News in South Africa 28th December:

1. World economy to surpass $100 trillion:

The world economy is set to surpass $100 trillion for the first time in 2022, two years earlier than previously forecast, according to the Centre for Economics and Business Research. 

World economy to surpass $100 trillion
Image taken by: Laura Tancredi

Global gross domestic product will be lifted by the continued recovery from the pandemic, although if inflation persists it may be hard for policy makers to avoid tipping their economies back into recession, the London-based think tank said. 

“The important issue for the 2020s is how the world economies cope with inflation,” said Douglas McWilliams, the CEBR’s deputy chairman. “We hope that a relatively modest adjustment to the tiller will bring the non-transitory elements under control. If not, then the world will need to brace itself for a recession in 2023 or 2024.”

In its annual World Economic League Table, the CEBR also predicted:

  • China will overtake the U.S. in 2030, two years later than forecast a year ago
  • India will regain sixth position from France next year and become third largest economy in 2031, a year later the previously predicted
  • The UK is on track to be 16% larger than France in 2036 despite Brexit
  • Germany will overtake the Japanese economy in 2033
  • Climate change will lower consumer spending by $2 trillion a year on average through 2036 as companies pass on the cost of decarbonizing investment

2. Omicron slowly dwindling:

South Africa recorded 3 782 new confirmed Covid-19 infections on Monday (down from previous highs of 18 000+ daily positive rates).

According to a statement by the National Institute for Communicable Diseases (NICD), as of Monday, the country recorded 3 417 318 laboratory-confirmed cases. There have been 15 new Covid-19-related deaths, bringing the confirmed death toll to 90 829.

The NICD reported that the 3 782 new Covid-19 cases identified in South Africa represented a 22% positivity rate.

As of Monday, Gauteng recorded 1 126 669 confirmed cases, KwaZulu-Natal 601 496 and the Western Cape 583 982.

Most new cases were recorded in KwaZulu-Natal, which accounted for 27% of the cases, followed by Gauteng with 22%. The Western Cape accounted for 17% of new cases; Eastern Cape 14%; Mpumalanga 7%; Free State 5%; Limpopo and North West 3% each; and the Northern Cape 2%.

KwaZulu-Natal recorded 1 007 new cases on Monday, Gauteng 841 and the Western Cape 645.

There were 150 new hospital admissions in the last 24-hour cycle. As of Monday, 8 990 people were in public and private hospitals for Covid-19.

South Africa conducted 21 076 433 cumulative tests, of which 17 230 were carried out in the last 24-hour cycle.

3. US travel ban to end on New Years:

The United States plans to end the travel ban imposed on South Africa following the discovery of the Omicron variant of the Covid-19 variant first detected by South African scientists at the end of November.

The discovery of the variant led to South Africa and other southern African countries having travel bans imposed on them by almost 70 countries – including the US and the United Kingdom – in the weeks that followed.

The UK ended its controversial travel restrictions last week, and according to the New York Times, this move is soon to emulated by US authorities.

The newspaper reports that the White House, quoting an unnamed senior official, will remove the travel ban on travel between the US and southern African countries at midnight on 31 December.

The move to lift the ban is not a surprise as top infectious disease expert Dr Anthony Fauci said on 20 December that it would be lifted soon.

“We’re likely going to pull back on that pretty soon, because we have enough [Omicron] infection in our own country and we’re letting in people from other countries that have as much or more infection than the southern African countries,” Fauci said at the National Press Club.

The move to lift the ban comes after heavy pressure from the South African government and the World Health Organization to end them, as they were deemed to not only to be onerous on the tourism sector but also to be ineffective when it comes to restricting the spread of the new variant.

4. New trends in banking:

David Pfaff, chief financial officer at Tyme Bank, has provided an overview of some of the key banking trends likely to emerge in South Africa in 2022.

Commenting in Payfast’s latest eCommerce performance index, Pfaff said that one of the most significant shifts would be fewer physical bank branches in South Africa.

“With the rise of mobile and internet banking, physical bank branches are no longer considered a necessity – in fact, most people would rather avoid them. In South Africa, low levels of digital literacy and high data costs mean that a hybrid approach is necessary to bridge the gap,” he said.

Pfaff said he also expects ‘buy now, pay later ‘ to become increasingly popular – especially among online shoppers who want to make purchases now but don’t have the immediate funds.

“Our data shows that the average transaction of a BNPL customer is significantly higher in value than immediate payments. This highlights the attraction BNPL holds for customers looking to avoid high-interest credit card fees, as well as its potential to benefit businesses catering to customers with various spending habits and budgets.”

Pfaff also expects multi-banking to grow as South Africans opt to open multiple accounts across several different banks.

“Over 50% of TymeBank’s customers are older than 35, which means many of them have had an existing banking relationship for at least 20 years – but are willing to give new banks a try.

“We’ve also observed the rising trend of people who are multi-banked, which is made possible by account aggregation technology that allows customers to safely see all their bank accounts on a single screen. Multi-banked consumers are utilising the ability to compare banking fees and benefits in order to tailor their own banking experience.”

5. Credit rating improving:

The tide is starting to turn for SA banks regarding credit ratings by international ratings agencies. Rating agencies are cautiously signalling that the outlook for banks in SA is improving or, at least, not expected to deteriorate further.

Fitch Ratings is the latest of the major agencies that announced a slight improvement for SA banks in its outlook on long-term Issuer Default Ratings (IDRs) for the five largest banks.

The agency announced that the long-term IDRs of Absa, Standard Bank, Investec, FirstRand and Nedbank have been upgraded from negative to stable. Fitch also affirmed the banks’ credit rating at BB-.

At the same time, the ratings outlook of four of the banks’ holding companies were changed from negative to stable. “We have also revised the outlooks on the long-term IDRs of four South African bank holding companies – Absa Group Limited, Investec Limited, Nedbank Group and Standard Bank Group – to stable (from negative) and affirmed the IDRs at BB-,” Fitch said in its announcement.

The agency has also affirmed the viability ratings, national ratings and debt ratings of all the banks and that of their holding companies. The agency has simultaneously withdrawn the support rating and support rating floor of all the banks “as they are no longer relevant” to the agency’s coverage following the publication of updated rating criteria a month ago.

“In line with the updated criteria, we have assigned government support ratings of b+ to all banks and no support to all bank holding companies,” Fitch said.

Fitch says that the improvement of the outlook of the long-term IDRs of all the banks was driven by their standalone creditworthiness, as expressed by their respective viability ratings (VR). “The VRs of all South African banks and holding companies are constrained by the South African sovereign rating as they do not meet Fitch’s criteria to be rated above the sovereign.

“Our assessment considers the concentration of their operations within the country and high sovereign-related exposure relative to equity (ranging between 185% and 250% at August-2021). The VRs of the four bank holding companies are at the same level as their respective group VRs as Fitch considers their failure risk to be substantially the same as that of their respective group,” according to the announcement.

It says the improvement reflects the view that downside risks to banks’ standalone creditworthiness, in particular operating environment conditions and capitalisation, have receded.

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

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