News in South Africa 9th June:

1. South Africa risks losing R613 billion:

South Africa stands to lose as much as $32.4 billion in export revenue, almost a 10th of its gross domestic product, should some of its main trading partners retaliate against its unwillingness to take a stance against Russia’s war in Ukraine.

South Africa risks losing R613 billion
Photo by Sascha Hormel

“Together, the EU and US account for 30.4% of total exports by South Africa,” compared with Russia’s 0.23%, or 0.07% of GDP, said Ndivhuho Netshitenzhe, an economist at Stanlib Asset Management (Pty) Ltd., an investment manager with more than R650 billion in assets under management.

This means, she said in a note, should geopolitical tensions escalate and the West acts against South Africa, it could lose up to R612.7 billion in export revenue.

South Africa says it has adopted a non-aligned stance toward the war in Ukraine and has abstained from several United Nations votes condemning Russia’s invasion.

This neutrality has become “seemingly compromised” as the nation consistently interacts with Russia through diplomatic and military channels, Netshitenzhe said.

In February, South Africa held naval exercises with China and Russia. The manoeuvres were criticised by the US and the European Union, who questioned the timing — one year after Russia launched its invasion of Ukraine.

Last month, a diplomatic row broke out between South Africa and America over accusations by US Ambassador Reuben Brigety that Pretoria supplied arms to Russia. The allegations were denied, and the nation’s Finance Minister Enoch Godongwana said the spat was resolved.

The increased risk and perceived closeness to Russia is likely to drive foreign investors out of the country, Netshitenzhe said.

Foreign ownership of government bonds fell to 26% by April from as high as 43% in 2018, she said, and the rand is the third-worst performing emerging market currency against the dollar this year.

“The rand’s performance is unsurprising as South Africa has systematically lost investor confidence,” she said. “South Africa’s poor policy choices, weak economic performance and ineffective political leadership have contributed to increased capital outflows.”

2. Manufacturing production booms:

Manufacturing, one of South Africa’s best-performing sectors in 2023 so far, saw production grow further in April.

Stats SA published data earlier this week showing that South Africa’s GDP grew by 0.4%, avoiding a technical recession following a 1.3% decline in Q4 2022.

Manufacturing was the main growth driver, with output jumping by 1.5%, adding 0.2 of a percentage point to GDP growth.

The production of food and beverages was the main reason for the industry’s positive growth.

Manufacturing data for April, published by Stats SA, shows that manufacturing activity remained strong in the month.

Year-on-year, manufacturing jumped 3.4% from April 2022 to April 2023.

The following areas were the main reason for growth:

  • basic iron and steel, non-ferrous metal products, metal products and machinery (5,3% and contributing 1,1 percentage points)
  • food and beverages (4,6% and contributing 1,0 percentage point)
  • petroleum, chemical products, rubber and plastic products (2,8% and contributing 0,6 of a percentage point)
  • motor vehicles, parts and accessories and other transport equipment (5,0% and contributing 0,5 of a percentage point).

Moreover, on a month-to-month basis, manufacturing activity in April increased by 0.5% from March 2023.

This was the second consecutive month-on-month growth after March recorded a manufacturing output increase of 3.4%, albeit from a 1.6% drop in February.

In addition, seasonally adjusted manufacturing production jumped by 1.2% in the three months ended April 2023 compared to the previous three months.

3. Load shedding eases:

Power supplies have stabilised in South Africa in recent days despite fears of a dark winter, but experts warn its creaking electricity grid remains volatile.

A prolonged energy crisis has devastated the continent’s most industrialised economy and frustrated locals as the embattled state energy firm Eskom imposed crippling power outages to prevent a national grid collapse.

Scheduled outages are now halted during daytime, giving badly battered businesses a reprieve.

Having endured up to half the day without electricity in recent months, South Africans are now only starved of power for slightly over two hours a day.

But energy expert Lungile Mashele said that the country’s electricity generation capacity was still “very volatile”.

“It’s not the most reliable system,” she told AFP, referring to the country’s 14 predominantly coal-powered stations, most of which are old and poorly serviced.

Scepticism still runs high among South Africans over load shedding.

The mistrust is probably justified.

On Saturday Eskom announced it would suspend power cuts “until further notice”, but backtracked three hours later saying that power cuts would resume immediately.

4. Cape Town races ahead to end load shedding:

By the end of this year, Cape Town will have fully implemented the wheeling of power across its grid, contracts for the procurement of 200MW of power from independent power producers will be signed, and a feasibility study for a 60 MWp solar and battery plant outside Somerset West will be complete.

By then, Joburg’s City Power will have triumphantly overhauled its load shedding schedules (it erroneously announced this last month), a system to remotely switch off geysers, may or may not yet be deployed across the metro, and it may just have signed a contract extension for supply from the Kelvin Power Station. It’s been talking about extending this deal since August 2022.

Cape Town is acquiring power as quickly as it can and creating a free market for power in the metro. Joburg is trying to somehow cut its way out of load shedding (impossible) and somewhat bafflingly cut supply more frequently during load shedding than it currently does. Seemingly, it wants to avoid two back-to-back two-hour slots (four-hour blocks) all the way to stage 8.

The contrast could not be any starker.

Cape Town’s plan is ambitious. Approximately R2.3 billion will be spent over the next three years across multiple streams: procurement from Independent Power Producers (IPPs), demand-side management, maintenance and the operation of its Steenbras pumped storage scheme, buying surplus power from households and businesses, and building city-owned plants and battery storage.

Mayor Geordin Hill-Lewis was clear on its strategy last year: “I think we must be really aggressive about trying to reduce our reliance on Eskom, and to bring additional capacity on-line as quickly as possible.”

5. Struggles to scrap E-tolls:

The scrapping of the controversial e-toll system in Gauteng still hangs in the balance as an agreement to settle the hefty bill again stalled.

The government initially committed to absorbing the R47-billion debt, with the Treasury set to cover 70% and the Gauteng provincial government taking over the rest of the bill.

But a memorandum of agreement is yet to be finalised further delaying the switch off of the gantries in parts of the province.

A memorandum of agreement was drawn up last year to help finalise the matter.

This included a proposal for a hybrid model to service the debt.

The gantries were initially meant to be switched off by December last year but that date was revised to some time early this year.

But a notice to switch off the user-pay system is yet to be gazetted.

“People are still getting invoices, people are still paying, they’re confused, they don’t know if they’re going to get refunded. It’s another example of a mess, that government cannot implement its decisions,” said the CEO of the Organisation Undoing Tax Abuse (Outa) Wayne Duvenage.

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

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