News in South Africa 4th April:

1. Why Eskom is exempted:

National Treasury claims pressure would be placed on the fiscus and the borrowing powers of state-owned enterprises (SOEs) if the exemption granted to Eskom from disclosing irregular and fruitless expenditure in its annual financial statements was not considered.

Why Eskom is exempted
Photo by Tayssir Kadamany

Reacting to widespread criticism of the exemption granted to Eskom, National Treasury stressed on Monday the exemption still requires Eskom to disclose financial and non-financial information on irregular, fruitless and wasteful expenditure – but only in its annual report.

“By allowing Eskom to report on irregular and fruitless and wasteful expenditure in its annual report and not in its financial statements, the National Treasury ensures that reporting transparency and accountability is not compromised and still made public as currently required, while mitigating the risks that could arise if these transactions are reported in the annual financial statements,” it said.

Additional time to comply

“The exemption also gives Eskom additional time to comply with the new reporting requirements on irregular and fruitless and wasteful expenditure.

“Eskom is not exempted from ensuring that it takes effective and appropriate steps to prevent irregular and fruitless and wasteful expenditure,”  National Treasury added.

It said Eskom is also not exempt from taking appropriate criminal or disciplinary steps because of any losses incurred to date.

National Treasury pointed out that all material losses through criminal conduct and any losses recovered or written off from irregular expenditure will still need to be reported in the annual financial statements.

2. Oil prices surge 6%:

World oil prices soared Monday after several top producers led by Saudi Arabia sprang surprise output cuts despite already angering the United States with a similar move last year.

Crude futures surged almost eight percent at one stage, a day after multiple members of the OPEC+ exporters’ alliance unexpectedly slashed production by a total of more than one million barrels per day.

By early afternoon, Brent crude oil was up 6% to just below $85 a barrel.

The shock reduction will start in May and last until the end of the year, with OPEC+ saying Monday it involves Algeria, Gabon, Iraq, Kazakhstan, Kuwait, Oman, Saudi Arabia and the United Arab Emirates.

It came on top of a decision from Russia, also an OPEC+ member, to extend a cut of 500 000 barrels per day.

The oil cartel had already angered Washington in October by slashing production by two million barrels per day.

At the time, the White House accused OPEC+ of “aligning with Russia”, saying the cuts would boost Moscow’s revenue and undermine Western sanctions imposed over its invasion of Ukraine.

Russia’s war on Ukraine stoked inflation as it sent energy prices soaring last year, but crude prices have fallen since then.

OPEC+ said in a statement on Monday that Sunday’s move was a “precautionary measure aimed at supporting the stability of the oil market”.

3. SARS collects more than R2 trillion:

The South African Revenue Service (SARS) collected just over R2 trillion in gross tax revenues over the past year, a 9.7% increase from the 2021/22 tax year. The gross revenues were R123 billion, above what the finance minister estimated in the 2022 Budget speech.

This was the first time that SARS exceeded the R2 trillion gross tax revenue mark. But it was R5 billion below SARS’s own revised estimate.

“Basically, for all intents and purposes, we have achieved what the [finance] minister set us out to achieve,” said SARS Commissioner Edward Kieswetter. 

Total tax refunds surged by almost 19% to more than R381 billion, with value-added tax (VAT) refunds increasing by almost 22% to R319 billion. 

“We’ve seen a higher than usual growth in VAT refunds. In fact, it’s the highest we’ve ever paid out. The R381 billion is R60 billion more than last year,” said Kieswetter.

SARS said the refunds were primarily driven by capital investments by companies.

SARS chief revenue officer Johnstone Makhubu said that while zero-rated exports largely drove the refunds, SARS saw a significant increase in capital investment imports.

4. Property market after the latest rate hike:

The latest rate hike by the South African Reserve Bank (SARB) created a stir among property experts, but the market is expected to remain stable for now – as long as sellers price realistically.

On Thursday (30 March), the SARB decided to hike interest rates by 50 basis points, which went against the market’s 25 basis point hike forecast.

“Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data-dependent and sensitive to the balance of risks to the outlook,” said Reserve Bank governor Lesetja Kganyago.

Despite the valid reasons for the hawkish hike and property experts noting that they are mindful that the SARB faced a difficult decision, many believe it was a bit steep – especially considering the current pressures on consumers in 2023.

According to Professor Andre Roux – an economist at Stellenbosch Business School – the domestic inflation rate remains firmly above the target range of 3% to 6%, and the SARB has a constitutional mandate to protect the value of the currency. 

However, given that South Africa is on the verge of a technical recession, along with double-digit food inflation, inordinately high levels of unemployment, high personal debt burdens, and persistent load-shedding, some leniency is easy to justify, he added. 

Several property experts agree with this sentiment, with some noting that the hike will put pressure on homeowners, especially small businesses.

5. Durban plans to clean up sewage:

Durban municipal workers will publish a detailed action plan to tackle the city’s sewage problem one year after KZN’s widespread floods.

The eThekwini municipality will publish its clean-up action plan within 30 days after coming under legal pressure by ActionSA, which lodged an application against the city at the Durban High Court last November.

eThekwini Water and Sanitation chief said that it is now safe to swim again at most Durban beaches.

All information sourced from articles posted by: Moneyweb, Fin24, News24, BusinessTech and Daily Maverick.

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