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Alexander Forbes upbeat despite volatile market

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Diversified financial services group Alexander Forbes had a tough trading environment in the six months to September characterised by volatile equity markets and headwinds in the South African economy.

The increase in unemployment and retrenchments in its client base and the resulting withdrawals in savings that impacted results also hit the group. The share price slid by as much as 16 percent to R6.35 on the market’s uncertainty about continued profitability, given the uncertain labour and economic environment.

Alexander Forbes, which declared a dividend of 15c a share, said it saw an increase in operating income from continuing operations which was up 9 percent to R2.6bn, while profit from continuing operations before non-trading and capital items increased by 2 percent to R552 million.

Headline earnings a share increased 126 percent to 26c a share due to listing and transaction costs in the prior year. The group also gained from continued rand weakness, which declined 9 percent in the average rand/sterling rate, increasing rand profit 29 percent from operations of R126m for the period under review.

AfriNet, the company’s subsidiary that covers all operations in Africa outside of South Africa, increased operating income by 17 percent to R161m for the six months and profit from operations rose 24 percent to R31m.

The group said this result was driven by strong organic growth across both the retail and institutional businesses with retail the stronger performer, increasing its operating income net of direct expenses contribution to 19 percent, from 13 percent in the same period a year ago on the back of a very successful and growing distribution base in Kenya, Botswana and Namibia.

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‘Manufacturing holds key to economic growth’

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Barclays bank’s economist Naledi Madala has urged the country to consider manufacturing, as a key tailwind to drive the economy and reduce inequality.

She was speaking at a gathering organised by the bank which focused on economic outlook for 2019. “We should not make a mistake of leapfrogging without manufacturing,” said Madala, lamenting that the country’s diversification remains a pipeline dream, as the diamond is still the economy’s mainstay. She bemoaned that mining activities in the country could not spring forward diversification, though non-mining GDP has been steady over the years.

“Extractive industries are not good stepping stones for diversification, the sector does not prepare us for the next step,” said Madala at the Barclays’ Economic Outlook Forum Review 2019. The economist further noted that government should confront head-on challenges of productivity and competitiveness to attract the much needed Foreign Direct Investment (FDI). Though diversification efforts continue to hit a brick wall, Madala said the country should expect increased activities in the mining sector hinged to ramp up in coal production in the year ahead.

She also implored government to consider a welcoming attitude towards foreign investors and generous tax incentives to businesses that set up in the country. Madala is also upbeat that the use of public private partnership model could also help diversify the economy coupled with privitisation. “Privitisation will offer opportunities for growth, through the renewed optimism from government, as business confidence has improved,” said Madala.

She implored the government and the business community to access what is going to drive and hinder growth highlighting that key headwinds to growth are income inequality, diversification challenge and productivity, among others. “The pace of poverty reduction has slowed down, while income inequality goes up,” said Madala

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MINISTER BEWAILS BAD REPAYMENT BY YOUTH

Keikantse Lesemela

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Minister of Youth Empowerment, Sports and Culture Development, Tshekedi Khama has told parliament his ministry continues to face challenges on the repayment of Youth Development Fund (YDF) loans.

Recently presenting the budget to Parliament, Khama said this financial year the ministry has received a total of 2582 YDF applications and approved 983of them to the value of P98 million. He said the programme attracts a high level of interest from youth but the ministry is only limited to funding a maximum of 1200 youth projects annually due to budget limitations.

“However the greatest challenge for the Fund is the repayment of the loan component by the majority of the youth businesses. The youth have advanced number of challenges for this including high rentals for operating spaces, low market access owing to tight competition and limited production capacities,” said Tshekedi, adding that they continue to pursue beneficiaries to repay the loans.

Out of the 919 businesses funded 1058 jobs have been created. The minister highlighted that disbursements of funds will continue to be undertaken until the end of the financial year. “The YDF is currently under review in line with the pronouncement made by the President, Dr Mokgweetsi Masisi in the State of the Nation Address, to improve beneficiaries through training, and encourage consortia and cooperatives,” said Tshekedi.

The ministry assists YDF beneficiaries in marketing their products and services through fairs and exhibitions. The ministry also runs entrepreneurship-training seminars for youth and in the past year 3692 young people were trained. Over 600 youth businesses attended fairs and exhibitions to market their products and services. Currently the ministry is collaborating with Local Enterprise Authority (LEA), First National Bank Botswana and Citizen Entrepreneurial Development Agency (CEDA) on training in entrepreneurship development and mentorship of YDF beneficiaries.

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