News in South Africa 18th December:
1. Meat is back on the menu:
Despite food price inflation remaining well outside the Reserve Bank’s headline inflation target range of 3%-6%, meat prices in South Africa are continuing their downward trend.
This is according to the latest food inflation brief from the Bureau for Food and Agricultural Policy (BFAP) for November 2023.
Continuing the increasing trend from August 2023, Stats SA showed last week that year-on-year inflation on food and NAB increased further from 8.7% in October 2023 to 9.0% in November 2023 – in line with levels last observed June / July 2022.
However, despite continued food inflation, CPI Headline inflation showed some recovery from 5.9% in October 2023 to 5.5% in November 2023.
Year-on-year the higher food inflation is primarily being driven by fruit, vegetables and sugar-rich food items, with all other food categories coming down.
Specifically, aside from oils and fats, which saw an exceptional spike in 2022, meat prices now have the lowest inflation in the food basket at 3.5%
The BFAP has recorded deflation for all kinds of beef and mutton prices, including fillet, sirloin, T-bones, chops and ribs.
The recent Bloomberg braai index showed a similar easing of prices heading into the festive season.
Warning
However, with the good news for meat prices comes a warning.
According to the BFAP, looking ahead, the group is still fairly confident that food price inflation could stabilise, and there could even be some declining trends in near future if vegetable prices start declining due to higher production levels in response to high producer process.
However, over the long run, South Africa’s infrastructure challenges and costs within the value chain (electricity, fuel, wages) are reasons for concern.
“Even if food inflation rates decline, rising costs within the chain imply that food will become more expensive in absolute terms, which is a major concern for low-income households,” it said.
The group added that with the looming impact of El Nino and significantly lower rainfall in the western production regions, summer crop prices, mainly maize, could also be affected.
“Most of the eastern and central production regions have received sufficient rain and intended plantings have been completed. However, in the west, some of the regions have received sufficient rain to plant, but there are still some areas that have not planted yet,” it warned.
“(December) will be decisive to complete the maize plantings. The impact of potentially higher maize prices will only feature in maize meal inflation rates three to four months later, i.e. from March 2024 onwards.”
2. Fuel price expected to ease:
Fuel prices are anticipated to continue to ease into the new year thanks to lower oil prices and a stronger local currency that has been observed recently.
This comes as motorists have had to stomach nauseating fluctuations in fuel prices throughout the year, led by elevated oil prices and a volatile rand.
According to a research note released at the end of November, PwC’s latest economic outlook has forecast that the first three months of the new year should register lower fuel price averages in comparison to the last quarter of 2023.
“Following the fuel price declines in November and December 2023, both petrol and diesel prices are expected to bottom out in Q1 2024, and then slowly increase during the remaining quarters of 2024,” PwC South Africa chief economist Lullu Krugel said.
“This is based on expectations in financial markets that the depreciation in the rand exchange rate during 2024 will be slightly faster than an anticipated decline in global oil prices,” she added.
As a key driver of inflation, the projected fuel price reductions in the new year will come as a welcomed relief to battered motorists and consumers.
According to PwC, there are options that could be explored to adjust fuel pricing formulas to support greater savings for consumers.
“South Africa’s economy consumes 60 million litres of petrol and diesel every day. At today’s fuel prices, this equates to R1.4 billion in fuel spent on a daily basis. This component of business and household spending has increased significantly in recent history, with diesel prices currently 41% higher than they were two years ago,” said Krugel.
“There are options on the table for a pricing formula review, and even a small downward adjustment in fuel costs could have a meaningful positive impact on business operational costs and household consumption budgets,” she noted.
The easing of fuel prices has already begun. Coming off the peaks of October, the months of November and December recorded between R2 and R3 declines in the per litre cost of petrol and diesel.
The latest data from the Central Energy Fund (CEF) shows further relief is on the cards to kick off the new year.
According to daily CEF estimates, petrol prices for 95 and 93 unleaded could drop by 76 cents and 62 cents in January, while diesel prices for 0.05% and 0.005% could drop by R1.34 and R1.41, respectively.
FNB senior economist Koketso Mano also echoed expectations that the new year will come with lower fuel prices, however, she noted that this will be subject to there being no extreme shocks to the system on the geopolitical front.
“Looking forward, we still think elevated inflation, hawkish monetary policy, as well as softer global growth should weigh on risk sentiment,” Mano said.
“Overall, what we think will support easing prices in the coming months more materially will be your softer refinery margins, and this theme drives our projections of fuel prices following a downward trend in the near term with some monthly volatility, and I guess these projections come with some caution [as you know] these geopolitical tensions warrant some caution when thinking about these predictions,” Mano added.
3. Cash transaction surge:
Cash transactions are expected to surge in South Africa over the festive season, as around half of consumers still favour cash as a payment method.
This is according to Cash Connect’s operations director Mark Templemore-Walters, who said that as many as 90% of transactions in South Africa are still settled with cash.
According to Bankserv, consumer preference for cash is particularly evident over holiday periods such as the festive season.
The organisation says that the amount of cash circulating in South Africa is R182 billion, with orders of R84 billion processed during the December period last year.
Templemore-Walters warned that retailers that go cashless risk shutting out people who cannot use cards or digital payments because they don’t have a smartphone or who cannot get a bank account and card as they do not have an ID or proof of address.
“These are some of the most vulnerable populations, including those in rural areas and foreign nationals,” he said.
The Bureau of Market Research has found that around 11% of transactions over the Black Friday and festive season periods will go through informal retailers, the vast majority of which operate on a cash-only basis.
Accenture research has also shown that 80% of South Africa’s population visit spaza shops daily.
“Cash costs are low for consumers and merchants alike for many transaction types, particularly smaller payments,” he explained.
“Cash is convenient, universal and works when there’s load shedding. It gives consumers privacy and control.”
“The barrier of needing a card terminal, computer or phone to pay and be paid doesn’t exist with cash.”
Research from fintech company, Stitch, shows that half of consumers favour cash because it is more convenient, 41% say it is safer, 25% say fees for digital payments are too high, and 22% value the anonymity.
“Despite the hype about digital payments, cash still clearly has a strong role to play,” said Templemore-Walters.
This was recently seen when the country’s largest clothing retailer, Pepkor, reported that 90% of its sales are still made in cash.
However, South African Reserve Bank’s Deputy Governor Fundi Tshazibana recently expressed her concern over the amount of cash in circulation in South Africa.
South Africa has between R160 billion and R180 billion of cash in circulation, she said.
Tshazibana explained that this amount of cash presents several challenges for the country’s individuals and businesses.
“It limits the types of transactions that can be interacted with and presents a set of vulnerabilities,” she explained.
“Losing physical cash means the loss is irreversible, unlike electronic wallets or other forms of payment.”
This significant amount of cash being used in the country also brings about concerns related to criminal elements.
“Conversations have revolved around tracking cash crossing borders, a responsibility of revenue authorities,” she said.
South Africa has also seen increased crime related to cash in transit (CIT). The Cash-In-Transit Association of South Africa shed light on how this crime increased.
There had been 217 CIT robberies across the country between January and August, compared to 191 in 2022 and 188 in 2021. This equates to almost one CIT robbery a day in 2023.
Tshazibana said this emphasises the need to secure physical cash in the country, and one way to achieve that is by reducing the amount of cash used in the country.
4. Holiday traffic incoming:
With Christmas just a week away, authorities are bracing for a surge in traffic volumes on major roads as more people start their festive break.
The Road Traffic Management Corporation (RTMC) said from next Friday major routes from Gauteng and the Western Cape are expected to be more congested as travellers from these two economic hubs make their way to different destinations across the country.
RTMC spokesperson Simon Zwane said with the closure of many businesses this week and many holidaymakers having started their journeys, the next peaks in traffic will be on December 22 and January 2.
“What we know for certain is that traffic volumes will increase, and this is expected not only on the national roads, but traffic will also increase in residential areas as well. A high number of officers will be deployed to ensure safety and facilitate free flow of traffic,” said Zwane.
“Officers deployed to the roads will not be limited to those from the traffic sector. Members of the SAPS and migration officers will also collaborate with traffic officers, so there will be more police visibility than on an average day.”
Gauteng traffic police spokesperson Sello Maremane urged motorists to be vigilant and drive with caution as traffic begins to pick up on major routes.
“A number of roads are expected to experience high traffic congestion starting this week until December 25,” he said.
The Western Cape has deployed 600 traffic officers who will work with the SAPS and other law enforcement authorities. Western Cape MEC for mobility Ricardo Mackenzie said traffic volumes had surged in the province.
“There have been several serious incidents so drivers must exercise caution. We have seen a number of drivers losing control of their vehicles after burst tyres, resulting in fatal crashes,” Mackenzie said.
South African National Roads Agency (Sanral) Western Cape regional manager Randall Cable said between Thursday and Saturday afternoon (2pm) at least 32,767 motorists from Cape Town had passed through the Huguenot Tunnel, while 20,375 cars were recorded into Cape Town.
Maremane said on Friday:
- the Pumulani Plaza on the N1 from Gauteng to Limpopo recorded 1,586 vehicles an hour, while 933 vehicles an hour were recorded travelling in a southerly direction;
- the Carousel toll gate recorded 1,693 vehicles an hour travelling north and 786 travelling south;
- the N3 De Hoek Toll Plaza recorded 573 vehicles northbound and 625 southbound; and
- the Tugela Toll Plaza in KwaZulu-Natal recorded 497 vehicles per hour travelling north and 836 south.
Routes that have been heavily congested from this week and are expected to be congested in the next few days include:
- the N2 from Cape Town to the Garden Route, on the North Coast from Durban to Tongaat;
- N4 east — Pretoria to Mbombela;
- N1 north — Pretoria to Polokwane;
- N3 south — Johannesburg to Durban; and
- N1 south — Huguenot Tunnel to Cape Town.
To accommodate increased holiday traffic volumes Sanral spokesperson Vusi Mona said the roads agency has suspended all road construction between December 15 and January 7. He said routine road maintenance teams would be on patrol around the clock to ensure roads are well maintained and safe.
5. SA visa backlog:
Tens of thousands of foreign executives, engineers and other key workers have endured a year-long wait for South African visas that business groups say is costing investment and threatening the country’s position as a continental hub.
Work visas now take around 48 weeks while secretary general of the Italian-South African Chamber of Trade and Industries Pamina Bohrer said there are many cases of people who have been waiting for more than a year.
All information sourced from articles posted by: BusinessTech, Moneyweb, DailyInvestor, TimesLive, and Fin24.
