Cape Town - The South African Human Rights Commission has said that economic challenges that prompted the VAT and fuel levy hikes announced in the budget could have been averted if the government had earlier demonstrated better management of the economy and clamped down on corruption. 
 
“Public and private sector corruption, according to the Auditor General, a fellow Chapter 9 Institution, costs the nation billions on an annual basis,” it said.
 
The commission, a national institution established to uphold constitutional democracy and human rights, said it believed a “significant portion” of the economic challenges facing SA could have been avoided had the state “demonstrated better management of the economy and demonstrated an intolerance toward corruption, inefficiency and maladministration”. 
 
In his maiden budget delivered on Wednesday, Finance Minister Malusi Gigaba announced that VAT would increase by one percentage point from 14% to 15%. 
 
The current zero-rating on foods including maize meal, brown bread, dried beans and rice would remain, and “limit the impact on the poorest households”. 
 
The SAHRC said it was “deeply concerned” that the VAT rate would go up, saying it was a tax that impacts the poor the most.
 
According to the budget, it is expected to bring in R22.9bn in additional revenue in the 2018/19 financial year. 
 
“Further, the SAHRC is also concerned with the increase in the fuel price through the introduction of a 52 cents per litre fuel levy,” it said. “This increase in fuel price particularly impacts on the poor as it affects the price of public transport and the price of goods as the vast majority of goods sold to the public are transported on the road.”
 
The commission also acknowledged that the budget was a “complex and difficult balancing act”, saying it was “fully aware” of the difficulties in limiting expenditure while collecting revenue through taxes and stimulating economic growth. 
 
Going up  
 
Gigaba had argued that the government was doing all it could to reduce the impact of the VAT hike on poor households, noting that the state was also boosting social grants payments and increasing the bottom three tax brackets.
 
He said plans to spend R57bn over three years on fee-free tertiary education for students with a family income below R350 000 per annum was another “important step forward in breaking the cycle of poverty and confronting youth unemployment”.
 
“Labour statistics show that unemployment is lowest for tertiary graduates,” he said.“Higher and further education and training is being made accessible to the children of workers and the poor.”
 
Source:News24
JOHANNESBURG - Old Mutual Plc returned to its South African roots on Tuesday when it listed its $11 billion African financial services business in Johannesburg, a move which largely completes a major overhaul of the company.
The 173-year old group has been disentangling its conglomerate structure created after a series of acquisitions since it moved its headquarters and primary listing to London in 1999.
Chief Executive Bruce Hemphill set the break-up in motion in 2016, saying the company’s four main businesses — a U.S. asset manager, a British wealth manager, an African financial services division and a South African bank — would achieve higher investor ratings as separate entities.
Old Mutual Plc’s African financial services business, Old Mutual Ltd, listed roughly 5 billion shares on Tuesday. They traded at 29.39 rand each during the session, valuing the company at roughly 145 billion rand ($10.7 billion).
Old Mutual Ltd, now the parent to what is left of Old Mutual plc, will also have a standard listing in London, and secondary listings on the stock exchanges of Malawi, Namibia, and Zimbabwe.
Hundreds of Old Mutual Ltd’s employees, blowing green vuzuzelas and beating drums, danced through the streets of Johannesburg ahead of the listing.
“What’s most exciting about our listing as an independent, standalone entity is that it enables us to unlock shareholder value and create a business with a strong strategic focus on sub-Saharan Africa,” Old Mutual Ltd’s chief executive Peter Moyo said.
MUTUAL AID
Old Mutual, which traces its roots back to the mid-19th as South Africa’s first mutual aid society with 166 members, has already sold its U.S. asset management business and on Monday separately listed its U.K wealth arm, renamed Quilter.
 
The break-up is part of a growing global trend for conglomerates to hive off bits of their businesses, sometimes in response to pressure from activist investors.
 
General Electric said earlier on Tuesday it would spin out its healthcare business and sell its stake in oil firm Baker Hughes, leaving the U.S. company focused on jet engines, power plants and renewable energy
 
“The nice thing about this Old Mutual break up is that you now have a vehicle that’s purely emerging market, if you want to buy that, and another vehicle that’s purely UK,” Michael Treherne, a portfolio manager at Vestact, said.
 
Later this year, Old Mutual’s African business will spin off part of its 53 percent interest in South Africa’s fourth largest lender, Nedbank.
 
Old Mutual, which will retain a roughly 20 percent stake in Nedbank, bought into the bank in 1986 when it was forced by apartheid South Africa’s strict capital controls into being a major shareholder in several local companies.
 
The company’s head office in London will be wound down this year. It has been cutting staff in London since it first announced the demerger two years ago. Staff numbers in London are expected to fall to around 40 this year from 120, Old Mutual has said. 
- REUTERS 
JOHANNESBURG - South African markets are pricing in the possibility of an interest rate hike this year as the rand falls, even though economists say this is unlikely as inflation expectations have not breached the upper end of the central bank’s target range.
 
South Africa’s rand has slumped nearly 9 percent against the dollar year to date, hurt by global risk-off sentiment and poor domestic economic data. It fell to a 7-month low last week.
 
Capital Economics senior emerging markets economist John Ashbourne said the currency fall has raised speculation that South African policymakers would follow some emerging market countries that have started raising interest rates.
 
Some have moved as a pick-up in their economy or other factors push up inflation, while others are being forced to act to steady their currencies.
 
South Africa’s forward rate agreements are implying a 25 basis-point hike in interest rates by the end of the year.
 
But a Reuters poll found last week that economists expect the South African Reserve Bank to keep its repo rate unchanged at 6.5 percent until 2020.
 
“We think that markets are getting ahead of themselves by pricing in rate hikes in South Africa... We do not think that this is likely,” Ashbourne said in a note.
 
“Policymakers have explicitly said that they will not react to currency moves until they see a lasting effect on domestic inflation. And the pass-through between currency moves and inflation is weaker in South Africa than in many other EMs.”
 
The central bank said in May it would maintain its vigilance to ensure inflation remained within the 3 to 6 percent target range, and would adjust the policy stance should the need arise.
 
The bank currently forecast CPI to average 5.1 percent in fourth quarter 2018, and 5.2 percent in the last quarters of 2019 and 2020. The next interest rates decision and inflation forecasts are due on July 19.
 
South Africa’s consumer price inflation slowed to 4.4 percent year-on-year in May as the rise in food prices eased.
 
“A weaker currency makes (the central bank) more fearful but it depends on how it impacts inflation twelve months out,” Citi economist Gina Schoeman said.
 
“We don’t think we will see rate hikes in 2018. It doesn’t mean there is no risk of it, and the market is correct to price for that.”
 
Schoeman said rate hikes over the past five years happened when the inflation forecast for twelve months out had breached 6 percent and stayed above that for two or three quarters.
 
“So it has to not only breach 6 percent, it has to also breach it for a sustainable amount of time. If it is not doing that, then we don’t have a risk of interest rate hikes,” she said.
 
Mexico’s central bank raised its benchmark interest on Thursday in a bid to counteract the effects of a peso slump and keep a downward inflation trend on track.
 
Argentina, Turkey, India and Indonesia are among the other countries hiking rates.
 
-Reuters 
Inflation eased to 4.4% for May compared to 4.5% in April, despite the implementation of a VAT hike implemented in April.
 
This is according to Statistics South Africa (StatsSA), which on Wednesday released the consumer price index figures for May. The index increased 0.2% month-on-month.
 
The market consensus was for CPI to accelerate to 4.6%, and in a market update on Wednesday RMB economist Isaah Mhlanga had projected an increase to 4.8% having considered the VAT pass-through.
 
Mhlanga also expected the fuel price and weak rand to impact inflation. “The oil price and a weak rand have had a huge impact (on inflation), but the second-round effects will only be visible in the months to come and they are difficult to quantify and separate from the first-round effects,” said Mhlanga.
 
He expects the current account deficit data due on Thursday to be a “shock to the currency”, RMB projects it to be 5% of GDP.
 
By 10:23 the rand was trading 0.44% firmer from the previous close at R13.68/$. 
 
Contributors to May's inflation include food and non-alcoholic beverages which increased 3.4% year-on-year. Inflation for restaurants and hotels increased by 5% year-on-year.
 
Transport contributed to the month-on-month inflation, the index increased 1.2%.
 
In May the CPI for goods increased by 3.5% year-on-year, unchanged from April. The CPI for services increased by 5.3% year-on-year, also unchanged from April
 
South: Fin24
Eskom's current load shedding due to the impact of protest action by workers will add to the weakness of the South African economy which is already battling, Economist
 
"Load shedding is unfortunate, because South Africa already has serious economic problems. Load shedding will take away consumer and business confidence as South Africans are already struggling to make ends meet," said Schüssler.
 
"Investors have pulled out of South Africa and continue to do so. South Africa has so many protest actions. It really hurts the economy."
 
He believes it will be harder for the local economy to catch up on whatever pace it loses now, due to the impact of load shedding. It would also make it harder for the country to avoid going into a recession.
 
"South Africa is sending out a message that we have severe interruptions in economic activity, and that we are not quite as open for business as we'd like to advertise," said Schüssler.
 
"We are creating a reputation of not implementing what we claim we will do. We say we will create a certain number of jobs and that we are open for business, but then Eskom implements load shedding."
 
'Totally irresponsible and grossly negligent'
 
"If this is the way Eskom's new management wants to run the power utility, then they must not be surprised that we are having load shedding and blackouts. In my view, it is totally irresponsible and grossly negligent of them to operate the national energy supplier in this way. This is very serious," said Blom.
 
He thinks Eskom's management could even be held personally liable for losses due to load shedding.
 
"They knew what was coming and know how vulnerable the situation is. We are heading for dark days and if Eskom wants to bully its workers and bully analysts critical of its management, the public should act as watchdogs," said Blom.
 
Earlier this year, Fin24 reported Blom as warning that load shedding could likely be expected this winter. Eskom subsequently denied that possibility.
 
"Eskom will remain vulnerable until it sorts out the labour and coal issues - which will not be soon. Furthermore, I hear of plant breakdowns," said Blom.
 
Credit: Fin24
Barclays Africa Group Ltd. may halve the number of top jobs at its South African retail and business bank as it reorganizes after its British parent cut its stake, according to a person familiar with the matter.
 
The Johannesburg-based lender started talks to consult executives on a plan that may result in the reduction of top management roles in the unit to 12 from 27 to flatten the company’s management structure, the person said, asking not to be identified because the matter is private. Once the consultation process is completed, the jobs will be advertised and executives who aren’t selected will be considered for employment elsewhere in the company, the person said.
 
Barclays Africa is reverting to the Absa Group name and revamping its strategy after Barclays Plc cut its controlling stake to below 15 percent to trim back its international operations. Chief Executive Officer Maria Ramos is embarking on a second round of top management changes after announcing in April that she is refocusing the company around four main divisions -- retail and business banking, corporate and investment banking, rest of Africa, and wealth management and insurance.
 
The South African retail and business banking division “is the first to commence a process of overhauling its structure” so that it fits with an organizational culture built around entrepreneurial drive and accountability, while “restoring market leadership in our core businesses,” Barclays Africa said in an emailed response to questions. “The aim is to create businesses that are agile” and collaborate well, it said, declining to comment further until the process is complete.
 
On the Payroll
 
The lender is seeking to double revenue from its business in the rest of the continent to 12 percent, while regaining market share among consumers in South Africa, where the retail and business banking unit accounts for more than half of the group’s earnings. Arrie Rautenbach, the CEO of the retail and business bank, will keep his job, the person said.
 
Plans to cut the number of executive jobs come a month after Deputy CEO David Hodnett, who in May last year was put in charge of the retail bank, resigned before completing a two-month sabbatical. Each person affected by the changes could remain on the bank’s payroll for up to three months before making a decision to either stay with the company or move on, the person said.
 
Craig Bond, the CEO of partnerships, joint ventures and strategic alliances, stepped down on Thursday after choosing to take early retirement, according to an internal memo, which was seen by Bloomberg News. Bond decided the time had come to “pass on the baton to new leadership,” it said.
 
The Costs Challenge
 
Barclays Africa’s operating expenses rose 2.9 percent faster than revenue growth in 2017 as the lender struggled to boost income amid an anemic South Africa economy and unemployment at a record high. Gross domestic product shrank 2.2 percent in the first quarter of this year from the prior three months as Jacob Zuma’s scandal-ridden tenure came to an end, with Cyril Ramaphosa replacing him as president in February. The central bank expects the economy to expand 1.7 percent this year.
 
“The economy is weak, so getting top-line growth is going to be difficult,” especially in the retail-banking business, said Adrian Cloete, an analyst at PSG Wealth in Cape Town. “It makes sense that they look at their costs.”
 
Shares in Barclays Africa declined 2.1 percent as of 10 a.m. in Johannesburg, in line with a 2.2 percent drop in Standard Bank Group Ltd., the largest lender in Africa, and a 2 percent drop in Nedbank Group Ltd. Barclays Africa in March said it will control costs while predicting improvements in loan and deposit growth.
 
Source: Bloomberg
Ultra marathon runner Dean Wight is no stranger to crossing the finish line at the Comrades Marathon, in fact he’s done it 27 times. 
 
But this year was extra special. 
 
Wight was able to raise more than R280 000 for a charitable cause. According to the Comrades Marathon charity leader board, Wight has raised the most money for charity.  
 
"Some people run for personal endeavours… but to also run for a cause or a charity makes it worthwhile," Wight told News24.
 
His love for running started in 1979, as an 11-year-old boy.
 
He was inspired to take up running after finding out that his grandfather also enjoyed the sport and signed up for his first Comrades in 1988 when he was only 19.
 
The rest is history. 
 
Wight partnered with the Hillcrest Aids Centre Trust (HACT) as one of their ambassadors. HACT is one of six official Comrades Marathon charities. 
 
"[I chose HACT] because they are the only local charity. And I would never be able to give back to a charity that isn't local, because I need to be here to meet with the people and understand who I am raising money for."
 
HACT was started in 1990 in response to the emerging HIV/Aids pandemic.
 
The organisation offers prevention and treatment programmes, as well as a 24-bed respite unit. HACT's geographical focus is the Valley of a Thousand Hills in KwaZulu-Natal and surrounding areas.
 
"Hillcrest Aids Centre is a registered NPO. While we do what we can to maintain some form of economic sustainability, we rely very heavily on donations and grants from those who support us," CEO Candace Davidson told News24.
 
Davidson said Wight was "phenomenal" and that his contributions would go a long way. Wight initially committed to raising R100 000, but he quickly surpassed his target and upped the ante to R200 000.
 
Wight is part of a group of 73 runners who ran the race on behalf of HACT. Collectively they have raised close to R600 000 for the organisation.
 
Source: News24
Sipho Pityana, businessman, Save SA convenor, and outspoken critic of former president Jacob Zuma, is set to take over as president of Business Unity South Africa (BUSA) later in June.
 
Pityana, the founder and chairman of black economic empowerment group Izingwe Capital, was unanimously nominated for election as president. He will take on his new role with effect from June 26, when the next AGM takes place, BUSA said in a statement on Tuesday. 
 
He will take over the reins from Eskom chairperson Jabu Mabuza, who served for two terms. Martin Kingston has been nominated to serve a second term as vice president. 
 
The new BUSA board and elected members will be ratified at the AGM.
 
"It’s an honour to be asked to serve the unified voice of business at such a critical time in our struggle for transformative inclusive economic growth, as we position our country to be a successful participant in the Fourth Industrial Revolution," Pityana said in a statement.
 
Pityana currently holds positions on various boards, including AngloGold Ashanti. He has held board positions at companies listed on the New York, London and Johannesburg stock exchanges, as well as unlisted companies.
 
He was the former chairperson of the National Students’ Financial Aid Scheme, or NFSAS, and is currently chairperson of Council of the University of Cape Town. He was also previously the chair of the Council for the Advancement of the South African Constitution.
 
Pityana also has experience in government, having served as director-general of the Department of Foreign Affairs from 1999 to 2002. He was also director-general of the department of labour from 1995 to 1999.
 
He was one of the founders of the National Economic Development and Labour Council (NEDLAC) and the Council for Conciliation Mediation and Arbitration (CCMA).
 
Pityana has served in a number of other business groupings. 
 
BUSA, in a statement, recognised Pityana's "strong sense of civic duty" which led him to form advocacy group Save SA, after revelations of state capture emerged. 
 
Other elected BUSA board members include Absa CEO Maria Ramos, Managing Director of the Banking Association of South Africa Cas Coovadia, and CEO of the Minerals Council of SA - previously known as the Chamber of Mines - Roger Baxter.
 
Speaking on his term of office, Mabuza said he was confident that he was leaving the organisation in a "stronger state", with business having a credible voice anchored by "constructive engagement" with social partners.
 
"It is critical for business to adopt a proactive and unified stance as it seeks to unlock value in the economy and address poverty, inequality and unemployment. I congratulate the incoming board under the leadership of Sipho," said Mabuza.  
 
 
Source: Fin24

South Africa has been rocked by news that it has slipped into a recession after its gross domestic product (GDP) declined 0.7% during the first quarter of 2017 after contracting by 0.3% in the fourth quarter of 2016. Jannie Rossouw explains what it means.

What is a technical recession?

It’s when an economy suffers two consecutive quarters of negative economic performance. It refers to shrinking economic output, sometimes also known as negative economic growth or economic decline.

In short, it implies that the economic activity of a country is declining. This is never a good thing. In South Africa’s case it’s particularly serious because the country needs strong economic growth to make inroads into unemployment, which currently stands at more than 27%.

South Africa desperately needs a strong economy for other reasons too. The first is that the living standards of its citizens can’t improve without economic growth. The second is that the economy needs to grow for the government to be able to increase revenue to meet its growing social welfare budget.

There are other ways to describe a recession, although the technical definition is one that’s generally accepted. Other definitions include “an economy performing below potential” or “an increase in the output gap”. As an aside, it’s interesting to note that there’s a technical definition for a recession, but no agreed definition for a depression (as in Great Depression of the 1930s).

South Africa’s economy showed marginal positive growth for 2016, although it then contracted in the fourth quarter of the year. With similar contraction in the first quarter of 2017, the country entered a technical recession.

If the economy shows positive growth for the remaining three quarters of this year, South Africa will avert a recession for the calendar year 2017.

What caused it?

Economic activity contracted over a wide range of sectors, including construction, manufacturing and transport. Only mining and agriculture made a positive contribution to output growth. All other sectors contracted.

This reflects subdued demand throughout the South African economy. The data on the first quarter confirms what many small and medium business owners have been saying since the beginning of 2017 – that demand is down and that business conditions are tough.

The important question is whether this recession will continue in the second quarter – April to June, or whether there will be a turn around to economic growth.

Who’s to blame?

It’s difficult to say who is to blame. But it must be noted that recessions are rare events, as policies are generally aimed at economic growth. This is the second recession experienced in the post 1994 South Africa.

Rapid economic growth depends on investment, which in turn is dependent on confidence and positive expectations of the country’s future. President Jacob Zuma’s administration doesn’t instil confidence. This partly explains subdued investment. The recent credit risk downgrades into sub-investment grade has made South Africa a less attractive investment destination.

The lack of confidence is also reflected in suppressed demand, which in turn results in contractions in economic output.

How do we get out of it?

Investment is required to get South Africa out of its depressed economic conditions. Investment will boost demand in the economy, with positive spill-over effects into a number of sectors.

Naturally restoring South Africa’s credit risk rating to investment grade would help boost investment. A better credit rating would reduce the risk of investing in the country.

The upcoming credit rating decision from global credit rating agency Moodys’ is going to be a critical moment. This after two big rating agencies Fitch Ratings and Standard & Poors downgraded some of South Africa’s instruments into sub-investment grade. A downgrade from Moodys’ will trigger massive capital flights which will exert further pressure on the economy.

What company are we keeping? Are other countries in the same boat at the moment?

South Africa is joining a growing list of countries which have slipped into technical recessions. These include Ecuador, Equatorial Guinea and Venezuela. It’s important to remember that a country’s status can change from quarter to quarter depending on its growth rate. This means that an assessment of economic growth or recession status needs to be made based on the most recent data.

Jannie Rossouw, Head of School of Economic & Business Sciences, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

  1. Opinions and Analysis

Calender

« September 2018 »
Mon Tue Wed Thu Fri Sat Sun
          1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30