News in South Africa 24th May:

1. Grocery costs spike:

South Africans are cutting down on groceries amidst challenging economic conditions.

Grocery costs spike
Photo by Gustavo Fring

Stats SA will publish the latest Consumer Price Inflation numbers on Wednesday (24 May), with economists anticipating a slight drop to 6.9% from 7.1% in March.

Inflation has remained sticky at elevated levels, sitting outside the South African Reserve Bank’s target range of 3% to 6%. The main driver behind high inflation is food and non-alcoholic beverages, which are currently sitting above 14% inflation.

Because South Africans are  facing such high levels of food inflation, many have forced to reduce how much they spend on certain items.

TrendER/infoQuest, a South African online research company, asked 300 South Africans if they had cut back on grocery spending in the last six months, and which items got cut from their baskets.

47% of consumers said they had to cut back on snacks, biscuits, sweets and desserts. Alcoholic beverages saw a 42% drop, while meat, chicken and fish saw a 41% drop.

Cold drinks/beverages (39%) and dairy products (33%) completed the top five.

Fruit and vegetables (18%) and pasta/rice (15%) were the least affected categories; however, one in five consumers still said they reduced their spending in these categories.

2. Eastern Cape flood risks:

Nelson Mandela Bay Municipality has set up an operations centre to keep an eye on areas that could be affected by more flooding.

The weather service warned there could be more devastating rains in the coming days in the Eastern Cape.

Meanwhile, almost an hour outside Gqeberha, a farming community says the heavy rain is worsening their service delivery nightmares.

3. Rand sinks lower:

May has not been kind to the rand. The beleaguered South African currency is down sharply against the US dollar, hitting a new record low along the way.

In fact, 2023 in its entirety has been unkind to the rand, and it has lost ground against the pound and euro too.

Recovery on the cards

Can the rand recover from these levels? History suggests yes. The biggest declines in the currency – 1984, 2001, 2008, 2015, 2020 – coincided with global conditions turning negative for emerging markets.

A strong dollar, falling commodity prices and a financial crisis – or some combination of the three – is toxic to the rand.

The year 2023 has been rather unique in that the rand has weakened while our peer group has mostly gained against the US dollar. The increased severity of load shedding is probably a big factor, and now Eskom has explicitly warned of Stage 8 power cuts during winter.

Each of these blowout episodes was followed by a recovery when global conditions turned positive.

Even in 1986, the rand rallied as the dollar retreated from elevated levels, despite the fallout from the Rubicon Speech, the debt standstill and increased global sanctions.

For the rand to recover from current bombed-out levels would require some good news on the electricity front but also largely depend on whether the dollar once again retreats from its globally strong position.

Since 1970, the dollar has only been stronger on a real trade-weighted basis 13% of the time. Further sustained dollar weakness will require a further closing in the expected interest rate gap between the US Federal Reserve and other major currencies, and probably outright cutting by the Fed.

4. Roads taking a toll:

The number of trucks on South Africa’s roads is damaging infrastructure, with many coal and chrome shipments flooding South Africa’s ports.

The increase in truck use is linked to the continued difficulty of Transnet’s rail network.

South African National Roads Agency Limited (Sanral) spokesperson Vusi Mona said that the nation’s roads cannot carry volumes of that size, adding that the only solution is to move loads on rail lines.

5. Insurance companies with most complaints:

The Ombudsman for Long-Term Insurance (OLTI) and Ombudsman for Short-Term Insurance’s (OSTI) joint annual report for 2022 showed that Santam Structured Insurance had the highest complaints ratio.

The number of claims OSTI receives about each insurer reflects the size of the company’s client base. Therefore, a company with more clients will likely have more claims directed to the OSTI. The inverse is also true.

OSTI added a more accurate metric to measure the number of complaints it receives about an insurer in proportion to the insurer’s size.

This metric shows the number of complaints received by OSTI per 1,000 claims received by the insurer.

According to this report, Santam Structured Insurance had the highest complaints ratio, with OSTI having received 333 complaints and the insurer receiving 25,196 complaints – this translates to 13.216 claims per 1,000.

In general, the reported numbers for 2022 were lower than those of 2021, said the report. 

However, this is unsurprising, “given that the brunt of the COVID-19-related insurance claims was felt in 2021”.

Name of insurerClaims received
by insurers (FSCA
Complaints received
Number of complaints
received by OSTI
per thousand claims
received by insurer
Abacus Insurance Limited6,209193.060/1,000
Absa Insurance Company Limited174,0526943.987/1,000
AIG South Africa Limited9,362101.068/1,000
Allianz Global Corporate & Speciality SA
Auto & General Insurance Company
Bidvest Insurance Limited16,482412.488/1,000
Bryte Insurance Company Limited356,5762040.572/1,000
Budget Insurance Company Limited64,6092573.978/1,000
Centriq Insurance Company Limited462,0631600.346/1,000
Chubb Insurance South Africa Limited1,71590.005/1,000
Clientèle General Insurance Limited92,04070.000/1,000
Compass Insurance Company Limited15,152382.508/1,000
Constantia Insurance Company Limited60,381940.002/1,000
Dial Direct Insurance Company Limited25,3631204.731/1,000
Discovery Insure246,0465552.256/1,000
Dotsure Limited136,7382912.128/1,000
First for Women Insurance Company
Firstrand Short-term Insurance61,1161111.816/1,000
Genric Insurance Company Limited80,093270.337/1,000
Guardrisk Insurance Company Limited317,7245711.797/1,000
Guardrisk Microinsurance Limited2,27200.000/1,000
Hollard Insurance Company Limited169,0794822.851/1,000
Hollard Specialist Insurance Limited6,775243.542/1,000
Indequity Specialised Insurance Limited3,16751.579/1,000
Infiniti Insurance Limited30,430411.347/1,000
King Price Insurance Company Limited156,9804743.019/1,000
Land Bank Insurance SOC Limited000.000/1,000
Legal Expenses South African Limited20,896874.163/1,000
Lloyd’s South Africa (Pty) Limited320.667/1,000
Lombard Insurance Group Limited30,1471224.047/1,000
MiWay Insurance Limited151,3374693.099/1,000
Momentum Insure Company Limited130,7342832.165/1,000
Monarch Insurance Company Limited10,89230.275/1,000
Mutual and Federal Risk Financing70,4862974.214/1,000
Nedgroup Insurance Company Limited73,0083835.246/1,000
New National Assurance Company
NMS Insurance Services (SA) Limited179,59620.011/1,000
Old Mutual Insure Limited201,0851,1795.863/1,000
OUTsurance Insurance Company Limited347,3413701.065/1,000
Professional Provident Society Short-Term
Insurance Company Limited
Renasa Insurance Company Limited85,151680.799/1,000
SAFIRE Insurance Company Limited6,26371.118/1,000
SA Home Loans Insurance Company
Santam Limited409,1165181.266/1,000
Santam Structured Insurance Limited25,19633313.216/1,000
SASRIA (SOC) Limited58370.012/1,000
Standard Insurance Limited141,4137125.035/1,000
Vodacom Insurance Company Limited93,3661571.682/1,000
Western National Insurance Limited20,801231.106/1,000
Workerslife Insurance Limited2,990110.004/1,000
Yard Insurance Limited3,912100.003/1,000
Data source: Ombudsman for Long-Term Insurance (OLTI) and Ombudsman for Short-Term Insurance (OSTI) annual report for 2022.

All information sourced from articles posted by: BusinessTech, ENCA, Moneyweb, Fin24, and DailyInvestor.

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