News in South Africa 15th August:
1. SA likely to keep AGOA status:
South Africa will likely keep its preferential access to US markets because hundreds of American firms are also benefitting, according to the nation’s ambassador to BRICS.

“I don’t think there is any serious threat of us losing preferential access to AGOA. AGOA is not a one-way issue, trade is not a one-way issue,” Anil Sooklal said at a Bloomberg conference in Johannesburg on Monday.
“You have 600 US companies doing business in South Africa. Are they going to turn their backs on that?”
South Africa has asked the US to consider an early extension of the African Growth and Opportunity Act, which expires in 2025.
But some US lawmakers have pushed the Biden administration to review South Africa’s access to AGOA, amid frustration over the country’s non-aligned position toward Russia’s invasion of Ukraine, and because they deem it too developed to qualify.
Tensions also spiked earlier this year when the US ambassador to South Africa, Reuben Brigety, accused it of supplying arms to Russia — an allegation Pretoria denied.
BRICS leaders from Brazil, Russia, India, China and South African will take part in a summit in Johannesburg next week, with Russian President Vladimir Putin participating virtually.
South Africa, which last year exported $2.7 billion of goods using AGOA and the so-called Generalized System of Preferences, will host an AGOA summit later this year.
Sooklal said that despite sanctions imposed on Russia, many companies continued to do business with the country.
“Everyone is turning a blind eye. This is a complex world we live in and money talks, despite sanctions,” he said.
2. SA is running out of money:
Renowned economist Dawie Roodt warned that South Africa is running out of money and facing a difficult time for the next five years.
Speaking to Nuuspod, Roodt said local governments are falling apart, state-owned enterprises (SOEs) are collapsing, and the state’s deteriorating finances.
Local governments are important to the economy as new businesses rely on these authorities to operate. However, basic services like water, electricity, and roads have deteriorated.
Most municipalities are mismanaged, corrupt and without any realistic chance of being turned around.
Another problem is that Eskom is dying, with the private sector increasingly relying on alternative energy production to survive.
Eskom’s debt burden of R420 billion is too much to handle, and it struggles to meet electricity demand.
The same goes for other SOEs, like the South African Post Office and Transnet, which struggle to fulfil their mandate and support the economy.
The third big challenge is the state’s finances, which are rapidly deteriorating without any significant interventions to stem the decline.
Roodt said South Africa’s fiscal deficit would be much larger this year than what Finance Minister Enoch Godongwana budgeted for.
“The state’s expenses are going to be much larger than expected, and economic growth much smaller,” he said.
There are a few reasons for the growing fiscal deficit –
- The salary bill for civil servants is larger than budgeted because they received above-inflation increases. This is set to continue with an election year in 2024.
- The government gave more money to failing SOEs than expected. This will continue, especially with the state planning to take over a large part of Eskom’s debt.
- South Africa’s tax collections are under pressure because the economy is not growing.
- Income from mining is declining because of a downturn in the commodity cycle and problems with South Africa’s rail and port services.
“South Africa’s fiscal deficit for 2023 is set to be between 6% and 6.5% of gross domestic product (GDP), much higher than the minister’s expected 4%,” Roodt said.
“The minister said they want to stabilise South Africa’s debt level at 70% of GDP, but it has already increased to 72%.”
3. Interest rate outfall:
Lending group Absa has said the first half of the year, characterised by higher interest rates and a rising cost of living, has seen more of its customers roll into arrears and fall into debt review, forcing the bank to take on heavier loan losses that pushed credit impairments up by 60%.
The bank handed out R8.3 billion in bad debt charges during the six-month period to the end of June 2023, with credit impairment charges in mortgage lending, its biggest loan book, growing the fastest.
Mortgage loan credit charges more than tripled – surging by a staggering 258% to R975 million as consumers bore the brunt of the South African Reserve Bank’s most aggressive and rapid interest rate tightening spell in 15 years.
The central bank, in its bid to bring price pressure under control, has delivered a 475 basis point (bps) increase in interest rates since November 2021. Since the start of the year, the repo rate has risen by 125 bps.
Consumers taking strain
Speaking following the release of the lender’s results, group financial director Jason Quinn said the period saw higher delinquencies and arrears, sustained pressure on its legal books, and larger numbers of customers slipping into debt review processes.
As a result, the credit loss ratio for home loans increased from a low of 19bps to 65bs, Quinn said.
The pressure faced by consumers has led to a slowdown in production and applications in the home loan segment, while approval rates have also “deteriorated” – a trend prevailing across the industry, he said.
Despite 6% home loan growth to R298 billion, production dropped by 26%, Quinn said.
4. R19 ‘summer holiday’ beating:
The rand has swung wildly over the last month, shifting from a move towards R17 to the dollar and trailing all the way back to over R19 to the dollar.
According to Investec chief economist Annabel Bishop, the rand’s movements can be partly explained by the ‘summer holiday’ effect – where the northern hemisphere summer vacation month sees many market players on holiday, with risk-taking typically dulled and negative events having a greater impact.
“Markets consequently tend to be risk averse in this period, which can run from May to September, with both perceived positive and negative market moving events having an exacerbated effect on financial market indicators,” she said.
This causes increased volatility as market reactions to events tend to be more pronounced.
For the rand, concerns over the global economic outlook, and especially from a small open commodity exporting country such as South Africa, has subsequently had a much deeper negative impact on the local unit – as does higher levels of risk aversion in global financial markets, Bishop said.
“The S&P Global Investment Manager Index for August highlights heightened risk aversion, with increased bearishness recorded across both risk appetite and expected return gauges.
5. SA is losing out on renewables boom:
South Africa has imported $10 billion worth of solar panels, lithium-ion batteries and inverters, most of which in the last three years, with $2.5 billion in the first six months of 2023 alone.
However, the local renewables manufacturing sector has not developed much, and it has not been able to keep pace with the strong rise in demand as it struggles to compete with international manufacturers, particularly those in China – meaning SA is missing out on billions of rands being generated from its own renewables boom.
All information sourced from articles posted by: Fin24, DailyInvestor, Moneyweb, BusinessTech and BusinessDay.