News in South Africa 30th September:
1. Eskom employee wage increase:
Eskom, which is under unprecedented financial strain, received another blow on Thursday when the CCMA awarded employees a further 1.5% wage increase, backdated to July 2021.
The company is under unprecedented economic strain as it burns millions of litres of diesel a day to keep the lights on. This comes on top of lower sales revenue due to load shedding and its generally unsustainable position due to high debt, low-cost recovery and unpaid bills by municipalities.
The award relates to the 2020/21 year in which Eskom granted a unilateral 1.5% increase to employees in the central bargaining forum. These are unionised employees belonging to NUM, Numsa and Solidarity. The CCMA has added an additional 1.5% which will be backdated to 1 July 2021.
This year, Eskom employees received a 7% increase after a damaging illegal strike that triggered stage 6 load shedding. At the time, Eskom said that the wage increase would add R1 billion to the wage bill.
The additional 1.5% will add about R142 million to the annual wage bill. It took a year for the arbitration to be finalised.
“The NUM understands that the CCMA works on the balance of probability and in this case the NUM version was more probable than that of Eskom,” the union said in a statement.
2. Mantashe – no electricity shortage:
Minerals Resources and Energy Minister Gwede Mantashe insists South Africa has enough electricity.
Speaking at an energy and mining investment conference in Limpopo on Thursday, Mantashe said there is 20,000MW of electricity sitting idle at Eskom, and the reason it’s not being rolled out to the people is simply due to a lack of skills and management at Eskom.
3. Wall Street nosedives:
Wall Street tumbled on Thursday on worries of a global economic downturn from aggressive central bank policy and fears that a rout in global currency and debt markets could spillover to stocks.
The Nasdaq fell 3% due to losses in megacap growth names such as Amazon.com Inc, Apple Inc, Microsoft Corp, Meta Platforms Inc and Tesla Inc . They were down between 3.09% and 6.25%.
The S&P 500 slipped to its lowest level since November 30, 2020, and was now set for a monthly decline of nearly 8%.
The benchmark index had recorded its first gain in seven sessions on Wednesday on easing Treasury yields after the Bank of England said it would buy long-dated British bonds to restore financial stability in markets.
However, the relief was short-lived as Sterling fell and bond prices slid on Thursday, with the sell-off in assets spilling over to even safe-haven U.S. Treasuries and top-rated German bonds.
The S&P 500 index has lost about $9.1 trillion in market value this year and was last valued at $31.2 trillion, according to Datastream.
“There’s so many huge macro issues right now that are just terrifying for equity investors who typically want to look at fundamentals of companies,” said David Russell, vice-president of Market Intelligence at TradeStation Group.
“So, it’s kind of like trying to go outside and do your gardening when there’s a hurricane coming.”
The yields on many Treasuries, which are considered virtually risk-free if held to maturity, now dwarf the S&P 500’s dividend yield, which recently stood at about 1.8%, according to Refinitiv Datastream.
At 12:23pm. ET, the Dow Jones Industrial Average was down 457.43 points, or 1.54%, at 29,226.31, the S&P 500 was down 79.82 points, or 2.15%, at 3,639.22, and the Nasdaq Composite was down 336.57 points, or 3.05%, at 10,715.07.
4. Bain & Co banned:
US consulting firm Bain & Co says* it “deeply regrets mistakes made” in its engagement with the South African Revenue Service (Sars) between 2015 and 2017, and that it is embarrassed and angry that its work was used by others to damage the tax agency and SA.
This follows National Treasury’s announcement on Thursday (29 September) that Bain would be prohibited from tendering for public sector work for a period of 10 years, commencing 5 September 2022, “for engaging in corrupt and fraudulent practices related to a Sars contract”.
This follows a ban imposed by the UK government, prohibiting the company from tendering for public sector work for three years for its role in state capture in SA. Bain is challenging that ban in court.
Responding to the ban on Thursday, Bain & Co says it had repaid all fees plus interest received from Sars prior to the sitting of the Nugent Commission, which was set up in 2018 to investigate governance failings at Sars and to recommend steps to prevent their repetition.
Bain says it has not pursued any public sector work since 2019, nor did it have plans to do so in the future.
The company says it nevertheless disagrees with the ban and is considering its options in response to this decision.
“We had already reached out to various stakeholders, including Treasury and Sars, to engage in further dialogue. Despite this outreach, we were given no notice of or opportunity to respond to the restriction prior to its apparent implementation,” says the statement.
National Treasury says it is collaborating with Sars and is “in the process of restricting Bain & Co South African Directors through a phased approach”.
5. Loan defaults on the rise:
The rate of consumers who defaulted on their loans for the first time increased in the second quarter of 2022, new data from Experian South Africa’s Consumer Default Index (CDI) shows.
The CDI increased quarter-on-quarter, from 3.68 in Q1 2022 to 3.80 in Q2 2022.
Year-on-year, however, the improving trend still remains, although not as pronounced as the 16% improvement seen in 2022 Q1. The index moved from 4.05 in Q2 2021 down to 3.8 in Q2 2022, representing a relative improvement of 6%.
The information services company said that this increase in consumers who defaulted on their loans for the first time from Q1 to Q2 2022 is aligned with the typical seasonality observations by the CDI.
This is where the index increases from March to May – mainly due to credit lending increasing during the Black Friday and Festive season spending spree in the preceding year, Experian said.
However, the relative year-on-year improvement suggests that the market is rapidly moving away from the tail end of reduced credit lending during the pandemic and is, in all probability, returning to the trend observed before the pandemic, it added.
The most significant year-on-year improvement in CDI was observed for Home Loans, moving from 1.82 in Q2 2021 to 1.62 in Q2 2022 – showing an 11% improvement.
According to Experian, however, the year-on-year improvement was not observed for all products. Vehicle and Retail Loans saw a 2% and significant 12% deterioration in CDI, respectively.
In a previous report on the CDI in Q1 2022, head of commercial strategy and innovation at Experian Africa Jaco van Jaarsveldt said: “The impact of the rapidly rising fuel, gas and grain costs, which are significant contributors to the global rise in inflation, is starting to have a direct impact on consumers across all products”.
Therefore, the deterioration of vehicle and retail loans could be viewed as evidence of this direct impact.
All information sourced from articles posted by: Fin24, ENCA, Moneyweb, TimesLive, and BusinessTech.
