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South Africa’s rand will rally into year-end with risks priced in



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The South African rand will see a significant appreciation against the U.S. dollar by the end of the year, as much of the macroeconomic risk facing the country is already priced in, according to Absa CIB Head of Currency Strategy Mike Keenan.

The currency plummeted in late March as the coronavirus began to spread throughout the world, sending riskier markets into an historic tailspin. Despite losing around 5% to the rand over the past three months, the U.S. dollar is still up by more than 16.5% against Africa’s most liquid currency since the turn of the year. As of Wednesday afternoon, the rand was changing hands at around 16.3285 to the dollar.

Compounding the impact of the crisis on the rand, beyond the natural expectations of a fall in emerging market currencies in a global economic downturn, were a host of pre-existing macroeconomic factors. Already blighted by low growth and rising debt, Moody’s in March downgraded the country’s last investment-grade sovereign credit rating to “junk.”

Keenan suggested that it was this “perfect storm” of factors that drove the currency up to 19.35 to the dollar in March.

“We believe a lot of that risk is now priced into the currency and even though things like low growth and the fiscal situation are not going to turn around overnight, I think the global environment is becoming increasingly more supportive of the rand,” he said, highlighting dollar weakness and a recovery for commodity prices as reinforcement for the export-driven currency.

“Added to that, we think the SARB (South African Reserve Bank) is close to the end of its cutting cycle, so we think the rand goes to 15.75 by the end of the year because all of the bad news is priced in, and we think we are in the recovery phase,” he added.

Devil in the data detail

South African GDP (gross domestic product) contracted by an annualized 51% in the second quarter, with the beginnings of a rebound anticipated in the third quarter as lockdown measures continue to ease. Keenan anticipates that some sectors, such as tourism and hospitality, will take longer to return to pre-Covid levels, while others such as property have shown signs of pent-up demand coming through in light of lockdowns being lifted.

“There is going to be winners and losers from this and it is going to be critical in the third quarter numbers to see how the various components play out,” he said.

“We are going to have to really scrutinize the detail of the data rather than just the headline figure, to see what sectors are coming back and which sectors are still under a lot of pressure, and then taking it a step further to see how much these various sectors employ.”

PRETORIA, SOUTH AFRICA – MARCH 16: Finance minister, Tito Mboweni briefs the media on the details of government interventions in various sectors of the departmental portfolios on COVID-19 at DIRCO Media Centre.

Phill Magakoe/Gallo Images via Getty Images

Unemployment remained high in South Africa even before the pandemic, and Keenan suggested that signs of a recovery in mass employment sectors such as manufacturing and mining would be key.

However, these sectors also face struggles predating Covid-19, with Finance Minister Tito Mboweni seeking to overcome opposition within the ruling ANC on much touted reform of state-owned enterprises, and the government embroiled in a legal battle with trade unions over public sector wage freezes in order to secure more fiscal space.

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Trump says ‘not prepared to sign off’ for Oracle-TikTok deal



President Trump told reporters on Wednesday that he was not ready to approve a proposal from Chinese company ByteDance that would make Oracle a technology provider for ByteDance’s popular video-sharing app TikTok. ByteDance submitted a proposal to the Treasury Department over the weekend and is awaiting a response.

It must be “100% as far as national security is concerned,” said Trump, adding that he would have to see the deal first before signing off on it. He said he would receive a report on Thursday morning. 

Trump’s stance adds complexity to a possible arrangement that could resolve a political disagreement between the U.S. and China, after Trump had taken steps to ban the app or have its U.S. operations transferred to a U.S. company.

President Trump said the U.S. government had been looking into the possibility of accepting a payment as part of a transaction.

“Amazingly I find that you’re not allowed to do that,” Trump said, referring to the idea of receiving “key money” for broker a deal, which he first proposed last month. “I said, ‘What kind of a thing is this?’ If they’re willing to make big payments to the government, they’re not allowed because there’s no way of doing that from a — there’s no legal path to do that.” 

He said that lawyers had told him as much.

“How foolish can we be?” Trump said on Wednesday. “So we’re looking into that right now.”

Trump also objected to the idea that ByteDance would retain a majority stake in TikTok’s U.S. operations, while Oracle could gain a minority stake, as Bloomberg has reported.

“Well, we’re looking into that,” he said. “From the standpoint of ByteDance we don’t like that. I mean, just conceptually I can tell you I don’t like that. That has not been told to me yet.”

Oracle offers cloud infrastructure that TikTok could use for data storage and hosting in the U.S. Microsoft, a larger cloud provider, had pursued an acquisition of TikTok’s assets in the U.S., Canada, Australia and New Zealand but on Sunday said that ByteDance had chosen not to move forward with a sale. 

WATCH: Oracle-TikTok deal has to be 100% as far as national security is concerned: Trump

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VCs have backed a trendy Dutch e-bike start-up as demand accelerates



VanMoof cofounder Taco Carlier riding one of the company’s e-bikes.


LONDON – As the pandemic forces people to rethink how they get from A to B, venture capitalists are looking to capitalize on companies offering new forms of transport.

VCs from Norwest Venture Partners, Felix Capital and Balderton Capital announced Wednesday that they had backed Dutch e-bike VanMoof with $40 million, just a few months after the company raised $13.5 million from tech investors.

Amsterdam-headquartered VanMoof, which has raised $73 million in total, said it will use the Series B funding to the further capitalize on a worldwide e-bike boom that has been fuelled by the coronavirus.

“E-bike adoption was an inevitable global shift that was already taking place for many years now but Covid-19 put an absolute turbo on it to the point that we’re approaching a critical mass to transform cities for the better,” said Ties Carlier, co-founder of VanMoof in a statement.

The company said its revenues have grown 10 times in the last 24 months to hit $100 million and the U.S. is now its third fastest growth market. During the worldwide lockdown, revenues climbed 220%, VanMoof said.

Colin Hanna, principal at Balderton, said the firm’s “control over design and production” was a key advantage that allowed the company to “react nimbly and effectively to the crisis.”

The new funding will help meet increased demand and reduce delivery times, VanMoof said. Some of it will also be used to set up a global e-bike repair service and software that works in conjunction with the company’s e-bikes.

Vast market

Accountancy firm Deloitte estimates that over 130 million e-bikes will be sold between 2020 and 2023 and VanMoof isn’t the only e-bike start-up catching the eye of VCs.

In June, Brussels-based Cowboy announced a 23 million euro ($27 million) series B funding round led by Exor Seeds, the early stage investment arm of Exor, which is the controlling shareholder of Ferrari.

The company’s e-bikes, which cost 2,290 euros, are linked to an app that is used to unlock the bike and give real-time information on speed, battery life and directions.

Elsewhere, Dance, set up by the founders of music streaming service SoundCloud, said in June that it has raised 4.4 million euros ($5.1 million) from a consortium of investors led by VC firm BlueYard, which is also based in Berlin.

Unlike other start-ups, Dance doesn’t want to sell e-bikes, which can cost well in excess of $2,000.

Instead, it has launched a 59 euro per month subscription service that gives customers access to an e-bike within 24 hours of them signing up via the company’s app. Dance says it will also take care of the e-bike and replace it for free immediately if it gets lost or stolen.


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