News in South Africa 21st July:

1. Financial stress climbing:

A survey of more than 35 000 people has revealed that 55% spend more than 40% of their take-home pay on debt repayments, while 37% say more than half their available income goes straight to servicing debt.

Financial stress climbing
Photo by Mikhail Nilov

Nearly 80% of respondents say that they “experience financial stress” – and nearly all indicated that their worries are impacting their home life, work and health.

It is concerning that people are stressing about their ability to meet their short-term needs, even when taking into account that the survey was conducted by debt counsellor DebtBusters among registered users of its website. This may skew the results slightly because financially secure people will probably not use the platform.

However, DebtBusters notes that the survey can be seen to be representative of South Africa as it only gathered responses from people not in debt counselling. 

Still, the results are enlightening and give a (scary) glimpse into the financial health of people.

In short, too much debt is crippling millions in SA, with rising living costs and higher interest rates creating problems for many.

“Three out of four South Africans feel money stress, a lot more than last year. Particularly women admit to the effects of financial stress at home and work and on their health,” says Benay Sager, head of DebtBusters.

Higher-income earners

While lower-income earners are the most stressed – as can be expected – it is telling that people who earn more are suddenly becoming financially stressed.

“They simply have too much debt. Sixty-two percent of the respondents taking home more than R20 000 have unsustainable debt levels,” says Sager.

“Those taking home more than R20 000 per month are under the most pressure. Around 44% of people earning between R20 000 and R35 000 use more than 50% of their income to service debt. Some 45% of people earning more than R35 000 per month spend more than 50% of their income to repay debt.

“This is the backbone of the middle-class population in SA,” says Sager, adding that 62% of this middle class have unsustainable debt levels. He notes that these higher-income earners also experienced the largest decline in their financial standing compared to a year ago. 

Overall, 70% of people who participated in the survey indicated that 30% of their earnings (after deductions) goes towards repaying debt.

Sager noted in a presentation of the results of the survey that people should not spend more than 30% of their income to repay debt. “We normally advise consumers not to spend more than 30% of their take-home pay on debt repayments, at most 40%.

“This is the limit, leaving two-thirds for living expenses and to save for emergencies and retirement,” he says.

2. Interest rates kept unchanged:

The SA Reserve Bank’s monetary policy committee left interest rates unchanged on Thursday – after 10 hikes in 21 months aimed at cooling inflation.

Three members voted to keep the repo rate unchanged at 8.2%, while two wanted an increase of 25 basis points. This leaves the prime rate at 11.75%. 

Since November 2021, monthly payments on a R2 million home loan are now almost R6 200 more expensive due to these aggressive hikes.

On Tuesday, Statistics SA reported that consumer price inflation had slowed dramatically to 5.4% in June from 6.3% in May. The last time consumer inflation was below the Reserve Bank’s maximum target of 6% was more than a year ago, in April 2022. 

The Reserve Bank has now revised its headline inflation rate down from 6.2% to 6.0% for 2023. It also lowered it to 5.0% in 2024, before stabilising at 4.5% in 2025.

It also lowered its food price inflation forecast for 2023 from 10.8% to 10.3% – but SARB governor Lesetja Kganyago warned that food prices remain high and the risk of drier weather conditions in the coming months has increased.

“In the absence of sustained and consistent increases in energy supply, electricity prices continue to present clear inflation risks. Load shedding and logistics constraints may also have broader effects on the cost of doing business and the cost of living,” Kganyago added.

Still, the Reserve Bank bumped its forecast for South Africa’s GDP growth from 0.3% to 0.5%. GDP growth forecasts for 2024 (1.0%) and 2025 (1.1%) remain unchanged.

Kganyago noted that households and firms look resilient, with spending still growing in real terms. Although credit growth to households and corporates has slowed in recent months, it has increased in real terms compared to last year, Kganyago noted.

3. Big changes at SARS for exports:

The South African Revenue Service (SARS) has enhanced its customs regulations in yet another move to modernise and stay on top of international trends.

According to the taxman, until the end of 2020, goods exported from South African Customs Union (SACU) member states and Mozambique to the UK were covered by a specific agreement called the Southern African Development Community-European Union Economic Partnership Agreement (the SADC-EU EPA).

Following Brexit, this has subsequently needed to change, with goods being traded under Free Trade Agreements (FTAs) also referred to as Economic Partnership Agreements (EPAs). Despite the change, tariff preferences applied to goods are set to remain the same.

The new South African Customs Union and Mozambique UL Economic Partnership Agreement (SACUM-UK EPA) went live on 14 July 2023, said SARS.

“Traders can now register and lodge customs declarations under the SACUM-UK EPA as well as the SADC-EU EPA.”

“Approved Exporters who previously used the SADC-EU EPA to export to the UK are required to apply and register with SARS to be Approved Exporters under the SACUM-UK EPA.”

Although the latest update may seem trivial, it forms a pivotal part of the revenue service’s adaptation to changes in the global economy, as seen earlier this year by introducing another customs procedure in the form of ‘travel passes’.

Originally trialled in November 2022, SARS announced a new online traveller declaration system that grants people a travel pass via email, ultimately allowing their goods to pass through the border.

The latest system implemented by SARS is an online platform enabling travellers to pre-declare goods they obtained and settle the relevant taxes when entering or exiting the country.

This process involves declaring a variety of items, such as products bought overseas, repaired or modified goods, and any items restricted or regulated by the law.

SARS said the system may be used on a voluntary basis, as it is still being piloted, and results from the pilot period will be used when it rolls out the system fully in line with customs legislation.

The taxman said that the next phase for the implementation of the new system is planned at all airports, starting with Cape Town International Airport on 28 February 2023, O.R. Tambo International Airport on 23 March 2023 and other airports in the second and third quarters of 2023.

4. Loadshedding to worsen:

South Africa is heading towards the end of winter when demand for electricity peaks, putting immense pressure on Eskom’s ageing coal-powered fleet. Experts are now warning that higher stages of load-shedding are on the horizon.

Energy analyst Clyde Mallinson spoke to Newzroom Afrika following an update on the implementation of the Energy Action Plan from Electricity Minister Kgosientsho Ramokgopa. 

Mallinson said what the minister described as a ‘perfect storm’, which pushed load-shedding to stage 6 last week, was “a normal cold front we get every winter, and the coal fleet could not cope with the increased demand.”

Eskom’s coal fleet has been unreliable, and it seems as though its good performance during winter so far is coming to an end. 

Electricity demand tends to peak towards the end of July and the beginning of August as the country experiences cold fronts. 

Chair of the National Rationalised Specifications (NRS) Association of South Africa Vally Padaychee previously said that “we are not out of the woods yet”, despite improved generation performance resulting in lower stages of load-shedding. 

“As professionals, we should not give the country a false sense of hope”, he said. 

The significant test for Eskom will come at the end of July and early August, as demand increases throughout winter and peaks at the beginning of August. 

Eskom’s generation fleet will come under pressure during this period. “Pragmatically, we are not out of the woods yet. We must wait and see,” Padaychee said.

5. Joburg explosion investigation continues:

The City of Johannesburg says a preliminary investigation into the explosion in the CBD, which led to one confirmed death and close to 50 others injured, has provided three possible causes, but only one scenario seems likely.

City manager Floyd Brink said the ignition of methane gas in underground storm water systems due to sewage ingress could have led to the blast.

He said the second possibility was the ignition of natural gas, mixed with oxygen in underground storm water drainage systems or service ducts and the ignition of gas from a gas pipe burst could have led to an explosion.

“The third and last possibility is the ignition of gas from a gas pipe burst,” Brink added.

He addressed journalists on Thursday evening at Mary Fitzgerald Square where the city has set up the command unit after Wednesday’s blast that left almost 50 people injured and one person dead. 

“At this stage only one of the above potential causes appears to be warranted, accidental leakage of natural gas into the service duct reaching explosion concentration levels of up to 15% and was ignited by a source unknown at this stage,” he said. 

He said the source of gas in the service duct is unknown, with investigations to continue to try to locate the source in the next few days.

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

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