News in South Africa 8th June:

1. Deadline for new BEE rules approaches:

Members of public in South Africa have just five days left to comment on the Draft Employment Equity (EE) Regulations 2023 on the proposed setting of sector EE targets.

Deadline for new BEE rules approaches
Photo by Diva Plavalaguna

The public was given 30 days to comment on the Draft EE Regulations 2023, which were published in mid-May.

In terms of Section 15A of the amended Employment Equity Act, 2023, the Minister may, after consulting the relevant sectors and with the advice of the Commission for Employment Equity (CEE), for the purpose of ensuring the equitable representation of suitably qualified people from designated groups at all occupational levels in the workforce, set numerical targets for any sector or part of a sector.

The Regulations provide for the setting of proposed five-year sector targets (in accordance with approved EE plan) for the various economic sectors in terms of population groups and gender for the four upper occupational levels (Top Management, Senior Management, Professionally Qualified and Skilled levels) and for employees with disabilities.

The amended Employment Equity Act was assented to by President Cyril Ramaphosa on 14 April 2023.

The Act was amended to provide for the Minister to identify sectoral numerical targets in order to ensure the equitable representation of suitably qualified people from designated groups at all occupational levels in the workforce, to provide criteria for the Minister to issue certificates of compliance and to provide for matters connected therewith.

The closing date for submission of comments is 12 June 2023.

2. Hyperinflation risk:

Efficient Group chief economist Dawie Roodt said the South African Reserve Bank (SARB) would unlikely win the inflation battle despite its best efforts.

In May, the SARB’s Monetary Policy Committee (MPC) voted in favour of an aggressive 50 basis points interest rate increase.

The decision was met with mixed reactions. Some economists welcomed the move, while others called it unnecessary and damaging to the economy.

Roodt was one of the economists who backed the Reserve Bank’s decision, pointing to the pain caused by inflation.

“Inflation reduces our buying power, erodes our savings, and creates social tensions between groups,” he said.  

This is not where it ends. Inflation also causes tremendous damage to economic growth.

He explained that the common definition of inflation is the “continuous increase in prices”. However, it can also be defined as “money losing its value”.

The SARB must, therefore, continue to maintain high interest rates to prevent inflation from getting out of hand.

The result can only be weak economic growth until something gives. And that something is likely going to be even more inflation.

However, South Africa’s inflation is not only demand-driven, which is the area which the Reserve Bank is targeting with higher inflation rates.

Load-shedding, poor governance, water shortages, failing rail infrastructure, and the weak rand all contribute to inflation through supply-side cost increases.

The government is also increasing spending, which puts more money into the system and increases inflation.

“The Minister of Finance might want to reduce state spending, but he cannot. He must continue to increase spending or face rebellion and fewer votes, which will continue to fuel inflation,” Roodt said.

Roodt expects inflation to slow down for a few months. “However, as long as we have a corrupt and incompetent government, inflation will remain high and may even morph into hyperinflation,” he said.

3. Eskom’s reporting exemption rejection:

Finance Minister Enoch Godongwana has rejected Eskom’s application for a partial exemption from the Public Finance Management Act (PFMA) and National Treasury regulations, which would have allowed it not to disclose irregular, fruitless and wasteful expenditure and material losses from criminal conduct in its annual financial statements.

Godongwana said on Wednesday he recognises the commitment of the Eskom board and management to fight and expose fraud and corruption, and the additional compliance and reporting burden facing Eskom and other state-owned enterprises (SOEs).

However, the minister added that Eskom needs to do more operationally to reduce the scope of fraud and corruption before such an exemption can be considered, and for it to be effective.

“As Eskom attempts to recover from the devastating impact of State Capture, and take steps against past and current corruption, it needs to ensure that its anti-corruption strategy is credible and has the support of key stakeholders like investors, lenders, suppliers, customers, and the public,” Godongwana said.

The decision drew praise from civil society organisations and analysts, including the Organisation Undoing Tax Abuse (Outa).

Eskom said it accepts the decision by Godongwana not to grant a partial exemption from reporting in terms of a section of the PFMA and will continue to report in terms of the National Treasury instructions in this regard.

4. Rebuild the economy – a matter of urgency:

Business for South Africa (B4SA) said the country’s prevailing energy constraints, as well as the crippling levels of crime and corruption, have not only left South Africa’s economy shaken but have exacerbated societal challenges.

Business leaders, including the CEOs of leading companies, met with President Cyril Ramaphosa and members of his cabinet this week to raise their concerns about the country’s bleak economic outlook.

The meeting ended with the business leaders agreeing to collaborate with the government providing it with skills and financial resources to tackle problems undermining the economy and its potential for growth.

B4SA’s Martin Kingston said rebuilding the economy was a matter of urgency.

“We’ve got a very major challenge in a form of both the economic and social environments in which we find ourselves and there’s no doubt that government, businesses and indeed other parties have recognised that if we don’t do something about it, and if we don’t pull collective resources skills and get capabilities, then the situation is going to deteriorate.”

Kingston said energy, transport, and corruption remain the biggest hurdles to economic growth.

5. Stocks drop after weak Chinese economic data:

Stock markets mostly retreated Wednesday as data showed ongoing weakness in China’s economy, offsetting hope that the Federal Reserve would skip an interest rate hike this month.

The OECD grouping of leading industrialised nations slightly raised its growth outlook for the world economy as inflation eases and after China dropped Covid restrictions, but it warned the recovery faced a “long road”.

A World Bank warning on the global economic outlook Tuesday gave some food for thought as it lowered its growth expectations for next year.

Reports that US Secretary of State Antony Blinken would visit China provided optimism for a thawing of relations between the superpowers.

By lunchtime, the JSE’s All Share Index was virtually unchanged. 

In foreign exchange, the Turkish lira sank to a all-time low against the dollar, with the currency continuing to struggle after the re-election of President Recep Tayyip Erdogan at the end of May.

The greenback, which hit a peak at 23.17 lira, was down against the euro, pound and yen.

The rand was last trading at R19.00/$. 

Traders are keeping tabs on China, with reports saying authorities have asked the country’s biggest banks to lower their deposit rates to boost the economy as it struggles to recover from years of zero-Covid lockdowns.

Analysts said such a move could indicate the People’s Bank of China was considering an interest rate cut as soon as this month.

All information sourced from articles posted by: BusinessTech, DailyInvestor, Moneyweb, EWN, and Fin24.

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