News In South Africa 8th January:
1. Elections pose major risk to economy:
South Africa’s upcoming national elections pose a major risk to the local economy, with policy uncertainty remaining elevated and investors wary of investing in the country entering uncharted political waters.
This risk was highlighted by the North-West University (NWU) Business School in its policy uncertainty index, which remained high in the fourth quarter of 2023.
Policy uncertainty is a major issue in South Africa as it has severe implications for business confidence and the investment climate in the country.
In its report, the NWU Business School said there are strong correlations between policy uncertainty and negative economic outcomes.
High levels of policy uncertainty lower investment, employment and, subsequently, economic output. This results in sluggish economic growth in South Africa.
Levels above 50 on the policy uncertainty index (PUI) reflect heightened policy uncertainty, while levels below 50 indicate that uncertainty is decreasing.
For the fourth quarter of 2024, the PUI lowered to 65.5 from 71.8 in the third quarter. Only when positive forces significantly outweigh negative ones will the PUI drop below 50.
Decreasing inflation and the Reserve Bank keeping interest rates unchanged pushed down the PUI, along with positive developments in the global economy and free trade in Africa through the expected extension of a trade agreement with the United States beyond 2025.
The US pledged its support for renewing these tariff concessions for Africa. In particular, the report said that US-SA economic diplomacy also seemed to be put back on a more constructive basis.
However, major negative forces remain, such as load-shedding, the ongoing crisis at the country’s ports, and South Africa’s stagnant economy.
Another source of policy uncertainty has been the serious deterioration in South Africa’s public finances during 2023, outlined by the Finance Minister in the Medium-Term Budget Policy Statement (MTBPS).
While South Africa prepares to calibrate its policy uncertainty, a major risk factor looms on the horizon – the 2024 general elections.
SARB Governor Kganyago and other experts have identified the elections as a key threat to the nation’s economic stability.
As Kganyago explained in a recent City Press interview, “Politicians adopting a populist tone ahead of the vote could create uncertainty among foreign investors, discouraging investment in South Africa.”
This concern isn’t unfounded, as global research indicates that policy uncertainty indices often rise significantly during election periods. South Africa is unlikely to be an exception to this trend.
2. Draft IRP 2024 failure:
The long-awaited updated Integrated Resource Plan (IRP) that was published by government last week has already drawn sharp criticism from energy policy and investment specialist and advisor Professor Anton Eberhard, who calls it a “Neanderthal plan”.
The IRP is a long-term plan that sets out the country’s required energy mix to ensure future energy security. It must balance different priorities like grid stability, cost and environmental obligations, including emission standards, taking into consideration technological developments and market changes.
The current IRP was already outdated upon publication in 2019. One of the assumptions it was based on was a 75% availability factor for Eskom’s generation fleet. In reality this has been declining year after year and ended 2023 at an average of 54.72%.
Other new information that was considered in the new draft includes:
- The delayed shutdown of several Eskom’s coal-fired power stations;
- Challenges with the completion and operation of the Medupi and Kusile power stations;
- The planned 20-year life-extension of the Koeberg nuclear power station;
- The looming deadline for Eskom to comply with emission standards;
- The timing of getting new generation capacity online; and
- Limited capacity of the transmission grid.
The new draft IRP looks at two time horizons, namely up to 2030 and the period thereafter up to 2050.
Horizon 2030
Several scenarios were developed and for Horizon 2030 the following plan emerged:
The new coal-fired generation to be introduced in 2024 and 2025 refers to the two units at Kusile that are not yet in commercial operation.
From 2027 the plan relies heavily on improved plant performance by Eskom as well as 6 000MW of new generation from gas – half public and half private – that has not yet been procured, to balance increased public and private sector renewable generation.
In addition, it requires delaying the shutdown of coal-fired power stations “where technically and commercially feasible” and expansion of the transmission grid.
Horizon 2050
For the 2050 horizon five different energy mixes were explored.
The least-cost option consists of solar PV, wind and gas generation, but is stated to be inadequate from a security of supply point of view.
Initially it shows a significant reduction in carbon emissions as the coal-fired power stations shut down, but from 2042 this increases due to high gas utilisation. This pathway is used as the reference case.
The second and third pathways explore only green energy with battery storage and green energy plus gas to fill the gap until the earliest date nuclear becomes available.
The fourth pathway is based on delaying the shutdown of about 15 000MW of coal-fired power stations by 10 years. That means low new-build cost and will “adequately maintain security of supply,” but carbon emissions will be around the same level as anticipated in 2026.
The fifth pathway provides for clean coal technologies, capping new coal at 6 000MW. It has the second least new-build cost and low emissions.
Shortcomings
Eberhard describes the IRP 2024 as “a stitch-up, with pre-determined outcomes in line with what the energy minister has been advocating – wishful thinking around improvements in Eskom power station performance, delays in coal decommissioning, “clean” coal, nuclear energy and lots and lots of gas.
“Yet South Africa’s [Minister of Mineral Resources and Energy Gwede] Mantashe has failed to make progress in any of these areas in the four-and-a-half years he’s been energy minister.
“The only thing he has actually achieved is a slow-down in renewable energy investments: a measly 150MW from projects he’s procured have actually connected to the grid.”
Eberhard says: “One of the disastrous consequences of this IRP is that there will be no acceleration in publicly procured renewable energy or enabling regulatory reforms, and South Africa will get nowhere close to the R1.2 trillion investment it needs in 60GW of new capacity and grid expansion.”
He says stakeholders will expose the inadequacies in the document.
“They will demand more techno-economic rigour, call for more transparency in cost assumptions and point to the cost to our economy of embarking on this neanderthal plan.”
The public has until 23 February to submit written comments.
3. January 2024 tax deadline warning:
Tax season for provisional taxpayers will be closing on 24 January 2024.
Provisional taxpayers will have until this date to pay their dues and finalise their affairs for the 2022/23 tax year.
Non-provisional taxpayers should have already submitted their annual income tax between 7 July 2023 and 23 October 2023.
These taxpayers would have declared their annual employment income after having earned it in the previous tax year, that is, between 1 March 2022 and 28 February 2023.
A provisional taxpayer, meanwhile, is any person who receives income other than remuneration. Most salary earners are, therefore, non-provisional taxpayers if they have no other sources of income.
According to the definition in the Income Tax Act, a provisional taxpayer is defined as any:
- Natural person who derives income, other than remuneration or an allowance or advance or who derives remuneration from an employer who is not registered for employees’ tax (for example, an embassy is not obligated to register as an employer for employees’ tax purposes)
- Company; or
- Person who is told by the commissioner that he or she is a provisional taxpayer.
Excluded from being a provisional taxpayer as defined are any –
- Approved public benefit organisations or recreational clubs that have been approved by the Commissioner in terms of s30 or s30A;
- Body corporates, share block companies or certain associations of persons that are exempt from tax;
- Non-resident owner or charterer of ships or aircraft;
- Natural person who does not earn any income from carrying on any business – provided that person’s taxable income will not be more than the tax threshold;
- A small business funding entity;
- A deceased estate.
- Any association that has been approved by the commissioner
Unlike employment-only taxpayers, provisional taxpayers are given more time to reconcile and declare their total personal income from both employment and non-employment sources.
Provisional taxpayers have from 7 July 2023 until 24 January 2024 to submit their annual tax returns and pay tax on all income earned between 1 March 2022 and 28 February 2023.
Avoid confusion
As has previously been highlighted by tax experts, the 24 January deadline for the 2022/23 tax year is not the same as the provisional tax return dates for the 2023/24 tax year.
According to SARS, provisional tax is not a separate tax from income tax. It is a method of paying the income tax liability in advance, to ensure that the taxpayer does not have a large tax debt on assessment.
“Provisional tax allows the tax liability to be spread over the relevant year of assessment. It requires the taxpayers to pay at least two amounts in advance, during the year of assessment, which are based on estimated taxable income.”
Provisional taxpayers typically have to submit two provisional tax returns during the tax year and then a final tax return of actual figures after tax year-end.
A third payment is optional after the end of the tax year, but before the issuing of the assessment by SARS.
For the 2023/24 tax year, provisional taxpayers would have already submitted their first provisional tax payment by 31 August 2023, where half the total estimated tax for the full year was to be paid.
The second tax payment is due by 29 February 2024, where the balance of the total estimated tax for the full year is to be paid.
The payments on these first and second submissions are consolidated into the provisional taxpayer’s eventual declaration of their total personal income within the annual submission.
The 24 January tax year end is in respect of the previous (2022/23) tax year, while the payment deadlines in August and February relate to the current (2023/24) tax year.
This means that the 24 January 2024 deadline is the end date for the two declarations made during 2022/23 provisional tax year, and the deadline for the 2023/24 tax year will be in January 2025.
- 30 August 2022 – 2022/23 Provisional tax payment 1
- 23 January 2023 – 2021/2022 tax deadline
- 28 February 2023 – 2022/23 Provisional tax payment 2
- 31 August 2023 – 2023/24 Provisional tax payment 1 (Current year)
- 24 January 2024 – 2022/23 Provisional tax deadline
- 29 February 2024 – 2023/24 Provisional tax payment 2 (Current year)
- January 2025 – 2023/24 Provisional tax deadline (Current year)
4. Johannesburg finances bleak:
Joburg mayor Kabelo Gwamanda has said that the council faces a worrisome financial situation going into 2024, alleging that his executive found a “near-bankrupt municipality” with over R6 billion in unpaid supplier invoices when they took over in May 2023.
5. Massive visa backlog worsens:
A leaked memo seen by the Sunday Times from the state attorney’s office to the Department of Home Affairs has raised questions about the latter’s growing visa backlog, which is reportedly now sitting at over 95,000 applications.
According to the paper, the state attorney’s office has warned of massive fallout from the backlog, including the thwarting of immigration processes, national security risks from the DHA trying to rush through applications, and an overall impediment to economic growth from skills being blocked from entering the country.
More worrying is the view that the problem does not appear to be getting any better.
In December, Home Affairs Minister Aaron Motsoaledi noted in a recent parliamentary Q&A that the backlog in temporary residency visas remained at over 74,309 – unchanged from the department’s last report at the end of October 2023 – adding that an additional backlog of 43,944 in permanent residency permits also remains.
The memo in question was dated 1 November, the Sunday Times said, which means that the December backlog was already well over 100,000 when combined.
Immigration lawyer Gary Eisenberg said in December that the backlog crisis is probably much worse and that the numbers provided by the department are somewhat misleading, as they likely do not include applications that have been appealed or are under review.
“It’s unclear whether the numbers given by the department include application appeals and those under review, and that number is likely far higher than the 74,000,” said Eisenberg.
“Even if some foreigners with the means are able to get a court order to force the minister to make a decision on their applications, many of those orders are being ignored,” he noted.
Eisenberg added that skilled foreign professionals – who are needed to fill the gaps on the critical skills list – are simply walking away. “They cannot wait a year for a visa or spousal visa, so they are going elsewhere.”
Like the state attorney’s office, experts have cast doubt on the department’s ability to clear the backlog.
In a parliamentary Q&A near the end of November, Motsoaledi noted that the time frame to fix the backlog has been pushed back from June 2024 to November 2024.
All information sourced from articles posted by: DailyInvestor, Moneyweb, BusinessTech, and CityPress.
