News in South Africa 5th December:

1. Load shedding causing mass unemployment:

Electricity Minister Kgosientsho Ramokgopa said over 800,000 South Africans stand to lose their jobs due to load-shedding.

Load shedding causing mass unemployment
Photo by Timur Weber

The Minister recently spoke to Eskom employees at Medupi Power Station, which recently experienced several breakdowns that plunged the company into elevated load-shedding levels.

“When Medupi coughs, the country catches a cold,” Ramokgopa said. “You coughed last week, and as you coughed, you removed two units, and as a result of that, we experienced intensified levels of load-shedding.”

The Minister explained that Medupi “stands between people’s livelihoods and prosperity” and emphasised the impact of breakdowns and subsequent load-shedding on the South African economy.

He said 640,000 people lost their jobs due to elevated load-shedding in 2022.

“At the current rate that we are going, where we have had the most days of load-shedding in 2023, we will most likely lose 840,000 jobs,” he warned.

The Outlier estimates that South Africa has experienced 6,776 hours of load-shedding in 2023, with 326 days of load-shedding so far.

This means that, on 4 December, there have only been 12 days without load-shedding this year.

The Minister has previously warned about job losses as a result of load-shedding and its cost to the economy.

He estimated the impact on gross value added to the economy would be R725 billion. 

This will have disastrous impacts on employment in South Africa, with Ramokgopa estimating that job losses due to elevated load-shedding could amount to 860,000 in 2023.

The Minister said Eskom’s inability to meet electricity demand reliably is detrimental to the government’s ability to help the poor. 

The effect of load-shedding on job losses has already been seen in South Africa’s mining sector this year.

In trading updates this year, mining companies and their CEOs have been outspoken about the deteriorating operating environment which prevents them from investing in South Africa. 

Exxaro’s coal production decreased by 11% in 2022 “due to the poor rail performance from Transnet” and the “structural constraint of inadequate electricity supply”.

Sasol attributed its declining output to South Africa’s deteriorating infrastructure and the “structural constraint” of load-shedding.

“Persistent load-shedding, infrastructure constraints, in particular, the poor performance of the national provider of rail and port logistics services […] continue to significantly impact our business,” it said.

2. Establishing water as an asset class:

In the arid landscapes of southern Africa, water scarcity and climate change cast a looming shadow over the region’s sustainability.

As we stand at the crossroads of environmental challenges, the Development Bank of Southern Africa (DBSA) charts a visionary course to establish water as an asset class.

This strategic move is not just about closing the financial gap but transforming the water sector, attracting private sector capital, and fortifying resilience.

The challenges posed by water scarcity and climate change require innovative solutions that transcend traditional funding mechanisms. Part of the answer lies in establishing water as an asset class, a transformative endeavour that beckons private sector capital and ensures sector resilience.

At the DBSA, we recognise the imperative of this approach and draw inspiration from successful initiatives like the Climate Finance Facility (CFF), the Embedded Generation Investment Programme (EGIP), and the Water Reuse Programme.

Our journey to transform water into an investable asset class is anchored in a programmatic approach, a proven path to success demonstrated by our experiences with CFF, EGIP, and the Water Reuse Programme.

Key insights include the importance of a structured framework, comprehensive risk mitigation, incentivising investment through tailored incentives, and the power of data-driven decision-making. These principles provide a clear roadmap as we embark on this transformative journey.

By establishing water as an asset class, we lay the foundation for a sustainable and resilient water sector.

Private sector investment is not just a means to bridge the financial gap; it brings expertise, innovation, and efficiency to the forefront. Our commitment at the DBSA is unwavering. Collaborating with private sector partners, government institutions and communities, we aspire to secure a brighter and more sustainable future for all.

Nature finance

In the dynamic landscape of climate change finance, the integration of nature and climate emerges as a beacon of innovation.

Nature finance, often an unsung hero, extends beyond carbon sequestration to encompass sustainable management and restoration of ecosystems.

At the DBSA, we recognise the symbiotic relationship between nature and climate, embarking on a transformative journey to seamlessly integrate nature finance into our climate finance portfolio.

Climate resilience takes centre stage in municipal planning, creating strong, adaptive communities capable of withstanding climate-induced shocks. Nature finance becomes climate finance as it goes beyond carbon sequestration, contributing to water resilience, biodiversity conservation, and community empowerment. Our vision at the DBSA involves a paradigm shift in how we perceive and deploy financial resources, encompassing holistic project assessment, innovative financing mechanisms, strategic partnerships, and capacity building.

3. Fuel price lowers:

South African motorists are set to pay notably less to fill up their cars from Wednesday (6 December), with the cost of petrol coming down by 65 cents per litre while diesel will be going down by between R2.35 and R2.41 a litre.

According to the Department of Mineral Resources and Energy, the decreases in December are mainly attributable to declining international petroleum prices, while the rand appreciated against the US Dollar during the period under review, on average, compared to the previous period.

Diesel and Illuminating paraffin prices declined more than petrol because of increased production of middle distillates by refiners to cater for the expected increase in demand during the upcoming winter season in the Northern Hemisphere.

As of Wednesday, inland 95 octane petrol costs R23.25/l, while at the coast, it costs R22.07/l, factoring in the slate levy and other costs. Diesel 0.005% will cost R21.99/l, while at the coast, it costs R21.30/l.

Notably, however, is that in line with the application of the Regulatory Accounting System (RAS), the Minister of Mineral Resources and Energy approved a net increase of 60.1 c/l in the annual margin adjustments on petrol and a net increase of 13.88 c/l on diesel and illuminating paraffin wholesale prices, with effect from the 6th of December 2023.

While a decrease in petrol prices is a welcomed relief for motorists, fuel prices have still increased significantly since the start of the year, with petrol prices increasing by 8.6%. Diesel, meanwhile, has increased by 2.6%, although this was recorded at closer to 20% just two months ago.

The table below shows the latest pump prices as of December 2023.

InlandNovember OfficialDecember Official
93 PetrolR23.44R22.79
95 PetrolR23.90R23.25
Diesel 0.05% (wholesale)R24.17R21.82
Diesel 0.005% (wholesale)R24.40R21.99
Sourced from BusinessTech

4. South Africa becoming irrelevant:

South Africa is becoming more and more irrelevant globally as the country’s economy is plagued by load-shedding, poor economic growth, and a lack of investment in innovation and entrepreneurship. 

This is feedback from Sygnia CEO Magda Wierzycka, who lamented South Africa’s economic constraints in the company’s results for the year ended 30 September 2023. 

“South Africa continues to squander its opportunities, from natural beauty and abundant resources to its world-prized constitution, respected universities, sophisticated financial services sector and well-functioning private sector,” Wierzycka wrote. 

She said the country continues to be weighed down by the electricity crisis and continuing inequality while its economic growth continues to underwhelm and the rand depreciates. 

“In the absence of a competent government, the provision of basic services is being increasingly ‘privatised’,” she wrote. 

Wierzycka also bemoaned the fact that South Africans have “become too complacent and accepting of corruption, disorder, and non-delivery”. 

“To achieve meaningful change, South Africans must unite again, much as we did in 2016 and 2017.”

The lack of change has led to South Africa’s global status being steadily diminished, with the country no longer being relevant to global superpowers. 

“On the global stage, where South Africa is becoming more and more irrelevant, world powers such as the US and China are trying to decouple, striking new alliances to strengthen their respective positions,” Wierzycka wrote. 

This is reflected in foreign investors dumping South African assets. 

Foreign investors have been dumping South African assets over the past five years, with R98.1 billion being sold so far this year, threatening the country’s financial stability. 

This is feedback from the Reserve Bank in its latest Financial Stability Review.

The report showed that foreign investors had been consistently selling South African government bonds and equities since 2018, with the sale of equities accelerating since 2021. 

Data collected by the Reserve Bank shows the financial sector is coming under “sustained pressure resulting from non-resident investors gradually reducing their holdings of government bonds and equities”. 

In particular, foreign investment in government bonds has been on a downward trend since 2018, with a sharper decline following the country’s removal from the World Government Bond Index in April 2020. 

The share of bonds held by non-residents has dropped from 38.7% in May 2019 to 25.4% in October 2023.

Over the past decade, domestic banks and financial institutions have taken on a greater role in supporting the South African economy, filling the void left by foreign investors who have been reducing their holdings of local bonds and shares. 

This shift has put pressure on the local financial sector to absorb an increasing supply of government debt, increasing the risk of instability from external shocks.

5. Residents plan to fix the city:

Civil society has banded together to try and solve major issues in the City of Johannesburg.

Many residents at the meeting were infrastructure experts who have worked in both the private and public sectors and have intimate knowledge of the city’s issues and how to fix them.

They are offering their services for free to help mitigate the many crises.

All information sourced from articles posted by: DailyInvestor, Moneyweb, BusinessTech, and News24.

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