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Chicago – Boeing received an illegal tax break from Washington state as part of $8.7bn in aid to assemble the 777X and manufacture the jetliner’s carbon-fibre wing there, the World Trade Organisation (WTO) said.

An incentive cutting a state levy on gross receipts by 40% is a prohibited subsidy that must be removed, a three-judge panel said Monday in Geneva. The tax break, which takes effect when the first 777X is delivered in 2020, gives an unfair advantage to the US plane maker to the detriment of overseas manufacturers, the WTO determined.

The European Commission said Boeing would gain $5.7bn from the disputed benefit, while the US company put the value at $1bn over 20 years. The decision marks the latest twist in a longstanding clash between the US and the European Union over government incentives to ease the heavy costs of developing new jetliners for Chicago-based Boeing and Europe’s Airbus Group.

The ruling is “an important victory for the EU and its aircraft industry,” EU Trade Commissioner Cecilia Malmstrom said in a statement. “We expect the US to respect the rules, uphold fair competition, and withdraw these subsidies without any delay.”

Boeing said the WTO rejected six of the seven incentives challenged by the EU and singled out a tax break on future 777X revenue, while allowing the incentive to stay in place for other jetliners the company makes in the Seattle area.

“In rejecting virtually every claim made by the EU in this case, the WTO found today that Boeing has not received a penny of impermissible subsidies,” J. Michael Luttig, the plane maker’s general counsel, said in a statement. The company expects the 777X tax break to be upheld if appealed, he said.

The WTO is also expected to determine next year whether the US and Boeing have adequately addressed $5.3bn in illegal benefits that flowed to the plane maker from NASA and state aid a decade ago as it developed the 787.

The most recent dispute centres on $8.7bn in state aid approved in 2013 by lawmakers in Washington, Boeing’s traditional manufacturing hub, as the plane maker threatened to manufacture the redesigned 777 elsewhere.

Washington landed the 777X work, as well as a composite-wing factory, after pledging to extend through 2040 tax incentives for aerospace-related companies that had been due to expire after 2024.

The measure has drawn fire locally because it didn’t require Boeing to maintain employment at a set level to maintain the tax breaks.

Airbus on Monday blasted the incentives, claiming they cost the company at least $95bn in lost aircraft sales.

Tom Enders, chief executive of the European planemaker, called for a global framework that would end the “ridiculous series of disputes” and spell out permissible aircraft subsidies for manufacturers in Canada, Russia and China.

“This WTO battle is a battle of the past which benefits only the armies of lawyers both sides employ for more than a decade,” he said.


Johannesburg – More than 70 percent of companies are missing their cost-cutting targets, Monitor Deloitte research shows.

This comes despite its survey indicating that more than 9 out of 10 companies plan on reducing expenses in the next 2 years,

“While local companies tended towards higher cost reduction targets, their failure rates were also higher,” the results of Monitor Deloitte’s first biennial Europe, Middle East and Africa cost survey, titled Thriving in Uncertainty shows.

It is the first time this survey has included South African information. According to the survey, two thirds of local companies planned to cut costs by more than 10 percent annually, but programme failure rates were higher than for other regions.

“Our research shows that South African companies are more likely to engage in narrow, tactical approaches to cost-saving, such as cutting down on external spend and streamlining business processes, but these are the very tactics that often result in implementation problems and an inability to achieve desired cost reduction objectives,” says Daryl Elliott, leader for strategic cost transformation at Deloitte Africa.

“Companies need to be more strategic about reducing costs, and examine their business and operating models to implement fundamental change. Ultimately, this leads to changes in their cost structure which are more sustainable and longer lasting.”

Globally, more than 80 percent of companies say they plan to take cost-cutting measures, with 57 percent of European companies and 58 percent of US companies reporting they were not able to meet their cost-cutting targets. This highlights the importance of cost management to companies worldwide.

South African respondents were most likely to say their approach to cost management was to take targeted actions in specific areas, with 59 percent reporting this. In addition, 45 percent of local respondents said they intensified existing productivity improvement programmes, which may indicate proactive cost management.

However, only 18 percent said they had conducted an enterprise-wide analysis of cost structure, followed by the deployment of a broad programme to restructure and manage the cost base across all operating companies and business units. This was markedly below the rate for other regions, with 32 percent of European companies, 49 percent of US companies, and 51 percent of Latin American companies choosing this strategy.

The data also found that South African respondents are optimistic for the next 24 months, with 90 percent projecting increased growth, but they were still planning to cut costs. However, 36 percent of companies expect below-inflation growth, against a backdrop of a sluggish economy with significant political and macro-economic risks.

Johannesburg – South Africa’s political turmoil and weakening economy will come under the harsh spotlight of international credit ratings from this week amid predictions the country could lose its investment-level status.

Moody’s will release its updated grading on Friday, before Standard & Poor’s issues its key announcement a week later on December 2.

Johannesburg – Mauritius-listed nutraceutical Go Life listed on the JSE’s Alternative Exchange on Wednesday.

Its opening share price of 50c gave it a market capitalisation of R385 million under the code GLI.

The listing was a bid to broaden its investor base and afford international investors the opportunity to invest, grow awareness of its products and enable international investors to support its growth, its pre-listing statement says.

The company recently announced its pending debut and said it was seeking the inward listing on the JSE’s junior bourse after earlier this year buying the 78 percent it didn’t own in Go Life Health Products (Go LifeSA), which holds Gotha Health Products.

“Go Life International was established to leverage the strength of existing South African nutraceutical companies, Go Life SA and to drive the presence of the South African products and brands across the global nutraceutical market.”

Gotha Health Products, a subsidiary of Go Life International, has been active in promoting health support products since 2005.

New York – After regulation and low yields made the world of banking quite dull following the financial crisis, things are about to get more interesting.

According to a new note from analysts at Macquarie Group, it’s time to “shift exposure” in the financial sector as the outlook looks much different in the post-election world.

The team, led by David Konrad, suggests moving toward “names that have more leverage to capital markets and increased economic activity and away from global banks whose multiples may remain suppressed owing to decreased trade and currency volatility, particularly in emerging markets.”

As a result, the team is upgrading Goldman Sachs Group Inc., thanks to its larger exposure to investment banking and investment management. On the flip side, the team is downgrading Citigroup Inc., thanks to ongoing risks to globalisation following the UK’s vote to leave the European Union and the surprise victory of Donald Trump in the US presidential race.

Following Trump’s victory — which has raised speculation of loosening of financial regulations and more fiscal spending, both of which are seen as positives for banks — the KBW Bank Index has rallied 13 percent, while the S&P 500 is up a mere 2.5 percent. This is a massive shift from the trend earlier this year, when Goldman Sachs bet on large US banks against the Standard & Poor’s 500 Index, only to be forced out of that trade less than 6 weeks later.

Since November 8, Citigroup is up 12 percent, Goldman has risen 16 percent, Morgan Stanley 18 percent, JPMorgan Chase and Co. 12 percent, and Bank of America 18 percent. They are also are all in the top 10 stocks in terms of points added to the S&P 500, according to data compiled by Bloomberg.

However, some analysts argue that this rally has gotten ahead of itself. “While we believe the incoming Trump administration – in tandem with the GOP-controlled Congress – are likely to push to improve the pace of U.S. economic growth, reduce some of the regulatory burden on the banks…investors appear to have greeted this possibility positively that large-cap bank valuations now appear to be at levels that are somewhat ahead of longer-term historical levels,” Analyst Matt Burnell at Wells Fargo wrote in a note published this week. “As a result, we believe a greater level of caution on the large-cap bank stocks is likely warranted for the near-term.”

Johannesburg – Just more than a year ago, the chief worry facing small and medium enterprises was electricity outages, and now its government regulation.

Last year, Arthur Goldstuck, MD of World Wide Worx and principal researcher for the SME Survey, released a few preliminary results of South Africa’s largest annual small and medium enterprise survey.

The 2015 report revealed probably the biggest shift in what SMEs considered to be the biggest external threat to their businesses.

According to Goldstuck and his team, 71 percent of respondents cited load shedding as the biggest threat their business faced.

This was almost double the amount of participants who named crime as their biggest threat, at 36 percent. Previous SME Surveys revealed that crime, the high cost of fuel and interest rates are what kept small and medium enterprise owners awake at night.

One year later, Middel & Partners wanted to know if load shedding was still the biggest perceived threat for South African businesses, and conducted a survey on its website asking visitors which factors they felt would hamper business growth in the final quarter of 2016.

While electricity supply did feature on this year’s list of perceived SME threats, it featured significantly lower, with only 17 percent of participants noting it as a threat.

So what’s the biggest threat businesses believe they face in 2016? With 21 percent of the votes, it turns out to be government regulations.

It comes as no surprise that South African SMEs feel uncertain about their business’s survival in our current economic climate. Sudden changes in policies and political positions earlier this year left a bad taste in local and international mouths, and business owners became painfully aware of their vulnerability to factors they don’t necessarily control.

On top of that, the new Black Economic Empowerment Codes of Good Practice became effective leaving most business owners in the dark, believing that the new codes could harm their business.

And then there was concern over Finance Minister Pravin Gordhan’s fate when he was charged with fraud, a charge that was subsequently withdrawn.

Washington – He is the head of a business empire and now he’s America’s next president. By combining these two roles, billionaire Donald Trump could face conflicts of interest of an scale unprecedented in US political history.

The Republican elected to the White House on Tuesday made his fortune by building a network of hotels, office towers and luxury apartment buildings as the head of the Trump Organisation.

His real estate empire is primarily located in the United States, but also extends to countries such as South Korea and Turkey. Managing political relations with such US allies while president risks creating a curious mix of competing goals.

The Trump Organisation is not publicly traded, so many of its activities are closed to scrutiny. But US media have reported it has financial ties with people close to Russian President Vladimir Putin. Trump raised Putin during his campaign.

“For the record, I have ZERO investments in Russia,” Trump tweeted in July.

The potential for conflicts of interest from Trump’s business activities are not limited to countries like Russia. According to the Wall Street Journal, Trump has received $2.5 billion in loans from Deutsche Bank since 1998.

But US regulators are currently in negotiations with the German bank over imposing a possibly multi-billion-dollar fine for its role in the 2008 financial crisis. This raises questions about how the Trump administration will react if it inherits the case, and whether the new president’s business interests will be considered