News in South Africa 15th January:
1. Massive electricity price hike:
Despite having the worst year of load shedding in 2023, and many analysts noting it is firmly here to stay in 2024, South Africans must prepare for another double-digit Eskom tariff increase this year.
In December 2023, the High Court of South Africa rejected the requests for a judicial review on the revenue decision and tariff approval made by The National Energy Regulator of South Africa (Nersa) regarding Eskom’s fifth MultiYear Price Determination (MYPD5) application for the 2023/24 and 2024/25 fiscal years.
The judgement followed applications by the Democratic Alliance (DA) and the South African Local Government Association (Salga) to review the Nersa decision on Eskom’s MYPD5 revenue application.
The High Court found that “when all is considered and the detailed and extensive reasons furnished by Nersa is compared with the attacks on its decisions, none of the review grounds pass muster,” the court said.
“All relevant factors have properly and in detail been considered, the conclusions reached were neither arbitrary nor irrational, and the issue of cross-subsidisation was considered at the appropriate stage,” it added.
Therefore, The High Court found that both the DA and Salga review applications must fail.
This means Nersa’s approved 18.65% increase in electricity prices for 2023 and 12.74% hike effective April 2024 will stand.
This is even though Eskom has failed to meet key conditions placed on it by Nersa aligned with its MYPD5, according to independent energy analyst Pieter Jordaan.
Due to the high cost of the diesel fuel used in Open Cycle Gas Turbines (OCGTs), an average utilisation rate – also called a load factor – of 1% is typically regarded as the utility-scale standard for this energy supply.
In Eskom’s price determination, due to the worsening power situation in South Africa, Nersa relaxed the 2023/24 load factor to 6%. This relaxation was conditional on Eskom reducing its breakdowns (UCLF) from 31% (2022/23 FY) to 20% and improving plant availability (EAF) from 57% (2022/23 FY) to 65%.
However, Eskom has failed to meet these conditions for the 2023/24 financial year to date, with UCLF averages at 33% and EAF at 55%. Meanwhile, the OCGT load factor stands at 20%.
2. Mass value destruction under Cyril:
The JSE has lost 22% in US dollar terms since President Cyril Ramaphosa took office. The Nasdaq-100 gained 147% and the S&P 500 75% during the same time.
There was tremendous positivity across South Africa when Ramaphosa took over from former President Jacob Zuma on 15 February 2018.
Ramaphosa beat Nkosazana Dlamini-Zuma in the race for the ANC presidency in December 2017, which resulted in Jacob Zuma’s resignation as president two months later.
Ramaphosa’s campaign focused on fighting corruption and implementing policies conducive to industrialisation and investment.
The hope of a new dawn engulfed South Africa. Referred to as ‘Ramaphoria’, the public and business community trusted Ramaphosa to bring about meaningful reforms.
This did not happen. The initial excitement faded as the deterioration of infrastructure, state-owned enterprises, and government institutions accelerated.
Load-shedding became a daily occurrence, Transnet collapsed, crime has reached record levels, and corruption is out of control.
Most local municipalities – responsible for providing citizens and businesses with electricity, water, and other services – collapsed.
These problems, in turn, resulted in poor economic growth, rising unemployment, and skilled people flooding out of the country.
Many business leaders and economists warned that the country is on the cusp of becoming a failed state.
Sygnia CEO Magda Wierzycka said South Africa was already a failed state, and the government was sabotaging businesses and killing the economy.
She added that the poor economic performance means the country has become irrelevant among international investors.
Renowned economist Dawie Roodt warned South Africa would face a serious financial crisis with rising debt and collapsing state authorities.
Roodt highlighted that state debt has reached record levels and is rising at an alarming rate.
“Very soon, the private sector is going to demand much higher returns on the increasing risk for funding the growing state debt,” Roodt said.
“Even the South African Reserve Bank is concerned about the growing amount of state debt the banking sector is funding.”
The results of poor governance and business-unfriendly policies are clearly seen in the value of the rand and the performance of JSE-listed companies.
Since Ramaphosa took office, the local currency weakened tremendously against the US dollar – from R11.55 in February 2018 to R18.63 today in January 2024.
Without meaningful economic growth and a rapidly increasing population, South Africans became much poorer in US dollar terms.
The JSE All Share Index (ALSI) performance versus the Nasdaq-100, S&P 500, and MSCI World Index clearly shows how much value the Ramaphosa administration destroyed.
Since Ramaphosa took office in February 2018, the Nasdaq-100 increased 147%, the S&P 500 75%, and the MSCI World 49%.
The ALSI, in comparison, declined by 22% in US dollar terms. It was one of the worst-performing exchanges globally.
3. Challenging year ahead for business:
This is going to be a challenging year for business. Globally there will be a record number of elections. At the same time, we face an unprecedented level of geopolitical stress with the Russia/Ukraine and Israel/Hamas wars creating major uncertainty.
South Africa is one of the many countries that will be heading to the polls. Our democratic institutions are a great strength, and it is thrilling to see them in action as we will sometime this year. But political campaigns can be a distraction to the business of running the country, particularly at a crucial time for us to make progress on the major challenges facing our economy. There is also a heightened risk of populist policy being rushed through parliament to add to the electioneering. Already, the passage of the unworkable National Health Insurance (NHI) Bill shows how destructive such moves can be, with the president this weekend promising to sign it into law despite opposition “whether they like it or not”. Of course, the law will never work simply because there is no capacity to implement it. As soon as it is signed, it will be embroiled in litigation on several fronts, including its constitutionality.
With economists predicting that the economy will grow only 1.5% this year, having grown 0.8% last year, the need to focus on kickstarting growth is obvious.
Populist politicking can obviously harm that effort. The NHI Bill, for example, is already giving businesspeople pause for thought about whether they will be able to rely on the South African health system in the future. Health professionals, who are easily globally mobile, are also worried about their futures. It is frustrating for those of us focused on delivering the changes that will push economic activity in the right direction.
Last year business and government renewed efforts to jointly work on the most pressing challenges for growth, including the electricity crisis, the logistics crisis, and crime and corruption. A pleasing announcement over the festive break was the appointment of a board for the Eskom transmission company, an important next step in its eventual unbundling to allow for a competitive and open electricity market.
Also during the break, the long-awaited draft Integrated Resource Plan was published, a document that has historically been important in planning out our energy development needs. The IRP is becoming less important as more electricity generation is taken on by the private sector. Still, it remains central to the vision for the future of the electricity system. It is progress that the draft has been published, yet there is much that needs to be fixed in it to meet the principle of lowest cost in planning out the future of the electricity system. An effective consultation on the draft will be important to align stakeholders on a rational plan for the sector.
It is critical that we maintain momentum in our reform partnership, delivering on agreed priorities while election season unfolds. The logistics crisis, for example, needs urgent steps to be taken between business, government, Transnet and other stakeholders to improve the efficiency of rail and port infrastructure. The obstacles facing exporters, from vehicles to minerals, are directly constraining economic activity, leading to lost jobs and lost revenue, including taxes. I hope in 2024, we will be galvanised to deliver on the plans that have already been forged to fix this crucial network industry without distraction.
The government and business partnership is critical to building confidence globally that South Africa is getting its act together. Today, the World Economic Forum opens in Davos, and South Africa is well represented by a delegation of senior business and government leaders convened by Finance Minister Enoch Godongwana. Our reform progress is the key message that must be conveyed and delivered to a global audience that will be on guard about heightened risks globally. We must be clear that our constitutional democracy is a bedrock for our economy, underpinning the rule of law and long-term stability.
4. Surge in online shopping scams:
Personal finance journalist Maya Fisher-French reports that there has been a surge in fake online shopping sites and that con artists are spoofing the domains of online banking and delivery companies to send scam emails.
When shopping for good deals online, checking certain aspects of the webpage is essential to ensure you aren’t getting scammed.
Tsonga, an online store selling South African-made leather shoes and bags, recently warned that fake social media advertisements were directing customers to fraudulent websites not affiliated with the brand.
“It is the silly season, please be vigilant and aware that there are fraudsters making offers of Tsonga specials and redirecting you to websites that are not associated with our brand!” Tsonga said in an Instagram post.
“These are not legitimate and will con you out of your hard-earned money.”
It explained that these sites are built to look as legitimate as possible to deceive customers and claim to offer discounts of up to 80%.
“Unfortunately, these sites appear legitimate until you look at the actual URL of the site you are visiting,” it added.
Even those experienced in spotting these kinds of scams can fall victim to them.
Fisher-French detailed in her article how she fell victim to such a scam.
While searching for shoes online, she spotted a legitimate enough-looking advertisement for a pair from the Sketchers brand, advertised at 40% off.
After placing an order and receiving an additional 43% discount, Fisher-French became suspicious of the site when no contact details were provided.
A better look at the URL revealed that she had been directed to skechers-south-africa.co.za, and she found several similar URL variations in a Google search.
A website called malwaretips.com warns about these Skechers in South Africa scams and provides tips on protecting yourself from falling victim to them.
“This scam website claims to sell various Skechers sneakers at very low prices, but will send you either counterfeit or inferior goods, or nothing at all,” it says.
Malwaretips.com believes the site is part of a network of fake sites based in China through which scammers sell customers’ personal and financial data, including names, home addresses, phone numbers and credit card details.
5. Cyril vows to sign NHI into law:
Presidency Cyril Ramaphosa has vowed to sign the controversial National Health Insurance bill into law, despite mounting opposition from the private sector, economists, analysts and legal experts, who have called the laws unworkable.
Delivering the ANC’s January 8th statement this past weekend, Ramaphosa addressed the looming NHI as part of the “positives” the governing party had brought to the people of South Africa.
He said that the NHI bill was a result of “30 years of struggle” and assured the crowd of thousands of ANC supporters that the bill would be signed into law to give everyone in the country access to free healthcare.
“This is going to happen whether they like it or not,” he said. “There has been huge opposition against the introduction of the National Health Insurance. I can say we are going to proceed…it will go ahead.” [January 8th address, 31:10]
Although speaking as the president of the ANC, Ramaphosa, as president of the country, is the final hurdle the NHI Bill has to cross to becoming law in South Africa.
The NHI Bill was passed by the National Council of Provinces (NCOP) on 6 December, pushed through by an ANC-led majority despite opposition from various sectors. The bill is currently with the president waiting to be signed into law.
Given the president’s latest comments, assurances last year that he would “not simply sign the bill into law” have fallen somewhat flat, and business leaders are taking note.
In her weekly newsletter, Business Leadership South Africa (BLSA) chief executive Busi Mavuso said that the president’s comments are incredibly damaging for an economy that is already being battered on several fronts.
She said that because 2024 is an election year, there is a heightened risk of populist policy being rushed through parliament to add to the electioneering.
“Already, the passage of the unworkable NHI Bill shows how destructive such moves can be,” she said.
The president’s comments that the NHI is coming “whether they like it or not” was just another blow.
Despite Ramaphosa’s comments, however, Mavuso reiterated the position of business and many other NHI critics: the NHI, as it stands, will never work.
“The law will never work simply because there is no capacity to implement it, and as soon as it is signed, it will be embroiled in litigation on several fronts, including its constitutionality,” she said.
Knowing this, but pushing ahead with the bill anyway, signals that Ramaphosa and the government aren’t interested in a workable solution, but are just hunting for populist votes. In the meantime, the economy and livelihoods of thousands will continue to suffer as a result.
All information sourced from articles posted by: BusinessTech, DailyInvestor, Moneyweb, and MyBroadBand.
