Top5 on Fin24: Treasury rocked as budget head quits and Eskom on the brink of insolvency | Fin24
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Top5 on Fin24: Treasury rocked as budget head quits and Eskom on the brink of insolvency

Nov 13 2017 18:10

Cape Town - Monday's top economic and finance reads.

Treasury rocked as budget chief quits

National Treasury has been rocked by the resignation of its long-time budget head Michael Sachs.

Fin24 has obtained independent confirmation from two sources close to Treasury that Sachs, a deputy director general who headed up the budget office, quit last week over interference by the Presidency.

This was later confirmed by Finance Minister Malusi Gigaba. 

The issue of free higher education, that is being steamrolled by Zuma, has pushed Sachs, a Treasury veteran of ten years, to resign.

“Michael didn’t necessarily oppose the idea of free education, but he wouldn’t stand for the interference in the budget process,” a source said.

EXCLUSIVE: Eskom’s cash dries up

Struggling power utility Eskom’s poor governance has left it teetering on the edge of insolvency, with only R1.2bn of liquidity reserves expected to be in hand at the end of the month.

Eskom’s latest report to its shareholder representative, Public Enterprises Minister Lynne Brown, showed that the state utility’s liquidity is fast drying up, as it struggles to raise funds in an unsympathetic market.

The report for the second quarter of 2017 painted an alarming picture of funding difficulties and declining liquidity, primarily driven by perceptions of poor governance.

Most importantly, the report, which has been viewed by EE Publishers and Fin24, raised issues of Eskom's status as a going concern by its auditors. In the report, Eskom tells Brown that its governance issues are having a negative impact on financial sustainability and the utility’s ability to keep going.

Rand breaches R14.50/$ amid move on Treasury for Zuma's free fees plan

iStock_ rand large

The rand has breached R14.50/$ on Monday as news filtered through of President Jacob Zuma's seemingly imminent plan to push through free higher education.

The rand, which opened at R14.40 to the US dollar on Monday after hitting R14.43/$ in early Asian trade, spiked to R14.50 against the greenback by 10:45 amid reports of the Presidency's interference at National Treasury to push through Zuma's fee plan.

By 11:15 the local unit has spiked to R14.51 to the US currency, a 16-month low after reports that Michael Sachs, a deputy director general who headed up the budget office, quit last week.

Zuma's populist faction has given up on pacifying ratings agencies - Silke

Political analyst Daniel Silke said the resignation of National Treasury stalwart Michael Sachs shows that President Jacob Zuma and his political faction have given up on pacifying the ratings agencies.

“South Africa stands on the precipice of a crisis of legitimacy as governance increasingly becomes more populist - and desperate - in the run-up to the December conference,” Silke told Fin24 on Monday.

“The populist faction seem to therefore have given up on pacifying the ratings agencies," he said. "The advance of pure populism to secure political ends without due consideration to the medium or longer term effect on the economy is now becoming increasingly entrenched.

"To be fiscally irresponsible at this time will quickly come home to bite the country and the poor that any educational subsidy seeks to benefit,” Silke said.

New credit rules bite into Lewis' revenue

Furniture store Lewis’ revenue was down 3.2% to R2.7bn mainly due to lower credit sales and changes to its insurance offering following an intervention of its credit assessment.

This is according to the group’s interim results report for the six months ended September 30, 2017, released on Monday.

The group’s merchandise sales were up 5% to R1.3bn, and credit sales accounted for 68.8% of these sales. Insurance revenue was down from R420.3m reported previously to R356.4m.

Operating costs amounted to R1.7bn, down from R1.73bn reported for the same period last year. Operating profit amounted to R191.8m, down from R275m reported previously. Net profit was down 17.7% to R143.4m. Headline earnings per share was down 15.8% to 163.9c. A dividend of 100c was declared.

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