News in South Africa 13th April:
1. RAF R300bil in debt:
Civil group Outa says that government has completely lost control of the Road Accident Fund, which is R300 billion in debt and reportedly on the brink of collapse.
The group noted that the fund has grown from R9 billion a year to R45 billion a year, and is being plundered by unscrupulous lawyers and officials that enable them – all while taxpayers keep footing the bill.
If the fund collapses, motorists will be left to fend for themselves in accidents and many will never receive compensation.
South Africa faces dire consequences if the RAF goes bust, warns Wayne Duvenage, CEO at Organisation Undoing Tax Abuse (Outa). Duvenage warned years ago that the RAF is “a plunder pot of massive proportion”.
2. Covid-19 loan guarantee scheme extended:
The Covid-19 loan guarantee scheme will be extended by three months.
The scheme was launched as part of government’s R500 billion stimulus package to support the economy given the impact of the Covid-19 pandemic. The scheme is based on a partnership between National Treasury, the SA Reserve Bank (SARB) and the Banking Association of South Africa (BASA). It is meant, specifically, to support struggling businesses.
The period for which businesses could draw down loans was to end on 11 April 2021, for most participating banks, read a statement jointly issued by the parties on Monday.
“After further consultation, the National Treasury, the [SARB] and the BASA have agreed to extend the deadline by three months to 11 July 2021, and in the process to harmonise this deadline for all participating banks.
“The guarantee scheme will continue to service all loans advanced up to the extended date, for up to five years. The further extension of three months will enable an orderly winding down of the scheme and allow those businesses who have applications already lodged to be assessed,” the statement read.
Banks had approved about 18% or R18 billion out of the R100 billion guarantee, as at 27 March. Banks had received more than 1 700 loan applications and approved less than half (511). Only 97 loans were taken up by clients.
3. Consumers carry risks of powerships:
Government’s proposed deal with Karpowership SA to buy electricity generated on its three floating power stations over a period of 20 years will expose consumers to considerable risk.
Maduna Ngobeni, acting chief operating officer of the Department of Energy’s office for independent power producers (IPPs), recently confirmed that among other things, fluctuations in the international price of liquefied natural gas (LNG) and the dollar/rand exchange rate will be passed on to consumers.
Other pass-throughs are carbon tax and environmental levies.
Mike Schüssler of Economists.co.za warns that consumers could find themselves at the same disadvantage Eskom did with its historic price agreement to supply the Hillside aluminium smelters in Richards Bay: this was done at a tariff linked to, among others, the dollar-denominated price of aluminium set in London.
The agreement was concluded decades ago and only came to an end in July last year. Eskom ended up selling electricity at a huge loss. Independent analyst Ryk de Klerk last year estimated that since 2013 the contract had cost Eskom R15 billion.
Eskom was however bound to it and earlier efforts to renegotiate the terms were unsuccessful.
4. MTN Group unbundling Fiber and Fintech:
MTN Group Ltd. has begun work toward separating its fiber and fintech units as part of plans to unlock value and raise funds to fuel expansion. The shares jumped to their highest in more than a year.
Africa’s biggest wireless carrier is seeking strategic partners and investors for the businesses, Chief Executive Officer Ralph Mupita said in a presentation Wednesday. The company owns 85,000 kilometers (52,817 miles) of fiber across the continent, while fintech products such as mobile-payment services are growing rapidly.
“We recognize that there is a significant data demand in Africa that is not going to stop,” said Mupita, who was promoted from chief financial officer to replace Rob Shuter last year. “Nothing is stopping us bringing other parties to help us fund the infrastructure we need. That work is already underway.”
The strategy represents the next phase of an ongoing plan to sell assets and pay down debt to free MTN to invest in expansion. The Johannesburg-company is looking to take advantage of the millions of Africans connecting to the internet for the first time every year, many through smartphones, as well as rapid population growth in major markets such as Nigeria.
5. Illicit cigarette sales spike:
The domestic market was flooded with illegal cigarettes following the announcement of an 8% hike in excise duties which affects tobacco products, a survey shows.
These cigarettes are selling for as little as R8 for a pack of 20 sticks – compared to the legal minimum collectable tax of R26.61.
British American Tobacco SA (BATSA) commissioned research firm Ipsos to conduct a survey on the cheapest purchase prices in the tobacco cigarette market. Using a “mystery shopper” approach, Ipsos had a shopper pose as an actual consumer to find out which cigarette brands were being sold at cheap prices at a sample of 4 000 stores (including informal traders) in Gauteng, the Free State and the Western Cape.
The second wave of research – based on a survey conducted in March – was released on Monday.
The survey found that almost three quarters (74%) of retail outlets in the three provinces are “openly” selling illegal cigarettes. “This is an increase of more than 7% on the last survey conducted before the excise increase in February,” a statement from BATSA read.