News in South Africa 31st October:

1. Election clean up:

South Africans should use next year’s elections to vote out “useless” politicians who have failed to prioritise jobs and drive investment, and choose leaders who will get the struggling economy back on track, according to one of the country’s top bankers. 

Election clean up
Photo by Element5 Digital

“You have to have a half-decent government and I don’t think at the moment we are anywhere close,” Investec Group Chief Executive Officer Fani Titi said in a speech at the Gordon Institute of Business Science in Johannesburg last week.

Titi added:

We get the government we deserve because we either don’t vote or when we vote, we vote poorly.

The ANC has led South Africa since 1994. The government made initial strides in tacking poverty, unemployment and inequality, but its performance deteriorated markedly during President Jacob Zuma’s nine-year rule, which was marred by repeated corruption scandals, policy missteps and inappropriate appointments. 

President Cyril Ramaphosa, who succeeded Zuma in 2018, has struggled to turn the situation around, with output constrained by electricity shortages and logistics bottlenecks. 

The economy has expanded less than 2% a year over the past decade. The International Monetary Fund doesn’t expect its performance to improve markedly until 2028 at the earliest and the National Treasury has warned that state debt is approaching unsustainable levels. 

Titi said:

If you are not a little scared about the country, there’s something wrong with you, because the trajectory is not good at all. We are governed by guys in their late 60s and some in their 70s with no idea about how the world works.

There is reason to be hopeful however, he said, because there is now realisation of the need for urgency to tackle the country’s challenges, with the private sector now working with government to address energy shortages, logistics constraints, crime and corruption. 

Tipping point

Several opinion polls show the ANC risks losing its national majority for the first time next year, an eventuality that would force it into a coalition if it wants to retain power. The next administration has to focus on creating an environment that unlocks private sector investment and allows business to create jobs, according to Titi. 

The upcoming election will be an opportunity to vote in younger people who have ideas on how to move the country forward, and the 2029 vote “will be critical”, he said. “If we don’t get it right, then you get to a tipping point where you can easily deteriorate into a Zimbabwe, where the courts don’t work, where the economy doesn’t work” for those without political connections, and that can’t be allowed to happen, Titi said.

2. No ordinary mid-term budget:

Just when we think South Africa’s fiscal woes cannot get worse, they do. Finance Minister Enoch Godongwana has the unenviable task of telling the nation on Wednesday, when he delivers his medium-term budget policy statement (MTBPS), just how much worse off we are.

He has already indicated that the lack of economic growth, fallen revenue collections, and increased debt obligations could culminate in South Africa running out of money by March next year.

Revenue collections are expected to be R60 billion less than budgeted for in February, while debt service costs have increased from the anticipated R340 billion to approximately R366 billion. The current debt burden means that for every rand collected, 18 cents go towards debt repayment.

Compounding factors

Casey Delport, investment analyst at Anchor Capital, says in a note that the MTBPS typically serves as an update on the primary budget set in February. However, this year, it carries added significance due to the substantial deterioration in the country’s fiscal health.

The investment community “remains hopeful” that Godongwana will provide reassurance that government will address the looming financial challenges and the mismanagement of state-owned enterprises (SOEs) in particular.

“A variety of other factors have compounded SA’s fiscal challenges, such as lower commodity prices, lower revenue collection, Eskom and public sector wage increases, the expected continued roll-over of the Social Relief of Distress [SRD] grant and rising borrowing costs,” says Delport.

Begging bowls

The usual line up of non-performing SOEs looking for cash bailouts remains.

These include the Post Office (which requires a further R3.8 billion on top of the R2.4 billion allocated in the current fiscal year), the SABC (with a loss of R1.1 billion), and Transnet (a loss of R5.8 billion in the previous year).

Delport adds that in addition to these “usual suspects”, the Gauteng Provincial Government still needs to pay R12.9 billion to settle the South African National Roads Agency (Sanral) Gauteng Freeway Improvement Project debt and interest rate obligation, with the government paying R23 billion.

Beyond the upcoming budget reviews, SA’s medium- to long-term fiscal trajectory requires a credible economic growth reform agenda.

Delport warns that without this agenda, fiscal sustainability will not be possible.

“Much rests on the hope of forming a coherent and stable government after the 2024 election.”

3. SARB blames government for inflation issues:

The South African Reserve Bank urged the government to address structural impediments such as record power cuts and poor infrastructure that are undermining its work by constraining supply, restraining economic growth and rapidly pushing up prices. 

The central bank is “meant to respond to short-term cyclical issues — but if the structural issues don’t change, what happens in this economy is that it behaves all the time like it is over-heating,” Deputy Governor Fundi Tshazibana said in an interview on Saturday. 

“It makes the job of the Reserve Bank very difficult because it means that even a small increase in growth looks like demand is exceptionally high when it actually isn’t. It distorts the numbers; it distorts the outcomes of that,” she said on the sidelines of the Kgalema Motlanthe Foundation Inclusive Growth Forum held in the Drakensberg in KwaZulu-Natal. 

Tshazibana also urged policymakers to deliver on their commitments to improve performance and shore up public trust. “If you have a plan and you have got all of these gaps, and you never meet your plan — policy is stated, and also the unstated part — your conduct and your behaviour then becomes the policy.”

The central bank has repeatedly called on the government to address the structural issues as they affect how monetary policy presents itself. 

Annual inflation has remained above the midpoint of the Reserve Bank’s target range of 3% to 6% — where it prefers to anchor expectations — since May 2021. It accelerated to 5.4% in September because of higher energy and food prices.

The bank earlier this year estimated that power cuts would add 0.5 percentage points to the inflation rate as businesses pass on the costs of backup energy solutions to consumers while shaving 2 percentage points off output growth.

Weaker economic activity has also had implications for tax revenue collections and public finances. South Africa’s Finance Minister Enoch Godongwana will provide more details on both when he lays out his medium-term budget on Wednesday. 

Godongwana is also expected to water down proposed spending cuts and ramp up borrowing amid pressure from his cabinet colleagues, who are wary of angering the public ahead of tough elections next year.

4. Big changes for load shedding in JHB:

Power utility Eskom has handed over load shedding operations for the City of Joburg to the region’s utility, City Power, effective from 6 November 2023.

The move follows an agreement between the two power utilities whereby City Power will take over load shedding operations for most of its areas of supply which were previously loadshed by Eskom.

This means that there will be changes to the load shedding blocks in the city, which will affect the schedule in areas load shed by City Power in Johannesburg and Eskom across Gauteng.

Areas which are load shed by City Power will remain on a two-hour schedule even during stages 5 and above of load shedding.

However, due to the configuration of the network and technical complexities, City Power customers in the following areas will continue to be load shed by Eskom:

  • Tshepisong;
  • Lufhereng (Roodepoort);
  • Hoogland;
  • Maroeladal;
  • Morningside;
  • Riverclub;
  • Dainfern;
  • Bloubosrand;
  • Waterford Estate;
  • Riverbend;
  • Kyasands;
  • Bellairspark (Randburg);
  • Halfway House;
  • Halfway Gardens;
  • Vorna Valley;
  • Willowway (Midrand);
  • Marlboro Transit;
  • Camp (Alexandra).

“The two entities will keep exploring technical solutions that will enable City Power to take over the load shedding operations of its remaining customers,” the utility said.

“City Power has its processes, systems, and technical capacity in place to take over the added load shedding operations as part of the new schedule.”

Revised blocks and schedules will be available for the City Power and Eskom customers on 6 November 2023 on their websites.

5. Ramaphosa announces extra public holiday:

President Cyril Ramaphosa has announced that South Africa will have the day off on 15 December 2023 to celebrate the World Cup victory of the Springboks.

In an address to the nation on Monday night (30 October), the president said that the victory of the Springboks at the 2023 Rugby World Cup “rightfully calls for a moment to celebrate”.

However, while many expected the public holiday to take place sooner, the president said the date should be pushed back to give the matriculants space to focus on their exams.

The Springboks won their fourth Rugby World Cup on Saturday (28 October) in a nailbiting 12-11 final against the All Blacks.

Ramaphosa lauded the performance of the team, as well as the performance of the Proteas in the Cricket World Cup. This is on top of many other victories in the sporting field.

These victories and strong performances have united the nation, the president said, adding that the nation is stronger together,

Speaking at a green hydrogen summit in Cape Town earlier this month, Ramaphosa joked that he would consider announcing a public holiday should the Springboks win the Rugby World Cup.

This set up an expectation from the South African public that the Monday address would revolve around fulfilling this “promise”.

Notably, the 16th of December is already a public holiday in South Africa for the Day of Reconciliation  – but in 2023, it falls on a Saturday.

When public holidays land on a Sunday, the day is moved to the following Monday. If it falls on a Saturday, it is not given a replacement day.

In the case of the extra public holiday on the 15th, it would be a case of South Africans getting the “missed” day off on the 16th.

All information sourced from articles posted by: Fin24, Moneyweb, DailyInvestor, and BusinessTech.

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