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South Africa Plans Sweeping Changes to Health-Care System

SOUTH AFRICA (Bloomberg) – South Africa’s health-care system may face a major overhaul as the government moves ahead with plans to implement mandatory national insurance and reduce the cost of private care.
The revamp is part of an effort to broaden access to treatment in a country where more than 80 percent of the population lacks private insurance. This leaves many people relying on a public system with too few doctors and dilapidated hospitals and clinics. Of the 8.7 percent of South Africa’s gross domestic product spent on health care, less than half goes to state facilities, government data show.

“We need a massive reorganization of the public health-care system,” Health Minister Aaron Motsoaledi told reporters in the capital, Pretoria, on Thursday. “What we are designing here, no-one has done in the world.”

A draft law published in the government gazette proposes setting up a national health-insurance fund that would buy services from accredited public and private facilities, which would then provide care for registered members. While the law is largely silent on how the system will be funded, Motsoaledi said taxpayer contributions would be compulsory.

Pricing Panel
A committee answering to the NHI fund board and the health minister would determine the prices the facilities could charge on an annual basis, while another advisory panel would decide what services should be offered. The government plans to fully implement the system by 2026.

“It will definitely be a longer-term plan,” Andre Bekker, an equity analyst at Arqaam Capital in Johannesburg, said by phone. “There seems to be a focus on primary care. It seems to be the most feasible option, where they can hit the hardest the quickest. The impact on the private hospitals in the short-term seems minimal.”

A separate draft law published Thursday proposes forcing private doctors and facilities to charge uniform prices for services and prohibiting top-up payments. Under the current system, medical insurers negotiate their own rates with hospitals and doctors, while patients face varying additional payments depending on their plan.

The draft law also proposes abolishing the use of medical-insurance brokers and scrapping prescribed minimum benefits in favor of comprehensive coverage.

South Africa Current-Account Gap Grows to Biggest in 2 Years

SOUTH AFRICA (Bloomberg) – South Africa’s current-account deficit swelled to the biggest in two years in the first quarter as a strong rand weighed on export income.

The shortfall on the current account, the broadest measure of trade in goods and services, widened to 4.8 percent of gross domestic product compared with a 2.9 percent gap in the three months through December, the South African Reserve Bank said in its Quarterly Bulletin released on Thursday in the capital, Pretoria. That exceeded the 3.9 percent median estimate in a Bloomberg survey.

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The rand’s surge to a three-year high in February following Cyril Ramaphosa’s ascent to the presidency lowered the appeal of South African exports and the value of merchandise shipments dropped by 9.6 percent, according to the central bank. After seven quarterly surpluses, the trade balance swung to deficit of 25 billion rand ($1.8 billion).

The currency has wiped out all gains since, plunging to its weakest level in almost seven months against the dollar this week. The bigger deficit could add to pressure on the rand and while this may push up import prices and the inflation rate, it may also boost export revenue. The National Treasury forecast the current-account gap will shrink to 2.3 percent of GDP this year.

“Historically, a weaker rand should result over time in an improvement in exports, and perhaps a depressing effect on imports, and improvement in the current account,” Piet Swart, head of balance of payments division at the central bank, told reporters in Pretoria.

The rand weakened as much as 0.9 percent against the dollar after the current-account data was published, and was 0.8 percent down at 13.7692 by 10:59 a.m. in Johannesburg.

“I would not expect the rand to fall significantly,” said Isaac Matshego, an economist at Nedbank Ltd. in Johannesburg. “What’s driving the weakness at the moment are global factors. Emerging markets are under pressure.”

Africa’s most-industrialized economy relies mainly on foreign investment in stocks and bonds to help fund the shortfall on its current account. These portfolio flows stood at 89.4 billion rand in the first quarter and foreign direct investment was 10.5 billion rand.

These are some of the highlights from the report:

  • Spending on fixed capital fell an annualized 3.2 percent from the previous quarter
  • Growth in household spending slowed to an annualized 1.5 percent from 3.6 percent
  • Government expenditure increased an annualized 1.2 percent
  • Household debt to disposable income was 71.7 percent in the first quarter
  • Merchandise export volumes fell 5.1 percent; imports decreased 1.5 percent
  • Nominal unit-labor costs rose 4.9 percent in the fourth quarter

— With assistance by Simbarashe Gumbo

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Gold Street Is Where South Africa’s Mining History Goes to Die

SOUTH AFRICA (Bloomberg) – Miners laid off, mines closing, losses mounting—a huge headache for President Ramaphosa.

The death rattle of the industry that once symbolized South Africa can be heard in the town of Carletonville—on Gold Street.

That’s where Paseka Selemela has been guarding cars since 2010, when the scaffolding business he worked for closed. Prior to that, he was an assistant at a now-shuttered mine owned by AngloGold Ashanti Ltd. Nor has he found work in other gold mines around the town, home to the world’s deepest shafts. Many of his friends and family members also have joined the legions of the retrenched, including 8,500 people in the area last year alone.

“These people can’t find jobs, just like me,” Selemela, 34, said under the winter sun, wearing a torn, dirty Chelsea soccer club shirt and jeans that hung loosely on his thin frame. “They try at the retailers, but there is nothing available there. They are employing fewer people because people are buying less. There’s no money.”

Additional cuts are to come across mines and towns in South Africa, once the world’s biggest producer of gold. A volatile currency, uncertainty about regulations and demand, labor union tensions, harder-to-access ore, high operating costs and falling prices mean about half of gold and platinum operations are loss-making.

More than 6 million people are unemployed and looking for work, taking the jobless rate to about 28 percent, a 15-year high. This excludes 2.5 million discouraged job seekers.

It’s a gargantuan task for newly elected President Cyril Ramaphosa, who came to office in February promising to revive the sluggish economy and clamp down on corruption. He’s spearheading a drive to attract $100 billion in new investments that could absorb unemployed youth as well as former mine and factory workers and to provide opportunities for young citizens.

He has his work cut out for him: The economy shrank the most in nine years in the third quarter, led by declines in agriculture, mining and manufacturing, Statistics South Africa said June 5. Gold production fell for the seventh straight month in April, the agency said on June 14.

After gold was discovered near what was to become the economic hub of Johannesburg in 1886, the country became the biggest producer. The metal spawned some of the world’s largest mining companies, such as Anglo American Plc. It transformed South Africa from a farming economy into the continent’s most industrialized. It provided opportunities for unskilled black males, who were restricted from many jobs because of their race under white-minority-rule, known as apartheid.

In 1980, mining vied with manufacturing as the largest contributor to gross domestic product, with each at about 21 percent. Today, mines account for 7 percent of the economy. In 1987, the sector employed 763,000 people; that’s down more than 40 percent to 447,000 now. The government, retailers and banks are now the country’s biggest employers.

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“A lot of the future of the industry is going to be based on constraining costs and a need to improve safety, but most particularly a focus on innovation and technology,” said Roger Baxter, chief executive officer of the Minerals Council of South Africa, which represents most producers. “It will continue to shrink until those initiatives start bearing good fruits.”

The newer platinum industry has its own problems. Producers are closing shafts and cutting thousands of jobs because a stronger rand and stagnating prices are squeezing profit margins. At the same time, reduced demand for diesel engines and the rise of electric cars threatens to erode the need for the metal, which is used in converters that control emissions in diesel-fueled vehicles. About 41 percent of platinum used last year was for this purpose, according to research from Johnson Matthey Plc, one of its top refiners.

“The industry is in crisis,” said Chris Griffith, CEO of Anglo American Platinum Ltd., the world’s largest producer. “It’s a chicken-and-egg situation. You need to invest yourself out of this situation by investing in growing demand.”

South Africa continues to be an important gold-mining jurisdiction worth investing in, said Bernard Swanepoel, a former CEO of Harmony Gold Mining Co. and board member of Impala Platinum Holdings Ltd., the world’s second-biggest producer.

“I really think it’s the last chapter, but the last chapter could be a good chapter,” he said. “Thirty more years of gold mining in South Africa could be a good chapter.”

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And the country’s huge mineral endowment means chrome, iron ore and manganese—of which the nation has the world’s biggest known reserves—are becoming more important for exports, said Ross Harvey, a mining analyst at the South African Institute of International Affairs.

“Minerals such as iron ore have good prospects,” he said. “It’s an irreplaceable product for the steel industry. But as mines bring in new technology, that will continue to drive down jobs absorption.”

Draft rules published June 15 by Mineral Resources Minister Gwede Mantashe could hurt new operations. The Mining Charter says nearby communities and employees’ groups should get a 5 percent interest in either the asset or the company that owns it. The Minerals Commission and its members are opposed.

Mark Bohlund, an Africa economist at Bloomberg Economics, said the government should be doing more for an industry that’s still among the country’s top export-revenue earners.

“The government could offer more tax incentives for the mining sector but the scope for this will be constrained by the need to reduce the budget deficit and stabilize public debt,” he said. “Beyond that, the government needs to improve its relationship with key mining-sector unions and persuade them to moderate their wage demands.”

South Africa has had success expanding its automotive industry, which now accounts for about 7 percent of GDP. Toyota Motor Corp., Ford Motor Co. and BMW AG all assemble vehicles locally. That can be put down to a state-incentive program that expires at the end of 2020, which both the carmakers and Trade and Industry Minister Rob Davies are eager to extend for another 15 years.

The state wants automakers to double the size of their combined workforce to about 225,000 to help to tackle the jobless rate, but the companies are reluctant to commit to specific targets. They view those as unrealistic given the global industry’s shift toward robotics and automation, said National Association of Automobile Manufacturers of South Africa Director Nico Vermeulen.

For Caldwell Nzimeni and his friends in Carletonville, working in a vehicle-assembly plant isn’t an option unless they migrate far from home and manage to acquire manufacturing skills they don’t have.

Nzimeni, 29, worked at Mponeng, the world’s deepest gold operation, for four years as an engineering assistant. He left in 2015 to complete his engineering studies but has been unsuccessfully applying for mine work for 18 months.

To make ends meet, he rents out shacks made from corrugated iron in the backyard of his home for 200 rand ($14) monthly and does plumbing and home-improvement jobs whenever he can find them. With the downturn in the town’s economy, his tenants are struggling to make their payments.

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South African Miners Say Free Carry Will Kill New Projects

SOUTH AFRICA (Bloomberg) – The biggest threat posed by South Africa’s new Mining Charter may be to mines that haven’t been dug yet.

The draft rules, published Friday by Mineral Resources Minister Gwede Mantashe, lay out several requirements for new mining rights, including that nearby communities and employees each get a 5 percent free-carried interest in either the asset or the company that owns it. The charter is aimed at distributing the industry’s wealth more widely among South Africans to make up for racial discrimination during apartheid.

New mines are already scarce in the country, which has been mined commercially for more than a century and where producers have struggled with rising costs, regulatory uncertainty and a restive labor force. The industry argues that the free carry — which means the respective groups don’t have to buy their shares or pay their way — will make new developments even less likely.

“We consider much of the South African resource base to be in sunset,” analysts at Morgan Stanley including Brian Morgan wrote in a note received Monday. Many potential projects have marginal economics to begin with and “higher hurdle rates could equate to lower future mining investment,” they said.

The free-carried interests for new mining rights are included in a mandatory 8 percent each to be held by workers and communities, while a further 14 percent must be owned by black entrepreneurs, according to the draft Mining Charter, which was published for public comment.

Read more: South Africa’s New Mining Charter to Credit Past Black Deals

Another requirement for new rights is that the workers and communities be paid 1 percent of earnings before interest, taxes depreciation and amortization in years when a regular dividend isn’t declared.

While existing producers have an easier time, they will still have to increase their black-ownership percentage from the current minimum of 26 percent to 30 percent within five years.

The changes might not weigh on current equity valuations, but could be a potential negative for South Africa’s mining industry in the future, Morgan Stanley said.

South Africa is seeking to spread the mineral wealth more equally in an industry in which highly paid, mainly white male executives oversee hundreds of thousands of mostly black workers laboring in deep and dangerous operations. The Mining Charter, first introduced in 2004, laid out rules and targets for areas such as black ownership, and was later updated in 2010.

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Almost half of deadly mine accidents in South Africa happened at Sibanye-Stillwater sites: Minister

SOUTH AFRICA (mining.com) – South Africa’s Mineral Resources Minister Gwede Mantashe said on Sunday that 20 out of 45 mining deaths reported since the start of 2018 have taken place at Sibanye-Stillwater’s (JSE:SGL) (NYSE:SBGL) mining sites.

At a press conference in Pretoria, Mantashe announced that the Mine Health and Safety Inspectorate is investigating and compiling a report on the precious metals producer with the idea of taking appropriate action.

“Mining is not about rocks‚ it is about people. Once you lose that‚ you think that mining is about rocks‚ it’s about minerals‚ it’s about prices‚ then you have lost the plot … If you ignore human beings‚ you’ll have no mining,” he said.

Earlier this week, five people died at Sibanye’s Kloof Ikamva gold project after they entered an abandoned section of the mine. This was just the latest in a series of fatal incidents at the companies’ South African operations, which have generated concern in the government and an uproar from the Association of Mineworkers and Construction Union, known as AMCU. Although it has acknowledged the accidents, the company says that AMCU only wants to hurt its reputation.

Nevertheless, according to Minister Mantashe, fatalities in the gold mining industry seem to be on the rise in South Africa and there are growing worries about the proportion that take place at Sibanye’s operations.

Mantashe’s pronouncement was made at a meeting aimed at discussing the country’s new Mining Charter. The government official said a 30-day period for public comments has just started and that once it ends, the law will be sent to cabinet for publication.

Among other things, the Charter stipulates that mining companies have five years to increase black economic empowerment ownership to 30 per cent‚ while black South Africans must constitute 50 per cent of board members‚ 20 per cent of whom must be black women.

Government will give credit for past black-empowerment deals even when the investors later sold their shares to whites or foreigners.

“Some people said that 30 per cent [ownership] is not substantial,” Mantashe said at the media briefing. “But if you convene to zero, where we were at the beginning, it is very substantial,” he added.

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South Africa proposes 5% black ownership in mining in mining firms

SOUTH AFRICA (Reuters) – South Africa plans to raise black ownership at permit-holding mining companies to 30 percent from 26 percent within five years, the latest draft of a hotly-contested new industry charter showed on Friday.

The government and miners had been at loggerheads over a previous version of the charter, which the Chamber of Mines industry body slammed as confusing and a threat to South Africa’s image with investors.

The new draft charter extends to five years from one year the time that existing mining permit holders will have to meet the new black ownership requirement.

It also addresses a dispute over companies that were not recognised as having complied with black empowerment rules under the previous version of the charter, even when that was the result of a black investor selling shares.

“Publishing of the Charter moves us a step forward in terms of ensuring regulatory and policy certainty for the industry,” mines minister Gwede Mantashe said in a statement.

Agreeing a new version of the charter is seen as instrumental to securing further investment in the mining sector, which new President Cyril Ramaphosa has made a priority.

The charter, published for public comment before being refined into law, is part of South African affirmative action rules that aim to reverse decades of exclusion under apartheid.

A new addition to the latest charter is that at least 50 percent of the seats on mining company boards will have to be allocated to black South Africans, and that at least 20 percent of those must go to black women.

For new mining right applicants, they must have a minimum of 30 percent black shareholding before securing the permit, according to the draft.

But the requirement that 10 percent of that ownership target be granted for free to communities and qualifying employees, dubbed ‘free carry’, might cause controversy among mining companies.

The Minerals Council South Africa, an industry lobby group, said it was against the free carry stipulation.

“The industry does not favour a requirement of 10 percent ‘free carry’ on new mining rights as part of the proposed 30 percent BEE equity ownership target, as it would render uneconomic a significant proportion of potential new projects, and would undermine and constrain any prospects for growth in the sector and indeed the economy as a whole.” MCSA said in a statement.

Other proposals in the charter include: new mining rights holders must pay 1 percent of core profit, or EBITDA, to employees and communities and that 70 percent the mining goods procurement budget must spent on South African made goods.

Demonstrators protest outside Megawatt Park, Sunninghill, June 14, 2018. Eskom workers are demanding a 15% salary increase while Eskom has decided to cut completely any increases for this year, saying they simply do not have the funds. Photo: Greg Roxburgh.

South Africa faces a very bleak winter of electricity discontent

SOUTH AFRICA (Sunday Times) – Demonstrators protest outside Megawatt Park, Sunninghill, June 14, 2018. Eskom workers are demanding a 15% salary increase while Eskom has decided to cut completely any increases for this year, saying they simply do not have the funds. 
Image: Greg Roxburgh

Economists and energy experts have warned that a current protest by Eskom workers who are threatening a national electricity shutdown could have dire consequences for the country.

Just the hint of a possible shutdown could negatively affect the economy.

Eskom said the generation and distribution of electricity across its network was constrained owing to “acts of sabotage and intimidation” by trade union members‚ but the National Union of Metalworkers of SA and National Union of Mineworkers denied this.

Meanwhile‚ electricity demand is set to spike this weekend as two cold fronts slam into the country‚ with temperatures set to plummet and gale-force winds and snow expected.

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Two killed in South Africa mosque attack

SOUTH AFRICA (news.com.au) – South African police say two worshippers have been stabbed to death in an attack on a mosque in Malmesbury, Western Cape.

Two people have been stabbed to death at a mosque in South Africa’s Malmesbury in the Western Cape before the attacker was shot dead by police.

Thursday’s attack comes a month after three knife-wielding men stormed a mosque north of Durban, killing one person and seriously injuring two others.

Police said that incident showed “elements of extremism” but did not otherwise comment on the motive behind the attack in Malmesbury, a small farming town north of Cape Town.

“Police were called out to a local mosque and found two people stabbed to death and several injured,” the police said in a statement.

“The suspect, believed to be in his thirties and armed with a knife, was still on the scene and charged at the police who tried to persuade him to hand himself over. He ignored the calls and tried to attack police. He was shot and killed in the process.”

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SOUTH AFRICA’S BLACK ECONOMIC EMPOWERMENT LAW TO EARN BLACK INVESTORS $1.3 BILLION

SOUTH AFRICA (Black Enterprise) – Vodacom Group, Africa’s second largest mobile communications company, will pay out approximately $1.3 billion to its black investors as part of the company’s participation in the black economic empowerment (BEE) effort, enforced by South African law.

The company said on Monday that it had “entered into an agreement of up to R17.5 billion with its existing black economic empowerment (BEE) partners and a newly formed staff scheme” that will see the partners swap their current holdings in Vodacom South Africa for shares in its parent company, Vodacom Group.

“Vodacom Group has agreed terms with Royal Bafokeng Holdings (RBH), Thebe Investment Corporation (Thebe), YeboYethu (existing BEE partners) and a newly formed staff scheme, whose combined interests will be consolidated into a new YeboYethu BEE structure that will own shares in Vodacom Group,” the company said in a news release.

In the approximately $1.3 billion agreement, BEE partners will exchange their current holdings in Vodacom South Africa for a shareholding of between 5.8% and 6.25% in Vodacom Group, the company said.

WHAT EXACTLY IS BEE?:

After its transition from Apartheid in 1994, South Africa’s African National Congress government decided to address the inequalities of Apartheid by redistributing assets and opportunities to South African blacks, Coloreds and Indian citizens, not available to them under White rule.

From South Africa’s own Treasury:

“It is an integrated and coherent socio-economic process. It is located within the context of the country’s national transformation programme, namely the RDP (Reconstruction and Development Programme). It is aimed at redressing the imbalances of the past by seeking to substantially and equitably transfer and confer the ownership, management and control of South Africa’s financial and economic resources to the majority of the citizens. It seeks to ensure broader and meaningful participation in the economy by black people to achieve sustainable development and prosperity.”

In essence, BEE attempts to “create a degree of economic equality which would not itself be a natural market outcome” of the newly created political and socio-economic climate in the country. In plain English, the affirmative program is meant to level the playing field and spread the wealth to the historically oppressed people during Apartheid.

VODACOM’S SHARE EXCHANGE:

Vodacom Group Limited, solely known as Vodacom, is a South African telecommunications company which provides voice, messaging and data services to over 55 million customers operating in over 40 African countries. The company is wholly owned by Vodafone Group plc, a British multinational telecommunications conglomerate.

In 2007, South Africa instituted the Broad-Based Black Economic Empowerment. The goal is to spread the wealth across a broad spectrum of disadvantaged South Africans, which is in contrast to the original BEE which was narrow-based and focused only on equity ownership and management representation. The new law ensured that black employees and citizens were able to purchase shares in privately held and public corporations.

The three investment groups named in the $1.3 billion share swap: Royal Bafokeng Holdings (RBH), Thebe Investment Corporation (Thebe), YeboYethu (existing BEE partners) are all community, South African and black-controlled investment groups. Royal Bafokeng Holdings (RBH), for example is a community investment company, entrusted with the unique responsibility of preserving and growing the financial capital of the Royal Bafokeng Nation (RBN), an ethnic homeland of the Bafokeng people. Although Thebe Investment Corporation’s ownership structure has changed over the years, the ANC still has a controlling stake in the empowerment group (investment firm) through Batho Batho Trust, founded in 1992 as an ANC investment company, ensuring that black wealth is passed down to generations of black South Africans.

The third investment group, YeboYethu Limited, a publicly traded company, was formed in 2008 as an employee stock ownership plan to buy and hold Vodacom SA shares for the benefit of its shareholders. When Vodacom formed the company in 2008, it issued 14.4 million YeboYethu ordinary shares at R25 each ($1.88 in 2018 USD) and as a result a public offer, more than 102,000 qualifying black investors bought a stake in Vodacom SA.

WHAT BLACK INVESTORS GET:

When October comes around, Vodacom will unwind the empowerment transaction it initiated in 2008 and there will be R3 billion ($226 million) dividends for participants to share. At R67.28 per share, that represents a return of 2.7 times on their original investment, Vodacom said. Also, investors will now have shares in Vodacom International group rather than Vodacom SA.

  • YeboYethu will remain listed on the BEE segment of the Johannesburg Stock Exchange
    5.8% – 6.25% deal that consolidates the BEE shareholding, through YeboYethu, at Vodacom Group level
  • Transaction delivers R7.5Bn of value to existing BEE shareholders, 6.7 times the original capital investment
  • R3.0bn special dividend to current BEE shareholders, representing 2.7 times their original equity contribution
  • Will increase Vodacom Group’s effective BEE ownership to 20%
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Three miners killed in accident at Sibanye gold mine in South Africa

SOUTH AFRICA (Reuters) – Three gold miners were killed in South Africa on Monday at a Sibanye-Stillwater plant and the company said rescue teams are searching for two others.

At least 18 people have died at Sibanye’s South African mines this year including seven trapped underground at the Masakhane mine in May.

Sibanye said five employees entered an abandoned working place at its Kloof Ikamva mine near Johannesburg and were killed in an incident the company is investigating.

“We are not sure what happened,” spokesman James Wellsted said. CEO Neal Froneman has said seismic events are a fact of life at South African mines.

“It seems that disasters have become the order of the day at Sibanye Stillwater and as NUM we are highly disturbed and angered by this,” National Union of Mineworkers said in a statement. “This is unacceptable.”

Sibanye noted in a recent operational update that last month’s disaster was a concern for its investors and a factor behind a roughly 28 percent fall in its share price last month.

In all, 88 people died in mines in South Africa in 2017 and 73 died the previous year. Prior to that, numbers of fatalities had fallen for nine years. The country has produced a third of all gold mined since records began.

Safety matters for investors in South Africa’s gold industry. The country is home to some of the world’s deepest mines. Sibanye-Stillwater is South Africa’s biggest producer. The company also produces platinum and has operations in the United States.