News in South Africa 19th September:
1. Load shedding suspended:
Eskom will suspend load-shedding for an additional seven hours on Tuesday, 19 September 2023, due to improved generation capacity and reduced breakdowns.
In a statement on Tuesday morning, the utility said that 13,577MW of generation capacity was unavailable due to breakdowns.
Therefore, it would suspend load-shedding from 09:00 until 16:00.
Following this reprieve, it will resume stage 3 load-shedding until 05:00 on Wednesday, 20 September 2023, as previously communicated.
Eskom said that it is closely monitoring the system performance and will make updates as the situation changes. Further announcements are expected later in the afternoon.
The 7-hour load-shedding break comes shortly after Eskom also suspended load-shedding in the early morning hours on Tuesday.
The utility stopped implementing the rotational power cuts between midnight and 05:00 after reporting breakdowns at 12,582MW of generation capacity,
The breakdowns have increased by nearly 1,000MW since that time.
Eskom’s latest peak demand statistics showed that it had more capacity available than electricity demand during the period of highest demand on Monday night.
Schedules
For people living in the major metros, load shedding schedules are available here:
- City of Johannesburg
- City of Ekurhuleni
- City of Tshwane
- City of Cape Town (PDF)
- Nelson Mandela Bay
- eThekwini
- Manguang
- Buffalo City
For access to other load shedding schedules, Eskom has made them available on loadshedding.eskom.co.za.
2. Economy in trouble:
South Africa’s economy faces significant headwinds, with consumers under severe pressure from elevated inflation and interest rates. This will result in muted economic growth for the remainder of the year and potentially a recession.
StatsSA recently revealed that South Africa’s gross domestic product (GDP) increased by 0.6% in the second quarter of 2023.
This is higher compared to the first quarter growth of 0.4%, which followed the shock GDP decline of 1.3% in the fourth quarter of 2022 amid record load-shedding levels.
However, economists are concerned that this growth is unsustainable as the main driver of South Africa’s economy is consumer spending, which turned negative in the second quarter.
PwC South Africa chief economist Lullu Krugel said that the local economy is consumer-driven, leading to a negative economic growth outlook.
“South Africa has a consumer-driven economy, with nearly 64% of the country’s GDP attributed to private final consumption in 2022,” Krugel explained.
“As such, the power of the financial consumer wallet is critical to the economy’s strength.”
Thus, with household spending declining by 0.3% in the second quarter, it is likely that the economy will not grow for the rest of the year.
Krugel also noted that the FNB/BER Consumer Confidence Index (CCI) declined from -23 in the first quarter of this year to -25 in 2023Q2.
The CCI reading “indicates tremendous concern among consumers about South Africa’s economic prospects and household finances.”
The survey showed that “the vast majority of consumers expect a deterioration in South Africa’s economic growth over the next 12 months and consider the present time as highly inappropriate to purchase durable goods”.
Stanlib chief economist Kevin Lings echoed Krugel’s comments, saying that negative household consumption indicates that consumers are under tremendous pressure from high inflation and interest rates.
3. Treasury’s desperate plan:
National Treasury has published its “guidelines” to national departments and provincial treasuries, which it says is advisory in nature, and not an instruction – all in a bid to cut spending as South Africa approaches a massive budget deficit this financial year.
The guidelines first cropped up in reporting earlier this month, sounding the alarm on the government’s growing financial crisis.
South Africa faces a budget deficit of up to R300 billion this financial year, with drastic measures needed to close the gap.
The deficit has arisen from much lower-than-expected revenue collection as well as much higher-than-expected government spending. The former has been driven by a downturn in the commodities market, and the latter by a 7.5% wage hike for public servants.
According to the Treasury, it has presented the guidelines to try and get government departments to cut spending.
However, it stressed that:
- The guidelines are not instructions;
- They only apply to national departments and schedule 3 public entities;
- They only apply for the remainder of the 2023/24 financial year.
The “guidelines” would apply to about 157 schedule 3 public entities (including the RTIA, the RAF, etc) and close to 100 provincial entities. Groups like Eskom, Denel, SAPO, ACSA and Telkom are not included as they are schedule 2 entities.
“While (the guidelines) do not apply to schedule 2 public entities, the executive authorities and accounting authorities of these entities are strongly urged to take these guidelines into account and implement similar measures,” Treasury said.
“These guidelines intend to assist accounting officers and accounting authorities to significantly reduce the pace of expenditure within their portfolios in the current financial year.”
Red flags over changes
The guidelines from Treasury come on top of other murmurings and speculation around wider budget cuts and bigger changes in the pipeline to cut spending. The full scale of these cuts will only be known when Finance Minister Enoch Godongwana tables the mid-term budget on 1 November.
Earlier this month, however, the Treasury introduced a host of ideas to President Cyril Ramaphosa to counter the country’s revenue shortfall and wider-than-expected budget deficit.
Proposals made by Treasury included:
- Increasing value-added tax by 2%, closing programs,
- Reducing or merging the number of government departments and state-owned enterprises,
- Managing the public-sector wage bill
- Reforming the skills development levy.
Treasury has also been pressured by the government to extend the R350 Social Relief Distress (SRD) grant that was introduced during Covid-19 as it has not been budgeted for beyond the current financial year.
Calls to cut spending have, however, been met with vehement opposition from those in the ANC, including the President, with 2024 being an election year. Unions have also threatened to strike if the spending cuts are introduced.
“We think the Treasury proposals on a freeze on vacancies, reducing the headcount, cutting departments, cutting programs, is going to collapse the capacity of the state,” said Cosatu spokesman Matthew Parks.
4. Global struggle to make enough diesel:
The world’s oil refiners are proving powerless to make enough diesel, opening a new inflationary front and depriving economies of a fuel that powers industry and transport alike.
While oil futures are rocketing — on Friday they were just below $95 a barrel in London — the rally pales in comparison with the surge in diesel. US prices jumped above $140 to the highest ever for this time of year on Thursday. Europe’s equivalent soared 60% since summer.
And it could get worse. Saudi Arabia and Russia have turned down the taps on production of crudes that are richer in diesel. On 5 September, both nations — leaders in the OPEC+ alliance — announced they would prolong those curbs through year-end, a period in which demand for the fuel usually picks up.
“We’re at risk of seeing continued tightness in the market, especially for distillates, coming into the winter months,” said Toril Bosoni, head of the oil market division at the International Energy Agency, referring to the category of fuel that includes diesel. “Refineries are struggling to keep up.”
The situation is challenging for a global refining fleet that’s been dogged by lacklustre production for months. Searing Northern-Hemisphere heat this summer forced many plants to run at a slower pace than normal, leaving stockpiles stunted.
There’s also been pressure on them to make other products instead like jet fuel and gasoline, where demand has rebounded hard, according to Callum Bruce, an analyst at Goldman Sachs Group Inc.
5. Another big fuel spike:
Fuel prices are set to rise significantly yet again based on current data.
The Automobile Association (AA) said unaudited data from the Central Energy Fund pointed to a petrol price increase of around R1.20 cents a litre and an increase in the wholesale price of diesel of as much as R2.
The AA said, at this stage, illuminating paraffin was showing an under-recovery of R1.84 cents a litre.
The main driver behind the potential increases are higher international oil prices that have climbed substantially since August, mainly on the back of reduced output by major oil-producing nations.
The weaker rand-dollar exchange rate is also contributing, but its impact is minimal at the moment.
All information sourced from articles posted by: MyBroadBand, DailyInvestor, BusinessTech, Fin24, and EWN.
