News in South Africa 11th November:
1. Mid-Term budget speech today:
Finance minister Enoch Godongwana will deliver his maiden Medium Term Budget Policy Statement (MTBPS) at 14h00 on Thursday (11 November).
The MTBPS can be viewed through several channels, including TV services like DStv, news channels, and live-streaming sources like YouTube.
You can watch the Budget Speech from the following sources:
Godongwana is largely expected to continue on his predecessor Tito Mboweni’s path towards fiscal consolidation and growth stimulation.
Investec chief economist Annabel Bishop said that the focus of markets and credit rating agencies will primarily be on fiscal metrics and whether or not the rand value of borrowings and deficits rise.
“We expect gross loan debt will come out at 70% of GDP for 2020/21, versus the 80.3% of GDP projection in February 2021 Budget. The latter preceded recent revisions to GDP numbers, and the declining ratio was due largely to this, rather than any major drop in borrowings.
“For the current fiscal year, we expect a debt: GDP projection of 69.8% of GDP – 2021 Budget prediction was 81.9% – both on the substantial growth and upwards revision in nominal GDP, with the upwards revision to the size of the economy itself creating a larger base to grow off.”
Basic Income Grant
Analysts expect further clarity around the R350 social distress grant, which is expected to be replaced by a form of basic income grant (BIG).
Reports indicate that the R350 grant could be terminated and replaced with a ‘family grant’ which would only be given to the head of a family household instead of individuals.
While economists agree that Godongwana is unlikely to announce any tax hikes and adjustments, the MTBPS should provide some direction as to whether we will see any new taxes come February 2022.
“Minister Godongwana has previously indicated that he is not a proponent of increased taxes to fund expenditure. He is on record at a recent ANC policy meeting where he expressed the views that South Africa cannot tax its way out of an economic crisis and pointed out that the recent tax increases did not yield substantial additional revenue,” said Nazrien Kader, Old Mutual Group’s head of tax.
Analysts are also hopeful that Godongwana pushes forward on the government’s plans to reduce red tape.
Angelika Goliger, EY Africa’s chief economist, said that while the impact of individual regulations may not be sufficiently headline-grabbing, easing them could serve to improve business substantially.
“In fact, they could actually result in net savings to the fiscus in many instances,” Goliger said.
2. SARS compliance drive brings in R172b:
Concerted efforts by the South African Revenue Service (Sars) to collect outstanding debt and to drive taxpayer compliance across all tax types have yielded R172 billion for the fiscus, the tax authority confirmed this week.
However, Sars Commissioner Edward Kieswetter admits that tax compliance levels remain under strain, with a drop from 65% to around 62.6%. The impact and prevalence of corruption and waste is not helping to enhance tax morality in our society, he warned.
Tax morality is generally influenced by the effectiveness of government and the delivery of services in exchange for individual and corporate taxpayers’ contributions.
Sars said in a statement – ahead of Finance Minister Enoch Godongwana’s first mid-term budget policy statement (MTBPS) on Thursday – that it collected R38 billion more than the revised R1.2 trillion revenue estimate.
Economic indicators were favouring better than expected growth, however, the inability of power generator Eskom to keep the lights on have dampened spirits ahead of the mini budget.
The taxman’s compliance drive ensured debt collections from large businesses (R12 billion), high wealth individuals (R42 billion), and “corporate actions” (R6.8 billion).
Sars’s Voluntary Disclosure Programme yielded additional revenue of R4.6 billion, outstanding returns (R5.4 billion) and targeted criminal investigations and preservation orders of less than R2 billion.
It has also recovered around R147 million from personal protective equipment fraud. The revenue authority has had a good success rate in terms of prosecutions through collaboration with the National Prosecuting Authority.
Although Sars paid out refunds to the tune of R300 billion, it prevented “refund leakage” of almost R46 billion. It also saved the fiscus R4.3 billion by reducing refunds.
3. Permanent stage 1 load shedding:
Eskom is running out of options to stabilise its grid, and experts say the power utility should consider permanent stage 1 load shedding to do the necessary maintenance to its plants.
Taking another look at the Turkish power ships deal, clearing the way for more renewable energy supplies and fixing the ongoing problems at Medupi and Kusile are among the best options the government has to fix SA’s electricity problems.
As another week of load-shedding hammered the country’s already struggling economy, the government was facing some tough decisions, economists and energy analysts stated.
“There are limited options open to Eskom to stabilise the situation, given that the challenges that have overwhelmed Eskom have developed over many years,” said North West University economist Prof Raymond Parsons.
The problems were the result of a “long-standing” combination of factors ranging from misguided energy policies to corruption and mismanagement, said Parsons, adding that load-shedding was needed to avoid a total breakdown in the national grid.
To ameliorate the position, both the government and Eskom would have to improvise in the short term while long-term structural changes were implemented, he said. Potential actions included assembling technical experts from outside Eskom and the government to pool ideas on how the utility could cope, and cutting red tape and mobilising independent producers to boost capacity and expedite their supply coming on-stream.
The government might also have to relook at the Turkish power ship proposal as a short-term option though under more acceptable conditions, said Parsons. “The costs of not accessing this capacity on an emergency basis may now be higher if SA does not act promptly.”
If load-shedding was inevitable for the next few years then Eskom could consider staying permanently on stage one.
“This would give businesses and households a higher degree of predictability within which to plan ahead, but with less costly disruption,” he said.
There are no short-term solutions to the problem, so Eskom needs to do as much maintenance as possible. At the same time, the government needs to look at long-term solutions and allow businesses to generate their own electricity.
4. Cell towers – battery and power woes:
Load shedding leads to network outages when cellphone towers are stripped of their batteries. South Africa’s largest cellular provider, by network coverage, reports losing 200 batteries every month.
As the country’s power grid falters, with demand outweighing the supply generated by Eskom’s ageing coal fleet, load shedding disrupts the economy and daily routine of most South Africans.
Mobile network coverage suffers during rotational cuts, with longer periods of load shedding diminishing coverage as back-up power sources, unable to recharge sufficiently, run dry. But there’s an even bigger problem facing cellphone towers and the coverage they provide, which is only exacerbated by load shedding.
The theft of cellphone tower batteries, driven by demand on the black-market, shows no sign of abating. Towers without batteries are rendered powerless during load shedding, unable to provide any network coverage.
Earlier this year, South Africa’s major telecommunications providers all reported a spike in battery theft and base station vandalism following the easing of lockdown regulations.
Vodacom said it had recorded an average of 700 incidents of battery theft and base station vandalism per month. Telkom reported an average of 650 battery and base station incidents per month. And while MTN said that incidents of battery theft dropped to 52 in May, it reported a 50% increase in copper cable theft.
The situation since then has shown little sign of improvement, with its most noticeable effects being felt during the recent bout of load shedding.
5. Rookie parties want government roles:
Rookie political parties who emerged as kingmakers in several hung councils are demanding administrative roles in local government as part of coalition negotiations – but these roles are not allowed to be doled out and follow a regulated process of appointment.
The only roles that can be part of negotiations are political roles, such as mayor, deputy mayor or mayoral committee placements. There is a separation between politics and the administration in local government.
While parties like Action SA have made it their mandate to put the poor and service delivery top of the agenda in negotiations, the Patriotic Alliance made it clear his party is vying for mayoral positions.