News In South Africa 14th May:
1. Lockdown level 3 on horizon:
In an address to the nation on Wednesday evening, President Cyril Ramaphosa said that most of the country should be in Level 3 of lockdown by the end of the month.
Some areas with high infection rates – particularly cities – may remain at Level 4.
But Ramaphosa indicated that Level 4 restrictions on retail, e-commerce and exercise will be lifted in coming days.
Ramaphosa said that without the lockdown, at least 80,000 South Africans could have been infected by now. The death toll could have been eight times higher. While 219 South Africans have died, at a similar stage of the pandemic in the US, there were more than 22,000 deaths.
2. Emergency budget to be tabled:
Finance Minister Tito Mboweni plans to be ready to table an “emergency” budget which makes provision for Covid-19 relief efforts by 24 June.
Treasury on Wednesday published the special adjustment budget guidelines on its site, which includes deadlines for departments to make submissions on their adjustment budgets.
According to Treasury the guideline document outlines the processes it plans to run to table a special adjustment budget.
“The date of 24 June is the date by when the National Treasury would be ready to table. It does not prescribe whether Parliament must organise for tabling on this date.
President Cyril Ramaphosa in April announced that government would provide R500 billion in fiscal support to be directed to Covid-19 priorities. Of this amount, R130 billion was to be reprioritised from the national budget which was tabled in February this year.
Government departments in the meantime have been asked to identify programmes and activities which can be temporarily halted to free up funds. Departments must show how their resource requirements will respond to the Covid-19 pandemic. They are required to make submissions as early as 22 May.
The fiscal response includes a R200 billion loan guarantee scheme, in partnership with private banks an the Reserve Bank, which went live on Tuesday. Treasury has initially provided a R100 billion guarantee and this will be extended to R200 billion depending on the need and success of the scheme.
3. Unusual power use in Johannesburg:
Eskom says it has taken the unprecedented decision to restrict electricity supply to parts of residential areas around Johannesburg, where unusual surges in consumption have been recorded.
There has been a trend of surges during peak usage periods, between 05:00 and 09:00, and between 17:00 and 20:00, leading the power utility to suspect a link to illegal connections.
Eskom says the decision to restrict supply was taken to safeguard equipment and costs associated with repairs, as power is being used indiscriminately during these peak periods. It will be implemented on a rotational basis.
Illegal connections and meter tampering have been identified as potential causes for the unusual uptick in usage in parts of Diepsloot, Braamfischerville, Ivory Park, parts of Soweto, the Vaal and Orange Farm.
4. Exclusivity clauses dropped:
Shoprite Holdings on Wednesday joined Pick n Pay in agreeing to drop exclusivity clauses in shopping mall leases against small and speciality retailers with immediate effect.
Supermarket chain Shoprite will also immediately cease exclusivity against other supermarkets in non-urban areas and phase out exclusivity over five years in urban areas, South Africa’s Competition Commission said in a statement on Wednesday.
The agreement with the Competition Commission follows findings from a Grocery Retail Market Inquiry released in November, which found that exclusive lease clauses contained in various leasing contracts impeded competition in the South African grocery retail sector.
The investigation also found that there were no compelling justifications for the continued existence of these exclusive lease agreements.
The phasing out of exclusivity will involve waiving this clause as leases come up for renewal and Shoprite will not sign any new lease agreements that contain exclusivity clauses.
5. Hedge fund bets on SA debt:
A London-based hedge fund that has made gains every year since it was founded, through risky bets including Ukrainian GDP warrants and sanctioned Russian bonds, is now putting its money on South Africa.
ProMeritum Investment Management LLP has allocated a fifth of its money – its biggest single holding – to South African government bonds, among the worst performers in emerging markets this year. It’s betting on a 15% rally in the next three to six months in response to the South African Reserve Bank’s aggressive policy easing and bond-buying in the secondary market. ProMeritum manages $320 million (R5.8bn), and handed investors a 9.6% return last year.
Pavel Mamai and Anton Zavyalov, who together founded ProMeritum in 2015, argue that the coronavirus-induced crisis is different from typical emerging-market crises, as the risk of depression is pushing central banks to prioritise growth, while accepting currency depreciation as an inevitable release valve. Some emerging markets have not yet priced in the new reality, notably South Africa, where yields could tighten 150 basis points as bonds benefit from positive carry returns.