News in South Africa 6th March:
1. Cabinet reshuffle:
President Cyril Ramaphosa is set to announce changes to his executive on Monday evening.
Presidency spokesperson Vincent Magwenya revealed this while giving an update on ”relevant topical issues of public and media interest” at the Union Buildings in Pretoria on Sunday.
“The president will announce the new national executive tomorrow, Monday 6 March, at 19:00,” he said.
Magwenya said that while Ramaphosa was still nursing a cold, the president was busy finalising the formation of the executive.
He was also adamant that the president was fully committed to his day-to-day tasks and taking South Africa out of the pressing situation it faced.
“Throughout this week, the president has been attending to his duties, despite having a common cold. He continued consultations on the forthcoming changes to his executive,” said Magwenya.
Ramaphosa’s spokesperson was emphatic in dismissing allegations that Ramaphosa prioritised personal engagements over matters of national importance.
DA leader John Steenhuisen harshly criticised Ramaphosa for his delays in filling key vacant Cabinet positions, saying he was prioritising personal interests over the interest of the country’s citizenry.
Magwenya was adamant that the president appreciated putting together an executive that would act on the government’s plans to rectify areas of concern.
Vacancies have been created in the executive due to the resignations of Ayanda Dlodlo, who was the minister of public service and administration, and deputy president David Mabuza.
To address the electricity crisis, Ramaphosa announced during his State of the Nation Address that he would be appointing an electricity minister but, after almost 30 days, had not yet done so.
2. Tightening of exchange controls:
Surprisingly, the National Treasury did not increase South Africa’s foreign allowances in its 2023 Budget.
It was the 11th consecutive year that the Single Discretionary Allowance (SDA) of R1 million and the seventh successive year that the Foreign Investment Allowance (FIA) of R10 million remained unchanged.
Unfortunately, inflation and a much weaker exchange rate have significantly reduced the dollar amounts South Africans can send offshore. It suggests that the National Treasury has progressively tightened exchange controls, almost by stealth.
This starkly contrasts the government’s steady relaxation of exchange controls since 1994.
The first democratic government inherited stringent exchange control regulations in 1994 but initiated a steady process to allow South Africans to take money offshore.
This relaxation process gained momentum in 2011 when the bank set the SDA at R1 million and the FIA at R4 million per year, subject to approval from the South African Revenue Service (Sars).
This meant South Africans could move R5 million offshore without much hassle if their tax affairs were in order.
In 2015 the bank hiked the FIA to R10 million but kept the SDA of R1 million unchanged, which more than doubled the investment ceiling to R11 million.
All and sundry were delighted with the announcement, and for 99% of South Africans, it was akin to the scrapping of exchange controls altogether, as very few had the means to send R11 million offshore.
However, since 2015 the National Treasury has not increased the limits.
Unfortunately, there are rumblings of discontent that inflation and a much weaker rand have rendered these limits, especially the SDA, insufficient.
The table below shows the impact of the weaker rand. The average exchange rate in 2015 was R12.50 per dollar, weakening to R16.38 to the dollar in 2022.
This means the $861 800 South Africans could take offshore in 2015 dropped to around $671 500 last year.
In fact, the $671 500 South Africans could take out last year was slightly less than the $689 000 they could export in 2011 under the old regime when the FIA was R4 million and the SDA R1 million.
3. Business confidence wanes:
Chief executives of businesses in South Africa have expressed growing frustration at the slow pace of action from the government in dealing with the various crises hitting the country.
And despite being proactive and presenting solutions to these problems, they feel like the government is not coming to the party.
According to Business Leadership South Africa (BLSA) CEO Busi Mavuso, business leaders feel like it is currently very difficult to operate in South Africa, despite a lot of focus on trying to find solutions.
While some progress is being made – such as business participation in initiatives such as the National Electricity Crisis Committee (Necom) and Operation Vulindlela – there are not nearly enough examples like this, she said.
Mavuso said that recent efforts from the Presidency and the National Treasury to unlock economic reforms have racked up a handful of achievements, including auctioning spectrum, allowing private energy generation and improving access to visas for foreign workers – however, it is still not enough to boost business confidence.
BLSA, as a representative body that collaborates with the government to provide the perspective of big business in South Africa, met with several large companies within the association.
Businesses said that state-owned enterprises are a major concern – especially Eskom. However, failures at the national freight and logistics company Transnet also pose significant threats to the economy, they said.
Business leaders also pointed to various local government failings and specific challenges they have with some national departments.
“There are also concerns about how industrial policy is being developed and the seemingly ad hoc nature of competition decisions,” Mavuso said.
The BLSA lead said that there were growing concerns surrounding South Africa’s recent diplomatic advances to Russia and China that are putting the country’s preferential access to the US market, among other things, at risk.
She said CEOs and other business people have noted a significant loss of focus by the government in engaging with partners and working towards solutions.
4. Rental growth recovers:
Rental growth in SA has recovered to pre-pandemic levels, according to payment automation platform PayProp’s Annual Market Report for 2022.
The average national rent increased by 3.4% year-on-year from the fourth quarter of 2021 to the fourth quarter of 2022, an increase of R268, and bringing the average rent to R8 175.
Rental growth is now higher than the 3.2% recorded in the first quarter of 2020, just before the pandemic hit in SA.
Johette Smuts, head of data analytics at PayProp, says rental growth has rebounded “impressively” over the last five quarters. In the third quarter of 2021, for example, year-on-year rental growth was just 0.2%. PayProp is one of the largest processors of residential rental transactions in SA.
“We have reached a very positive milestone in that rental growth has now recovered to pre-pandemic levels,” she says.
However, Smuts cautions that affordability challenges could curb a continued recovery in rental growth in 2023.
In the fourth quarter of 2022, 28.5% of tenants were regarded as “high risk,” an increase of 4% compared to the same period in 2021. In the fourth quarter of 2022, 18.1% of tenants were in arrears.
PayProp estimates that tenants spend an average of 46.6% of their net income on debt repayments and 29.1% on rent.
“Slow economic growth due partly to unreliable electricity supply, and interest rate increases, are just two of the factors stretching tenants financially – the effects of which we’ll continue to see throughout the year,” she said.
5. Department of Water’s drastic plans:
The Department of Water and Sanitation is considering withholding equitable shares from municipalities that do not pay their water bills to prevent the financial ruin of the nation’s struggling water boards.
Water boards were owed R16.1 billion by municipalities by the end of December 2022, including an overdue R10.9 billion for more than three months.
The department said that the poor finances of water boards affect ratings by rating agencies, negatively affecting investor confidence.
All information sourced from articles posted by: News24, Moneyweb, BusinessTech, Fin24, and BusinessDay.
