News in South Africa 27th September:
1. Hospitals in crisis:
South Africa’s critical private and public hospitals are facing an onslaught of challenges making it harder to care for patients – with extended load shedding exacerbating a skills shortage in the sector.
Speaking to ENCA, chairman of the South African Medica Association (SAMA) Mvuyisi Mzukwa said that there is a huge possibility that vulnerable people going into theatre, having a child at a hospital or in ICU could face serious complications because of load shedding.
He has called on the government to take action and exempt all hospitals from blackouts: “It is important we do it as quickly as we can.”
South Africa has experienced the worst load shedding it has ever seen on record this past week, with stage 5 blackouts persisting for most of the week.
The national power utility on Sunday (25 September) announced that stage 3 load shedding would continue to be implemented during the day between 00h00 and 16h00, escalating to stage 4 during the evening peaks between 16h00 and 00h00.
Mzukwa said that power surges have been ripping through medical equipment, and despite there being battery backups or generators in some hospitals, when load shedding reaches the higher stages, such as Stage 5 or 6, they cannot sustain energy for long enough.
Backup systems due to poor maintenance also often don’t kick in on time or at all – systems need to be able to supply the electricity in seconds as soon as a blackout occurs, said Mzukwa. SAMA has not been alone in calls for intervention, with the Health Professions Council of South Africa (HPCSA) echoing its sentiment.
In a statement by the council’s president, Simon Nemutandani, load shedding was said to be crushing hospitals across the country.
Low staff numbers
As a result of poor working conditions and pay, many of South Africa’s skilled medical staff are seeking work elsewhere.
To combat this, the Department of Home Affairs August added new skills to the country’s critical skills list – many of which include medical practitioners and individual specialisations.
Despite this, hospital groups have voiced frustration over the government’s failure to address the decreasing number of medical practitioners, especially nurses. The Hospital Association of South Africa (HASA) said that nurses in the country are reaching retirement age without the necessary inflow of younger employees.
Private hospital group Life Healthcare said that at the end of December 2020, there were over 21,000 nurses in training, but the country needs as many as 26,000 additional nurses to meet growing demand.
2. Rand weakens further to the dollar:
On Monday, the rand broke through R18 to the dollar for the first time since the pandemic-induced madness that took hold in April 2020, and subsided again during May of that year.
That is due in part to dollar strength and various global factors. But the rand is also tanking all by itself; it is the worst-performing currency among its emerging-market peers over the past month, with the government’s inability to deal with load shedding cited as a major reason.
A dollar is now just about 20% more expensive than it was a year ago, in rand terms. And compared to six months ago, every $1,000 you buy will cost just about R4,000 more.
It is not a great time to be planning travel to the United States and places that are tracking the US dollar.
But there are places where a rand is still worth a fair bit of money, as measured against its value a year ago, and other places where the impact is not as bad.
In India, rands are now worth about 8.5% less than a year ago, and roughly the same is true of China’s renminbi.
In Canada, the value erosion has been about 10%.
But for South Africans, the price of a euro is just about flat; a year ago, you would have paid about R17.50 for a euro, now you’ll pay about R17.40. The value of the Swedish krona is likewise flat over the past year, as is the New Zealand dollar.
But three destinations for South Africans – including one of the most popular – stand out as cheaper right now than a year ago, in rand terms. Even if one is only theoretically so.
The UK, thanks to a budget the market hates:
The pound hit an all-time low against the dollar this week as its new government said it would cut taxes, then said it would cut taxes more, without any apparent plan to cut spending or boost revenues elsewhere in the short term.
With South Africa running only the relatively benign risk of not enough electricity, the rand is just about 6% stronger against the pound than it was this time last year.
Japan, because it won’t follow the American example:
The rand is about 8% stronger against the yen than it was a year ago, even after Japan’s government stepped in to artificially support its currency for the first time in 24 years last week.
Japan has refused to follow the lead of the US Federal Reserve and hike interest rates, insisting it must keep borrowing money cheap in order to encourage inflation – of which it has had too little for too long.
Argentina, on paper – but not really:
In constant value terms, spending your rands in Argentina will now get you about 22% farther than it did this time last year.
Unfortunately, the value of the peso has not been constant. In July, data on Monday showed, inflation in Argentina spiked to a 20-year high, and it is now forecast to top out at close to 100% this year.
As with Argentina’s previous economic crises, they say you can live like a king in Buenos Aires right now, if you have hard currency. Unfortunately, that will have to be dollars, putting you back at square one.
3. Central banks hawkish:
Central banks were decidedly dovish when Covid hit, slashing rates and injecting liquidity into markets on an unimaginable scale. They then opted to be lenient on nascent signs of inflation last year, hoping that it would prove transitory. No more.
Central banks have turned hawkish en masse, with World Bank data showing more central banks hiking interest rates this year than at any time in the past.
In other words, in the space of two years we’ve gone from extraordinary monetary easing to record tightening as deflationary fears have been replaced by fears of persistently high inflation.
The pace of increases has been accelerating in many cases. For instance, Sweden’s Riksbank kicked off a busy week of central bank decisions by raising its policy rate by 100 basis points, the biggest increase in 30 years. Whereas 25 basis point increments had been standard practice in many countries for many years, in 2022 that quickly gave way to 50, then 75 basis point moves. For some, 100 might be the new 75.
What is even more remarkable is that Sweden maintained negative interest rates until very recently, while the European Central Bank also had sub-zero rates as late as June this year. The Swiss National Bank also joined the negative interest rate club in 2015, a move that many considered to be bizarre. It moved back into positive territory last week with a 75 basis points increase. The Bank of England also hiked its rate last week by 0.5%.
Hawks in blue crane country
South Africa’s own central bank has also taken a hawkish turn.
The Reserve Bank’s Monetary Policy Committee raised the repo rate by 75 basis points for the second time in this quarter, taking it to 6.25%. Two of the five committee members wanted to hike by 100 basis points.
This is despite inflation moderating. Headline inflation dipped in August to 7.6% due to lower petrol prices, suggesting that the inflation peak was July. Food inflation rose further, but core inflation, excluding volatile food and energy prices surprised by pulling back to 4.4%.
This suggests that inflation in South Africa is still primarily supply-driven, rather than the demand-pull inflation the Fed is now battling in the US.
The Reserve Bank’s own forecast suggests that inflation will return to the target range in the second half of next year, and in fact slightly reduced its forecast for the average 2023 inflation from 5.7% to 5.3%. Inflation is expected to average 4.6% in 2024, which is close to the midpoint of the range.
With the weakening global outlook, as well as the likelihood of persistent load shedding in the months ahead, it is no surprise that the Reserve Bank’s growth forecasts were lowered. The economy is now projected to growth 1.9% in 2022 (from 2% previously), 1.4% in 2023 and 1.7% in 2023.
4. Absent SOE boards:
State-owned companies that were victims of state capture and cadre deployment are currently sitting with a large number of vacancies on their boards – some of which have not been filled for years.
The Eskom board, for example, should have 15 board members but has been only eight since 2018.
There have been calls from several sectors for the Eskom board to be completely replaced due to their failure to deal with load shedding.
5. No engineer on Eskom board:
While South Africa suffers through the worst load shedding on record and Eskom continues to face a deep electricity crisis, none of the board members at the power utility has any electrical engineering background.
Some of the directors have operational electricity experience, but experts say that it is necessary for some kind of engineering experience to be present to make a difference.
“It’s absolutely necessary,” says Parmi Natesan, the CEO of the Institute of Directors. “Industry knowledge and technical proficiency [are] important,” she says, pointing out that one of the reasons for African Bank’s failure in 2014 was that its board composition did not have the requisite skills.
Natesan says that while a company’s operations are the purview of its management, it is still essential to have the requisite skills. “[The directors] may not necessarily have run a company,” says Natesan, “but they need to know the sector.”
Eskom is an engineering company that runs power plants, and it does not have a director who understands its core business, says an industry expert. Those plants are in crisis, and the board needs directors who can speak “plant language” to support Eskom’s executive suite, which is being rebuilt after being compromised by State Capture.
Until its capture, Eskom always had one or two electricity utility specialists on its board. But that practice ended under former president Jacob Zuma, whose patrons, the Gupta family, trained their sights on coal supply to Eskom.
Natesan says a blend of skills is essential and that a public-facing company like Eskom needs to keep the public interest in mind — or “what’s good for the country”, she says.
All information sourced from articles posted by: BusinessTech, Business Insider, Moneyweb, News24, and Daily Maverick.
