The Beginning of New Debt Collection Practices

Africa money safricas surging stocks and sluggish economy


´╗┐Aug 3 Once again, South African stocks are on a tear. Drawn by earnings growth, fat dividends and expectations of further Africa expansion, investors -- particularly foreign ones -- have ploughed into Johannesburg's retailers, banks and industrials, sending the All-share index to another series of record highs this week. While Johannesburg is home to at least a dozen companies that boast world-class management teams and an uncanny talent for squeezing out shareholder value, the latest surge in equity prices raises hard questions about Africa's top economy. The outlook is tempered by a raft of structural problems: woefully high unemployment, inadequate power supply, a volatile currency and a government that can't quite seem to quell talk of nationalisation. It is unclear whether investors have accurately priced big chunks of the equity market -- especially recent favourites such as retailers -- given the nagging macro risks."I think there's a total mismatch between what's happening in the country and the pricing," said John Biccard, who runs Investec Asset Management's value fund."The story the foreigners buy is that South African consumer companies are in a structural up market; that there's been a structural change, which is of course entirely fictional."Instead, Biccard reckons that the growing spending power of many consumers comes from two places: higher government wages and grants, and the massive increase in unsecured lending to low-wage earners.

And with many reliant on South Africa's sprawling mining industry for jobs, the outlook for consumers could worsen if commodity prices fall further. FOREIGN SENTIMENT Over the last 12 months nearly 50 shares on Johannesburg's All-share index have gained more than 30 percent, with retailers posting some of the most gravity-defying performances.

Woolworths, which sells clothing and high-end food and is eyeing further expansion in Africa, has clocked a stunning 70 percent increase, while discounter Shoprite has increased 60 percent. Both are trading at heady price-to-earnings (PE) ratios: Woolworths at 26 and Shoprite at 33."These businesses are overarchingly being driven by international sentiment rather than domestic economic reality," said Adrian Saville, an economist and chief investment officer at Cannon Asset Managers, about retailers. But Saville is quick to point out that while portions of the market are at inflated PE ratios, the index itself isn't.

The All-share is currently trading at around 13.3 times average earnings, according to Thomson Reuters data, well below its recent historic high of near 18 times in early 2010. The South African Reserve Bank cut interest rates to a 40-year low last month and trimmed its 2012 growth forecast to 2.7 percent. Finance Minister Pravin Gordhan has since told Reuters that growth could come in even lower. That's especially troubling when the government says it needs an annual GDP increase of about 7 percent to make a meaningful dent in unemployment, currently hovering at around 25 percent. But even low growth is still growth, and gradual economic expansion usually translates into rising per capita income, more spending and therefore, higher corporate earnings and an increase in stock prices. And for investors in much of the developed world, South Africa's slow growth is a better prospect than what they can get at home."Whilst growing at 3 percent is nowhere near what South Africa requires, it's in the right direction and it's ahead of population growth," said Saville."South Africa hungers for 6, 7 or 8 percent growth, but global investors will take 3."

Airbus and idb back islamic aircraft leasing fund


´╗┐Airbus Group and the Jeddah-based Islamic Development Bank (IDB) are seeding a sharia-compliant aircraft leasing fund to cater to growing demand for commercial financing from airlines in the Middle East, Asia and Africa. The fund, which will exclusively finance Airbus aircraft, has a target size of $5 billion and could help boost the European planemaker's edge against rival Boeing in the fast growing commercial airline market in the Gulf region. The European planemaker developed the fund together with Dubai-based Quantum Investment Bank and Palma Capital, and will seed it together with the IDB. Cayman-based International Airfinance Corporation will serve as fund manager. Gulf airlines such as Etihad Airways, Emirates and Qatar Airways have transformed the aviation industry over the last decade through aggressive expansion, while Islamic finance is a growing element to win business in the region."Our main goal is to attract new sources of capital to our industry for the benefit of our customers. Our market has become a lot more international, in particular in the financial market," Yann Ballet, head of project and structured finance at Airbus Group, told Reuters.

With an order book that is heavily weighted towards Middle East and Asia, Airbus was keen to develop an Islamic finance solution to cater to that part of the world, he added."We came very quickly to the conclusion that Asset-based finance is very attractive under Islamic finance principles."

The fund will use a 4-to-1 mix of sharia-compliant debt and equity, with the first tranche expected to close by the end of September, Ballet said, adding the fund already had existing investor commitments and several transactions in the pipeline. Use of lease financing has expanded among commercial airlines. Large carriers, which tend to secure lower lease rates, reduce the risk of a fall in the value of their fleets, while smaller rivals gain aircraft they could not buy outright. Commercial aircraft financing surpassed the $100 billion mark for the first time last year and this figure is set to be higher this year, a report by consultancy Flightglobal said.

Lease financing currently represent a third of aircraft deliveries and this could reach half of all new aircraft deliveries by the middle of the next decade. Gulf-based carriers are prominent in Airbus' order book, but the fund's geographical mandate covers all of the IDB's 56 member-countries, which could see it extending financing well beyond the region. In May, Indonesian airline Garuda Indonesia secured $100 million in financing from a unit of Malaysia's Maybank to fund its operations and expansion. In 2012, Sri Lankan completed a $175 million sharia-compliant loan facility from a syndicate of five Gulf-based Islamic banks.