News in South Africa 26th September:

1. Storms flood Western Cape:

Heavy rains and winds battered the Western Cape on Sunday and Monday, forcing hundreds of families to flee their flooded homes. In Covid Village in Mfuleni, a man died, apparently electrocuted by a live wire in the water.

Storms flood Western Cape
Photo by DIALO Photography

About 2 000 families fled their shacks in Mfuleni after a night of pouring rain, community leader Thembisa Thuba said. She said clothes and bedding had been washed away and electrical appliances drenched.

Residents have left their shacks to save their lives,” she said.

Thuba said she and other community leaders were opening locked but uninhabited shacks to accommodate flood victims.

Zukile Komani, 32, died during the storm, apparently electrocuted in flood water in Mfuleni after the Kuils River burst its banks. Neighbour Mxolisi Melento said he had stepped out of his flooded shack at about 6am and found Komani’s body. (The cause of death is not yet confirmed.)

Thuba said the rains are so heavy that the methods the shack dwellers used before, such as trenches to divert the water, no longer work.

Thuba said: “We are used to floods, but the ones we are experiencing now are worse than the previous ones.”

Other informal settlements in Dunoon, Khayelitsha, Philippi and Strand were also hard hit by floods.

The South African Weather Service had issued a level 9 warning of disruptive rain and gale force winds.

The N2 was closed at Bot River after floods washed away the bridge, with traffic being diverted at Swellendam. The N1 between De Doorns and Worcester was also closed with traffic being diverted via Wolseley, Ceres and Trompsberg pass.

City of Cape Town disaster risk management spokesperson Charlotte Powell said the rain should start subsiding by Monday evening but very high winds would continue for three hours.

2. SARB concerns over SA’s spending risks:

South Africa is strapped for cash, and the country’s central bank has a stern warning for the ruling African National Congress: You can’t spend your way out of trouble.

“Deteriorating fiscal risks lead to higher interest rates,” Reserve Bank Governor Lesetja Kganyago said on Thursday after holding interest rates at 8.25%. “Foreigners will want to be compensated.”

South African government bond yields have climbed above 12% in recent months even as the country’s inflation rate has declined to 4.8% from above 7%, as investors weigh threats to the public purse. The central bank aims for inflation at the mid-point of its 3% to 6% target range.

Tax revenues fall short of spending, and debt issuance to make up the gap has boosted yields. The National Treasury wants austerity measures but faces opposition from others worried about public unrest ahead of next year’s election, in which the ANC risks losing its majority.


“Government spends more than it earns from taxes. We spend as a nation more than we produce. We import more than we export,” said André Roux, head of the Futures Studies program at Stellenbosch Business School. “These kinds of deficits cannot be sustained for a long period.”

Party leaders meet in October to hammer things out, and Finance Minister Enoch Godogwana, who presents a budget update on Nov. 1, will be under intense pressure to go easy from other ministers. The fallout over proposed cost containment measures is believed to be a contributing factor in the delay of the budget, which ordinarily happens in late October.

Some in the ANC fear a repeat of the deadly violence of 2021 if social spending programs are axe in a country where millions live in chronic poverty alongside conspicuous wealth and the unemployment rate is above 30%.

Kganyago, who under the constitution is granted operational independence from the government in setting rates, made it plain that being fiscally reckless will cost South Africa higher debt-service payments, leaving even less money to go around.

Likening investor appetite to eating a slice of bread, he said they’ll want a spread “whether it’s butter, jam or whatever,” and it will get pricey if the fiscal picture darkens.

“Foreigners are not prepared to eat the bread on its own. They would want to have the spread added, and that spread had better be sufficient for them to buy it,” he told a press briefing following the interest-rate decision.

His colleague, Deputy Governor Kuben Naidoo, offered a less colourful but more direct explanation of the trade-offs being faced by the government as it tries to balance competing demands.

“In the normal course of events in the business cycle, weaker fiscal does lead to tighter monetary policy,” he told the reporters. “A looser fiscal stance makes the work of monetary authorities more difficult.”

Public frustration is simmering over rolling power cuts and the ANC’s repeated failure to deliver basic public services. Opinion polls see them dipping below 50% control of parliament, which would force them to forge a coalition alliance with one or more of the smaller parties.

“There is a big concern about the erosion of the ANC’s electoral power at a national level,” said Sithembile Mbete, who lectures in political science at the University of Pretoria. “The stakes, I think, are higher for the party than they have ever been.”

3. SA can save R20b a year:

South Africa could save R20 billion a year if it reduced its debt servicing costs by just 1%. This was revealed by Stanlib chief economist Kevin Lings, who spoke at Morningstar’s Investment Conference 2023. 

Lings said South Africa currently spends around 20% of tax revenue on interest payments to service its debt. 

This is set to increase as the country cannot pay off the principal amount on its debt, only the interest owed on the principal. 

South Africa’s debt servicing costs have skyrocketed over the last 15 years, from 7% of tax revenue in 2008 to 20% this year. 

This has led to fears of a debt spiral, with the IMF’s second-in-command warning that the country may see its debt servicing costs grow exponentially. 

The IMF projects that the interest bill on the government’s debt could skyrocket to triple the size of its health budget within five years. 

This would result in interest payments on debt consuming 27% of the country’s entire budget, up from 19%. 

South Africa’s current debt-to-gross domestic product (GDP) ratio is 73%. In nominal terms, the country owes around R5 trillion.

The situation is set to become much worse as the country’s fiscal deficit this year will be around 6% of GDP.

4. AGOA deal to change:

The top US trade official said renewing the nation’s preferential access programme for African products without changes counters the Biden administration’s objectives in global commerce. 

“I think copy-paste is to really lose an important opportunity,” US Trade Representative Katherine Tai said Friday.

“The world is really different from when AGOA was first created. Africa is very different,” she said, referring to the Africa Growth and Opportunity Act. AGOA was enacted in 2000 and has since been at the core of US trade and investment policy with sub-Saharan Africa, giving about three dozen nations duty-free access to the world’s biggest economy.

In December, US and African trade officials agreed that the programme’s current iteration — which expires in 2025 — needs updating and stronger implementation

South Africa, which has asked the US to consider an early extension of AGOA, will host a forum on the programme from November 2 to 4.

Some US lawmakers have pushed the Biden administration to review the nation’s access to AGOA amid frustration over the country’s non-aligned position toward Russia’s invasion of Ukraine, and because they deem it too developed to qualify.

“We’re on a timeline – you’ve got to reform, you’ve got to update while the world is changing,” Tai said in response to questions at an event at the Center for Strategic and International Studies in Washington.

“There are really important opportunities for us to explore and to try to capture,” she said. Tai said the African Continental Free Trade Area, which would be the world’s biggest free-trade zone by area when it becomes fully operational by 2030 is “something we should try to figure out how to incorporate.

”Speaking at the same event, World Trade Organisation Director-General Ngozi Okonjo-Iweala, who was born in Nigeria, said African nations would like to see an AGOA agreement that is “at least a decade out” to create predictability for investors. 

5. 21 123 complaints against SA’s lawyers:

21,123 complaints of misconduct have been levelled against South African lawyers from 2020 to 2023, but the Legal Practice Council (LPC) says only 175 resulted in those legal practitioners being barred from practising – a figure that is 0.8% of all those complaints.

This enquiry into complaints against lawyers comes after an attorney in the Eastern Cape received a R15.2 million state medical negligence payout for a severely disabled child three years ago, but – when he finally set up a trust for the now 9-year-old girl – only R50,000 of that amount had been deposited into it.

The attorney is one of 310 lawyers who have been suspended by the LPC in recent years.

All information sourced from articles posted by: Moneyweb, BusinessTech, DailyInvestor, Fin24, and News24.

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