Tag: South Africa

If South Africa’s richest man, Johann Rupert, had to run South Africa with his personal wealth, he wouldn’t even be able to keep the government going for a full month.

This is one of the findings of Bloomberg’s latest Robin Hood Index for 2018, which measures how global billionaires could improve the lives of the poor if they gave all their money away.

In the 2018 iteration of the index, the data and media firm questioned how far billionaire wealth could stretch if the world’s richest had to cover the costs of running their home-country government daily.

According to the index, the typical running cost, per day, for South Africa is $333.5 million (approximately R3.98 billion). With an estimated net worth of $8.1 billion (Bloomberg data), Rupert’s wealth would only keep South Africa going for 24 days – hitting around the middle mark of the 49 countries assessed.

Cyprus’ richest man, John Fredriksen ($10.4 billion) could keep his home country running for well over a year (441 days), while China’s top billionaire, Jack Ma ($45.5 billion) could only keep his government running for four days, Bloomberg said.

To calculate government running costs, Bloomberg took total government spending spread over 365 days. It stressed that the index was simply an ‘intellectual exercise’ and not reflective of governments’ priorities or the intricacies of each individual country’s positioning.

South African billionaires

According to Forbes’ real time ranking of billionaires, there are only five dollar-billionaires in South Africa, down from eight billionaires in the official ranking for 2017.

Market movements during 2017 and the start of 2018 – as well at the widely publicised fall of Steinhoff International – saw a three super-rich businessmen lose their billionaire status: retail magnate Christo Wiese, investor Allan Grey, and ‘boere Buffett’ Jannie Mouton have all dropped off the list.

Forbes differs from Bloomberg in that it ranks diamond magnate Nicky Oppenheimer as the richest man in the country, with Johann Rupert ranked second.

Expanding on Bloomberg’s index model, South Africa’s billionaires, combined, could keep the government running for just under 63 days.

This is how long South Africa’s billionaires can keep the government running, individually:

Giving all their money away

If South Africa’s billionaires were to give all their wealth away to the country’s poorest, each person living in poverty would walk away with a once-off payment of about R11,400.

According to Stats SA’s poverty data released in 2017, approximately 40% of the population live below the lower-boundary poverty line – or 21.9 million people.

Using Forbes’ data, total billionaire wealth in South Africa amounts to $20.9 billion – or R249.55 billion . The table below shows how much each billionaire would contribute.

Billionaire wealth data as at 12 February 2018. Currency exchange at 1 USD = 11.94 ZAR

Source: Business Tech

South African salaries: what top executives earn

PwC has released its annual non-executive directors report, detailing the average salaries and increases given to South African executives across every major sector.

The data is based on PwC’s internal resource base and the 343 active companies listed on the Main Board of the JSE.

The total market capitalisation of these companies on the cut-off date was R16.49 trillion. This excludes preference shares, special purpose listings and suspended companies.

Because fees rarely follow a normal distribution curve, the report used a quartile/percentile range in preference to averages and standard deviations that assume normality.

It further broke down the earnings for large, medium and small-cap companies:

  • Large-cap: The top-40 JSE-listed companies, valued by market capitalisation;
  • Medium-cap: 41 to 100 of the JSE-listed companies, valued by market capitalisation; and
  • Small-cap: 101 to 343 of the JSE-listed companies, valued by market capitalisation.

Chairpersons and deputy chairpersons|

The report found that median chairperson fee across the entire JSE was R566,000 in 2017 – a 8.8% increase year on year.

Some listed companies also appoint a deputy chairperson. The purpose of the appointment is to deputise for the chairperson in the event of the absence of the latter from scheduled board meetings or to represent the chairperson due to time or other constraints.

The median salary for a deputy-chairperson was R933,000 in 2017.

This substantial difference in earnings is likely due to the fact that only large and medium-cap companies tend to appoint deputy-chairpersons.

Lead independent directors

Lead independent directors serve as independent directors and may help deal with difficult or underperforming executives as well—a task that has traditionally fallen to the chairperson.

Possibly the most significant contribution is the lead director’s dialogue with the CEO about substantive business matters or governance issues.

Most lead independent directors say they speak with CEOs many times between board meetings. Relations between CEOs and boards can be rocky and lead directors help maintain open communication in the boardroom.

“As companies gain more experience and feel higher levels of comfort with lead directors, their role is likely to continue to evolve. This role has proved to be successful for most, with 65% saying their positions have provided significant benefit for their companies,” the report said.

The median remuneration for lead independent directors was R1,007,000 in 2017.

Non-executive directors

Non-executive company directors saw some of the biggest increases among South African executives in 2017, with the median earning R377,000 (2016: R345,000).

“Although the increase awarded to incumbents is above CPI, when considering the shortage of talent to fill the positions and the responsibility shouldered under current regulations, we believe effective NEDs fulfilling these roles in JSE-listed companies are underpaid,” PwC said.

Remuneration among “super-caps”

This year’s analysis included 343 companies listed on the JSE, excluding preference shares and special purpose listings. It is of interest to note that only five (2016: 6) companies account for 50% of the total market capitalisation and 29 account for 80% (2016: 34).

In examining other large stock exchanges, similar market-cap scenarios appear most notably on the LSE and NYSE.

In categorising the top 10 full-year trading companies by market cap as the ‘super caps’ and perform an analysis of the fees paid to NEDs on their boards, PwC found that their fees are exponentially higher than our analysis of all 343 trading companies.

The median remuneration for chairpersons at these “super-cap” companies was R5,190,000.

The median remuneration for non-executive directors was R2,134,000.

Source: BusinessTech 

Entities involved in South Africa’s national payments system, including BankservAfrica and the Payments Association of South Africa (Pasa), have begun work on a major architectural and technical overhaul of the system to facilitate speedier settlements and to add new features to encourage fintech innovation.

BankservAfrica CEO Chris Hamilton said at a press conference in Johannesburg on Tuesday that the existing payments system was developed in the 1980s, and that a major upgrade is required. This, however, will take time as inputs have to be considered from a wide range of industry role players.

“The basic architecture of the South African payments system was laid down in the 1980s, and it was at one time among the best in the world,” said Hamilton. “But our social priorities have changed; our economy is rapidly digitising and going mobile, so we need to rethink our payments plumbing, including much greater focus on the key issue of our time: how to bring underbanked communities into the mainstream economy.”

Bankserv, which was founded in 1972, is owned by the major banks, with FirstRand Group, Absa, Standard Bank and Nedbank each holding about 23.1% of its equity. The organisation, which is heavily regulated, facilitates interbank settlements on behalf of its 23 members, most of them licensed banks.

In the 2017 financial year, Bankserv processed 452.6m ATM transactions worth R188.2bn. It handled R52.5bn worth of point-of-sale transactions and R290.9bn worth of credit card authorisations. It handled electronic funds transfers of R9.4 trillion.

Hamilton said it is engaging with its partners in the financial services ecosystem to modernise South Africa’s payments infrastructure in a “phased approach”.

“This involves developing a quantifiable view of what modernisation looks like — and the design thereof — and engaging with stakeholders and the related industry in this process to facilitate collaboration.”

He said the less friction that exists in the payments system, the more efficient South Africa’s economy can be. “Having a really good payments system doesn’t necessarily give you a great economy, but you can’t have a great economy without a great payments system.”

Fintech challengers
As more and more fintech players challenge the incumbent banks, however, there’s a need for a new, more efficient system that allows for innovation while at the same time continuing to protect consumers.

Hamilton emphasised that South Africa “has among the best payments infrastructure in the world” but that it can’t afford to stand still.

For one thing, the system hasn’t served the entire economy, and there’s a pressing need to address demands for “financial inclusion”.

“In a way, South Africa has two economies side by side. One of the challenges for the guys in charge of the payments infrastructure … is to start to find ways to bridge that gap,” he said.

The second challenge is that the economy is “changing in fundamental ways”, he added. “The economies of the world’s nations … are on a very broad trajectory of digitisation. This will take financial services in increasingly different ways.”

He said it is imperative that the national payments system doesn’t hinder innovation, particularly around mobile money. “Luckily, we have a number of examples to draw on from around the world on how the payment system should start to change to deal with that challenge.”

He said BankservAfrica has been working to renovate its existing infrastructure “to ensure it’s in the best state it can be”, while at the same time collaborating with the the Payments Association of South Africa (Pasa), the Reserve Bank and industry players to define what a future payments architecture should look like.

Most payments systems today were designed in the 1980s, when the benchmark was cheques, which would clear after three to five days
“These things take a long time because there are a lot of organisations involved. I’m delighted that it has gained some traction and the banks are putting their senior strategic people on it,” Hamilton said.

“We have our own ideas of what that architecture should be, but we don’t get to make those decision by ourselves. The central bank needs to ensure what we are doing in the public interest.”

One of the key elements of a new national payments architecture is ensuring it is speedy, with real-time settlement. “Most payments systems today were designed in the 1980s, when the benchmark was cheques, which would clear after three to five days. These systems are not designed to give you instant value, but rather to give you next-day value.”

Although South African banks have had real-time payment systems for several years, Hamilton admits it “hasn’t taken off as expected”, in part because of cost. This needs to be addressed in the new architecture.

But there are also other features that need to form part of a new payments system. These include “data richness” and “data flexibility”.

Netflix era
“The systems designed in the 1980s tried to minimise the amount of data being moved around. In an era where our kids are streaming Netflix, large volumes of data aren’t an issue any more.”

When significantly more data is added to the payments system, banks and fintech innovators will be able to offer more applications and new ways of supporting the economy, he said.

A new system must offer greater flexibility and adaptability, to allow people to try new things and innovate. “You want to make a system that is open and secure and yet allows innovators to have a go more easily and cheaply.”

BankservAfrica and Pasa last year released a joint research report, which provided insight into the current state of low-value, high-volume payments infrastructures across the globe. The research showed that a modernised payments system is critical.

“We are delighted at the response and engagement from the banks on the research and we are looking forward to the industry design phase starting in 2018,” Hamilton said. Bankserv hopes to be able to start considering technology choices for the new system by later this year.

The research report found that current payments systems are no longer as effective in a digital world. The research identified that South Africa is not alone in its desire to modernise payments, but that this is a global challenge which is being addressed by global players at varying levels.

“Modernisation can only be achieved through industry collaboration, which includes both private and public partnerships, as the success of implementing industry change should be as open, inclusive and transparent as is practical,” said Martin Grunewald, acting chief payments officer at BankservAfrica.

“The approaching digital economy brings the need to future-proof the design of South Africa’s existing national payments system infrastructure to accommodate the demand for efficiency and cost reduction to facilitate economic growth and competitiveness, while serving unbanked communities for financial inclusion.”

By Duncan Mcleod for TechCentral 

Suburbs with highest broadband speeds in SA

The Q4 2017 MyBroadband Speed Test app results show that Midstream Estate, Cornwall Hill Country Estate, and Country Lane Estate have the highest broadband speeds in South Africa.

To calculate the average speed in an area, results from speed tests performed by MyBroadband Speed Test app users were compiled.

MyBroadband’s Speed Test app for Android and iOS gives smartphone users the ability to test their Wi-Fi and mobile data connections.

In Q4 2017, over 200,000 Wi-Fi tests were performed by iOS and Android users.

The average download speed over Wi-Fi in South Africa was 11.59Mbps, while the average upload speed was 6.99Mbps.

These speeds are closely linked to the average broadband speeds in the country, as most Wi-Fi connections are linked to a fixed broadband connection.

Highest speeds
The results show that Midstream Estate was the suburb with the highest average download speed, at 42.57Mbps.

Cornwall Hill Country Estate and Country Lane Estate were second on 36.42Mbps, and Durbanville and Bellville third on 34.70Mbps.

The table below shows the suburb results. Only suburbs where a large number of tests from multiple devices were performed are listed.

Broadband Speeds in South Africa

Source: MyBroadband

November retail sales data surprised market expectations with an 8.2% year-on-year increase, the strongest performance in five years.

According to FNB senior economic analyst Jason Muscat, Black Friday, during the last week of November, helped lift sales in the sector.

Sales were higher than the 3.5% year-on-year sales recorded for October, according to data released by Stats SA on Wednesday.

“This was the strongest year-on-year performance in five years,” said Muscat. Month-on-Month sales for November were 4% higher, compared to a -0.1% decline for October and -0.4% recorded for September.

“The figures should be viewed as transient in light of significant buying during the ‘Black Friday’ month, and in the context of relatively lacklustre trading updates from many domestic retailers.”

Muscat said that the figure shows that consumers and retailers are still constrained. Retailers are forced to introduce deep discounts to drive revenue, while sacrificing profit, and consumers are making use of the opportunity to save.

“Nevertheless, the sector is on track to make a significant, positive contribution to both fourth quarter GDP and full year 2017 GDP.”

Muscat said that a moderation in the retail sales data for December is expected. There will also likely be a contraction in the sales data for the first quarter of 2018, coming off the exceptionally high data reported for the fourth quarter.

Investec economist Kamilla Kaplan is also of the view that there may be weaker sales growth reported for December, especially as the Bureau of Economic Research Retail Survey for the fourth quarter showed that the retail sector’s performance during the festive period was not as expected.

The highest growth was reported for other retailers at 20.8%. This includes book stores, jewellers, sporting goods and second-hand goods. Retailers of household furniture, appliances and equipment reported growth of 14.1% and retailers of textiles, clothing, footwear and leather goods reported growth of 12.4%.

The main contributors to the 8.2% increase were general dealers, having contributed 2.6 percentage points, textiles, clothing, footwear and leather goods with 2.3 percentage points, and other retailers which contributed 2.2 percentage points.

Stefan Sulzer, partner and managing director at Boston Consulting Group, said at the end of 2017, the overall economy was in a fragile state as a result of factors such as appalling business confidence, political uncertainty ahead of the election of the new ANC president, as well as high unemployment.

Consequently, it was expected that all of these factors would culminate in constrained consumer consumption.

“However, the overall development of the retail sector was strong, following suit with the previous months. Amongst other factors, this was fuelled by significant promotional activity by retailers in SA,” said Sulzer.

“Based on the most recent retail figures, we can conclude that Black Friday 2018 was bigger than the previous year. It will now be interesting to see what momentum the retail sector carried into the arguably more important December 2017 trading period.”

Source: Supermarket & Retailer

The road death toll during the 2017/2018 festive season has decreased to 1527, an 11% drop from the previous year.

Minister of Transport Joe Maswanganyi released statistics on Monday morning in Pretoria.

Maswanganyi also revealed stats on speeding drivers, corruption at licensing centres and the department’s plans to curb road deaths in 2018.

More registered vehicles

The department stated that SA entered the 2017/18 festive season with a higher number of registered vehicles compared to the same period in 2016. Maswanganyi said: “In December 2017 there were 11 028 193 registered vehicles in the country compared to 10 801 558 in December 2016. The number of driving licences issued had increased from 12 163 813 to 12 658 135.”

How has the department made SA’s roads safer?

Maswanganyi said: “When releasing the festive season report in 2017, we made commitments to deal decisively with fraud and corruption, engage the Department of Justice on the reclassification process of some road offences and also begin the process of the introduction of a 24/7 shift within the traffic law enforcement fraternity.

“As a result of these efforts and a well-executed festive season plan, we recorded noticeable declines in the number of fatalities in seven (7) provinces with the exception of the Western Cape and the North West provinces which recorded 7% and 11% increases respectively.

“Limpopo was a star performer as it managed to achieve the highest reduction in the number of fatalities followed by the Free State and KwaZulu Natal.”

Appalling road deaths among pedestrians

The highest number of fatalities was among pedestrians which increased from 34% to 37% and fatalities among drivers also increased from 23% to 27%. However, there was a decline in passenger fatalities from 41% to 35%.

While there was an increase in fatalities among drivers between the ages of 25 and 34, there was a decline in the number of fatalities among drivers between the ages of 35 and 49.

A significant decline was noted among pedestrians aged 25 to 34. There was “a disturbing increase” among those aged 35 to 44, said the Minister.

Traffic violations

The number of traffic violation notices decreased to 304 603 compared to 453 263. The department said: “There was a decline in the number of people who were fined for failing to wear safety belts and the number of discontinued vehicles.

“While drunken driving was a major focus area during the period under review, there was, however, a decline in the number of motorists arrested for drunken driving from 5943 in the 2016/17 period to 3301 in the 2017/18 period.”

What about speeding drivers?

Maswanganyi said: “Speed continued to be a major headache with 922 drivers arrested compared to 785 in the 2016/17 period. Five motorists were arrested in Limpopo, Gauteng, KwaZulu Natal and Western Cape for driving at speeds exceeding 220km/h in120km zones.

“An impressive 43% decline in fatalities was recorded on the Top 13 identified hazardous routes with244 deaths recorded on these routes compared to 429 in the previous period.

“However, there was a disturbing increase in the number of fatalities within the municipal boundaries of eThekwini, Johannesburg, Nkangala, Cape Town, Ekurhuleni, Ehlanzeni, Capricorn, City of Tshwane, Thabo Mofutsanyane and Bojanala.”

Fraud and corruption in SA

Maswanganyi said: “In dealing with fraud and corruption, we closed down a state-owned driving licence centre in Nkowankowa, Limpopo where learners’ and driving licences were issued without due regard to the driver fitness.

“In this regard, five examiners and three civilians who facilitated corrupt deals were arrested. Twelve traffic officers were also arrested for taking bribes from motorists.

“In Gauteng, we raided three (3) privately owned vehicles testing centres and arrested ten (10) vehicle examiners on allegations fraudulently issuing roadworthy certificates to vehicles that they never examined.

“These efforts inspired more dedicated traffic officers to also act against offers of bribes by corrupt motorists. Their inspiration resulted in the arrests of three (3) motorists who offered bribes to traffic officers. Two of these arrests took place in Limpopo and one in the Eastern Cape. The total number of people arrested in this festive season on fraud and corruption charges stands at thirty-two (32).”

Audit process of vehicle testing centres

The department says it will combat fraud at vehicle testing centres with the roll-out of an auditing process.

Maswanganyi said: “To further decisively out root fraud and corruption, we have initiated a process to audit all vehicle testing centres and driver and learner testing centres to establish adherence to regulations and standards. This process will run parallel to the investigation that is being undertaken by the Special Investigation Unit (SIU) as proclaimed by the State President in November 2017.”

“We also engaged Magistrates as part of the process to ensure that there are tough consequences for those who break the rules of the road, particularly drunk drivers, speedsters and reckless and negligent drivers. This is part of finalising the reclassification process of these offences into Schedule 5 offences, which are more severe.”

“The process of introducing the 24/7 shift has also begun in earnest. The shift is now implemented in full in the Western Cape whilst other provinces are at different stages of implementation.”

Plan to curb road deaths in 2018

Maswanganyi said: “In line with the proclamation signed by the President, the RTMC will work with the Special Investigating Unit to intensify investigations into allegations of unlawful and improper conduct relating to the registration and licencing of motor vehicles together with irregularities in the issuing of driving licences.

“We will do these things to ensure that we continue to reduce road crashes and fatalities further than what has been achieved in the recent festive season.”

Source: Wheels24

What did South Africans google in 2017?

Google has revealed the results of its 2017 Year in Search, offering an overview of the year’s major moments and top trends.

“This year’s trending searches show growing interest in local celebrities and events, with seven of the top 10 trending search terms being local,” said Google.

The results are detailed below.

Top trending South African searches

Dumi Masilela
Cyclone Dineo
Joe Mafela
Karabo Mokoena
Joost van der Westhuizen
Black Friday
Mayweather vs McGregor fight
Fast & Furious 8
Hurricane Irma

Trending personalities

Dumi Masilela
Joe Mafela
Joost van der Westhuizen
Zodwa Wabantu
Mandla Hlatshwayo
Lundi Tyamara
Simphiwe Ngema
Grace Mugabe
Hugh Hefner
Chester Bennington

Top ‘near me’ searches

Pharmacy near me
Dentist near me
KFC near me
Jobs hiring near me
Hardware store near me
Gynaecologist near me
Printing shops near me
Steers near me
Sushi near me
Doctors near me

Top TV show searches

13 reasons why
Games of Thrones
Big Brother Naija
American Gods
Idols SA
Sex in the City
Big Little Lies

Top searched recipes

Oxtail recipes
Sweet potato recipes
Beef stew recipes
Vegan recipes
Creamed spinach recipes
Halal recipes
Prawn recipes
Spaghetti recipes
Cauliflower recipes
Bread recipes

How the world sees South Africa

South Africa dodged a bullet when credit ratings agency Moody’s Investor Services put the country on review for a downgrade rather than reducing its status, as rival agency S&P and Fitch did, notes London-headquartered global newspaper, the Financial Times.

This four-month reprieve creates an opportunity for the South African government to send a signal to the international community that it will undertake a political and economic overhaul. International investors are asking why Moody’s rates South Africa more favourably than Argentina and Ukraine, which both have reform programmes. Yields on South African bonds reflect the assumption that a Moody’s downgrade is on the way.

The South African government and investors may think none of this matters, with bonds and the currency recovering after former finance minister Pravin Gordhan was fired. But look beyond the short term opportunities to buy, as respected economist Dr Azar Jammine of Econometrix has, and it is evident that the S&P and Fitch teams have given up on South Africa for now.

The outcome of the credit ratings reviews by S&P and Moody’s revealed a mixed result. S&P did indeed downgrade the credit rating on South Africa’s local currency debt to junk status, but Moody’s has deferred its decision to do so until after next year’s Budget. As a result, the worst-case scenario of South Africa falling out of key world government bond indices in such a way as to precipitate a huge outflow of capital from sales of domestic bonds, has been averted for the present. The earliest date at which such an outcome can now materialise is March next year.

Essentially, S&P has given up on South Africa being able to restore its fiscal strength and promote higher economic growth over the next few years, whereas Moody’s seems to have given the government an urgent opportunity to undertake the structural reforms needed to promote higher economic growth and alleviate the fiscal deterioration. The latter rating agency also seems to give greater credence to the importance of having deep financial markets, a stable and sound banking system, a solid spread of maturities for government debt, as well as deriving the benefits of having a freely floating exchange rate and democratically-oriented institutions. S&P in contrast has taken the view that irrespective of the ANC’s presidential electoral outcome, there are likely to be huge impediments to undertaking reforms that might improve the economic growth and fiscal outlooks.
The uncertainty surrounding the possibility of further credit ratings downgrades and South Africa falling out of world government bond indices, therefore remains in place. In such a situation, the Rand is likely to remain under pressure, but not to collapse. The one ray of hope that we see is that real economic growth might surprise on the upside and as a consequence could serve to prevent the worst-case scenario materialising in 2018.
Both views on credit ratings downgrades have been partially vindicated

Clients will be aware of the uncertainty with which we have been looking ahead for several months at the S&P and Moody’s credit ratings and reviews which were due to be released on November 24th. Over this period we were arguing that there was a very high probability of the credit rating on S&P and Moody’s local currency debt ratings being downgraded to junk. However, we were uncertain as to whether or not these ratings agencies would give the country the benefit of the doubt and wait to see what panned out in the ANC’s electoral conference in December and the subsequent policy adjustments that this might bring forth, before taking the final action in downgrading. We had argued that ratings agencies that had already placed the outlook on South Africa’s credit rating to negative, had 12 months in which to either go ahead with a downgrade or restore a stable outlook.

This meant that S&P had until April to make up its mind and Moody’s until June. In the event, S&P seems to have decided that there is no point in holding off a ratings downgrade to junk despite not yet knowing for certain what the outcome of the ANC’s electoral conference might bring, whilst Moody’s has decided instead to place the country’s rating on review. It has been fairly transparent in suggesting that it wishes to see what the electoral outcome might be and subsequently to wait to see what measures are announced in the February 2018 Budget before deciding whether to join S&P in downgrading South Africa’s local currency debt.

As we have frequently argued, a junk status rating for local currency debt by both the S&P and Moody’s would precipitate South African government bonds having to fall out of key world government bond indices. Such an event would lead to tracker funds which base their asset allocation on the breakdown of the various world government bond indices being driven to sell out of South African government bonds.

The resultant outflow of funds could amount to over R100bn, or even R150bn, leading to a rapid depreciation of the Rand’s exchange rate, with inflationary consequences and potential upward pressure on interest rates. This could damage economic growth still further, thus exacerbating the ability to raise sufficient government revenue to reduce the budget deficit and constrain the increase in the public debt.

S&P has given up hope of an early restoration of fiscal strength, Moody’s hasn’t

On Thursday last week Fitch credit ratings agency had left its credit ratings at one notch below investment grade (ie the best junk rate rating) in respect of both foreign currency debt and local currency debt. Encouragingly, however, it maintained the stable outlook assigned to South Africa’s credit ratings. In the case of S&P, it maintained the one notch differential between the rating of foreign and local currency debt even while reducing the rating on local currency debt to junk status.

This meant revising down its rating on South Africa’s foreign currency debt to two notches below investment grade, thus allocating the worst rating of all to this form of South Africa’s credit rating. On the other hand, so long as Moody’s persists with keeping South Africa on review rather than going ahead with a further downgrade, its rating on both local and foreign currency debt remains at the lowest rung of investment grade just above junk status. The difference between S&P and Moody’s in deciding whether or not to go ahead with downgrading South Africa’s debt to junk status lies in the fact that S&P appears to have given up even bothering to wait until the outcome of the ANC’s electoral conference before going ahead with its decision.

Essentially, S&P has decided that no matter what the outcome of the presidential election, South Africa is going to struggle to restore the strength of its fiscal position. In the case of all three ratings agencies, three main problems manifest in South Africa’s fiscal situation. Firstly, because of the low rate of economic growth and the downward revisions of growth forecasts over the past year, including by all three ratings agencies, the projected growth in government revenue is just too low to accommodate a reduction in the budget deficit in the face of difficulty in reducing government expenditure due to social pressures. Secondly, there is deep concern about the possible liability for government emanating from poor corporate governance and low or negative returns at state-owned enterprises (SOEs). This might exert further upward pressure on South Africa’s debt metrics should guarantees granted to the SOEs by government be called up.

Thirdly, worries continue that economic growth remains unacceptably low and that under such circumstances fiscal consolidation requires dramatic action to curtail expenditure, a required development which is unlikely to be forthcoming. The difference between S&P and Moody’s is that the former believes that no matter what the electoral outcome in December, whoever succeeds president Zuma as leader of the ANC will be unable to effect structural changes to ameliorate the country’s fiscal situation for a long while.

In contrast, Moody’s suggests that if it sees sufficient action to address structural weaknesses in the economy being taken by a new leadership in the aftermath of such an electoral outcome, it might yet hold off a downgrade to junk. In this regard, the forthcoming February 2018 Budget is obviously perceived by the agency as being the litmus test of required action to improve the fiscal situation. Clearly, the agency is still providing a ray of hope that an appropriate new leader of the ANC will bring about changes in the structure of the economy and manifest the intention to effect such changes in next year’s Budget in such a way as to give a renewed sense of hope that some action is being taken to prevent the public debt from getting out of hand.

Several negative structural features identified by S&P

Similar structural weaknesses in the South African economy are identified by all three credit ratings agencies. The aspect of unacceptably low economic growth goes without saying. S&P picks up on this by arguing correctly that capital investment remains unacceptably low and this is likely to constrain an improvement in economic growth in the longer term. It argues further that even though there have been encouraging signs of an improvement in the country’s trade balance, this has less to do with increased competitiveness from an export point of view and more to do with an unwillingness to increase capital investment, leading to a lower rate of growth in imports of capital equipment.

In other words, the improvement in the balance of trade and a reduction in the current account deficit are a function of economic weakness rather than strength. Part of the reason also why S&P seems to have given up on South Africa’s being able to address its structural weaknesses, lies with the labour market situation. Clearly S&P does not foresee any major amelioration in the standoff between the stance of employers and that of workers in the economy, no matter who leads the country. One reads into the agency’s stance a perception of the ideological divide between market-friendly and interventionist policies persisting.

Finally, S&P highlights the difference between South Africa and other emerging markets in tackling inequality. It argues that whereas other similar countries have made some inroads into reducing inequality, this is not the case with South Africa where such inequality has been exacerbated. We have frequently suggested that the causes of this lie in the very poor outcomes of the domestic educational system which leaves such a high proportion of the workforce unable to command a job, or alternatively not to be able to perform a job that adds sufficient value to accommodate remuneration of a level that will allow for reduced inequality. Furthermore, the concentrated structure of the private sector, with so much power residing in the hands of big rather than small business, also constrains the ability of the economy to reduce inequality.

Fortunately, some positive structural attributes re-emphasised by Moody’s

On the other hand, as was the case with Fitch’s credit rating review on Thursday, Moody’s did at least re-emphasise some of the positive features of the South African economy which still justify an investment grade rating.

These include the depth of its financial markets, the strength of its banks, the well-diversified maturity spread of its government debt, as well as the fact that the country operates on a flexible exchange rate regime which can insulate the economy from the worst ravages of exchange rate depreciation.

Moody’s also draws attention to the ongoing strength of many of the country’s institutions such as the judiciary and other vibrant democratic non-governmental organisations. The presence of such institutions provides it with confidence that the country can indeed tackle its fiscal challenges under the right circumstances. In the case of S&P, even though the organisation acknowledges the persistence of institutional strength, it nonetheless points out various areas of deterioration in this attribute.

The most important of these is the manner in which S&P expresses its alarm at the deterioration of the ability of the South African Revenue Services to collect taxes. Nonetheless, one derives some encouragement from the fact that the credit ratings agencies are still prepared to acknowledge some residual strengths in the economy. The most important of these would appear to be the ongoing independence of the Reserve Bank in the implementation of monetary policy, something which is not prevalent in many other emerging markets.

Uncertainty to continue prevailing, but with a strong message to forthcoming president of the ANC

The mixed nature of the credit ratings reviews by S&P and Moody’s unfortunately leaves continued uncertainty in the outlook for the country’s credit ratings and through this for financial markets in the next few months.

This is not disastrous and has at least allayed the worst-case scenario for the present, but can unfortunately not eliminate the possibility of such a scenario still materialising through the course of 2018. As a result, it is unlikely that the Rand can make significant gains in coming months. Instead, the currency might experience a continuation of bouts of significant weakness as some bondholders increasingly anticipate the country’s bonds having to fallout of world government bond indices.

Essentially, it suggests that the Rand will trade somewhere between R14 and R15 over the next few months, without eliminating the possibility of a much more substantial depreciation in the event that Moody’s does go ahead with downgrading the country’s local currency credit rating in March. Under such circumstances, there is little chance of domestic interest rate relief, but at least it does mean that the Reserve Bank will be reticent to increase interest rates.

What if economic growth does turn out to be stronger than previously anticipated?

There is a final point worth making on a more positive note. In recent weeks and months we have increasingly pointed to the possibility that real economic activity might after all turn out to have been stronger than anticipated.

We have argued that, contrary to the fact that economic growth forecasts have progressively been downgraded in recent years in each important budgetary presentation, it is not inconceivable that for a change we might find a situation in which the government, as well as analysts, begin to revise economic growth forecasts upwards. In their latest credit ratings reviews, all three ratings agencies downgraded their forecasts for South Africa’s economic growth by a good few decimal points for both 2017 and 2018.

We are now increasingly posing the question as to whether or not the 0.6% to 0.7% prevailing forecast for economic growth in 2017 and the 1.0% to 1.2% growth forecasts for 2018, might not turn out to be unduly pessimistic. In the event of this suspicion turning out to have been correct, it is just conceivable that the ratings agencies will recognise that the deterioration in the country’s fiscal situation might not turn out to be as aggressive as currently anticipated. In the case of Moody’s, at the margin, this might assist in the agency staving off downgrading the country’s credit rating to junk in March.

Under such circumstances, the worst-case scenario of South Africa falling out of key world government bond indices might yet be avoided. However, common wisdom suggests that the probability of such a positive outcome is less than 50%.

By Jackie Cameron, Dr Azar Jammine for Biz News 

Do-or-die priorities for SME survival

With 70-80% of SMEs failing within the first five years, and only 1% growing to employ more than 10 people, South African SMEs are struggling to realise their own growth potential and become active drivers of job creation. And with slow economic growth, on-going political uncertainty, and a national budget shortfall of R209-billion, SMEs seeking much-needed funding face a tough time ahead.

Following the crisis at African Bank a few years ago due to non-payment of unsecured loans by its customer base, traditional lenders largely lost their appetite for exposure to unsecured lending. This has left the majority of SMEs without access to funding via traditional banking channels. And where such loans are on offer, the application process is loaded with administrative and bureaucratic red tape that can take more than three months to work through, with no guarantee that the loan will be awarded.

In fact, in our latest survey of South African SMEs, 76% of respondents said they suffered through tedious paperwork and waited for months only to have their applications for funding denied. This is creating an environment of immense risk to SMEs.

The #1 priority for SME success
I believe access to adequate and flexible funding is the number one priority for South African SMEs over the next six months. The results from our survey showed that access to credit is the single biggest business challenge South African SMEs face today, with a further 33% listing cash flow management as a primary challenge.
A deeper look into why SMEs are seeking funding brings further cause for alarm: nearly a quarter of respondents listed “unforeseen circumstances” as their reason for seeking funding. In a time of constrained economic growth and difficult trading conditions, profits are likely minimal, meaning any event causing need for quick access to funding could spell disaster – or even ruin – should the SME not get the funding they need.
To fill the gap left by the big banks’ unwillingness to expose themselves to unsecured business lending, a vibrant ecosystem of innovative fintech companies have emerged. In the Disrupt Africa Finnovating for Africa 2017 report, South Africa was found to be home to 94 fintech start-ups, 22 of which offer some form of lending support. Such tech-first lenders are able to adapt quicker to changing market needs than their big traditional peers, and are playing an increasingly important role in supporting a rather fragile SME sector. And since they are built on technology and unencumbered by legacy systems, this new breed of fintech company can process and award loan applications in a matter of days compared to the 2-3 months traditional lenders such as banks generally demand.

The role of the SME owner in ensuring survival, success
But it’s not all about the banks and lenders: SME owners also need to play a more active role in ensuring their businesses are resilient enough to withstand times of hardship. Many SMEs lack basic accounting and administrative processes, leaving SME owners blind to potential weak spots or areas of opportunity.
Successful entrepreneurs are able to take calculated risks to accelerate their growth and expand into new markets, but without a solid understanding of the current state of their business, any risk they take is potentially ruinous. A lack of adequate financial reporting also limits SMEs’ ability to apply for and secure funding,

Technology as enabler
Technology can provide support to SMEs wishing to strengthen their administrative and operational processes. Even competent use of something as basic as Excel could give SME owners much-needed insight into the state of their businesses. Online accounting software such as Xero gives SMEs enormous authority over their finances and helps business owners plan and strategise more effectively. In a do-or-die environment such as the one we currently find ourselves in, every slight advantage could mean the difference between success and failure, survival or bankruptcy.
SMEs should prioritise marketing their business effectively. In fact, 47% of respondents in our survey listed marketing as the biggest potential factor in growing sales and revenue, and yet only a third had a marketing budget. Technology can provide cost effective marketing opportunities to SMEs and assist with reaching and influencing key stakeholders. Google AdWords, social media profiles, LinkedIn groups, and even a basic website not only increases the SME’s exposure in the market, but also gives potential lenders comfort that the business is well-supported and in a healthy state.

Entrepreneurs should also seek membership of relevant associations and industry bodies to get access not only to other businesses and business owners, but to draw on the knowledge and research capacity most such associations and industry bodies produce. The better a SME owner’s knowledge of the market in which he or she operates, the better they are able to adapt to changes and ensure the long-term sustainability of their businesses.

Partner, and partner well
Partners can play a vital role in supporting and driving business growth in the SME sector. Whether it is an equity partner providing much needed financing during the early stages of a business, or a business partner that provides goods or services that are complementary to an SME’s core business, effective partnership is essential for long-term business sustainability.
SME owners should however take care to ensure the partner shares similar values and ethics, and strive toward building long-term trust with a view to ensuring mutual benefit between the two businesses. Our philosophy is to seek SMEs that share our passion for sustainable business growth, and to build a long-term partnership that enables us to provide on-going lending support through various growth stages.
In our current economic climate, a go-it-alone, shoot-from-the-hip approach is a recipe for disaster. SME owners should prioritise gaining access to funding, improving their financial and administrative processes, expand their marketing efforts, and seek appropriate partnerships to ensure they continue to survive and thrive.

By Trevor Gosling, CEO of Lulalend

Black Friday has evolved into so much more than just finding the best discount. It has also become a clever way to earn points and rewards from your bank and loyalty programmes, with several leading lenders taking part in the retail phenomenon this year.

Dr Christoph Nieuwoudt, CEO of FNB Consumer says that e-commerce is likely to get a boost around Black Friday and Cyber Monday as some consumers will be looking to avoid the long queues associated with such shopping sprees.

“Any savvy shopper can cash-in on the specials without spending time in queues and traffic, trying to move from one destination to another. While e-Commerce is still in its infancy in South Africa compared to global standards, both the consumer and retail sectors are warming up to the use of technology to deliver and acquire goods and service.

“From placing a food delivery order, buying clothing, booking a taxi ride or renewing your license disc, it’s all being integrated into the virtual world and available at your fingertips.”

Dr Nieuwoudt said, broadly, the use of online shopping is a trend that has been gradually gaining momentum locally, pointing to the growing number of customers who are using the bank’s digital platforms to purchase goods and services.

“We expect the use of technology, especially for day to day services, to increase significantly over the next few years, partly because consumers are starting to realise that it’s both inevitable and a much better way to do a lot of things,” he said.

And while digital transactions may be on the rise, Geoff Lee, Absa head of card, noted that approximately 65% of all transactions in South Africa are still done in cash, which he warned was dangerous and inconvenient.

“The perks of plastic are fast eclipsing those of hard cash, particularly when you take into account the loyalty programme benefits that also come with card purchasing,” added Lee. “So the reasons for adopting this behaviour are simple and logical: it’s faster when you Tap-and-Pay, it’s safer than carrying cash, you earn rewards when you swipe, and you can easily track your spend.”

BusinessTech looks at what some of the major banking groups will be offering on Black Friday 2017.


To help customers save and start using cards more, the bank said it has partnered with a number of leading retailers to bring customers registered for Absa Rewards ‘even better’ specials this Black Friday, 24 November 2017.

Absa’s one-day-only Black Friday specials include:

Every customer that opens a Dynamic Fixed Deposit account and keeps it running for 12 months will earn up to 8.20% when the account is opened at any Absa Branch, or through your Private Banker.

You won’t pay commission when you buy your Forex from any Absa branch on Black Friday.
Absa Rewards members will enjoy as much as 7% cash back when you swipe your Absa card at any Tiger Wheel & Tyre for transactions greater than R4 286.

Instead of earning up to 15%, you will earn as much as 30% in Cash Rewards when paying with your Absa card at hi-stores, which are owned by The Foschini Group and offer a comprehensive portfolio of 18 retail brands that cover clothing, footwear, jewellery, sportswear, mobile phones and technology products, and home stores.

Relax at select Mangwanani African Spas on Black Friday and pay R599 for a half day spa which includes three treatments and a meal. Bookings must be made and paid for by card on 24 November 2017; the deal will be applicable for Tuesday and Friday bookings until 24 December 2017.

Get 1% cash back when you purchase a 2017 Toyota RAV 4 and get 7 years / 150 000 km Service Plan and an eight-year Unlimited mileage warranty. Or get R15 000 deposit assistance from McCarthy.co.za when you buy a 2017 Polo Vivo Trendline 1.4 and still earn 1% cash back.
Get as much as 50% off on back-to-school bundles, IT hardware, stationery and more when you use your Absa card for online purchases made on Bidvest Walton’s website, www.waltons.co.za. You will also receive your normal benefit of 3.5% in Cash Rewards.

Standard Bank

With Standard Bank, customers will be able to collect double UCount Rewards Points when swiping their Standard Bank Credit Card at the group’s Rewards Retailers this Black Friday.

The bank will also run special offers through its business banking unit, which will be announced on Black Friday.


FNB, through its rewards programme, eBucks, will offer Black Friday deals with an 80% discount on its products for members.

The company told MyBroadband that Black Friday fits in well with a bigger campaign it is currently part of – Tap Into Summer with FNB & eBucks.

The Tap Into Summer campaign started on 1 November and offers FNB customers and eBucks members good deals from the eBucks Shop.

“In addition, during this campaign eBucks Shop offers great deals daily which are valid for one day,” it said.

On Black Friday, a discount of 80% will apply on its products – including electronics, appliances, gaming, and consumables.

The eBucks Shop will also offer free delivery on selected products during this period.

Source: Business Tech

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