News in South Africa 24th January:
1. Over 1 900 business shut down in 2022:
Stats SA has published the latest liquidation data for South Africa, showing that company liquidations shot up over 30% in December 2022 year on year – although overall closures for the full year were slightly lower than the year before.
According to Stats SA, South Africa saw 159 liquidations in December 2022, up 30.3% from December 2021.
Most of the liquidations were voluntary (V), with only seven being compulsory (C) or ordered closures.
For the full year, 1,907 businesses and companies were liquidated, down from 1,932 that had to shut their doors in 2021.
Most of the businesses that closed in the country were in financing, insurance, real estate, and business services, followed by trade, catering and accommodation.
The community, social, and personal services industries were also hit hard by liquidations – but a large portion of companies that shut down were also unclassified.
According to the director and head of the insolvency and Business Rescue Practice group at Werksmans Attorneys, Dr Eric Levenstein, the data from 2022 paints a bleak picture for businesses in 2023, with the year already off to a rocky start for many in the face of extended periods of blackouts due to load shedding.
With the prospect of higher interest rates, low growth and still high inflation, many companies already face corporate failure at the start of the year, he said.
“Insolvency and business rescue practitioners will be kept busy as financial distress continues to have an impact on companies not being able to generate sustainable revenue in continued challenging trading conditions,” Levenstein said.
2. Nersa hike challenged:
Build One South Africa (Bosa), the United Democratic Movement (UDM) and the metalworkers union Numsa on Monday filed court papers to set aside energy regulator Nersa’s approval of Eskom’s plan to increase the electricity tariff.
Earlier in January, Nersa gave Eskom the go-ahead to hike electricity prices by 18.65%, effective from the start of April.
The Democratic Alliance and civil society organisation Not In My Name International also confirmed that they will be taking the government to court over the tariff increase.
Bosa’s leader Mmusi Maimane said it is unfair for South Africans to be subjected to high electricity prices amid rolling power cuts.
Maimane said he hoped the judiciary acts in the people’s best interest by reviewing Eskom’s implementation of a double-digit electricity price increase.
“We need a government that is accountable and our action in court requires the state to be held accountable for its actions on load shedding.”
The three organisations say they are to request the hearing to take place on 28 February 2023.
Moreover, President Cyril Ramaphosa also made a clarion call for Eskom to refrain from implementing the electricity tariff hike.
3. Rejected wind energy projects need saving:
The South African Wind Energy Association (Sawea) wants international experts to assist in salvaging the 23 wind generation projects that failed to achieve preferred bidder status in the sixth bid window of the government’s Renewable Energy Independent Power Producer Procurement (Reippp) programme.
The bidders have collectively invested about R100 million in these projects, just to be left out due to a lack of connection capacity in Eskom’s transmission grid in the Northern, Eastern and Western Cape.
This came as a shock since they had relied on Eskom’s Generation Connection Capacity Assessment, which was published in March 2022 and indicated that there was enough capacity.
In the meantime, projects aimed at power generation for private clients took up all the available capacity and overtook the bidders in the public procurement process.
This resulted in only five solar projects – with a mere 860MW of combined generation capacity – being announced as preferred bidders.
This after President Cyril Ramaphosa, as part of his energy emergency plan, in July last year increased the initial 2 400MW bid round to 4 200MW in an effort to add generation capacity to the grid to address load shedding.
Failure
According to Eskom, all available connection capacity in the three Cape provinces has been taken up, which would mean the total investment in these projects will be wasted. They were positioned where the wind resources are best and cannot be moved to other locations.
Niveshen Govender, CEO of Sawea, says the industry is asking for the appointment of a consultant experienced in managing constrained grids to advise Eskom on ways to integrate these projects into the network.
He notes that countries in Scandinavia as well as Australia and the state of California in the US have dealt with the same challenge and South Africa can learn from them. “The most difficult thing will be to get Eskom to agree to it and share the information.”
Govender adds that the industry is prepared to carry the cost. If Eskom agrees, it can be done within six months, he says.
Time is of the essence
The timeframe is important, because the authorisations for the 23 projects, including environmental approval, are only valid for another year. Thereafter they lapse and the time and money spent will have been in vain.
4. Emerging markets favored by investors:
The global investment tide is turning in favour of emerging markets, delegates at the World Economic Forum in Davos heard on Thursday, with JSE CEO Leila Fourie believing that SA is set to be one of the beneficiaries.
Last year was brutal for riskier assets, as the war in Ukraine sent a shockwave through markets, and the MSCI ACWI, a broad gauge of developed and emerging markets, closed almost 20% lower. Countries like India and Turkey bucked the trend, however, with the former recording 6.9% GDP growth for 2022 and the latter expected to reach at least 5%.
Fourie and other members of a panel discussing emerging markets on Thursday said three elements are driving the positive sentiment, including hopes that the US Federal Reserve will be able to moderate the pace of monetary policy tightening as inflation eases.
“We’ve now come out of a confluence of very serious problems, which devalued or created very negative valuations and a risk-off attitude towards emerging markets,” said Fourie.
Even though the consensus is that the US will experience a softer landing instead of a recession, expectations are that it will only record growth of around 1.8% this year, which would be harmful to the dollar and drive investment flows to the emerging markets, she said.
Brazilian billionaire André Esteves said another contributor to this positive sentiment was a shift of many emerging markets from being a growth story for investors, to being a value-for-money one. Bonds and shares in these countries are undervalued, he said.
In October, the International Monetary Fund (IMF) projected a 3.7% GDP growth for emerging markets and other developing countries in 2023., while it expects advanced economies to grow by 1.1%.
Unfortunately, SA isn’t expected to grow like other emerging markets. The IMF forecasted a 1.1% GDP growth, and that was before the current bout of load shedding.
But more positively, some markets, like Russia and other parts of Eastern Europe, have become unfeasible for investment. SA is also more likely to attract investors looking for fiscal discipline, as it is one of countries whose sovereign debt position looks better than before the pandemic.
“South Africa is in a much better position now than prior to the pandemic,” said Fourie. “Of course, over the recent past, with the rising dollar, the debt levels have increased. As we come into what would hopefully be a soft landing and the dollar devalues, that will, of course, provide some relief,” she added.
Fourie told the conference delegates that SA was also in an advantageous position as geopolitical tensions continue to affect the supply chains of many products. SA, as a member of the BRICS bloc, has kept trade ties with Russia, while it is also a net exporter of food, offering the prospect of another boost.
“Those countries that are less dependent on gas – and SA, in this instance, is more dependent on coal for energy on a relative basis – will likely gain. And so will oil exporters, many of whom are in emerging markets,” said Fourie.
5. Crypto advertising regulations:
South Africa’s Code of Advertising Practice, used by the Advertising Regulatory Board (ARB) to ban specific ads or sanction advertisers who overstep, now has a specific section to deal with crypto assets.
And it says those selling bitcoin and its fellow crypto tokens have to be very clear and unambiguous about the risk of losing money.
The section on crypto joins specific rules for a long list of other industries, including work-from-home schemes, charities, property, and cellphone services, which may pose unique risks to consumers if improperly promoted.
The crypto rules were created alongside companies in the industry, lead by Luno, which said it wants buyers to enter the crypto market with their eyes open.
Other rules state that:
- any crypto asset or service must be explained “in a way that is easily understandable for the intended target audience”
- benefits and features must be presented balanced against risks
- any claim about returns or forecasts must be backed up by evidence, with explanations of how forecasts are calculated
- a reference to past performance must include the warning that it is not indicative of future performance
- advertising can’t promote borrowing money to buy crypto assets, unless the advertiser is a registered credit provider
All information sourced from articles posted by: BusinessTech, EWN, Moneyweb, Fin24, and Business Insider.
