News in South Africa 26th July:
1. Food price relief:
South Africa’s food inflation should continue to decline, despite new risks facing agriculture in South Africa.
According to Stats SA, Consumer Price Inflation (CPI) cooled from 6.3% in May to 5.4% in June – the lowest reading since 5.0% in October 2021.
Crucially, annual inflation for food and non-alcoholic beverages – one of the main drivers of high inflation levels – continued its downward trend, dropping from 11.9% in May to 11.0% in June.
However, there have been increased risks in global agriculture recently, with India banning rice exports and Russia terminating the Black Sea Grain Deal, which allowed for grain and oilseed exports from Ukraine.
That said, Wandile Sihlobo, the Chief Economist of the Agricultural Business Chamber of South Africa, said that food inflation should continue to decline for the rest of the year.
Sihlobo said that the decline in red meat prices, which have softened at farm levels, should continue in the retail for the coming months.
Meat prices have recently seen deflation in South Africa, with weaner calf prices (-5%), pork (-2%) and poultry (IQF pieces, -1%) all dropping, according to the Bureau for Food and Agricultural Policy (BFAP).
Although fruit prices are no longer declining, Sihlobo said that they should remain affordable due to improved domestic supplies.
He added that the 9.5% year-on-year drop in the “oil and fats” for June aligns with the softening price trend seen globally, with South Africa still importing its palm oil.
Concerns
He said that there are still risks to “bread and cereals” product prices. He said that South Africa imports millions of tonnes of rice and wheat imports, and the global disruption in trade of these items could affect global prices, including in South Africa.
However, he said that South Africans should not be concerned as there have been no notable increases in international, domestic maize and wheat prices.
“Whether these price gains are sustained will depend on the Black Sea Grain Initiative developments and India’s rice exports. Importantly, there is roughly a lag between three to five months between the price changes at farm and retail levels,” he added.
2. Investment plummets:
The latest analysis of the country’s capital projects by Nedbank shows that capital investment in SA is on the decline.
Adding up all the capital investment in fixed infrastructure – as announced by the private and public sector for the foreseeable future – shows that it has decreased by a massive 30% compared to a year ago.
A note to the Nedbank Capital Expenditure Project Listing report for the first half of 2023 tells the whole story: “Fixed investment is spending on physical assets such buildings, infrastructure, plant, machinery and equipment, which adds to production capacity.”
The economy cannot grow without fixed investment.
The Nedbank survey aims to list all the capital projects announced by either the private or public sector, with the latest list showing a sharp fall in fixed investment activity in the first six months of the year.
“The value of new projects announced amounted to an annualised R173.1 billion, down from R248.5 billion and R392.7 billion recorded in 2022 and 2021, respectively,” according to the report.
“The slowdown resulted from a moderation in new projects announced by the private sector and zero announcements from public corporations,” it says.
“Projects announced by the private sector fell to R69.8 billion from R193.6 billion, accounting for only 40% of the total.”
This somewhat conflicting statement is explained in that Nedbank says it could not pick up any new projects by public corporations in the first half of the year, but that nearly R237 billion worth of projects are underway, most of which were announced in 2021.
These projects involve large undertakings by Eskom, the Passenger Rail Agency of SA (Prasa) and the SA National Roads Agency (Sanral).
Nedbank’s listing shows a dramatic decline in fixed investment activity in the first half of 2023 as persistent power outages, rising interest rates and cost pressures weigh on profitability and erode business confidence.
“The value of new projects announced during the first half of the year fell to an annualised R173.1 billion from R248.5 billion in 2022,” according to the analysis.
“[General] government replaced the private sector as the major driver, with planned new projects rising to R103.4 billion, accounting for 60% of the total value of new projects announced in the first half of 2023.
“In sharp contrast, no new projects were announced by public corporations following a flurry of announcements in previous years.”
The bank says capital projects by the private sector dropped to an annualised R697.8 billion, amounting to around 40% of the total value of new projects announced.
3. South Africans earning less:
70% of South Africans are earning the same or less than they did three years ago – and they’re less confident in the economy than ever.
The 2023 Old Mutual Savings and Investment Monitor (OMSIM) revealed that, while there have been some positive shifts in personal earnings, 70% of respondents are earning the same or less than they did in 2020.
“With the inflationary environment, this means that the majority of working South Africans have less income in real terms,” according to the report.
The 2023 OMSIM revealed the following about respondents’ current incomes compared to what they earned in 2020:
- 8% of respondents are earning significantly less
- 19% are earning a bit less
- 43% are earning the same
- 30% are earning more
The report also found that confidence in the South African economy is currently at the lowest it has ever been.
Only 27% of respondents said they feel confident about the local economy, with female respondents reporting the lowest confidence.
Respondents earning between R40,000 and R59,999 reported the highest confidence levels at 30%. Respondents aged 18 to 29 and respondents aged 60 and older also had the most confidence at 30%.
While resilience and optimism remain high, the 2023 OMSIM found that the individual improving outlook seen post-Covid-19 has paused.
Only 71% of respondents believe things will improve over the next six months, compared to 72% in 2022.
Old Mutual’s head of knowledge and insights, Vuyokazi Mabude, said that, despite the ongoing financial pressure, South Africans remain resilient and are saving.
However, they are struggling to manage short-term and long-term priorities.
“The top 3 savings goals are, primarily for retirement, building emergency buffer savings, and paying off debt,” said Mabude.
“To increase household income, South Africans are holding down several jobs. Polyjobbers make up 50% of this market, with more young workers (18 to 29 years old) becoming part of this growing trend.”
The number of young “polyjobbers” is up from 60% in 2022 to 70% in 2023, with many using social media to supplement their incomes.
“As consumers have moved to reduce costs, the short-term insurance sector and medical schemes have been impacted, with cover being reduced as consumers trim monthly premiums to help increase household income.”
4. Youth unemployment crisis:
Deputy President Paul Mashatile has warned the private and public sector that the apathetic approach to youth unemployment will threaten the social and political stability of South Africa.
Mashatile was speaking at the launch of the South Africa National Human Development report in Pretoria on Tuesday.
The latest report by the United Nations Development Programme (UNDP) has looked at youth unemployment in South Africa through a human development lens.
The findings of the report have revealed that joblessness among young people is hindering economic growth, threatening social cohesion and putting pressure on public resources.
Mashatile agreed that the report shone a light on the government’s blind spots in tackling youth unemployment.
“We agree with the UNDP when they say there is no doubt that the high unemployment rate is a ticking time bomb. Addressing and tackling youth joblessness is not only sound economics, but it’s a developmental imperative.”
5. Karpowership to push ahead:
Karpowership will push ahead with bids to secure environmental approval to install two ship-mounted power plants in South African ports.
South African Environment Minister Barbara Creecy dismissed appeals from five environmental groups that sought to block the company from applying for the approval to install a 450-megawatt gas-fired facility at the port of Richards Bay on the northeast coast, according to a ruling seen by Bloomberg.
In a separate decision, she allowed Karpowership to pursue environmental approval at Saldanha on the west coast, overturning an earlier decision by her department to deny permission for a 320-megawatt operation.
The rulings are the latest twist in a saga that has seen the Turkish firm’s projects repeatedly delayed by a court case and environmental challenges. It’s also a boost to the government’s attempts to increase power generation amid persistent blackouts that are stifling economic growth and souring the mood of voters ahead of elections next year.
Karpowership has been working on three projects since winning about 60% of a state tender in March 2021 for 2 000 megawatts of emergency electricity to ease the crisis. A plan to produce 450 megawatts at Port of Ngqura will be delayed over a disagreement with the national port operator over the location of the power ship.
The decisions are “a significant boost towards the finalisation of Karpowership’s” projects, the company said in an email.
All information sourced from articles posted by: BusinessTech, Moneyweb, DailyInvestor, EWN, and Fin24.
