News in South Africa 28th October:
1. D-Day for mid-term budget:
The medium-term budget will be announced this afternoon, and all eyes will be on government’s plans to deal with the public wage bill, its ballooning debt, and its struggling state-owned enterprises – particularly SAA.
As at the latest Budget in June 2020, the Treasury estimated that gross national government debt was projected to increase from R3.26-trillion, which would be 63.5% of GDP in 2019/20, to R3.97-trillion (81.8% of GDP) in 2020/21. By the end of 2022/23, gross loan debt is expected to amount to R4.83-trillion, or 86% of GDP. Gulp.
One of the most important things SA may learn in the Medium-Term Budget Policy Statement (MTBPS) is whether the government is still targeting that 86% number, or whether it is going to be pushed up.
In any event, that means the debt-service costs will increase from R204.8-billion in 2019/20 to R236.4-billion in 2020/21, and then to R301.1-billion in 2022/23. That’s 21.5% of expenditure, rising to 22%.
Compared with tax revenue, usually smaller than expenditure, the number is a bit larger. Nishan Maharaj, head of fixed interest at Coronation Fund Managers, says interest service costs will “skyrocket” to around 25% of tax revenue over the next three years, “which will place South Africa on the precipice of a debt trap”.
2. African Bank retrenches:
One of South Africa’s new banking challengers, African Bank has joined a long list of companies who have to let go of their staff because of Covid-19.
African Bank announced on Tuesday that it has started retrenchment consultation processes with the banking sector union, Sasbo. The bank anticipated that the Section 189A consultations will affect 1 269 of its 3 728 employees.
The bank said it anticipates a job loss ratio of approximately 25% of those number affected meaning that ultimately around 317 people or 8% of its staff members may be out of jobs at the end of these consultations.
“The Covid-19 outbreak and the associated protracted lockdown intensified the dire state of the economy. Given the financial pressure faced by our customers the bank has recorded a reduction in sales as well as collections, which has created excess capacity across the different business units,” wrote the bank in a statement on Tuesday afternoon.
3. Ramaphosa to address nation:
President Cyril Ramaphosa has flatly dismissed speculation that he is planning to return the country to a hard lockdown.
Despite warnings of a Covid-19 resurgence, including from health minister Dr Zweli Mkhize, Ramaphosa said a hard lockdown was not on the cards.
Ramaphosa made the say while taking oral questions from MPs in the National Council of Provinces (NCOP) on a range of issues, including Covid-19 corruption, gender-based violence and the controversial trip to Zimbabwe last month by defence minister Nosiviwe Mapisa-Nqakula with the ANC in tow.
He said talk of a return to a hard lockdown was premature, adding that what was required for now was strict adherence to Covid-19 safety protocols — particularly as the festive season approached.
“We’ve been reading about reports of how groups of people have gone to various manifestations, it could be meetings, it could be parties, where infections have been reported, where people having gathered together have become super spreaders.
“That is worrying and we must continue to say, as South Africans, we need to make sure that we heed adherence to the measures that have been put to us by the medical advisory committee. We all need to adhere to those measures, particularly now, as … we move towards that fun period of December where people will let their guard down,” he said.
4. Sasol’s share price drops 10%:
Sasol shares lost more than 10% on Tuesday, losing some of the momentum that had been regained after a dramatic plunge following the revelation of cost overruns associated with the construction of the Lake Charles Chemicals Project in the US.
After opening at R152, the stock spiralled to close 10.23% lower at R92.20.
The share price drop comes as another storm heads towards the US Gulf Coast, with warnings extended to Louisiana, where Sasol’s Lake Charles Chemicals Project is located. The Lake Charles project has already been affected by hurricane Delta and Hurricane Laura in recent months.
However, David Shapiro, deputy chair of Sasfin Securities, speculated there could be several factors behind the share price dive, including a waning interest from Robinhood traders who had targeted Sasol stocks.
5. Sanral defiant that e-toll fees must be paid:
The SA National Roads Agency (Sanral) has dismissed suggestions that the user-charge principle used to justify e-tolls will be undermined if motorists are forced to pay for the expansion of the Gautrain.
The possibility of motorists paying for the Gautrain expansion was confirmed by Gautrain Management Agency (GMA) CEO William Dachs, when he commented on engagements between National Treasury and the Gautrain Management Agency (GMA) about funding the expansion.
Sanral general manager for communications Vusi Mona said it continues to affirm the view that e-tolls remain in place and, until otherwise directed, road users are expected to pay.
“Sanral remains firmly of the opinion that the user-pay principle is a worldwide accepted principle which Sanral supports,” he said.
Finance Minister Tito Mboweni will possibly make an announcement about the future of e-tolls in his medium-term budget policy statement (MTBPS) speech on Wednesday.