News in South Africa 22nd September:

1. All talk no action for energy crisis:

Hours after Cyril Ramaphosa held a Cabinet meeting to discuss the country’s energy crisis, the president and his ministers were still deliberating on reports presented by Public Enterprises Minister Pravin Gordhan.

All talk no action for energy crisis
Image taken by: Sebastian Sørensen

The president held a scheduled Cabinet meeting on Wednesday, which was expected to discuss various issues, but the country’s energy crisis was the most important. 

Ramaphosa cut short his visit to the United Kingdom on Monday to deal specifically with the country’s load shedding crisis. 

The Cabinet meeting began at 08:00 – but, by late afternoon, Cabinet spokesperson Phumla Williams said the executive was still deliberating. 

She said a comprehensive outline of the government’s response would be provided after interventions had been mapped out. 

Williams said the government was committed to finding a solution to load shedding. 

“Cabinet also discussed the problem of load shedding that has disrupted the economic activities of businesses over the past week and inconvenienced households in the country.

“Cabinet expressed regret that intermittent load shedding is happening when the government is vigorously engaged with the interventions announced by President Cyril Ramaphosa in July 2022 to overcome the country’s surmountable energy crisis.

JHB rejects Eskom’s demand for 38% tariff hike:

The Multi-Party Government in Johannesburg says it rejects Eskom’s request to the National Energy Regulator of South Africa (NERSA) for a 38.1% electricity tariff increase for the 2023/24 financial year.

Environment and Infrastructure Services Department (EISD) MMC, councillor Michael Sun, and officials from City Power attended the NERSA hearings on behalf of the City of Joburg.

“Whilst as a City we have full appreciation that Eskom must be financially viable, but this must not be achieved at the detriment of the residents of Johannesburg,” Sun said.

“If Eskom’s proposed application of a tariff hike of 38.1% is approved, City Power would have little room but to pass-through the costs to its customers. This would place further financial burdens on residents within the City of Johannesburg.”

The proposed tariff hike, which is far higher than the current inflation rate, would have a devastating impact on the residents of Johannesburg and on the ailing local economy, further eroding business confidence and disrupting the city’s fragile economic recovery, it said.

2. SARB interest rate decision today:

The rand was steady in early trade on Thursday before the central bank’s interest rate decision later in the day.

At 0615 GMT, the rand traded at R17.76 against the dollar, less than 0.1% weaker than its previous close.

The South African Reserve Bank (Sarb) will announce its latest monetary policy move at a news conference starting around 1300 GMT, a day after the US Federal Reserve delivered another 75 basis point (bps) rate hike.

Economists polled by Reuters predict the Sarb will also raise rates by 75 bps as part of efforts to bring inflation back within its 3%-6% target range.

Data on Wednesday showed August inflation eased to 7.6% year on year from 7.8% in July, still well above the bank’s target although suggesting inflation may have passed its peak.

3. Income support probable:

Finance minister Enoch Godongwana said an announcement on income support for the vulnerable will be made in the medium-term budget policy statement (MTBPS) to be tabled in parliament on October 26 if Treasury is ready by then.

“We are looking at different income support measures, and it is probable if we are ready we can by October 26 make some comments in that regard,” the minister said in parliament on Wednesday.

There has been much debate on the different types of income support to replace the R350 a month social relief of distress grant when it terminates at the end of March 2023. While there is strong civil society support for a universal basic income grant, neither Treasury nor business believes it is affordable given SA’s fiscal constraints.

4. Demand for credit surging:

New data from consumer credit reporting agency TransUnion shows that consumer demand for credit is surging, in spite of the second lowest consumer confidence levels in three decades, rising inflationary pressure and a high-interest rate environment.

TransUnion’s Q2 2022 South Africa Industry Insights Report showed an increase of 37.9% in new credit card accounts over the same period last year. At the same time, delinquencies are stabilising across major consumer credit products, and secured lending performance has stabilised, although there are signs of a slowdown in home buying activity, the agency said.

The latest analysis covers a period of rising inflationary pressure, a high-interest rate environment, and additional macroeconomic factors exacerbated by conflicts abroad. The report found a number of notable trends within the South African consumer credit industry pertaining to new business volumes, delinquencies and the level of outstanding debt.

Vehicle loans

Originations on vehicle finance loans are up 3.1% YoY, to 132,000 in Q1 2022. Current volumes’ originations are 0.9% below pre-pandemic levels (Q1 2020). From an age distribution perspective, Millennials accounted for 47% of new business, followed by Gen X at 34.2%, said TransUnion.

Gen Z consumers grew by 36% YoY, albeit off a lower base. In terms of risk, consumers with a credit score above 721 (Super Prime) contributed 26% of originations, with actual volumes up 15.2% YoY. The average new loan amount increased by 10% YoY, surpassing the previous high in Q4 2021 to R362,000.

The increase in new loan amounts aligns with the TransUnion Q1 2022 Vehicle Price Index findings, which reflected price inflation for new vehicles at 4% and used vehicles at 7.9% compared to Q1 2021, with the ratio of used vehicles sold to new at 2.2 to 1.

Home loans

Home loan origination volumes increased marginally compared to the prior year, but balances on home loans have decreased, said TransUnion.

New home loans were up 1.3% YoY and 15.7% below the prior quarter at 45,000 as of Q1 2022.

Despite the increase in origination volume, the market is expected to slow due to rising inflation and interest rate pressure deterring consumers from large purchases. The average new loan amount of R812,000 is down 5.2%, despite home prices continuing to increase, which indicates consumers are likely purchasing more affordable homes.

Millennial consumers are the primary contributors to new business accounting for 52% of new business volume, said the credit expert.

The findings are in the context of the second lowest consumer confidence reading in three decades, second only to Q2 of 2020 at the peak of the initial outbreak of the pandemic. That reading signalled a corresponding marked slowdown in consumer spending in the same months, with a 2.5% year-over-year (YoY) decline in retail sales from a year earlier in June.

Consumer sentiment was primarily impacted by the highest inflation rate in 13 years, as well as increased interest rates. This was reflected in the Q2 TransUnion South Africa Consumer Pulse Study published in July, with 60% of households surveyed indicating that they were focused on cutting back on discretionary spending.

Sourced from: BusinessTech

5. 4 Day work week progress:

A coalition of South African organisations, including Productivity SA, is now recruiting for a “pioneer pilot” in 2023, when employees at participating companies will work 80% of their current hours for 100% of their current pay.

These companies, say the promoters of the plan – and a growing body of research – can expect to still achieve 100% of their current output, while saving money. They may also help solve unemployment, make life easier for single mothers, and contribute to reducing climate change, among other benefits.

If your boss will need some convincing about all of that, the local 4 Day Week organisation would like to help. And then it would like to help your boss convince the board, or equivalent oversight body, that the change should be permanent.

That, current experience suggests, may not be hard. One of the world’s biggest four-day work week trials, in the United Kingdom, just hit its halfway point this week. Of the 70 companies participating, 86% already plan to keep the four-day schedule when it ends, citing the same benefits generally reported in such experiments: happier people, better output, and lower costs.

“I would argue this is not actually rocket science,” Andrew Barnes, author of the book “The 4 Day Week“, told a launch webinar on Wednesday. “If you have a more engaged, more empowered, more focused workforce, they will deliver more output than one that isn’t.”

Barnes, and the local partners working with his global organisation that promotes the four-day concept, say the typical arguments against the idea have all been knocked down in trials. Manufacturing companies have seen the benefits of shorter hours, as have organisations that bill by the hour, such as law firms.

For some, the benefits manifest in fewer sick days, which means fewer temporary workers who have to be brought in at a high cost. Other companies have lower staff turnover and a lower cost of recruitment. 

In South Africa, says Barnes, electricity outrages make it particularly attractive to squeeze more work into less time, so that “when load shedding hits, you’ve actually made up for that time”.

As for unemployment, one thesis is that four-day weeks encourage some organisations to hire more people using the money it saves on overheads due to a compressed work week. 


All information sourced from articles posted by: News24, Moneyweb, BusinessLive, BusinessTech, and Business Insider.

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