News in South Africa 11th May:

1. Cost of living rising ever higher:

The upward pressure on food, fuel, and electricity prices will adversely impact all households during 2022.

Cost of living rising ever higher
Image taken by: Greta Hoffman

However, due to varying spending abilities and priorities, households in different expenditure deciles will be impacted differently, a new analysis by professional services firm PwC shows.

The firm noted middle to higher-income groups are re-evaluating their discretionary spending patterns and are either “buying down” or reducing insurance and savings products – especially considering that Covid-19 vaccines have alleviated some of the threat to serious illness or death.

On the other hand, households in the lower to lower-middle income categories will struggle to sustain their monthly basket of goods purchases. Given increased costs of necessities, these households will need to carefully consider the affordability of other discretionary monthly expenses, including insurance products.

Low-income households  – deciles 1 and 2, based on Statistics South Africa’s latest consumer basket and income surveys – spend more than half of their money on food and non-alcoholic beverages.

This includes grain products (bread and maize) which in the coming months will cost significantly more due to higher international commodity prices. In turn, higher-income households spend a significantly smaller proportion of their money on foodstuffs.

“Households from decile 3 upwards will feel direct pressure on food budgets as well as rising electricity and transport costs. There will also be second and third-round effects from higher electricity and fuel tariffs impacting on the cost of producing/delivering other goods and services.

“Furthermore, once non-fuel prices are adjusted upwards due to an increase in fuel costs, these prices are sticky downwards and are unlikely to decline if fuel prices moderate in the future,” PwC said.

Given the consequent higher inflation, weaker external demand, and an unreliable power supply, PwC now forecasts a real GDP growth rate of 2% this year (from 2.3% previously) with continued downside risk.

Alongside this weaker economic outlook is even greater concern about the speed of the country’s jobs recovery, the firm said.

“There is little scope for South Africa’s unemployment rate to improve (decline) this year if local business sentiment is weighed down by these international factors. Furthermore, as economic growth moderates back towards 1.5% over the long-term, the unemployment rate is likely to continue higher from its current rate of 35.3%.

2. Winter power outages:

South Africa could be in for another night in the dark after Eskom said that it could not guarantee that it would be able to provide electricity to all households and businesses at all times this week.

The utility implemented stage two power cuts from 5pm to 10pm on Monday and Tuesday this week as it experienced more problems with its generation system.

Spokesperson Sikhonathi Mantshantsha said that the high demand in winter was also affecting Eskom’s overall ability to provide its only service to the country.

“The onset of winter has seen increased demand and this will relate to capacity constraints throughout this period, particularly in the evening and morning peaks, unfortunately, this will generally require the implementation of load shedding during the evening peaks,” he said.

3. Automotive industry challenges:

The Covid-19 pandemic has put South Africa’s automotive industry back by about three years in achieving the “aspirational and ambitious targets” set for the industry in the SA Automotive Masterplan 2021 to 2035.

This has resulted in the industry considering approaching the Department of Trade, Industry and Competition (dtic) for an early review of the masterplan despite the industry achieving some new export performance records in 2021.

Norman Lamprecht, the executive responsible for trade, exports and research at automotive business council Naamsa and author of the SA Automotive Export Manual, said Covid-19 has set the industry back by about three years.

“The targets under the masterplan are still official targets but one must also be realistic in terms of achievements and what can be achieved under current circumstances,” he said.

Naamsa CEO Mikel Mabasa said the automotive sector is certainly concerned about the challenges it has seen and is facing.

Naamsa CEO Mikel Mabasa said the automotive sector is certainly concerned about the challenges it has seen and is facing.

The objectives of the SA Automotive Masterplan 2035 are:

  • Achieve 1% of global production, which is projected to be 1.4 million units by 2035.
  • Increase local content in South African assembled vehicles to 60% from less than 40% currently.
  • Double industry employment to 224 000 people.
  • Improve manufacturing competitiveness levels to the same level as leading competitor countries.
  • Transform the industry across the value chain.
  • Deepen value addition, particularly for supply to regional markets.

Lamprecht said that in line with global trends, the South African economy and the domestic automotive industry sharply rebounded from the low-based, Covid-19 affected 2020 but the growth experienced since the initial shock has not been sufficient to return to pre-pandemic levels.

However, he said that despite the pandemic and supply chain disruptions, such as the global shortage of semiconductors, the industry’s key performance indicators included several records in 2021.

4. Mining company investment:

International mining companies at the recent African Mining Indaba said they are prepared to increase their investment in South African projects by 84% – but only if the government tackles the red tape surrounding the processing of mining permits and the approval for self-generation projects.

This follows the South African Mining Council highlighting that the country missed out on R35 billion due to faulty export systems.

President Cyril Ramaphosa hinted the government could be open to discuss requests from mining companies to allow for the private operation of Transnet Freight Rail’s dedicated heavy-haul coal, manganese and iron ore export lines.

He was speaking on the second day of the Investing in African Mining Indaba in Cape Town on Tuesday.

5. Kruger Park R370mil upgrade:

South Africa’s Kruger National Park (KNP) is set to receive R370 million worth of upgrades, repairs, and refurbishments over the next three years.

The KNP’s upgrading and refurbishment project, primarily funded by an infrastructure development programme allocation to SANParks from the department of forestry, fisheries, and environment, will see contractors breaking ground in June.

The first phase of this project, expected to last a year, “will provide important impetus to upgrading infrastructure and improving the visitor experience”, according to Managing Executive of KNP, Gareth Coleman.

“We are currently finalising contracts and works packages with successful contractors for civil and building works, and this should be completed by the end of May 2022,” said Coleman in a statement on Monday.

“Contractors will move onsite during May and June 2022, and we will start seeing the results of these investments in the second half of 2022.”

At least 11 tourism facilities in the park have been prioritised for repair and relaunch in 2022.

The main building at the Shingwedzi camp, in the northern section of the park, will also get a new roof after the previous one was removed due to extensive termite damage.

Other facilities due for a makeover include the viewing deck at Skukuza camp and the restaurant viewing deck and handrails at Olifants camp, both impacted by termites. More than 110 tourism accommodation units across the park will also be renovated.

Entrance gates at Pafuri, Punda Maria, Orpen, Phabeni and Numbi, will be upgraded.

In addition to these priority projects, upgrades will also be made to the park’s staff accommodation, the resurfacing of identified tar roads, and the re-gravelling of selected gravel roads.

All information sourced from articles posted by: BusinessTech, EWN, Moneyweb, BusinessLive, and Business Insider.

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