News in South Africa 10th October:
1. Wrong side of the war:
The war between Israel and Hamas could be another conflict in which South Africa is deemed to be on the wrong side.
In a rand note, Investec Chief Economist Annabel Bishop said that the stronger-than-expected US payroll data saw the rand weaken to R19.64/$ yesterday before returning to R19.29/$, as it increased the chances of higher US interest rates for longer.
In addition, a stronger US labour market – with over 330,000 jobs added in September – increased concerns about the pace of the slowdown in inflation, with more robust expenditure also likely to keep US interest rates higher for longer – increasing risk off.
“Also adding to risk aversion for global financial markets is the uncertainty of the outbreak of war in the Middle East between Israel and Palestine, which is seen to risk some upward pressure on oil prices and so potentially inflation,” Bishop added.
“Worries also stem from the conflict broadening to include other countries in the Middle East, as well as the conflict deepening. Israeli Prime Minister, Benjamin Netanyahu, has already warned that it will be a long and difficult war.”
The United Nations Secretary-General condemned the attacks by Hamas against Israeli towns near the Gaza Strip and central Israel, whilst the US has called for an end to the conflict, as peaceful negotiation into a two-state system is the only way forward.
The conflict caused oil prices to increase from $84/bbl to over $87/bbl, as other Middle Eastern countries may join the conflict.
“In 1973, OPEC (the Organization of Petroleum Exporting Countries) imposed an oil embargo against the US during the Arab-Israeli War, although the bulk of US imports now come from Canada, with Mexico in a distant second place,” Bishop said.
However, the rand is also at risk due to the conflict if the government doesn’t play its cards correctly.
“While South Africa is geographically far removed from the Israel/Gaza conflict, South Africa is not deemed to have shown complete neutrality towards the Russian/Ukraine war, and concerns exist that this may be repeated, which would undermine the rand further,” Bishop said.
The Department of International Relations and Cooperation (DIRCO) has also called for a ceasefire, but it is clear that they do not blame Palestine for the escalation.
“The new conflagration has arisen from the continued illegal occupation of Palestine land, continued settlement expansion, desecration of the Al-Aqsa Mosque and Christian holy sites, and ongoing oppression of the Palestinian people,” the department said.
Although the ANC government has consistently backed Palestine over the last several decades, the US is a staunch supporter of Israel, with the New York Times reporting that weapons and warships are being sent from the world’s largest economy to Israel.
2. SA turns to powdered and liquid egg imports:
SA’s embattled poultry sector is fast-tracking the importation of liquid and powdered eggs as it looks to mitigate bird-flu shortages ahead of the festive season.
Egg shortages are hitting SA supermarkets, with some retailers restricting the amount customers can buy at any one time.
The industry also plans to reduce exports to help with supply, while there are also hopes that the outbreak may now be contained.
3. Eskom’s power output same as 23 years ago:
Figures from Statistics SA’s latest survey on electricity generated and available for distribution in SA show that Eskom was still deteriorating in August 2023.
In fact, Eskom scored a hat trick of own goals in August – electricity available to users declined by 2.7% compared to July 2023; electricity supply fell by 8.6% compared to August 2022; and electricity available for distribution in SA decreased by 9.1% in the eight months to end August compared to the corresponding period in 2022.
The latest of the monthly surveys of the electricity sector also shows that private power producers are steadily growing and benefiting from Eskom’s failures.
While Eskom produced nearly 9% less electricity in August compared to a year ago, Stats SA notes that the total electricity supply decreased by only 6.4%. The difference between the two figures represents the growth of electricity supply by private producers.
Eskom’s share of total electricity supply in SA
According to Stats SA figures, total production of electricity available for distribution to consumers amounted to 17 980 gigawatt hours (Gwh) in August. Eskom distributed 15 376Gwh to consumers net of its own use of electricity in its power stations, imports and exports.
The deterioration at Eskom means the state power utility is currently producing approximately the same amount of electricity it produced 23 years ago.
In contrast, electricity produced by private power producers has been increasing fast since 2000.
At the beginning of 2000, private electricity production amounted to a mere 725GWh. In August 2023, it has increased by 260% to 2 604GWh.
Electricity production by private entities is mostly by way of environmentally-friendly wind and solar plants, and has increased from less than 5% of the total electricity available in SA 20 years ago to the current 15%, according to the Stats SA figures.
In reality, private electricity generation is probably a few percentage points higher than the official figures suggest because small residential rooftop systems and those installed by small businesses would not be counted by Stats SA.
4. SARS under pressure:
The South African Revenue Service (SARS) is offering payment arrangements to indebted taxpayers in a last-ditch attempt to fill the growing fiscal pothole.
Tax Consulting SA’s head of strategic engagement and compliance, Jashwin Baijoo, said the organisation has recently noted SARS officials reaching out directly to indebted taxpayers to offer payment arrangements if they cannot fully pay their debt.
He explained that this is a strategic move on SARS’ part as it is a way to alleviate the pressure on the fiscus. This pressure was caused by the drastic decline in corporate income tax collection this year.
South Africa’s economy is only expected to grow by around 0.3% in 2023. However, SARS’ target for revenue collection growth is between 4% and 6%.
So far, SARS has achieved revenue collection growth of only 2.6% due to declining corporate income taxes and increased VAT refunds.
In particular, the mining sector’s contribution to the fiscus has sharply declined as commodity prices weakened and the country’s failing state-owned enterprises impacted their sales.
SARS deputy commissioner Johnstone Makhubu told the 10th Tax Indaba that tax collections have fallen R22 billion short of the Finance Minister’s February budget estimates for the first five months of the 2024 financial year.
Therefore, to reduce the deficit, Baijoo said SARS is approaching indebted taxpayers in “a last-ditch attempt to collect what they can”.
“Whilst this may come across as SARS relieving your stress, in reality, these emails are last-ditch attempts by SARS to collect what they can to fill the ever-growing fiscal pothole,” he said.
5. Cash-in-transit crisis:
There have been 249 cash-in-transit robberies since January, a 30% increase compared to last year, while another incident occurred on the N12 in Joburg on Saturday.
Fidelity CEO Wahl Bartmann noted it took the SAPS over 30 minutes to respond to the heist, adding that there is no government support to help fight this crisis.
Bartmann is now calling on the army to step in.
“We need the support from government, when the trucks were burnt down, military stepped in, why cant they deploy the military to support us?”
Meanwhile, Gauteng Premier Panyaza Lesufi is calling for a cashless economy in the province.
This to combat the surge of cash-in-transit robberies.
All information sourced from articles posted by: BusinessTech, Fin24, Moneyweb, DailyInvestor, and eNCA.
