News in South Africa 14th December:

1. Expected food prices in 2023:

The latest food inflation brief from the Bureau for Food and Agricultural Policy (BFAP) shows that food prices in South Africa remain at elevated levels and that consumers should expect higher prices going into next year.

Expected food prices in 2023
Photo by Pixabay from Pexels

Reflecting the higher levels of food inflation recorded in October 2022, the BFAP food basket was 12% higher than its previous report, with the thrifty health food basket coming in at R3,298 per month, up R10 from September, and up R367 from October 2021.

Oils and fats had the highest price increases year-on-year with inflation at 25.7%, followed by bread and cereals (19.5%), meat, milk, chees and eggs (10.5%) and fish (10.3%)

Month-on-month, however, fruits saw the biggest jump at 4.1%.

According to the BFAP, some price hikes were softened by movements within each category.

High inflation on maize and wheat-based foods was dampened by significant deflation in rice prices, while high inflation on several vegetables was dampened by significant deflation in potato prices, low inflation on some vegetables (broccoli, pumpkin, cucumber, and carrots) and deflation on some vegetables (sweet potatoes and cauliflower).

High inflation on some fruits was dampened by significant deflation in the prices of bananas, avocados and papaya. High inflation on coffee, tea and fruit juice was dampened by low inflation on soft drinks and mineral water.

On a more global outlook, the group said that food inflation in South Africa was lower than in the EU, Kenya and Zambia but higher than in Brazil, the USA and China.

These were the biggest price shifts. Where inflation was recorded above 10%:

  • Vegetables: onions, peppers, cabbage, tomatoes, lettuce, spinach, beetroot, canned mixed vegetables, various frozen vegetables;
  • Fats/oils: plant oils, mayonnaise;
  • Pork: ham;
  • Starch-rich foods: wheat flour, brown bread, maize meal, instant noodles, white bread, pasta, breakfast cereals, baked goods;
  • Beverages: coffee, tea, fruit juice;
  • Fruit: apples, pineapples, oranges;
  • Beef: T-bone, corned beef, offal, mince, chuck, brisket, stew;
  • Legumes: canned baked beans;
  • Chicken: fresh whole chicken, frozen non-IQF chicken portions;
  • Dairy: milk, gouda cheese, powdered milk, sour milk;
  • Sugar-rich foods;
  • Eggs;
  • Other: whiteners, salt, tomato sauce, soup powder, chutney;

2. Income tax to pay for grants:

A panel of experts has recommended that the Covid Social Relief of Distress (SRD) grant be permanently introduced and financed through income tax

study which looked at the social, fiscal and economic impact of permanent basic income support to the most vulnerable found that this would reduce poverty for 13.1 million beneficiaries and reduce income inequality.

The study, commissioned by the Department of Social Development in collaboration with the International Labour Organisation, was published on Tuesday.

Panellists included Adjunct Professor Alex van den Heever of Wits University’s Social Security Systems Administration and Management Studies; Professor Margaret Chitiga-Mabugu, Dean of the Faculty of Economic and Management Sciences at the University of Pretoria; Professor Jan van Heerden of the Faculty of Economic and Management Sciences at the University of Pretoria; and Professor Michael Noble, Director and Senior Research Fellow at the South African Social Policy Research Insights, among others.

The expert panel’s first report, published in December 2021, looked at the feasibility of extending basic income support to citizens between 18 and 59 years old.

In the second report, the panel focused exclusively on the SRD grant, or a wage subsidy that would cost the same.

They looked at the economic, fiscal and social implications of making the grant permanent, up to 2045.

The report looked at the impact of social assistance using four models:

  • The SRD Grant, costing a total of R50 billion a year, and financed through an increase in value-added tax (VAT);
  • The SRD Grant, costing a total of R50 billion, financed entirely through an increase in personal income tax on the top three deciles (highest earners in the country);
  • A wage subsidy, equivalent to R50 billion, financed entirely through personal income tax on the highest earners and allocated to workers in the lowest paid jobs including domestic workers and farm workers; and
  • The SRD Grant, costing a total of R50 billion, combined with a wage subsidy costing R25 billion, both financed entirely through personal income tax.

They found that the wage subsidy showed promise for improving economic output but would be less effective in addressing poverty and inequality than the SRD grant.

Using both the wage subsidy and the SRD would have advantages but it would be hard to replicate the wage subsidy model in real life, they said.

An SRD grant funded by raising income tax of top earners would raise household spending, wages, and economic growth, and would reduce inflation.

Most crucially, it would reduce the number of people living below the “lower bound poverty line” (at present R945 per person per month) by 15% nationally within two years, according to the simulation.

Presenting the findings, Van den Heever said the grant could be introduced “in a manner that is economically and fiscally sustainable while at the same time having a material impact on poverty and inequality”.

3. Home Affairs visa backlog:

South Africa’s Department of Home Affairs (DHA) is battling its way through a vast backlog of visa applications, which it hopes to have cleared by June 2024.

Home Affairs is drowning in outstanding visa applications. This backlog, made worse by the department’s disastrous decision to centralise the adjudication of long-term visas, has led to longer processing times, frustrated foreign applicants, and missed work opportunities.

This seemingly never-ending backlog has caused the DHA to issue consecutive blanket extensions to visa and waiver applicants, with the most recent deadline given as 31 March 2023.

Under fierce pressure, the DHA has been accused, by IBN Immigration Solutions, of unjustly rejecting applications. “Now, it seems that Home Affairs officials have clear KPIs to adjudicate X number [around 20] applications per day,” noted IBN Immigration Solutions’ Andreas Krensel in November. “This leads to a very, very high number of rejections.”

And according to a recent parliamentary answer given by the Minister of Home Affairs, Aaron Motsoaledi, there’s no quick fix to clear the visa backlog.

“The current backlog across all visa categories is 56,543,” said Motsoaledi in response to a question posed by DA MP Thembisile Khanyile.

“The department envisages to have cleared the current backlog by June 2024 for all categories of visas.”

4. Lenders’ tightening appetites:

South African banks never fully opened their lending taps after the Covid-19 pandemic. And just as more consumers turn to debt to cope with the spiralling cost of living, lenders are tightening their appetite again.

According to one of the country’s biggest credit bureaux, TransUnion, consumers were thirsty for credit to bridge the gap between their incomes and the rising cost of living. But while South Africans opened more credit accounts, lenders offered lower loan amounts and credit card limits. Even non-bank personal loans and clothing accounts weren’t exempted.

The TransUnion industry insight report has a month lag on credit origination data. But it still paints a solid picture of how banks and other lenders responded to the increased appetite for credit. It shows that credit originations increased by 14.5% year-on-year in the second quarter. Credit card origination volumes saw the biggest increase at 39.4%, followed by clothing accounts (34.2%) and retail revolving credit facilities (30.8%).

However, while at face value, these loan origination volumes might lead one to believe that SA’s credit market was a hive of activity, new accounts opened in all credit lines – save for home loans – remained notably below the 2019 levels.

For instance, card originations volumes were 18% below pre-pandemic levels. And even when one compares the current numbers to 2021 instead of 2019, the growth in new cards issued doesn’t match the outstanding balances. Outstanding balances decreased by 2.2% year-on-year in the third quarter of 2022, indicating that while people might be getting new credit cards, lenders are giving them smaller credit limits than before.

TransUnion said the average limit granted by lenders on new cards issued in the second quarter of 2022 was 5.2% lower than in the same period last year. The limits are lower because there has been a spike in “riskier borrowers” applying for credit. Consumers with sub-prime credit scores accounted for 53% of new accounts opened.

TransUnion’s report is in line with the National Credit Regulator’s (NCR) latest Consumer Credit Market Report (CCMR).

5. President to stay on:

South African President Cyril Ramaphosa survived a special vote at the National Assembly regarding the Phala Phala report– with votes dismissing the report winning 214 to 148.

The decision to quash a further investigation into the Phala Phala scandal means that Ramaphosa can run for a second term as President of South Africa and ANC – the latter being decided later this week.

All information sourced from articles posted by: BusinessTech, Moneyweb, Business Insider, Fin24, and BusinessDay.

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