News in South Africa 4th July:
1. Food supply under threat:
PwC has warned that South Africa is at risk of heightened food insecurity with load-shedding, adverse weather, and deteriorating infrastructure disrupting the country’s food supply.
This is from the financial advisory firm’s South Africa Economic Outlook, released in June, where it discussed how businesses could respond to the difficulties of the current economic conditions.
According to the Global Food Security Index, South Africa ranks 52 of 113 countries for food availability.
PwC is concerned that this may deteriorate towards the end of 2023 with food inflation at a 14-year high, making basic staples unaffordable, and increased disruptions to the agricultural sector.
Of particular concern are the elevated levels of load-shedding, which also affect the water supply on farms, as a third of South African farms rely on electricity to pump water for irrigation.
This disrupts the food supply, making it increasingly difficult for retailers to consistently source food at affordable prices.
PwC’s warning echoes that of Pitso Sekhoto of the African Farmers Association of South Africa, who warned that the country would reach a point where food supply cannot be guaranteed.
This is due to deteriorating infrastructure preventing farmers from getting their produce to market.
“We are in a very, very bad situation because of authorities not doing what they are supposed to do” and the local government’s failure to maintain critical infrastructure.
Sekhoto said municipalities and provincial governments are responsible for South African agriculture’s mess.
2. Massive nationwide strike this week:
The Congress of South African Trade Unions (Cosatu) is expected to embark on a nationwide strike this Thursday (6 July).
Cosatu, which boasts roughly 2 million members across the country, said it will be protesting against socio-economic factors hurting everyday workers.
“It is a demonstration by workers that government needs to do more to end the current levels of load-shedding, cable theft, crime and corruption, wasteful expenditure and austerity cuts crippling the state, suffocating the economy, and further plunging workers into high levels of indebtedness and misery,” it said.
“This is also a signal to the government, the Reserve Bank, and the commercial banks that the working class can no longer afford to bear the burden of rising levels of inflation, electricity tariff hikes and relentless and reckless increases in the repo rate.”
The strike is protected under section 77 of the Labour Relations Act and is expected to affect major urban centres and cities in all nine provinces. The National Economic Development and Labour Council (Nedlac) has granted the union a certificate to strike.
The union said that the following steps could be taken to alleviate pressure on employees and uplift the economy:
- Raise the SRD Grant to the food poverty line in the October MTBPS.
- Extend the Presidential Employment Stimulus to accommodate 1 million active participants in October 2023 and 2 million in February 2024.
- Ensure the implementation of the two pot pension reforms on 1 March 2024.
- Unblock the delays in the rollout of the public infrastructure programme.
- Intervene in the 36 municipalities routinely failing to pay their employees.
- Repeal the Municipal Systems Amendment Act clause banning all 350 000 municipal workers from holding office in a political party at any level.
- Urgently intervene to rebuild and modernise Transnet and Metro Rail.
- Urgently intervene to prevent the collapse and liquidation of the Post Office.
- Allocate additional resources to ensure the SAPS, NPA, SIU, Hawks and judiciary are sufficiently resourced to win the war against crime and corruption.
- Allocate further funds to SARS to tackle tax evasion and customs fraud.
Fill out all funded public service and sector vacancies by December 2023.
Cosatu’s parliamentary coordinator Matthew Parks told ENCA that a 42% unemployment rate is unacceptable. He said that those that are employed face lost wages, employers who undermine collective agreements, municipalities that have or are collapsing and a hampered economy.
3. Manufacturing activity declines:
Employment creation in the manufacturing sector is set to remain low. The latest factory activity in South Africa has fallen to a two year low.
Absa’s latest Purchasing Managers’ Index has shown a 1.6% decline to 47.6 in June.
For the first time since 2018, all five subcomponents used to calculate the manufacturing activity were below the neutral 50-point level, pointing to a worsening of business conditions in manufacturing.
A key drag on the sector seems to come from weak demand, with the new sales orders index coming down as export sales continue to decline.
Domestic demand also remains under pressure but the business activity index improved on the back of significantly fewer blackouts during the month.
4. Petrol price down and diesel up:
On Wednesday, the unleaded petrol price (95) will be cut by 17c a litre, while 93 will be lowered by 24c a litre. Diesel prices will be hiked between 12c and 18c a litre, depending on the sulphur content.
Illuminating paraffin will be lowered by between 4c and 5c, the Central Energy Fund (CEF) reported.
South African fuel prices are determined mainly by international oil costs and the rand-dollar exchange rate, as oil is priced in dollars.
The average rand-dollar exchange rate for the past month was R18.6825/$, compared to R18.9854 during the previous month.
The oil price fell slightly over the past month. This was due to international recession fears and anticipated global economic slowdown, the Department of Mineral Resources and Energy said in a statement. In addition, OPEC and non-OPEC members also decided not to increase oil production cuts during their last meeting.
But global petrol prices increased due to the continuing driving season in the Northern Hemisphere. Middle distillate prices (including diesel) increased at a higher rate than petrol due to tighter supplies, the department said.
The latest change brings the price of a litre of 95 unleaded petrol to R22.46 in Gauteng, from R21.40 at the start of 2023 – and a record price of R26.74 in July last year.
The wholesale diesel price is now R19.49 a litre in Gauteng, from R21.22 at the start of the year.
5. Future load shedding warning:
Electricity Minister Kgosientsho Ramokgopa says South Africa needs to ensure that it upgrades and expands the nation’s electricity grid to avoid another energy crisis in the future.
He said that the current system cannot bring on enough new generation capacity from renewable energy sources from the areas best suited for it.
He said that the grid capacity in the Northern and Western Cape is nearly exhausted, while there is insufficient capacity in the Eastern Cape to connect the amount of renewable energy that South Africa would need to meet future demand.
All information sourced from articles posted by: DailyInvestor, BusinessTech, ENCA, Fin24, and Business Day.
