News in South Africa 2nd March:
1. Unions aim high with wage demands:
Union insiders stated that the decision by public-sector unions to publicly share details of this year’s wage demands was a desperate move to appear active to disgruntled members who were resigning in droves.
In a pre-emptive unprecedented move, unions on Monday revealed they had tabled demands including an inflation plus 4% wage increase at the Public Sector Coordinating Bargaining Council.
Public sector unions have been struggling for relevance among members since their failure to overturn government’s decision to pull out of last year’s wage agreement.
While ordinarily, contents of their plans ahead of the pre-negotiations phase would be kept secret, union leaders fielded media interviews defending their demands.
Government still plans to cut the public sector wage bill by over R300 billion over the next three years.
2. Pensions invest in infrastructure:
Your pension fund savings may soon be invested in green energy, dams, and roads after government published proposed changes to pension fund regulations that will make it easier for funds to invest in infrastructure. In fact, up to 45% of a pension fund may be invested in these projects.
Australian, Canadian, and Dutch pension funds have long invested in infrastructure – either via companies (or private equity funds) that run large projects, or even by directly investing into these projects themselves. For example, they would buy stakes in solar power plants, and earn returns from the electricity sold to customers. Or they would help to fund the building of roads, and earn toll fees as part of agreements with governments. In addition, governments may sign long lease agreement for big assets funded by these investors, who earn their returns that way.
Now the South African government wants to change Regulation 28 of the Pension Fund Act to encourage retirement funds to do the same here.
Some retirement funds already invest in infrastructure via “alternative investments”, including hedge funds, and private equity funds. But pensions funds are not allowed to invest more than 15% of their savings in these kinds of funds.
3. Four tax incentives put to rest:
National Treasury indicated in the 2020 budget that government is reducing the number of tax incentives in the tax system, and the 2021 budget has reminded taxpayers that four further tax incentives are scheduled to lapse on reaching their respective sunset dates.
Treasury noted that: “Tax incentives often undermine the principles of a good tax system, which should be simple, efficient, equitable and easy to administer.”
It also observed that: “Tax incentives and some expenditure deductions provide favourable tax treatment to certain taxpayers or groups of taxpayers, and inevitably result in the creation of vested interests and lobby groups.”
The incentives in respect of airport and port assets, rolling stock, and low-cost residential units have a sunset clause of February 28, 2022.
The film incentive, which provides for the exemption from normal tax of income derived from the exploitation rights of approved films, expires on January 1, 2022.
Treasury has invited stakeholders to provide detailed reasons on why the sunset clauses should be extended. The submission deadline is March 31.
4. Tobacco saga back in court:
South Africa’s tobacco ban saga continues, with the High Court granting Cogta minister Nkosazana Dlamini-Zuma leave to appeal a December ruling that the five month tobacco ban under lockdown was unconstitutional and invalid.
Leave was granted because two court rulings on the ban reached different conclusions – for and against the minister – meaning there are grounds for the matter to proceed to the Supreme Court of Appeal.
In January, when the minister applied for leave to appeal, Batsa filed a cross-application for leave to appeal despite the judgment having gone overwhelmingly in its favour. The court granted leave to do so, stating that there was a prospect the supreme court might arrive at another view on this point.
Lawyers for the company on Monday said its appeal would proceed in terms of challenging the Cape court’s decision not awarding a costs order against the minister.
5. Cashbuild profits double:
Cashbuild, southern Africa’s largest retailer of building materials, doubled its headline profit over the past six months, with revenue up 21% to R6.7 billion. Revenue for stores in existence prior to July 2019 (pre-existing stores –
303 stores) increased with 19% and our 14 new stores contributed 2% growth.
Gross profit increased by 29% with gross profit margin percentage increasing from 24.8% to 26.4%. Selling price inflation was 4.5%. Operating expenses, including new stores, were well controlled considering the revenue growth, increasing by 11% (existing stores 9% and new stores contributed 2% of the increase) resulting in the operating profit increasing by 92%.
Basic earnings per share increased by 113% with headline earnings per share also increasing by 102% from the prior period. The board has declared an interim dividend (No. 56), of 724 cents (2019: 435 cents) per ordinary share out of income reserves to all shareholders of Cashbuild Limited.
South Africa has seen a spike in DIY and home improvement during lockdown, as consumers work from home.