News in South Africa 21st July:
1. Inflation at 13 year high:
The average rate of consumer price inflation (CPI) for South Africans hit 7.4%, StatsSA said on Wednesday, the highest seen in 13 years.
But that was nothing compared to the increases in some prices, making for a much harder hit depending on your fondness for electricity, driving your own car, or bread.
On average, South Africans have not seen prices increase this fast since May 2009, when the CPI rate hit 8%, StatsSA said.
CPI limited to prices set by the government was up 17.8% year-on-year, the organisation’s detailed breakdown showed.
The national CPI food basket was 9.2% more expensive than a year ago – but increases were much higher if you ate a lot of bread, or did a lot of deep-frying.
Oils and fats prices shot up by 6.2% just compared to May, making for an annual price increase of 34.3%.
Bread and cereals prices rose by not much under 3% in the month, making for an 11.4% year-on-year increase.
For rural areas, those price increases were slightly worse, hitting 39.7% and 11.7% respectively.
Transport price increases were also crippling. As calculated by StatsSA, the average cost of transport in South Africa is now up 19.2% compared to June 2021. But for those using private transport, the average costs have shot up by 36.8%, thanks to huge fuel price increases.
Public transport prices have not tracked those fuel-price increases yet, increasing by a relatively modest 12.4% year-on-year.
Electricity was another big contributor to the high overall inflation number. Average household utility bills are up only 5.4% year-on-year for June, said StatsSA, but the portion of those bills that pay for electricity and other fuels used around the home was up 14.2% compared to June 2021.
2. Repo rate increase:
With South Africa’s headline consumer inflation coming in at 7.4% for June – 1.4 percentage points above the top end of the SA Reserve Bank (Sarb) target and hitting a 13-year high – the central bank may have no option but to hike the repo rate by 75 basis points (bps) on Thursday.
This would be the sharpest hike in almost two decades. The last time the Sarb hiked by 75bps was in September 2002.
Whether it is a 75bps or 50bps hike that Sarb Governor Lesetja Kganyago announces just after 2pm, it is likely to be a split vote by the bank’s five-member Monetary Policy Committee (MPC).
Consensus among economists and analysts was that the June CPI reading would come in at 7.2%, after breaching the Sarb’s 4-6% inflation target for May. CPI in May came in at 6.5%, well ahead of analysts’ forecasts of around 6.1%.
With inflation hitting multi-decade highs in key international markets, countries like the US have been forced to up rates by 75bps (at the Federal Reserve’s last meeting). While SA and several emerging markets started hiking repo rates earlier, the move by the US has rattled global markets and is fuelling forecasts of a US recession and possible global recession.
If the US Federal Reserve is forced to continue to take a hawkish stance on rates to bring inflation under control, the likes of the Sarb may follow suit, to keep the interest rate differential between SA and developed markets stable.
Commenting on Tuesday, ahead of the June CPI reading and the MPC meet, BNP Paribas South Africa senior economist Jeff Schultz reckons the Sarb will hike the repo rate by 75bps to 5.5%.
This would see SA’s prime lending rate of commercial banks increase to 9%.
“Don’t expect the [Sarb MPC’s] decision to be unanimous, we think a 3-2 split in favour of a faster frontloading is likely,” says Schultz.
3. Loan defaults on the rise:
The rate of consumers who defaulted on their loans for the first time increased in the first quarter of 2022, new data from Experian South Africa’s Consumer Default Index (CDI) shows.
The CDI increased quarter-on-quarter, moving from 3.49 in 2021 Q4 to 3.68 in 2022 Q1. Year-on-year, however, an improvement was observed, moving from 4.39 in 2021 Q1 down to 3.68 in 2022 Q1, said the information services company.
Jaco van Jaarsveldt, head of commercial strategy and innovation at Experian Africa, said: “The year-on-year improvement was observed across all products, with the most significant improvement for unsecured credit products.
“Relatively speaking, the improvements observed for credit card and personal loans were the most significant, with both of these products showing a relative improvement in CDI of almost 23%.
“However, consumers are cautioned against reading too much into the year-on-year improvements which can be attributed to the tail end of reduced credit lending by credit providers and spend by consumers due to the impact of Covid lock downs experienced in 2021.
“What is of concern is the quarter-on-quarter increase observed across all products, predominantly caused by the turmoil in Ukraine. The impact of the rapidly rising fuel, gas and grain costs, which are significant contributors to the global rise in inflation, is starting to have a direct impact on consumers across all products,” said Van Jaarsveldt.
For the first time in almost 18 months, the Retail CDI saw a deterioration on a quarter-on-quarter basis, moving from 10.41 in Q4 2021 to 10.97 in Q1 2022, he said.
Again, when looking at the quarter-on-quarter trends for this segment, the opposite can be seen as the higher cost of living has a more pronounced impact on this segment, the information specialist said. The quarter-on-quarter CDI shows a deterioration from 5.23 in 2021 in Q4 to 5.27 in Q1, with this trend expected to continue into the coming months.
“We expect the CDI trend to continue deteriorating as interest rate increases take effect and advise consumers to manage their budgets carefully through this challenging time,” said van Jaarsveldt.
4. Unpaid ANC salaries:
With the ANC’s national policy conference scheduled for next week at Nasrec in Gauteng — expected to be attended by thousands of delegates — staff at party headquarters, Luthuli House, have called for the event to be postponed after they weren’t paid their June salaries.
Reporters have learnt from ANC staff representative committee chairperson Mvusi Mdala that a culture of non-payment of wages has not only affected workers at party headquarters, but also in branch offices in the Western Cape and North West.
It’s not only June salaries that have gone unpaid. Apparently, this has been an issue for at least four years.
“I am also affected by it… it is a very unfortunate situation and we are highly disappointed with the treatment we are getting from this uncaring leadership of the ANC,” said Mdala.
“We have seen them running conferences from one province to the other, spending money which is more than enough to pay its staff. But they say they don’t have money.
‘They don’t care’
“That indicates one thing to us… that they continue not to care about the welfare of staff members of the ANC. Their only concern is to get elected to positions.”
Explaining the extent of the crisis, Mdala said: “We have about 12 families whose loved ones were working for the ANC and who have passed on in recent years, but to date, their provident funds have not been paid out because the employer has failed to pay its contributions for the past four years… some of these deceased ANC staff were breadwinners.
“Some of our staff can’t send their children to school… others have lost their hard-earned investments, houses and cars. Yet the situation is not getting any better — it’s worse.”
5. WHO Monkeypox decision:
The World Health Organization will reconvene its expert monkeypox committee on Thursday to decide whether the outbreak now constitutes a global health emergency — the highest alarm it can sound.
A second meeting of the WHO’s emergency committee on the virus will be held to examine the evidence on the worsening situation, with nearly 14,000 cases reported from more than 70 countries.
A surge in monkeypox infections has been reported since early May outside the West and Central African countries where the disease has long been endemic.
On June 23, the WHO convened an emergency committee of experts to decide if monkeypox constitutes a so-called Public Health Emergency of International Concern (PHEIC) — the UN health agency’s highest alert level.
But a majority advised the WHO’s chief Tedros Adhanom Ghebreyesus that the situation, at that point, had not met the threshold.
Now a second meeting will be held, with case numbers rising and spreading to six more countries in the past week.
If the committee advises Tedros that the outbreak constitutes a PHEIC, it will propose temporary recommendations on how to better prevent and reduce the spread of the disease and manage the global public health response.
But there is no timetable for when the outcome will be made public.
Ninety-eight percent of reported cases “are among men who have sex with men (MSM) — and primarily those who have multiple recent anonymous or new partners,” Rosamund Lewis, the WHO’s technical lead for monkeypox, told a press conference on Wednesday.
They are typically of young age and chiefly in urban areas, according to the WHO.
The committee will look at the latest trends and data, how effective the countermeasures are and make recommendations for what countries and communities should do to tackle the outbreak.
Regardless of the committee’s PHEIC decision, the “WHO will continue to do everything we can to support countries to stop transmission and save lives,” Tedros told the press conference.
He said the WHO was validating, procuring and shipping tests to multiple countries, but said one of the most powerful tools in the fight against monkeypox was information.
“That’s why WHO is continuing to work with patients and community advocates to develop and deliver information tailored to the affected communities,” Tedros said.
The European Centre for Disease Prevention and Control said that as of Monday, 7,896 confirmed cases had been reported from 27 countries in the European Economic Area.
The worst affected were Spain (2,835), Germany (1,924), France (912), the Netherlands (656) and Portugal (515).