News in South Africa 14th September:
1. Truck looting spikes on roads:
The looting and violent attacks on road freight logistics vehicles and the destruction of trucks and goods have begun to undo both the status of South Africa as a safe haven for investment and as an efficient logistics hub, for foreign traders, says chief executive officer of the Road Freight Association, Gavin Kelly.
He pointed out that 80% of the country’s goods are carried over roads.
Kelly said that what started out as sporadic incidents on a few routes has become the norm on any and all routes of the total supply chain and is now affecting destinations and originations. “With the total supply chain now being impacted, the economic effects are far-reaching.”
According to the Road Freight Association, while the short-term losses run into millions of rands, the long-term impact is incalculable and will be felt long after the burning has stopped and when it is far too late.
Depending on the category of vehicle, the type and value of cargo, and the specialised equipment required for the cargo, Kelly said that the financial impact could be anywhere between R3 million to R10 million.
And, the cost of loss of income through businesses closing is far greater.
What cost are we looking at?
The RFA said that the cost to operational assets is just the tip of the iceberg.
The cost to the South African economy will run into billions of rands lost as business confidence from foreign investors plummets and those who use the country as a transit hub move to other safer countries.
“The level of opportunistic crime is far too high – it needs to be dealt with. Now. Time and again, the association has called for the rule of law to be shown to be firmly in place and that the safety and security of South Africa and its people be ensured.
“The government needs to act swiftly and decisively to bring an end to this senseless destruction of the road freight sector,” said Kelly.
2. Rand falls to dollar:
South Africa’s rand fell on Tuesday as the dollar was buoyed by stronger-than-expected US inflation data, suggesting that the Federal Reserve may have to stay aggressive in raising interest rates.
US consumer prices unexpectedly rose in August and underlying inflation picked up amid rising costs for rents and healthcare, according to readings reported by the US Labour Department.
Fed officials will meet next week to deliver the interest rate decision, with traders betting on a third straight rate hike of 75 basis points (bps).
“With FOMC [Federal Open Market Committee] members, particularly Jerome Powell, communicating increasingly in favour of a 75bps increase in US interest rates, South Africa is now seeing a significant probability of one too next week,” Investec analyst Annabel Bishop said in a research note.
Like most emerging market currencies, the rand is highly susceptible to global drivers like the US monetary policy.
At 15:41 GMT, the rand traded at R17.39 per dollar, 1.55% weaker than its previous close.
The dollar index, which measures the currency against six rivals, was up 1.22% at 109.54.
On the local economic data front, figures from Statistics South Africa showed that the country’s total mining output in July dropped 8.4% year on year.
Shares on the JSE fell, mirroring the slump in global equities following the US inflation data.
3. Greylisting preventative measures:
Justice minister Ronald Lamola has tried to assuage investors that the South African government is taking the threat of being greylisted seriously.
Speaking to investors in Cape Town, the minister said that the greylisting threatens to entrench inequalities in South Africa and make it more difficult for companies to do business and invest in the country.
The minister said the department is hard at work responding to the findings and recommendations.
He said the actions taken by the department include:
- The creation of the Anti-Money Laundering (AML) Desk within the National Prosecuting Authority (NPA). The desk has formulated an Anti-Money Laundering Desk Strategy, which covers the investigation and prosecution of money laundering and terrorist financing.
- The NPA’s International Cooperation Unit’s processes have been improved in respect of referrals relating to foreign predicate offences. Staff capacity has been increased at head office.
- Mutual legal assistance (MLA) requests on State capture investigations were made to several countries in 2018. These countries include the USA, the UAE, India, Canada, the Netherlands, and China.
- The NPA is pursuing seven foreign bribery matters wherein MLAs were sent to foreign authorities, which shows its willingness to pursue such matters through ongoing communication with foreign jurisdictions.
- The Asset Forfeiture Unit has, since 19 November 2019, pursued cases of foreign predicate offending relating to charges of fraud, which is one of the focus areas in terms of SA’s risk assessment.
- The AFU has obtained eight Preservations in seven matters to the value of R40.3 million and eleven forfeitures in ten cases to the value of R31.8 million.
The minister said these “interventions will provide a material response” to the FATF.
South Africa faces greylisting because it has not done enough to stop money laundering and illicit financial flows, nor take action against those caught.
4. Considered changes to liquor laws:
The beer industry is open to the government amending liquor laws and regulations. As long as it is backed up by research, says Beer Association of South Africa (BASA) CEO Patricia Pillay.
BASA, which represents both craft brewers as well as large companies like South African Breweries and Heineken SA, says as long as any new measures are backed up by “empirical” research, it is open to seeing them implemented.
Pillay’s statement comes as both the national government, and several provincial governments are considering tighter laws and regulations on liquor in the wake of the 21, mostly children, who died in a tavern in the Eastern Cape at the end of June.
In July, President Cyril Ramaphosa said in his weekly letter that SA needed to have a “frank conversation” about how it consumed alcohol.
The cost of alcohol abuse to the country is huge. It amounted to about R37.9 billion, or 1,6% of the 2009 GDP, according to a 2014 study by researchers at the University of Cape Town, South African Medical Research Council (SAMRC), and the University of the Witwatersrand.
What restrictions could happen
The SAMRC has been outspoken in its calls to have tighter liquor restrictions. In a blog post, published after liquor sales were halted under the Covid-19 lockdowns, it said the country should consider introducing tighter regulations regarding the sale of alcohol.
The post recommended that the government:
Restrict Availability
- Limit hours and days of the week of sales – and include community participation in licensing outlets in residential areas
- Raise the minimum drinking age to 19 years
- No deliveries by drivers not employed by an outlet with an off-consumption license
- Implement a tracking system for tracking alcohol products all the way back to the source of supply
- Include an assessment of outlet densities in granting new licenses
- Consider risk-based licensing where annual license fees reflect the risk of harm associated with the outlet’s trading hours and record of compliance with liquor laws
- Support alternative income generation for home-based unlicensed outlets that will never meet licensing requirements
Implement drink-driving countermeasures
- Reduce BAC levels for drivers to 0.02g AA/100ml of blood with other measures
- Increase police patrols (random breath testing)
- Test blood alcohol levels after serious motor vehicle collisions
- Require ignition locks be fitted in cases of persons convicted of drink driving offences
Restrictions on advertising and packaging risk-based licences
- “First prize” would be to ban all alcohol advertising except at points of sale
- If not, a full ban as suggested above: (1) ban advertising where more than 20%- 30% of the viewing audience is under 20 years of age, (2) do not permit sports sponsorships by alcohol companies, (3) limit alcohol advertising to describing the product and not linking drinking with social and financial success
- Ensure that products/packaging include information on calories, number of standard drinks and visible warning (words/pictures covering at least 1/8th over the total label)
- Ban sale of alcohol in larger containers: ≥750 ml beers/bottles of spirits/wine, glasses >125 ml in restaurants, ≥500ml ciders
Increase the low price of alcohol
- Increase current benchmarks for alcohol in South Africa (23% of the retail sales price of wine, 38% of beer and 48% of spirits – being excise tax plus VAT) in general to make alcohol less affordable
- Consider minimum pricing per unit of pure alcohol, eg R8 – R10 per unit minimum
5. Eskom owed R50bil:
The total debt owed to Eskom by municipalities surged by nearly R10-billion between 30 September 2021 and the end of July 2022. As at 31 July 2022, municipal debt to the power utility stood at a staggering R49.7-billion, reporters found.
The August month-end results are still being finalised and are not yet available, Eskom spokesperson Sikonathi Mantshantsha said in response to questions from reporters.
On whether the picture had changed substantially, Mantshantsha said: “Due to continuing low payment levels, the outstanding debt has been steadily increasing monthly.”
As at 31 July 2022, 96 out of 278 municipalities in SA were indebted to Eskom:
- Northern Cape: 21 municipalities owed a total of R2,983,153,202.
- Free State: 16 municipalities owed a total of R16,753,639,773.
- North West: 11 municipalities owed a total of R3,385,887,130.
- Eastern Cape: 11 municipalities owed a total of R2,364,950,301.
- Mpumalanga: 10 municipalities owed a total of R14,167,394,658.
- Gauteng: eight municipalities owed a total of R8,024,882,108.
- KwaZulu-Natal: eight municipalities owed a total of R764,314,297.
- Limpopo: six municipalities owed a total of R1,062,095,447.
- Western Cape: five municipalities owed a total of R256,094,773.
Together, these 96 municipalities owed a whopping total of R49,762,411,689 to the power utility as at 31 July this year.
The debt by local municipalities has been steadily accumulating because Eskom has been lenient in its collection methods over the years, and continued to supply offending municipalities with power — establishing a culture of non-payment. However, without collecting the money owed by municipalities — a crucial part of its revenue — Eskom cannot service its debt load and will be forced to ask the government for more handouts.
All information sourced from articles posted by: BusinessTech, Moneyweb, ENCA, Business Insider, and Daily Maverick.
