News in South Africa 17th January:
1. Hardships pile up for consumers:
Economists are raising red flags over higher inflation rates, which will invariably lead to more interest rate hikes from the South African Reserve Bank (SARB) as South Africans continue to sit under the pressure of high levels of load shedding and a massive electricity price hike coming in April.
A host of economist and analyst views were published on Monday (16 January) in response to the ongoing power crisis in South Africa and the decision from energy regulator Nersa last week (12 January) to allow Eskom to hike electricity prices by 18.65% from 1 April 2023.
The overarching message from the reactions is that the electricity price hike will undoubtedly push up costs for households and businesses in the country, which will lead to inflationary pressure in an environment of already elevated prices.
The Bureau for Economic Research (BER) also published its Inflation Expectations Survey for the fourth quarter of 2022, feeding into this narrative.
The IES is a quarterly survey to measure inflation expectations and other macroeconomic variables related to inflation across four social groups – namely analysts, business people, senior representatives of trade unions and households.
According to the latest results, inflation expectations have been raised across most sectors, with only analysts holding their views from the previous quarter – though this was already at elevated levels.
Average five-year inflation expectations rose marginally from 5.4% in the third quarter to 5.5% in the fourth quarter. This can be attributed to business people who revised their expectations upwards from 5.6% to 6.1%.
After moderating from 6.5% to 5.8% in the third quarter, household inflation expectations during the next 12 months rebounded to 6.3% in the fourth quarter. Average household inflation expectations over the next five years remained unchanged at 8.4% in the fourth quarter.
Beyond 2022, the three social groups have different views on economic growth; analysts expect the economy to continue losing momentum, with growth dropping to only 1.1% in 2023, while the other two groups expect growth to be retained relatively close to their 2022 forecasts. On average, growth is expected to decelerate slightly to 2.0% in 2023.
2. Godongwana fighting for investors at WEF:
Finance Minister Enoch Godongwana is at the World Economic Forum (WEF) to meet with global leaders in government, business and civil society to sell South Africa as an investment destination.
Godongwana says it is vital to acknowledge the challenges South Africa faces, but it is far more essential to highlight how the country is trying to address these issues.
The minister says dealing with red tape and working with businesses to address the power crisis are vital areas the government is focusing on.
3. Global sentiment bleak:
While war rages in Ukraine, layoffs roil a wide range of corporations and industries, and the threat of deeper economic challenges looms, pessimism and factional tensions are surging worldwide, new research shows.
A survey from communications and PR giant Edelman is illustrating how global jitters about a potential recession are fanning the flames of fear and mistrust. Just four in 10 respondents who participated in the Edelman Trust Barometer for 2023 predicted that they and their families will be “better off” in five years — a dramatic 10-point reduction from last year.
The United States and 23 other countries are at an all-time low in this category, said Edelman, which has published its annual Trust Barometer for more than two decades.
Edelman published its 2023 Trust Barometer this weekend, coinciding with a constellation of other warning signs that further economic pain may be on the way. Last week, Brian Moynihan, CEO of Bank of America, joined leaders from fellow Wall Street banks when he told shareholders BofA had come to view a “mild recession” as a “baseline scenario,” according to a Sentieo transcript. And the Wall Street Journal’s latest quarterly survey found a 61% chance of a recession within the coming year.
The Edelman Trust Barometer, which this year polled more than 32,000 respondents in 28 countries, found that trust is tilting away from the public sector. Sixty-two percent of respondents said they trust businesses, versus 51% who said they trust governmental institutions. In fact, “business increased its ethics score for the third straight year, rising 20 points since 2020,” Edelman said. “It is the only institution viewed as both competent and ethical.”
In a press release, Edelman CEO Richard Edelman said respondents — by a “six-to-one margin” — said they want to see businesses get more engaged on issues like climate change, economic inequality, and workforce reskilling.
The notion that the private sector is benefiting from the public sector’s optics problems may come as a surprise to those who lived through the last economic crisis, when the Great Recession channeled vitriol toward corporate leaders and Wall Street was pilloried for its role in producing economic carnage.
4. Fighting over diesel funds:
Eskom and National Treasury disagree over how money should be raised to buy diesel.
Eskom says load shedding will remain for another two years, and buying diesel is the only short-term relief possible.
Despite the Public Investment Corporation (PIC) rolling over R13 billion of Eskom’s debt which Treasury thought would give Eskom more money for diesel, Eskom’s management says it still does not have enough money, and the PIC rollover was already included in its plans.
5. Sassa owes millions in rent:
The South African Social Security Agency (Sassa)’s Durban District office hasn’t paid its rent for over five years and owes over R6 million, while the Northern Cape’s Ritchie Local Office has not paid rent for ten years.
These are just a few of the answers given by the state agency in a parliamentary response in November 2022 to DA MP Bridget Masango’s question about outstanding rent at different Sassa offices.
Delays with municipalities issuing invoices or sending the wrong invoices have caused these payment challenges, according to Sassa spokesperson Paseka Letsatsi.
Sassa listed at least 19 offices which had outstanding rent bills, of which seven are in KwaZulu-Natal. Sassa told GroundUp that it has since only paid the rent to some of these offices.
Letsatsi said that “most challenges for non-payment of rent are due to either delay in municipalities issuing invoices or the invoices sent being incorrect”. Despite sending monthly reminders to municipalities, there is often no response, he said.
KwaZulu-Natal had the most offices with outstanding rent, some of which had been outstanding for several years. The Archie Gumede office’s rent hasn’t been paid for nearly ten years. The Durban District office also hadn’t paid its rent for over five years and owed over R6 million.
Sassa said that despite the non-payment of rent, the offices are still “operating at full capacity”.
All information sourced from articles posted by: BusinessTech, SABC News, Business Insider, Fin24, and Moneyweb.
