News in South Africa 12th April:

1. Home Affairs in termination of ZEP system:

One of the most important human rights cases of recent decades got underway in the Pretoria High Court on Tuesday, with no fewer than four separate cases challenging Home Affairs Minister Aaron Motsoaledi’s decision to terminate the Zimbabwean Exemption Permit (ZEP) system.

Home Affairs in termination of ZEP system
Photo by Safari Consoler

The Department of Home Affairs’ legal team will appear before the Pretoria High Court on Wednesday to defend a controversial move to scrap the Zimbabwean Exemption Permit (ZEP) programme.

Three civil society organisations are currently challenging the move that was announced by department minister, Aaron Motsoaledi, in 2021.

It is set to leave in the lurch, some 178,000 Zimbabwean nationals who were living and working in South Africa on the strength of ZEPs, some for more than a decade.

The three challenges, which are all being heard together, got underway on Tuesday, when the court heard from the Helen Suzman Foundation and the Consortium for Refugees and Migrants in South Africa (CoRMSA).

And on Wednesday, the Department of Home Affairs will respond.

Children’s rights concerns

Several of the groups challenging the minister’s decision to end the ZEP system point to the catastrophic effect this will have on the region. Hundreds of thousands of people, including children who have grown up and attended school here, would be forced to uproot and relocate to Zimbabwe.

“We do not say that the minister had no power to terminate [the ZEP system]. He did. But he had to consult and consider the impact on Zimbabweans and make sure he did not breach fundamental human rights in the Constitution,” argued Budlender.

There are multiple grounds on which the decision should be set aside by the court, including its lack of procedural fairness, he added.

The decision further trampled constitutional guarantees of the right to dignity and children’s rights, not least because there is a danger that children could be separated from their parents.

The minister made the decision without prior consultation with ZEP holders or the public, he argued.

2. Nersa proposes a 15.1% hike:

Energy regulator Nersa has published its latest discussion document containing the proposed municipal tariff hikes for 2023.

The regulator proposes a 15.1% hike for municipal customers from 1 July 2023. The hike is based on the bulk supply tariff increase for municipalities of 18.49%, announced last month.

According to Nersa, bulk purchases represent 74.23% of total costs incurred by municipalities. Other costs include repairs and maintenance, salaries and wages, finance cost, etc.

The increase for 2022 was 7.49%, so the proposed increase for 2023 is close to double last year’s rate.

“There will always be a difference between Eskom’s increase and that of the municipalities due to the Municipal Finance Management Act time lag,” Nersa said.

The municipalities’ implementation date is 1 July, whereas Eskom’s financial year starts on 1 April. Due to the MFMA requirements, Eskom can only increase its prices to municipalities from 1 July 2022 rather than 1 April 2022.

3. SARB – Deregulate SA’s power and transport sectors:

South African Reserve Bank (SARB) Governor Lesetja Kganyago called for sweeping reforms to macroeconomic policies to boost economic growth, and lessen exchange rate volatility and sovereign risk.

Proposed changes include structural reforms, deregulation of the nation’s transport and electricity sectors, lowering the inflation target and a shift back to predictable, transparent fiscal policy rules.

“With the rise in debt created by our efforts to confront weakening growth and failures of state enterprises, there is little chance of improving credit quality without new rules and more strategic use of macroeconomic policy,” Kganyago said in a speech at the Peterson Institute for International Economics in Washington Tuesday. 

Lowering the inflation target to 3%, the bottom of the current range, will be a “major benefit to fiscal policy” and economic growth, the governor said. It will also reduce the potential for an upward drift in the real exchange rate and cut loan-service costs for the country’s over-indebted public sector, he said. 

Public finances in Africa’s most industrialized economy were hard hit by a decade of graft, known locally as state capture. A full house of junk credit ratings and rising government debt following a R254 billion rand relief package for power utility Eskom are adding to the strain. 

Meanwhile severe power rationing because of Eskom’s inability to meet demand and logistics-network constraints are eroding the nation’s economic-growth prospects, disrupting local supply chains and stoking inflation. 

That’s spurring investors to place a premium on the local currency. The rand has weakened more than 7% against the dollar the year, making it the second worst performer in a basket of 16 major currencies tracked by Bloomberg. 

4. High costs to fix power crisis:

South Africa should not shy away from spending to fix the country’s power crisis, its electricity minister told Reuters, ahead of a cabinet decision later this month on his proposals to end the worst power blackouts on record.

Kgosientsho Ramokgopa, appointed last month to the newly created role, was speaking in an interview less than two months after the National Treasury granted state utility Eskom R254 billion of debt relief over the next three years.

President Cyril Ramaphosa’s government has made repeated attempts to improve power availability but failed to make progress.

Ramokgopa’s appointment is the latest effort to make a breakthrough before national elections next year at which the African National Congress faces the prospect of losing its parliamentary majority for the first time since the end of apartheid.

Ramokgopa said he thought focusing on improving the performance of Eskom’s ailing coal plants was the best opportunity to lower the intensity of power outages.

But he said other interventions were needed including investing in the capacity of the national grid and maintaining large outlays on diesel for Eskom’s emergency open-cycle gas turbines.

“Continued high levels of load-shedding (power cuts) … penalise the South African economy and it causes untold injury to the poor, and our ability to attract investment,” he said in the Union Buildings, the seat of government.

He said that if South African borrowing costs had to rise to fund diesel purchases then that was a necessary trade-off given the impact outages were having on unemployment and growth prospects.

He said another set of interventions cabinet would consider included Eskom investing more in the coal mines it buys from to ensure better-quality supplies and allowing Eskom to buy directly from original equipment manufacturers rather than from intermediaries.

5. Rand expectations in 2023:

Experts are unanimous in saying that the rand will remain under pressure in the near future due to an uncertain global economic outlook, a strong dollar, and higher oil prices.

However, local factors are increasingly important in determining the value of the rand.

The South African Reserve Bank (SARB) surprised the market by raising the repo rate by 50bps to 7.75% at the last meeting of the Monetary Policy Committee. 

This saw a short-lived increase in the rand’s value to R17.72 to the dollar from a high of R18.60 before the interest rate hike. 

The rand quickly returned to trading above R18/$ and, as of 11 April, is trading at R18.47/$. 

South Africa’s currency is the third worst-performing emerging market currency in 2023 and is trading at a significant discount to its fair value. 

All information sourced from articles posted by: EWN, BusinessTech, Fin24, Moneyweb, and DailyInvestor.

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