Thursday, 18 June 2020

The recent 50 basis point repo rate cut announced by the South African Reserve Bank gives many homeowners a little wiggle room, even in these very challenging times, says John Manyike, Head of Financial Education at Old Mutual.

“The rate cut will leave homeowners with some surplus cash, providing some much-needed relief, given the economic constraints caused by Covid-19,” he says, “But while the additional cash may come in handy during these tough times, homeowners need to consider maintaining their home loan repayments at pre-rate cut levels. Depending on how long you maintain the additional payments, doing this could significantly reduce the total interest you pay and shorten the loan repayment term.”

Manyike’s message to homeowners is simple: take a long-term view of the benefits of the rate cut to maximise its positive impact on your finances, especially if you can afford to pay a little bit more than what is required.

Here is an example that illustrates the benefits of paying extra on your home loan:

Property Price

Loan Amount + interest

Monthly Instalment

Interest Rate

Loan Term

Total Paid to Loan

1 000 000

R1 970 275

R8 209

7.75%

20 years

R1 970 275

Illustration: paying an extra R1 000 every month

Property Price

Loan Amount + interest

Monthly Instalment

Interest Rate

Loan Term

Total Paid to Loan

R1 000 000

R1 728 458

R9 209 (extra R1000)

7.75%

15.67 years

R1 728 458

Total loan amount reduced by

R241 817

Savings on 52 months of bond service fee (assumed R69 p.m.)

R3 588

First time buyers

While this is also an opportune time for first time buyers to consider entering the property market, it’s important to do some homework and fully understand all the costs associated with buying a home such as attorney fees, bond registration fees and ongoing costs such as rates, water, electricity and insurance.

“Remember to consider not only if you can afford the monthly instalments but also if you can afford the ongoing costs associated with owning a home,” says Manyike. “Also, do not forget that interest rates can go up as well as down, so consider various future scenarios and incorporate a buffer in your calculations before you make any decisions.

“It’s always a good idea to speak to a financial advisor to help you formulate a financial plan. Given the uncertainty of the current economic climate, their advice and insights could be very valuable to you,” says Manyike.

Fixed versus variable interest rates

Homeowners and new home buyers also need to explore the pros and cons of opting for a fixed interest rate versus a variable interest rate. A fixed rate remains unchanged even if interest rates change, while a variable rate follows the rates adjustments made by your bank following Reserve Bank announcements.  

The disadvantage of a fixed rate is that you may miss out on savings when rates are cut.  On the other hand, a variable rate may be costly if the Reserve Bank maintains high interest rates over a prolonged period.

Bring down your debts

“The key is not to automatically see a low interest rate environment as an opportunity to buy more. It can also be used to help ease your debt load. Apart from paying extra on your home loan, you can consider using it to increase your credit card and personal loan repayments,” says Manyike.

 

 

Published in Opinion & Analysis

First, we tried the antimalarial drug hydroxychloroquine. Then we tested the antiviral drug remdesivir. But new UK research gives the strongest indication yet we may have found a useful treatment for COVID-19.

This time it’s an old anti-inflammatory drug, dexamethasone, which has been described as cheap, old and boring.

Preliminary results from a clinical trial just released indicate the drug seems to reduce your chance of dying from COVID-19 if you’re in hospital and need oxygen or a machine to help you breathe.

The results were significant enough for the UK to recommend its use for severe COVID-19.

Before we roll it out in Australia, we need to balance the drug’s risks with its benefits after peer-review of the full trial data.

What is dexamethasone?

Dexamethasone has been used since the late 1950s, so doctors are familiar with it. It’s also inexpensive, with a packet of 30 tablets costing around A$22 (for general patients) under Australia’s Pharmaceutical Benefits Scheme.

So if it does work for COVID-19, this cheap and boring drug, already available in Australia with a prescription, would be easy to add to current treatments.

Dexamethasone belongs to a class of drugs known as corticosteroids and is used to treat a range of conditions related to inflammation. These include severe allergies, some types of nausea and vomiting, arthritis, swelling of the brain and spinal cord, severe asthma, and for breathing difficulties in newborn babies.

And it’s dexamethasone’s application to those latter two respiratory conditions that prompted doctors to think it may also help patients severely affected by COVID-19.

What did the trial find?

The recently reported results come from the Randomised Evaluation of COVID-19 Therapy, or RECOVERY, trial.

The researchers put patients into one of three groups: those needing ventilation (a machine that helps them breath); those who just needed oxygen therapy; and those who needed no treatment to help them breathe.

Patients in each of those groups were given dexamethasone (6mg once a day, either as a tablet or via intravenous injection), for ten days. A fourth group (a control group) was not given the drug.

Dexamethasone was most useful for the ventilated patients; deaths for this group dropped by about one-third with drug treatment. In contrast, deaths only dropped by one-fifth for those patients who were only receiving oxygen therapy. There was no benefit to patients who could breathe normally.

Results of the dexamethasone trial have just been released.

The researchers calculated that giving dexamethasone to eight ventilated patients would prevent one from dying, on average. And giving it to around 25 patients needing oxygen alone would 

How might dexamethasone work for COVID-19?

When a patient has severe COVID-19, their immune system ramps up to catch and control the virus in the lungs.

In doing this, their body produces more infection-fighting white blood cells. This results in inflammation and pressure on their lungs, making it very difficult for them to breath.

It’s therefore likely dexamethasone reduces this inflammation, and so reduces pressure on the lungs.

 

What are the downsides?

There are potential complications with using dexamethasone.

First, dexamethasone also suppresses the immune system when it reduces inflammation. So, it’s not usually recommended for people who are sick, or could be sick, from other infections. So doctors will need to make sure patients have no other infections before they are prescribed the drug.

If the results of this trial are correct though, the drug doesn’t appear to compromise the patient’s ability to fight COVID-19; it might just affect their ability to fight off other diseases.

Second, the drug is only useful for patients with difficulty breathing and needing some assistance either through ventilation in a hospital or from oxygen therapy.

There appears to be no benefit for patients who don’t need help breathing. So we shouldn’t be giving it to everyone who tests positive to the virus.

 

Third, like all drugs, dexamethasone has side effects that need to be monitored. Serious, but rare ones include: severe stomach or intestinal pain, sudden changes with vision, fits, significant psychiatric or personality changes, severe dizziness, fainting, weakness and chest pain or irregular heartbeat, and swelling of the face, lips, mouth, tongue or throat, which may cause difficulty in swallowing or breathing.

What happens next?

The results of the clinical trial are preliminary. So we need to wait for the full study data and scientific peer-review before we can make a definitive decision as to whether dexamethasone treatment is a worthwhile, and safe, addition to COVID-19 therapy in Australia.

 

 

Nial Wheate, Associate Professor | Program Director, Undergraduate Pharmacy, University of Sydney

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Published in Business

The provisional liquidator for state-owned regional airline SA Express says that the number of parties interested in buying or investing in the airline has grown from just two to seven, while its ultimate fate it still being considered.

Aviwe Ndyamara was briefing Parliament's Standing Committee on Public Accounts on Wednesday. The briefing took place after the North Gauteng High Court in Pretoria ruled on Monday that the airline's provisional liquidator could sell or transfer the airline's property.

While SA Express and SAA are both state-owned airlines, they are distinct businesses. SAA was placed into business rescue in December 2019. Its business rescue practitioners published their long-delayed business rescue plan on Tuesday evening.

About two months after SAA went into voluntary business rescue, SA Express was placed into business rescue by an order of the court. It entered provisional liquidation in late April this year after its joint business rescue practitioners filed an urgent court application.

Ndyamara he told parliamentarians on Wednesday that the the regional airline's liquidators would continue investigating the affairs of the company while starting to engage a sales process.

"We are not yet in the position to quantify the costs of the sales process; however, all expenses incurred will form part of the liquidation administration expenses. We are in the process of engaging more than six interested parties," said Ndyamara.

Ndyamara said with the finalisation of an interim valuation complete, the liquidators managed to reduce the bond of security of SA Express from R1.8 billion to R113 million. This refers to security required by a master of the high court when appointing a custodian, in this case the provisional liquidators, over an asset, in this case SA Express.

He said the airline had an ongoing lease agreement for offices and hangars for R2.2 million a month, and ongoing aircraft and engine lease agreements of no less than R22.5 million a month.

"Immediate consideration must be given to the termination of the onerous lease agreements however this may result in an impact of the licenses," Ndyamara said.

The airline currently holds two licenses which are scheduled to expire in late July, as well as approval to act as an aviation security training organization approval which expires on 31 December. Ndyamara said the liquidators hoped to engage a sales or investment process before the licenses expire.

'Never investors, only vultures'

SCOPA members found little comfort in the submission of the liquidators in terms of ensuring accountability for the transactions, leadership failures and mismanagement that sent SA Express on the path to business rescue.

SCOPA member and Democratic Alliance MP, Alf Lees, asked Ndyamara what the funding expectations were for the parties interested in buying or investing in the airline.

He also asked what actions have been taken to hold accounting officers accountable for a failure to pay the South African Revenue Service or pay over Unemployment Insurance Fund provisions.

Ndyamara said the North Gauteng High Court ruling empowered liquidators to inquire about specific transactions at the airline. He agreed that there were statutory payments that were not honoured.

"We are extremely early in the liquidation process. It is early stages. If you look at the extension of our powers, it looks at inquiries where we can investigate these affairs and transgressions that may have happened before business rescue or liquidation," he said.

ANC MP Mervyn Dirks, meanwhile, said a litany of leadership failures at SA Express meant there were "never investors for this airline, there were only vultures".

Committee chair Mkhuleko Hlengwa, meanwhile, said National Treasury must come before the committee and explain its role as it relates to finance and the overall approach of government to SA Express.

 

Credit: Fin24

Published in Travel & Tourism

It’s two years since a surprise leadership change took place in Ethiopia. Introducing himself with a historic speech to the nation, the new Prime Minister Abiy Ahmed preached democracy as the only future for the country of more than 110 million.

The initial reforms were breathtaking. So much so that imagining democracy became justifiable. But Abiy’s administration inherited an extraordinary set of problems.

Apart from the challenge of democratising an authoritarian state, it had to deal with ethnic violence and conflicts. And massive internal displacement of citizens.

Two years later, the government seems to have controlled the issue of internally displaced people. Resettlement programs appear to have been mostly successful.

And there’s been considerable progress in ensuring peace and stability. News of violence is now mostly confined to two areas where the Oromo Liberation Army operates.

Beyond domestic politics, the volatile Horn of Africa also posed major challenges to Abiy’s leadership. But Ethiopia’s former arch-rival, Eritrea, is no longer a regional adversary.

In addition, Abiy played a major role in the Sudanese transition from chaos to some political promise. And the fact that he changed the loud silence between Somaliland and Somalia into potentially history-making meetings also deserves recognition.

But, looking back over this period, Abiy’s major achievement could be viewed as the dismantling of the 28-year-old Ethiopian People’s Revolutionary Democratic Front and the birth of a nationally unified political organisation, the Prosperity Party. This is not without its challenges too, however.

These developments have reinvigorated opposition groups afresh. In particular, the Tigray People’s Liberation Front, a regional political organisation that had major dominance over the old revolutionary front, has now emerged as a major political foe to Abiy’s Prosperity Party.

This poses a menace to Ethiopia’s path to reform. As a result, Ethiopia’s road to democracy and national elections, which were due to be held in August, is now facing two challenges: a global pandemic, and deteriorating relations between the Tigray regional state and the Prosperity Party, which is in charge of the federal government, and the remaining eight regions and two city administrations.

National elections

In its fight against the COVID-19 pandemic, Ethiopia has so far done a promising job. But cases continue to grow – slowly but alarmingly.

Abiy cited the pandemic as a reason to postpone the national elections. The current administration’s five-year tenure was set to expire come September 30, 2020. Debates on the legitimacy of the government after that date have dominated national discussions.

The government proposed a number of options. One was to dissolve parliament and declare a state of emergency. Another was to request a special constitutional interpretation of the challenge. Yet another was to extend the tenure of current incumbents.

The opposition was consulted and the issues were discussed in parliament. The decision that was finally taken was to ask for a judicial review process to provide a constitutional interpretation. These are done through the Council of Constitutional Inquiry, which then submits its recommendations to the House of the Federation for discussions and a decision.

The House of the Federation is the upper house of Ethiopia’s bicameral legislative branch. Its legislative authority is limited to powers on budgetary allocations, powers to interpret the constitution, and to safeguard the federal constitutional framework.

Based on House’s decision, the chamber postponed the national election.

The decision was not received well by the Tigray People’s Liberation Front. The regional parliament in Tigray has since defied the federal government’s decision, and announced it will hold its own elections.

High stakes

This decision has wide-ranging implications. By holding an election without the supervision of the National Electoral Board, the Tigray People’s Liberation Front is undermining Ethiopia’s federal constitutional system.

Going it alone is a reflection of the front’s loss of power since the demise of the Ethiopian People’s Revolutionary Democratic Front coalition. This has weakened its resolve to maintain Ethiopia’s constitutional system.

The decision poses a threat to Ethiopia’s promising democracy. It has ignited an unprecedented level of tension between the Tigray region and the federal government. If this situation deteriorates further, the country’s fledgling democracy could regress.

So far, Abiy’s administration has ignored the threat from the Tigrayan People’s Liberation Front. This could lead to undesirable repercussions.

The federal government’s reluctance to address the crisis in Tigray might lead to renewed violence. This could in turn harm government’s response to the public health crisis caused by the COVID-19 pandemic.

Finally, unless addressed, the deteriorating relations between the federal government and the Tigray region could further unravel Ethiopia’s dangerously designed federal system that in any case, is in need of major revision.

For democracy to take root in Ethiopia, the Tigrayan People’s Liberation Front’s defiance to the country’s constitutional order must resolved.The Conversation

 

Yohannes Gedamu, Lecturer of Political Science, Georgia Gwinnett College

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Published in Opinion & Analysis
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