News in South Africa 25th August:

1. South Africa’s ‘true’ crime stats:

Stats SA has published the latest Victims of Crime (VoC) survey, showing that thousands of crimes continue to go unreported in South Africa, skewing the true reflection of serious crimes in the country.

South Africa’s ‘true’ crime stats
Photo by RDNE Stock project

The survey comes less than a week after the latest crime statistics were published by the South African Police Service for the second quarter of the year, which showed a decrease in violent crimes such as murder in the country, as well as a reduction in several other serious crime categories.

South Africa’s official crime statistics are based on incidents or crimes reported at police stations and crimes discovered by the police. This means the data can only reflect the crimes that go through the official process, leaving many crimes unaccounted for.

The VoC Survey, on the other hand, looks at crimes through the victim’s experience, including the significant number of crimes that go unreported in South Africa.

Broadly, serious crimes like murder are almost always reported to the police – but as categories move towards theft or even common assault, incidents are severely under-reported, implying that the SAPS reported figures a massively understated.

Sourced from BusinessTech

Crime Levels in South Africa

According to the data from Stats SA, household crimes, including housebreaking, home robbery and theft of motor vehicles, increased from 2021/22 to 2022/23.

Crimes experienced by individuals also increased, except for the hijacking of motor vehicles and consumer fraud.

Overall, the most common crime experienced by households in South Africa is housebreaking (where the victims are not in the house at the time of the incident), with 1.1 million households experiencing housebreaking incidents in the 2022/23 period.

These households collectively experienced 1.6 million incidences of housebreaking occurred, representing 5.7% of all households in the nation.

However, the percentage of households that reported incidences of housebreaking to the police declined from 59.2% in 2021/22 to 51.4% in 2022/23.

This means that almost half of all housebreaking reported to the police are not accounted for in the official crime stats.

Moreover, there were an estimated 238,000 incidences of home robberies (where the occupants were in the house at the time), which affected 195,000 households over the period.

In this type of crime, only 56.8% of households reported some of all incidences of their home robberies to the police.

Additionally, 68,000 households experience assault, with a total of 85,000 incidents. Here, only 53.7% of households that experienced assault reported some or all incidences to the police.

There were over just 1.52 million incidences of theft of personal property over the period, which affected 1,228,000 South Africans aged 60 or above.

Only 41.4% of individuals who experienced theft of personal property reported some or all incidences to the police.

In addition, a total of 314,000 adults experienced consumer fraud, and only 38.1% of victims reported these incidents to the police – a decrease of 6.1% compared to the prior period.

Overall, it is clear that South Africa’s officials crime statistics, which are already alarmingly high, do not reflect the true numbers of crimes in the country

2. Rate cut unlikely anytime soon:

Although the South African Reserve Bank (Sarb) is likely done hiking its benchmark repo rate, and inflation has cooled beyond expectations, the beginning of a rate-snipping cycle come September is not close to possible.

This is the consensus view of some economists pondering the next move by the Monetary Policy Committee (MPC) following this week’s inflation print, which showed the Consumer Price Index (CPI) slowed down to flirt with the Reserve Bank’s preferred midpoint of its 3% to 6% inflation target band.

Statistics SA data this week showed that inflation slumped to 4.7% in July – the lowest level in two years, after surprisingly falling back within the target band in the prior month at 5.4%.

The Sarb has rapidly raised interest rates to 8.25% since November 2021, taking it up from pandemic lows of 3.5% in the wake of stubborn inflation. Its inflation-fighting campaign since then has delivered a cumulative 475 basis points (bps) increase, which was halted at the last rate-setting meeting when the MPC decided to leave it unchanged.

At its coming September meeting, the MPC is likely to continue its inaction, Tatonga Rusike, sub-Saharan Africa economist for the Bank of America (BofA), suggests, saying “the good news likely ends with July CPI”.

“We see the current policy rate as the terminal rate,” Rusike said in BofA’s South Africa Watch report on the latest inflation figures.

Municipal rate increases for water and electricity bode badly for inflation, with moderate increases on the cards, he said.

“But [it will] remain close to the 5% mark to year-end,” he added.

3. Bond yield curve steepens:

A nervy environment for global bonds is adding to investor concern about South Africa’s fiscal outlook, pushing the government yield curve near its steepest in a year.

With severe power cuts eroding economic growth, a government wage increase that was higher than budgeted and tax revenue missing targets, bond investors are worried the National Treasury will have to ramp up issuance at a time when global yields are rising, drawing capital away from emerging markets.

That’s weighing on longer-term debt. The spread between bonds maturing in 2044 and 2026 has widened about 65 basis points this year to 345 basis points as yields on the longer-dated securities soared.

Though August generally sees weaker demand for government issuance, the average bid-to-cover ratio of 2.4 in four sales this month is the lowest for any August going back to at least 2019, based on data compiled by Bloomberg. Demand for 2044 notes at Tuesday’s auction was just 1.7 times the amount on offer, compared with 2.7 for 2032 securities. 

“Bonds at the long end of the curve have struggled for demand for some time now, which is unsurprising given South Africa’s growth and fiscal risks,” said Rand Merchant Bank analysts in a note to clients on Wednesday. “Until there is material improvement on those fronts, National Treasury will continue to struggle to auction off long-duration bonds. Putting additional pressure on demand at present are external dynamics pulling capital away from EMs.”

Local bonds have underperformed nearly all emerging-market peers this year, handing investors losses of 7.2% in dollar terms. That compares with the average return of 1.6% for rivals.

Any adjustments to issuance would likely be announced in Finance Minister Enoch Godongwana’s medium-term budget presentation in October. Godongwana flagged in May that the nation’s fiscal position had changed “adversely.”

Deutsche Bank economist Danelee Masia forecasts a tax revenue shortfall this fiscal year of R55 billion, as well as a spending overrun of about R20 billion.

“National Treasury can make up for a shortfall of up to R80 billion,” said Masia in a note to clients on Monday. “However, this would necessitate a more bullish turn in the external environment, which may be the largest risk to the issuance outlook.”

4. BRICS currency never under consideration:

Suggestions that the BRICS group of emerging market powers establish their own currency to reduce their reliance on the dollar aren’t under serious consideration and never have been, South Africa’s finance minister said.  

No one has tabled the issue of a BRICS currency, not even in informal meetings,” Enoch Godongwana said in an interview on the sidelines of the bloc’s annual summit in Johannesburg on Thursday.

“Setting up a common currency presupposes setting up a central bank, and that presupposes losing independence on monetary policies, and I don’t think any country is ready for that.” 

The bloc, which also includes Brazil, Russia, India and China, is evaluating other ways to reduce their reliance on the greenback, including trading directly in their own units and ensuring that the New Development Bank, which they established in 2015, adapts how it raises its funding. 

By way of example, when South Africa trades with neighbouring Botswana, which isn’t a BRICS member, “We know the rate of exchange between the two currencies, “ Godongwana said.

“There is no reason why we can’t pay them in pula, and they pay us in rands.” 

The finance minister welcomed a decision by BRICS to extend membership invitations to six more countries because it would give South Africa better access to bigger markets and deepen trade relations between the Global South. 

Other highlights from the interview:

  • “The Chinese themselves want their renminbi to be recognized as a reserve currency by the World Bank and International Monetary Fund, and if you are saying they must abandon that project, they will not be happy.”
  • There is an incorrect perception that BRICS wants to develop an “anti-West “ or an “anti-Swift” payment platform.
  • “There is a discussion by central bankers of how to facilitate payments between countries, assuming we use local currencies.

5. Municipalities unable to pay Eskom bills:

Municipal debt of R63bn is one of the most pressing challenges facing Eskom, which itself is also struggling with money problems.

Eskom’s distribution group executive, Monde Bala, noted that penalties won’t work.

“We can impose penalties for late payment, but when a municipality is not paying its bills, the penalty will be of little effect”.

So, Eskom is now considering stronger enforcement of the distribution licence conditions. “If they don’t pay, they run the risk of losing their licences,” said Bala.

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

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