News in South Africa 20th December:

1. 20 Durban beaches open:

As thousands of holidaymakers are expected to descend on Durban shores for the festive season, eThekwini Municipality Mayor Mxolisi Kaunda has assured visitors and residents that the city’s beaches are safe for swimming.

20 Durban beaches open
Photo by Bayu jefri

Kaunda gave his assurance as he officially reopened the iconic uMhlanga Rocks Whalebone Pier to much fanfare and public applause, just in time for the bumper festive season in Durban.

Kaunda said the results conducted jointly with the Institute for Water and Wastewater Technology (IWWT) at the Durban University of Technology (DUT) revealed an improvement in the beach water quality. 

“The city’s results sampled on 12 December, as part of its weekly routine testing, have also revealed that of the 23 bathing beaches, 20 beaches are e-coli compliant with acceptable standards for swimming and other water recreational use. 

“The safety of residents and visitors remains a priority, and with constant testing, we want to ensure holidaymakers and residents of their safety. These results confirm an improvement in our beach water quality, as most are compliant with excellent and acceptable standards for swimming and other recreational use,” Kaunda said. 

The Mayor said the city has a team of expert scientists who are hard at work testing the water quality at the municipal ISO 17025 accredited laboratory. 

Kaunda emphasised that the municipality is transparent with the results, which are shared publicly.

“If there are poor results, the pollution team immediately traces the source so that remedial work is done to stop the pollution,” he said.

The city also conducts re-sampling to ensure the quality of beach water so that an informed decision is made on whether or not to close a particular beach. 

Kaunda said the city will continue joint sampling with an independent organisation, including the IWWT and Adopt-A-River, whose samples are tested by Talbot. 

“The city does daily monitoring of all 23 bathing beaches to make an informed decision. However, for joint sampling, only selected beaches are tested, some of which are non-bathing. 

“Beaches that have poor water quality are closed, and the public is informed when the water at beaches has been tested and if they are safe for swimming. This routine weekly testing is continuing and conducted across all the city’s 23 bathing beaches,” Kaunda explained. 

The beaches that are open include:

  1. uShaka,
  2. Addington,
  3. Point,
  4. North,
  5. Bay of Plenty,
  6. Wedge,
  7. Battery,
  8. South,
  9. Country Club,
  10. Thekwini,
  11. Laguna,
  12. uMhlanga Main,
  13. uMdloti Main,
  14. Bronze,
  15. Westbrook,
  16. uMgababa,
  17. Toti Main,
  18. Reunion,
  19. Warner,
  20. and Brighton. 

The beaches that are closed include:

  1. Pipeline,
  2. Winkelespruit,
  3. and Anstey’s. 

Thirty-four swimming pools are open, and these include the Laguna Paddling Swimming Pool, which was reopened recently after it was closed due to infrastructural challenges. 

Kaunda also announced that the repairs at the popular Children Amusement Centre swimming pool, which is along the beachfront, are expected to be completed soon.

He said 65 beach guides will be stationed across the various city beaches to aid visitors, and an additional 160 seasonal lifeguards have also been deployed to beaches. 

“This attests to the fact that the city is ready to host a safe and memorable festive season for the anticipated 792,410 visitors expected to flock to Durban,” Kaunda said.

2. Sars introduces Vat estimated assessments:

Taxpayers not responding in time to requests for relevant material supporting their value-added tax (Vat) returns have been forewarned. The South African Revenue Service (Sars) will, from now on, issue estimated assessments.

The Vat vendor will no longer be allowed to submit a request for correction for the same period once the estimated assessment has been issued. A Vat vendor normally has five years to submit a request.

The implementation of estimated Vat assessments where taxpayers fail to respond to a request for so-called relevant material timeously should not come as a shock, says Webber Wentzel consultant Des Kruger.

“Sars has been empowered to do so since the introduction of the Tax Administration Act (TAA) in 2011. It is apparent that while empowered to do so, Sars lacked the functionality to do so. Now it does.”

The process

Zulfah Mullins, tax compliance officer at Hobbs Sinclair, highlights that vendors who disagree with the estimated assessment must submit their supporting documents within 40 business days of receiving the notice.

If the taxpayer cannot submit the documents within the time allowed, they may request an extension, but only in certain circumstances.

Since the estimated assessment may result in an obligation to pay tax, Vat vendors are advised to request a suspension of payment.

According to Charles de Wet, tax executive at ENSafrica, once a taxpayer submits their return and receives a verification letter, they generally have 21 days to submit the requested documents. Once that deadline is missed, Sars will automatically issue the estimated assessment. The second deadline is the 40 business days unless a further extension is granted.

De Wet believes the estimated assessment will be based on the writing back of input taxes. “The process may be different, but I think the outcome will be the same. It means there is now an interim phase before entering the dispute phase.”

Objections and appeal

Kruger says although a request for correction will not be permitted once an estimated assessment has been issued, Sars correctly notes that the taxpayer has a second bite at the cherry in the form of a further 40 days to request a reduced assessment.

Should Sars refuse the request, the taxpayer can object and appeal the estimated assessment. He disagrees with Sars’ view that the vendor will not be allowed to object since an estimated assessment is not subject to dispute.

Aneria Bouwer, senior consultant at Bowmans, shares Kruger’s view. If the taxpayer has submitted the relevant documents, but Sars refuses to revise the estimated assessment, the taxpayer is allowed to object.

“I think the Sars notice is misleading. It states that the vendor will not be allowed to submit a notice of objection as an estimated assessment issued in terms of the TAA is not subject to dispute. That is not correct,” Bouwer says.

Sars may issue an estimated assessment if they are not provided with the relevant information. However, the act only states that the assessment will not be subject to objection or appeal if Sars and the taxpayer agree in writing to an amount that is payable.

“If the vendor provides the supporting documents and Sars does not revise the assessment, the taxpayer can object to the assessment.” Sars’ communication is not clear, Bouwer adds.

3. Eskom will need another bailout soon:

Eskom will need another bailout from taxpayers in the next three to four years if there is no reform to the current electricity tariff structure. 

This is feedback from former Eskom CEO Andre de Ruyter, who told the Business Day Spotlight podcast that without tariff reform, the utility’s revenue will not cover the cost of electricity generation. 

In his 2023 Budget Speech, Finance Minister Enoch Godongwana outlined the government’s plan to take over R254 billion of Eskom’s debt. 

Eskom’s debt reached R442.7 billion at the end of September 2023. 

Godongwana said Eskom “will not need further borrowing during the relief period”.

This bailout comes with strict conditions.

  • Eskom must prioritise capital expenditure in transmission and distribution.
  • Eskom must focus on the maintenance of its existing generation fleet to increase the energy available.
  • The relief is only to be used to settle debt and interest payments.
  • Eskom must implement the recommendations from an independent assessment of its operations, which the Treasury has commissioned.

Speaking to the Business Day Spotlight podcast, De Ruyter said the bailout was insufficient to turn around the utility but that it was the right thing to do and that National Treasury was prudent in applying strict conditions to the deal.

“You cannot continue to indefinitely hose out money at Eskom without getting some quid pro quo attached to it. Throwing more and more money at the problem without trying to fix it decisively is not a prudent way forward,” De Ruyter said.

He said he would have added one more condition to the bailout – Eskom must get cost-reflective tariffs from Nersa. 

“If we do not get them, Eskom does not get cost-reflective tariffs, then in three to four years, the entity will be back at Treasury’s door with a begging bowl, asking for more, because its costs will be higher than its revenues,” De Rutyer said. 

Eskom has increased the price of electricity by 446% since load-shedding began in 2008, driving up inflation and significantly increasing the cost of doing business in the country. 

South Africa’s energy system faces a dual crisis of rising costs and declining performance.

Household electrical costs have risen by 60% since 2017, and the recently announced price increases of 18.7% for the 2023/24 financial year will maintain the pressure on consumers.

Between 2007 and 2017, the average Eskom tariff increased by 333%. By 2022, it had increased 450% since 2007, consistently exceeding headline inflation by a substantial margin.

The current electricity pricing regime ties prices to Eskom’s costs, resulting in decades of mismanagement and crisis spending being passed on to consumers. 

Eskom’s ballooning costs have been driven primarily by increased financing costs, with the utility’s expenditure growing significantly since 2007 without a corresponding performance improvement and added revenue. 

4. Businesses are dissatisfied:

According to the Bureau for Economic Research (BER), the 2023 average business confidence level is now almost 10 points below that of 2022 and consistently below the long-term average.

Business confidence in the “other services” sector — which provides the latest trends and outlook for hotels, restaurants, transport, real estate and business services — fell in the fourth quarter, pointing to overall subdued sentiment in the SA economy.

BER economist Katrien Smuts said the outcome implies that almost six out of 10 respondents are dissatisfied with prevailing business conditions.

5. Good news for petrol prices:

Fuel prices have been a major driver of inflation in South Africa over the last two years, but data from PwC and the Central Energy Fund show that South African motorists can expect some good news for 2024.

According to PwC’s latest economic outlook for South Africa, petrol and diesel prices have risen by 22% and 41%, respectively, in the last two years.

However, this is expected to ease as fluctuations in the pricing of international oil and the performance of the rand are expected to stabilise in 2024 – resulting in less substantial adjustments in the prices of petrol and diesel next year.

“The futures market is pricing in a slow depreciation in the South African rand, weakening from around R18.30/$ at the time of our modelling to around R18.95/$ at the end of 2024,” said PwC.

Expectations of a weakening in the rand are in line with the long-term historical trend.

“Additionally, financial markets expect a slow decline in oil prices over the same period. Brent oil is priced to decline from around $81.80/bbl at the time of our modelling to $79.50/bbl at the close of 2024,” it added.

According to the firm, this suggests fuel prices should, on average, be lower in the first three months of 2024 compared to the current quarter of 2023.

Based on current assumptions, both petrol and diesel prices are expected to bottom out in 2024Q1 and then slowly increase (on average) during the remaining quarters of 2024 and into 2025.

The data indicated that petrol could cost an average of 0.6% more in 2024 at R23.24/litre compared to an estimated R23.10/litre in 2023. The slow upward trend in our fuel price forecasts reflects the negative trend in rand futures being slightly steeper compared to the decline in oil price futures.

Diesel, however, is projected to cost 0.6% less at R21.40/litre compared to an estimated R21.54/litre in 2023.

“This comes after notable declines in both product prices during November and December 2023, off the 15-month-high peaks seen in October,” said PwC.

“This is relatively good news when considering an average consumer price inflation forecast of 5.2% for 2024m,” it added.

However, despite the relaxation in prices, the firm noted with concern that petrol and diesel prices have doubled over the past seven years, which is a rate that is unsustainable for the fuel users in the country.

Good news for January

Mid-month data from the Central Energy Fund points to another cut in fuel prices at the start of 2024, with both petrol and diesel expected to come down.

As of 18 December, petrol prices are currently showing an over-recovery of between 53 cents and 67 cents per litre, while diesel is showing a bigger cut of between R1.18 and R1.25 per litre.

If these over-recoveries carry through to the end of the month, motorists and other fuel users will catch a much-needed break when they get back to work in the new year.

These are the expected changes:

  • Petrol 93: decrease of 53 cents per litre
  • Petrol 95: decrease of 67 cents per litre
  • Diesel 0.05% (wholesale): decrease of 118 cents per litre
  • Diesel 0.005% (wholesale): decrease of 125 cents per litre
  • Illuminating paraffin: decrease of 119 cents per litre

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

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