News in South Africa 4th October:
1. Eggs rationed:
Woolworths and Pick n Pay are rationing eggs to customers in a bid to ensure regular supply as SA’s worst ever avian influenza outbreak continues to gather momentum.
Woolworths said in response to questions on Tuesday that it had “implemented a limit on whole egg purchases in our stores to six eggs per customer” while it worked with its farmers to “ensure regular supply returns as soon as possible”.
This follows a News24 report at the weekend that detailed how retailers were scrambling to secure egg supplies as the outbreak of H5 and H7 strains of bird flu wreaked havoc in the poultry sector. Customers across Cape Town and Johannesburg, where the outbreaks have been especially bad, were noticing emptier egg shelves in supermarkets.
Woolworths said it was experiencing significant supply challenges “as was the case across the market”, prompting the decision to limit the amount of eggs customers could purchase.
It said this was a “temporary measure”, adding it appreciated the “patience and understanding our customers have shown during this time”.
The group was rolling out signage about the rationing drive to all stores, including the group’s online and Dash service.
It continued to monitor the bird flu situation both locally and internationally, it said, adding it was following strict biosecurity protocols to “protect our hens as best as we can”.
Pick n Pay said it was also asking customers to “shop responsibly”, adding it would “limit purchases to one or two egg packs per customer, depending on the region”.
“We will continue to work closely with our suppliers to manage our stock so that we assist stores in areas where suppliers have been affected,” it added.
SA’s largest retailer. Shoprite said it was not rationing eggs and had “no plans to do so at present”.
The avian influenza crisis also prompted Thoko Didiza, Minister of Agriculture, Land Reform and Rural Development, to meet with retailers on Monday to discuss its impact on SA.
Her department said in a statement on Monday the meeting with retailers followed one with the South African Poultry Association last Friday.
The department said it was evident from its meeting with retailers that the main challenge was on the production side, with supply constraints in some SA regions.
2. Measures to counter poultry shortage:
The government intends to introduce a temporary rebate on import duties of chicken meat to combat a potential shortfall in the face of a number of highly pathogenic avian influenza (HPAI) outbreaks.
According to the Department of Agriculture, Land Reform and Rural Development, the total loss due to the outbreaks amounted to around 1.4 million chickens by 21 September.
A total of 50 HPAI H7 outbreaks and 10 HPAI H5 outbreaks were reported.
Minister of Trade, Industry and Competition Ebrahim Patel has now directed trade commission Itac to consider the creation of a rebate on meat and edible offal of fresh, chilled or frozen chicken.
Food security
In a statement issued on Tuesday, Patel says the outbreaks led to the culling of around 2.7 million chickens.
“The impact of the depletion of locally available poultry will have severe food security implications on the availability and prices of poultry, which is a basic, staple protein in South Africa.”
He requested Itac to investigate a rebate on import duties “in an expedited manner”. Interested parties have been given two weeks (until 16 October) to submit comments to the commission.
Itac must consider whether the temporary rebate should only apply to ordinary customs duties or whether the recently reinstated anti-dumping duties should also be included.
Patel reimposed anti-dumping duties – after suspending the imposition for 12 months – in August. Imports of frozen bone-in chicken portions already carry a most favoured nation (MFN) rate of 62%.
Imports from Brazil, Denmark, Spain, Poland and Ireland now carry additional duties for five years until 2027. They range from less than 3% for some companies in Poland and Ireland to 265% for one company in Brazil.
Paul Matthew, CEO of the Association of Meat Importers and Exporters South Africa (Amie), has welcomed the announcement.
Vaccinations:
Didiza is also looking at the possibility of vaccination and reviewing applications by various suppliers, according to her department.
The South African Veterinarian Association said in a statement last week the poultry industry is facing an “existential crisis” due to the avian flu outbreak and called on the government to permit the immediate importation of vaccines targeting the H7 and H5 influenza viruses.
While accurate figures are difficult to quote, reports from poultry producers and veterinarians indicate that as much as 30% of the country’s commercial layers and 25% of the broiler breeding stock have so far been affected, according to Wilhelm Maré, chairman of the association’s Poultry Group.
“All the efforts by the industry and government to contain the disease have been ineffective,” Maré said by phone on Tuesday. “The only option is to vaccinate with an effective vaccine.”
3. Mining profits cut in half:
South African mining company profits have plunged by almost half this year, dropping almost R100 billion because of the blows from lower commodity prices, crippling power cuts, rail network constraints and rising costs, News24 said, citing a report by PwC.
An analysis of 29 domestic mining companies showed that combined net income slumped to R108 billion in their latest financial years from a record R206 billion, according to PwC’s annual South Africa Mine report.
Transnet Freight Rail’s poor performance, particularly on the export coal line, has been a major challenge, according to the report.
It’s sobering to think that SA, once the world’s leading producer of gold and now ranked number eight behind Kazakhstan and Mexico, has roughly 27 years of gold reserves left. That’s according to the PwC SA Mine report for 2023.
Equally sobering is the fact that minerals accounted for R575 billion, or 58% of total exports, in the first six months of 2023.
The outsized contribution of mining to foreign currency earnings and the balance of payments was achieved despite power outages and a dreadful performance from state-owned ports and rail operator Transnet. It’s been estimated that Transnet’s inability to freight goods to port costs the country R1 billion a day, equivalent to 5% of GDP (on top of an estimated 10% loss to GDP in 2022).
All this makes the mining sector’s performance against frightful odds look especially heroic.
Other challenges facing miners include above-inflation cost pressures, volatile commodity prices and currency exchange rates, illegal mining and a critical skills shortage – not to mention a dysfunctional cadastral system for identifying and securing mining rights. Until that’s fixed, little in the way of exploration is likely to happen.
4. Factory mood deteriorates:
A gauge measuring manufacturing sentiment in South Africa fell to the lowest level in more than two years because of weaker demand and constrained production.
Absa’s purchasing managers’ index, compiled by the Bureau for Economic Research, fell to 45.5 in September from 49.7 in the previous month, the Johannesburg-based lender said Monday in an emailed statement. The latest PMI reading missed the median forecast of three economists in a Bloomberg survey of 49.5, falling further below 50 points — a level that indicates contraction in an industry that contributes about 14% to South Africa’s gross domestic product.
The September reading was the lowest since July 2021, according to data compiled by Bloomberg. Both external and domestic demand for South African manufactured goods came under pressure in the month, the Johannesburg-based bank said.
“This most likely reflects the weakening growth momentum in the Eurozone and the UK, both key export markets for local manufacturers,” Absa said. “On the domestic front, restrictive borrowing costs and perhaps also the sharp fuel price hikes at the start of September weighed on demand.”
Factory output also took a knock because of increased and more intense power outages in September. That resulted in the business activity index slumping 8.1 points to 41.9.
“For the entire third quarter, the business activity index averaged 43.3, down from an average of 48.1 in the second quarter,” Absa said. “The move lower would be consistent with a quarterly contraction in actual manufacturing output. If this materialises, it will weigh on overall GDP growth momentum in the third quarter.”
5. Petrol prices over R25 a litre:
South African motorists are now paying almost R26 per litre to fill up their cars from Wednesday (4 October), with the cost of diesel and petrol climbing between R1.08 and R1.97 per litre.
Fuel prices have increased significantly since the start of the year, with petrol prices increasing by 20%. Diesel, meanwhile, has increased by 17.7%, despite consecutive cuts in the first half of 2023.
According to the Department of Mineral Resources and Energy, the increases for October are mainly attributable to rising international petroleum prices, while the rand depreciated against the US Dollar during the period under review, on average, compared to the previous period.
As of Wednesday, inland 95 octane petrol costs R25.68/l, while at the coast, it costs R24.96/l, factoring in the slate levy and other costs. Diesel 0.005% will cost R25.22/l, while at the coast, it costs R24.53/l
Notably, however, is that despite the upward pressure on fuel prices, the Minister of Mineral Resources and Energy approved a retail margin increase of 5.0 c/l to be effected in the retail price structures of all octane grades of petrol from last month, which he said is necessary to accommodate the wage increases of pump attendants, cashiers and administrative staff at service stations.
The pain of these increases will not only be felt at the pumps but at the grocery stores as well.
The AA said that the increases – especially diesel – will have negative consequences for consumers as higher input costs will be recovered through higher prices at the till.
“Motorists will feel the pinch in higher prices at the pumps, but consumers across the board can expect higher prices for goods and services,” it said.
All information sourced from articles posted by: News24, DailyInvestor, Moneyweb, Fin24, and BusinessTech.
