News in South Africa 22nd December:
1. Load shedding filled holidays:
South Africans are set for a bleak, load-shedding-interrupted ‘festive’ season as Eskom’s generating output plummets to completely new lows.
At Tuesday evening’s peak, it wasn’t even able to output 23 000MW in total. This forced unprecedented overnight Stage 6 load shedding so that it could replenish the upper dams at its pumped storage schemes, which are being run as much as possible to keep the lights on.
No ‘December reprieve’ this year
Ordinarily, depressed demand as mines and factories shut for this period would offer some sort of reprieve from load shedding.
Instead, as Eskom’s generating performance deteriorates further – and with its diesel budget exhausted – the intensity of load shedding has had to increase over this period.
Eskom will likely try and avoid load shedding altogether on Christmas Day.
But this will require extensive use of its pumped storage schemes as well as diesel which it does not have the budget for. Perhaps Public Enterprises Minister Pravin Gordhan can ‘secure’ additional supplies from an inter-governmental ledger transfer.
In its last update on Friday, Eskom said that 8 023MW of generation capacity was on planned maintenance, with a further 16 672MW offline due to breakdowns. This totals more than 24 500MW of capacity, from an installed base of 49 000MW.
In effect, half of Eskom’s capacity is offline (which is being exacerbated by the inability to use its diesel peaking plants at anywhere close to full capacity).
Stage 8 – critical service breakdown:
South Africa’s provinces do not have contingency plans for if the country moves to stage 8 load shedding at any point, with water, sewage and communications at serious risk if it happens.
There has been little to no guidance from the national government on such a scenario, and most authorities appear to be looking to Eskom for what to do.
According to the DA, beyond stage 6, there are no longer any guarantees that critical services will be exempt.
2. Dollar to weaken in 2023:
After experiencing a historically strong year, the U.S. dollar appears overvalued against a broad basket of currencies, and macroeconomic fundamentals are poised to deteriorate in 2023.
This is the view of Brandywine Global portfolio manager Anujeet Sareen who provided a global currencies outlook for the next year.
He said the primary drivers of the dollar in 2022 were relative growth outperformance and relative monetary tightening.
Although U.S. real growth decelerated in 2022, the substantial growth shocks in Europe and in China led to relative U.S. economic outperformance.
In parallel, the Fed raised interest rates by 400 basis points (bps), more than nearly all other major central banks.
Relative monetary policy is set to move in parallel with the shift in relative growth, and the Fed is approaching peak policy rates near 5%.
However, the European Central Bank, given that its policy tightening cycle began later, may still raise interest rates further in 2023.
European inflation is likely to slow somewhat later, and fiscal policy is more supportive of growth in Europe than in the United States. This relative shift in monetary policy is constructive for the euro.
In Japan, monetary policy also is poised to begin tightening in 2023. Governor Kuroda, one of the principal architects of Japan’s aggressive reflationary monetary policies, is set to step down in early April.
While his successor has not yet been determined, the acceleration in Japanese inflation has increased the probability of tighter Japanese monetary policy, which would strengthen the yen.
Overall, the powerful rally in the dollar in 2022 was driven by an alignment of factors that will not persist in 2023.
The greenback is expensive, and relative growth prospects point to a weaker dollar next year.
Relative monetary policy will also tighten more outside the U.S., notably in Europe and possibly in Japan as well.
3. SA’s minimum wage vs the world:
South Africa’s minimum wage is expected to be updated next year in March 2023, considering the high cost of living amid rising global inflation and hiked interest rates.
The previous increase was above inflationary levels; however, since then, inflation has skyrocketed – vastly changing market conditions.
South Africa differs from some countries abroad in that it actually has a national minimum wage. According to Cliffe Dekker Hofmeyr, some places such as Austria, Belgium, Denmark and Finland do not have such.
The minimum wage can be determined for a country through collective bargaining, or sometimes it can be based on a person’s age, such as in the UK or Ireland. The wage can also differ across provincial or regional boundaries, like in China and Japan.
Domestically, however, there is a legal requirement that employers pay workers the national minimum wage, which is applicable across the board.
Since its inception, the wage has been amended consistently in 2019, 2021 and again this year, where it was adjusted to R23.19 per hour, roughly a 6.9% increase from the year before.
The prior increase was higher than the rate of inflation; however, since that time, the rate of inflation has surged, drastically altering market conditions.
The average worker who receives the hourly minimum wage will take home R3,710 per month (eight hours a day, 20 days a month).
- 2019 – R20.00 per hour
- 2020 – R20.76 per hour
- 2021 – R21.69 per hour
- 2022 – R23.19 per hour
This move by the government was in line with a global trend to improve the lowest allowable salaries.
The following jurisdictions have also increased (or are in the process of increasing) their national minimum wage:
(Note: Countries that based their minimum wage off a monthly outcome were calculated backwards to get the hourly rate; these are, however, mere calculations. For the sake of calculations, a normal working day was 8 hours, while an employee was estimated to work 20 days a month. All rand conversions were taken at R17.26/$, R17.82/€ and R20.51/£.)
4. Home buyers wary:
People looking to buy residential property will likely increasingly shy away from cities and towns with dysfunctional municipalities, cautions property consultancy and research firm Rode & Associates.
It defines dysfunctional municipalities as characterised by high debt levels and a collapse in service delivery.
The latest Rode report on the property market refers to the trend of potential buyers avoiding dysfunctional municipalities in general as part of its outlook for the housing market.
Rode expects nominal house prices to grow at a slower rate in 2023 due to the weak economy, high unemployment, increasing interest rates, and the electricity supply crisis.
Nominal house price growth was 3.6% over the first 11 months of 2022, marginally slower than the 4.2% growth for the full 2021, according to FNB data. However, in real terms (taking inflation into account), house prices fell sharply as the consumer inflation (CPI) rate averaged 6.8% over the same period.
5. Durban beaches unsafe:
More trouble at eThekwini beaches. This time ActionSA wants them all closed.
This follows the drowning of 3 people at North Beach and the party is now calling for an investigation.
It cites a leaked report in the possession of eThekwini Municipality, alleging irregular appointment of a service provider, Lifesaving South Africa.
The Non-Profit Organisation is used by the municipality to train lifeguards.
ActionSA claims the lifeguard certificates issued by the NGO do not meet the necessary standards.
There have been continued calls for the beaches to be shut down due to overcrowding and the risk posed by high levels of E.coli in the water due to sewage spilling into the ocean after the recent flooding in the province. Safety concerns now add to the issue.
All information sourced from articles posted by: Moneyweb, DailyInvestor, BusinessTech, Fin24, and ENCA.
