News in South Africa 9th January:

1. Challenging year ahead:

Some economists are predicting a challenging economic environment for South Africa in 2024 as domestic and global headwinds persist.

Challenging year ahead
Photo by Towfiqu barbhuiya

The early-year forecasts comes amid an unresolved energy crisis, bottlenecks in the logistics sector and the pending general elections.

The deteriorating state of the country’s public finances is also expected to be a sore point.

South Africa’s economic outlook in 2024 is also expected to be shaped by geopolitical developments and global economic trends.

With interest rates still high in many global economies, companies and consumers look set to be in a pickle for longer.

The International Monetary Fund (IMF) has forecast global economic growth to ease to 2.9% for 2024.

Economist at the North West University Business School, Raymond Parsons, said he forecasts economic growth in SA to be flat.

Political economist, Dale McKinley, agreed.

“Generally the predictions are too optimistic. I would say we’ll be lucky if we get to 1% of growth in the overall economy. It’s essentially standing fairly still.”

While key risks to the economic outlook remain elevated and warn of another roller-coaster year for SA, both economists believe the implementation of various reforms could fast-track growth.

2. Some good news for load shedding:

South Africa is guaranteed to experience load shedding again this year – but current projections show that the situation is likely to be far less severe than what was seen in 2023.

The start of the new year has already been mired by earlier-than-expected power outages, with Eskom announcing the return of load shedding on 1 January 2024 after several units broke down amid elevated levels of planned maintenance.

According to independent energy analyst Pieter Jordaan, Eskom took around 8,000MW of its generating plant out for planned maintenance over the final fortnight of 2023 but was unable to return many of the units on time in the first week of 2024.

“Its plant availability was further crimped by escalating breakdown levels – rising from 12,000MW to 16,000MW over that same period – leaving its coal fleet as crippled as last year,” he said.

However, with demand lower than ever before, the blackout levels were somewhat subdued, especially when compared to the same period in 2023.

Using Jordaan’s blackout modelling, South Africans experienced 0.7 days – or 17.5 hours – in the dark in the first week of 2024, effectively half the 1.32 days recorded in the same week in 2023.

According to energy experts, load shedding during this week could have been avoided altogether had Eskom not overreached on its planned maintenance.

National Rationalised Specifications Association of South Africa’s (NRS) Vally Padayachee said that the country was thrust back into darkness because Eskom had taken more generation capacity out for planned maintenance than needed.

Jordaan, meanwhile, noted that Eskom suffers from “chronic delays in the return of units from planned maintenance”, explaining the shortfalls.

More positively, however, while load shedding and Eskom’s planned and unplanned outage issues are expected to persist in 2024, the good news is that the current trend pro-rates to “only” around 38 accumulated days of blackouts by year-end – this is compared to the 72.6 days experienced in 2023.

On average, South Africans spent less than 30 minutes per day without power in 2021, compared to 2.25 hours in 2022 and 4.8 hours in 2023.

“Based on the current pro-rata projection, 2024 may moderate to 2.5 blackout hours per day,” Jordaan said.

While load shedding may moderate – even significantly – in 2024, the fact remains that scheduled outages are still going to be a prominent feature of the year.

3. Rand manipulation charges dismissed:

The Competition Appeals Court (CAC) dismissed charges against 23 banks and financial institutions implicated in the Competition Commission’s probe into alleged currency manipulation.

The CAC handed down a judgement on Monday, 8 January, dismissing the Competition Commission’s eight-year case against three big South African banks and most of the foreign banks implicated in the probe. 

The ruling, therefore, dismissed the claims against Standard Bank, Nedbank, and FirstRand.

This leaves just Investec and the four foreign banks whose traders pleaded guilty to charges brought by the US Department of Justice years ago.

Investec remains in the case because it did not join the application to the CAC to prevent the case from going ahead.

The CAC dismissed the charges against some of the banks and financial institutions for various reasons.

This included a lack of jurisdiction to prosecute some of the international banks and an incorrect attempt to prosecute holding companies not involved in the alleged trades. 

In addition, some charges were dismissed for lack of evidence, with the court stating the commission should have been more thorough in setting out its case.

“An occasional participation in a chatroom or unspecified conduct which is tenuously inferred as being part of the overall conspiracy is insufficient to meet these jurisdictional requirements,” the court said.

Standard Bank has already responded to the CAC’s ruling in a press statement released on Tuesday, 9 January.

“The Standard Bank of South Africa Limited welcomes the Competition Appeal Court’s decision to uphold its appeal by dismissing currency manipulation allegations against Standard Bank,” the bank said. 

“Standard Bank has always maintained that the Group is wholly committed to the rule of law, respects the important role of institutions, and upholds South Africa’s Constitutional Democracy, and our Constitutional obligation to ensure that our country improves the quality of life of all citizens.”

4. Deadline looms for EE report submissions:

Employers have until next Monday to submit their 2023 annual Employment Equity (EE) reports to the Department of Employment and Labour or face possible fines as punishment.

On Monday the department, which issued the reminder to business, said entities have until midnight on 15 January to comply.

Government noted that this year’s filing will be based on the current EE Act and not the Amended Act of 2022.

The latter seeks to, among other things: ease the regulatory burden on small businesses with fewer than 50 employees; empower the minister to regulate employment targets for people in designated groups; and adjust employment equity compliance requirements for entities doing business with the state.

The amended act has already jumped through the various regulatory hoops, but remains pending until the president signs off on its effective date.

“Submission of [a company’s] annual equity report is prescribed in accordance with the Employment Equity Act of 1998,” the department noted.

“The purpose of Employment Equity Act is to promote equal opportunity and fair treatment in employment through the elimination of unfair discrimination, implementing affirmative action measures to redress the disadvantages in employment experienced by designated groups and to ensure their equitable representation in all occupational levels in the workforce.”

The 2022 employment equity reporting cycle registered a total of 27 532 submissions – accounting for over seven million employees – an increase of 1.9% on the previous year.

Employment equity has been one of the many hot-button issues in recent years as businesses in various sectors – including banking, construction and retail – either came under fire for alleged non-compliance or spoke out against the amendment’s threat to straining productivity.

5. Rand struggling:

The rand is not experiencing its usual strong start to the year as domestic issues are scaring off investors.

The rand ended last Friday, 5 January at R18.66/$ after experiencing volatility after releasing the minutes from the Federal Open Market Committee’s (FOMC’s) December meeting caused some risk. The rand has not seen much change since, sitting at R18.22/$ today, 9 January.

“The domestic currency, which typically experiences a stronger period around the turn of the year due to lower global financial risk-aversion, has not seen much strengthening, as domestic concerns continue to weigh on it,” Investec Chief Economist Annabel Bishop said.

South Africa’s new integrated resource plan (IRP) was published for public comment last week and has received widespread criticism.

The IRP advocates for prolonged use of coal and nuclear usage while stating that renewable energy technologies do not provide a secure energy supply. This comes despite former Eskom CEO Andre de Ruyter stating that there are 66,000 MW worth of renewable energy projects in the pipeline.

There have also been calls for greater private-sector participation, but the plan only sees a pipeline of projects from the “business community” with a total generation capacity of 10,400 MW, excluding projects with no specified location or commercial operation date.

Congestion at the Cape Town and Durban ports also continues to impede growth, with concerns over the energy and freight outlook adding to the lacklustre nature of the rand.

There are also concerns over this year’s elections, with the growth in political noise in the run-up to the elections and the uncertainty over the probable coalition government adding to the weak nature of the rand.

There has also been a dramatic increase in the distrust of leadership over the last 20 years, with the Institute for Justice and Reconciliation Barometer for 2023 highlighting a decline in confidence in most major public institutions.

The proliferation of new political parties ahead of the elections has impacted predictability, with several having the potential to bolster the ANC in a coalition government after the election.

However, it’s not just domestic issues having an effect, as global growth is expected to be weaker than last year, which has negatively affected financial market sentiment.  

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

Leave a comment

Your email address will not be published. Required fields are marked *