News in South Africa 28th November:
1. Over 1000 businesses closed in 2023:
Data from Stats SA shows that 136 businesses closed their doors in October.
According to Stats SA, the 120 businesses closed down voluntarily, while 16 did so on a compulsory basis.
This means that over 1,376 businesses have been liquidated since the start of the year.
However, the number of liquidations actually decreased by 13.4% in October 2023 compared with October 2022.
In addition, the number of liquidations declined by 10.3% in the three months ending October 2023 compared with the same period in 2022.
Moreover, the total number of liquidations decreased by 13.0% in the first ten months of 2023 compared with the first ten months of 2022.
On a per-industry basis, the unclassified industry saw the most liquidations, with 44 in October.
This was followed by the financing, insurance, real estate and business services industry, which saw the most liquidations, with 38 in October. This took its yearly tally to 463 – the most of any industry.
This was followed by trade, catering and accommodation (26) and community, social and personal services (38).
Difficult quarter
Despite the year-on-year decline in liquidations, several pieces of economic data showed that October was an abysmal month.
For instance, the Absa Purchasing Managers’ Index (PMI) dropped from an upwardly revised 46.21 in September to 45.4 in October.
“Given that the frequency and intensity of load shedding eased notably in October, the weak performance from the activity index is perplexing,” the Bureau for Economic Research (BER) said.
“It is now back to the July 2023 level when prolonged disruptions on the N3 transport corridor most likely resulted in a (temporary) shortage of inputs. These transport issues contributed to weak manufacturing output.”
“On the consumer front, elevated relative (food and fuel) prices, as well as restrictive borrowing costs, are depressing demand for local manufactured goods.”
Naamsa’s New Vehicle Sales data also showed a 2% y/y decline from 46,350 units in October 2022 to 45,445 in October 2023. This was the third successive month of decline in the new vehicle market.
Confidence among South African business leaders also remains low due to the challenging economic environment, with the RMB/BER Business Confidence Index dropping by two points to 31 in Q4 2023. This means that less than a third of respondents were happy with the overall business conditions.
2. Legislation to prevent state capture:
Draft legislation to address the ability of corrupt elements to capture a democratic state and the poor governance at key state entities that allowed this to happen is on the cards.
National Treasury said on Friday that draft legislation could be published as early as January to give effect to important proposals contained in the reports arising from the Zondo Commission of Inquiry into Allegations of State Capture and the Nugent Commission of Inquiry into Tax Administration and Governance at Sars (South African Revenue Service).
Ismail Momoniat, former director-general and now technical specialist at National Treasury, says the focus must be on real corruption that leads to financial losses and getting proposals to limit the scope for corruption legislated.
In his keynote address at the 10th birthday celebrations of the Office of the Tax Ombud (OTO) in Pretoria, Momoniat said that although the country has been rebuilding some of the captured institutions, such as Sars, many of the changes are still not “grounded in law”.
Depoliticise appointments
A key area is the issue of depoliticising appointment processes.
“You don’t want people who are nice-to-politicians people. You do not want people who are political. You want someone who understands what a business is and not to get operationally involved.”
The architecture of South Africa’s tax system should take the lessons from the state-capture era to heart. Currently, there is still a lot of power in the hands of the Sars commissioner to be used at his discretion.
Sars, like Eskom, is an absolute monopoly with very intrusive powers. Even if there are good people, there will be abuse. “They get used to having power and to exercis[ing] that power,” notes Momoniat.
“It is all well if we have a good commissioner, as we have now had for many years. But we need just one bad example, and then you have trouble.
“You can never get rid of corruption or abuse, but you can reduce the scope for it.”
Momoniat says the first step is ensuring the appointment processes focus on merit and that no one person has absolute power. Following the democratic elections in 1994, there was quite a bit of naivety, and the government operated a lot in good faith.
However, when state capture happened, people did what the politicians instructed them to do, even though they were wrong. Within the architecture of our tax system, there must be checks and balances.
3. Investors tired of apartheid excuses:
Krutham managing director Peter Attard Montalto says the constant blaming of everything on apartheid is an unhinged story investors have heard for far too long from government ministers.
Attard Montalto published a column he wrote for Business Day on his company website, highlighting the risk of the 2024 general election.
He argues that the election risks further damaging sentiment as we get more fear in the ANC, developing into more mad pronouncements from the government.
“The constant blaming of everything on apartheid is an unhinged story investors have heard for far too long from government ministers,” he said.
He added that the ministers tell overseas investors that, somehow, they should treat South Africa as a charity case and buy its bonds because of the legacy of apartheid.
“This sob story narrative does not go down well, especially compared with the more robust narratives emerging from others like Kenya,” he said.
Attard Montalto added that the same goes for international funding related to South Africa’s just energy transition.
He also took aim at electricity minister Kgosientsho Ramokgopa, who said Eskom employees must be paid bonuses to improve staff morale and performance.
Ramokgopa said he had asked Eskom’s management and board to re-introduce performance incentives for employees at power stations.
To pay for these bonuses, he suggested Eskom use the money saved from a reduction in the use of diesel as the performance of coal power stations has improved.
Attard Montalto highlighted that the bonuses to Eskom generation employees already exist and were reintroduced by former Eskom CEO André de Ruyter.
“The nauseating spin is all quite normal in an election but risks hampering sentiment,” he said.
“This was not the case in 2019, of course, where the narrative was purer about solidifying the end of state capture.”
“Now, there is a complex mix of detailed and positive reform communications with investors and business and political promises that often overlap and conflict.”
4. Eskom bailout insufficient:
S&P Global Ratings analysts have warned that the government’s debt relief package for Eskom is not enough to make it a financially sustainable company, stacking up pressure on the public enterprises department to speed up the break-up of the troubled state power utility.
The ratings agency lifted Eskom to a B rating last week, five notches below investment grade, meaning the utility can meet its financial obligations but is more exposed to economic and external shocks.
5. Appeal to halt NHI Bill:
Business organisations have written to the presiding officers of the National Council of Provinces (NCOP) with an urgent appeal to stop the National Health Insurance (NHI) Bill from being passed by Parliament’s second house on Wednesday.
According to the letter, the committee had ignored the constitutional issues raised by four provinces and a wide range of stakeholders, and blindly pushing it through in its current form will have dire consequences.
All information sourced from articles posted by: BusinessTech, Moneyweb, DailyInvestor, BusinessDay, and Fin24.
