5 things you need to know in SA business today and how Alphabet dethroned Apple as the world's cash king
1. Yes, the Fed lowered interest rates yesterday. But no, it didn’t help the rand. (Lower US rates should make the local currency, which still earns investors a fat interest rate, more appealing.)
That’s because the US central bank boss Jerome Powell called the rate move a "mid-cycle adjustment," indicating there may not be other cuts in the future.
He later walked back those remarks, clarifying that there's still a chance of further easing, but the damage was done. The rand fell more than 1.3% overnight, and is now at R14.34/$.
2. The South African Revenue Service has placed three key executives on precautionary suspension: Hlengani Mathebula, Chief Officer: Governance, International Relations, Strategy and Communications; Teboho Mokoena, Chief Officer: Human Capital & Development and Luther Lebelo, Group Executive: Employee Relations. Lebelo and Mathebula gave evidence before the Nugent inquiry, where they were quizzed on allegations of governance failures at the revenue agency. Lebelo played a role in the events surrounding the suspension of former deputy SARS commissioner Ivan Pillay in 2014.
3. A small bit of good economic news: South Africa exported more than it imported in June. A trade surplus of R4.42 billion was recorded, which was more than economists expected.
4. Newly reinstated Old Mutual CEO Peter Moyo turned up for work yesterday - while the company said that he rather shouldn't. "It is very clear that there has been an irreparable breakdown in trust and confidence, and that any future working relationship is untenable," the company said. His lawyer said that any attempt to block him would be in violation of a court order for his temporary reinstatement. But Old Mutual is appealing the high court order and has directed its former CEO not to return to work until the appeal process has been completed.
5. The UK mall owner Intu – long a favourite of South African investors wanting offshore exposure – has had more than 30% of its value wiped out yesterday. The company, which owns 17 of the largest shopping centres in the UK as well as a number of Spanish malls, reported that its rental income for the six months to end-June fell by 7.7%. The company is listed in London and on the JSE.
How Alphabet dethroned Apple as the world's cash king
Reported by Carmen Reinicke
The Google parent's holdings of cash and marketable securities, net of debt, topped $117 billion (R1.6 trillion) in the most recent quarter. That exceeded Apple's recently reported cash pile of $102 billion, according to the Financial Times, which first reported the shift.
Apple used to have $163 billion (R2.2 trillion) in cash on hand, but has made an active effort recently to reduce its stockpile. The iPhone maker first came under fire for its massive reserves from activist investor Carl Icahn six years ago.
Many investors don't want companies to hold on to large amounts of liquid assets. They instead prefer that companies use that money to buy back stock or pay shareholder dividends.
Alphabet has also faced scrutiny for holding on to so much cash, especially following the GOP tax plan in 2017, which imposed an immediate tax on overseas cash holdings for US companies. In addition, Alphabet has been hit with 8.2 billion euros in antitrust fines in the EU over the last two years.
Apple responded to backlash about its cash by increasing buybacks by $122 billion and paying out dividends over the last 18 months. It also bumped up its research and development spending by 15% in the last quarter to its highest level in 18 years.
In contrast, Alphabet has been holding more money in its financial reserves and spending it trying to break into new markets. It's also spent $25 billion in the last year on real estate, buying multiple Google office spaces in New York and building data centers for its cloud computing business.
And while Alphabet has spent little on stock buybacks, that may soon change. The company's board just approved adding $25 billion to its stock repurchase program. Since the beginning of the year, the company has been authorised to repurchase $37.5 billion of its own stock.
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