News in South Africa 29th August:

1. Good news for petrol and food prices:

Consumers are in for a reprieve in the coming months in South Africa as economic indicators point to food price inflation stabilising, while end-month data from the Central Energy Fund shows a likely petrol price cut for September.

Good news for petrol and food prices
Image taken by: Gustavo Fring

Stats SA published the latest consumer price inflation figures for July, pegging headline inflation at a 13-year high of 7.8%.

While the figure will be a shock to the pockets of consumers, economists at the Bureau for Economic Research (BER), and Nedbank noted that it was not unexpected, with most analysts expecting 7.7%.

The biggest contributor to CPI came from the transport sector, led by fuel prices, up 53% year on year.

Food and non-alcoholic beverages rose by 9.7% year on year, while utilities increased 4% on the back of a 7.4% month-on-month jump in electricity and other fuel costs as Eskom’s annual tariff increase was implemented and surveyed by Stats SA.

However, the BER said that the picture is better for August’s data, which it said should decline along with the petrol price.

“On a more positive note, in August, the monthly CPI rate should decline on the back of the sharp fuel price decline at the start of the month. The rate of increase for food prices could also start to moderate in August, implying that the July figure may have signalled the peak in headline CPI,” the BER said.

This sentiment is echoed by Nedbank’s analysis, with the bank saying that inflation has likely peaked, and will continue to drop over the next year.

Food prices

Analysis from the Pietermaritzburg Economic Justice and Dignity group shows that its food basket price is moderating. While prices are still increasing, the pace is slowing down. The group’s food basket was up marginally, by 0.6% month-on-month in August.

According to the Bureau for Food and Agricultural Policy (BFAP), there are three different scenarios for food price inflation in South Africa. The positive news is that in all three scenarios, food price inflation eases from current levels (10.1% in July).

Petrol price

The key driver behind economists’ more optimistic outlook for the next few months is the petrol price, which is expected to come down by over R2 in September.

Month-end data published by the CEF shows a significant over-recovery for petrol (93 and 95) with a more moderate over-recovery for diesel.

Petrol 95 could be cut by as much as R2.30 per litre in September, while diesel could come down by as much as R1.26 per litre. These cuts would put the petrol price at R23.13 per litre and diesel at R23.26 per litre.

This would put petrol prices back to levels seen before the steep hikes in June, but still around R3 more expensive than in February 2022, before the global pressures from Russia’s invasion of Ukraine took effect.

Local fuel prices are easing due to a lower oil price and stronger rand – though both of these metrics have come under continued pressure throughout the month.

2. RAF hauled to court:

The Road Accident Fund (RAF) is being hauled to court over a contentious new policy to stop paying out for past medical expenses covered by medical aid.

A Limpopo man who was left unable to walk for months on end after a car crash in May 2017, is challenging the move.

He said it unfairly discriminated against medical aid members like him and violated their basic human rights.

Moreover, this isn’t the only court action the fund is facing over the policy. Discovery Health, too, is challenging it.

The controversial move was announced in an internal communique published earlier this month, which states that all RAF offices must now reject claims for past medical expenses – which were covered by medical aid on the grounds that these claimants “sustained no loss or incurred any expenses”.

Speaking to Eye Witness News, Mawila’s lawyer – Jason Ruiters of Roets & Van Rensburg lncorporated – explained that the RAF’s new policy had serious implications for all claimants on medical aid,

“This is because a claimant has a contractual obligation to reimburse his medical aid for past medical expenses covered or paid by them once he is successful with his RAF claim. The decision by the RAF to reject a claim for past medical expenses means that the RAF will not be paying for such past medical expenses while a claimant is under a contractual obligation to repay the medical expenses to his medical aid. The net result of this decision by the RAF is that a claimant will now be left out of pocket”.

“In terms of the RAF Act, the fund is obliged to compensate any third party for loss or damage which the third party might have suffered, caused or arising by a motor vehicle accident,” he said.

“The impact of this communique is that the RAF escapes liability and will now not be paying for claims for past medical expenses where a road accident victim has medical aid. Never before has such a limitation existed with regard to such claims. Nowhere in the act or any other law or any regulation in the RAF, exempts them from paying such costs.”

The matter is set to come before the court late next month.

3. Child support payment system crashed:

The centralised system used to facilitate child support payments in South Africa has suffered a couple of setbacks since its launch, with a crash in 2020 blamed on corrupted data and improper backups.

South Africa’s Department of Justice and Constitutional Development (DOJ&CD) uses the MojaPay system to process child maintenance payments. This centralised financial management allows citizens to receive the money straight to their bank accounts, saving the time and expense of visiting service points.

And while this system was meant to make things easier for those owed child maintenance payments, with provinces fully migrating to MojaPay back in early 2020, it hasn’t been smooth sailing. Each court is required to submit payment schedules onto the system, which are then supplied to and administered by MojaPay on a national level.

The system’s most recent failure, in September 2021, impacted thousands of beneficiaries. This crash emanated from a highly publicised ransomware attack on the DOJ&CD, which delayed payments and forced the department to deploy an “alternative email system” to coordinate a crisis response plan.

Almost two weeks after the ransomware attack was first made public, the department reported that “some functionality of the MojaPay system had been recovered” and that “most maintenance payments had been processed.”

The minister outlined the technical specifications of what transpired in the lead-up to the major outage, which delayed payments for months.

The “root cause”, according to Lamola, was “data corruption” resulting from human error, whereby the database administrator of the service provider chose an “incorrect option in the client copy process. “This led to the crash of the production server,” answered Lamola.

Making matters worse for the department and the thousands of child maintenance beneficiaries left out of pocket, the MojaPay system took longer to restore than initially expected because of bad data backups.

“The solution could not be restored as per the prescribed disaster recovery timelines, primarily due to incomplete backups (system error on backups), which led to delays in getting the system functional,” said Lamola.

“To reduce the restoration timelines, a process to copy the data on the servers to external hard drives had to be undertaken to restore the data.”

To prevent a repeat of this type of system outage, the minister noted that regular, scheduled backup restore tests would be performed, and backup processes would be “optimised”.

4. SARS targeting illegal cigarettes:

The South African Revenue Service (SARS) is going after sin taxes owed to it from the illicit sale of cigarettes in the country.

Johnny Moloto, the general manager for British American Tobacco South Africa (BATSA), stated that almost 70% of all cigarettes consumed in the country now belong to illicit brands, turning South Africa into the biggest illicit tobacco market in the world.

BATSA is now echoing its previous calls for an investigation into the entire tobacco sector in South Africa.

Case win

On Friday, 25 August, SARS took charge of bank accounts, premises and all other assets owned by cigarette manufacturer Gold Leaf Tobacco Corporation (GLTC) and of its directors Simon Rudland and Ebrahim Adamjee.

This, after Sars was granted an ex parte preservation order in the High Court in Pretoria in which a curator was appointed to look after the affairs of GLTC, Rudland and Adamjee.

Sars approached the court in secret and accused GLTC, Rudland and Adamjee of “fraudulent, intentional tax evasion” and being “obstructive”. 

Based on what seems to be a multiyear probe, ace investigators said the accused did not declare more than R2.5-billion in income from illicit cigarettes for the years 2017/18, nor VAT of more than R356-million from September 2016 to July 2017. 

To hide the crimes, the plunder network allegedly managed a cross-border money-laundering racket that leaned on bribed Sasfin banking officials to sneak more than R3-billion in undeclared money mainly to Dubai, camouflage their footprints by deleting banking transactions, expedite payments, craft fake documentation and delete forex movement reports to the Reserve Bank. 

Sasfin COO Rodger Dunn in March admitted to Sars that the bank’s own belated investigation “evidences deletion of transactions”. In an astonishing letter annexed to a Sars court application dated 31 March 2022, Dunn admitted the bank statements for GLTC had to be reconstructed. By the time Dunn wrote this letter, Sasfin had not salvaged all the information. 

When Scorpio phoned Dunn, he insisted on following protocol, which does not involve him speaking to journalists. 

Sasfin CEO Michael Sassoon was at pains to say “we are 100% cooperating with Sars” and that all subpoenaed documents had been handed over.

From the court documents, it is not clear whether Sasfin managed to retrieve all the deleted information.

Sassoon said: “I think we have given everything to Sars that was needed.” 

Four out of five banking officials accused by Sars of manipulating and deleting bank processes and statements have left the bank, Sassoon confirmed. (Scorpio will return to Sasfin and its banking officials in the third story of this series.)

5. Another Covid wave possible:

Virologist Professor Barry Schoub says South Africa should brace for another wave of COVID-19.

He’s urging South Africans to get their jabs to be safe.

The World Health Organization (WHO) has revealed that more than one million people have died this year alone due to COVID-19.

“The big problem that we have in SA is low vaccine and we need to increase it quite urgently because we’re not out of the woods yet,” he said.

“There certainly will be another wave, probably the end of next month maybe even October.

“It is for that reason that people who are not vaccinated… should go and get vaccinated.

“Covid is not over.”

The WHO is warning that many countries have become complacent in the face of the ongoing COVID-19 pandemic.

The organisation says it’s time for a reality check.

All information sourced from articles posted by: BusinessTech, EWN, Business Insider, Daily Maverick, and ENCA.

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