News in South Africa 30th October:

1. Midterm budget this week:

As Minister of Finance, Enoch Godongwana prepares to deliver his mid-term budget speech this week, he said that if the country doesn’t cut expenditure and increase borrowing, it will be out of cash by the end of March 2024.

Midterm budget this week
Photo by Pixabay

He made the comments at the Kgalema Motlanthe Foundation’s three-day Inclusive Growth Forum, which was in the Drakensberg.

Godongwana is set to deliver his midterm budget on Wednesday on the back of some jitters over austerity measures.

He has argued that his cuts are below 2022’s underspending of R28 million.

Godongwana said South Africa has an issue with capacity. He also gave some insights into how Treasury is approaching Wednesday.

“First thing we’ve done is to manage this thing in a more prudent way, do a combination of cutting expenditure, and bumping up borrowing.”

2. Further job losses in mining:

Job losses are set to continue at South African mining companies as the sector faces significant headwinds from an inconsistent electricity supply, water shortages, and deteriorating logistics preventing them from getting their products to market. 

Mining analyst Peter Major told reporters that the government must realise that unemployment and poverty will rise if it does not address these problems quickly and adequately. 

Major was speaking about the release of third-quarter production data from Anglo American Platinum (Amplats) and Kumba Iron Ore. 

For the third quarter, Kumba’s production declined by 12% compared to the year before, while Amplats’ plunged by 9%. 

Major said the biggest factor contributing to these numbers is the economic environment in which these miners operate. 

Mining companies rely heavily on economic growth to drive demand, which raises prices for their commodities. 

However, South African mining companies have been unable to capitalise on rising demand and high prices due to an inability to get their commodities to market as Transnet’s rail and ports have become bottlenecks. 

For example, iron ore prices have risen the past two quarters in a row, yet Kumba’s sales guidance for the third quarter fell over 10% as it cannot get its iron ore to market. 

Kumba now has a stockpile of 9 million tonnes of iron ore across its operations that it simply cannot transport to the coast to export. 

In the first half of the year, Transnet’s deteriorating performance cost Kumba R6 billion in lost sales and pushed the company to defer R2 billion in investments in South Africa. 

Major said there is no point in expanding production if you cannot get your commodities to market and warned that Kumba may retrench workers. 

On the other hand, Amplats experienced a five-day water stoppage at its Rustenburg operations, which caused its production and sales to decline 9% in the third quarter. 

Major said these companies are as reliant on Eskom, Transnet, and local governments for water supply as the average citizen in South Africa. 

While they can mitigate the effects more successfully, they will not be able to do so for much longer.

“Unfortunately, like most things our government has been trying to run, it has been unable to do a proper job,” Major said of Transnet. 

“With all these infrastructure problems, the government has to realise if they do not get it right and help companies, there is going to be worse unemployment and poverty.”

“Government cannot create wealth. Only people and companies can. So, the government has to help companies and people, or unemployment will go up.”

3. SOE disaster:

Former Statistician-General of South Africa, Pali Lehohla, warned that the country is heading for disaster and that there is no end in sight.

Lehohla made this comment during a discussion on SABC News about government bailouts to struggling state-owned enterprises (SOEs).

Transnet is the latest state-owned enterprise to ask the government for support to implement its turnaround plan.

Transnet said its board would discuss the plan to address its estimated R130 billion in debt with the Public Enterprises and Finance Ministries.

It followed the government’s decision to take over R254 billion of Eskom’s R423 billion debt, which include R168 billion in capital and R86 billion in interest.

Lehohla said providing SOEs with bailouts is not the solution to address the problems they experience.

“There is something far more fundamental that must happen at the SOEs than just throwing money at them,” he said.

“At the current rate and with the current architecture of conception of the state-owned enterprises, there is something fundamentally wrong.”

He said many politicians like the word ‘state-owned enterprises’, but what it takes to run these institutions is a far cry from what is happening.

Lehohla said that compared to countries that have properly run SOEs and national development programmes, South Africa’s “is a joke”.

He said the government’s master plans, recovery and reconstruction plans, and development models are not technically competent.

Renowned economist Dawie Roodt said the reason for right-leaning economic events is that the government fails to effectively implement its left-leaning plans.

“The ANC government is left-leaning. It is a socialist government where people call each other comrades and refer to the state as a ‘developmental state’,” Roodt said.

However, the government is too incompetent to implement its left-leaning policies or properly manage the institutions it controls.

The result is that the private sector steps in to resolve the problems created by the government, which is then seen as privatisation.

Roodt said Eskom is a good example, where the private sector started to create its own electricity because of Eskom’s failure to provide reliable power.

Another is the South African Post Office, where private courier companies took over the task of delivering parcels in a timely manner.

“It is not official government policy to privatise anything, but in reality, the private sector is taking over the tasks of state-owned enterprises,” he said.

He urged the government to accept that it is poor at running state-owned enterprises and enable a smooth transition to privatise these functions.

4. Rugby not reason for no load shedding:

Eskom managed to stave off load shedding for almost 10 days, until the unwelcome sight of “Stage 2 and Stage 3” was implemented from 4pm on Sunday – with Stage 3 implemented overnight and Stage 2 in place on Monday.

For the past week – and this had nothing at all to do with the Rugby World Cup and the achievements of the Springboks (seriously!) – the utility has managed to avoid implementing load shedding since 10pm on October 19.

Quite a few things went Eskom’s way when it came to generation in the last 10 days.

First, the return of two units at Kusile Power Station way ahead of schedule on the temporary recovery plan (following the flue duct collapse last year) added as much as 1 600 megawatts (MW) to generation. In reality, this was closer to 1 000MW as those units ramped up to full production.

It is unclear at this point whether these units have even reached this point, given the difficulties in returning units to service after being offline for 12 months.

The return of this generation capacity was a welcome boost for Eskom, which, together with a significant – yet temporary – improvement in the efficiency of the coal fleet, allowed for the longest break in load shedding since September last year.

The coal fleet has consistently been producing more than 20 000MW, which is a solid performance considering that at various points in the depths of winter, it barely managed 18 000MW from those power stations. Kusile only counts for half of that improvement. (In fact, last week, there were a number of hours where the coal fleet was producing more than 22 000MW!)

This has certainly been a major contributor to Eskom’s energy availability factor, or the measure of generation capacity available, hitting a high for the year of 60.46%.

Before the week ending last Sunday, Eskom had not managed to get to the 60% mark (its previous best was 59% in week 23). It will only publish a report for the week to Sunday at the end of this week, but based on data from Eskom, its performance is likely to have been almost as good.

5. Visa waivers to boost tourism:

South Africa’s tourism minister is pushing for visa requirements to be eased or waived for Chinese and Indian nationals to boost visitor numbers from the world’s most populous nations. 

“Visas are a problem,” Patricia de Lille, who was appointed to her post in March, said in an interview in Bloomberg’s Cape Town office on Thursday. “I see my role as dealing with regulations, the visa issues, regulations around tour operating licenses and then, air access, getting more flights to come to South Africa.”

The government has identified the development of the tourism industry as key to reducing a 33% unemployment rate, but has long faced criticism that it makes it too difficult to enter the country. 

The visa system is overseen by Home Affairs Minister Aaron Motsoaledi, who acknowledges its deficiencies, but complains that he lacks the staff and budget to fix it. An online visa system that’s available in about 34 countries doesn’t work properly and while some qualification requirements have been dropped, including the submission of bank statements, security screening continues to result in delays. 

De Lille was tasked with attracting at least 10 million visitors in the year through March, the same as before the global pandemic struck, and is targeting 15 million by 2030. That’s down from a previous goal of 21 million, a revision necessitated by changing global travel patterns.  

More details sourced from articles posted by: EWN, DailyInvestor, BusinessTech, Moneyweb, and Fin24.

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