| Finance Minister Tito Mboweni's supplementary budget turned out to be a damp squib for those wanting details about how the government plans to cut spending as the deficit continues to widen - and eventually balance the books. Taxes are going up, but only from next year. Most of the rest wasn't unexpected: the economy is expected to shrink by 7.2% this year, the largest contraction in nearly 90 years. The budget deficit is projected to come in at 15.7% of GDP, up from the 6.8% forecast in February's budget. National Treasury plans to tap international financial institutions for the $7 billion in funding it needs to support its response to the Covid-19 pandemic. National debt will rise to almost R4 trillion, or almost 82% of GDP by the end of the fiscal year. In February, it was forecast to reach R3.56 trillion, or 65.6% of GPD. While the government will have to dig a little deeper, shareholders may have to as well if they don't want their holdings diluted due to the spate of rights issues currently in the pipeline. While Tongaat Hulett may resort to raising equity capital to meet its commitment to reduce its debt, Sun International is the latest company to announce a rights issue due to the impact Covid-19 has had on trading at its hotels and casinos. Brait's results for the year to end-March illustrate the impact its recent rights issue had on its net asset value per share. Sun International's announcement preceded news that Nueva Inversiones Pacifico Sur, which owns a stake in its Latin American subsidiary Sun Dreams, was planning a R22 offer to buy a majority stake in the group and would partly underwrite the rights offer. Also in today's newsletter, Impala Platinum has ramped up its operations sooner than expected, Schroder European REIT has trimmed its dividend to conserve cash, and investors welcomed PPC's appointment of Anthony Ball as an executive director. He's chairman of large shareholder Value Capital Partners (VCP) so has a vested interest in improving the cement producer's fortunes, Incidentally, VCP is also a big shareholder of Sun International. Finally, InceConnect has joined up with Bridge and www.acumen.zone to launch iHIVE, which uses a cloud-based voucher delivery system to provide relief to the most vulnerable amongst us as a result of Covid-19. Vouchers are delivered directly to the handsets of beneficiaries based on the data provided by the well-known non-profit organisations we've partnered with and are redeemable at retailers around the country. Click here to find out more about this initiative. I hope you have a good day. Stephen Gunnion Managing Editor, InceConnect
The latest from Ingham Analytics The aloe ferox took centre stage again for a while at the opening of the Minister of Finance's supplementary budget speech yesterday and given the bitter fiscal backdrop will possibly appear again when a second adjustments budget is presented in October. Ingham Analytics paraphrase Ernest Hemingway on this. How do you go bankrupt? Answer: gradually, then suddenly. This path to perdition that South Africa has chosen is due to financial indiscipline, poor policy choices driven by ideology rather than pragmatism, and endemic theft and corrupt practices within the body politic. The Ingham Analytics website contains several notes addressing central banking, commercial banking, foreign exchange and bonds (click www.inghamanalytics.com). Sovereign risk and bank credit risk go hand in hand and all these markets have a common thread. The latest note is "BA900 isn't a British Airways service to Jo'burg". They make the observation that the banking system cannot be hostage to political expediency - only discipline will rectify years of fiscal incontinence, not the central bank. They expect ongoing volatility in bank share prices with a weakening bias. | 