News in South Africa 23rd September:
1. Load shedding threatens food supply:
Agri SA says it has requested an urgent meeting with Eskom CEO Andre de Ruyter to discuss the outlook for load shedding in the country, ahead of the summer crop planting season.
The federation of agricultural organisations says it fears the current state of energy supply in the country – should it continue at this level – will have harsh implications for local food production and may also jeopardise export agreements.
“The greatest threat of load shedding is to the country’s food security, as crops fail for lack of irrigation or farmers plant less for fear of losses,” Agri SA said in a statement.
“The country will only experience the consequences of load shedding in the future, as the produce anticipated from this summer’s crop fails to materialise. The result will be food shortages and high prices.”
Agri SA acknowledged Eskom’s efforts to stabilise the grid through the launch of its power purchase programme earlier this week, which looks to procure 1 000 megawatts (MW) of power from independent producers and neighbouring countries. However, the industry says it needs a more detailed longer-term plan to help it plan for the approaching season.
Cost implications
Further, Agri SA says load shedding has had a significant impact on the productivity of farmers, with most farmers being forced to work fewer hours and pour more money into covering additional labour costs.
“Blackouts also disrupt cooling and packing with ramifications for food quality, and they pose a health hazard for humans and animals alike, as they disrupt access to clean water for consumption and stop wastewater treatment.”
“Electricity is a key agricultural input. According to the Department of Agriculture, Land Reform and Rural Development (DALRRD) statistics, the agricultural sector spent approximately R9 billion on electricity in 2021,” Agri SA said.
“This is more than 7% of the sector’s expenditure on intermediate goods and services. A reliable power supply is especially critical for the sector’s irrigation and water treatment.”
Agri SA further warns that load shedding means bad news for the industry’s international relationships, as persistent power cuts interfere with cold chain protocols mandated by foreign markets and can result in late shipments.
“These outcomes will diminish South Africa’s standing as a reliable source market,” Agri SA adds.
2. Repo rate hiked by 75 basis points:
The South African Reserve Bank’s Monetary Policy Committee (MPC) has hiked the repurchase rate (repo rate) by 75 basis points.
The increase means that the repo rate will now be 6.25% per year from 23 September 2022, with prime now at 9.75%.
The MPC made the decision during its meeting on Wednesday. This was the fifth consecutive increment following a two 25 basis points hike in November and in January. The repo rate was hiked by 50 basis points at the May meeting. The MPC upped the ante with a 75 basis point rise at its July meeting.
Addressing media on Thursday, Reserve Bank Governor Lesetja Kganyago said three members of the MPC preferred the announced increase.
“Two members preferred a 100 basis points increase,” he said.
While the vote split indicates a more hawkish bias among the panellists, the benchmark is now close to 6.36% — the implied year-end 2023 rate according to the bank’s quarterly projection model.
Kganyago stressed that the model is just a broad policy guide, but it does signal the committee is front-loading its fight against inflation, and there may be room to cool the hiking cycle, it said.
3. Eskom – diesel shortage:
As Eskom grows more dependent on diesel to keep the lights on, it now faces delivery and supply challenges as PetroSA struggles to meet demand.
While the group has assured South Africans that there is no diesel shortage in the country, it says it is becoming increasingly more difficult to procure the supply needed for Eskom’s generators.
Eskom, meanwhile, could not confirm when diesel stocks would be replenished as severe load shedding persists.
4. Tax base growing:
1.1 million South Africans who earn R500,000 or more per year are responsible for 73% of all taxes in the country, statistician Garth Zietsman said.
In an article written for the Free Market Foundation, Zietsman said adults who earn R500,000 or more make up 19.3% of taxpayers.
This group earn 53.5% of all income subject to income tax and pays 76.5% of all assessed income tax.
Assuming they accounted for nearly all the business taxes and spent most of their after-tax income, they ended up paying about 73% of all government revenue.
Zietsman’s calculations suggest that the top one-fifth of earners spend close to half their productive efforts involuntarily working for the government.
On average, 22% more of their income goes toward government revenue than is the case for the country as a whole. Therefore, about 46% of their income goes to the government.
It implies that the other four-fifths of income earners spend one-fifth of their lives working to keep the state afloat.
SARS commissioner Edward Kieswetter recently commented on the issue, saying fears that the personal income tax base is dwindling because of unemployment and emigration are exaggerated.
Kieswetter told Financial Mail that South Africa’s tax base is growing and that financial emigration is inconsequential in tax collections.
He explained that personal income tax has been resilient and outpaced South Africa’s GDP growth in recent years.
The SARS commissioner said the country’s tax system is benefitting from people earning more and higher compliance rates.
However, speaking at the WBS Leadership Dialogues, Kieswetter admitted that there are factors that continue to erode South Africa’s tax base.
These factors include tax emigration, tax crime, and tax planning – technically known as transfer pricing and base erosion.
He said tax emigration is small in relation to tax crime, which accounts for billions in tax losses yearly.
Kieswetter added that South Africa’s tax base increased by 3.5 million people. It resulted from adding people who should be registered but are not and ensuring taxpayers are registered for all tax types.
5. Holistic approach to curriculum:
The department of basic education plans to offer grade 10, 11 and 12 learners a three-stream curriculum – offering academic, vocational and occupational subjects.
The department said the plan aims to encourage pupils to move away from pursuing purely academics and to consider vocational or occupational training because not all matrics will go on to study at higher education institutions.
All information sourced from articles posted by: Moneyweb, BusinessTech, Fin24, Daily Investor, and TimesLive.
