News in South Africa 23rd August:

1. Eskom gears up for renewables:

Eskom is working with the South African Renewable Technology Centre (SARETEC) to upskill its workers and adapt to the shift to renewable energy, moving away from coal power stations.

Eskom gears up for renewables
Image taken by: Singkham

On Monday (22 August), the national power utility signed a memorandum of agreement with SARETEC to develop renewable energy artisan skills and support the implementation of the Just Energy Transition (JET) Strategy.

The JET Strategy places importance on the ‘transition to lower carbon technologies,’ while taking the workforce into account, said Eskom.

“Eskom has a pipeline of clean energy projects at various stages of development and recognises that there is a dire lack of skills along the value chain,” it said.

SARETEC is an initiative of the Department of Higher Education and Training and focuses specifically on accredited training in the renewable energy industry – including wind and solar.

It will support Eskom for the next 36 months to establish a similar renewable energy training facility fit for the purpose of training artisans and technicians at Eskom’s Komati Power Station and qualifying beneficiaries from the surrounding communities in the Mpumalanga region.

Eskom said that as a member of both the South African Wind Energy Association (SAWEA) and the South African Solar Photovoltaic Industry Association (SAPVIA), it would continue to draw ongoing support from them.

“Given the accelerated global movement towards investment in a clean energy transition, there is a need in South Africa to upskill, retrain and develop a workforce to take full advantage of the opportunities presented by this transition,” said Eskom.

2. Backtrack on school property rates:

The City of Joburg on Monday announced that it will limit the increase in property rates for institutions formerly categorised as “educational” in terms of the rates policy to 5% from 1 July this year.

The city earlier indicated that it would defend court applications to review and set aside a council decision that resulted in increases of between six and 10 times the amounts billed for such institutions in the previous financial year.

It was reported late in June, that the council approved a change in its rates policy to remove the “education” category, taxed at a rate of 0.25% of the rate for residential properties.

This meant that public schools would be taxed as “Public Service Purpose” properties and have to pay 1.5 times the amounts paid by residential property owners. Private schools would be rated as businesses at 2.5 times the residential rate.

The recategorisation took effect on 1 July and schools have already started getting their hugely increased bills.

Christo Bokhorst, a director at Rates Watch, said at the time that a private school valued at about R70.5 million that had been paying just over R12 000 per month in the previous financial year would have to pay more than R126 000 per month when classified as businesses.

Even if it qualified for the 25% rebate the city offered, it would still be liable for almost R95 000 per month in property rates.

The rates bill of a public school with the same valuation would increase from R12 000 per month to almost R76 000 per month, according to Bokhorst’s calculations.

According to Phalatse the city’s legal and contracts department has requested a meeting with the legal counsel of the parties that have brought the court applications and will put forward a proposal for their consideration.

“The City hopes that in reaching out with a win-win solution, an end can be brought to the matter, along with a commitment from the City to address the issue more permanently in the next fiscal year.”

3. Greylisting unavoidable:

SA will very likely be greylisted despite efforts by the Treasury to prevent the country from joining the ranks of nations deemed to have inadequate protections against money laundering and terrorist financing.

That is the view of Standard Bank CEO Sim Tshabalala, who warned in July that SA’s potential greylisting by the Financial Action Task Force (FATF), an intergovernmental body that assesses countries’ ability to combat illicit financial activity, would be worse than a sovereign credit downgrade.

4. Delivery fee woes:

South Africa’s online shoppers are increasingly unhappy with high delivery fees, either switching to online retailers with cheaper or free shipping, or just walking away from shopping carts when they see how much shipping will cost.

This is according to the 2022 South African Digital Consumer Experience Report, based on a survey completed by 2,000 respondents.

According to the report, high shipping fees increasingly cause customers to ditch their cart when it’s time to check out, at a rate 14% higher than recorded in the previous year.

“A possible cause of this is that with more of us shopping online and doing so more frequently, we have a greater awareness of who does – and doesn’t – offer free or cheap shipping. Costs are now becoming a key factor in the consideration process,” said the authors.

In addition to high delivery fees – as one of the more significant reasons customers abandon their cart at checkout at the last minute – other factors include payment failure (39%, from 26% in 2021), poor site design (36%), and slow expected delivery.

Polled customers added that cheaper (or free) shipping, faster delivery, and more specific dates and times of delivery are all crucial factors in encouraging them to complete a purchase online. However, an added benefit would be a click-and-collect solution offered by retailers such as Takealot, Woolworths, and TFG.

“The faster you deliver, the higher the chance of customers checking out. The best play is to give the customers maximum choice – be it same day, next day, evenings, weekend, two hour or click and collect. Let the customer choose.

“With the right choice, customers are typically happy to pay a premium for express delivery,” said co-head of TFGLabs Claude Hanan.  

On the bright side, the overall abandonment rate has decreased. Last year, 76% of the respondents pulled out of buying an item at checkout.

5. Dodgy debts of schools:

A primary school in Pimville serving roughly 1 000 pupils recently saw its bank account seized while fending off a multi-million rand claim from Sasfin Bank. Its state subsidy for the year was subsequently paid into the seized account, leaving the school effectively defunded.

The independent but state-subsidised St Peter Claver Primary School is among hundreds of schools and colleges, as well as small businesses, that have had their rental agreements for IT equipment ceded by financial middlemen to Sasfin’s South African Securitisation Programme (SASP).

(Securitisation is the financial practice of pooling various types of contractual debt and selling their related cash flows to third party investors.)

Key takeaways

  • Seemingly questionable debts hobbling a poor school in Soweto have found their way into the investment bank’s vast securitisation programme.
  • Sasfin seemingly paid scant attention to the dubious underlying contracts on which the debt was incurred.
  • This cautionary tale of alleged corruption and opportunism has now resulted in the financial Goliath pursuing a hapless David, putting the school at risk.

School debts make up a surprisingly significant part of the R3,6-billion SASP programme which buys up and converts office equipment rental agreements into asset-backed debt securities.

Sasfin claims that schools make up only 5% of its overall securitisation business, but the proportion is far higher in specific securities studied by amaBhungane, amounting to roughly 10%. By way of example, one single security generated in December 2017 contains 198 school debts totalling R90-million.

In response to questions the bank claimed that schools are no more vulnerable to default than businesses but conceded that it “experienced a small decline in credit performance of schools during the Covid lockdown which was somewhat exacerbated by delays in payment of government grants over the last couple of years”.

All information sourced from articles from: BusinessTech, Moneyweb, BusinessLive, Business Insider, and amaBhungane.

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