,” it said on Tuesday.

Murray & Roberts saw the writing on the wall. Having built significant South African landmarks such as Johannesburg’s Carlton Centre, the continent’s tallest building, the company sold its building and infrastructure units in 2016 to focus on international businesses focused on projects such as underground mining and oil and gas.

While M&R’s market valuation is a fraction of what it once was, the stock has gained 44% in the past year amid takeover interest from 40% shareholder Aton GmbH.

READ: R4.5bn new development at O.R. Tambo Airport
The industry’s woes are a far cry from the build up to the FIFA Soccer World Cup in South Africa nine years ago, which required major national infrastructure spend, including on new stadiums.

However, that boom was cast in a dark light even before the tournament took place, when the Competition Commission started investigating collusion in the industry. The regulator settled with 15 firms in 2013, while Group Five was granted immunity for co-operation.

Government spending

While South African President Cyril Ramaphosa last month said government’s infrastructure spending had slowed, he also said the state will contribute R100bn into a fund over 10 years. The plan is to use this to get financing from both private and state-owned companies to reboot the industry.

In the meantime, the FTSE/JSE Africa Construction & Materials Index is down 27% in the past 12 months, compared to a 6% drop in the FTSE/JSE Africa All Shares Index. There is also risk that if South Africa’s local construction industry is wrecked, future building projects will become more expensive, Ter Mors said.

According to Ter Mors, as South Africa depletes its capacity to build its own infrastructure, when the cycle turns again, it will be forced to rely on international companies and their pricing.

Source:https://www.fin24.com/Opinion/group-five-collapse-signals-sa-construction-demise-20190312

March 5, 2019

Rural areas to receive electricity powered by renewable sources

Rural areas far from the national grid will get electricity through renewable energy sources, says Minister of Electricity and Energy U Win Khine.

He said the government will provide electricity to these areas through renewable energy as lower population density and electricity usage may not make it economical to expand the national grid.

U Win Khine added that the government would look into the supply and distribution of these renewable energy sources to rural areas.

He pointed out that the government was also taking steps to enact a renewable energy law, implementation and related procedures.

The first meeting of the National Renewable Energy Committee was held on March 1 and comprises the Ministry of Electricity and Energy (MOEE), related ministries as well as private organizations.

Meanwhile, the deputy director of the Ministry of Science and Technology’s renewable energy research department, Dr Thi Thi Soe, told Myanmar Times that policy and strategy would be needed to develop and implement renewable energy projects.

She said the move to have create more public awareness, research and infrastructure development will also attract investors.

The government aims to distribute electricity to 50pc of the country by end-2019, and to cover the entire country by 2030.

Myanmar’s current power-generation capacity stands at 3,500MW with electricity usage improving 15pc yearly. The MOEE plans to generate an additional 394MW in 2018-19, 450MW in 2019-20, and 1,712MW in 2020-21.

According to earlier reports, the government aims to generate 8pc of electricity through renewable energy sources by 2021 and 12pc by 2025 through solar and wind energy.

Currently, Myanmar has one solar energy power plant, the first in the country, located in Magway Division generating 170MW of electricity. Another two solar energy plants, located in Myingyan and Wundwin in Mandalay Division, with a generation capacity of 150MW each, have been planned.

An agreement has also been signed with China’s Three Gorges Corporation to develop a 30MW wind energy power plant in Chaung Thar, Ayeyarwaddy Division, which would make it the first in the country.

According to the MOEE, wind energy plants can potentially be developed in Chin State, Rakhine State, Yangon Division, Shan State, Kayah State, Tanintharyi Division, Mon State and Kayin State.

Source:https://www.mmtimes.com/news/rural-areas-receive-electricity-powered-renewable-sources-minister.html

March 5, 2019

Finance Firms Given 15-month Regulatory Grace Period if No-Deal Brexit

British regulators will give banks, asset managers, insurers and brokers until mid-2020 to fully comply with rules that replace European Union law in the event of a no-deal Brexit.

The Bank of England and Britain’s Financial Conduct Authority (FCA) on Thursday published a “near final”version of the rulebook that would come into effect if Britain leaves the EU without a transition deal.

Britain has already turned EU laws into UK statutes, but this “onshoring”entailed some changes to function properly and financial firms have said they would have limited time to comply if there is a no-deal Brexit, meaning they would be in breach of regulation and face possible sanction.

“In most cases, we plan to allow firms a period of 15 months to adapt,”the FCA and BoE said in separate statements.

Financial firms have been planning for all forms of Brexit since Britain voted in June 2016 to leave the EU, with the bloc as well as the UK putting in place measures to avoid markets falling off a “cliff edge”if there is a no-deal Brexit.

But FCA chief Andrew Bailey told UK lawmakers on Wednesday that despite the preparations, he could give no assurance that a no-deal Brexit would not disrupt finance.

“This grace period will offer relief and a degree of regulatory predictability,”Jonathan Herbst, global head of financial services at Norton Rose Fulbright law firm, said.

The final version of the rulebook would be published on 28 March, a day before Brexit is officially due to take place on March 29, if there is no deal.

If there is a transition deal, financial firms would continue under EU rules until the end of 2020 when the UK wants new, long-term trading terms with the bloc to start.

FCA executive director international, Nausicaa Delfas, said Thursday’s announcement was a significant milestone in the financial sector’s preparations for a no-deal Brexit.

“They ensure that there is a functioning regulatory regime from day one, and that firms are clear as to the requirements they need to meet by end March 2019 and beyond, so they can continue to meet the needs of their customers,”Delfas said.

Source:https://www.mmbiztoday.com/articles/finance-firms-given-15-month-regulatory-grace-period-if-no-deal-brexit

March 5, 2019

Myanmar launches trade, investment project with UK support

The Ministry of Commerce together with the Directorate of Investment Administration (DICA) and the International Trade Center (ITC) launched the Trade and Investment Project (TIP) on Monday with the aim of boosting Myanmar’s business ecosystem by improving trade and investments.

The TIP, which would run from 2019-21, is funded by a US$5.28 million grant from the UK’s Department for International Development (DFID) with technical assistance from the ITC, a multilateral agency based in Geneva.

The project’s strategic focus include improving trade competitiveness and business environment through updating National Export Strategy (NES), supporting investments in building productive capacities as well as expanding public and private trade and investment support services to micro, small and medium enterprises.

The TIP will also improve the investment promotion through the Myanmar Investment Promotion Plan (MIPP), and enable priority sectors growth through specialized support for the private sector.

The current NES, which runs from 2015-19, has a list of 11 prioritized sectors, which includes rice; beans pulses and oilseeds; fisheries; forestry products; textiles and garment; rubber; tourism; information and promotion; trade facilitation and logistics; access to finance; and quality management as supporting services to improve export.

The Ministry of Commerce will be adding fruits and vegetables, gems and jewelry, handicrafts, processed food products and digital business as the potential export sectors for the updated NES (2020-25).

The Ministry of Commerce’s permanent secretary U Aung Soe said the states and divisions of the country will then develop the prioritized sectors assigned to them following the NES’s updating of these sectors.

He said the NES will need to address how the country can leverage new opportunities through the creation of sustainable agro-processing, manufacturing and services jobs.

U Aung Soe added that it would also be important for trade to be inclusive and reach all the states and divisions, as well as promote the building of productive capacities.

Meanwhile, DICA Director General U Aung Naing Oo said seven states and divisions will be chosen for the TIP implementation, which will also support the MIPP.

ITC Executive Director Arancha Gonzalez said Myanmar has great growth potential as the TIP will work with private and public sector partners to capitalize on these opportunities and help the country to position itself for greater investment and deeper regional integration.

The DFID’s senior economist and inclusive-growth team leader Tom Coward said the TIP will support economic development in the states and divisions as well as generate jobs and improve incomes.

The launch of TIP comes at a time when exports appear to be gaining on imports. Data from the Ministry of Commerce showed the trade deficit for the first four months of the 2018-19 fiscal year, which starts in October and ends in September, has declined with imports increasing at a slower pace compared to the same period of last fiscal year.

According to the data, trade volumes for the period up to the second week of February reached US$12.65 billion, a gain of US$634 million compared to the same period of last fiscal year. Exports stood at US$5.9 billion while imports dropped by US$280 million to US$6.8 billion.

The government is targeting a total trade of US$31 billion for the current fiscal year, with US$15.3 billion for exports and US$15.8 billion for imports. This would reduce the trade deficit to US$500 million.

Myanmar exports items from seven major commodity groups. These include manufactured goods consisting mainly of garments, as well as agriculture produce, minerals, cattle, fisheries and forestry products.

In comparison, Myanmar’s major import items are divided into four groups — capital goods, intermediate goods, consumer goods and cut-make-pack garment products.

Source:https://www.mmtimes.com/news/myanmar-launches-trade-investment-project-uk-support.html

March 5, 2019

Approval given for South Korean industrial complex in Hlegu

The Myanmar Investment Commission (MIC) has approved the setting up of a South Korean – Myanmar Industrial Complex (KMIC).

During a meeting on February 20, the MIC gave its go-ahead for the complex to be established as a joint venture.

The development and operations of the first phase of the complex, which will be run by the Korea – Myanmar Industrial Complex Development Co Ltd, will be on land in Hlegu Township, Yangon Region. Phase one of the project is expected to utilise 127 hectares out of 224 hectares allocated for the complex.

KMIC will run as a 60/40 partnership between South Korea’s Land and Housing Cooperation and Myanmar’s Department of Urban Housing and Development under the Ministry of Construction.

US$110 million has been allocated for the project which is expected to take five years to complete.

The Ministry of Construction had said in May 2018 that the project is projected to create between 50,000 and 100,000 jobs when it is completed.

Plans for the complex call for areas dedicated to small, medium and large enterprises, employee housing, a training school, park, and business-related services.

The complex is important as many South Korean manufacturing companies are now interested to expand in Myanmar, Kim Young-sun, Secretary General of the ASEAN-Korea Centre, said in 2018.

Besides the complex, South Korea is contributing to the building of the Korea – Myanmar Friendship Bridge project in Dala Township.

source:

https://www.mmtimes.com/news/approval-given-south-korean-industrial-complex-hlegu.html

February 21, 2019

Interest in Mandalay Real Estate Spikes Early in 2019

The Mandalay real estate market became active in early 2019, with more people wanting to rent properties, according to real estate agents in Mandalay.

“Since the end of Vassa — a three-month annual retreat for Buddhist — there are more people who want to rent properties, especially people from the country side renting both condominiums and apartments,’’ said U Lun Maung, a real estate agent in Mandalay.

In 2018, monthly rental prices for apartments ranged from K100,000 to K150,000, but have gone up to between K150,000 and 250,000 depending on location and size of the apartments in more popular ares.

“Monthly renting fee for a villa [or, a large house, ED.] were K500,000-800,000. But now it reaches K1 million to 2 million depending on the location,” said U Yang Aung, an executive of Mandalay Regional Real Estate Agents Development Association.

Depending on the property’s location and size, the monthly rental fees for a villa ranges from K1.5 million to K3 million, while average apartments rental fees ranges K75,000 to K150,000.

Source:https://www.mmbiztoday.com/articles/interest-mandalay-real-estate-spikes-early-2019