News in South Africa 10th November:
1. Public service workers paid too much?:
Research and analytics group Intellidex has published a new report looking at public-sector worker pay in South Africa.
The report, which was commissioned by Business Unity South Africa (BUSA), uses the same calculations as the IMF – which considers the public sector as ‘general government’. This corresponds to South Africa’s national and provincial departments and public entities, but exclude local government and state-owned companies.
Based on this consideration and data from Stats SA, the size of the public sector has risen by over 18% between 2010 and 2020, from a little over 1.8 million to a little under 2.2 million.
Of these, about 50% are employed by departments in provincial government and 21% by departments in national government.
The combined effect is that these factors force a faster-than-inflation rise in average remuneration, with inflation-adjusted average remuneration rising 44% in the past 12 years from R272,000 in 2006/07 to R393,000 in 2018/19, Intellidex said.
Intellidex said that the increase in remuneration has been fastest for officials on the lowest salary levels and has been progressively slower higher up the hierarchy.
Critically, the increase in payroll costs has outstripped the rate of growth of the economy, with the result that these costs consume a larger and larger share of GDP, said Intellidex.
2. Vaccine progress rallies markets:
Overnight, markets staged a massive rally following the news that the first results from a large trial of 44,000 people showed that the Pfizer/BioNTech proposed vaccine is 90% effective.
This was better than was expected.
The oil price jumped 8%, with Sasol catapulting 24% in a single session on Monday, to R112.59.
But the optimism was poison to gold, which is the safe-haven asset of choice in tumultuous times. The gold price fell 4.5% to $1,863/oz. Gold Fields fell 15.5%, while Harmony dropped 16%. This is despite Harmony’s solid trading update today, which showed a 38% increase in gold output and falling costs.
We start the day at R15.41 to the dollar, R18.23 to the euro and R20.32 to the pound.
3. Zondo disappointed in government:
Deputy chief justice Raymond Zondo, the state capture commission chairperson, says it is unacceptable that almost all prominent state-owned companies are on their knees.
Zondo says someone would be forgiven for thinking these SOEs have been on autopilot, looking at the level of impunity and lack of consequence management.
According to Zondo, pretending no one saw the coming collapse of the SOEs would be disingenuous.
For this state of affairs, politicians, accounting authorities and management of SOEs over the years must take collective responsibility for their incompetence.
“It is like there is nobody who supervises, whether or not ministers do their job, DGs do their job, heads of SOEs do their job, people under CEOs do their job, and boards of SOEs do their job,” opined Zondo.
“Leaders are put in leadership positions so that they can make decisions and lead. This is now the story of the SOEs, so many of them appear to be in serious trouble, didn’t somebody see a long time ago that there was trouble coming and took steps to ensure that that the SOEs did not get to where they are now.
Zondo believes it is high time for the country to have decisive and bold people in positions of power within the SOEs and political leadership space.
In closing his monologue, he said: “You do not know whether people are afraid of making wrong decisions, but if you are a leader or manager, you must be able to take decisions whether you are wrong or not wrong, you must take a decision.
“The worst thing is for you not to make a decision because you are scared of making a wrong decision. It seems intolerable.”
4. Telkom, Multichoice and Spur profits:
This morning, Telkom reported a 25% increase in headline profit for the six months to end-September. Its mobile data revenue grew 51% driven by 81% growth in mobile traffic. It warned that it is started seeing a deterioration in the debtors’ book in recent months, but it wasn’t as bad as previously expected.
Multichoice says its half-year headline profit will be between 40% and 45% higher than in the previous year – largely thanks to a better performance from its other African countries, and big cost-cutting.
In a trading update, Spur has warned that its headline profit could be down by up to 55%. This is worse that it previously expected, and the company warned of impairments and credit losses due to the financial plight of franchisees amid the pandemic.
5. Gauteng not releasing figures:
Last week the Gauteng Treasury released its third Covid-19 Expenditure Disclosure report covering the month of September 2020. The report records a total expenditure of R123,139,439 a figure significantly down on previous months. But while the costs are down, the red flags are up.
Judging by the shortness of the report (available here) it would seem that the Gauteng government and its departments are becoming less comfortable with the practice of transparency. The report’s format is different from previous months, no longer providing cumulative figures for different departments’ expenditure since April, the period since the declaration of the State of Disaster.
When it comes to the Department of Health, the report records that it “did not spend on Covid-19 related goods and services in the month of September 2020” which would seem improbable.
But it is also missing vital information from the big-spending Department of Infrastructure Development (GDID), even though it is midway through an extremely expensive and controversial ICU field hospital building programme using Alternative Building Technology (ABT) and September’s figures would have been revealing.
Insiders say that an SIU investigation has led to some suspensions at the department, though more details will only be forthcoming once it is complete.