News in South Africa 13th July:
1. New crypto laws:
The South African Reserve Bank is set to introduce new regulations around trading cryptocurrency in the country in the next 12-18 months, says deputy governor Kuben Naidoo.
Speaking in PSG’s latest Think Big webinar, Naidoo said that South Africa was largely on par with other countries when it comes to cryptocurrency regulation, with the initial hype around digital currencies and the technology dying down in recent times.
He added that most central banks around the world are now focused on regulating the broader crypto environment but also learning from it and seeing how it can be used. He added that it was important to separate the genuine technological advancements and the potential improvements to the payments system from ‘the hype’.
“We are not intent on regulating it as a currency as you can’t really walk into a shop and use it to buy something. Instead, our view has changed to regulating (cryptocurrencies) as a financial asset. There is a need to regulate it and bring it into the mainstream, but in a way that balances the hype and with the investor protection that needs to be there.”
- Naidoo said the first step is to ensure that cryptocurrencies are declared as a financial product, which means they would fall under the purview of the Financial Intelligence Centre (FIA) and be monitored for money laundering, tax evasion, and terrorist financing activities.
- The SARB then plans to develop a regulatory framework for the exchanges in South Africa to allow for crypto listing, which would include traditional banking regulations such as Know Your Customer (KYC) rules and exchange control regulations.
“Whether it goes up or down is not the question here – the job of the central bank is not to pick winners and losers in an investment race. Our job is to regulate something so that people have an adequate ‘health warning’ – but crypto is far too volatile to be used as a payment space.”
2. More Eskom corruption:
More dodgy dealings have been uncovered at Eskom, with two former employees of Swiss engineering firm Asea Brown Boveri (ABB) arrested, along with their wives, in connection with alleged kickbacks in exchange for inflated contracts.
The contracts, including a R2 billion control and instrumentation deal at Kusile, resulted in ABB paying Impulse International R549 million in 2016 and 2017 – at a time when former acting Eskom chief executive Mathsela Koko’s stepdaughter, Koketso Choma, stood to benefit.
Meanwhile, the demand for load shedding survival supplies surge:
Eskom’s heightened load shedding schedule has seen a surge in demand for alternate power products, with at least one South African retailer reporting a 300% increase compared to last year.
Rotational blackouts have been especially bad amid a rise in unexpected plant breakdowns, coupled with scheduled maintenance for worn-out units, and an unprotected strike by Eskom staff. Although the strike has since ended, remnants of the stay-away, which delayed maintenance work at six power stations, are expected to remain.
The announcement of Stage 6 load shedding at the end of June saw a mad dash for alternate power products. Candles, paraffin, gas bottles, and emergency lights have flown off shelves. Finding an Uninterruptible Power Supply (UPS) or electric generator has become difficult. Load shedding hasn’t diminished, and neither has the demand for these products.
Makro reports that sales of generators, inverters, gas cooking tops, cylinders, rechargeable globes, and lanterns have soared in the past weeks.
“We are currently experiencing a very high demand for generators, inverters and backup power solutions nationwide in our stores,” said Gary Lindhorst, Makro’s DIY merchandise manager.
“Year-on-year sales for alternate power-related categories have gone up by over 300%.”
This massive increase in demand is especially significant, considering that demand for alternate power products amid 2021’s brutal load shedding schedule was already high.
The retailer also said that it would “be offering fully installed solar solutions to customers very soon.”
3. Public servant strike risk:
More than 200,000 public servants have threatened to test the government’s finances as they push for an inflation-beating 10% increase across the board as part of ongoing wage negotiations.
The Public Servants Association (PSA) has lodged a dispute with the government after wage negotiations stalled and threatened that workers could down tools if an agreement is not reached in the next month.
4. Khoi and San rooibos R12.2mil payout:
South Africa’s rooibos industry has just paid out as much as R12.2 million to the Khoi and San communities as part of a benefit-sharing agreement signed almost three years ago.
In 2019, the rooibos industry, the National Khoi and San Council, and the South African San Council signed an access and benefit-sharing (ABS) agreement, which will see the Khoi and San communities share in the profits of the rooibos industry, who benefit from their traditional knowledge of the tea and the commercial use of the plant.
The R12.2 million sum is the first tranche of the access and benefit-sharing fund, following years of negotiations stretching back to 2014 when the South African government recognised the Khoi and San as the rightful traditional knowledge holders of rooibos.
The South African Rooibos Council (SARC) said the agreement would see all volumes of rooibos sold levied through one process. It said a benefit-sharing levy of 1.5% of the farm gate price of rooibos would be paid out into a trust annually, estimated at R12 million a year.
The SARC said the funds were primarily intended for uplifting the Khoi and San communities, citing that their use will be independently decided by the National Khoi and San and South African San councils.
Martin Bergh, the chairperson of the SARC, said benefit-sharing funds aim to contribute to poverty reduction, food security, social development, and biodiversity conservation.
“As a signatory to the Nagoya Protocol, South Africa requires all who trade in indigenous biological resources, such as Rooibos, to share benefits with traditional knowledge holders in a fair and equitable way,” the SARC said in a statement on Tuesday.
5. Exports boom despite economic struggles:
All around the globe July will be remembered as a winter of particular discontent, to borrow from the words of William Shakespeare.
The list of frustrations that plague people in virtually all countries is headed by rising inflation (especially prices of energy commodities), rising interest rates, and a slowdown in economic growth.
In South Africa’s case, the list is expanded by the worst-ever period of load shedding, decaying road and rail infrastructure, and the existence of dozens of dysfunctional municipalities (outside of the Western Cape).
Concern also exists over the sharp depreciation of the rand exchange rate in recent months, but this is a universal phenomenon, driven by the inordinate strength of the US dollar.
Currency weakness is not a serious problem yet, as it provides welcome dividends to exporters, but a persistent depreciation will make it more difficult to contain inflation.
Apart from the sharp increases in fuel prices, the most immediate issue threatening the financial resilience of businesses and households is the electricity blackouts. As expected, the reaction among the full spectrum of representative organisations in the country has been pronounced, and society at large is piling pressure on government to address the energy crisis as a matter of urgency.
Fortunately, the macro economy remains on solid ground, with South Africa’s international trade performance going from strength to strength and continuing to break records, most notably the cumulative value of exports during the first five months of the year, which amounted to R791 billion.
Furthermore, new vehicle sales in the domestic market increased by more than 7% in June and export sales by 18% (year-on-year).
Many foreign companies remain positive about South Africa’s prospects for securing sustainable growth, despite the daunting challenges.
This is reflected in the solid performance of foreign direct investment (FDI) inflows, which came in at an impressive R27 billion during the first quarter of the year.
Unequivocal proof of the renewed faith in the country’s economic future since the gradual implementation of market-friendly reforms under President Cyril Ramaphosa is provided by the five-fold increase in the average quarterly FDI inflows since 2018 (compared with the state capture era).