Here’s what caught our attention on Friday:
1. Sona – the morning after
President Cyril Ramaphosa delivered his state of the nation address for 2019 on Thursday, with the market digesting the news on Friday. The speech comes ahead of the general elections, which the president said will take place on May 8. While the speech provided South Africans with some reasons to be optimistic, there were a few elephants in the room. More on this here.
2. Plans to revive Eskom
Eskom was one of the major concerns highlighted in Thursday’s state of the nation address. The president confirmed what many predicted would happen, that Eskom would indeed be split into generation, transmission and distribution, under a state holding company, to isolate costs and lessen the burden on the fiscus. He added that government will also be providing financial support and that further details will be given in the budget later this month.
Reuters is reporting that dollar-denominated bonds issued by Eskom rose across the curve on Friday following Ramaphosa’s pledge.
3. Sasol expects profit increase
Sasol expects to see significant earnings growth for the six months ended December 31, 2018. The energy company says earnings per share are expected to increase between 110% and 114% to R23.71 and R24.16, while headline earnings per share is expected to increase between 30% and 34% to R22.97 and R23.68, respectively. The company says the increases are associated with crude oil hedges and closing exchange rates.
Meanwhile, Sasol says capital costs at its Lake Charles chemicals project in Louisiana have increased once again, to as much as $11.8 billion, and start up of the units will be as many as five months later than expected.
The company expects to release results on February 25 2019.
4. Net1 Q2 results
The company, which was embroiled in a number of matters relating to the social grants fiasco, is reporting its second quarter results for 2019, in which it highlights a revenue of $97.2 million, fundamental earnings per share of $0.88 and an adjusted negative ebitda of approximately $25 million. Net1 says that its operating loss was attributable primarily to its rural South African businesses. Net1’s CEO says his primary concern is to now focus on stemming losses in South African financial inclusion operations, right size the businesses and get the SA operations to a ‘break-even level’ by the end of this year.
5. Rand update
The rand dipped to a one-week low on Thursday ahead of President Cyril Ramaphosa’s state of the nation address and on the back of a stronger dollar. “There is some weakness in the rand on Friday,” says Jameel Ahmad, global head of Market Strategy at FXTM, “although it is doubtful that this is a reaction from investors to Sona, but instead linked to a correlated move of strength in the USD against EMEA currencies.”
The rand was at R13.70 to the dollar at 8:46am on Friday.