News in South Africa 19th April:

1. Zero economic growth for SA:

Many experts project close to zero economic growth for 2023 as severe load-shedding has hobbled the country’s growth prospects.

Zero economic growth for SA
Photo by Tima Miroshnichenko

In 2022, the economy grew by 2.5% – above the 1.9% proposed by the minister of finance in the medium-term expenditure framework. Economic growth in 2023 promises to be much lower

The IMF recently revised their 2023 South African growth projections down 1.1% to 0.1% in 2023. 

In March, the South African Reserve Bank (SARB) dropped its forecast down to 0.2% growth for 2023. It said the supply-side performance of the economy remains “severely impaired” due to load-shedding and logistical constraints.

In the February budget, Treasury projected economic growth of 0.9% for 2023.

Expert opinions on economic growth in South Africa:

  • Bureau for Economic Research (BER) chief economist Hugo Pienaar said that the BER had revised its real GDP growth outlook down to 0.3% for 2023. 
  • BNP Paribas South Africa forecasted GDP growth of 0.2% for 2023.
  • Maarten Ackerman, the chief economist at Citadel, said they see 0.0% growth in 2023, mainly due to load-shedding severity.
  • FNB senior economist Siphamandla Mkhwanazi said conditions are becoming increasingly unfavourable for the domestic economy. FNB expects economic growth to slow to 0.4% in 2023.

2. Andre de Ruyter to appear before government:

Former Eskom CEO Andre de Ruyter confirmed that he would appear before a parliamentary committee on Wednesday, 26 April.

De Ruyter is set to appear before the Standing Committee on Public Accounts (Scopa) after dropping off the map following an explosive interview with ENCA, alleging ANC-linked corruption at the most critical company in South Africa.

According to Scopa chair Mkhuleko Hlenga, De Ruyter will appear virtually before the committee to answer questions relating to the corruption allegations.

The committee said that it is looking forward to interacting with the former CEO and hopes that the interaction could expose the ‘considerable malfeasance and corruption’ at the national power utility.

On 31 March, De Ruyter agreed to consult the committee; however, no specific date was given. The committee said that the former CEO would be quizzed on corruption, theft, maladministration, sabotage, the lack of consequence management, cartels and other financial irregularities at Eskom.

On 21 February, De Ruyter suggested that those in the ruling party viewed Eskom as a “feeding trough” and that corruption was entrenched at the utility.

He expressed concern about attempts to water down governance around the $8.5 billion that was received at COP26. He claimed that a senior government minister had told him that in order to pursue the greater good, some people had to be allowed to “eat a little bit”.

This ruffled feathers within the ANC, and the ruling party called on De Ruyter to lay criminal charges within seven days. Failure to do so would result in the party laying section 34 charges against him relating to the failure to report knowledge or suspicion of corruption.

The ANC also announced that they were finalising summons; however, with no knowledge of where the CEO was, they were unable to deliver defamation summons.

While allegations of corruption at Eskom run wild, the power utility is hanging on by a thread coming into the winter months, when demand is expected to skyrocket and load shedding to increase in severity and frequency.

3. Eskom must fix power stations using income from tariffs:

National Treasury on Tuesday briefed MPs on the Eskom Debt Relief Bill, reiterating that Eskom may not borrow for the next three years and that the company will not receive any other financial support from government to fix its ailing power stations. 

From 1 April, Eskom must fund all of the expenditure on its existing plants from the tariff raised from customers. This will include the life extension of Koeberg, a multi-billion project to replace three steam generators in each of the nuclear power station’s two units. While the project only got under way this year, it has been planned for many years. 

The briefing to MPs confirms the gulf between Treasury’s approach to Eskom and that of Minister of Electricity Kgosientsho Ramokgopa, who suggested 10 days ago that government provide Eskom with additional funds to fix its plants. 

The bill, which must be passed by Parliament before the money can flow to Eskom, proposes advances to Eskom of R78 billion in 2023/24, R66 billion in 2024/25 and R40 billion in 2025/26. These advances will cover capital and interest payments as they fall due and may only be used for that purpose. 

Over and above this, for 2025/26, the bill proposes a debt take-over by the government of R70 billion of Eskom’s loan portfolio. 

Eskom has over R420 billion of debt which it has been unable to service from its revenue. 

The debt relief will flow as a loan, which will be converted to equity by Treasury, when all the conditions are met. As the government is the sole shareholder of Eskom, all this would require would be to issue more shares. 

The conditions include the following: 

  • Eskom’s capital expenditure will be restricted to investment in the existing generation fleet as well as infrastructure for transmission, and distribution. No greenfield generation projects will be allowed during the debt-relief period. 
  • Eskom may not use proceeds from the sale of non-core assets for capital and operating needs. All proceeds from the sale of non-core assets, including the Eskom Finance Corporation and any property sales, will be used for the debt-relief arrangement. 
  • No new borrowing will be allowed until the end of the debt-relief period, unless written permission is granted by the Finance Minister. 
  • The R350 billion of Treasury guarantees will reduce in line with National Treasury recommendations. 
  • Eskom will not be allowed to use its derivative contracts (swaps/hedges) to structure new debt or loan agreements without the approval of National Treasury.
  • The debt relief can only be used to settle debt and interest payments
  • Eskom may not implement salary and wage increases that negatively affect its overall financial position and sustainability

4. South Africans are getting poorer:

Data from Capitec shows South Africans are getting poorer.

The lender, which provides banking services to roughly one-third of the South African population, says its clients became poorer in the financial year to end-February as their income levels failed to keep up with inflation.

Despite reverting to more affordable products, the bank’s clients spent 8% more on groceries on average, and 16% more on fuel, compared to a year before. 

Interesting numbers from Capitec on consumer spend. Clients spent more on:

  • Takeaways +36%
  • Fuel +16%
  • Cell phone +10%
  • Groceries +8%
  • Restaurants +7%
  • Electricity +2%
  • Clothing +2%

And less on:

  • Pharmacy -30%
  • Home maintenance -13%
  • Alcohol -9%

Capitec: Consumer spend by debit order category: Clients spent more on:

  • Home loans +20%
  • Vehicle financing +15%
  • Loans +12%
  • Communication +12%
  • Debt collection +5%
  • Investments +3%

And less on:

  • Education -15%
  • Insurance -1%

Further, sharp interest rate increases through the year meant the value of the average loan debit order increased by 20%, and the average vehicle finance debit order grew by 15%.

5. Markus Jooste doesn’t show to face charges:

Steinhoff shareholders are looking to authorities in Europe for justice in what has been described as the largest corporate scandal in South Africa.

Shareholders mostly believe there have been few signs of a local criminal investigation against the people who were allegedly involved in the accounting fraud that saw the company crash from a core holding in most portfolios to barely surviving.

Disgruntled shareholders are demanding justice, but were disappointed once again when former Steinhoff CEO Markus Jooste did not turn up in a German court to face accounting fraud charges.

Unfortunately, court cases do not go away quickly. The German prosecutors have indicated that they will apply for an arrest warrant for Jooste. They will probably get it, which might lead to a lengthy legal process.

Meanwhile, George Evans, accused together with Jooste, has appeared in court and pleaded his case. He was fined €30 000 (approximately R600 000) and will not be prosecuted further, subject to certain provisions.

All information sourced from articles posted by: DailyInvestor, BusinessTech, Fin24, News24, and Moneyweb.

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