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Another dreadful week for the JSE. Content hosted by iono.fm

The JSE share price is down by 2.5%. In company news, Clicks has released an interesting set of results, a nice comparison with last week's Dis-chem results. Richemont announces a deal with Alibaba, while Verimark announces plans to delist. Stadio is set to acquire another higher education institution. Allied Electronics and Tesla released results, so it would seem that Musk isn't doing too badly.

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The week ahead of November 2018. The S&P 500 Index in the US is now slightly below the level at which it began the year. In other words, all the gains thus far in 2018 have been wiped out. More worryingly, the fall from the 2 931 peak on Sep 20 to the current level of 2 659 represents a percentage drop of 9.3%, or just a whisker away from being in a correction phase.

And the fact that the S&P 500 hasn't gone lower and into correction territory is all thanks to the US retail investor. Retail investors have been piling into stocks, whereas their institutional and hedge fund counterparts a have been cautiously avoiding the market. This confidence is reflected in record lows for cash holdings at brokerages such as Charles Schwab. Bank of America Merrill Lynch is seeing a similar pattern among its retail investors. This unbridled enthusiasm for stocks indicates that retail investors believe the good news coming out of the US economy will carry on for a long time yet and are shrugging off concerns associated with rising interest rates and incipient trade wars.

Retail investors are a skittish bunch and it wouldn't take much to spook them but for the time being, they are the only thing that's keeping the S&P 500 and the other major US stock indexes going. This is the longest bull market in US equity market history. Although it corrected in Feb this year, it kept making new highs until this month. It is probably time for a healthy correction.

The JSE All Share Index finished the week at 50 838. Since the 25 Jan, it has fallen by 17.6% and is flirting with bear market territory. However, it is nowhere near the levels seen between 11 May 2008 and 16 Nov 2008, when it fell by 45%.

New finance minister Tito Mboweni delivered his maiden medium term budget policy statement (MTBPS) last week in fine style, though he failed to allay the fears of economists and, more importantly, the ratings agencies. Moody's, the only ratings agency that still has SA on investment grade rating, has voiced concern that the increasing debt to GDP percentage coupled with the higher than anticipated budget deficit were ratings negative.

Cyril Ramaphosa's much-anticipated Investment Summit took place in Sandton last week amid much fanfare. Companies and institutions pledged approximately $20bn to help kick-start the moribund SA economy and most, if not all participants left the event in a very upbeat mood. Ramaphosa is held in extremely high esteem by the local and international business community and is seen as a man with whom they can do business. But this economy cannot just run on the back of promises made by one individual, no matter how charismatic he may be. In order to break out of recession and get back onto a sustainable growth path, the economy needs profound structural reform including, if necessary, partial or wholesale privatization of state-owned assets. Hopefully, we will miss a downgrade by Moody's but as 2019 progresses and the general election looms ever closer, SA will remain under the microscope of all of the ratings agencies.

Company reporting this week;

29 October 2018: Famous Brands - Interim

29 October 2018: Raubex - Interim

31 October 2018: Cartrack - Interim

1 November 2018: Afrimat - Interim

1 November 2018: Lonmin - Final

Economic related events this week;

29 October 2018: SA Private Sector Credit Extension & M3 Money Supply Sep

30 October 2018: SA Unemployment Rate Q3

31 October 2018: SA Trade Balance Sep

1 November 2018: NAAMSA New vehicle Sales Oct

1 November 2018: Absa Manufacturing PMI Oct

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Sport in an INCEtant - 30 October 2018. There was non-stop action in the sporting World over the last week. With all the different events going on, there was sure to be something on offer for even the slightest of sport fanatics with action including the conclusion of the Currie Cup, the HSBC Shanghai Championship as well as plenty of football and tennis to feast on throughout the week. In the week to come, there will be even more on offer as the ATP will play out the final Masters 1000 series in Paris which got underway on Monday.

Rugby

With just one week to go until the Springboks begin their tour of the Northern Hemisphere, the oldest competition in the World, the Currie Cup, was played out on Saturday with local stars looking to mount one final charge towards being named in the Boks touring squad which begins with a match against England on Saturday. The Currie Cup final was contested between undoubtedly the two strongest domestic sides this season with the age-old rivalry between Western Province and the Natal Sharks. Many expected Province to be too strong for the Durban outfit, however, rather disappointingly - the final was decided on which team made fewer errors on the day. It was a sloppy encounter in which neither side were able to impress, however, coach Rob du Preez was able to claim his maiden Currie Cup title along with his three sons who all featured in the starting 15 of the Sharks. It was a well-deserved victory for the Sharks who have finished the season off on the perfect note. The focus will now shit to the November Internationals which will see Springbok fans hoping for continued improvement in the exciting Springbok side.

Golf

In the final World Golf Championship event of the year, the top golfers in the World did battle in the sun-soaked city of Shanghai, which produced a nail-biting finish on Sunday morning. Justin Rose, Xander Schauffele and big-hitting Tony Finau all traded blows throughout the day on Sunday, with the lead switching between the latter two almost on a hole-by-hole basis. The tournament reached its climax when Schauffele and Finau were left to slug it out in a playoff on the daunting 18th hole at Sheshan International which ultimately saw the 25 year-old American, Schauffele claim his biggest victory to date by recording a birdie. The European Tour will now begin the final stages of the Race to Dubai with the Turkish Airlines Open getting underway on Thursday and a strong field is expected in Antalya.

Football

Unfortunately, the weekend of footballing action was marred by the tragic news that the Leicester City owner and Chairmain, Vichai Srivaddhanaprabha, was on-board a helicopter that crashed shortly after leaving the Leceister field on Saturday evening. The footballing World has been rocked by the devastating news, tributes have poured in for both Leicester and the family during this tragic time. In terms of footballing action, the weekend produced wins for Liverpool, Chelsea, and Manchester United while Arsenal were held to a 2-2 draw away at Crystal Palace, bringing to an end an incredible eleven match winning streak in all competitions. In the Spanish League, el Classico was played out on Sunday where a struggling Real Madrid side would have been looking to turn their season around by claiming a victory over their Catalan rivals. It was not to be, however, as Madrid slumped to a 5-1 thrashing at the hands of their fiercist rivals!

Tennis

South African tennis fans were treated to a delightful display on Sunday afternoon when the giant, Kevin Anderson, was able to dismiss Japan's, Kei Nishikori, and claim the ATP 500 Vienna title, the biggest of his career. The win guaranteed Anderson a spot in the ATP World Tour Finals to be held in London in Novemebr which is a fitting end to a remarkable season by the South African great who is comfortably within the World's top 10 male players. Meanwhile in Switzerland, Roger Federer was able to further extend his winning record in his home event in Basel, going on to beat surprise package, Marius Copil, in the final and in doing so, notched up his 9th title at this event. The Paris Masters 1000 series gets underway this week with Djokovic seemingly being the man to watch after a spectacular run of form in the second half of the year!

What to watch this week

With bucket loads of action on offer in the week to come, you'll be forgiven for letting some of the major attractions pass you by. One encounter that can't be missed will be the clash between the Springboks and England that gets underway at Twickenham on Saturday afternoon, with the Boks looking to extend on their series win against the English just a few months ago!

That's all from me, enjoy your action-packed week ahead!

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Famous Brands hopeful on UK burger chain. The restaurant group says remedial action taken at Gourmet Burger Kitchen should result in the chain adding value in time

Famous Brands is giving Gourmet Burger Kitchen (GBK) a facelift and has strengthened its management team after the upmarket burger chain reported an increased first-half loss.

The quick-service restaurant and supply chain group says management oversight at GBK has improved after it took steps to turn the chain around. It has also closed six stores under a targeted closure programme for distressed sites. Last week, it announced that GBK had entered a Company Voluntary Movement in a move that would ensure the financial viability and sustainability of the business.

GBK's operating loss tripled to 2.6 million in the six months to end-August from a year earlier. Due to the adverse trading conditions and sustained underperformance of the brand, it's impaired its investment by R874 million before tax.

The board is satisfied that the positive impact of remedial interventions underway in the operation and the inherent strength of the GBK brand will, in time, add value to the group," Famous Brands said. "The brand remains the leader in the premium burger category in the UK in terms of consumer sentiment, and management's focus is on re-establishing the gold standard across the entire value chain and customer journey to leverage that position."

Famous Brands said with the exception of its Coega Concentrate tomato paste plant, its operations in SA, the rest of Africa and the Middle East delivered good growth and a solid operating performance over the six-month period. It's also taken remedial measures at Coega, which reported an operating loss of R17.8 million due to underutilisation of capacity.

Group revenue rose 5.4% to R3.58 billion in the six months to end-August. Before accounting for the impairment, earnings before interest, tax, depreciation and amortisation increased by 4.8% to R526 million, while headline earnings per share rose 10.6% to 188c. However, the impairment resulted in a basic loss per share of 572c, down from earnings of 171c last year. It hasn't declared an interim dividend.

Famous Brands said it continued to comply with its financial covenants and meet its debt repayment obligations. Net debt decreased by 24% to R1.84 billion from a year earlier.

Its shares gained 1.9% to R102.60 yesterday.

Famous Brands: CVA process is a clear admission that not only is GBK in serious trouble, but there is no prospect of a buyer. And losses are not abating, with an operating loss of R45m matching that of the preceding 6mths. Impairment of R874m in addition to the R304m in FY18.

-- Karin Richards (@Richards_Karin) October 29, 2018

-FAMOUS BRANDS LTD HY HEPS 188 CENTS-CONTINUES TO COMPLY WITH FINANCIAL COVENANTS AND COMFORTABLY MEET DEBT REPAYMENT OBLIGATIONS-HY REV 3,583.6 MLN RAND, UP 5.4 PCT-NO DIVIDEND IS DECLARED FOR THE PERIOD UNDER REVIEW

-- Nick Kunze (@NickKunze2) October 29, 2018

MTN sticks to its guns in Nigeria. The mobile network operator says it remains committed to listing its Nigerian business and will defend itself against allegations by the Central Bank and Attorney General

MTN says it remains committed to listing its Nigerian business despite its recent run-in with the Central Bank of Nigeria and that country's Attorney General. The mobile network operator says it continues to engage extensively with the Nigerian authorities after the Attorney General alleged the group had underpaid $2 billion on tax and the Central Bank ordered it to repatriate $8.1 billion in historic dividends that said were taken out of the country illegally.

In a third-quarter update yesterday, MTN said it continued to deny the allegations and claims and would continue to defend its position.

Stronger operational performances from Nigeria and Ghana, where it also recently listed, helped support its business in the period to end-September. It added 2.5 million new subscribers over the quarter, increasing its total subscriber base by 1.1% to 225.4 million. Active data subscribers increased by 5 million from the previous quarter to 74.2 million while active MTN Mobile Money customers grew by 1.7 million to 25.8 million.

Service revenue grew by 10% from a year earlier, boosted by strong growth in Ghana, Nigeria and Iran. Group data revenue jumped 24% year-on-year. Service revenue in South Africa rose 3%, edging closer to the group's medium-term target of mid-single-digit growth. Data and digital revenue increased by 12.5% and 9.9% respectively, while outgoing voice revenue fell by 8.4%.

MTN recorded an improved operational performance in many markets in the third quarter," group president Rob Shuter said. "Group service revenue grew by 10% year on year, ahead of our medium-term target of upper-single-digit growth, supported by continued strong growth in voice and data revenue."

The group said it had reduced its gross US dollar debt by about $00 million, supported by proceeds from the sale of MTN Cyprus of $303 million, the settlement of a loan from its Ugandan Tower Compay of $34 million as well as the proceeds from the MTN Ghana listing of $202 million received after the quarter's end.

Its shares rose 3.3% to R86.75 yesterday, paring losses for the year to 36%.

Quite sad reading through MTN results this morning, MTN Nigeria is cooking and had it not been for the exogenous event the stock would be outperforming... Joys of stock-picking :)

-- Mark Narramore (@marknarramore1) October 29, 2018

$JSEMTN qrtly update. Looks like a 'fair'' set of results: Some pockets of concern: Stale EBITDA (ZAR weakness). MTN Nigeria had fair results too. Iran (MENA) cell still 49% of equity - big cash there!

-- 24K Magic (@ZAR_Chez) October 29, 2018

Low inflation puts a lid on Shoprite’s sales. The retailer says it doesn't foresee material increases in food inflation until next year, which should keep prices low this festive season

Shoprite has reported muted first-quarter sales growth due to food deflation and poor product availability after a provider strike and a new warehousing system in Gauteng meant it couldn't get enough goods onto the shelves of its stores.

In an operational update, the supermarket group said turnover rose just 0.4% in the three months to end-September. That excludes the effects of hyperinflation on its Angola operations. SA sales grew by 1.7% during a period which saw continued low inflation, with close to 12-thousand items remaining cheaper than they were a year ago.

The retailer said the core-customer base of its Shoprite chain, in particular, remained under pressure due to rising transport costs and unemployment. Its Checkers chain continued to show better growth, although it was also affected by availability issues in the broader Gauteng region.

This resulted in significant lost sales opportunities, which naturally benefitted some of the Group's competitors," Shoprite said. "The situation has now normalised and a more positive volume trend is emerging in October on the back of improving product availability."

Its operations across the rest of Africa reported an 8.6% drop in turnover in rand terms, mainly due to the depreciation of Angola's currency, the kwanza, after year-end and more recently the depreciation of Zambia's kwacha. This was partly mitigated by its hedging strategy.

Shoprite's furniture division reported an 8.7% increase in sales, while the OK Franchise division recorded turnover growth of 6.3%.

Although some food price inflation is inevitable in the next few months due to current rand weakness and escalating transport costs, Shoprite said it didn't foresee material increases in internal food inflation until next year, which is good news for consumers ahead of the festive season. It said it remained positive about its operational strength and is making good progress on its strategic priorities particularly around private label development, franchise offer and its ability to capture a higher share of the more upmarket shoppers' grocery spend.

Its shares declined by 0.5% to R182 yesterday.

Shoprite trading update Q to Sept. Problems. Africa sharp currency devaluations, negative food inflation in sa and strike problems systems at gauteng distribution center. Buy looking cheap

-- Wayne McCurrie (@WayneMcCurrie) October 29, 2018

South Africa's most popular retailers: Shoprite vs Pick n Pay vs Spar vs Checkers via @supermarketmag

-- Supermarket&Retailer (@Supermarketmag) October 29, 2018

Materials save Raubex as roads crumble. The roadbuilding and construction group is right-sizing its roads business due to a big slowdown in work from SANRAL

Raubex's materials business has shielded it from a rocky performance from its roads construction division, helping the group report a small profit for the six months to end-August.

It says the low volume of work experienced during the period has forced it to right-size its asphalt and bitumen supply operations to the current level of demand. Raubex blames lower spending on road infrastructure by the SA National Roads Agency (SANRAL) and delayed contract awards from provincial government for the slowdown in its roads business. This has affected the construction of new roads as well as the rehabilitation and maintenance of existing ones.

Its materials division, on the other hand, has been the main contributor to first-half earnings with stable conditions in the mining services operations supported by some volume growth from its commercial quarry operations. Its infrastructure division has made good progress in executing projects in Cameroon and is well positioned to participate in the rollout of renewable energy projects in South Africa, where it says it's starting on secured work.

For the period, it's reported a 4% decline in revenue to R4.48 billion while operating profit fell 57% to R158 million. It said its material division contributed 121.5% of group operating profit, mitigating the losses in the road surfacing and road construction divisions. Headline earnings per share sank 73% to 35.7c and it's declared an interim dividend of 12c per share.

Its order book increased by 12% to R8.41 billion at the end of August, with close to a quarter of that representing contracts outside of South Africa in the rest of Africa and Australia. The order book for SANRAL decreased by 61.4% to R563 million. It's replaced it with work on road infrastructure managed by concessionaires as well as an increase in the order book from private clients mainly in the affordable housing and commercial billing sector.

If SANRAL work returns to more normalised levels, there should be a significant improvement in the road maintenance and road construction operations," Raubex said. "Overall conditions in the South African construction sector are expected to remain challenging and the short-term outlook is uncertain with the sector very much under pressure from the slow rollout of general infrastructure spend in the country and the current lower volume of work from SANRAL."

The group said it expected a challenging second half, with conditions in the SA construction sector remaining constrained. In the meantime, it plans to increase its projects in the rest of Africa and Western Australia, which it says is supportive of growth.

Its shares closed 0.3% down at R18.70 yesterday.

Raubex Group Posts Half Year Revenue Of R4,48 Billion, Down 4 Pct - Reuters News-HY ORDER BOOK OF R8,41 BILLION (H1 2018: R7,52 BILLION)-INTERIM DIVIDEND OF 12 CENTS PER SHARE DECLARED-HY HEPS DOWN 72,8% TO 35,7 CENTS PER SHARE

-- Nick Kunze (@NickKunze2) October 29, 2018

OP-ED: Tito's Tough Choices. Tito Mboweni, SA's finance minister, is to be commended for his measured Medium-Term Budget Statement, one having to deal with slow growth, declining revenue, higher expenditure, increasing joblessness and diminishing wiggle-room.

The problems are immense and growing. The failure to grow the economy and the need to meet public demands has seen government spending increase more rapidly than SA's ability to fund these demands, hence increasing debt service obligations. These will rise to 15.1% of the budget in 2021/22, compared to 13.9% now, and debt overall to a threatening 59.6% of GDP (or R4.1 trillion) by 2023.

Yet, unsurprisingly, with an election coming up, Tito has largely avoided the tough policy choices that government needs to make - and not just politically fudge - if it is to put the country onto a growth path, one of "prosperity", to use the minister's lexicon, which its citizens anticipate.

Five such choices stand out:

The first is whether to simply tinker with the current policy path - as Mboweni has attempted - versus a public acknowledgement of the need for a different path. The budget statement notes that "South Africa's budgets for social and economic services are substantial, but the quality of spending is in many areas unacceptably poor, undermining (and in some cases collapsing) service delivery. Poor governance - reflected in inefficiency, corruption and financial mismanagement - reduces the impact of spending and increases pressure on the budget." True, but a critical initial step to high rates of growth is to admit that the low growth problem stems from more than just corruption, even though this has undoubtedly made it worse.

Related to this, second, is whether to back government or the private sector as the critical agent of growth. Mboweni appears to come down on the side of greater private sector participation, observing that "a crucial component ... is our intention to partner with the private sector to increase investment in public infrastructure". Yet it's hard to see how the rhetoric squares with the reality of bailouts to the likes of SAA and other state-owned companies, and the continued expenditure burden of public sector employees.

This, third, links to the next choice: To continue to spend on government's salary bill versus shrinking these numbers. This would have to involve cutting back on personnel, as well as wage demands. Currently the public sector wage bill sucks up more than one third of the R1.7-trillion budget. This bill has risen from R395-billion in 2014/15 to R590-billion in 2018. The public sector's increased wage demands now, as the minister reminded, exceed budgeted baselines by R30-billion, about the same amount of money that has been scratched out for extra spending on education, health, social and infrastructure over the next three years. Of course, this wage burden relates not just to public servants, but excessive spending on government, from the size of Cabinet to the profligacy of its members, as the minister admitted. To put this figure in some perspective, it is more than three times the annual budget of the Department of Trade and Industry. As a result, annual government debt service costs are projected to increase to nearly R250-billion in 2021/22, about the same SA currently spends on basic education.

This again links to a fourth choice: whether to maintain the governance compact that has delivered political power to the ANC, and some degree of social stability, versus resetting this relationship. This takes various practical forms. For example, whether to extend the bargaining council agreements which have stuffed (there is no more polite word) the manufacturing sector, where job numbers have declined from 1.44 million in 2005 to 1.18 million today. From March to June in 2018 alone, 13,000 manufacturing jobs were shed. This decline should be regarded as a national emergency.

And fifth, the government needs to decide exactly how it is going to achieve its strategy of investment-led growth. This requires more policy detail than political declarations. It's no good accusing the private sector of an investment strike, but rather to ensure the conditions and opportunities than enable it to seek a reasonable return against risk. The proof of the changing relationship with business is ultimately not in the rhetoric, but in the reality.

Business, for its part, will need to speak truth to power, rather than stick to its usually vapid and non-committal commentary.

For example, while SAA is now to enjoy a further R5-billion bailout, it is necessary to decide what the government wants it to be. A subsidised carrier of tourists to spend money in SA, a public service protected employer, or a commercially successful airline?

Mboweni noted that "we require reforms to change the structure of our economy, raise productivity, increase competition and reduce the cost of doing business...".

Again, the question is how? The government will have to decide how to insert competition outside only of regulating monopolistic practices in big business, including in its own activities - such as the SOCs, and in allocating government support to business.

Overall Mboweni's interim budget reflection leaves a big question begging. What is SA's value proposition to investors?

And the message of SA's declining economy, omnipresent in the figures of the day, is clear: SA's economy cannot be all things to all people, as much as the government tries politically to avoid that economic reality. DM

Mills heads the Brenthurst Foundation; Schewitz is in manufacturing in Buffalo City.

OP-ED: 2018 MTBPS - idling at a crossroads. South Africans have become accustomed to finance ministers using quotes in their speeches to express the sentiment of the moment at the same time as providing a stamp of their own style of leadership. In this regard, Finance Minister Tito Mboweni's maiden MTBPS speech delivered the Dickens quote:

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity... we were all going direct to Heaven, we were all going direct the other way."

This quote encapsulates the 2018 MTBPS moment pretty aptly. Just two weeks into his new role, Minister Mboweni had the unenviable task of stating where we are at now as a nation. It is indicative of the current juncture that his speech was entitled "the economy at a crossroads" and euphemistically referred to hell as "the other way".

In this pre-election year the expenditure ceiling was not revised downwards, meaning that Treasury doesn't propose to cut overall government spending come the February 2019 Budget speech.

Following previous expenditure cuts, this holding pattern is unlikely to deliver the much-needed relief poor households require. However, considering the announcement of a stimulus package, one would have expected increases and not freezes in social expenditure and/or increases, not freezes in tax revenue from those living and working in South Africa who can afford to contribute to the social compact.

Rather, government's stimulus package entails reprioritisation of expenditure, which it might be argued is not a stimulus package at all, but rather more austerity that is taking us the other way.

This mini-budget fails to adequately meet the needs of the 64.2%, or approximately 30 million South Africans who live below the poverty line.

For these households, when prices go up (like when the VAT rate increased by 1%) they cannot reach into their savings and are therefore forced to cut back on the goods and services they buy, which is more often than not food.

In terms of the revenue required to fund critical social programmes in health, education, social development, housing and safety, the MTBPS revealed a facet of that highway to hell that we've been on.

There is a projected revenue shortfall of R27.4-billion. It emerged that part of the reason for this shortfall has to do with an R11-billion backlog of VAT refunds that needs to be cleared. This is coupled with an expected shortfall in corporate and personal income tax.

Here the effects of what has occurred at the South African Revenue Service have further revealed themselves. Following the dismantling of SARS' large business centre and investigative capacity, it is unsurprising that tax revenue collection is down. In order to address this deficit, Treasury will have to resort to increased borrowing. Fortunately, Treasury has allocated much-needed funds to repair the damage to the revenue service.

The MTBPS says that government will avoid increases in the major tax instruments unless the economic environment requires it. As a result of the reprioritised expenditure R1.4-billion is being allocated to SARS over the medium term.

We can see that restoring SARS to a well-functioning institution is key to the plan of revenue-raising. It seems that Treasury believes that we'll generate sufficient revenue without needing to raise taxes if we can restore SARS' capacity. The timing of that turnaround, however, will be a critical factor.

Realistically, we know that it takes time to rebuild institutions. In this context, appointing credible leadership at SARS and bringing experienced officials back needs to be one of government's top priorities. Minister Mboweni did affirm the importance of strengthening the SARS leadership team.

Central to this plan should be addressing tax evasion as a central cause of our budget deficit. When large businesses make use of accounting firms as enablers to evade their tax obligations, they are reneging on the social compact that is a feature of democracy and leaving citizens to pick up the bill through increases in taxes such as VAT and personal income tax.

It was good to hear the minister's frank statements regarding how too much money goes missing and the need to spend money better. There are positive actions that are being taken in terms of the restoring good governance and fighting corruption.

It is also critical to also hold the minister to his acknowledgement that civil society "can help" in improving transparency and governance processes. In order to do this the minister should continue to support initiatives that focus on strengthening civil society participation in the planning and budgeting processes.

Among the key fiscal risks are the managing of debt, the exposure in relation to loan guarantees given to state-owned enterprises and unpaid bills at provincial and local government. Government has provided guarantees of R670-billion.

The largest of these guarantees is to Eskom. The implication of a guarantee is that if the state-owned enterprise is not able to settle its loan by the date it is due, then the creditors have recourse against the National Revenue Fund, which supersedes the payments relating to other government expenditure, including social grants, for example.

Indeed, we are seeing the impacts of debts that are maturing at state-owned entities that have been beleaguered with governance issues, with bailouts of R5-billion to SAA, R1.25-billion to SA Express and the Post Office receiving R2.9-billion to defray debt and fund operational requirements.

Harking back to the Dickens quote, it is the epoch of incredulity. As the inquiries proceed, we are becoming increasingly aware of the details of the extent of what has occurred in the state-owned enterprises.

More of these kinds of risks have the potential to realise and will have to be confronted as they arise. One such risk is that the Road Accident Fund's liability is expected to grow to R393-billion by 2021/22 and will require further large increases to the fuel levy -- up to 80 cents per litre.

While the Minister of Finance acknowledged that increases in electricity and fuel prices, with unemployment, poor services and corruption are impacting hard on the poor -- we are seeing an announcement of the need of further fuel increases.

With further fuel levy increases on cards, which will have a knock-on impact on food prices, the zero-rating of white cake flour and bread flour, will be small comfort at the household level.

Presently, 5.9 million children are under the age of five years. Twenty-seven percent of these children are stunted and it is to these children that the Minister needed to deliver a true stimulus package.

From the perspective of those hardest hit by austerity, perhaps the MTBPS should have been responsive to another of Dickens's characters, that of young Oliver Twist, who asked: "Please Sir, may I have some more?" DM

Corporate finance activity of the week. Lonmin undertakes refinancing

The company has announced that it has entered into a $200 million metal purchase agreement with Pangaea Investment Management, an associate company of Jiagxi Copper Company, pursuant to which the upfront payment will be amortized over three years. Lonmin will settle its pre-existing term loan of $150 million and cancel all its other pre-existing undrawn facilities.

PBT repurchases shares

The company has repurchased 305,062,917 shares at a price of R0.20 per share at a total cost of 61 million.

Mustek repurchases shares

The company has repurchased 2,420,414 shares at a price of between R6.70 per share and R7.20 per share at a total cost of R17,22 million. The general repurchased commenced from September 5 until October 17, 2018.

Results of Rand Merchant Investment's distribution alternative

The company has issued 9,088,564 new shares in terms of its scrip distribution alternative at a price of R38.00 per share resulting in retained profits to the company of R345,4 million.

South32 repurchases shares

The company this week repurchased a further 3,080,841 shares for A$11,6 million (R118,3 million).

Hammerson plc repurchases shares

This week the company repurchased 1,137,146 shares at a cost of 5 million (R92,9 million) as part of a share buyback programme for its ordinary shares to return realised disposal proceeds to shareholders over the next 12 months. The maximum aggregate consideration under the programme will be "300 million up to a maximum of 79,422,719 ordinary shares.

Glencore repurchase shares

This week the company repurchased a further 14,741,676 shares at a cost of 45,4 million (R841,8 million) in terms of its buy-back programme

MICROmega to change name

MICROmega was recently reclassified from the Business Support Services subsector classification to the Computer Services subsector following the disposal of the NOSA Group. The company's move into a growth focused portfolio based on technology dependent services has resulted in the company proposing a name change. The new name Sebata Holdings will take effect from October 31, 2018.

Five companies issued a profit warning announcement

The following companies issued profit warnings this week: Hulisani, Howden Africa, Brikor, Premier Fishing, Brands and Novus.

14 companies either issued, renewed or withdrew cautionaries

The following companies advised shareholders: Choppies Enterprises, eXtract, PBT Group, Stellar Capital Partners, Imbalie Beauty, Clover Industries, Santova, African Phoenix Investments, Verimark, enX, Middle East Diamond Resources, MTN, Astoria Investments and Famous Brands.

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