Trade Winds bimonthly update volume 37

Dear valued customer,

There has been considerable negative publicity of late concerning a company with a name very similar to ours, Abeyla Trading Pty Limited, which has been exposed in a major corruption scandal with the South African power utility.

Please be assured we have no connection or affiliation in any way to this company.

Abeyla Exports is a privately owned, independent company. We pride ourselves on an exemplary trading record built on hard work, integrity and vision. Abeyla Exports does not trade within South Africa – we are exclusively export-orientated and believe we add value to our customers’ supply chains and will continue to be of service to our valued customers for many years to come.

Please do not hesitate to make contact with us should you have any further queries.

We thank you for your continued loyalty and support. 

Load shedding rocks the nation, Eskom announced load shedding a little over two weeks ago with structured planning and little to no concern that it would continue into the weeks thereafter, however within this week load shedding has moved from stage 2 to stage 4 with the announcement that it is here to stay for the remainder of winter.

As expected, this has catastrophic effects on the economy as manufacturing and day to day life is dealt a major blow, this is unfortunate considering South Africa’s GDP has just grown slightly by 1.1% as well as the recent increase in manufacturing.

South African mining firms looking at a positive 2021, as most other sectors were negatively impacted by the pandemic last year, mining companies within South Africa managed to increase profits paving the way towards long term growth.

The 2021 annual review of the top mining companies found that net profits climbed above 15%, cash on hand increased 40% whilst market capitalisation rose by nearly two thirds to $1.46 trillion.

The mining sector has been boosted by higher commodity prices with major miners reporting growth in earnings, raising prospects for further investment into operations and diversification into base metal that support cleaner technologies, whose demand is expected to increase sixfold in the next two decades.

The question remains whether government can attract some of this capital through tax policy incentives as mining executives have raised concerns about tax regulations that have skyrocketed over the past 12 months.

Border updates, earlier last week there were delays reported at the Beitbridge border post, however since then no significant delays have been reported, this news is welcomed considering the major border crossing is currently under maintenance.

No concerns have been reported further north.

Major blow to South African steel fabricators, a major blow has been dealt to the South African steel fabrication industry following the decision by French oil company Total to declare force majeure on its Mozambique LNG project at the end of April due to an attack by Islamic State-linked militants the previous month.

Total acquired a stake as operator from the Anadarko Petroleum Corporation two years ago, which at the time was the latter’s largest foreign direct investment in Africa. Another significant LNG project affected is at Rovuma, with US oil company ExxonMobil delaying its final investment decision until 2023 due to the worsening security situation.

These two projects in northern Mozambique were expected to buy huge quantities of South African steel, as well as other goods and services. The total in-plant steel structure tonnage was estimated to be about 70 000 tonnes for Rovuma alone.

The LNG projects were also an important focus of the Steel Industry Master Plan unveiled by the South African government in October last year.

The first draft emphasised the need to improve on investment, expand and create jobs, promote local productive capacity via localisation and boost export-oriented manufacturing or import substitution industrialisation in line with the National Industrial Policy Framework.

Potential transport strike on the cards, this week a second round of wage negotiations for South Africa’s road freight industry, which hasn’t had a strike for nine years is now facing the prospect of labour action because of a set of tough demands made by organised labour.

According to Penwell Lunga, who chairs the Road Freight Association’s board and sits on the body’s Labour Relations Committee, labour has issued the industry with 30 demands as part of its wage negotiations.

Top of the list is a wage increase of 20% across the board for one year which could be applicable for three years provided that the industry agrees to a three-year retrenchment freeze.

In addition, Lunga told delegates that labour wanted minimal salary adjustments of R10 000, R12 000, R13 000, R18 000 and R20 000 respectively for general workers, for Code 8, 10 and 14 drivers, and for ultra-heavy drivers.

On top of that, labour demands housing allowances, a working week reduced to 40 hours without loss of pay, the scrapping of the industry’s incentive scheme system, and the removal of drive cams from cabins for monitoring purposes.

Lunga advised that the demands mentioned are well above the 20% increase and that the previously agreed 7.5% which remains until February next year had been initially reconsidered, but industry doesn’t like to go back on a binding agreement.

The negotiations are continuing this week.

Sea freight costs surge as backlog continues, cargo ships have been delivering their loads later than ever this year, adding to the supply-chain woes that are undercutting efforts by retailers and manufacturers to capitalize on resurgent economic demand.

The delays around the world, the result of a large-scale restocking by businesses as consumer demand improves, are tying up vessel capacity, adding to a shortage of sea containers needed to move goods and sending shipping costs soaring as container freight rates rise at a historic pace.

The cost of moving a 40-foot sea container from China to U.S. West Coast ports was quoted this week at $5,650, up 34.5% since the start of the year and 228% higher than the same period last year.

It is estimated that sea freight costs to South Africa have increased in the region of 40% – 55%.

There are also delays being experienced with cargo coming through to South African ports as shipping lines are now waiting until the vessels are loaded to 100% capacity before departure, these delays are being experienced with direct vessels and especially transhipments where delays of up to 4 weeks can be experienced.

Delays at US ports, congestion continues to weigh on Trans-Pacific ocean cargo, especially on the US west coast where demand has been outstripping port capacity for most of the year.

In the latest development German line Hapag-Lloyd has announced that it will not call at the Port of Oakland because of ongoing congestion and delays for the foreseeable future, the decision involves two services, with the omissions expected to last until August unless improvements are made at the port.

Incidentally, volume to Oakland has been steadily increasing because of berthing diversions down south at the ports of Los Angeles and Long Beach where congestion has played havoc with throughput.

Among other things, it resulted in Oakland recording a cargo-handling record of 100 096 import TEUs in April.

It’s the first time that the port has exceeded the 100,000 mark of containers handled in one month.

Zimbabwe gold miners optimistic, gold production declined over the past two years but miners remain optimistic of the country’s potential to achieve its target of producing 100 tonnes yearly as challenges experienced by the sector can be overcome.

Zimbabwe’s gold production had dropped from 35 tonnes in 2018 to 20 tonnes last year because of erratic electricity supplies and inadequate foreign currency.

Another major problem was a lack of meaningful exploration over the years to recognize new deposits to allow the opening of new mines and expand existing ones, however new measures have been adopted by the government which could allow the opportunity to revive production and grow the sector.

These include the review of the foreign currency retention ration to 80:20 for all increases in production, the improved turnaround in payment and the ongoing processes to come up with a gold sector policy framework.

The country has in the past experienced slumps in production, back in 2008, production fell to just 3 tonnes. The Zimbabwe Mining Development Corporation expects to ramp up production at its Sabi and Jenna Mines to 1,680 tonnes annually by 2023.

FQM pays huge tax to Zambian government, Zambia’s largest taxpayer, First Quantum Minerals, paid more than US$850 million in taxes, royalties, duties and fees to the Zambian government.

To put it into perspective, the contribution paid to Zambia represents 78% of the entire contribution FQM paid globally, The company also has operations in Australia, Finland, Mauritania, Panama, Spain and Turkey, as well as exploration prospects in a number of other countries.

Despite the additional challenges faced in 2020, FQM achieved its highest ever annual copper production, which was reflected in the increased amount of its contributions to Zambia’s public finances.

FQM paid approximately US$209.5 million in mineral royalties and a further $202.8 million in company income tax in Zambia during 2020.

As part of the company’s voluntary disclosures, the report reveals that USD$6.5 million was spent on community projects, and infrastructure support during 2020.

In addition to its regular community programmes, the Company provided Covid-19 testing equipment, PPE and treatment and isolation facilities for the surrounding communities in North-Western Province, including a new ICU and high dependency care unit at Solwezi General Hospital.

Terrorism fight, top priority for Cabo Delgado, President Filipe Nyusi on Wednesday demanded that the newly appointed Secretary of State for the northern province of Cabo Delgado, Antonio Supeia, make further efforts in the fight against the terrorism that has plagued parts of the province since October 2017.

Nyusi insisted that the Secretary of State for the province must monitor the programmes to assist the displaced.

At the ceremony in Maputo where he swore Supeia into office, Nyusi also stressed the need to guarantee social welfare and health care for the hundreds of thousands of people displaced from their homes by the terrorist attacks.

On the back of this, The United Nations Children’s Fund has promised to increase its support for child victims of terrorism in Cabo Delgado from an estimated 51 to 90 million US dollars.

This promise was made by the UNICEF Regional Director for Southern and Eastern Africa, Mohamed Malick Fall, who is currently on a visit to Mozambique to learn about the impact of the terrorist attacks and the impact it has had on children.

Although the exact number of vulnerable children in Cabo Delgado was not yet known, Fall promised that UNICEF will increase its support as the current levels of aid are insufficient.

Upcoming Public Holidays:
16th June 2021 – Youth Day (South Africa)

“Not everyone who chased the Zebra caught it, but he who caught it, chased it”