News in South Africa 16th May:

1. SA beats climate targets… due to load-shedding:

South Africa is ahead of its target for cutting emissions of greenhouse gases due to ongoing breakdowns at its coal-fired power stations.

SA beats climate targets… due to load-shedding
Photo by Pixabay

The output of the climate-warming gases from the world’s 14th-biggest emitter is already falling even though its Nationally Determined Contribution, a target adopted by the cabinet in 2021, only forecast a decline from 2025.

Regular breakdowns of the coal-fired power plants that supply more than 80% of South Africa’s electricity mean that less carbon dioxide is being pumped into the atmosphere and daily rotational cuts of more than 10 hours a day are further limiting emissions from factories.

“It’s unintentional,” Crispian Olver, the executive director of South Africa’s Presidential Climate Commission, said in an interview in Johannesburg on Monday. “We reckon we are well within the range” of meeting the 2030 target, he said.

South Africa aims to reduce its emissions to between 350 and 420 megatons of carbon dioxide equivalent by 2030, bettering a target set in 2015 of emitting between 398 and 614 megatons by that date.

The 2021 goal was key to South Africa securing pledges of $8.5 billion in climate finance from some of the world’s richest nations.

2. Rand suffering:

Over the past year, the rand has been battered and it seems as if there will be no relief any time soon.

At first, it was the US Federal Reserve starting to increase interest rates and recession rumours beginning to spread that caused investors to run to the safety of US markets. As short-term capital flooded the US markets, the US dollar (USD) got stronger and stronger, and the rand, consequently, weaker and weaker.

History tells us that the USD usually starts to depreciate again 12 to 18 months after its initial increase, as the US economy comes under pressure.

This usually causes investors to start looking for yield elsewhere, which in turn helps to support other emerging market currencies like the rand.

Unfortunately, 12 to 18 months later, the US economy is still the healthiest economy out there and shows very few signs of slowing down substantially.

Because uncertainty scares investors, and because developed countries now offer even more attractive yields and their listed companies seem to be getting through tighter monetary conditions, emerging market currencies are bleeding (note that this is not something that can be sustained indefinitely).

Rand taking it from all sides

Unfortunately, owing to a failing state in South Africa, the rand has not only been battered by global waves but local waves too.

We all know about government’s inefficiencies but the rate of deterioration has recently weighed more heavily on the rand.

Failing state-owned enterprises like Eskom have led to rumours about rolling blackouts [as opposed to planned load shedding]. In fact, many larger corporates have already started to plan for a ‘no grid’ eventuality, when Eskom will simply fail and take the economy back to the dark ages.

We do not believe we are close to this point but markets seem to be starting to price this in as a potential eventuality.

Even if we do not have a total grid collapse, government’s persistent erosion of the business environment is weighing down any potential we have for growing our economy sustainably.

3. Darkness approaching – Malema:

Julius Malema has warned of a complete electricity grid collapse.

The Economic Freedom Fighters (EFF) leader said that South Africa’s energy situation had reached alarming levels that could see the masses take to the streets over the matter.

He said that government did not appear to be taking the power crisis seriously, further calling for President Cyril Ramaphosa and his Cabinet to resign.

Government has assured the public that a blackout is not on the cards.

Malema said that the country’s electricity woes had reached a point of complete failure.

The leader of the red berets warned that this could happen within the next few weeks, with total blackouts going on for days.

“We are almost at a point of grid collapse. It’s a reality, South Africans must know. We are heading to darkness and ANC politicians are continuing with business as usual.”

He believes that the crisis will be worse than the COVID-19 pandemic.

4. SA risks becoming ‘uninsurable’:

Short-term insurers warn that South Africa could soon become uninsurable due to the frequency of crises in the country.

Insurance industry members said that risks, such as weather-related claims, load shedding and social instability, are becoming too large for private insurers.

Insurance cover for certain events may be withdrawn by insurance companies, such as the withdrawal of pandemic cover in 2020 and the recent withdrawal of grid failure.

5. Major changes for trusts:

Trusts have come under more scrutiny in South Africa, with new laws and tax initiatives cracking down on non-compliance.

Wealthy families and companies often use trusts to protect and distribute assets, minimise taxes, maintain privacy over their holdings and control the timing and conditions of transfers across generations.

Following the legislative fallout of the Financial Action Task Force (FATF), an international watchdog, finding South Africa insufficiently regulated in terms of counter-terrorist financing and money laundering mitigation strategies, the country embarked on a speedy legislative process amending various finance laws, including the Trust Property Control Act, 1998.

The new amendments, as outlined by the General Laws (Anti Money-Laundering and Combating Terrorism Financing) Amendment Act, seek to address a shortcoming in beneficial ownership transparency in South Africa’s regulatory framework.

President Cyril Ramaphosa signed the amendments into law on 1 April 2023.

The department stressed that members who do not comply with the Amendment Act would face harsh punishment if found guilty in a court of law.

According to the Amendment Act, a trustee commits an offence if they fail to:

  • Disclose to an accountable institution that they engage within the capacity of a trustee that the relevant transaction or business relationship relates to trust property
  • Record the details of the accountable institution
  • Establish and record the beneficial ownership information of a trust
  • Keep an up-to-date record of the beneficial ownership information
  • Lodge a register of the beneficial ownership information with the Master of the High Court.

The department added that a trustee convicted of any of the offences referred to above would be liable to a fine of up to R10 million, or imprisonment for up to five years, or to both such fine and imprisonment.

Before the amendments, the Trust Property Control Act 1988 did not provide for reporting on beneficial ownership and hence, had no prescribed penalties for non-compliance, said the department.

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

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