News in South Africa 22nd January:

1. High interest rates crushing households:

Economist and independent analyst Dr Roelof Botha said the South African Reserve Bank’s (SARB) high interest rates have created a “self-inflicted pandemic” in the country as households struggle to get by.

High interest rates crushing households
Photo by Muhammad-Taha Ibrahim

Botha’s comments were made in light of the Altron FinTech Household Resilience Index for Q3 2023 showing that most South African households are experiencing significant financial challenges due to the SARB’s hawkish monetary policy.

Botha told BusinessDay TV that the Altron Index has become a valuable tool to assess whether households are in a position to apply for and obtain some form of credit. 

“I don’t have to tell the viewers that it’s been pretty tough since the Reserve Bank started with its hawkish monetary policy,” he said.

“They like the term ‘hawkish’ because there’s no sign of demand inflation in the economy, and yet they refuse to lower interest rates, which the economy desperately needs.”

He explained that the indicator that has pulled down the Altron Index in the past two years had been high interest rates, which have led to higher debt costs.

Altron FinTech Household Resilience Index (AFHRI) Q3 2023. Source: Altron FinTech

The SARB started its current hiking cycle in November 2021 and has since raised the repo rate by a cumulative 475 basis points to a 14-year high of 8.25%.

“The ratio between household income and debt costs has obviously declined,” Botha said. 

“If you look at the reciprocal debt costs as a percentage of household income now, it is virtually the same as it was in the second quarter of 2020, the Covid-quarter.” 

“It is a point of huge concern because, essentially, it’s not necessary. This is like a self-inflicted pandemic.”

Botha has previously expressed his concern for the economic impact of the SARB’s high interest rates.

He said the gains South Africa made in the post-Covid-19 recovery period have been wiped out by this high interest rate.

“It’s as if the Monetary Policy Committee just doesn’t know when to stop,” Botha said. 

“They are breaking the economy. They must take their foot off the brakes and hit the gas, and that means lower interest rates.”

SARB Governor Lesetja Kganyago recently said the rates will only come down when inflation has sustainably returned to the mid-point of its target range – 4.5%.

“Don’t try to figure out what the decision might be based on one monthly figure,” Kganyago warned.

“There’s so much uncertainty out there about the inflation outlook among central bankers, and we are no exception.”

“Yesterday’s and today’s inflation figures do not help determine the monetary policy rate – what matters is what inflation is in the next 12 to 24 months.” 

Household debt costs as a percentage of income. Source: Altron FinTech

2. Call to cut ‘work experience’ requirements:

President Cyril Ramaphosa has called on businesses in the country to remove prior work experience requirements for job positions, in a bid to boost the employability of South Africa’s job-seeking youth.

In his weekly letter to the nation, the president said that the record success of the country’s matric class of 2023 means that thousands of fresh matriculants will be moving on to various tertiary institutions to further their education.

However, he said that there are many who will also move into the working world with just their matric, and called on “all of society” to make more job opportunities available to them.

“As government, we have made the call for businesses to invest in our nation’s future by employing more young people, and, where possible, to do away with the requirement of prior work experience,” he said.

Ramaphosa said that the government has made tax incentives available to businesses to encourage more youth employment, and said companies should make use of this avenue to ensure those seeking jobs can find them.

“I encourage companies to use the Employee Tax Incentive to hire more young job-seekers, to make more training and mentorship opportunities available, and to sign up with the Youth Employment Service and other initiatives being rolled out in partnership with government.”

South Africa’s 2023 matriculants set a new record, having passed with a national rate of 82.9% – the highest pass rate since the National Senior Certificate was introduced in 2008.

Matriculants who do not go on to further studies will be entering an extremely difficult work world, where unemployment remains unacceptably high.

The Quarterly Labour Force Survey (QLFS) for the third quarter of 2023 saw the national unemployment rate improve to 31.9% – and 41.2% by the expanded definition which includes discouraged workseekers.

Youth unemployment, however, has reached alarming levels.

According to Stats SA, the country’s youth (aged 15 to 34, not involved in education or training) remain vulnerable in the labour market.

While the QLFS results showed that the total number of unemployed youth decreased by 174,000 to 4.6 million over the quarter, the overall unemployment rate for the segment still sits at 43.4%.

World Bank data pegs South Africa’s youth unemployment rate even higher at 51.5%, making it one of the highest rates in the world.

3. Exporters avoiding South Africa:

Exporters in South Africa and other countries in the region are increasingly avoiding South Africa’s dismal rail and harbour logistics in favour of alternative routes to ensure their products reach markets timeously and efficiently, according to experts.

On 2 January the first copper from the Kamoa-Kakula copper fields in the Democratic Republic of Congo (DRC) arrived in Angola’s Lobito harbour via the new Lobito Atlantic Railway corridor, while Mozambique’s Maputo harbour reported record cargo volumes, mostly South African minerals.

The copper exports arrived in Lobito within eight days, compared to the 25 days it usually takes to be trucked to Durban.

The Invanhoe mining group says the line passes within five kilometres of the Kamoa-Kakula Copper Complex licence boundary and through its Western Foreland Exploration Project. Logistics costs constitute almost a third of the mine’s cash costs and the new rail corridor will reduce not only the costs, but also the carbon emissions considerably.

Impact on SA

Mike Walwyn, who chairs the Cape Town Chamber of Commerce harbour liaison forum and has about 40 years of experience in the logistics industry, estimates that copper exports from neighbouring countries constitute about 5% of all exports through Durban.

He says that in itself is not such a big loss, but neighbouring countries are increasingly seeking alternatives due to the inefficiency of South African rail and harbour operations.

“Earlier all DRC copper exports went through Durban, but it has already started shifting to Dar es Salaam and Beira,” he says, adding that manganese and chrome that used to be exported through Richards Bay is increasingly going through Maputo.

He agrees that the Lobito corridor would have been built at some stage and that frustration regarding exports through South Africa has probably resulted in the plans being executed now.

“Remember, copper is non-perishable and therefore less sensitive to delays than fresh produce,” says Walwyn.

Citrus producers along the Orange River are increasingly using the Walvis Bay harbour for exports instead of Cape Town, despite the increased distance, because a week’s delay can be catastrophic for them.

According to Havenga the copper exports from the DRC are relatively small in volume.

“Our railway and harbours don’t need it. As it is currently being trucked to Durban, the road freight industry created the necessary capacity and that will be redundant if it is exported through Lobito in future.”

He says the road freight industry is however also asking for a turnaround in the rail service. There are currently many “fly by nights” trying to capitalise on the poor state of rail and they are giving the road freight industry a bad name, he says.

Havenga believes the Transnet rail service has reached a turning point – there was already a big improvement in the second half of 2023 – but argues that the development of east-west corridors in Africa is a positive move.

Havenga says South Africa must focus on the recovery of its rail system, especially with regards to exports of coal through Richards Bay, iron ore through Saldanha, manganese through Gqeberha, among others, and the logistics route between Gauteng and Durban.

4. Policy uncertainty scares off investors:

Policy uncertainty in South Africa scares investors and prevents them from investing in the country, hobbling economic growth. 

This is feedback from Investec South Africa CEO Richard Wainwright, who told CNBC Africa on the sidelines of the World Economic Forum that uncertainty is the main issue on the continent. 

“The issues are around uncertainty, particularly about policy frameworks. The continent and South Africa in particular have a lot of work to do on that front,” Wainwright said. 

Increased uncertainty results in increased volatility in financial markets, which results in investments not being made. 

He explained that high levels of uncertainty have a chilling effect on investment deals, with decisions effectively being put on hold. 

“It is policy certainty that will be the key driver for investment,” Wainwright said. 

Another issue he noted that inhibits investment in South Africa and the continent is the onerous regulatory burden companies face. 

For economic growth to take off, it has to become easier to do business in South Africa and the continent, while it must also be made easier for goods, people, and ideas to flow.

South Africa’s policy uncertainty has steadily increased over the past decade, resulting in lower investment, higher unemployment, and sluggish economic growth.

This was revealed by the North-West University (NWU) Business School in its quarterly Policy Uncertainty Index.

The index showed that uncertainty eased to 65.5 in the fourth quarter of 2023 from 71.8 in the third quarter.

Levels above 50 reflect growing policy uncertainty, while levels below 50 indicate policy uncertainty is declining.

The report said policy uncertainty would only drop below 50 when positive forces significantly outweigh negative forces.

In its report, the NWU Business School said there are strong correlations between policy uncertainty and negative economic outcomes.

High levels of policy uncertainty lower investment, employment and, subsequently, economic output. This results in sluggish economic growth in South Africa.

5. Top-performing private schools in SA:

Despite their costly tuition fees, private schools in South Africa are known for their prestige and excellent results year-on-year – but some are the cream of the crop.

The perception that private schools provide a superior education is why many parents opt to send their children to these schools in South Africa.

Private schools generally offer smaller class sizes, more individual attention, and access to highly qualified teachers due to having more funding than their public counterparts.

These differences seemed to reflect in their 2023 matric results, with the Department of Basic Education publishing the final National Senior Certificate results for the matric year showing a 2.8 percentage point increase in the pass rate to 82.9%.

Reaching above this, on Thursday (18 January), the IEB announced an overall pass rate of 98.46% for its 2023 National Senior Certificate (NSC) examinations – a slight uptick from the 98.4% recorded in 2022.

The IEB and its board congratulated the matric class of 2023 and extended congratulations to their teachers, parents, guardians, and all those who supported the learners in their studies.

Interestingly, all the top 10 independent girls’ schools on this list achieved more distinctions per candidate than almost all the top boy’s schools – with the exception of St John’s College.

The same is true for most of the co-educational schools – with the top six achieving over 3 distinctions per candidate, on average.

St John’s College topped the all-boys schools, reporting an average of 4.13 distinctions per candidate – topping the list of all top-performing private schools in the country.

Hilton College followed this in second with 2.8 distinctions and St Benedict’s College in third with 2.25.

Comparatively, Roedean School for Girls and Kingsmead College tied as the top achievers among the all-girls schools – reporting an impressive 3.8 distinctions per candidate.

This was followed by St Andrew’s Senderwood (3.7) and St Mary’s Waverly (3.7), tied in second place and Durban Girls’ College (3.6), which make up the top five girls’ schools.

Co-educational schools also produced some notable results, with SAHETI and Redhill School topping the lot with an average of 4 distinctions per candidate. Crawford College Sandton is third with 3.7 distinctions, while Herzlia High School (3.50) and King David Linksfield (3.36) rounded out the top five.

Combining these subcategories to list the top 10 best-performing private schools, the ranking comprises all-girls and co-educational schools, without any top all-boys schools.

The top 10 overall best-performing schools are:

  1. St John’s College – all-boys
  2. SAHETI – co-educational
  3. Redhill School – co-educational
  4. Roedean – all-girls
  5. Kingsmead College – all-girls
  6. Crawford College Sandton – co-educational
  7. St Andrew’s Senderwood – all-girls
  8. St Mary’s Waverly – all-girls
  9. Durban Girls’ College – all-girls
  10. Herzlia High School – co-educational

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

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