News in South Africa 6th September:

1. Cost of living crisis:

The South African government is debating the merits of introducing another relief package for citizens hard-hit by the recent economic turmoil in the country.

Cost of living crisis
Image taken by: Nicola Barts

The country is facing a cost of living crisis, which has already led to unrest and protest action.

Cabinet began a debate about introducing an economic relief package at its two-day biannual planning meeting on Monday to shield restless South Africans from the worst cost of living crisis in more than a decade.

The minister in the presidency, Mondli Gungubele, said that the government is waiting for the release of the updated figures on South Africa’s GDP – set to be released by StatsSA on Tuesday (6 September) – but anticipates a weak quarter.

The meeting in Tshwane will involve debates among high-ranking cabinet members, ministers and President Cyril Ramaphosa on how best to reform and implement economic policies in the country.

A specific talking point of the meeting is the country’s cost of living crisis and how the government could best mitigate it.

South Africans have been facing record high food and fuel prices throughout this year. A recent survey from Debt Rescue found that as a result of the high inflationary market, as many as 81% of respondents are cutting down on daily meals as they can no longer afford them.

“The price of basic foodstuffs has risen astronomically over the past year. Accelerating inflation plays a huge role in this as it affects the financial stability of the average consumer. Steep inflation is causing expenditure to increasingly exceed the income of the average person, and people are feeling desperate and out of control financially,” said the CEO of Debt Rescue, Neil Roets.

The latest consumer price information shared by Stats SA indicated that year-on-year increases in transport costs (up by 25% vs 20%); food and non-alcoholic beverages (9.70% vs 8.60%); housing and utilities (4% vs 5.10%) as well as miscellaneous goods and services (3.60% vs 4%) are the main contributors to the cost-of-living crisis.

In terms of current relief for South Africans, according to the Department of Social Development, almost half of all people rely on some financial support from the government.

The department recorded in May of this year that the extension of the Covid-19 Social Relief of Distress (SRD) grant has taken the percentage of people who rely on social transfers up to roughly 47%.

In August alone, over R12 million South Africans applied for the SRD grant following the amendment to regulations that made the income threshold R625, up from the original R350 per month.

2. E-toll replacement?:

Transport Minister Fikile Mbalula says if e-tolls on the Gauteng Freeway Improvement Project (GFIP) are scrapped, it is likely they will be replaced by something else.

“I am sure you are hoping that we scrap e-tolls,” Mbalula said last week during a briefing on the new smart card driving licence.

But he added: “For every scrap, there’s always another thing that comes up and all of that.

“But don’t say that I said e-tolls will be scrapped. Wait for me to come back with Finance Minister Enoch Godongwana,” he said.

This is a reference to an earlier statement by Mbalula, which he repeated on Friday, that “before or at the MTBPS (medium-term budget policy statement in October) we will make the big announcement about the e-tolls”.

Alternative mechanism

Organisation Undoing Tax Abuse (Outa) CEO Wayne Duvenage said the organisation is looking forward “to the end of e-tolls”.

Duvenage said Mbalula’s comments suggesting something will replace e-tolls if they are scrapped means National Treasury “is going to find another mechanism to raise funds”.

“But as we have always said, the mechanism has already been in place and they have been financing it e-tolls through Treasury allocations for the last six years and from taxes collected from the fuel levy,” said Duvenage.

“Hopefully they don’t see a need to increase the fuel levy to do this,” he said.

Duvenage admitted Outa suggested 10 years ago that the government should finance the GFIP through a 10-cents-per-litre ring-fenced increase in the fuel levy.

“But they have already increased the fuel levy, so that horse has bolted and they have done it. If they want to do it again, it would be frowned upon by Outa.”

Outa has highlighted that the fuel levy has increased by more than R2.50 per litre since the Gauteng freeway upgrade began in 2008.

Duvenage stressed that e-tolls have failed since they were launched in 2013, which was a matter and outcome Outa had warned the government about since 2012.

Fuel prices down, fuel levy up?

Outa and the Automobile Association (AA) last month expressed concern that government may hijack the consumer benefits of expected reductions in fuel prices to increase the fuel levy and use these funds to pay for the repayment of the GFIP bonds.

AA spokesperson Layton Beard said the association would be unhappy if the government increased the fuel levy to pay for the GFIP.

Beard said the general fuel levy generates R90 billion to the fiscus annually and the AA supports the use of a portion of these funds to pay for the GFIP, but this is subject to the fuel levy not being increased and the government using the current funds being raised to pay for the GFIP.

Outa and the AA’s comments followed Mbalula’s admission in June this year that a decision was taken by cabinet on e-tolls, which was taking government in the direction of the fuel levy, but this plan was scrapped because of the then-sharp increases in oil and fuel prices.

3. Toilet paper price hike:

Kimberly-Clark in South Africa, which owns nappy and toilet paper brands Huggies and Baby Soft, says price increases will continue into 2023 as pulp and sea-freight costs weigh on the business.

The company expects inflation across all categories to breach 10%, from a current average of 6% to 8%, Steven Hayes, Kimberly-Clark’s general manager for the sub-Saharan Africa consumer unit, said.

“We do see inflation across our categories for the remainder of this year; we are forecasting for that to continue into the early parts of next year, with pricing stabilising towards the second half of next year,” Hayes told Business Insider South Africa.

“Pricing across our categories will reach just over 10%, in terms of inflation to the consumer,” he said.

The category most sensitive to price hikes is its toilet paper and tissue, where the price of pulp (a critical raw material for making such paper) has seen considerable increases.

This should be echoed by other suppliers of toilet paper and tissue across South Africa, with the potential for record high toilet paper prices in 2023.

4. JHB coalition collapse:

The City of Joburg’s coalition is on the verge of collapsing as minority parties put city mayor Mpho Phalatse in their crosshairs.

The so-called ‘one-seat parties’ are rallying to topple the DA-led coalition, with the ANC expected to benefit from their support to regain power in the metro.

However, the coalition has accused ANC members of bribery and corruption in trying to buy the votes of smaller parties.

It has laid charges against two ANC councilors to this effect.

5. Latest fuel price update:

The Department of Energy has published the latest fuel price update for September, showing a sizeable cut to both petrol and diesel prices in South Africa.

While prices were projected to come down by around R2.30 per litre, an adjustment to the slate levy has eaten 30 cents per litre of the price cut, resulting in a price drop of R2.04 per litre for petrol, and between 46 and 56 cents per litre for diesel.

Prices will be adjusted as follows:

FuelPrice change
Petrol 95Decrease of 204 cents per litre
Petrol 93Decrease of 204 cents per litre
Diesel 0.05%Decrease of 56 cents per litre
Diesel 0.005%Decrease of 46 cents per litre
Illuminating Paraffin (wholesale)Decrease of 82 cents per litre
LPGASDecrease of 165 cents per kilogram
Sourced from BusinessTech

The changes will be implemented on Wednesday, 7 September.

The average international product prices for petrol, diesel and illuminating paraffin decreased during the period under review.

The rand appreciated against the US dollar during the period under review, on average, when compared to the previous period. The average rand/US dollar exchange rate for the period 29 July to 1 September 2022 was R16.70 compared to R16.87 during the previous period.

This led to a lower contribution to the Basic Fuel Prices on petrol, diesel and illuminating paraffin by 12.97 c/l, 15.63 c/l and 15.90 c/l, respectively.

The combined cumulative petrol and diesel Slate balances at the end of July 2022 amounted to a negative balance of R13.168 billion; however, the department has approved a Slate Levy of 83.68 c/l (an increase of 30.66 c/l) to be implemented into the price structures of petrol and diesel with effect from 07 September 2022.

All information sourced from articles posted by: BusinessLive, Moneyweb, Business Insider, TimesLive, and BusinessTech.

Leave a comment

Your email address will not be published. Required fields are marked *