News in South Africa 6th December:

1. Govt pollution harms children:

Two studies ordered by South Africa’s government into the impact of air pollution on community and child health showed emission limits it imposed on companies that emit the toxins are insufficient.

Govt pollution harms children
Photo by Pixabay

The studies were undertaken in key industrial regions by academics at the University of KwaZulu-Natal and the Council for Scientific and Industrial Research, a state research agency, and were completed in 2016 and 2019, copies seen by Bloomberg show.

The government didn’t widely publicise the findings, a controversial decision given that it has faced lawsuits over pollution levels and is assessing whether to allow the state power utility to continue violating emission restrictions or enforce laws that could shut plants and worsen energy shortages.

Around the time of the second study’s completion, the government was sued by environmental activists for not enforcing its own laws in the so-called Highveld Priority Area and in 2022 South Africa’s High Court ruled that the government had breached citizens’ constitutional right to clean air. The government has appealed.

In August this year, activists filed another case against the government over pollution in the Vaal Triangle Air-shed Priority Area — which was examined in the first study. Both regions are close to South Africa’s biggest city, Johannesburg, and the capital, Pretoria.

The research adds to evidence of the harm caused by state utility Eskom’s 14 coal-fired power stations, petrochemical plants and oil refineries run by Sasol and Africa’s largest steel mill, owned by a unit of ArcelorMittal SA. The use of coal for domestic cooking and heating adds to pollution levels.

The companies have all acknowledged that their emissions impact human health and said they have taken steps to reduce them, although they have in some instances also sought postponements to complying with new limits to be imposed from 2025.

“Adverse health outcomes do occur even below the pollutant standards,” the researchers wrote in the Highveld Study. “These necessitate further investigation and review of the safety of current air quality standards. There is a need for addressing air pollution more rigorously.”

In response to queries, South Africa’s environment department said the Vaal Triangle study area was published in 2016 and “printed copies disseminated to stakeholders.” However, a person familiar with the matter said only the printed copies were made available and no effort was made to circulate the findings more widely. The person asked not to be identified as they aren’t authorised to speak to the media.

The Highveld Priority Area study wasn’t published, although some of its conclusions appeared in the plaintiff’s arguments in the 2019 court case, the department said. That study refers to the Vaal paper as a reference, and says it remained unpublished.

Emission standards:

South Africa, which burns coal to generate more than 80% of its power, has considerably laxer emission standards than countries including China and India.

“The South African government allows its citizens to be exposed to air pollution levels that are up to four times higher than what the World Health Organisation recommends,” said Jamie Kelly, an air quality analyst at the Centre for Research on Energy and Clean Air, citing emission limits on particulate matter and nitrogen dioxide. “If the South African government values the health of children and adults, they should impose stricter air pollution standards.”

Both studies conclude that pollution is adversely affecting children’s health, making them more susceptible to allergens, and many had inflamed respiratory tracts that resulted in more instances of asthma and other diseases.

2. Billions in bailouts for failing SOEs:

The government plugging billions of rands in bailouts into failing state-owned enterprises is a sign of its commitment and “strategic intent” to turning things around and making these groups financially sustainable, says Public Enterprises Minister Pravin Gordhan.

The South African government has injected billions of rands into state companies over the years, but continues to get very little out of them. The latest findings by the Auditor General of South Africa delivered only one clean audit for the country’s state-run companies.

Auditor General Tsakani Maluleke, on 29 November 2023, tabled the audit outcomes for the national and provincial government for the year to end March 2023.

The audit highlighted that while there was a trend of improvement for smaller parastatals and some government departments, SA’s key SOEs again underperformed.

“Those auditees with the greatest impact on the lives of South Africans and on government finances, which we refer to as ‘high-impact auditees’, are lagging behind on financial and performance management disciplines,” she said.

Out of the 19 major SOEs that are expected to operate like businesses and generate profits, only one – the Development Bank of Southern Africa (DBSA) – managed to receive a clean audit.

The Auditor-General (AG) expressed disappointment that no other major SOE was able to achieve the same level of success as the DBSA. The AG stated that there was “absolutely no excuse” for this and urged other SOEs to improve their performance.

Among these poor performers were the entities under the Department of Public Enterprises – including Eskom, Transnet, Alexkor, South African Airways (SAA), South African Forestry Company Limited (SAFCOL), and Denel.

SAFCOL and Transnet received an unqualified audit with findings, meaning the company was able to produce quality financial statements but struggled to produce quality performance reports and/or comply with all key legislation.

The other four were the only SOEs to receive outstanding audits, meaning they did not submit any financial documents in time.

During a recent parliamentary Q&A, Gordhan was asked whether he intends to resign from the Cabinet in light of the failure of the state-owned entities under his watch and administration

Gordhan’s response can be succinctly summarised as “no” and, contrary to the AG findings, he said that each SOE is on a “challenging recovery path” but showing signs of some success.

He also pointed to State Capture as the culprit that crippled the SOEs in question. “The boards are working diligently to overcome the effects of State Capture and restore the entities to effective operations,” he said.

In his response, Gordan outlined what he believes are strides made by the various SOEs under his administration, but most of his points were intentions and plans still in the process of being completed.

3. SA at risk of recession:

There’s a risk that the South African economy – battered by higher levels of load shedding, inflation and chaos at ports – may end 2023 in recession after disappointing GDP data in the third quarter.

Another negative performance in the fourth quarter, which was hit by a return of stage 6 load shedding, could tip the country into recession.

4. Mixed bag for construction:

The latest FNB/BER Civil Confidence Index paints a mixed picture for construction in South Africa.

The index dropped by two points from 43 points in 3Q2023 to 41 in 4Q2023, meaning that nearly 60% of those in the civil engineering industry are dissatisfied with the prevailing business conditions.

Despite the overall decline, sub-indices are far more positive, with growth in activity continuing to gain momentum, resulting in better-than-average overall profitability.

“Activity in the civil construction sector has been on an upward trajectory for the past few quarters. However, according to Statistics SA it fell back somewhat in 3Q2023, contracting in real terms by 0.9% year-on-year,” Siphamandla Mkhwanazi, Senior Economist at FNB, said.

“That said, the survey results suggest that construction activity likely rebounded in 4Q2023.”

Looking ahead, respondents said that they expect an improvement in order books in the next quarter.

This and a decline in the index measuring the keenness of tendering price competition to its lowest level since 2013 suggest that the growth momentum will be maintained, even if it’s just over the short term.

“The survey results reveal a sector in which demand is currently relatively abundant and the pipeline of work robust. However, respondents remain concerned about the prevalence of criminal activity in the sector as well as the uncertainty created by the cancellation of tenders and delays in tender adjudication, which may have weighed on the overall business mood,” said Mkhwanazi.

5. Braai costs cool as festive season nears:

Price rises for South Africa’s traditional barbecue have slowed for the first time in four months, just in time for the holidays as the country gets ready to grill its way through December.

South Africans do love a braai, as the barbecue is known locally, and during the prolonged Christmas break, it goes from being a weekend treat to a frequent staple.

A sharp drop in onion and potato prices, which have declined 24% and 11%, respectively, cooled the overall pace of increase in Bloomberg’s Shisa Nyama Index to 10% last month versus a 17% gain in October.

Nationally, food prices rose 8.8% in October compared with the same period last year, data from Statistics South Africa showed, helping quicken annual consumer price inflation to 5.9% from 5.4% in September.

South Africa’s central bank has lifted interest rates to a 14-year high of 8.25% and says inflation risks warrant keeping borrowing costs elevated for longer. The latest inflation statistics are scheduled to be announced on Dec. 13.

Crunching data from the Pietermaritzburg Economic Justice and Dignity Group, the shisa nyama index tracks the prices of key ingredients in a traditional barbecue consumed in South African townships, including potatoes, cooking oil, corn meal, carrots, tomatoes, frozen chicken, beef and wors — a sausage made from ground meat offcuts. 

To compile its survey, the PMBEJD’s data collectors track the prices of 44 food items on the shelves of 47 supermarkets and 32 butcheries that target the low-income market in the greater areas of Johannesburg, Durban, Cape Town, Pietermaritzburg, Springbok in the far northwest and the far north-eastern town of Mtubatuba.

Supply constraints:

The uptick in food inflation has largely been a function of supply constraints for some food items, including potato prices, which, although showing a large moderation, have remained sticky, Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa, said.  

“The recent rise in the price of these products will probably be a temporary blip,” Sihlobo said. “I remain optimistic that South Africa’s consumer food price inflation will return to a moderating path going into 2024.”

A better-than-expected weather outlook, which could potentially mean the agricultural sector will escape the worst impacts of El Niño events, also bodes well for food prices, he said.

All information sourced from articles posted by: Moneyweb, BusinessTech, Fin24, and DailyInvestor.

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