News in South Africa 22nd January:
1. Repo rate unchanged at 3.5%:
The Reserve Bank has decided to keep rates unchanged at 3.5%, in line with the expectations of economists.
Governor Lesetja Kganyago made the announcement on Thursday afternoon, following the bank’s Monetary Policy Committee’s (MPC) first meeting for the year this week. Two of the MPC’s five members were in favour of a cut of 25 basis points.
The MPC expects inflation to remain “well contained” in 2021, before rising to around the midpoint in 2022 and 2023, said Kganyago.
The Reserve Bank also revised its growth forecast for 2020 to -7.1% from -8% at the last meeting. It expects growth to remain muted in the first quarter of 2021. Overall 2021 growth is projected at 3.6%.
The Reserve Bank sees potential new waves of the Covid-19 virus weighing on economic activity both globally and locally. “… Constraints to the domestic supply of energy, weak investment and uncertainty about vaccine rollout remain serious downside risks to domestic growth,” said Kganyago.
Governor Lesetja Kganyago also announced on Thursday that the central bank is willing to help the government with the funds required to purchase the Covid-19 vaccine.
Although the government has not indicated how much it would need to procure vaccines from international various manufactures, Kganyago said the payments would likely require foreign currency.
Kganyago added that the government might not need to turn to the central bank for foreign exchange because it has a positive “balance in [its] foreign exchange account” and the government could simply draw on that to purchase the vaccine.
2. Alcohol ban affecting illegal trade:
With the rise in Covid-19 cases, more police visibility and “Janu-worry” blues, alcohol sales in the illicit market have slumped.
The sudden ban on the sale of alcohol under lockdown level 3 not only prevented people from getting their tipple, it also reportedly hit bootleggers and illicit traders, who were unable to restock from suppliers before the ban came into effect.
“Business is bad,” an alcohol bootlegger stated in an interview this week. “We never got a chance to stock up. Our suppliers, too, did not get a chance to stock up before alcohol was banned.”
“He caught us off guard. No-one suspected that he would ban the sale of alcohol, especially during the festive season. Even the guys who are our suppliers were not aware,” said the bootlegger.
He said there were fewer suppliers of alcohol this time around.
“We all buy from the few that have alcohol. One minute they have it, the next minute they don’t. So this time sales are very bad. We are still selling, but one or two beers a day,” he said.
He sells a 750ml bottle of beer for R35.
“It is not like the last time when we had enough alcohol to sell and people were willing to spend.”
Beer, once his mainstay, is now not a commonly sold item — largely because his suppliers are scared of the police. “The cops are more visible than they were the last time. This time around, it’s not even easy to bribe.”
As a result – and due to the increased policing around the alcohol ban – illicit sales have taken a hit. While some brands and alternatives are being sold on the black market, traders report a dearth in interest and supply.
3. Gold backed funds highest ever:
An analysis of the flow of investment into exchange-traded funds (ETFs) and similar investment products that offer exposure to physical gold show that investors loaded up on gold during a year in which the world lurched from one crisis to the next.
Globally, gold-backed ETFs recorded the highest inflow of new investments during 2020, leading to ETFs worldwide buying an additional 877 tons of gold.
The increase in investment in physical gold via ETFs in 2020 dwarfs the previous annual record of 2009 when funds reported net purchases representing 646 tons of gold.
This increase in gold purchases is the largest ever in a single year, increasing the total amount of gold owned by investors in ETFs and similar investment vehicles to 3 752 tons at the end of 2020.
A report by the World Gold Council states that total gold holdings was even higher at the beginning of November at 3 915 tons before net outflows in the last few weeks of the year.
4. Worst load shedding still to come:
Energy expert Chris Yelland said South Africa experienced the worst load-shedding on record in 2020 and that he expects 2021 to be even worse.
Yelland said the reality is that Eskom’s energy availability factor (EAF), which is a measure of the availability of Eskom current fleet of power stations, is declining year on year.
“The best thing that I think one can hope for is that Eskom could stabilise this energy availability factor at the current low levels,” said Yelland.
As demand for electricity picks up, Eskom’s ageing power generation fleet will be under severe pressure. However, the biggest problem is breakdowns. During the most recent bout of load-shedding, 14,748MW of capacity was unavailable due to unplanned maintenance, breakdowns, and outage delays.
The lost capacity because of breakdowns dwarfed the 5,358MW which was unavailable because of planned maintenance.
Power and mining expert Ted Blom recently said South Africa should brace itself for the worst year of load-shedding yet in 2021, with Stage 8 being a possibility.
He said Eskom is able to absorb around 11,000MW of electricity shortages before they have to implement load-shedding.
Eskom’s outlook for the next three months shows a near-consistent unavailability of 20,000MW because of planned and unplanned outages. This will leave Eskom with a deficit of around 9,000MW, which Blom said can result in stage 6 or even stage 8 load-shedding.
Yelland is less pessimistic on Eskom’s load-shedding outlook, saying to expect stage 8 load-shedding is alarmist.
“You can’t write it off. But to say that we are heading for that is premature. But as I say, it’s not impossible, but I don’t think it’s likely,” Yelland said.
5. Doctors and nurses need help:
The city of Tshwane, the municipal area in which George Mukhari Academic Hospital is situated, is a COVID hot spot. The hospital lies next to Ga-Rankuwa, a sprawling labyrinth of settlements that stretch to the border of the North West province, and serves a population of about 1.7-million people.
Doctors and nurses and other healthcare professionals are under extreme pressure in South Africa – not just physically, but mentally as well.
A new investigative report has delved into how healthcare workers are coping with the second wave of Covid-19, which is being driven by a more infectious variant, leading to greater admissions and more death.
The surge is taking its toll, with doctors saying they need help: more staff, and psychological support.