Top 5 on Fin24: Deputy finance minister confident SA will avoid downgrade, Naspers to reduce stake in Tencent

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Cape Town – A roundup of Thursday’s top economic and finance reads on Fin24.

African leaders sign major free-trade deal

africa economy large

African leaders have signed accords setting up a continental free-trade area that’s expected to boost commerce within the 55-member African Union and eventually supplant a patchwork of existing agreements.

More than 40 nations signed the African Continental Free Trade Area agreement, or AfCFTA, which commits governments to removing tariffs on 90% of goods and phasing in the rest in future. The agreements will still require ratification by the individual governments and will only come into force when ratified by at least 22 countries.

“The promise of free trade and free movement is prosperity for all Africans, because we are prioritising the production of value-added goods and services that are Made in Africa,” Rwandan President Paul Kagame said before the leaders began signing the agreements. “The advantages we gain by creating one African market will also benefit our trading partners around the world.”

Deputy Finance Minister Gungubele confident SA will avoid downgrade

Mondli Gungubele

Deputy Finance Minister Mondli Gungubele on Thursday hinted he was confident that the country will avoid a credit downgrade by Moody’s when the ratings agency announces its review on Friday. 

Gungubele said meetings between National Treasury and ratings agencies during last week’s international investor roadshow gave him hope of a positive outcome.

He was addressing a meeting between public policy makers and business leaders in Johannesburg.

“We had a session with almost all ratings agencies … we had very positive discussions, very frank and honest discussions,” he said.

Boost in household goods lifts retail trade sales

Retail trade sales increased by 3.1% year-on-year in January 2018, Statistics SA announced on Thursday.

This increase is measured in real terms, in other words at constant 2015 prices.

The highest annual growth rates were recorded for retailers in household furniture, appliances and equipment (9.2%); retailers in textiles, clothing, footwear and leather goods (6.5%); and all ‘other’ retailers (5.8%).

The main contributors to the 3.1% increase were retailers in textiles, clothing, footwear and leather goods; all “other” retailers; and general dealers.

Naspers plans to sell up to 190 million Tencent shares

Selling shares

Naspers announced on Thursday that it intends to sell up to 190 million shares in Chinese internet giant Tencent Holdings, or about 2% of Tencent’s total issued share capital.

Once completed, the sale will reduce Naspers’ stake from 33.2% to 31.2%.

“The funds will be used to reinforce Naspers’ balance sheet and will be invested over time to accelerate the growth of our classifieds, online food delivery and fintech businesses globally and to pursue other exciting growth opportunities when they arise,” Naspers said in shareholder announcement.

Tencent shares were trading at 439.40 Hong Kong dollars at noon South African time on Thursday. At current exchange rates and share prices, the sale of 190 million shares would amount to R126bn. 

Rand firms for second day as markets consider downgrade unlikely

The rand continued to firm for a second day on Thursday, as markets considered it unlikely that Moody’s will downgrade South Africa’s sovereign credit rating.  

At 15:53 on Thursday, the local currency was trading at R11.86 to the dollar. 

Ratings agency Moody’s is set to announce on Friday whether it will downgrade the country’s sovereign credit rating to junk.

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