Tag: economy

How rolling blackouts affected the economy

BankservAfrica’s monthly Economic Transaction Index (Beti), a broad indicator of the country’s economic health, showed that transactions declined by 0.4% from February to March.

“The March Beti declined across all measurement periods,” says Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, in a statement. Naidoo said the numbers are a clear indication of the “deteriorating state of the economy”.

According to a recent article in MoneyWeb,  Eskom’s load shedding in March hit the economy hard. Individual transactions increased in value but decreased in number during this period.

The standardised nominal value of the Beti was R875.7-billion while the average value per transaction was R8 444. This is the first nominal rise in 23 months, said Naidoo. This rise, however, is due to VAT refunds paid in March.

“Without the nearly R20-billion worth of VAT repayments paid into the National Payments System, the March Beti would have been worse off.”

Source: Supermarket & Retailer

Data shows that 2 out of 3 South African consumers participated in Black Friday shopping at some point, according to Isana Cordier, sector head for consumer goods and services, corporate and investment banking at ABSA.

ABSA card data indicates that, on average, every last Friday of the month consumers spend about 55% of purchases on groceries.

On Black Friday, however, this changes and durable goods make up about 20% of purchases.

“It, therefore, seems that consumers are holding back spending on those durable items to buy them on Black Friday. South Africans especially like to spend on electronics on Black Friday,” Cordier said at a recent consumer insights event hosted by ABSA in Cape Town.

Black Friday has become the biggest spending day of the year in the SA retail sector, with more than R3bn spent last year.

Another interesting trend for her is that, whereas Black Friday shopping in SA was initially mostly centred around Gauteng and the Western Cape, the “frenzy” has started to spread to other provinces as well.

For instance, the Eastern Cape now makes up about 7.2% of Black Friday spending in SA, KwaZulu-Natal 14.2% and the Free State 4.1%. Gauteng still accounts for 37% of spending in SA on Black Friday.

Fin24 reported last year that retail sales over the Black Friday and Cyber Monday period most likely “saved” the South African economy in November, according to the BankservAfrica Economic Transaction Index (BETI).

On Black Friday and Cyber Monday, a total of 5.2 million card transactions were recorded.

More significantly, according to the BETI report, there was 55% growth in online sales for Black Friday and 36.4% for Cyber Monday.

Shock as Sun City’s value plummets

By Siseko Njobeni for Business Live

The tough economy is behind the shock decline in Sun City’s value.

Sun International has for the first time reduced the value of Sun City as a struggling economy brought pressure on the iconic resort and casino.

The R306m reduction in value to R2bn comes after the company spent R1bn on refurbishments at the Sun City complex in 2016.

The drop in the resort’s value attests to the difficulties facing SA’s leisure and retail sectors due to increased competition, sluggish economic growth and reduced discretionary consumer spending.

Food prices set to rise during 2019

By Dean Hutton for Bloomberg/Business Insider SA

Shoppers at Shoprite, Woolworths and Spar saw only small increases in food prices last year. But Shoprite is warning that prices could head higher in coming months.

Comparing prices at Shoprite and Checkers now, versus a year ago, there remains little evidence of price pressure.

Amid all the other pressures in the economy, food inflation has been the one relatively happy place the past year.

In its results this week, Shoprite reported that its prices only went up by 0.4% in the six months to end-December.

Woolworths said its food prices only increased by 1.2% in the same period, while Spar food price rose by only 1.4% – and the retailer says prices continue to fall across a wide range of grocery and perishable items.

In December, some 10,719 items in Shoprite and Checkers stores were cheaper than a year before.

The most notable price drops were among basic commodities such as frozen chicken portions, sunflower oil, rice, fat spreads and UHT milk across all our supermarket brands, a spokesperson told Business Insider SA.

However, the food price party could be drawing to a close.

In September last year, more than 11,600 items at Shoprite and Checkers were cheaper than a year ago, indicating that prices of almost 1,000 products have stabilised by December.

Shoprite itself is warning that prices will start to pick up. “The price of maize meal has already started increasing, which in turn will impact the cost of chicken feed,” the spokesperson said.

At the height of South Africa’s extreme drought in 2016, the white maize price reached R5,000 a tonne – which pushed up food inflation to more than 7%. However, following good rains in many parts of the country, the maize price fell to below R2,000 a tonne. Of late, however, the maize price is back around R3,000 amid renewed drought concerns.

“(Also), the price of sugar has traditionally over the past years increased in the first quarter of the year and we expect this increase to still be implemented,” Shoprite said. “Other categories to be affected will depend on factors such as inflated supplier prices, exchange rates, etc.”

Comparing prices at Shoprite and Checkers now, versus a year ago, there is little evidence of price pressures, however.

For now, the price of Huletts white sugar (2.5kg) remains unchanged at R34.99 from a year ago, at Shoprite.

The price of Ace Super Maize Meal (10kg) has actually fallen to R48.99, from a year ago (R52.88). A coffee brand like Frisco (750g) is also cheaper now (R54.99) than a year ago (R59.99). At Checkers, prices were also largely in line with twelve months ago, with some products like Sir Fruit juice falling from R29.99 to R25.99

The only big increase we could find was in sunflower oil, with the Helios brand (5 litre) up from R74.99 a year ago to R79.99

Zimbabwe introduces new currency

Source: BBC

“Nobody knows what it is,” is the verdict of Zimbabwe’s former trade minister and now opposition politician Nkosana Moyo.

He was talking about what appears to be a new currency in the country.

It has been introduced over the last few days but its impact is not yet clear.

Why is it needed?
Zimbabwe has a troubled history with currency.

In 2009 it ditched the Zimbabwe dollar and adopted the US dollar after hyperinflation destroyed its value. At its height prices were almost doubling every day and the reserve bank printed notes worth 100tn Zimbabwe dollars to try and keep up.

But because more US dollars were leaving the country – in the form of payments for exports – than coming in, US dollar cash was in short supply. This led to long bank queues as people struggled to get their money out.

In 2016, the government introduced bond notes and coins, which were supposed to be worth the same as the US dollar, to make up for the cash shortage.

But no-one had faith that they were equivalent and, on the black market, bond notes have lost value against the dollar.

And now the government has introduced the Real Time Gross Settlement (RTGS) dollar, which is being described by some as a new currency.

RTGS dollar?
It’s not a phrase that exactly rolls off the tongue, but the initials are familiar to Zimbabweans who have been using them to describe money that has been electronically transferred into their bank accounts.

As well as paying for goods in US dollars, Zimbabweans have been able to use other foreign currencies such as the South African rand, plus bond notes, debit cards drawing on bank accounts and money stored on a mobile phone app.

But each of them had a different exchange rate, meaning that customers were sometimes charged different prices depending on what payment method they chose.

The RTGS dollar is supposed to bring together bond notes and debit card and mobile money payments to make sure that they are all worth the same.

Significantly, the government has given up on the pretence that the bond note and the US dollar have the same value. Now it is saying that the value of the RTGS dollar against the US dollar will be set by the market.

What makes a currency a currency?
While business journalists and commentators are saying that there is a new currency, the government has not used this phrase.

The Zimbabwe dollar has such a tarnished history that the government is reluctant to be seen to be returning to this.

At its simplest, a currency is something that is widely accepted as a means to buy goods and services.

From now on the government wants things priced in RTGS dollars, rather than US dollars, and people should be able to use the various payment methods denominated in RTGS – debit cards, bond notes and mobile phone money – to purchase them.

So it feels like a currency but there are no plans to have notes and coins with “RTGS dollars” written on them and you cannot use them outside the country.

How much is an RTGS dollar worth?
The government has said it wants the price of the RTGS dollar to be determined by the market.

It initially suggested that it should trade at 2.5 RTGS dollars to the US dollar, but this was significantly less than the black market rate for the bond note, which was selling at more than 3.5 to the dollar.

If the RTGS dollar is truly allowed to float without intervention then the black market should be eliminated altogether.

The government hopes that it will make things simpler as there won’t be different prices quoted according to the various currencies and payment methods.

It also hopes that prices will stay the same or even decline as stability and predictability is brought into the market.

Will this solve Zimbabwe’s problems?
Zimbabwe has been hit by rising inflation and increasing levels of government debt for many years.

But if the RTGS dollar is the solution, then the government is “misdiagnosing the problem”, opposition politician Mr Moyo says.

He argues that poor economic management is at the heart of the problem, saying that government expenditure needs to be reined in.

But Finance Minister Mthuli Ncube insists that austerity measures he introduced in last year’s budget are working and government revenue is increasing.

As long as the government does not try to manage the RTGS dollar exchange rate, then this is a step in the right direction, says the chief economist at Renaissance Capital, Charlie Robertson.

But given the history that Zimbabwe has with currencies, it will take a lot to restore people’s trust, he adds.

Zuma’s second term cost SA R470bn

President Jacob Zuma’s second term cost SA’s economy R470-billion, Nedbank chief economist Dennis Dykes told Business Day on Tuesday.

The former president is said to have cost SA the following during his second term:

  • R470bn of GDP stemming from corruption, maladministration and misguided policies
  • R140bn in estimated lost tax revenue
  • A subsequent reduction in the budget deficit in 2019 to about 2.4% of GDP (currently at a projected 4%)
  • A reduction in government debt to R250bn: less than 49% of GDP versus 56% of GDP
  • The South African economy could have been up to 30% (R1-trillion) larger
  • The economy could have created 2.5-million more jobs
  • The government could have collected R1-trillion more in tax
  • The government could have minimised Eskom’s debt, which is R419bn by comparison.

How loadshedding has impacted local businesses

By Prinesha Naidoo for Bloomberg/Fin24

Businesses in South Africa have spent the past week struggling to operate amid rolling blackouts that affect their operations for as many as five hours at a time.

The power cuts by cash-strapped utility Eskom, which provides about 90% of the country’s electricity, are a “hugely damaging reality check,” President Cyril Ramaphosa said Thursday amid a fifth straight day of blackouts.

The reductions may cost the country as much as R5-billion rand a day, according to the Organisation Undoing Tax Abuse, a civil-society group.

Bloomberg visited some businesses during blackouts to see how they were coping with the situation.

Suzanne van Weely said she is throwing out as many as 15 loaves of unbaked bread daily – about a 10th of what she produces at her Supercalifragilistic bakery and coffee shop in Linden, Johannesburg.

“People don’t get the things they want and they walk out,” Van Weely said. With fridges shut down, cheesecakes, mousses and trays of tiramisu “are going off. It’s all stuff that costs money to make,” she said.

Across the road, trading at her father Ronald’s store, Magnificent Paints and Hardware, is at a standstill. When the power goes out, his regular customers – local contractors – stop working and so do his orders and sales.

Three of his six delivery trucks are parked in the yard while he sits in a back office lit only by a rechargeable lamp and the light from his smartphone screen.

“The power outages are way too long,” he said. “Four and half hours is way too long – most people work for eight hours so more than 50% of the workday is lost. They should make it two hours then we can at least get some business done.”

Around the corner, the screens on electronic fuel pumps at the Linden Garage gas station are blank. While owner Marco Dalle Ave jokes that his old mechanical pumps were seemingly more advanced and better suited to rolling blackouts, he is worried about turnover and having to pay staff.

“If you can’t operate, you can’t make money,” he says. According to him, a generator would cost more than R100 000 rand – which he can’t afford.

Francois Labuschagne, who also can’t afford a generator, said electricity shortages are killing business at Print2Go, his printing shop.

“It is like the economy has just been cut in half – half of the economy is operating half of the day and it is not like there is a plan,” he said. “As a business owner, this is a ridiculous situation, we’ve got staff to pay – if the business goes under then staff lose their jobs.”

While the Rembrandt butchery has a back-up generator, power cuts still have a devastating effect, said Marco Huisamen, its manager.

With petrol prices close to record levels, running the generator is expensive and doesn’t provide nearly enough energy to keep all the lights on, fridges cold and meat band saws working all at once.

By Sifiso Zulu for EWN

South Africans are looking to President Cyril Ramaphosa for answers after the latest round of load shedding; the most severe to hit the country.

Eskom says it had no choice but to implement stage 4 load shedding on Monday after an urgent need to shed 4,000 megawatts off the grid.

Stage 4 load shedding has never been implemented before, and this drastic measure by Eskom took the country by surprise.

But it appears that even President Ramaphosa was not expecting the latest development, saying it came as a shock and was most worrying.

Energy expert Chris Yelland agrees that this move was unprecedented and speaks to how dire the situation is at the debt-ridden power utility.

“This is uncharted territory. So, it’s much deeper than it’s ever been before, and it did come as a surprise because it was announced that six generation units shut down as a result of unplanned outages.”

Ramaphosa recently announced plans to unbundle Eskom into three entities to deal with generation, transmission and distribution.

Labour unions have vowed to fight the plan, arguing that it’s the onset of privatising Eskom.

Total’s oil and gas discovery worth R1trn

By Paul Burkhardt, Bloomberg/Fin24

Total SA said it has opened up a new “world-class” oil and gas province off the coast of South Africa after making a significant gas-condensate discovery there will provide a boost for the economy of R1-trillion over the next 20 years.

Success in the nation’s first deep-water well is a potential boon for a country that imports most of its oil, processing the remainder of its fuels from coal and natural gas.

“We are very pleased to announce the Brulpadda discovery, which was drilled in a challenging deep-water environment,” Kevin McLachlan, senior vice president of exploration at Total, said in a statement on Thursday.

“Total has opened a new world-class gas and oil play and is well-positioned to test several follow-on prospects on the same block.”

Total, the operator, now plans to acquire 3D seismic data before drilling as many as four more exploration wells at the license.

“It’s a catalytic find,” Niall Kramer, chief executive officer of the South African Oil & Gas Alliance, an industry lobby group, said by phone. The country has only drilled in shallow waters before, with little to show for it, he said. “There’s nothing that has been on this kind of scale.”

Exxon, Eni

The new oil and gas region, with estimated volumes of around 1 billion barrels according to consultant Wood Mackenzie, has drawn interest from explorers including Exxon Mobil and Eni SpA, which also hold stakes in the waters.

“It’s probably quite big,” Total CEO Patrick Pouyanne said Thursday on a conference call. “Having said that, the region is quite difficult to operate: huge waves, the weather isn’t very easy.”

Total was drilling about 175 kilometers (109 miles) offshore in the Outeniqua Basin to a final depth of 3 633 meters (11 900 feet). The discovery, which also includes some light oil, could prompt a rush of activity offshore by other companies, especially since South Africa is due to introduce new oil and gas legislation later this year aimed at spurring exploration.

Africa as a whole has seen an increase in drilling, with oil and gas rigs around the continent topping 100 in recent months, according to Baker Hughes data. The count was as low as 77 in 2017.

Total has a 45% working interest in Block 11b/12B, Qatar Petroleum holds 25%, CNR International 20% and Main Street, a South African consortium, 10%.

Meanwhile, Minister of Mineral Resources Gwede Mantashe told delegates on the last day of the 2019 Investing in African Mining Indaba on Thursday that his department’s plan to separate oil and gas from the Mining Charter and develop separate legislation for the extraction method would yield immediate impact.

He lauded Total’s discovery as one of the outcomes.

Source: IOL 

The Competition Commission in South Africa said it has noted an agreement between Standard Chartered Bank and the New York State Department of Financial Services where Standard Chartered pleaded guilty to currency manipulation.

The Competition Commission said in a statement: “The Competition Commission has noted a consent agreement, which subsequently became a court order, between Standard Chartered Bank and New York State Department of Financial Services. In the consent order, Standard Chartered pleaded guilty to currency manipulation which included the South Africa Rand (ZAR) between 2007 and 2013. This is captured on pages 9 and 10 of the court order.”

The Commission said it would consider the impact of the order on the ongoing forex litigation with the banks in South Africa.

The statement continued: “In February 2017 the Commission referred to the Tribunal for prosecution a collusion case against Bank of America Merrill Lynch International Limited, BNP Paribas, JP Morgan Chase & Co, JP Morgan Chase Bank N.A, Investec Ltd, Standard New York Securities Inc., HSBC Bank Plc, Standard Chartered Bank, Credit Suisse Group, Standard Bank of South Africa Ltd, Commerzbank AG, Australia and New Zealand Banking Group Limited, Nomura International Plc., Macquarie Bank Limited, ABSA Bank Limited (ABSA), Barclays Capital Inc, Barclays Bank plc (Respondents).

“The Commission investigated a case of price-fixing and market allocation in the trading of foreign currency pairs involving the South African Rand since April 2015. The Commission found that from at least 2007, the respondents had a general agreement to collude on prices for bids, offers and bid-offer spreads for the spot trades in relation to currency trading involving US Dollar / Rand currency pair.

“Further, the Commission found that the respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times. Citibank N.A. pleaded guilty and reached a settlement agreement with the Commission and agreed to pay an administrative penalty of R69 500 860. Citibank N.A. undertook to cooperate with the Commission and avail witnesses to assist the prosecution of the other banks.”

The commission said that since February 2017, it has been engaged in protracted litigation with the rest of the banks, including Standard Chartered Bank, on pre-trial issues such as jurisdiction of the South African authorities and disclosure of the Commission’s evidence.

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