News in South Africa 7th April:
1. Essential food prices volatile:
Avocados, oranges, tomatoes, chicken portions and cooking oil are some of the food items that have seen volatile price increases over the last two years as a result of global inflationary pressures as well as local disruptions and extreme weather events, says the Competition Commission in its latest Essential Food Pricing Monitoring report.
The report tracked food price data up until January 2022, before Russia launched its attack on Ukraine.
In just two months after the attack, the price of sunflower oil has surged 55% ,and canola oil by 40%, though the increases will only start to reflect on retailer’s shelves in the next 30 days.
Consumers can expect oil to be priced between R99.99 to R119.99 for 2-litre’s worth, Morne Botes, commercial director for SOILL, which owns the B-Well and African Gold oil brands, told Business Insider South Africa.
Botes said that the increases are currently being managed by producers, manufacturers, and retailers and will be phased in slowly to prevent panic buying and to sell the available stock at a fair price.
“The increases are coming… Some pricing might already have changed, but the full change in price is not visible yet,” Botes said.
“South Africa suffered unrest and riots in July 2021, with disruptions to supply chains, product shortages and impacts on pricing of certain goods. Fluctuations in the oil price, volatility in the exchange rate, and severe weather events globally have also contributed to local food price inflation,” the report notes.
According to the report, the wholesale price of tomatoes saw several spikes between March 2020 and January 2022, rising as high as more than R16 per kilogram in April 2021 from just over R8 in March 2020.
In the fruit category, avocados and oranges are said to have registered the most price fluctuations – at times higher than the expected seasonal spikes.
Wholesale prices for avocados peaked at R35 per kg in January 2022 from just below R10 in March 2020.
The price of oranges rose to nearly R15 in January 2022, increasing from just above R5 at the onset of the pandemic.
At the height of the pandemic, the price of fresh chicken portions peaked at R50 per kg, but later dropped to above R30 per kg in November 2021. Lamb peaked at above R150 in February 2021 but dropped to above R100 in November 2021.
With food inflation reportedly rallying above headline inflation and even reaching its highest level in a decade, the commission’s report notes that poorer consumers – who typically spend a significant portion of their income on food – are the ones most affected by the rising food prices.
“Inflation in essential foods hurts the poor as these goods account for more of their consumption and expenditure, which leaves poorer consumers more affected by food price rises than richer consumers.”
Since the start of the Covid-19 pandemic, the country’s food inflation has been rallying two percentage points above headline inflation. Further, despite headline inflation dipping to 5.7% in January 2022 from 5.9% in December 2021, food inflation increased to 6.2% in January from the 5.9% recorded in December 2021.
2. Relief grant fraud:
The Department of Social Development says it will implement a host of changes to avoid further R350 social distress relief grant fraud in the country.
Thousands of government employees who had no business receiving the grant fraudulently benefitted from the system over the last year, costing the economy millions of rands.
Minister Lindiwe Zulu said that the process is being handled electronically with beneficiaries checked against Home Affairs’ database, and also checked against details in the banking system to ensure that people legitimately qualify for the grant.
3. Bids open for renewable energy:
The Department of Mineral Resources and Energy (DMRE) has opened bid window six of its Renewable Energy Independent Power Producers Procurement Programme (REIPPPP).
The announcement comes as the government increasingly looks to renewable energy resources such as solar and wind as it plans to phase out its long-term reliance on coal. The window is expected to procure a further 2,600MW of renewable energy from Independent Power Producers (IPPs), of which 1.6 GW is wind energy in line with the gazetted IRP2019.
The department has set a firm date for the closing date for bid submission as 11 August 2022.
The bid window has been welcomed by the South African Wind Energy Association (SAWEA) which it said is a step towards addressing energy security and further stimulating the role of the wind sector in South Africa’s development objectives.
“The announcement to open BW6, calling for proposals from IPPs, adds vitally needed power capacity to the country, which continues to struggle with a strangled energy supply that is preventing the necessary economic recovery that South Africa so badly needs.
“This also adds impetus to the sector’s push for industrialisation, which relies on rolling procurement in order for the industry to attract the necessary market investment and reduce risk,” said Niveshen Govender, chief executive of SAWEA.
South Africa can address fundamental challenges of energy access, energy security and climate change through the deployment of renewable energy, Govender said.
“We can harness our abundant potential of increasingly cost-competitive renewable energy to service the growing demand for electricity and avoid a potential fossil-fuel lock-in, in addition to local and foreign investment.
4. Illicit tobacco floods market:
British American Tobacco South Africa (Batsa) says research indicates criminals have flooded South Africa’s retail market with illicit tobacco, citing a major new study conducted by independent market researcher Ipsos.
The government lifted the ban on the sale of tobacco products in August 2020, but according to Batsa this “has done little to curb the illegal trade’s rampant growth”.
Ipsos, a global leader in market research, has conducted two studies into the illegal tobacco trade in South Africa since the tobacco ban was lifted in 2020.
The first was conducted “soon after criminal manufacturers seized control of South Africa’s cigarette market as a result of the government’s lockdown ban on legal tobacco sales”, and the second was conducted between March 2 and 21, 2022, across 4 593 nationwide retail outlets.
The latest study, which incorporated “mystery shoppers” who were tasked with purchasing the cheapest cigarettes available at an outlet, indicates an explosion in sales of illicit cigarettes:
- Four out of five stores in the Western Cape (80%) sell cigarettes below the minimum collectible tax (MCT) rate of R22.79 per pack, as do almost 70% of outlets in Gauteng. This is a significant increase compared with previous research. “Cigarette packs that sell for less than the MCT should be considered illegal, as this means the manufacturer has not paid the minimum amount of duties to Sars [South African Revenue Service].”
- The number of garage forecourts across the country selling illicit cigarettes has quadrupled in the last year.
- It is possible to buy a single pack of 20 cigarettes for as little as R7 in many retail outlets nationwide. This is even cheaper than the lowest price of R8 found in the October 2021 study.
- “Products bearing trademarks licensed to or owned by Zimbabwe-based Gold Leaf Tobacco Corporation (GLTC) and Carnilinx, a member of South Africa’s Fair-Trade Independent Tobacco Association (FITA), continue to win this illegal price war.”
- The majority of stores in the Western Cape (79%), the Free State (74%) and Gauteng (69%) sold cigarettes below the MCT, demonstrating that “the manufacturers could not have paid due taxes on these products”. This is a significant increase since the previous Ipsos study.
- Brands “owned by or licensed to GLTC Zimbabwe are the most widely available at illegal prices, with almost half (44%) of purchases made below MCT. Purchases below MCT of brands owned by or licensed to GLTC South Africa rose by 17% in the last year”.
- “More than half (52%) of purchases of brands owned by Carnilinx were below MCT.”
- The study did not find any Pall Mall cigarettes sold below the MCT, even though it was the cheapest available brand in 642 stores (around 14% of total stores included in the sample). Pall Mall is owned by Batsa.
Batsa GM Johnny Moloto commented that: “The latest Ipsos study provides compelling evidence that criminals continue to dominate South Africa’s tobacco trade … These criminals are hiding in plain sight, robbing the fiscus of vital revenue when it is needed most. They are destroying legitimate businesses and jobs while national unemployment rates hit record highs.”
Moloto added that illicit tobacco sales “should be tackled as a matter of utmost urgency … They are depriving the fiscus of more than R19 billion a year”.
5. Greyhound opens again:
Greyhound and Citiliner buses, which stopped operating in February 2021 due to Covid-19, will be back on the roads on April 13 before Easter after the company’s relaunch in Boksburg, east of Johannesburg on Wednesday.
Luxury coach operator Greyhound and Citiliner, the semi-luxury division of Greyhound, were put up for auction by former owner KAP Industrial after operating at a loss for a number of years, resulting in about 4,000 people losing their jobs.
The passenger bus lines’ financial woes were worsened by reduced travel due to Covid-19 restrictions, the closure of borders with Mozambique and Zimbabwe and the restriction of bus occupancy numbers.
The bus sector employs about 35,000 people and contributes R5bn a year to the economy.
Speaking at the relaunch, deputy transport minister Sindisiwe Chikunga said it was a “bitter pill to swallow” when Greyhound, which was established in 1984, ceased operations last year. “We couldn’t imagine our roads without Greyhound,” she said.
“We welcome the return of this luxury coach line. Transport has been identified by economic policy pronouncement as fundamental, it’s the heartbeat of SA’s economic growth and social development.”
Intercity bus services were becoming the fastest-growing mode of transportation due to competitive pricing.
With the easing of the lockdown restrictions and the ending of the national state of disaster, intercity bus services were gradually recovering and the relaunch confirmed that.
However, increasing costs of fuel, labour and vehicle maintenance, among others, could force operators to cut corners in control costs.
“Such shortcuts have dire consequences as far as road safety is concerned,” Chikunga said, pleading with operators to comply with regulations.
The relaunch of Greyhound and Citiliner bus lines would contribute to the growth of the tourism sector, which accounts for an estimated 8.6% of GDP and supports about 1.5-million jobs.