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Five things making headlines in South Africa today

Land reform panel takes cautious approach, Fitch downgrades SA’s credit outlook, Eskom plants still in trouble, Liberty Two Degrees results and more.

Here’s what caught our attention on Monday:

1. Land reform panel recommends EWC only in specific cases  

The panel of experts appointed by President Cyril Ramaphosa to advise him on land reform has given the green light to the amendment of the constitution to allow for the expropriation of land without compensation, but only under certain circumstances. Moneyweb is reporting that the panel is calling on government to finalise amendments to the Expropriation Bill, after which it will map out procedures on the kind of land that can be expropriated and the conditions under which compensation may apply.

Some of the conditions for expropriation without compensation include abandoned land, ‘hopelessly’ indebted land, land held for speculative purposes, property obtained through criminal activity or land unused by SOEs.

Read: Ramaphosa’s land panel endorses a careful approach

2. Fitch downgrades SA’s credit rating outlook

Ratings agency Fitch has downgraded South Africa’s sub-investment credit rating outlook from stable to negative, citing government’s constrained public finances as a concern. It said government’s support for debt-laden SOEs, such as Eskom, is putting pressure on the fiscus. In the report, released on Friday, Fitch says it expects the consolidated general government deficit to widen to 6.3% of GDP in the current fiscal year, from 4.2% last year, adding that the downward revisions of GDP growth also raises concerns of South Africa’s GDP growth potential, as a whole.

Read: Fitch downgrades outlook on South Africa’s credit rating

3. Kusile and Medupi still facing challenges 

After a five year delay, only one unit of Eskom’s Kusile coal-fired power station is being handed over for commercial service. Units 2 and 3 have been synchronised to the grid but are still undergoing testing and commissioning. The initial intention was to have at least six generation units handed over for commercial service in 2014, but this deadline was missed. 

At Medupi, another of Eskom’s delayed power plants, units 3, 4, 5 and 6 have been handed over for commercial service, however, unit 2 is undergoing commission and unit 1 is still under construction. According to the article on Moneyweb, the Medupi units were meant to be handed over to commercial services in 2013, but also missed the deadline. 

Read: The crisis at Kusile and Medupi continues …

4. Liberty Two Degrees results

Real estate investment trust Liberty Two Degrees is reporting a 1.03% decrease in headline earnings and headline earnings per share to R258.6 million and R28.48 respectively. The company’s net asset value per share for the six months ended June 30, 2019 decreased by 2.27% to R9.59 while profit before tax amounted to R244.2 million. The company says its portfolio is valued at R10.2 billion, following the acquisition of a further R1.2 billon of the co-owned Liberty Property Portfolio, which came into effect on November 1, 2018. Liberty Two Degrees’s net property income amounted to R338.8 million, up 24.19% and its distribution per share amounted to 29.31 cents for the period.

5. The week ahead and rand update

The rand suffered last week on the back of comments from Moody’s, which said the government’s cash injection into Eskom is ‘credit negative’ and Fitch, which downgraded South Africa’s credit outlook to negative as concerns over government’s public finances rise.

Read: Rand steady in early trade

In the week ahead, South Africa can expect the release of the Q2 unemployment rate on Tuesday and balance of trade on Wednesday. Monday’s data shows that South Africa’s credit demand growth slowed to 6.91% in June.

Read: South Africa credit demand growth slows to 6.91% in June

The ECB last week kept interest rates on hold, and it’s a big week for the world economy, as the US Federal Reserve is set to begin its two-day meeting on Tuesday. The rand on Monday was at R14.31 to the dollar at 7:59.

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