News in South Africa 17th May:
1. Retrenchment and vaccination:
Long-standing precedents mean someone who refused a Covid-19 vaccine can be fairly retrenched without being paid any severance, the Commission for Conciliation, Mediation and Arbitration (CCMA) has ruled.
In fact, it would not be fair to expect retrenchment pay, the CCMA said.
The recent ruling came in what the employment law practice of Cliffe Dekker Hofmeyr (CDH) called a case with “relatively simple” underpinning facts.
Baroque Medical, a company that sells specialised medical products, implemented a policy of mandatory Covid-19 vaccinations. An employee refused to comply, citing “medical, personal and religious reasons”. She did not substantiate the medical objection, and the CCMA rejected her personal and religious reasons.
The CCMA accepted the company’s basis for demanding vaccinations from staff, saying it dealt with hospitals and medical practitioners.
“Accordingly, to safeguard its own employees and ensure that the operations of the employer are not severely affected by absences as a result of staff contracting the Covid-19 virus, and that those entities and individuals that had contact with staff members of the employer are adequately protected, it embarked on a risk assessment which made it apparent that a mandatory vaccination policy had to be imposed.”
The employee who refused to be vaccinated did not challenge that policy, or the procedural fairness of her dismissal. But the process had not been substantially fair, she said, because alternatives to retrenchment were not properly considered.
Her company countered that it had considered letting her work from home, but she couldn’t do her job without being at the office – and any other job in the company would still come with the requirement for vaccination.
An employee does not have to be offered a different post altogether before being retrenched, the CCMA said, but could by long-standing precedent be offered the same position under different conditions.
In this case, it held, the company’s operational circumstances changed. In response, it offered the employee her job with a change of conditions: she had to be vaccinated. She refused, without good reason. And that means she falls under retrenchment rules for those who unreasonably refuse alternative employment – and so are not entitled to severance pay.
In the Baroque case, the CCMA said, it would be grossly unfair to expect it to pay severance.
2. Middle class short on funds:
Financial services group FNB estimates that it takes an average of five days for a middle-income consumer to spend up to 80% of their monthly salary.
This suggests that the average middle-income consumer, earning between R180,000 – R500,000 per annum, survives on 20% of their monthly salary for more than 20 days in a month.
In addition, salaried middle-income consumers with secured and unsecured credit spend, on average, 30% of their income on unsecured credit and 35% on secured credit, the lender said.
According to Raj Makanjee, CEO of FNB Retail, this is one of the indications that the average consumer is stretched financially.
“The trend also points to a continued culture of consumption, leaving consumers with little to start saving and investing for financial independence,” he said.
The data compares to similar data published in 2018 by FNB which showed that more than half (56%) of middle-income consumers spent their entire monthly salary in five days or less after receiving it.
FNB categorised middle-income consumers as those who earn a gross monthly income of between R7,000 up to R60,000.
3. Ubank under curatorship:
Reserve Bank Governor Lesetja Kganyago has moved to assure those with accounts at Ubank that it will remain operational, saying that possible investors are looking at the bank.
The governor announced on Monday that Ubank had been placed under curatorship.
Ubank is a financial services provider focussing on the gold and platinum mining communities.
Reserve Bank Governor Lesetja Kganyago said that it was up to the curator KPMG to manage the bank from here on.
“The curator is also required to recover and take possession of all the assets of Ubank. Furthermore, the Prudential Authority obliged to ensure that all payments, clearing and settlement obligations of Ubank will continue to be met,” he said.
The bank does not have enough capital and there are concerns for the financial safety of clients.
But Stuart Theobald of Intellidex said that Ubank was not a reflection of the rest of the banking sector.
“Ubank is a fairly unique bank – small bank operating in a specific area particularly focused on mining and workers in mines,” he said.
The curators will now be looking at securing investors.
4. Grain prices skyrocketing:
Grain prices are skyrocketing on the back of supply shortage fears, and consumers will likely be paying more for bread in three months, according to an agricultural economist.
On Monday, wheat prices reached a record high of €435 or R7 338 per ton, this after India – the world’s second-largest wheat producer – banned exports of the grain to ensure its own food security, AFP reported.
Domestically the price of wheat is also at record highs, noted Paul Makube senior agricultural economist at FNB Agribusiness. The price of wheat is now above R8 000 per ton.
The price of maize (white) is nearing R5 000 per ton, with the price of yellow maize breached R5 000 per ton, according to the South African Futures Exchange.
“We have in previous years reached above R5 000 per ton, during a drought situation … The current prices are encroaching into those levels,” said Makube.
The price increases are driven by developments in international markets, coupled with a weaker rand-dollar exchange rate.
The local unit on Monday slumped to its lowest level in months since November 2021, trading at R16.29 to the greenback.
Heleen Viljoen, intern economist at GrainSA, noted that the global outlook for supplies is also poor.
The US Department of Agriculture’s May report for the World Agricultural Supply and Demand Estimates (Wasde) released last week showed the outlook of grain supplies are a lot less than expected – and this translated to price hikes.
“Global supply is lower than they [the market] had anticipated, and that is why this week prices are skyrocketing,” said Viljoen.
5. Eskom crisis 20 years in the making:
The Eskom crisis has been two decades in the making with current sky-high breakdowns having their roots in decisions taken in the early 2000s.
Eskom COO Jan Oberholzer says the root cause of the current crisis in the utility’s generation unit is a shortage of both system capacity and funding.
Speaking at the utility’s System Status and Outlook Briefing on Wednesday, he made the point that the seeds of this emergency were sown in the first decade of this millennium and the results began to be seen from 2012.
Using benchmarks from German energy association VGB Energy that show comparable performance of coal fleets globally, Oberholzer explained how this has led to the recent exceptionally poor performance of the coal fleet.
Eskom says plants have been set to run at high utilisation, “high utilisation means plant systems are required to operate at their limits, leading to strain, increased wear-and-tear, decreasing plant reliability and requirement for increased maintenance”.
So the even higher utilisation led to less time available for maintenance, even though more maintenance was required simply due to the plants being run this hard.
The result of this is plant breakdowns.
Eskom says its plants’ unplanned energy loss factor (the amount of capacity lost to breakdowns) was “in line with or better than peers up to 2011” after which the impact of an artificially high energy availability factor and the decisions to run plants too hard over the prior decade began to take their toll.
It makes the point that there are “many influencing factors” but that the “main root cause is consistently running at high utilisation over many years”.
Eskom asserts that this cycle can only be broken with adequate funds and the space in which to perform the maintenance required. Both of these remain a problem.
Eskom currently relies on annual bailouts from government to service its mammoth debt pile (technically, the interest on this).
And the utility desperately needs between 4 000MW and 6 000MW of supply to be added to the grid by “the external market” so it has the headroom to get its coal fleet back to some semblance of stability.
It impressed on government the urgency of this as far back as December 2019.