Press review: South-African economic news from September 29th to October 10th.

Here is a short summary of the major economic news of the past two weeks in Southern Africa.

The Cap40 team regularly publishes news from the French consulate in Pretoria in order to give you fresh insights on the most important economic matters in the country and region.

 

Air France and kulula.com to partner.

On 2 October 2014, Air France announced a “codeshare” partnership with kulula.com, South Africa's largest low-fare airline. This partnership will enable Air France to add its code to kulula.com’s domestic flights and will allow Air France’s clients to purchase a single ticket including kulula.com’s domestic flight.

The two airlines confirmed that discussions were underway to include kulula.com’s flights in Air France’s frequent flyer programme, Flying Blue.

 

Three South African public companies fail to submit annual report to national Parliament.

South African Airways, South African Express and Broadband Infraco, all three state-owned companies, were unable to table their respective Integrated Reports in due time.

Whilst the submission of the report for Broadband Infraco was due to a technical matter, Ms Lynn Brown, Minister of Public Enterprises, said that in respect of the two airlines, she “had initiated a process to address the matters related to them”. She noted that she “intended to submit to Cabinet in the not too distant future a proposal which will address the State's ownership of airlines and the long-term financial stability of SAA and SAX”, therefore questioning the relevance of the State’s ownerships in the two airlines.

 

Nedbank Group announces 20% shareholding in Ecobank.

The pan-African group Ecobank and the 4th South African banking group Nedbank Group jointly announced that Nedbank Group acquired a 20 percent shareholding in Ecobank, for an amount of $493 million.

Nedbank Group CEO noted: “This shareholding represents an important step in the deepening of the banking alliance Nedbank Group has  with  Ecobank since 2008. Nedbank Group’s clients are increasingly expanding their business operations into the rest of Africa,and  Nedbank Group’s own operations in Southern and East Africa,  combined with  Ecobank’s unrivalled pan-African footprint and strength in West and Central Africa provides  our clients  with access to banking solutions across 39 African countries.”

 

Nersa approves 12.7% electricity tariff increase.

The National Energy Regulator (Nersa) allowed Eskom to implement a 12.7% once-off increase on electricity tariffs. This increase will be effective in the first period of 2015. In line with the increase implemented in the past few years, the tariffs were initially set to rise by 8% in 2015. However, this increase is below the 16% demanded by Eskom. 

Nersa has reviewed the increase rate in order to enable Eskom to recover approximately R7.8 billion for their over-expenditures during the 2010-2013 period.

Eskom has indeed been facing critical financial difficulties in the past three years, mainly imputable to a high level of indebtedness, governance problems, the belated delivery of the new Kusile and Medupi coal-fired power plants and the very high cost of the oil-fired generating plants used as an alternative to Kusile and Medupi to face power consumption peaks.

 

Publicis acquires three South African communication agencies.

The French multinational acquired BrandRocks, which will merge with the Publicis-owned company Saatchi & Saatchi. Liquorice, one of the leading digital marketing agencies, will be integrated to DigitasLBi. Finally, the independent communication agency Machine will be merged to Publicis Worldwide, and a local branch called Publicis Machine will be set-up.

The Publicis group continues its expansion in South Africa, after the acquisition of Prima Integrated Marketing, OwenKessel and Lighthouse Digital.

According to Publicis, South Africa occupies the 8th position in terms of growth potential for advertising in the next three years.

 

The Competition Commission of South Africa approves the merger between Lafarge and Holcim.

The Swiss group Holcim does not operate directly in South Africa but holds a 2% share in the South African cement manufacturer Afrisam, a direct competitor of Lafarge.

The participation of Holcim in Afrisam entailing a technical assistance agreement, the Swiss group has however been prompted to sell its stakes in Afrisam within the three years following the merger.

 

Lonmin recovers its baseline production level.

The platinum producer Lonmin, which together with Amplats and Implats had been critically affected by the 5-month strike in the platinum industry until an agreement was reached in June, said it had recovered its baseline production level in August.

 

Transnet and Becsa sign a “take-or-pay” agreement.

The public railway company Transnet signed a firm delivery contract with the coal division of the Australian group BHP Billiton for the transport of coal to the shipping terminal of Richards Bay.

BHP Billiton committed to pay R2.4 billion per year until 2024. Transnet said they were looking to sign similar contracts with more clients in order to finance its R45.5 billion infrastructure investment in the railway line linking the Mpumalanga basin to the port of Richard Bay. 

 

Fuel prices to rocket in Angola.

For the first time since 2010, the Angolan government significantly increased the fuel prices on September 27th, on average by 25%.

This tariff increase will enable the Angolan government to finance investment spendings and is part of a wider program aiming at decreasing the subsidies granted to the energy sector. The subsidies to the energy sector are estimated to cost an annual 4% of GDP. This structural adjustment program is strongly back by the IMF.

The country is heavily dependent on hydrocarbon production, which accounts for more than 95% of its exports and 70% of its tax revenues.

 

The Mozambican ministry for mineral resources launches a call for expression of interest for a study relative to a gas pipeline project.

The project would depart from the town of Palma, in the Rovuma basin, and would be financed by a $50 million loan granted by the World Bank.

The study comprises five sections: (i) a market study on potential outcomes for gas production in Mozambique and Southern Africa; (ii) a technical study on the implication of gas production in the region; (iii) an economic analysis relative to the transport costs of natural gas via a pipeline; (iv) an assessment of the social and environmental risks; (v) a series of recommendations on how to hit the strategic targets set by the Mozambican government.

Mozambique owns the 8th largest proven natural gas reserves in the world and adopted a Natural Gas Master Plan in June 2014.   

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