Tag: South Africa

By Riaan de Villiers for BizNews

The 2019 national and provincial election elections have come and gone, leaving us all to face the consequences. The media have spread the message that the ANC has won the national election with a 57% share of the vote. While lower than its 62.15% in 2014, which is taken as a cause for concern for the ruling party, this is still widely described as a ‘solid majority’, and a ‘strong mandate’ for Cyril Ramaphosa.

On Saturday evening, in a graceful and non-partisan speech at the IEC election results centre, our returning president, Cyril Ramaphosa, described the election as a ‘resounding expression of the will of the people of South Africa’, which had ‘reaffirmed the vibrancy of our democracy’.

All this has helped to bolster the impression that the ANC has won the support of more than half of the South African electorate. This is a big, and ultimately dangerous, illusion.

If the voter turnout of 65.9% is taken into account, the ANC’s ‘share of the vote’ drops to 35%. And if the registration rate of 74.5% is added, it plummets to a dismal 27.9%. Put differently, the ANC now governs with the active consent of little more than a quarter of the South African electorate. Added to this, eligible voters who did not vote outnumbered those who did (for all parties) by more than a million. Put differently, more than 18 million eligible voters – more than half of the electorate – did not even vote.

This sort of slippage takes place in all representative democracies with voter registration and voluntary voting systems. They are routinely analysed as indications of the waxing and waning of political participation, as well as support for particular political parties. But rates of registration and turnout rates in mature and stable democracies tend to be far higher, and don’t really threaten those systems themselves.

By contrast, what is at stake in South Africa is not just the level of consent with which the ANC will govern the country for the next five years, but the legitimacy of its ‘young and fragile’ democracy. And the alarm bells are ringing loud and clear.

Given the fluidity and uncertainty surrounding the 2019 election, votes have probably been lost across the political spectrum. However, the bulk of votes have certainly been lost among members of deprived communities, stuck in the bottom half of what is now the most unequal society in the world.

People in those communities are not only disillusioned by the lack of progress by their former parties of choice – notably the ANC – over the past 25 years, but have also lost the belief that the ANC or any other government could or would do anything about it in the future.

Many of them are younger people who see no point in entering the formal political system. More specifically, they have given up hope of receiving a worthwhile education, and ever getting a formal job. (Indeed, it was heart-breaking to watch the faces of young people expressing their disillusionment on some of the better vox pop TV broadcasts in the run-up to the polls.

This precipitous drop in the legitimacy of our democratic system hidden in the latest election results should come as no surprise. Besides continuing a steady trend over previous elections, it also occurs in inverse lockstep with a growing phenomenon that our politicians have desperately tried to ignore for several years, namely the rapidly growing number of poor communities – arguably the people who require the most effective governance and the best service delivery – that routinely express their political demands by means of violent protests, defying state agencies and destroying public property and infrastructure in the process. To state the obvious, this is not meant to happen in a well-functioning democracy. Their sense of being effectively represented by either local, provincial or national political representatives is clearly close to zero.

The ease with which we can lapse into a fundamental misrepresentation of the election results, the ANC’s ‘mandate’, and the legitimacy of the democratic system is illustrated by Ramaphosa’s address at the IEC election centre of Saturday night.

Interestingly, he avoided any direct reference to a mandate by a majority of the electorate. Instead, in what seems to be a careful choice of words, he paid tribute to the ‘millions’ of people who went to the polls to choose the public representatives who would champion their collective interests, and the ‘many’ people who had braved the rain and cold to cast ballots that would determine the country’s future.

He did refer to the low levels of participation by young people. He started by applauding those young people who had participated in the elections, and the way they sought to encourage others to do so on social media. Departing from his written address, he went on to say: ‘We should be pleased that young people are taking such a keen interest in the life of their country. We do however need to say that we want that keen interest to keep growing. Because many more young people are still outside the fold of voting activity. And we want them to participate far more than those who have participated now.’ So he did flag this as an issue, but in an avuncular, dumbed down sort of way.

He then went on to declare: “Our people have spoken – and they have done so clearly and emphatically… I thank all of you for making it possible for this election to be a resounding expression of the will of the people of South Africa… We can declare with certainty that democracy has emerged victorious.’

Well not really. If the people had spoken, they had largely done so by staying away from the polls. If the election was a ‘resounding expression of the will of the people of South Africa’, it largely expressed their loss of confidence in the democratic system. So the election can’t really be regarded as a victory for democracy. On the contrary, even in strict numerical terms, the electorate has actually delivered a vote of no confidence in our democratic system.

In an end-of-election message on its website, the ANC declared: ‘South Africans have given their vote of confidence to the ANC to continue to lead transformation and government to speed up the process of building a better life for all.’ To the extent that this is meant to imply that a majority of voters had done so, they have done no such thing.

It‘s a striking illustration of the sleight of hand aimed at perpetuating the myth that the ANC has a mandate to govern from the majority of the South African electorate.

Everybody was tired on Saturday night. The president’s speech was a ceremonial one, and he might not have written it himself. In one of his off the cuff asides, he suggested that, having done a great job, journalists could take some time off and get some sleep. It raised a good laugh. He clearly seemed to be in need of a good sleep himself.

One can only hope that, after having had one, the president, members of his party, and indeed all the other members of the cosy new political elite who were on view at the IEC’s closing results ceremony, will set about addressing challenges posed by the real results of the 2019 elections with greatly renewed energy, and a greater sense of urgency.

As for those 400 returning and incoming MPs, insulated from the inconvenience of direct accountability to voters by the PR system, perhaps they should stop thinking about what they are going to do with their million rand-plus remuneration packages and what’s on the menu in the parliamentary dining rooms, and start thinking about what they are going to do so help ensure that, in another five years’ time, parliament will be there at all.

By Roxanne Henderson for Business Day

From free burgers and ride-hailing services to hip-hop concerts and discounted petrol, SA banks are going all out to win customers as competition hots up.

The biggest lenders are facing an onslaught of entrants for the first time in 12 years. And they are responding before the newcomers find their feet by pushing loyalty programmes, revamping digital offerings for technology-savvy millennials, targeting existing customers with extra products and services and cutting fees.

The challengers — some of whose founders or senior staff cut their teeth in the banks they are now up against — could not be coming at a worse time. Most lenders are reducing costs, retrenching staff and closing branches to cope with an economy that has not expanded above 2% a year since 2013 and a move toward the increased use of digital services.

Tax increases, higher utility costs and stubbornly high unemployment are squeezing consumers, who are not only looking to cut their expenses but also want more convenience.

“Banks are becoming more client-centered, many new players are entering the space offering a basic banking account at competitive prices, so they have to create stronger relationships with existing clients,” said Nolwandle Mthombeni, an analyst at Mergence Investment Managers in Cape Town.

“Technology has become the biggest expense item for some of the incumbents as they try compete with new entrants that do not have any legacy systems.”

FirstRand’s First National Bank, Standard Bank, Absa and Nedbank are using credit as their biggest leverage over new contenders, according to Jan Meintjes, a portfolio manager at Denker Capital.

Central bank data shows that term loans jumped almost 15% in the 12 months to February after contracting the prior two years, while the value of credit card debt increased 9.2% from 4.7% a year earlier, after shrinking in 2017. Lenders are turning to different approaches to snag customers.

Nedbank got local rapper Ginger Trill to launch an offering that gives university students a cheap account, credit card facility, as well as fast-food restaurant and ride-hailing vouchers. It added a digital personal assistant and concierge offering to its app that links to a network of 350,000 product and service providers.

“We’re trying to amplify our brand’s resonance,” said managing executive for consumer banking Mutsa Chironga.

Nedbank, known for targeting affluent customers, also plans to revamp its loyalty programme and digitise its platforms.

FNB tries to get eyeballs to its app by connecting business customers with retail clients, or home buyers to sellers so they can do deals without a realtor. FNB is also digging deep into its client data to find cross-selling opportunities.

“Where we see a transactional relationship with us, but a credit relationship elsewhere, we try to crowd” out competitors, said CEO Jacques Celliers.

FNB rewards cardholders filling up at stations owned by Engen Petroleum, the country’s biggest fuel distributor, through its eBucks programme.

“Our growth in insurance and the exciting opportunities we see in investments will be key avenues for growth,” he said.

Bank Zero, co-founded by former FNB CEO Michael Jordaan, plans to start a digital offering later in 2019 that will be among at least five institutions, including Old Mutual and African Bank, taking on traditional banks.

Discovery, SA’s largest health-insurance administrator, wants to gradually add customers to the bank it recently opened, starting with the 350,000 credit cardholders it shared with FNB through a joint venture that ended in 2018. The company plans to tap into the 4.4-million lives it reaches through insurance, wealth management and its Vitality loyalty programme.

The bank will follow the same concept as Vitality, which rewards clients who eat healthily and exercise with discounts on flights, gym and meals or Apple Watches at a fraction of the price if they meet fitness targets.

“They’re going to make an impact,” said Meintjes. “Whether they’re going to make money is a separate question.”

Billionaire Patrice Motsepe’s TymeBank, which uses kiosks in Pick ’n Pay stores to open accounts with no monthly fees, signed up 210,000 clients within two months. To break even, the lender will need 2-million.

To get this done, it is sending mobile teams and a portable kiosk to transport hubs, university campuses and big employers — a throwback to a technique Absa used in the early 2000s to reach rural customers with briefcases packed with equipment to sign people on. The Big Four know the price of ignoring the competition.

Capitec Bank started as an unsecured lender in 2001 to grow to a full-service offering with a market-leading 11.4-million customers. The stock has gained 59% over the past 12 months, outperforming all the members of the FTSE-JSE Africa Banks index, which is down 0.4% over the period, as well as Investec.

“It’s only when Capitec started evolving and entering into transactional banking that they saw the threat,” said Mthombeni. “Banks are forced to respond differently to competition now.”

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.

New TymeBank signs up 50 000 users

Although the bank only soft-launched at the end of 2018, TymeBank has already signed up 50 000 customers. This is according to Business Tech, who heard from the company’s CEO, Sandile Shabalala, at the BusinessTech Digital Banking Conference on Wednesday.

Shabalala says that the new digital banking group is looking to radically change the way South Africans access banking services in the country – and has run its first full store activation in preparation for its official launch.

The bank’s soft-launch involved placing the group’s kiosks in selected areas. The bank operates on a partnership model with Pick n Pay and Boxer stores in South Africa. This provides an easy-to-access physical point of presence for customers in places they frequent.

The partnership gives the bank 750 points of presence through the retailers’ networks, and access to 10 000 cash till points. According to BusinessTech, this gives the bank access to an extensive network without having to spend a cent on building its own infrastructure

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

Following a fuel price roller coaster in 2018, in which prices finally subsided meaningfully towards the end of the year, South African motorists can look forward to some price stability, at least for the next month.

According to the Automobile Association, the price of petrol is likely to increase by around eight cents a litre, while diesel is set to go down by three cents and illuminating petrol by nine cents. This prediction is based on late-month, unaudited data released by the Central Energy Fund.

This would push the price of a litre of 95 Unleaded petrol to R13.50 at the coast and R14.09 in Gauteng, with 93 Unleaded rising to R13.87 in the latter region.

While the rand has gradually appreciated against the US dollar in the past month, firming from around R14.50 to the dollar to current levels in the region of around R13.70, international crude oil prices edged higher, to hover around the $60 mark, although this is still well below the highs of around $84 recorded in October.

“What is worth noting is that the average rand strength against the US dollar has been increasing for nearly a month, and we are hopeful this may point to a period of greater stability for the currency,” the AA added.

“If international oil prices continue their current stable trend, South African fuel users may see fewer of the wild swings in fuel prices which characterised 2018.”

But don’t spend all those savings just yet. Last year showed us how volatile the fuel market can get.

By Alexander Winning and Macdonald Dzirutwe for IOL

South Africa turned down a request from its southern African neighbour Zimbabwe for a $1.2 billion (about R16.6 billion) loan in December, a spokesman for the finance ministry said on Monday.

“South Africa doesn’t have that kind of money,” National Treasury spokesman Jabulani Sikhakhane said.

Zimbabwean officials were not immediately available for comment.

Zimbabwe was hit by deadly anti-government protests last week after a hike in fuel prices stoked anger over an economic crisis.

Police say three people died during demonstrations that turned violent in the capital Harare and second city Bulawayo. But human rights groups say evidence suggests at least a dozen were killed.

Zimbabwean President Emmerson Mnangagwa said on Sunday that he would return home from a European tour and skip the World Economic Forum in Davos to address the crisis.

By Jamie McKane for MyBroadband

The South African Reserve Bank has published a consultation paper on policy proposals for cryptocurrency assets, detailing its recommended regulatory approach to Bitcoin and other tokens in South Africa.

This paper currently only offers recommendations and is open to comment from the public until 15 February 2019.

The Intergovernmental FinTech Working Group (IFWG), which includes members from Treasury and the SARB, formed a Crypto Assets Regulatory Working Group to construct recommendations for the regulation of digital assets in South Africa.

This consultation paper is a product of this working group, and addresses the possible advantages and disadvantages of cryptocurrency in a South African context – including its ability to be used for criminal activities and its impact on financial services.

“Upon conclusion of the consultation phase, the regulatory authorities will specify the way forward through a policy instrument such as a guidance note or position paper aimed for first quarter of 2019,” the paper stated.

“The IFWG and Crypto Assets Regulatory Working Group is of the view that regulatory action should not be delayed until the most appropriate regulatory approach has become clear, but to rather act and amend as innovation evolves.”

Proposed regulations
The regulations proposed in the paper aim to help monitor the purchasing and selling of cryptocurrency, with a major focus on improving compliance with existing financial security legislation.

Under these new rules, all cryptocurrency asset trading platforms, custodial service providers, and payment service providers will be required to register with the IFWG and comply with AML/CFT provisions of the Financial Intelligence Centre Act.

These platforms include Bitcoin exchanges, trading centres, and cryptocurrency ATMs.

Additionally, the government recommends that cryptocurrency service providers monitor user transactions – especially large transactions which may be linked to terrorist activity.

Regulatory authorities did add that they would not impose any market entry conditions for registered entities.

Where companies and service providers do not comply with these requirements, the government recommended that administrative sanctions be imposed.

The Crypto Assets Regulatory Working Group said it would continue monitoring the state of the cryptocurrency market, especially businesses and users situated in South Africa.

Loadshedding is here to stay

Source: MyBroadband 

South Africa should prepare for “years of gloom” and citizens must start stockpiling candles and torches, thanks to what lies ahead at Eskom.

According to a report in the Sunday Times, Eskom’s load-shedding and financial problems “could drag the country into a death spiral”.

Eskom needs to spend billions of rand on maintenance in 2019 and has promised that load-shedding will subside by March, but the report quoted energy analyst Ted Blom who said coal shortages will continue until 2025.

“About 80% of Eskom power generation relies on coal,” said the report.

Eskom has been described as being at a “coal cliff”, where there are not enough coal mines to supply its needs, and that new mines will take years to develop.

Eskom has made headlines in recent weeks for its coal shortages, and in November 10 of its power stations had less than 10 days of coal supply left.

With coal shortages comes more load-shedding, and while this is a severe problem for people who want to go about their daily lives, it can be a death sentence for businesses and the economy.

Continued load-shedding may even force the ratings agencies to downgrade SA to junk status due to all the local investments which would disappear.

Econometrix chief economist Azar Jammine stated in the report that this has led South Africa’s growth rate to drop to the second-worst among the G20 countries.

Economist Mike Schussler described this as “a nightmare for SA”, and said we are “at the edge of a cliff”.

Eskom technically bankrupt
The Organisation Undoing Tax Abuse (Outa) recently said Eskom’s financial results indicate a company that “is technically bankrupt”.

While presenting its 2018/2019 interim results, Eskom revealed that its 2007 debt of R40 billion has swelled to R419 billion and is estimated to exceed R600 billion in the foreseeable future.

In addition, Eskom’s huge staff complement including fixed-term contractors has increased to 48,628 in 2018 from 47,658 in 2017, costing South Africans R29.5 billion in March 2018.

Eskom’s dire financial situation is set to get even worse as its full year loss is set to grow to R15 billion – up from the expected R11.2 billion.

Outa said Eskom does not have a sustainable business model or a comprehensive financial plan to claw itself out of the debt hole it is currently in.

“If Eskom was a private company, it would either be under business rescue or in liquidation,” said Ronald Chauke, Outa’s energy portfolio manager.

He said the appointment of Calib Cassim as Eskom’s permanent chief financial officer may offer some stability and comfort that the rot will stop.

However, Outa said, it’s the power utilities’ declining revenues which inhibit it from turning into profitability or controlling its ever-increasing operational costs.

Eskom moves turnaround strategy to 2019
Eskom has also said that it only expects to launch its turnaround strategy in 2019 after at least two delays of its much-anticipated recovery plan.

The power company’s long-term strategy has been approved by the board, but the plan is seen as being implemented “in the new year”.

This news come after a third day of scheduled power outages on Saturday due to inadequate energy availability.

Financial constraints limited maintenance amid unplanned outages from an aging fleet of power stations, making matters worse.

How SA climbed its way out of a recession

By Lameez Omarjee for Fin24

The SA economy has officially emerged from recession, Stats SA announced on Tuesday morning, following a 2.2% rise in GDP growth for the third quarter of the year.

The economic growth figures were broadly in line with the expectations of economists surveyed by Fin24 prior to publication, who had projected growth rates of between 0.8 and 2.6%.

The rand firmed by as much as 1% shortly after the release of the results.

However, despite the rebound, economists still expect overall GDP growth for the year to be weak, below 1%.

Here’s what boosted growth in the third quarter:

1. Manufacturing industry expands

Growth was mainly driven by the secondary sector, which grew by 4.5%. This was aided by a 7.5% increase in manufacturing. Large contributions came from steel and metals, and motor vehicle production, among other things.

2. Agriculture rebounds

Even though the primary sector contracted by 5.4% in the quarter – mainly due to a large drop in mining – the agriculture industry rebounded following two quarters of substantial contractions.

During the third quarter, increased production in field crops, horticultural and animal products, helped improve growth to 6.5%.

Earlier on Tuesday, Bloomberg reported that confidence in the industry had declined to its lowest in nine years. The agribusiness confidence index dropped from 48 to 42, mainly due to concerns over weather conditions and a lack of clarity on land reform policy.

3. Transport industry rebounds

The tertiary sector grew by 2.6% during the quarter. The transport, storage and communication industry in particular expanded by 5.7%, rebounding from a -4.9% contraction in the second quarter and improving from 0.9% growth reported in the first quarter.

4. Finance, real estate and business services continue growth trend

Also within the tertiary sector, the finance, real estate and business services industry continued its growth trend, increasing by 2.3% during the quarter.

Additionally, the trade industry – particularly wholesale, retail and food and beverages – and catering and accommodation increased by 3.2%.

5. Expenditure-led growth

Expenditure GDP grew to 2.3%, following a decline of -2.6% and -0.7% reported in the first and second quarters respectively. Government expenditure grew by 2.2%, while household expenditure grew by 1.6%.

However, gross-fixed capital formation declined -5.1% during the quarter, largely due to a decline in investment in construction works, transport equipment and residential buildings, according to the StatsSA report.

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