News in South Africa 25th February:
1. Budget speech – response largely positive:
he response to National Treasury’s 2021 budget has been broadly positive, with analysts praising the finance minister for sticking to his guns on cutting spending, while dropping plans to raise more taxes.
However, it has not been without controversy, particularly from the alcohol and tobacco industries, which have been hard-hit by lockdown and government bans. They came off as some of the biggest losers in the budget.
British American Tobacco SA (Batsa) believes finance minister Tito Mboweni made a mistake by hiking tobacco prices as the industry tries to recover from the ban that was imposed during the hard lockdown.
“The 8% increase is far in excess of the government’s planned excise policy and is another windfall for the illegal market that flourished during the 20-week prohibition last year and now is over 50% of the South African market — one of the highest in the world,” Batsa said in a statement.
SA Breweries (SAB) has expressed disappointment over finance minister Tito Mboweni’s decision to increase the excise rate for beer by 8%.
Mboweni announced the increase during his budget speech on Wednesday.
SAB said in a statement the move was “yet another blow following a series of setbacks that the beer value chain has had to weather over the last 12 months, including 19 weeks of sales bans culminating in a loss of more than 200,000 jobs [1.2% of national employment] and R52bn lost in GDP contribution [1% of national GDP at market prices].
“The announcement means that tax on beer will increase by almost double the rate of inflation. In a time of unprecedented economic hardship, this decision will fundamentally impede the recovery of a value chain already on its knees.”
2. Woolworths reports profits:
Retailer Woolworths on Thursday (25 February) reported strong growth in its food division for the 26 weeks ended 27 December 2020, with improved trading momentum across all businesses over the final six weeks of the reporting period.
Group sales for the period increased by 5.3% compared to the 26 weeks ended 29 December 2019, but declined by 0.5% in constant currency terms.
“South Africa’s weak macro environment and consumer confidence has been further exacerbated by the second wave of Covid-19, placing further strain on consumer discretionary spend,” it said.
- Turnover +5.8% to R39.6 billion
- Turnover and concession sales +5.3% to R43.0 billion
- Profit before tax +66.2% to R3.6 billion
- Adjusted profit before tax +24.6% to R2.7 billion
- Headline earnings per share +58.3% to 261.1 cps
- Adjusted diluted headline earnings per share +19.4% to 193.7 cps
However, no interim dividend was declared (from almost 90c in 2019).
3. Johnson & Johnson effective against new variants:
The single-shot Johnson & Johnson vaccine is highly effective in preventing severe COVID-19, including newer variants, according to documents released by the US Food and Drug Administration on Wednesday.
The news came as the regulator was set to convene an independent panel Friday that will likely vote to authorize the vaccine, making it the third available in the country hit hardest by the coronavirus pandemic.
In large clinical trials, the J&J vaccine’s efficacy against severe disease was 85.9 percent in the United States, 81.7 percent in South Africa, and 87.6 percent in Brazil. Overall, among 39,321 participants across all regions, the efficacy against severe COVID-19 was 85.4 percent, but it fell to 66.1 percent when including moderate forms of the disease.
Crucially, analyses of different demographic groups revealed no marked differences across age, race, or people with underlying conditions.
The vaccine was generally well-tolerated, with no reports of severe allergic reactions (anaphylaxis), which have been seen in rare cases for the Pfizer and Moderna shots. Mild to moderate reactions, like injection-site pain, headache, fatigue and muscle pains were more likely to occur in younger participants than older. There were no reported deaths in the vaccine group, but five in the placebo group.
“The analysis supported a favourable safety profile with no specific safety concerns identified that would preclude issuance of an EUA (emergency use authorization),” the FDA wrote.
4. E-toll still not mentioned in budget:
The controversial e-toll system on the Gauteng Freeway Improvement Project (GFIP) failed to get any direct mention in the 2021 Budget Review although there were general references to the “user-pay” policy.
The review said the financial positions of public entities and local government remain weak as a consequence of poor financial management, adding that medium-term debt redemptions of state-owned companies total R182.8 billion.
“Without rapid improvements in financial management and the resolution of longstanding policy disputes – including the user-pay principle – they will continue to put pressure on public finances,” it said.
However, an annexure to the Budget Review stressed, without making any reference to e-tolls on the GFIP, that until the user-pay policy for roads is fully implemented, the SA National Roads Agency (Sanral) will continue to have limited access to capital markets to fund its toll roads.
5. Distell and Aspen see increases while Spur declines:
Distell saw its half-year revenue grew by almost 4% to R15 billion – thanks in part to strong exports, which climbed by more than 15%. Its headline profit grew by 12%.
Pharmaceutical group Aspen expects that its half-year headline profit will grow by between 8% and 13%, with revenue growth up to 18% stronger. Its net borrowings have declined from R35 billion in June to R28 billion.
Spur reported that its restaurant sales declined by almost 30% to R2.9 billion for the six months to 31 December 2020, compared to R4.1 billion in 2019.