News in South Africa 4th January:
1. Petrol price drop:
Motorists can breathe a sigh of relief this week with petrol and diesel prices seeing a substantial drop in the price from Wednesday, 4 January. However, households will remain under pressure due to high food costs, analysts warn.
Petrol prices will be coming down by R2.06 per litre, while diesel will see a drop of between R2.81 and R2.69 per litre from 50ppm and 500ppm, respectively.
This means a litre of 95 unleaded petrol will cost R21.40 inland and R20.75 on the coast.
According to the Department of Mineral Resources and Energy, the main reasons for the fuel price adjustment were an average Brent Crude oil price decrease from $88.77 per barrel to $85.08 per barrel during the period under review. Oil prices also continue to drop, in response to fears of a global economic recession.
However, despite the welcome relief on the petrol front, prices remain elevated and above R20 a litre – and this is exacerbating an already high cost of living for millions of South Africans, largely driven by high food price inflation.
According to the latest food inflation brief from the Bureau for Food and Agricultural Policy (BFAP) food prices in South Africa remain at elevated levels, and consumers should expect higher prices going into 2023.
“We expect that food inflation could peak in the first quarter of 2023, after which the higher base effects apparent from March 2022 will result in smaller inflationary effects during the rest of 2023,” it said.
2. Climate change breakthroughs:
The damage caused by climate change over this past year was at times so immense it was hard to comprehend. In Pakistan alone, extreme summer flooding killed thousands, displaced millions and caused over $40 billion in losses. Fall floods in Nigeria killed hundreds and displaced over 1 million people. Droughts in Europe, China and the US dried out once-unstoppable rivers and slowed the flows of commerce on major arteries like the Mississippi and the Rhine.
In the face of these extremes, the human response was uneven at best. Consumption of coal, the dirtiest fossil fuel, rebounded in 2022. Countries like the UK and China seemed to back away from major climate pledges. But all of this gloom came with more than a silver lining. In fact, it’s all too easy to overlook the steps toward a lower-carbon world that came about in between more attention-getting catastrophes.
As 2022 unfolded, a clear pathway of climate hope emerged. New policy breakthroughs have the potential to unlock enormous progress in the effort to slow and reverse warming temperatures. Below is a list of six encouraging developments from a very momentous year, as nation after nation elected more climate-oriented governments and enacted new efforts to curb greenhouse gas.
1. President Biden’s approves aggressive climate legislation
2. The EU taxes carbon dioxide at its border
3. Birds, bees and biodiversity get a big break
4. Rich nations agree to fund loss and damage, energy transition
5. Changes in leaders, change in attitudes
6. Taking methane matters more seriously
3. Pay hike for domestic workers:
The Department of Employment and Labour’s National Minimum Wage Commission is recommending an above-inflation hike to the NMW for 2023, which could see the rate for domestic workers jump to R25.05 an hour.
The commission announced in December 2022 that it is conducting an investigation into the NMW for 2023, and is eyeing an increase in the range of CPI+0.5% and CPI+1%.
With CPI averaging around 7% for 2022, this would put the hike around 8%.
The current national minimum announced by Employment and Labour Minister Thulas Nxesi in February 2022 was adjusted from R21.69 in 2021 to R23.19 in 2022 for each ordinary hour worked. The increase came into effect on 1 March 2022.
A hike to R25.05 would push the monthly rate to over R4,000 for a worker who works 8 hours a day, 20 days a month. This is approximately R300 more than in 2022.
Salary data from SweepSouth in August 2022 showed that the average domestic worker in South Africa takes home just R2,997 per month – significantly below even the current NMW of R3,700 a month.
New targets
On top of a hike for 2023, the commission is also looking at setting medium-term targets for the NMW.
NMW chairperson, Professor Adriaan van der Walt said that all wage-earning workers must earn enough to maintain a decent standard of living, defined as sufficient to support themselves and their families at a level that is both socially acceptable and economically viable.
“The target should ensure that the value of the national minimum wage does not decline relative to the median wage,” he said. The commission is inviting representation from the public concerning the medium-term target to be set.
Another development around the NMW is that the commission has started an investigation into the protection of Community Health Workers (CHWs) in South Africa.
4. Load shedding awful this year too:
Eskom says that stage four power cuts will be implemented from 4pm on Friday afternoon to 5am on Saturday morning.
The power utility will then implement stage two power cuts until 4pm on Saturday afternoon.
The rolling blackouts will then be suspended until 5am on Monday morning, after which stage two power cuts will be in effect until further notice.
Load shedding last year and this year:
South Africans have had to endure in excess of 200 days of power cuts last year, with no sign of the country’s energy crisis improving any time soon.
In fact, Eskom has recently warned that prolonged outages will continue to be implemented over the next few months.
While many businesses and factories have closed their doors for the holidays, resulting in a drop in demand for electricity, the country is currently facing Stage 3 power cuts – which will be ramped up to Stage 4 on Thursday afternoon.
“I think it’s also extenuated at this time, by the fact that Eskom has taken an opportunity to do a lot of maintenance, in fact record levels of maintenance, so something like 16% of the Eskom’s plant is shut down for planned maintenance,” said energy analyst Chris Yelland.
Yelland believes the situation is not going to get any easier as the new year begins.
“I think the real test will come in the middle of January…there’s going to be a big ‘pick up and demand and that’s when the system will be really be tested. I have no doubt that load shedding this coming year is going to be as bad, just as bad as this year.”
5. Scenarios that threaten global markets:
After the worst year for global stocks in more than a decade, and a rout in bonds that’s unmatched this century, some investors aren’t prepared to take anything for granted in 2023.
While optimists are betting on central banks pivoting to interest rate cuts, along with China fully emerging from its Covid isolation and conflict in Europe abating, others are on the lookout for risks that may throw markets back into turmoil.
Below are five scenarios that threaten to bring more trouble for investors in the year ahead:
Entrenched inflation
“The bond market is expecting inflation will pretty neatly come back into zone in 12 months,” said Matthew McLennan, co-head of the global value team at First Eagle Investment Management.
But that may be a big mistake. There is a real risk that wages growth and supply-side pressures like elevated energy costs keep fueling consumer price gains, he said.
This would rule out the pivot to cuts from the Federal Reserve and European Central Bank that markets see coming in the middle of the year.
The flow-on impact: stocks and bonds falling further, dollar strength and more pain in emerging markets.
China stumbles
Chinese stocks have jumped about 35% from their October nadir on the prospect of the world’s second-biggest economy fully reopening from lengthy and draconian lockdowns.
Weighing against this optimism is the danger of the health system being overwhelmed as infections surge, and economic activity collapsing. Crowded hospitals and queues at funeral parlors have caused alarm in recent weeks, and been accompanied with a drop off in social mobility in major cities.
“China’s infection curve will rise and will only peak one or two months after Chinese New Year,” said Marcella Chow, global market strategist for JPMorgan Chase.
She expects the nation to succeed in reopening but still cautions of “risk in terms of how Covid evolves.”
Russia-Ukraine war
“If the war worsened and if NATO became more directly involved in hostilities and sanctions ratcheted up, it would be quite negative,” said John Vail, chief global market strategist for Nikko Asset Management.
Secondary sanctions against Russian trading partners, notably India and China, would amplify the effect of current restrictions at a perilous moment for the global economy, according to Vail.
“That would be a major supply shock for the world in terms of food, energy and other items like fertilizer, certain metals and chemicals,” he said.
Emerging markets slump
Many investors see dollar strength easing in 2023 and energy costs falling — two factors that would relieve pressure on emerging markets.
Any failure to curb inflation would scuttle this outcome for currency markets, while an intensification of the war in Ukraine is just one of many risks that could send energy prices skyrocketing again.
Covid rerun
A more contagious or deadly strain of Covid-19, or even the present variants lingering longer, could begin to jam up supply chains once more, which would ripple on into inflation and slow economic activity.
“We believe the macro hit to growth would be most felt by larger economies and those more dependent on trade,” said JPMorgan’s Chow.
All information sourced from articles posted by: BusinessTech, Moneyweb, EWN and TimesLive.
