News in South Africa 7th March:

1. Crude oil surges over $130:

Crude oil prices surged nearly 10% on Sunday evening to top $130 a barrel on fears of a supply crunch.

Crude oil surges over $130
Image taken by: Tiger Lily

Oil’s relentless price rise comes on the back of fears about a supply crunch after American Secretary of State Antony Blinken told NBC’s “Meet the Press” on Sunday that the US was in discussion with European allies about a ban of Russian oil.

International benchmark Brent crude oil futures were up 8.38% at $128.01 a barrel on Sunday night, while US benchmark West Texas Intermediate (WTI) oil futures were up 7.23% at $124.04 a barrel.

At one point overnight, Brent crude touched $139.13 a barrel before paring losses. Both Brent and WTI crude oil futures are up about 65% this year to date.

Russia is the world’s third-largest oil producer, according to the International Energy Agency.

Oil prices could rise to $200 a barrel as the US would not be able to meet the supply shortfall from a Russian crude oil ban, said Scott Sheffield, CEO of Pioneer Natural Resource, a top US shale oil producer, per the Financial Times.

How this affects South Africa:

South African motorists face further petrol hikes over the coming months as oil prices increase – with a R2/litre hike expected in April based on current trajectories.

The shock of surging oil prices cascaded through financial markets Monday (7 March) as investors sought to price in the impact of a potentially prolonged period of higher global energy costs.

“Depending on oil price moves in the rest of the month, the increase could be significantly more than R2/litre. This follows a hefty petrol price hike of about R1.50/litre in March. Reports over the weekend of ‘active discussions’ between the US and European partners about a ban on Russian oil imports pushed oil prices up significantly further in Asian trade this morning.”

André Thomashausen, emeritus professor of international law at Unisa, has warned that in a worst-case scenario, South Africans could expect to pay as much as R40 for a litre of fuel.

Daily petrol price data from the Central Energy Fund (CEF) shows South Africa was currently on track for a petrol price hike of between R1.88 and R1,93 at the end of March, although this could still climb further if global oil prices continue to climb.

2. US comments on SA neutrality:

The United States left no diplomatic stone unturned,” to avoid war, US deputy secretary of state Brian McKeon insisted in an interview this weekend.

He was asked to comment on Ramaphosa’s remark on February 25, the day after the invasion began, that; “Some of us were very disappointed when the meeting between President Biden and President Putin did not happen. 

“Because if that meeting had gone ahead without any conditions, I’m sure we would have avoided the calamitous situation that is unfolding now,” he told journalists then.

McKeon said, in fact, the US had exhausted all diplomatic options.

“The President [Biden]  spoke to President Putin several times in the last few months. The Secretary of State [Antony Blinken] spoke to his counterpart foreign minister Lavrov. 

“The National Security Adviser Mr [Jake] Sullivan spoke to his counterpart in the Kremlin several times. We had diplomatic meetings in Europe, both bilaterally and in the Nato context and in the OSCE [Organisation for Security and Cooperation in Europe].

“We exchanged documents with the Russians both bilaterally and in Nato. There were security issues Russia said it was concerned about, nuclear forces and conventional forces in Europe, which we were prepared to address and speak to. 

“But the territorial integrity and sovereignty and sovereign choices of Ukraine, those were for Ukraine to make,” McKeon added, in an apparent reference to Putin’s principal and apparently non-negotiable demand that Ukraine renounce any application for membership of Nato.

“We were not going to negotiate for Ukraine. So I think we went the last mile, seeking to address Russia’s concerns diplomatically. And President Putin chose war.”

Asked how the US viewed South Africa’s position, McKeon noted that Blinken had said the US was not going to “parse” every country’s vote.

“South Africa abstained on the General Assembly vote. That’s a lot better than joining Russia. Russia was effectively alone with only four other countries. And in some respects that silence has a sound which has been heard. They (South Africa)  didn’t endorse what Russia did.  We would have preferred a yes but certainly abstention is a lot better than a no.” 

And McKeon said South Africa’s relations with the US would not be harmed as a result.

“No. We seek strong relations with the Republic of South Africa and one vote is not going to change our view on the importance of the bilateral relationship.

“South Africa is one of the leading countries on the African continent obviously because of its political and economic size and consequence. No, we will continue to try to strengthen our partnership with South Africa.”

3. Lockdown irrelevant:

South Africa should not have limitations on gatherings and other existing lockdown restrictions in place, says Shabir Madhi, professor of vaccinology at the University of the Witwatersrand.

Speaking to eNCA, Madhi said the government should also have lifted its national state of disaster months ago, with the focus shifting to the number of hospitalisations and deaths seen in the country, and not the number of cases reported.

“The lockdown restrictions have been obsolete for some time,” Madhi said. “They are completely obsolete, and are in fact now doing more damage.”

The professor pointed to businesses and entire sectors of the economy that are still struggling to recover from the worst of lockdown, while restrictions that are still in place – on gatherings and events – have been and remain crippled.

Madhi criticised the government and the National Coronavirus Command Council (NCCC) for being out of step on these issues, pointing to countries such as the United Kingdom which have allowed large crowds and eased other restrictions without seeing an influx in hospital admissions and death.

South Africa is still tracking the number of infections when it should be looking at hospitalisations and deaths, which have been the lowest since the pandemic began – with some days where zero deaths have been reported, the professor said.

“Simply stated, the National Coronavirus Command Council are completely out of the loop in terms of what is required at this point and time. Unfortunately, the national Department of Health doesn’t seem to be reading from the correct page.”

Madhi said that the government’s target of 70% of the population being vaccinated is also now irrelevant, as between 80% and 85% of the population have boosted immunity against the virus, either from previous infection, the vaccine, or a combination of both.

4. Need for removal of PCR tests:

The Tourism Business Council of South Africa says that it is happy to hear the government is planning to ease Covid-19 restrictions – however, it stressed that the PCR test requirement for vaccinated travellers has to be scrapped urgently to remain competitive in the tourism market.

This follows an announcement from the Health Ministry stating that it plans to end the national state of disaster.

The chief executive officer of the Tourism Business Council said that the mandatory negative PCR test for incoming travellers was the biggest threat to South African tourism.

5. SARS targeting expats:

The Budget Review 2022 was far from a ‘good news’ budget for South Africans working abroad (expats).

For the fifth consecutive year, changes have been proposed that clearly indicate that the South African Revenue Service (Sars) is still targeting expats and views them as low-hanging fruit to boost revenue collection.

The three main points directly impacting expats are outlined below.

Apportioning the interest exemption and capital gains tax annual exclusion

The first tax proposal in the Budget Review addresses apportioning the interest exemption and capital gains tax annual exclusion when an individual ceases to be tax resident.

Section 9H(2)(c) provides that the taxpayer’s next year of assessment will start on the day their tax residency ceases.

This can result in the taxpayer having two consecutive years of assessment in a 12-month period.

The question that arises is whether the two consecutive years of assessment in a 12-month period give rise to a doubling up of the exemptions (known as double dipping) and exclusions that a taxpayer has in a period of assessment. In practice there seems to be uncertainty with regard to this issue, as there are different interpretations and applications of these provisions.

Cross‐border tax treatment of retirement funds

The second proposal focuses on the cross-border tax treatment of the retirement funds of those who cease their South African tax residency.

Expatriate tax is a topic that has been hotly debated in recent years, and last year the government had to retreat when it was determined that its plan to tax the retirement interest of expats ceasing tax residency would contradict South Africa’s obligations in terms of the double tax agreements (DTAs) it has in place with other countries.

Expats who have ceased their South African tax residency already have to pay a capital gains tax when they financially emigrate, and their retirement funds are not currently included in the scope of this ‘exit tax’. However, it is evident that the government has put a bit more thought into this within this year’s Budget Review and is planning to change this.

Three-year lock up on pension funds

The third key area – the treatment of pension funds of non-residents – has already been in place since March 1, 2021. South Africans who have ceased their tax residency are still able withdraw their retirement funds (or any other SA policy) in full from South Africa, if they can show an unbroken period of three years as a tax non-resident.

If one intends to withdraw a personal policy in South Africa, one will require a South African bank account in their personal name. Unfortunately, policy providers will not pay to a third party nor an overseas bank account. In addition, for a successful policy withdrawal payout, the account in one’s personal name should be a non-resident account.

Two possible solutions are the conversion of one’s existing bank account to a non-resident status, or a facilitated non-resident forex facility.

All information sourced from articles posted by: Business Insider, BusinessTech, Daily Maverick, ENCA, and Moneyweb.

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