News in South Africa 15th September:

1. New SOE plan proposal:

A radical new model for SA’s troubled state-owned enterprises (SOEs) could be on the cards, with the approval this week of the draft National State Enterprises Bill, which would lay the basis for private equity investment in state companies and listings on the stock exchange. 

New SOE plan proposal
Photo by Sergio Souza

This will include the biggest “commercial” state enterprises, such as Eskom and Transnet, which will be moved into a newly created State Asset Management Company. It is the culmination of five years of work by Public Enterprises Minister Pravin Gordhan, advised by some of the members of the Presidential State-Owned Enterprises Council. The council itself has not produced a policy document. 

The bill is expected to be published for public comment in the Government Gazette on Friday.  

The new shareholder model is based on similar reforms in Malaysia and implies greater private participation in the network industries. Eskom and Transnet urgently need more capital, but are constrained from borrowing as they need more revenue to service existing debt.

Gordhan has previously said that the model would have the advantage of separating the state’s ownership functions from its policy and regulatory functions, minimising the scope for political interference, and introducing greater professionalism into the entities. 

He has also previously said that the new model would replace the Department of Public Enterprises, which would cease to exist. 

It is unclear, though, how the model proposed by Gordhan will be received by the ANC, which in December last year passed a resolution that all state-owned companies should return to their line departments. In particular, the ANC wanted to see Eskom housed in the Department of Energy. 

However, the prospects are slim that the bill will be processed by both Nedlac and Parliament before the legislature is dissolved, ahead of the next election. Parliament has a packed programme as Cabinet ministers rush to finalise their programmes. Legislation not completed when Parliament rises – probably in March – will have to be started again from scratch by the new administration. 

2. National strike warning:

South Africa’s largest labour union federation is threatening to go on strike if the government backs proposed austerity measures, which could include reneging on a public sector wage agreement.

National Treasury presented President Cyril Ramaphosa with a cost-saving plan to help tackle the country’s revenue shortfall and budget deficit. Options include increasing taxes and slashing the number of government departments and state-owned enterprises. The alternative is issuing more debt – a prospect that’s hit South African bonds in recent days.

The Congress of South African Trade Unions (COSATU) was part of a delegation of labour leaders who met with Ramaphosa on Tuesday, where they told him that the Treasury’s suggested steps would undermine public services.

“We think the Treasury proposals on a freeze on vacancies, reducing the headcount, cutting departments, cutting programs, is going to collapse the capacity of the state,” said Cosatu spokesman Matthew Parks. He said that Ramaphosa assured them that the measures were still a draft and remained under discussion.

The president’s office said separately that the unions had agreed to help tackle key problems hobbling the South African economy, including rolling power cuts, a jammed freight logistics infrastructure and violent crime.

“Given the scale of the challenge, we require support from all social partners to urgently accelerate the implementation of the government’s plans,” Ramaphosa said in a statement released after the meeting.

Wage Deal

A key Cosatu concern is what happens to a public sector wage agreement struck in March that granted workers an average 7% increase for the next financial year.

Finance Minister Enoch Godongwana at the time warned that such a deal, which had not been fully budgeted for, would “require very significant trade-offs in government spending.”

Labour leaders have not forgotten that the Treasury walked away from the last leg of a 2018 wage agreement, citing fiscal constraints.

“That is something that unions won’t agree to,” Parks said. “It is going to provoke a real strike.”

3. Long-term benefits to stage 6 load shedding:

During a meeting on Wednesday, the Cabinet was assured that elevated stages of load-shedding are a temporary measure that will have long-term benefits for the country. 

This was revealed by Minister in the Presidency Khumbudzo Ntshavheni during a briefing on the Cabinet’s meeting on Wednesday. 

Ntshavheni said the Cabinet had extensive deliberations about the electricity challenges the country is facing. 

In particular, Cabinet was updated on Eskom’s current planned maintenance programme that is being implemented by the utility “to ensure the sustainability of Eskom’s plants”.

“The implementation of the planned fleet maintenance programme has resulted in higher stages of load-shedding in recent days”, Ntshavheni said. 

“The implementation of stage 6 load-shedding in the last week was a regress from the trend of lower stages of load-shedding in previous weeks.”

“Cabinet was assured that the current implementation of higher stages of load-shedding is a short-term measure as Eskom prepares for sustained lower stages of load-shedding in the near future,” Ntshavheni said. 

“There are clear plans for when additional capacity will come through. There is the return to service of Kusile units 1 to 4. There is also additional work being done. Cabinet is sure that the increase in load shedding stages is indeed a temporary measure,” she said in response to questions. 

Ntshavheni’s comments echo those of senior government members, including the President and Deputy President. 

Last week, President Ramaphosa said South Africans should see the current stage 6 load-shedding in a positive light as it is “short-term pain for longer-term gain”.

“The load-shedding that we are going through now is occasioned by what Eskom is having to do to reposition the generation of our fleet,” Ramaphosa said.

“They are maintaining our fleet. They are making sure that incidents of load-shedding that have been given rise to in the past because of unplanned load-shedding events like breakdowns are put behind us.”

He added that the more intense load-shedding will not last. “This, as much as it is stage 6, is of a short-term nature,” Ramaphosa said.

4. Latest trends in forex scamming:

The number and variety of forex scams have multiplied since the Covid lockdowns, when millions of South Africans were understandably concerned about the security of their jobs and income.

One of the newer scams involves convincing the victim to send bitcoin to an address controlled by the scammer on the promise of making vast riches.

“The first thing to look out for is promises of high returns of say 7% or 10% a week, or even a month,” says Isaac Izy, partner at online broker OctaFX.

“Yes, it is possible to make returns like that in the forex market, but very few people do it consistently. Scammers will convince you they have an automated trading system that works like an ATM, churning out profits daily. Don’t fall for this.”

The first port of call when seeing an offer that seems too good to be true is the website of the Financial Sector Conduct Authority (FSCA). There is a search function that allows members of the public to check whether or not a company or entity is licensed to provide the services they are offering. If you’re still unsure, there is a number to call that will very quickly establish the legitimacy of the company.

These are some of the trends in scamming that have become prevalent in recent years.

1. Deceptive forex investments with unrealistic returns

“Beware of individuals showcasing lavish lifestyles on social media, claiming they’ve unlocked the secrets to quick wealth through forex trading,” says Izy. “They prey on desperation, promising sky-high returns if you hand over your money to them. They’ll request funds from you, assuring a return within a week. These scammers go to great lengths, even fabricating testimonials to appear legitimate. Remember, anyone guaranteeing returns in trading is unequivocally a scammer. Protect yourself and steer clear.”

2. Impersonation via fake social media profiles

Another prevalent scam involves impersonating public figures or affluent individuals on social media platforms. These fraudsters compile images of well-known personalities, creating counterfeit profiles to dupe unsuspecting victims into falling for investment schemes. They are able to add credence to the fake accounts by building up a large social following. These imitations can look like the real thing, but they are not. “Exercise extreme caution with these accounts,” adds Izy. “Always verify through video calls or in-person meetings before parting with your money.”

3. Crowd funding schemes

A relatively new type of scam involves so-called forex mentors who encourage you to pool your funds with scores of other victims into a single account, the idea being that the ‘mentor’ is an expert and will help you on your way to accelerated riches. You may be told that you are part of a select group chosen to participate in this rare opportunity to make money at the shoulder of a forex master. For instance, they may claim they’re assisting 100 clients, each contributing a sum. The mentor then aggregates these amounts, supposedly enhancing the chances of success. Clients are promised access to monitor trades as a form of transparency. However, behind the scenes, mentors collude with brokers. The broker furnishes the mentor with a fictitious ‘real’ account, known as a test account, displaying fictitious funds. “Eventually, this account will incur substantial losses, which the mentor will attribute to a bad trading day,” says Izy. “Clients are left without grounds for complaint, having witnessed the losses. In truth, the funds never reached the trading account. The scammer diverts the funds to finance their extravagant lifestyle, enticing more unsuspecting victims. Remain vigilant.”

5. Greylisting concerns:

FirstRand CEO Alan Pullinger doubts SA’s will to leave the FATF greylist.

“If you stand back and look at it through hard economic eyes, I’m not sure the BRICS construct makes a ton of sense for us,” He said on Thursday.

He added he was concerned that SA’s reputation as an investible economy is sliding and pointed out that one of the bloc’s new members, Iran, has been blacklisted by the FATF while another, the UAE, is also on the greylist.

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

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