News in South Africa 14th August:
1. Economy likely to grow:
South Africa’s economy probably avoided a contraction in the second quarter, despite record power cuts, logistical constraints and sagging consumer confidence.
In the view of analysts polled by Bloomberg Aug. 4-10, the economy stagnated quarter-on-quarter, compared with a forecast for a 0.1% contraction last month.
Better-than-expected mining and manufacturing output contributed to their revised projections. The sectors that make up more than a fifth of the total gross domestic product grew 1.5% and 2.3%, respectively, in the three months through June, according to data published by Statistics South Africa last week.
“The supply side of the economy seems to have stabilized, despite ongoing load-shedding and domestic logistical constraints,” said Jee-A van der Linde, a senior economist at Oxford Economics Africa.
The data supports the view that many big businesses are adapting and insulating themselves from load-shedding, the local term for power cuts, by building their own generation capacity, Absa economists led by Miyelani Maluleke said in a research note.
Although the data implies modest economic growth in the second quarter, high living costs and restrictive monetary policy are weighing on consumer demand, Van der Linde said.
The FNB/BER Consumer Confidence Index recorded its second-lowest reading since 1994 in the quarter, indicating tremendous concern among consumers about South Africa’s economic prospects and their household finances, according to FNB.
Household spending comprises about two-thirds of GDP.
The central bank paused its longest phase of monetary tightening since 2006 last month after raising borrowing costs by 475 basis points since November 2021.
Inflation remains above the 4.5% midpoint of the target range at which it prefers to anchor price-growth expectations.
Policymakers predict headline inflation will only reach the midpoint in 2025. The statistics agency is scheduled to publish GDP data for the second quarter on Sept. 5.
2. Interest rates toll on households:
With interest rates at the highest level in 14 years, households are taking tremendous strain. Some estimates put the increases in car and home loan repayments at an average of 11% and 38% in rand terms respectively in the last 18 months.
Nedbank says household debt burdens are at 62% of disposable income, while the “cumulative 475 basis point increase in interest rates since 2021 pushed debt service costs to 8.4% of disposable income from a 16-year low of 6.7% in the final quarter of 2021″.
“As a result, households increasingly relied on savings to sustain living standards, depleting the buffers built up during the pandemic. The personal savings rate stood at -0.2% in the first quarter from a peak of 1.5% in the third quarter of 2020.”
It says “growth in mortgages, vehicle finance and personal loans softened, while demand for transactional credit remained relatively firm”.
Approval rates for vehicle finance and personal loan applications at Nedbank are at the lowest levels in five years, while for credit cards, only last year’s approval rate was lower. Take-up rates on vehicle finance are at the lowest level in five years.
Home loans are the outlier, with approval rates at their highest in five years (higher than pre-pandemic). Take-up rates on home loans are at the highest level since 2019.
3. Eskom – generation capacity improving:
Power generation capacity is improving as the weather becomes warmer, according to Electricity Minister Kgosientsho Ramokgopa.
Ramokgopa updated members of the media on Sunday on the functioning of all the country’s power stations and the latest energy availability figures.
He said generation capacity had improved since last month and the country currently had 29,000 megawatts available.
In his weekly update, Ramokgopa spoke about Eskom’s plans to ensure that generation capacity was consistently improving.
Just this week, demand breached the 29,000 MW mark and Ramokgopa said this showed the consistency of it’s systems.
He said as the country entered a less severe period of cold, the use of electrical heating appliances had decreased, and this had resulted in greater generation availability.
“The utility will be implementing more planned maintenance projects at its power stations so that dilapidating infrastructure can be replenished and refurbished in time to prevent unplanned breakdowns,” said Ramokgopa.
4. Mpumalanga price spike:
Mpumalanga, often seen as simply a tourist hotspot, has recently seen the highest increase in property prices.
According to Stats SA, the overall residential property price index dropped from 3.8% year-on-year in February 2023 to 3.6% in March 2023 year-on-year. It did, however, increase by 0.2% month-on-month.
Although the Western Cape is often cited as the area with the highest rising prices, Mpumalanga actually recorded the highest increase in the index at 17.3% – far above the Western Cape’s 5.7%.
Limpopo saw the second highest year-on-year increase, jumping 7.4% in March 2023 – far below Mpumalanga’s 17.3%.
Gauteng, South Africa’s most populous province, only saw an increase of 1.9%.
However, the Western Cape was still the main contributor to the 3.6% annual inflation.
The Western Cape’s 5.7% year-on-year increase contributed 1.8 percentage points, whilst Gauteng’s 1.9% contributed 0.8 of a percentage point.
Mpumalanga did, however, contribute 0.4 percentage points to the overall 3.6% annual inflation – the third highest overall.
5. SAA needs pilots:
SAA aims to recall some former pilots as it expands its operations.
During the restructuring of the airline, SAA entered into an agreement with the SAA Pilots Associations (SAAPA) that, should the airline be able to recruit more pilots, it would look at those pilots that were retrenched in 2021 first.
SAA confirmed the pilot recall drive on Thursday (10 August).
The airline did not indicate how many pilots it aims to recall, but according to industry insiders, it is almost 60.
All information sourced from articles posted by: DailyInvestor, Moneyweb, EWN, BusinessTech and BusinessDay.
