News in South Africa 22nd August:
1. Missteps impact country growth:
South Africa is suffering a death by 1,000 cuts from repeated own goals, such as the country’s elevated load-shedding levels, logistical inefficiencies, and financial greylisting.
Standard Bank CEO Sim Tshabalala told Newzroom Afrika that the negative impact of repeated missteps by South Africa is adding up and will make it more difficult for the country to grow.
Tshabalala singled out greylisting, in particular, as significantly impacting Standard Bank’s operations on the continent.
Greylisting makes it more challenging to do correspondent banking with global partners as “we are getting more and more questions”, Tshabalala said.
It has become more complex to do regular trade transactions as partner banks require more forms and more paperwork. This makes these transactions less efficient and more expensive for Standard Bank.
Correspondent banks are forced to ask more questions of South African banks and companies performing international transactions as regulation pushes them to gather more information now that South Africa is on the Financial Action Task Force’s greylist.
Issues such as greylisting “are a death by 1,000 cuts – they all add up”, Tshabalala said.
“Things that are negative about our country and diminish our status are happening slowly, but they add up. Greylisting is but one in a long list of things that create a negative perception of South Africa.”
Tshabalala also called on South Africa to get its house in order before it tries to compete or partner with other nations on the global stage.
“It makes sense for South Africa to look for ways of improving its ability to trade and invest between itself and its partners,” Tshabalala said.
However, this will not help South Africa succeed in a multipolar world unless it improves its infrastructure, enhances the performance of its logistics systems, and stabilises its electricity supply.
The country will also have to make it easier for people to get visas to travel to South Africa and, in particular, ensure skilled professionals can enter the country.
2. Brics meeting today:
Major emerging market powers are meeting in Johannesburg August 22-24 for the Brics leaders summit.
The BRICS countries, an acronym of the five members Brazil, Russia, India, China and South Africa, meet for three days for a summit in Johannesburg starting Tuesday.
Representing 23% of the world’s gross domestic product (GDP) and 42% of the world’s population, they are seeking to dull Western economic domination in global affairs.
Here are some facts and figures about the BRICS
Aspirants
The bloc whose economic growth is mainly driven by China and India, is now open to expansion. Twenty three candidates have applied to join the BRICS, and an almost similar number have expressed an interest – among them Argentina, Ethiopia, Iran and Saudi Arabia.
One of the attractions of the group is the New Development Bank, created in 2015 with the aim of offering an alternative to the World Bank and the IMF.
The Shanghai-headquartered bank has since invested $30 billion in infrastructure development projects in member states and other developing economies.
The Putin dilemma
Preparations for the summit saw diplomatic tensions rise on the global stage after host President Cyril Ramaphosa invited Russia’s President Vladimir Putin who is the target of an International Criminal Court (ICC) arrest warrant over the war in Ukraine.
Following months of speculation, Pretoria finally said Putin will attend the summit via video link.
South Africa, whose ruling ANC party forged relations with Moscow during the Cold War, when the Soviet Union backed its fight against apartheid, has refused to condemn Russia’s invasion of Ukraine.
Down with the dollar
The five countries account for 18 percent of international trade, the majority of which is transacted in dollars.
Critical of the greenback’s predominance in world trade, one of their goals is to free themselves from the dollar.
The bloc supports the increased use of members’ national currencies for trade and the introduction of a common payment system in the long term.
Brazil and China earlier this year signed a bilateral agreement to settle their trade in their local currencies.
3. Sarb to kick off easing cycle:
The South African Reserve Bank is likely to leave its repo rate unchanged this year before kicking off a cutting cycle in early 2024, chopping 25 basis points in every quarter as inflation slows closer to its comfort level, a Reuters poll found.
If this happens, South Africa’s Reserve Bank will join a list of emerging market central banks that have either already begun cutting rates or will embark on a loosening path after tightening to brake inflation long before many developed nations.
In a survey conducted in the past week, 17 of 20 economists predicted the repo rate would be kept steady next month at 8.25%, with 16 of them seeing no change again in November. Two economists predicted a September hike of 25 basis points while the other one saw a 50 basis points lift.
However, the poll suggests the Sarb will cut rates by 25 basis points as early as January or March and again in every subsequent quarter next year.
Investec chief economist Annabel Bishop said the United States is expected to cut interest rates next year and the Sarb is expected to do the same, potentially from Q1 24 for South Africa’s repo rate.
Bishop added that easing inflation, and potentially flat to lower interest rates next year would be a positive for households. There are risks, however, to the largest component of the CPI, food prices, due to the combination of climate change and El Nino conditions.
A sister poll suggested the US Federal Reserve is likely done raising interest rates and a slight majority of economists surveyed now expect the central bank to wait at least through end-March before cutting them.
In South Africa, inflation is expected to slow further in the coming months and average 4.9% next year from 5.9% this year and then fall to 4.6% in 2025. The South African Reserve Bank wants inflation between 3% and 6%.
Economic growth is expected to be 0.3% this year and 1.2% in 2024.
4. Manufacturing sheds 96,000 jobs:
The South African manufacturing sector lost jobs in the second quarter of 2023, shedding 96,000 quarter-on-quarter.
The last time the sector grew employment was in the fourth quarter of last year.
Stakeholders in the industry said this is due to load-shedding, weak demand, rising costs, industrial action, and poor municipal services – making job cuts inevitable.
5. New deadline for NHI:
The Select Committee on Health and Social Services has extended the deadline for public comments on the contentious National Health Insurance (NHI) Bill by two weeks.
The purpose of the NHI is to ensure access to quality healthcare for all South Africans, and it will establish a fund that covers nearly all medical treatment from accredited providers at rates set by the government.
The Select Committee on Health and Social Services said it received numerous requests from stakeholders to extend the date on written submissions for the act.
The committee has obliged by extending the deadline from Friday, 1 September 2023 to Friday, 15 September 2023.
The Bill is already before the National Council of Provinces (NCOP) after being passed by Parliament in June, in spite of vehement opposition.
Should it pass at the NCOP, it will then be sent to President Cyril Ramaphosa to be signed into law.
All information sourced from articles posted by: DailyInvestor, Fin24, Moneyweb, TimesLive, and BusinessTech.
