News in South Africa 19th May:
1. Steinhoff chairperson resigns:
Heather Sonn, the chairperson of Steinhoff, has resigned from all her functions at the multinational retailer.
In a statement on Monday morning, Sonn said a company in which she is a shareholder, Gamiro Ventures, had “unwittingly” completed a transaction with Geros Financial Services that “now appears may have been associated with and (indirectly) funded by the company (Steinhoff)”.
“In December 2017 I requested that this transaction be placed on the list for investigation by PwC when a name in the shareholding structure of the shareholder of Geros was recognised as a name that also appeared in the Viceroy Report.
“Unfortunately, it has taken over 2 years to get to a conclusion as to the nature of the relationship between the company and Geros, but there were multiple priorities for the company at the time,” she said.
Sonn said that “based on what is now known to me” the transaction “would have required certain disclosures which I would have made had I been aware thereof”.
Peter Wakkie, the vice chairperson of Steinhoff’s Supervisory Board, said in a statement that Sonn had “in no way been found to have participated in the accounting irregularities at Steinhoff”.
2. Wall Street surges:
Wall Street surged overnight amid optimism about a coronavirus vaccine. The pharmaceutical company Moderna reported that its medicine has helped create immune responses that may help protect people from being infected with the coronavirus.
Crude oil futures rocketed by as much as 13%, with WTi trading at $33.
3. Growthpoint coming up short:
One of SA’s leading landlords, Growthpoint Properties, says it is receiving requests for additional rent payment relief on a daily basis with tenants battling to pay their bills as the nationwide lockdown enters its eight week. The group’s flagship V&A Waterfront development in Cape Town has only been able to collect around 50% of what it billed tenants in those two months.
“The V&A Waterfront is significantly impacted by Covid-19, considering some 66% of its net property income comes from the retail and hotel sectors,” said Growthpoint in a statement.
Growthpoint said because the V&A Waterfront is heavily dependent on foreign tourists who account for 50% of sales at retail outlets and 80% of ihotel occupancies, it had to give R26 million in rental discounts just for April and May.
It also had to give rental discounts of around R1m in each month to marine and industrial tenants, specifically helicopter operators.
Growthpoint, which also owns shopping malls like N1 City, Fourways Crossing and the Waterfall Mall, said only 22% of its retail tenants were classified as essential and fully trading. Whereas the company usually bills its tenants in the region of R1.1bn per month – excluding the Waterfront – in April, it collected R735 million or 71% of normal revenue after giving a combined discount of R99 million on all its properties. In May, it collected R665 million.
4. Massmart seeks rental relief:
Strained by operating under lockdown conditions since the end of March, the Wal-Mart owned Massmart is now seeking rental relief to manage its cash position.
The company’s stores such as Makro, Game and Builders Warehouse have only been allowed to sell essential goods during the lockdown period with the sale of alcohol banned under the current regulations.
“We will continue to proactively work with all suppliers and stakeholders to manage our cash position going forward including,” the company said in a trading update on Monday.
To save cash, it is “negotiating and participating in the rental relief package from the Property Industry Group”.
Massmart, which went into the lockdown already struggling under the weight of a sluggish economy and poorly performing Game stores, reported an almost 12% decline in sales for the 19 weeks to May 10.
The Covid-19 financial challenge comes on the back of declining profits as the group in 2019 reported a R861 million loss. This year it shut down its poor performing DionWired electronic stores and revealed that it would consider whether to close the 11 non-performing Masscash stores.
“We should also take into account that the company had lost a bit of market share before Covid-19 hit, the pandemic is now likely to delay their turnaround,” said Nolwandle Mthombeni, equity analyst at Mergence Investment Managers.
5. Acsa needs R10 billion:
Airports Company SA (Acsa), which manages and operates nine airports in SA, says it expects it will need about R10 billion in government guarantees over the next five years in order to obtain bank loans to continue operating.
The airport management company and the SA Civil Aviation Authority on Tuesday briefed Parliament’s portfolio committee on transport on their strategic plans for the 2020/21 financial year.
Acsa predicts it will need about R1 billion in government guarantees for the 2020/2021 financial year and about R3 billion over the next three years.
Current sentiment and flight bans brought about by the coronavirus pandemic, as well as Acsa’s and South Africa’s sovereign debt downgrade to sub-investment grade by Moody’s in March, was threatening its ability to raise funding, it said.
Although Acsa expects that it would be able to repay loans once flight operations start to expand again, it foresees that banks will not be willing to lend it money at the moment unless the loans are backed by some form of government guarantee.
Interventions to save money in light of the pandemic’s impact – such as a freeze on recruitment for the next three months and the disposal of non-core investments – will not bring about enough savings.