JOHANNESBURG, Sept 2 Shares of South Africa's JD
Group jumped more than 5 percent in early trade on
Tuesday after the struggling furniture retailer said it would
sell its financing arm, after getting hit by exposure to the
troubled consumer debt market.
Companies in South Africa are scrambling to scale back
credit to low-income consumers, who are struggling to repay
loans in the face of the weak economy and rising food and fuel
Last month the central bank bailed out African Bank
Investments, known as Abil, after the lender was hit by
rising bad debts.
"It's another example of just how bad things are in the
consumer credit sector," said Nic Norman-Smith, chief investment
officer of Lentus Asset Management, which owns shares in JD
Group's parent, Steinhoff International.
JD Group, 86 percent-owned by furniture manufacturer and
retailer Steinhoff, said in a statement late on Monday it had
agreed to sell its finance unit to an international consumer
finance group, adding that the deal, which does not include its
insurance operations, had yet to be finalised.
It also said it would likely report a hefty full-year loss
later this month.
"For Steinhoff, the sale would clear up a lot of uncertainty
in terms of future capital requirements in funding JD Group. It
also focuses JD's future onto pure retail - which is more
in-line with Steinhoff's core business," said Norman-Smith.
For years JD Group and other retailers have sold sofas and
dining sets to lower-income customers on credit.
African Bank also sold furniture through its Ellerine
Holdings arm, which is now undergoing "business rescue" - a
restructuring that gives it temporary protection from creditors.
Shares of JD Group were up 5.1 percent at 23.60 rand at 0733
GMT, while shares of Steinhoff were down 3 percent.
(Reporting by David Dolan; Editing by Mark Potter)