Tuesday 03 March - DAILY NEWS SUMMARY
Pretoria News (www.pretorianews.co.za) Page 1 – Massive water crisis in the city
Page 4 - Possible to avert global spread of virus, says WHO Page 4 - N Korea fired two ballistic missiles
The Star (www.iol.co.za)
Page 9 – Coronavirus; ‘church guilty’
Business Day (www.businesslive.co.za) Page 4 - Coronavirus could wilt agriculture
Page 6 - General Electric king ‘Neutron Jack’ Welch dies Page 19 - Blitzboks' stunning comeback victory
Citizen (www.citizen.co.za) Page 4 – SA-China trade to suffer Page 9 - Virus death toll keeps climbing Page 18 - Debate to liquidate SAA not dead.
Massive water crisis in city
Salvokop pipeline burst leaves 500 000 residents high and dry; tankers sent in Pretoria News
3 Mar 2020
LIAM NGOBENI liam.ngobeni@inl.co.za
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RESIDENTS of Sunnyside and Arcadia were left stranded following the water pipe burst that supplies the whole area. | Oupa Mokoena African News Agency (ANA) AN ESTIMATED 500 000 people in and around the heart of the capital are without water as the City of Tshwane scrambles to fix a pipeline that burst on Thursday afternoon.
The Salvokop pipeline burst has affected water supply to several areas, where people have had to rely on tankers and municipal trucks since Friday.
The metro had to shut supply off to allow for the installation of a new pipeline.
Affected areas include Sunnyside, Salvokop, Arcadia, Clydesdale as well as the south of the Pretoria CBD.
The area has hospitals, old-age homes, national and provincial government departments, ter- tiary institutions and schools, embassies and hotels.
Kronendal, Residentia and Sonnheim centres, also in the affected area, have many elderly residents in their care.
Zinah Mogapi, of Sunnyside, said the burden of having to cart buckets of water after work was immense. “I knock off late from work; I have two small boys who cannot fetch water for themselves, and the queues are just too long. We wait hours only for the truck to leave for refilling and not come back.”
Mogapi said it had been a mission, but appreciated that there were trucks coming in.
Thabang Mohlala, an e-hailing service driver, said he was losing money while waiting in line to collect water. “We waste an hour or even more while we are waiting in line because some people bring too many buckets and the water runs out.
“It is quite frustrating, given the fact that this is not the first time. Quick fixes do not help; we will find ourselves here again if proper plans are not put in place.”
Student Gabisa Mabulwana said the water issue was a big problem. He said although he was less affected, it was not suiting him to come back late from the library and then have to go to collect water to cook his dinner.
“I decided to come and collect it this morning as the queues get worse later on after other people arrive home after work and need water.”
Ward councillor Shaun Wilkinson said the damaged pipe section had been removed success- fully, and the metro was replacing it with a new section which was being prepared for con- nection at an off-site factory.
He said the expected completion for repairs was Friday. “Please do not interfere with the trucks, tamper with fire hydrants, attack truck drivers or take their keys.”
Wilkinson said the affected areas had a combined population of 500 000 people. He said they could not put a truck outside every flat and on every corner. “Try to collect more water than just enough to boil a kettle. At some point the trucks may leave to fill up.
“Chat to the driver and confirm if he is returning so you do not wait in vain for the truck.”
Wilkinson encouraged residents to have a “spirit of ubuntu” during the water shortage period for elderly residents residing in certain flats in affected areas or old-age homes.
He said such residents were too frail to go to collect the water and had difficulty in standing in the long queues or in carrying the buckets.
“I urge residents that are still energetic and youthful to think of the elderly in these difficult times; extend a helping hand to the gogo next door to you…
“Group each other and collect water for a few residents in an old-age home that will have a hard time carrying it into their flats.”
City spokesperson Lindela Mashigo said work to end the water shutdown was progressing well. He said that despite the rain, the workmen were able to drain water from the pipeline ditch.
“This process was then followed by excavation of the leaking pipe that had been under stress.
The ongoing repair work includes the preparation of the bedding for the new pipe which is yet to be fitted after it has been cut.
“The cutting and moulding of the replacement pipe is unfortunately a job that has to be meticulously done and not rushed.”
Mashigo said they had been alerted to the gushing site by the Passenger Rail Agency of South Africa.
“City officials established that the burst is at the same area as the 1 000mm diameter pipe that was experienced in August last year.
“Residents will be kept abreast on the restoration period. The City will continue to supply tankers for water provision in the affected areas until the situation normalises.”
Mashigo pleaded for patience, saying the City would continue to maintain its presence in the affected areas by deploying roaming bowsers at strategic points to supply free water to con- sumers.
“The City wishes to apologise for the inconvenience caused as a result of this unplanned in- terruption. Notwithstanding the current rains, it is hoped that by end of the week repairs will be completed.”
Meanwhile, some residents of Ga-Rankuwa Zone 14 and Soshanguve Extension 19 were left without power yesterday morning following the theft of cables that supply both areas.
Replacement of the stolen cables was under way late yesterday, and the City said it was hope- ful that if uninterrupted by the persistent rain, power supply would be restored by midnight.
Residents were advised to treat all electrical points as live at all times.
N Korea fires two ballistic mis- siles
Pretoria News 3 Mar 2020|
TOKYO: North Korea fired two projectiles into the sea off its eastern coast yesterday, the South Korean military said.
Two “short-range” unidentified projectiles flew 240m – at a maximum altitude of 35km – after being launched from the North Korean port city of Wonsan.
Japan’s Defence Ministry confirmed the launches, describing the projectiles as “bal- listic missiles”.
UN Security Council resolutions ban North Korea from firing ballistic missiles which can carry nuclear warheads. The launches were the first since the end of November, and the first since Pyongyang claimed to have a “new strategic weapon”.
Possible to avert global spread of virus, says WHO
Pretoria News 3 Mar 2020|
ALTHOUGH Covid-19 has spread to 62 countries, the vast majority of the cases have appeared in five countries, UN health chief Tedros Adhanom Ghebreyesus has said, arguing that it was still possible to avert a global spread.
Of the more than 88 900 global cases of Covid-19, 90% were reported from China, most of them from the outbreak epicentre in Hubei province.
Outside of China, over 8 700 cases had been reported to the World Health Organisa- tion (WHO) in Geneva, with four countries accounting for 81% of this figure, WHO chief Tedros said, adding that South Korea, Italy, Iran and Japan were causing the biggest concerns.
“This is not a one-way street. We can push this virus back,” Tedros said, arguing that all countries could contain the virus if they took action.
China reported 202 new coronavirus infections and 42 deaths in the past day, bring- ing the number of cases of Covid-19 in mainland China to 80 026, authorities said yesterday.
South Korea saw another spike in cases of the virus, with 599 new infections bring- ing the total to 4 335, according to the Korea Centres for Disease Control and Pre- vention.
In China, more than half of patients who fell ill from the virus since the outbreak have now recovered, according to official information.
The South Korean outbreak, the largest outside China, is mainly concentrated in the south-eastern city of Daegu and the surrounding North Gyeongsang province.
“This morning I received information from the Health Ministry that a mother and her daughter have tested positive for the coronavirus,” President Joko Widodo told re- porters.
The two had had contact with a Japanese tourist who had the virus, the president said.
In Japan itself, most schools were closing for a month to contain the spread, on the orders of the national government.
Japan has confirmed a total of 967 infections, the majority from the Diamond Princess cruise ship, which was docked in Yokohama while under quarantine.
Covid-19 has spread to dozens of countries across the globe, and killed more than 2 900 people worldwide, since the outbreak began in Wuhan in China’s Hubei province in December.
Coronavirus: ‘church guilty’
South Korea seeks murder charges against secret movement after outbreak The Star Early Edition
3 Mar 2020
LEE Man-hee.
SOUTH Korea sought murder charges against leaders of a secretive church at the heart of its ballooning coronavirus outbreak yesterday as the global death toll rose above 3 000 and the Chinese province at the epicentre reported a fall in new cases.
World stock markets regained some calm as hopes for global interest rate cuts to soften the economic blow of the virus steadied nerves after last week’s worst plunge since the 2008 financial crisis.
The global death toll was up to 3 044, according to a Reuters tally.
In the largest outbreak outside China, South Korea has had 26 deaths and reported another 599 infections yesterday, taking its tally to 4 335 following Saturday’s biggest daily jump.
Of the new cases in South Korea, 377 were from the city of Daegu, home to a branch of the Shincheonji Church of Jesus, to which most of South Korea’s cases have been traced after some members visited China’s Wuhan city where the disease emerged.
The Seoul government asked prosecutors to launch a murder investigation into leaders of the church, a movement that reveres founder Lee Man-hee. Seoul Mayor Park Won-soon said that if Lee and other heads of the church had co-operated, pre- ventive measures could have stopped fatalities.
“The situation is this serious and urgent, but where are the leaders of the Shincheon- ji, including Lee Man-hee, the chief director of this crisis?” Park said on Facebook late on Sunday.
Seoul’s city government said it had filed a criminal complaint with the Seoul Central District Prosecutors’ Office, asking for an investigation of Lee and 12 others on charges of murder and disease control act violations.
Lee knelt and apologised to the country yesterday that one church member had in- fected many others, calling the epidemic a “great calamity”. “We did our best but were not able to stop the spread of the virus,” Lee told reporters.
The virus broke out in Wuhan late last year and has since infected more than 86 500 people, most in China.
Outside China, it has in recent days spread rapidly, now to 53 countries, with more than 6 500 cases and more than 100 deaths. Italy has 1 694 cases, the vast majority in the wealthy northern regions of Lombardy, Veneto and Emilia Romagna.
All members of the Lombardy local government were to undergo tests after a coun- cillor tested positive.
Another of the worst-hit nations, Iran, reported infections rising to 1 501, with 66 deaths.
Middle East airlines have lost an estimated $100 million (R1.5 billion) so far due to the outbreak and governments should help the carriers through this “difficult period”, an official of the International Air Transport Association (IATA) said. Global airlines stand to lose $1.5 billion (R23.5bn) this year.
The Organisation for Economic Co-operation and Development warned that the out- break was pitching the world economy into its worst downturn since the global finan- cial crisis, urging governments and central banks to fight back.
Officials in US President Donald Trump’s administration on Sunday tried to calm market panic that the coronavirus could cause a global recession, saying the US public had over-reacted and stocks would rebound due to the American economy’s underlying strength. The S&P 500 index tumbled 11.5% last week. Roughly $4 trillion (R62.6 trillion) has been wiped off the value of US stocks. Vice-President Mike
Pence, who is leading the administration’s response to the virus, said the market “will come back”.
“The fundamentals of this economy are strong,” he said.
General Electric king ‘Neutron Jack’ Welch dies
• ‘Manager of the century’ presided over a stock surge of almost 3,000%
Business Day 3 Mar 2020
Richard Clough and Rachel Layne Straight From the Gut. Jack: Winning. Winning,
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/CNBC
Gold standard: Jack Welch, former chair & CEO of General Electric, in an interview in September 2015. GE was the world’s biggest company by market value at more than
$500bn in 1999.
Jack Welch, the champion of corporate efficiency who built General Electric (GE) into one of the world’s largest companies and influenced generations of business leaders, has died. He was 84. His death was reported on Monday by CNBC, which cited his wife, Suzy. The former GE chair and CEO, whose blunt style and ceaseless cost cutting earned him the sobriquet
“Neutron Jack”, mentored proteges who went on to run some of the world’s best-known firms. He was named “manager of the century” by Fortune magazine in 1999.
Jack Welch, the champion of corporate efficiency who built General Electric (GE) into one of the world’s largest companies and influenced generations of business leaders, has died. He was 84.
His death was reported on Monday by CNBC, which cited his wife, Suzy.
The former GE chair and CEO, whose blunt style and ceaseless cost-cutting earned him the sobriquet “Neutron Jack,” mentored proteges who went on to run some of the world’s best- known companies. Named “manager of the century” by Fortune magazine in 1999, he presided over a stock surge of almost 3,000% during a two-decade tenure.
“He became the gold standard of greatness, the icon of industrial imagination,” said Jeffrey Sonnenfeld, a Yale University business professor who knew Welch since the 1980s. “His track record over those 20 years as CEO is hard to see excelled anywhere.”
Known simply as Jack to even low-level employees, Welch became the youngest CEO in GE’s history in 1981. He created a leaner company, yet one whose dependence on finance
would eventually prove to be a threat. Along the way, he moulded GE’s culture to reflect his demanding personality, one larger than his 1.7m frame.
“I like challenging people. I like debate. I like all those things,” he told interviewer
Charlie Rose less than two months after his 2001 retirement. “And yet I love having a drink with ’em, too.”
Welch stepped down four days before the September 11 terrorist attacks. He remained active for more than a decade as a consultant and media commentator.
Business leaders extolled his ability to boost profit and shareholder wealth with his restless, results-driven approach. GE became the world’s biggest company by market value at more than $500bn in 1999.
IMITATORS
Imitators across corporate US copied his leadership strategies, and recruiters snapped up lieu- tenants including James McNerney Jr, who later became Boeing’s CEO, and Robert Nardelli, who ran Home Depot and Chrysler.
Another GE executive, Jeffrey Immelt, would best them to succeed Welch.
Welch’s legacy was dented in retirement, as GE’s stock lost a third of its value within a year.
The shares would lag behind the pre-September 11 level for virtually all of Immelt’s 16 years as CEO.
Soon after Enron collapsed in late 2001, GE found itself facing accounting questions such as whether Welch relied on moves such as one-time asset sales to produce consistently steady profit gains.
GE Capital under Welch grew so vast that the unit’s struggles in the 2008/2009 financial cri- sis would imperil all of GE.
It has since exited nearly all of the lending businesses.
“There’s been some revisiting”of business, Sonnenfeld the robustness said. of the financial services model. GE Capital was providing cover for some other parts of the There was a
“backlash that did dog Jack Welch.”
John Francis Welch Jr was born on November 19 1935, in Peabody, Massachusetts. He was the only child of John Sr, a Boston & Maine Railroad conductor, and Grace Andrews Welch.
Growing up in Salem, Massachusetts, he was outspoken and athletic. He played golf, hockey and baseball at Salem High School, where he was voted “most talkative and noisiest” boy by classmates and wrote in the school literary magazine that he wanted to “make a million”.
HE BECAME THE ICON OF INDUSTRIAL IMAGINATION. HIS TRACK RECORD OVER THOSE 20 YEARS AS CEO IS HARD TO SEE EXCELLED ANYWHERE
Welch’s mother infused him with self-confidence and helped him overcome a boyhood stutter
— “the most influential person in my life,” he wrote in his 2001 autobiography
After a close hockey defeat as a youngster, Welch flung his stick across the ice, prompting his mother to march into the locker room, grab him by the jersey and shout: “You punk! If you don’t know how to lose, you’ll never know how to win.”
In 1957, he graduated with honours from the University of Massachusetts at Amherst with a bachelor’s degree in engineering. Three years later, he received a doctorate in chemical engi- neering from the University of Illinois and took a $10,500-a-year job with GE in Pittsfield, Massachusetts, where the company developed new businesses in plastics.
Working his way through the ranks from vice-president to vice-chair, Welch gained a reputa- tion as a maverick, questioning whether GE was being run the right way.
He saw GE’s future in plastics, medical equipment and financial services, not household ap- pliances.
At 45, Welch succeeded Reginald Jones as chair and CEO. While GE was profitable, Welch was concerned that it was too big to be flexible. He sorted GE’s divisions into “winners ”—
those first or second in their industries — and “losers,” mostly older units that had to improve or face disposal.
Over a five-year span in the 1980s, he sold more than 200 businesses and closed dozens of factories. Annual dismissals of the 10% of employees deemed the lowest performers also be- came standard. Welch’s moves would shrink the workforce by one-third to 239,000 people.
“A successful leader can shock an organisation and lead its recovery. An unsuccessful leader will shock an organisation and paralyse it,” Welch said in a 1994 Industry Week interview.
“Organisations constantly need to be regenerated.”
GE under Welch spent more than $25bn on acquisitions, and he pushed into finance as the US economy shifted away from manufacturing. He looked overseas, too, boosting foreign sales by more than 50%.
DAYS OF BRAINSTORMING
He pioneered widely imitated training programmes, including “Work-Out,” in which employ- ees learnt to accelerate decision-making with days of brainstorming. In 1995, Welch imple- mented the Six Sigma quality controls to improve manufacturing processes. Noting GE’s success, companies around the world would adopt a similar methodology.
Welch knew thousands of employees by name and would send handwritten notes to voice his approval or dissatisfaction.
“He had tremendous, tremendous passion for the business, but he also had tremendous pas- sion for people,” William Conaty, whose 40-year GE career included serving as human re- sources chief under Welch, said in a 2014 interview. “If your wife was sick, he’d want to know how she was doing.”
Welch also worked six days a week, taking only Sunday off to golf — he called working weekends “a blast ”— and expected similar dedication from those who wanted to get ahead.
“I never once asked anyone, ‘Is there someplace you would rather be — or need to be — for your family or favourite hobby or whatever?”’ he said in his 2005 book,
Welch delayed his mandatory age-65 retirement for almost a year for a final challenge: a
$53bn bid for Honeywell International that collapsed when he baulked at European regula- tors’ demands for concessions.
A lifelong Boston Red Sox fan, Welch would test executives and potential hires on their baseball knowledge. He was also a golf addict, hitting the links with presidents George HW Bush and Bill Clinton and executives including Warren Buffett and Bill Gates.
After leaving GE, Welch served as a part-time adviser, a partner at investment firm Clayton Dubilier & Rice and consultant to companies including JPMorgan Chase. He taught at the Massachusetts Institute of Technology’s business school, opened a management institute bearing his name and stayed in the public eye with guest-host gigs on CNBC and New Eng- land Sports Network.
Welch married Carolyn Osburn in 1959, and they had four children before getting divorced in 1987. He was married to corporate lawyer Jane Beasley for 13 years.
They got divorced in 2002 amid revelations of an affair with Harvard Business Review editor Suzy Wetlaufer that began when she was interviewing him for an article.
The two got married in 2004 and went on to collaborate on
but not before divorce proceedings opened a public argument over Welch’s fortune, with his second wife’s lawyers claiming his asset valuation of $456m was at least $100m too low. The case was settled in 2003.
By then, Welch’s retirement package had been shown to include his $11m Central Park West apartment in New York City, use of a private jet, a leased Mercedes-Benz, restaurant and laundry expenses, country-club fees and sports tickets. He later opted to pay for some perks himself.
Blitzboks’ stunning comeback victory
• Makata goes over in extra time after Du Preez holds his nerve to lock the score at 24-24 Business Day3 Mar 2020Agency Staff Los Angeles /AFP
Sakoyisa Makata scored in extra time as SA fought back from 19-0 down to defeat Fiji 29-24 and win the Los Angeles leg of the World Rugby Sevens Series in the early hours of Sunday morning.
Makata’s sudden-death winner completed an extraordinary comeback for the Blitzboks, who trailed 24-12 with just more than a minute to go against the Fijians.
Fiji, chasing back-to-back tournament wins after their victory at the Sydney Sevens in Feb- ruary, looked to be on course for the title after storming into an early lead at the Dignity Health Sports Park. The South Pacific islanders’ Vilimoni Botitu scored the opening try in the first minute and Sevuloni Mocenacagi extended Fiji’s lead before Napolioni Bolaca made it 19-0 with SA looking ragged.
But Stedman Gans pulled a try back for the Blitzboks on the stroke of half-time to make it 19-7 at the break.
Selvyn Davids then scored soon after the restart to cut the Fiji lead to 19-12.
However, a sweeping lengthof-the-field attack from Fiji that ended with Jerry Tuwai dotting down in the corner restored the islanders’ 12-point cushion at 24-12 with just more than a minute remaining.
SA rallied again though and Chris Dry’s try made it 24-17. With the seconds ticking down, SA then waived the conversion attempt to take a quick restart and the decision paid off when they regained possession from the kickoff.
Branco du Preez scored wide out on the left and then nervelessly banged over the dropkick conversion to make it 24-24 to set up sudden-death and Makata’s moment of glory.
“The guys just made so many basic errors in the first half and we paid for it,” SA coach Neil Powell said. “But they were unbelievable after half-time. The guys just focused and kept be- lieving in the system.
“The guys know exactly what to do. We said just believe in the system and the system will help you out.”
The Fijians, who thumped England 26-5 in the quarterfinals, swept into the final with a daz- zling semifinal display against Australia, turning on the style in a 43-7 rout. Aminiasi Tuima- ba scored a brace while Sevuloni Mocenacagi produced a sublime no-look offload to set up a superb try for Jerry Tuwai.
The Blitzboks had advanced to the final after a clinical 17-0 victory over 2018 World Cup champions New Zealand in the semifinals. Flying wing Angelo Davids set the Blitzboks on the way to victory with two firsthalf tries before a well-worked effort from Werner Kok ex- tended the SA lead just after half-time.
Agriculture could lose up to R39.23bn
• Agbiz says lower demand from import-hungry Asia may see value of SA’s exports declining Business Day
3 Mar 2020
Bekezela Phakathi Parliamentary Writer phakathib@businesslive.co.za
!
/Elizabeth Sejake
Local produce: The Agriculture Business Chamber says Asia accounts for a quarter of SA’s agriculture exports, which could put the sector at risk.
SA’s agricultural sector could lose as much as R39.23bn in export revenue due to the out- break of the deadly coronavirus.
SA’s agricultural sector could lose as much as R39.23bn in export revenue due to the out- break of the deadly coronavirus.
The rapidly evolving epidemic of the flu-like virus, known as Covid-19, has rattled world markets, with investors taking a wait-and-see approach as they gauge the effect of the virus on the global economy.
According to the Agriculture Business Chamber (Agbiz), China’s temporary closure of some of the manufacturing hubs and restrictions on human movements could negatively affect de- mand from local firms.
Agbiz, an organisation that represents the agribusiness sector, said the longer firms remained closed, the more likely some might stop paying workers, which could also have an effect
“Given on that consumer SA’s agriculture demand. is export-orientated, with exports of roughly $10bn in 2019, the potential disruptions the coronavirus could cause on global value chains is a key concern,” Wandile Sihlobo, head of agribusiness research at Agbiz, said in a market update on Monday.
“This is specifically the case for Asia, as the epicentre of the outbreak, and also an area that accounts for a quarter of SA’s agriculture exports.”
China, with 8% of global agricultural imports, is the secondbiggest importer in the world.
Sihlobo said there were two channels to consider when thinking about the potential implica- tions of the virus for the SA agriculture sector.
SOFTENING DEMAND
First, aforementioned typically the exports supply products to side Asia of is the SA in good be higher shape, than and is that promising of 2019 to because of improved domestic weather conditions.
Sihlobo said this means any decline in exports in the near term would be a function of soften- ing demand rather than supply from the SA side.
Agbiz had observed a significant decline in global commodity prices over the past week, in line with what happened in global stock markets.
“The underpinning reason for this being the fact that Asia is an important agriculture market, not only to SA, but the world,” Sihlobo said.
“To be specific, China, with 8% of global agricultural imports, is the second-biggest importer in the world. Moreover, Japan, with 4% of global agriculture imports, is the sixth-biggest im- porter in the world. South
Korea and Hong Kong collectively account for 4% of global agriculture imports.
“The top 15 importers account for goes nearly to imports, Asia 60% (China, of of which world Japan, a agricultural quarter South
Korea and this Hong proportion Kong). of Ultimately, Asia within a reason global we ob- served agriculture declining trade is agricultural commodity prices,” Sihlobo said.
He said the potential decline in Asia’s agriculture demand and falling prices could see the value of SA’s agriculture exports to Asia also declining.
“While the picture of what could unfold looks gloomy, we note that, thus far, we have not yet observed disruption on the movements of products to Asia.
“However, the risk could materialise the longer there is no solution to the coronavirus and the he said. spread of the virus worsens,”
THE POTENTIAL DISRUPTIONS THE CORONAVIRUS COULD CAUSE ON GLOBAL VALUE CHAINS IS A KEY CONCERN
THE TOP 15 IMPORTERS ACCOUNT FOR 60% OF WORLD AGRICULTURAL IM- PORTS, OF WHICH A QUARTER GOES TO ASIA
It is apt that Sweden, a pioneer in the West when it came to the use of negative interest rates to ward off deflation as the global economic slowdown sparked by the financial crisis persist- ed, is debating the effectiveness of the strategy.
While there is still a debate about whether it succeeded in its primary goal of boosting con- sumer-price growth, at 1.2% in January, the rate was just twice the lowest level of 2015, when the central bank went into the unknown. The fear at the time was that price growth would go negative and if it stayed there would entrench a negative spiral where lower prices encourage consumers to delay spending in the hope of getting even lower prices later. That discourages investment in production and ultimately results in rising unemployment, reces- sion or even depression.
Negative rates have consequences that are undesirable. Pension funds, which hold a huge proportion of “safe assets”, have seen returns on their bond holdings depressed and in some cases have had to pay to lend money to governments. Banks have been similarly weakened, paying billions to central banks for keeping their deposits, while prospects of negative returns could prevent consumers from keeping money at commercial banks. That was probably one
of the reasons commercial banks chose to take the hit and not pass on the negative rates to depositors.
That debate is unlikely to be settled any time soon. Instead, it has sparked a new one as the world is gripped by the coronavirus outbreak in China, which has spread to other parts of the world, threatening an unprecedented halt to global economic activity.
The spread, which saw New York and Berlin on Monday being among cities that have report- ed their first cases, has led to speculation that authorities across the world will introduce a new round of stimulus. The question is, with eurozone interest rates below zero, those in the UK under 1% and the main rate in the US just below 2%, what can monetary policy achieve?
When central banks unleashed an unprecedented amount of stimulus to deal with the global financial crisis that started a decade ago, the question was always whether they had gone too far and would therefore find themselves ridiculously short of ammunition when the next one came.
That day has arrived, and the question.
The challenge for central banks is that if they are facing what is essentially a supply-side risk, of what use is interest rates? If workers aren’t able to leave their homes to go to work, shop or take holidays, the relative cost of money isn’t going to be the main important determinant of their economic behaviour.
Therefore, it’s questionable how long the relief rally that followed a Federal Reserve state- ment on Friday that it could cut rates in light of evolving (not revolving) risks will last. For similar reasons, the prospect of fiscal stimulus from governments is also proving to be inef- fective in boosting confidence.
For SA, this latest global crisis couldn’t have come at a worse time. Last week’s budget laid bare the fiscal crisis the country is in after a decade of mismanagement and lacklustre growth.
With just over two weeks before the SA Reserve Bank decides on interest rates, attention will turn to how our policymakers react to the coronavirus outbreak and the effect on markets.
Under normal circumstances the kind of currency depreciation that has seen the pound at more than four-year lows above R20/£ and approaching R16/$ would have analysts debating the potential inflationary effect and the possibility of higher interest rates.
It’s not much of a consolation, but the kind of hit we can expect to demand at a time when some analysts are predicting that China’s economy could contract 6% on a quarterly basis probably means inflation will be the least of our worries.
With our rates nowhere near zero, we might at face value look as if we’ll be among the few with a room for a sizeable monetary stimulus injection. But it’s most likely that the prudent step would be to stay put, lest we risk a run on our assets.
FOR SA, THIS LATEST GLOBAL CRISIS COULD NOT HAVE COME AT A WORSE TIME
SA-China trade to suffer
HIT: SCOPE FOR VIRUS-INDUCED BUSINESS HAVOC SIGNIFICANT The Citizen (Gauteng)
3 Mar 2020
Brian Sokutu – brians@citizen.co.za
Disruptions may shave 0.2% off SA’s GDP this year, says study.
As the impact of the coronavirus on global trade continues to wreak havoc, econo- mists yesterday warned a slowdown in Chinese economic activity could affect South Africa’s mineral exports to China and tourism to SA.
Against a background of almost R1 trillion wiped off the South African Securities Ex- change (JSE) last week – the fourth-biggest weekly loss since 1978 – Momentum Investments economists
Sanisha Packirisamy and Herman van Papendorp, painted a gloomy picture of the future.
Citing a PricewaterhouseCoopers (PwC) study, they said the scope for coronavirus- induced business disruption in SA could be significant as China was SA’s largest trading partner.
Bilateral trade accounted for nearly a third of total China-Africa trade in 2017, ac- cording to Control Risks Group.
Last year, China bought nearly 11% of SA’s exports, while almost a fifth of SA’s im- ports originated from China.
The PwC study cited International Monetary Fund forecasts anticipating trade disrup- tion would shave 0.2% off gross domestic product growth in SA this year.
This was taking into account affected export revenues and disruptions to manufac- turing and retail supply chains exposed to imports, and tourism.
A 2018 tourism report from Statistics SA recorded 97 000 Chinese tourists to SA in 2018. China was the seventh-largest origin of foreign visitors to SA.
A dip in Chinese activity could be disruptive to key industries, where the economy plays a significant role in the supply chain. For example, PwC cited cellphones – SA’s largest import category by value from China, with China supplying 85% of the country’s cellphone imports.
In its economic and market snapshot for February 2020, Momentum noted that:
Although growth risks posed by the economic spillover effects of the coronavirus were skewed to the downside, only a modest dent was expected to impact annual growth in the US.
While the coronavirus has had a minimal economic effect so far, the number of infec- tions has jumped in the eurozone, highlighting risks of short-term economic damage.
Japan’s growth plunged by a larger margin than anticipated in the final quarter of last year on soft durable goods spending and limited fiscal support from government, which only ramped up towards the end of the year.
Chinese officials have implemented a number of economic support measures to help offset the effect of the outbreak, but risks of softer activity spilling over into the sec- ond quarter remained significant.
Coronavirus worries slammed riskier asset classes further last month amid concerns over the spread of Covid-19 outside China.
Virus death toll keeps climbing
UNRELENTING: SENEGAL, SAUDI ARABIA, LATVIA LATEST TO REPORT CASES FOR FIRST TIME
The Citizen (Gauteng) 3 Mar 2020
Geneva/Beijing
The fight against virus should become a bridge for peace, says WHO chief.
Coronavirus now appears to be spreading much more rapidly outside China than within but can still be contained, and stigma is more dangerous than the disease it- self, the World Health Organisation (WHO) said last night.
WHO chief Tedros Adhanom Ghebreyesus said almost nine times as many cases had been reported outside China as inside in the previous 24 hours, adding that the risk of coronavirus spreading was now very high at a “global level”.
He said outbreaks in South Korea, Italy, Iran and Japan were the greatest concern, but that there was evidence that close surveillance was working in South Korea – the worst affected country outside China – and the epidemic could be contained there.
“Stigma, to be honest, is more dangerous than the virus itself. Let’s really underline that. Stigma is the most dangerous enemy,” he told a news briefing in Geneva.
He said the fight against the coronavirus should become a bridge for peace, com- mending the United States for supporting sending medical aid to Iran despite the tensions between them.
“I think we have a common enemy now,” he said.
The global death toll stood at 3 079, with the number of dead in Italy jumping by 18 to 52 and Latvia, Saudi Arabia and Senegal reporting cases for the first time.
Yet equity markets surged after their worst plunge since the financial 2008 crisis last week, encouraged by the prospect of government action to stem the economic im- pact.
Finance ministers of the G7 group of leading industrialised democracies were ex- pected to discuss measures in a conference call today, sources told Reuters.
A senior US official said he was concerned about a likely jump in the number of cas- es in the US, which has had more than 90, with six deaths. South Korea has had 26 deaths and reported another 599 infections yesterday – taking its tally to 4 335.
The virus broke out in Wuhan late last year and has since infected more than 90 160 people, mostly in China. Outside China, more than 70 countries now have cases, with more than 8 700 infected and more than 100 deaths. – Reuters
‘Debate to liquidate SAA not dead’
HIGH-MAINTENANCE: AIRLINE BURNS THROUGH R2 BILLION IN TWO WEEKS, SAYS MINISTER
The Citizen (Gauteng) 3 Mar 2020
Tebogo Tshwane Moneyweb
Treasury worried R3.5 billion loan from Development Bank will run out by mid-March.
It continues to be a tale of two possibilities for South African Airways (SAA) – with Friday seeing the business rescue practitioners announce that they have been given a further extension to produce a draft restructuring plan for the airline, and Deputy Finance Minister David Masondo saying the option to liquidate SAA is not completely off the table.
Masondo was speaking at a postbudget review dialogue in Johannesburg. He spoke about the biggest pressures on the fiscus – one being the government’s consistent bailouts to state-owned entities.
SAA received R16.4 billion (over three years) in Finance Minister Tito Mboweni’s budget speech last week, specifically to cover the airline’s guaranteed debt and in- terest. Mboweni said more money would still be needed to fund the state-owned car- rier’s restructuring.
The cost structure of SAA is “very high” Masondo said, describing how the airline burns through R2 billion in two weeks, mainly in paying for fuel, salaries, leased air- craft and maintenance.
“We had a simple solution as Treasury when the business rescue practitioners [BRPs] came to us with three options – the one we liked was to liquidate, but we were not successful as the outcome was to restructure,” said Masondo.
The airline was placed under voluntary business rescue in December, receiving R2 billion in post-commencement funding (PCF) from local commercial banks, with a further R2 billion to be provided by the state. Towards the end of January, the Devel- opment Bank of Southern Africa swooped in with an emergency loan of R3.5 billion when the business rescue process was put on the line due to government not being able to raise its half of the PCF on time.
Treasury is now worried that the R3.5 billion will run out by mid-March, said Mason- do.
Public Enterprises Minister Pravin Gordhan recently made similar statements to par- liament’s standing committee on public accounts and the public enterprises commit- tee.
Masondo said the debate to liquidate the airline was “not dead in government” as they wait to see the BRPs’ restructuring proposal.
“We will look at the business rescue plan and maybe it will present more persuasive arguments,” said Masondo.
In a statement on Friday, BRPs Les Matuson and Siviwe Dongwana explained that lenders and creditors had allowed them to extend the date of publication of the busi- ness rescue plan from 28 February to 31 March to consult all the relevant stakehold- ers.
The employees’ and creditors’ committees, as well as the department of public en- terprises, will be given an opportunity to make representations to the practitioners regarding the draft rescue plan. Within 10 days of the plan being published, creditors will have the last say where they will vote on whether or not to approve it.
Masondo said the decision to not liquidate was premised on the hope that SAA will succeed if given the chance to restructure its business model, which includes cutting routes and labour.
