News in South Africa 8th November:
1. Load shedding crisis:
South Africa’s load shedding crisis could escalate as Eskom’s relationship with service providers, Tenova Mining and Minerals SA, has reportedly soured to the point that critical work at the Kusile power stations has stopped.
A contractual dispute with Eskom has reportedly led to work on conveyor belts – needed to transport coal to the plant – ceasing. This has been ongoing for two weeks.
The work stopped after Eskom stopped paying the company handling the process. The power utility said it stopped the payments to offset overpayments of around R500 million it made over the years.
This delay has raised fears that the two units will not be ready in time, increasing the prospects of more load shedding. Eskom has confirmed that work has stopped at one of the units, and Tenova has indicated that it has not walked away from the contract.
On Sunday, Eskom announced that stage 2 load shedding will continue throughout the week until Saturday (13 November).
The power utility said that the extended load shedding is due to the current lack of generating capacity and its inability to build sufficient reserves.
Eskom said that higher levels of load shedding could be required during the week, as the system remains incredibly volatile and unpredictable.
Eskom has warned in a summer load shedding forecast for 2021/2022 that its system is likely to remain severely constrained for the near future.
For people living in the major metros, load shedding schedules are available here:
- City of Johannesburg
- City of Ekurhuleni
- City of Tshwane
- City of Cape Town (PDF)
- Nelson Mandela Bay
- Buffalo City
For access to other load shedding schedules, Eskom has made them available on loadshedding.eskom.co.za.
2. Food prices set to rise:
South African consumers will have to dig deeper in their pockets at the tills this festive season, with food prices set to rise on the back of rising petrol prices, feed, and input costs.
This week, the price of petrol increased to a record R19.54 by R1.21 a litre, an increase that will exacerbate the already high cost of food, analysts say.
“The recent fuel price does not bode well for the inflation profile in the short- to medium-forecast horizon, particularly food inflation. This is also exacerbated by the fact that there are other cost-push pressures, like fertiliser costs and electricity costs,” Kulani Siweya, Agri SA’s chief economist, told Business Insider SA.
He said the uptick in retail prices might come as a result of retailers charging more to account for the higher transportation and distribution costs that come with continued fuel hikes and other factors.
Paul Makube, a senior agriculture economist at FNB, said the higher fuel price will affect all agricultural produce but will mostly impact fresh produce and meat products given their sensitivity and frequency of distribution.
“Going into the festive season, we are expecting food prices to remain elevated as meat prices are expected to remain firm on strong demand that comes with the festive season as well as lower slaughter numbers and rising world prices as we have seen play out this year,” Siwela said.
He said that prices for chicken, which have also remained high due to strong global prices, may remain elevated.
Other factors contributing to higher food prices include global food prices on the rise that are spilling over into the domestic market and electricity inflation, Siwela said.
The global shipping crisis has also caused financial constraints and, in some cases, delayed the arrival of critical input products such as pesticide and herbicide, which South Africa imports close to 80% of, Makube said.
3. No increased lockdown restrictions:
The Health Department has assured South Africans that there were no indications yet that further COVID-19 lockdown restrictions would be necessary now that the local government elections were over.
However, there are worries that a fourth wave could be sparked by a new variant and the department has to be prepared for anything.
The department has modeling experts who track various scenarios, look at the public’s behaviour, vaccine uptake and also possible new variants.
The Health Department’s acting Director-General Nicholas Crisp said that they were working with various other departments, the private sector, and business entities to get the economy going again and avoid further lockdown restrictions. He said that there were no signs to back up such a move for now.
“We are not in a hurry to introduce any further restrictions. There are no indications at the moment that this will be necessary or even valuable to implement any form of restrictions right now,” said Crisp.
If it is a new variant, Crisp said that the department would simply have to plan for the worst and hope for the best.
4. SA mini budget and what it might hold:
When South Africa’s new Finance Minister, Enoch Godongwana, delivers his first Medium-Term Budget Policy Statement (MTBPS) on November 11, 2021, he will need to focus on business-friendly policies that stimulate sustainable economic growth to ensure that South Africa avoids real fiscal difficulty over the next two to three years, according to wealth management experts, Citadel.
Citadel chief economist, Maarten Ackerman, says all eyes will be on Godongwana to see if he keeps his predecessor Tito Mboweni’s more economically prudent policies that were designed to stimulate business growth, grow the fiscus and create jobs.
However, Ackerman does not foresee Godongwana making any big changes to existing budget policies. “Looking at where we are right now, we don’t really see big announcements regarding tax changes or any other policy changes, so it’s likely to be more of an update, and an indication of what we can expect when the National Budget Speech is delivered in February,” says Ackerman.
Citadel chief investment officer, George Herman agrees: “The MTBPS is often more about policy than nitty-gritty numbers, but it does tell the market where the governing party is taking our finances.”
Ackerman points out that the South African economy has rebounded more positively over the past year than had been expected, or budgeted in the February National Budget, partly thanks to the reopening of the global economy supporting strong exports from the local commodities and agricultural sectors.
“This doesn’t mean that we are out of the woods yet, it just appears far better in comparison to the worst of the pandemic. What one hopes to see is whether the minister is going to be prudent and use this opportunity to ‘bank’ some of the benefits that we’ve seen, because we are still in a very tight fiscal position and, if we don’t get the economy going very soon, we might have some further fiscal challenges in the next two to three years,” says Ackerman.
Godongwana will need to balance providing sufficient support to policy items that drive sustainable, long-term economic growth, such as those that bolster stable electricity supply, the restructuring of ports, industrial development and remove any red tape that impact the ease of doing business, while still carefully managing policies that are intended to close South Africa’s inequality gap, such as social support, minimum wage, and the proposed National Health Insurance.
Says Ackerman: “But that is where the problem lies: if we don’t get the economy going in the next two to three years, it will be very difficult to remove that social support and if we don’t get more tax revenue from a faster growing economy we will need to borrow even more. About 20% of South Africa’s tax revenue is already going to servicing debt, which is why the longer-term risk of a very bleak fiscal environment remains if we don’t strengthen the economy urgently and broaden the tax base.”
5. Parties backing off of coalitions:
With 61 municipalities up for grabs, including five metros, political parties have appointed their coalition negotiating teams and are deciding whether to take a slice of power now or play the long game and look to 2024.
DA leader John Steenhuisen on Sunday made it clear his party will not enter any coalitions with the ANC or EFF. Speaking after a meeting of the party’s federal executive, he said the DA would rather sit on the opposition benches than reach agreements with parties that don’t share its values.
“We learned to our own detriment what happens when you try to enter into agreements with parties that don’t share these core fundamentals. So we have committed ourselves to being part of opposition majorities with like-minded parties, keeping an eye on keeping the ANC out of power in as many places across South Africa,” said Steenhuisen.
Political parties across the spectrum are weighing up the same challenge – whether to take a slice of power in one of the 61 municipalities, including five metros where no party got an outright majority in the 1 November vote, or to join the opposition benches and focus on growth, while hoping the ANC continues its decline.
“It’s not our job to save the ANC. Our job is to save South Africa and the two are not compatible,” said Steenhuisen.
Under that approach, the DA might be able to cobble together coalitions in Johannesburg and Tshwane with ActionSA, the Freedom Front Plus and a number of smaller parties. ActionSA and the DA have similar policies and ActionSA has also ruled out working with the ANC.
But it’s understood that ActionSA’s leader, Herman Mashaba, is set on becoming Johannesburg mayor, a position he held with the DA from 2016 to 2019. The demand might frustrate DA leaders and, if agreed to, give Mashaba a platform for 2024.
The ANC appears to have taken a more pragmatic approach and has suggested it is open to working with anyone. The party held a National Executive Committee meeting on Sunday and in a statement said its Treasurer-General, Paul Mashatile, and Deputy Secretary-General, Jessie Duarte, are leading its negotiating team.
“This follows the number of hung municipalities throughout the country. The ANC is a common denominator in all these hung municipalities,” it said.
With the ANC and DA losing seats in many councils, they’ll have to look beyond the EFF to form majorities and will need to appease smaller parties and bet on whether they will be reliable coalition partners.
The bargaining will be intense and won’t end once mayors have been elected. As the last five years of coalitions have shown, horse-trading doesn’t end when a coalition is formed.