News in South Africa 12th January:

1. SA to pay back R28 billion:

Nations in Sub-Saharan Africa have been locked out of international debt markets for 22 months now, and investors are increasingly betting the drought will soon end as countries seek funding for a slew of principal payments coming due this year and next.

SA to pay back R28 billion
Photo by Joslyn Pickens

South Africa is due to repay $1.5 billion (R28 billion) in bonds this month, while Kenya has a $2 billion maturity in June.

Second-half principal repayments will then come from Senegal, Ivory Coast and Gabon. Ethiopia was slated for December but defaulted last month.

It’s already been a long wait for nations that need the funding and for high-yield investors eager for new deals. The drought in issuance began in April 2022 and lasted throughout 2023.

The last time Sub-Saharan African countries spent a full year without a single international bond sale was in 2009, in the midst of the global financial crisis.

“There has been limited supply from higher-yielding EM countries, so the demand may be robust for well-priced new issues with positive fundamentals,” said Shamaila Khan, head of fixed income for emerging markets and Asia Pacific at UBS Asset Management.

But issuance could be limited by still-elevated borrowing costs for most sovereigns in Africa, she said.

One of the main contenders to try and end the lockout is Kenya.

The spread between yields on Kenya’s dollar debt and US Treasuries has narrowed by more than 400 basis points since reaching a record high last year.

It closed at 599 basis points on Wednesday, according to JPMorgan Chase data, down from its high of 1,028 in April.

“Kenya could well be the first to issue this year, and one would imagine that market demand would be forthcoming,” said Simon Quijano-Evans, chief economist at Gemcorp Capital Management in London.

If markets perceived that a new bond issue was coming, that could also help pull down spreads from current levels as it would imply an improvement in the country’s financial position for 2024, he said.

“Combining that with a contraction in UST yields could help pull all-in yield for a 10-year USD bond closer to the 9% mark at some stage in the first half,” Quijano-Evans said. Kenya’s debt due in June currently trades at a yield of 15.8%.

Other contenders to end the borrowing drought include South Africa, Angola and Nigeria, according to Morgan Stanley. Each could tap the market at yields around 10%.

South Africa specifically could issue as much as $2.5 billion (R46.6 billion) in the second quarter, “but issuance of this amount will be very dependent on external financing conditions,” strategists including Neville Mandimika said in a note to clients.

2. Another SOE bailout brewing:

South Africa’s National Treasury is considering whether a cash injection is needed to fully fix state port and rail company Transnet SOC Ltd., Finance Minister Enoch Godongwana said.

Derailments, equipment shortages, vandalism, corruption and poor weather have hobbled Transnet’s operations. That’s prompted companies to cut thousands of jobs to reduce costs as commodities pile up at warehouses and ports. The Treasury agreed last month to provide a 47-billion rand ($2.5 billion) support package to the company, making about half of the amount accessible to meet immediate debt obligations.       

What’s needed to fix Transnet — which has a 130 billion-rand debt pile — and improve its logistics network “will inform whether we do the injection or not,” Godongwana told reporters in Johannesburg on Thursday at a pre-World Economic Forum briefing. “We’re still doing the numbers.”

Inefficiencies at Transnet have resulted in deliveries from coal mines on the company’s rail network to the nation’s main coal-export terminal dropping to the lowest level in three decades. Ports have become clogged with vessels, partly due to extreme weather that’s damaged equipment.

“We need logistics to work because it’s quite critical for the economy,” Godongwana said.

3. Home, business solar installs doubled:

The amount of installed rooftop photovoltaic solar on commercial and residential buildings doubled in the past year, according to data from Eskom. At the end of November 2023, total capacity was 5.04GWp (gigawatt peak), up 108% from the 2.4GWp level a year prior. This dramatic increase shows just how quickly businesses and households (with the means) are abandoning the grid as load shedding hit a record level in 2023.

Last year, load shedding was more than double the amount experienced in 2022 at 24.6GWh (versus 11.8GWh) according to the Load Shedding Notifier app. says there were 6 907 hours of load shedding last year compared to 3 776 hours in 2022.

While Gauteng has the largest installed base of solar photovoltaic (PV), at 1 217MWp, the increase in the past year has been the lowest – just 43% – among all nine provinces. The Western Cape saw the biggest increase, with installed capacity practically tripling in the year. There was also a large jump in the North West (over 200%), likely due to a few sizeable plants supplying mines in the province coming onstream.

Solar PV (MWp)
Nov 2022Nov 2023Change
Eastern Cape130.2368.2183%
Free State160.3280.275%
Northern Cape79.1129.564%
North West184.8669.3262%
Western Cape161.9642.4297%
Source: Eskom

The amount of ‘rooftop’ solar installed by the private sector is nearing triple the 2.2GWp installed to date under the government’s Renewable Energy Independent Power Producer Procurement Programme (Reipppp).

The utility estimates the amount of solar installed by measuring the change in typical energy consumption in certain areas over time and then aggregating this data.

Data from Gaylor Montmasson-Clair, senior economist at Trade & Industrial Policy Strategies, shows that imports of solar panels, lithium-ion batteries and inverters reached $3.3 billion in the first three quarters of 2023. Using a crude average of R18:$1, this is around R60 billion of equipment. The $3.3 billion figure is roughly double the $1.7 billion of imports for the whole of 2022.

Source: Gaylor Montmasson-Clair via X

It is not as simple as equating the 5GWp to five stages of load shedding.

At the midday peak, the 2.2GW of installed Reipppp solar PV produces around 1.8GW for Eskom, with far less produced in the early and late hours of sunlight. In recent years, solar PV has contributed around five million MWh to Eskom.

According to the Council for Scientific and Industrial Research, the average capacity factor of solar PV supply from the country’s various independent power producers’ renewable energy projects was 25% in 2022. This is not directly comparable to rooftop PV but is a useful guide. This means that the 5GW of installed capacity on commercial and residential rooftops equates to 1.25GW at a capacity factor of 25% (even at a more generous capacity factor of 30%, this is 1.5GW).

4. Manufacturing boost:

report published by StatsSA has shown that manufacturing production in the country increased by 1.9% in November 2023 compared with November 2022, whilst seasonally adjusted manufacturing sales increased by 2.1% over three months.

With the manufacturing sector in South Africa taking a massive knock due to the Covid-19 pandemic, the country’s manufacturing output levels is said to be clawing its way back to pre-Covid levels. However, Investec said that despite November’s moderate annual growth, conditions in the manufacturing sector “remain lackluster”.

Volume of manufacturing production. Source: StatsSA

Manufacturing production

Rising 1.9% year-on-year (November 2022 compared to 2023), the largest contributions were made by:

  • Wood and wood products, paper, publishing and printing (8% and contributing 0.8 of a percentage point);
  • Motor vehicles, parts and accessories and other transport equipment (5.7% and contributing 0.6 of a percentage point).

The largest negative contributions were seen by:

  • Food and beverages (-2.0% and contributing -0.5 of a percentage point);
  • Basic iron and steel, non-ferrous metal products, metal products and machinery (-1.4% and contributing -0.3 of a percentage point)
Source: StatsSA

Manufacturing sales

Seasonally adjusted manufacturing sales increased by 1,1% in November 2023 compared with October 2023. Overall, seasonally adjusted manufacturing sales had increased by 2,1% over three months ending November 2023.

This was a turnaround of month-on-month changes of -0,5% in October 2023 and -0,1% in September 2023.

The largest manufacturing sales contributions were made by:

  • Motor vehicles, parts and accessories and other transport equipment (8,6% and contributing 1,4 percentage points);
  • Petroleum, chemical products, rubber and plastic products (3,2% and contributing 0,7 of a percentage point). 
Manufacturing sales at current prices (R million). Source: StatsSA

5. Doctors flee public sector:

South African doctors are fleeing from state hospitals to work at their private sector counterparts as the government no longer has the funds to absorb newly qualified doctors into the public system. 

This is feedback from the chairperson of the South African Medical Association (SAMA), Dr Mvuyisi Mzukwa, who told Newzroom Afrika that this situation has even pushed some doctors to leave the country. 

His comments come on the back of it being revealed that 800 qualified doctors are not being employed in public health posts because of a shortage of funds.

“Annually, the department cites budget constraints as a barrier to hiring qualified medical doctors, yet no substantial measures are evident to solve the funding dilemma,” the SAMA Trade Union (Samatu) said last week.

“This contributes immensely to the web of factors that prompt the continuous emigration of qualified doctors,” the union said. 

Mzukwa also said the government is concealing the number of openings at state hospitals by not replacing retiring doctors. It is instead erasing their positions entirely. 

He added that the state’s inability to absorb newly qualified doctors is also due to its failure to plan for the future and use its resources effectively and adequately. 

While the healthcare budget has been gradually cut, the Department of Health has not had a clear understanding of the resources the department needs and how this may change in the future. 

“This is a serious problem for the state because they have been scapegoating doctors for going to the private sector, but they cannot absorb those doctors,” Mzukwa said. 

“The problem is you are leaving the public healthcare sector in a dire state because there is a shortage of staff, and those that remain are overwhelmed.”

This, in turn, has a chilling effect on future doctors who are wary of working in the state-run system because of the workload and deteriorating work conditions. 

“In the state system, there is a dire shortage of healthcare workers, especially doctors. In rural areas, the shortage is particularly dire,” he said. 

The shortage of healthcare workers extends from nurses to highly trained specialists whom the public sector is also unable to employ for various reasons. 

Mzukwa said many of these specialists end up working in the private sector, leaving the country, or remaining in their current posts rather than filling a specialised role.

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

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