South Africa

Best of Breakingviews 2016: Our readers’ top picks

30 Dec 2016

You demonstrated a varied, voracious appetite for insight in 2016. The most-clicked columns, podcasts and graphics encompassed the rise of Trump and Brexit Britain to Singapore, Saudi Arabia, negative rates, tech titans and an ethical dilemma for Harvard's business school dean.

South African debt will be downgraded before Zuma

21 Dec 2016

After legal and political setbacks, the country’s president is more vulnerable than ever. Yet Jacob Zuma’s power base makes removing him difficult. The longer he clings to office, the bigger the chance that South Africa loses its investment-grade credit rating in 2017.

S&P’s sleight of hand is South Africa’s gain

2 Dec 2016

The credit ratings firm has downgraded the sub-Saharan state's local currency bonds but spared its foreign debt. This allows South Africa to escape junk status for the time being. Almost as important, there's no excuse now for firing respected finance minister Pravin Gordhan.

S&P faces Catch-22 over South Africa downgrade

28 Nov 2016

The rating agency will soon decide whether the emerging economy's debt merits junk status. President Jacob Zuma's weakening of state institutions strengthens the case. Yet a downgrade could further undermine respected Finance Minister Pravin Gordhan - making the situation worse.

South Africa, land of the limping buffalo

2 Nov 2016

President Jacob Zuma faces a new probe over corruption allegations, just days after inflated charges against Finance Minister Pravin Gordhan were binned. Graft worsens South Africa's challenges, from unemployment to slow growth. Zuma himself is central to the problem.

South African U-turn on Gordhan is Pyrrhic victory

31 Oct 2016

The rand has recovered after the national prosecutor dropped fraud charges against the finance minister. Relief that Pravin Gordhan will stay on to repair the stuttering economy may be short-lived. The case has revived concern about political interference in state institutions.

South Africa’s real ratings test is yet to come

26 Oct 2016

Finance Minister Pravin Gordhan has cut GDP forecasts and predicted a higher deficit. His mini-budget shouldn’t heighten the risk of a sovereign downgrade. But if Gordhan’s Nov. 2 court appearance on questionable fraud charges prompts his resignation, junk status may soon follow.

South Africa is making the worst of a bad job

11 Oct 2016

State prosecutors have told Finance Minister Pravin Gordhan to appear in court on fraud charges, just days after he is supposed to deliver a budget to ease fears about a credit-junking. Such antics needlessly exacerbate Pretoria’s economic problems – including a sliding rand.

Emerging market fans get South Africa wake-up call

25 Aug 2016

The rand has slumped since Finance Minister Pravin Gordhan was ordered to report to a special police unit. Falling stocks and bonds are a timely reality check for money managers who have been lured back to emerging markets. An indiscriminate hunt for yield generally ends badly.

M&A activist twist suits almost everyone

11 Aug 2016

Activist hedge fund Elliott won a bump in value on two agreed deals - for brewer SABMiller and UK retailer Poundland. Both results are good for shareholders in the targets, and not too bad for the bidders. It should, though, provoke a subtle shift in how deals get done.

Old Mutual takes the slow road to breakup

11 Aug 2016

The South Africa-focused financials group announced a split earlier this year. Favourable currency moves mean its South African operations are now worth more. But a poor first half for its flagship UK wealth manager suggests a listing could take longer to materialise.

Steinhoff stuffs its cash into the U.S. mattress

8 Aug 2016

The South African retailer is paying $3.8 billion for U.S. speciality bedding retailer Mattress Firm, a chunky 115 percent premium that promises a return of just 5 percent. If South Africa's prospects weren't so troubling, such a deal wouldn’t be worth getting out of bed for.

Steinhoff gives Poundland investors easy way out

13 Jul 2016

The South African group is paying 597 mln pounds for the UK retailer. That's below where Poundland listed in 2014, but a 22 pct premium to its 60-day average share price. With the retailer's margins set to fall and market uncertainty, investors have a simple way to cash out.

Barclays Africa sale starts clock on Diamond bid

5 May 2016

The UK bank has placed $878 mln of shares in its Africa arm at a tight discount of 6.5 pct, with South Africa’s state pension fund taking a tenth. Central bank opposition to private equity won’t stop a tilt by its former boss for the rest. Barclays can sell that in 90 days’ time.

Anglo American is winning race to cut debt pile

28 Apr 2016

The $1.5 bln the miner will raise from selling its Brazilian phosphate and niobium units is better than might have been expected. A multiple of 10 times EBITDA proves the company can still get a good price even in a downturn. Anglo is slowly but steadily sharpening its focus.

Darty’s spiraling price tag can still go higher

21 Apr 2016

Fnac has upped its offer for the electrical goods retailer to 779 mln pounds, and added cash. Its bid is now higher than rival Conforama’s latest one, although the South Africans can probably offer more. But, after finding additional synergies, so now can Fnac.

Bollore stake boosts Fnac’s Darty bid in two ways

12 Apr 2016

The Vivendi chief is buying a 15 pct stake in struggling French CD and book seller Fnac. That gives the retailer more cash to up its 660 mln pound bid for Darty. Speculation about what the billionaire has in mind should boost the value of the shares Fnac is offering Darty too.

Old Mutual splits for good reason: it can

11 Mar 2016

The Anglo-South African financials group is breaking into four. It has that rare combination of businesses that don’t go together, a boss willing to empire-shrink rather than build, and potential hidden value. Other groups have the same problem, but lack a clear way to fix it.

Darty bids will leave investors well upholstered

2 Mar 2016

The electrical retailer’s 662 mln pound merger with French bookstore Fnac has been gazumped by furniture retailer Conforama. Fnac could pay a lot more, and add cash. But Conforama’s parent seems intent on diversifying away from South Africa. Darty can sit tight for a better deal. 

SAB’s dregs might wet a private buyer’s whistle

16 Dec 2015

Spinning off Peroni and Grolsch could raise $1.2 bln for the UK brewer’s new owner AB InBev and ease antitrust approval. Rivals like Carlsberg or Asahi have little to gain from SAB’s cast-offs. A buyout firm or acquisitive family investor, though, could spy a double-digit return.