News in South Africa 23rd June:
1. Renewables put on hold:
As South Africa ramps up its roll-out of renewable energy, it is now confronting the same challenge faced by countries across the globe. Depleted grid capacity in resource-rich areas is making it increasingly difficult to connect new renewable energy projects to the grid, particularly in the Northern Cape, Eastern Cape and Western Cape.
‘The simple truth stands that if there is no grid capacity in the country, there is no more renewable energy and there is no future for renewable energy. This will continue to cripple the energy system and our economy.”
These were the words of Niveshen Govender, CEO of the South African Wind Energy Association (Sawea), after commemorating Global Wind Day during a panel discussion hosted in Cape Town on 15 June by renewable energy company Red Rocket.
Sawea believes there is massive potential for wind energy, with South Africa now considering the feasibility of offshore wind and wind-powered green hydrogen production.
Govender said: “This increases the South African potential for new wind generation to more than 100 [GW] in the next 10 years. On Global Wind Day, it is important that we encourage governments, businesses and individuals to invest in wind, support research and development, and embrace policies to accelerate the deployment not just in South Africa, but globally.”
However, the biggest stumbling block remains the depleted grid capacity to connect new renewable energy plants in resource-rich areas around the country.
Depleted grid capacity
According to Eskom’s current Generation Connection Capacity Assessment (GCCA), grid capacity in the Northern and Western Cape is fully depleted, while the Eastern Cape has worryingly low grid capacity.
There are variations of available capacity in each of the other provinces, with a total remaining grid capacity of about 22,754MW.
Grid access requires independent power producers (IPPs) to apply for a cost estimate letter – this provides a good indication of the interest in grid access in each province. Eskom said the interest in each province currently exceeds grid capacity, except for Gauteng, Mpumalanga and KwaZulu-Natal.
Eskom’s Transmission Development Plan 2023-2032 is aimed at supporting grid expansion for both public and private IPP projects, which is aligned with the amount of renewable energy that needs to be connected. However, Govender said the timelines didn’t seem to align.
He said although there was a strong policy framework to support the roll-out of renewable energy, and wind energy specifically, they continued to choke on implementation.
2. Business confidence collapses:
Business confidence across several sectors in South Africa has declined to extreme lows, with the latest ‘other services’ survey from the Bureau of Economic Research (BER) further highlighting the glum outlook.
According to the Q2 2023 Other Services survey, business confidence dropped by a further two points from Q1 2023’s 45 points to 43 points – following a record 23-point drop in that quarter.
The BER’s confidence index ranges between zero and 100, with zero representing no confidence at all and 100 representing extreme confidence, where all participants are completely satisfied with current business conditions.
Currently, only four out of 10 business executives in the other services sector are satisfied with their prevailing business conditions.
“The decline in confidence was supported by a further downtick in activity. However, despite the decline, the current level of activity is normally associated with a somewhat higher level of confidence,” the BER said.
“Based on comments by some of the respondents, a challenging business environment amid intense load-shedding during the survey period, as well as high borrowing costs while inflation remained elevated, contributed to the negative sentiment.”
3. Salaries fall:
Average salaries in South Africa declined last month as rising inflation, low business confidence levels and rolling power cuts continued to weigh on the labour market, a BankservAfrica report showed.
The average nominal monthly salary measured in the BankservAfrica Take-home Pay Index slipped 2.7% to R14 457 in May from the year before, while take-home pay adjusted for inflation fell 8.8% to a record low.
“An environment of such low confidence is not conducive for job creation or comfortable wage increases,” said Elize Kruger, an independent economist.
The country is also contending with a 33% unemployment rate and the nation’s economic outlook remains bleak.
“The job market and salary adjustments are likely to remain lackluster for the remainder of the year, a scenario that could only exacerbate the unemployment crisis,” Kruger said.
4. Tax season opens up:
More than three million taxpayers will again receive an automatic assessment from the South African Revenue Service (Sars) this year. The filing season for the 2022/23 tax year kicks off on 7 July.
Sars has made several changes to the process and has published clear guidelines for taxpayers on how to respond to an auto-assessment and what to expect when they are required to file their own returns.
A major change for auto-assessed taxpayers is the time they have to revise their returns if they disagree with the assessment.
Last year taxpayers only had 40 business days from the date of the auto assessment. Sars has now extended this period to coincide with the normal filing due date for non-provisional taxpayers.
The filing dates for non-provisional taxpayers starts on 7 July at 20:00 and ends on 23 October.
“This will give those in the auto-assessment population more time to file a return if they wish to edit their auto-assessments,” says Sars.
Between 1 July and 7 July 2023, taxpayers will be notified by SMS or email if they were selected to receive an auto assessment. When people do receive an SMS or email, they should review their assessment to make sure it is correct.
5. Commodity boom expected:
FNB Wealth and Investments’ Wayne McCurrie said it is close to the bottom of the commodity cycle and is now very bullish on commodities.
“We are probably right at the bottom of the commodity cycle. It always happens when interest rates peak and economic growth slows,” he said.
Commodity shares take a bit longer to recover with looming interest rate cuts but should start to recover soon.
“When global growth picks up, it is going to happen in an environment where there is virtually no new supply of commodities,” he said.
It is because the commodity companies faced a very challenging time in 2015 and, since then, spend virtually no money on new projects.
In recent years, many mining companies favoured paying dividends instead of investing excess cash in expanding their operations.
McCurrie said increased capital expenditure (Capex) must happen to satisfy the expected demand and, therefore, expects a boom in the commodity sector.
South Africa, which is a large exporter of commodities, is expected to benefit from increased demand.
Gold, ores, and basic metals form 27.5% of South African exports and contribute significantly to South Africa’s gross domestic product (GDP).
Due to the significance of commodities within South Africa, many economists look to the commodity cycle to predict economic growth and slumps.
All information sourced from articles posted by: DailyMaverick, BusinessTech, Fin24, Moneyweb, and DailyInvestor.
