Tag: 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.

Source: Fin24

A landmark court ruling by the Constitutional Court that decriminalised the private and personal use of cannabis could leave employers in a pickle when it comes to health and safety in the workplace, experts have said.
This is because it may be difficult to determine for certain whether an employee is under the influence of cannabis or not when they come to work, which could have implications – particularly for employees performing potentially hazardous work.

The Occupational Health and Safety Act states that no person who is or appears to be intoxicated may enter or remain at a workplace. They may also not have in their possession, partake of, or offer any other person intoxicating liquor or drugs, it adds.

The exception is medicine, where the employer may only allow them to perform their duties if the side effects are not a threat to anybody’s health or safety.

Why it’s hard to test for cannabis
Gerhard Roets, Construction Health & Safety Manager at the Master Builders Association North, says the cannabis ruling left the construction industry scratching heads over how to ensure employee safety.
“In practical terms, the issue for employers is how to determine whether workers are under the influence of cannabis or not when they come to work.”

This is because the metabolism of cannabis is complex. Delta 9-tetrahydrocannabinol (THC) is the psychoactive substance in cannabis that provides the “high”.

Hemp oils derived from cannabis seeds are used medicinally – the health benefits are associated with the non-psychoactive cannabidol (CBD). But hemp products may contain some THC, which could also show up in drug tests.
Furthermore, a standard urine test just screens for the metabolites of cannabis, which can show up long after the psychoactive effects have worn off.

All this means is that a positive test may not reveal anything that incriminates the employee.

“One needs to understand that the Court’s ruling only decriminalises the possession, consumption and private cultivation of cannabis for private use in a private space. This means that employers remain responsible for providing and maintaining a work environment that is safe for all,” says Roets.

The Master Builders Association believes the main issue is that there is not an effective, standardised testing method available that can be used across industries.

“Until the testing issue is resolved, and the state of being ‘under the influence of cannabis’ is medically defined, employers will have to tread carefully,” says Roets.

But do you need a test?
Labour lawyer Michael Bagraim, also a DA MP and the party’s spokesperson on labour, says regardless of grey areas around testing, employers will have to rely on good old-fashioned observation for now – and employees should be aware that they don’t need a positive test in order to risk dismissal.

“Just like alcohol, cannabis intoxication is not acceptable at the workplace,” he told Fin24.

“On many occasions, and there have been many cases to this effect, the dismissal takes place after physical interpretation of intoxication. For instance, with alcohol you would notice slurred speech, bloodshot eyes, erratic behaviour and even breath smelling of alcohol. On the strength of the witness who notices this, a disciplinary inquiry is held and the individual can be dismissed.”

He says it is “slightly more difficult” with cannabis, but “you can palpably see if someone is intoxicated or not”.

“An eye witness is often stronger than the outcome of a positive result in a test,” he explains. “On many occasions an employee refuses a test and you cannot force someone. Also, cannabis can be detected for over a month after its use. A person might not be intoxicated but will still fail the test. A much stronger argument is an individual noticed to be intoxicated, with erratic behaviour.”

Professor Halton Cheadle, partner at specialist labour law firm BCHC, told media earlier this month that companies may have to reconsider their policies that deal with substance abuse. It’s important to review policies to ensure employers are equipped to take care of their employees’ safety, Cheadle said.

Source: Fin24

South African businesses of all sizes, including educational institutions, have been particularly hard hit by an onslaught of cyber-attacks, although this is not always public knowledge, according to Kerry Curtin, cyber risk expert at Aon South Africa.

Cyber risk was ranked as the #1 risk facing educational institutions and is likely to remain so for the foreseeable future, according to Aon’s 2018 global risk management survey.

Curtin says the potential theft or leakage of data, particularly confidential information in an educational setting, should be top of the list in risk planning.

“The need to strengthen institutional resiliency against potential damage, compromising hacks and downtime is crucial,” she adds.

This is because schools, like any other business, are increasingly dependent on technology. The knock-on effect of a cyber incident at an educational facility has the potential to be financially and reputationally catastrophic.

For example, in 2016 it was reported that the University of Limpopo’s website was taken down, leaking exam papers and the details of over 18 000 students, in addition to perpetrators publicly posting what was believed to be the login details for the University’s intranet.

The sheer number of cyber-attacks on educational institutions suggests that the sector is not as prepared as it should be in its efforts to safeguard networks, according to Curtin.

Aon provides the following tips for the education sector:

Safeguard institution-owned devices

All computers, laptops and smart devices owned by the educational institution should at the very least have a current anti-virus programme installed, in addition to adware and malware protection.

One of the biggest threats to any business is the people operating these devices and their naivety regarding cyber risks, so education is key.

BYOD policy

The practice of students and staff members bringing devices to school or university that interact with the institution’s network is very likely. The first line of defence is keeping guest devices separate from the network, allowing the institution to keep data secure on an administrative network, as well as monitor traffic more closely.

When it comes to sending sensitive information, it is crucial to implement a secure file exchange solution that can protect against cyber threats such as phishing scams.

Multi-factor authentication

While passwords alone do not provide adequate levels of security and hackers are able to circumvent physical biometrics such as fingerprint identification as a single layer of authentication, Multi-Factor Authentication (MFA) is fast becoming the next line of defence.

Social media policy

Not only does the policy need to stipulate what is deemed as acceptable behaviour from employees and students, but it also needs to explain what the benefits are of becoming an ambassador for the brand and the legal ramifications inherent to social media platforms.

What it costs to send a WhatsApp message in SA

By Jamie McKane for MyBroadband

WhatsApp has become the most popular messaging app for smartphones in South Africa, thanks to its cheap messaging costs compared to standard SMS rates offered by mobile operators.

The app offers South Africans a way to call, text, and share media with each other at rates far lower than anything offered by mobile networks, even when using a mobile data bundle.

Our previous tests have shown that using WhatsApp to call over a mobile data connection is far cheaper than making a cellular call to another user.

However, other forms of communication offered by the app use different amounts of mobile data.

We therefore tested how much data was used by different types of WhatsApp messaging and calling options.

Data usage
The WhatsApp data usage was measured using WhatsApp’s built-in network usage tools, which provide a refined data usage measurement for smaller options such as text messages.

Data on video and voice calling over WhatsApp was sourced from MyBroadband’s previous tests.

We used two Android smartphones for this test, sending one message at a time between the devices and monitoring the data usage reflected within the application.

The data usage for text messages, standard-resolution photos, one-minute voice calls, 30-second voice notes, 10-second videos, and one-minute voice calls was collected and compared to provide an overview of the data usage requirements for WhatsApp on a modern smartphone.

From the data we collected, it is apparent that certain functions such as voice notes and standard text messages use very little data and can be quite optimal for communicating over mobile data.

To determine how much each message would cost, we compared the amount of data used for each message type with the price of a 1GB data bundle on each mobile network in South Africa.

Standard 1GB mobile data bundle pricing was used to provide parity with Rain, which charges a flat R50-per-GB rate on its data-only network.

We used these prices to calculate a price-per-MB, which was then used to calculate how much each WhatsApp message type would cost on the mobile networks.

The results are posted below:

Source: Fin24

The purchasing power of South African households’ net wealth increased by R60.2bn over the period from the end of the first quarter of 2018 to the end of the second quarter despite the economy slumping into recession.

This is one of the findings of the Momentum-Unisa Household New Wealth Index.

The main reason for this improvement is given as an increase of R46.5bn in the real value of households’ assets. At the same time, the real value of households’ liabilities – mostly outstanding debt – decreased by R13.7bn.

The real value of household net wealth is obtained by subtracting the real value of their liabilities – mostly their outstanding credit and other debts – from the real value of their assets – mostly of the real values of their retirement funds, financial investments and residential properties.

The real value of household assets was boosted by an increase in the real value of households’ investments – specifically in retirement funds – which benefitted from an increase in share prices of the resources sector in particular.

These share prices received support from the rand exchange rate, which depreciated by almost 14% against the dollar over the period, offsetting declining commodity prices.

The real value of households’ residential assets did not receive much support over the quarter. House prices contracted in real terms, while real investments in the residential sector also declined.

According to FNB’s House Price Index, real house prices was 0.5% lower compared to a year ago, and virtually unchanged compared to the first quarter of 2018.

Furthermore, real fixed capital formation in the residential sector contracted by 6.5% in the second quarter of 2018 compared to the first quarter.

“The weak state of the economy and in consumer finances, as well as uncertainty about land reform, are factors that combined to the weak performance of real household residential assets,” says the report.

Households’ outstanding liabilities continued to increase at a slower pace than household consumption expenditure inflation.

This situation – whereby outstanding household debt increases at a slower pace than inflation – is indicative of consumer finances being under pressure, according to the report.

The report predicts that preliminary estimates point to a decline in the real value of household assets during the third quarter of 2018 as share prices tumbled over this quarter, while real house price growth remained negative.

SA is most crypto-friendly country in Africa

By David Kariuki for Cryptomorrow 

French banking group BNB Paribas and IT company Capgemini has released a report stating that South Africa is Africa’s most crypto-friendly country having allowed cryptocurrency payments, trades and investments to flourish almost without restrictions.

The country is also leading in Africa with regard to crypto regulation, adoption and development, which is not a surprise because the country leads in many areas and is Africa’s most sophisticated economy. For instance, it hosts a number of bitcoin ATMs and digital currency exchanges – including Luno. Luno has more than two million customers around the world and allows people to buy crypto using Rand fiat.

In South Africa, the scenario is developing favorably for cryptocurrency industry because of the open-mindedness of the South African Reserve Bank (SARB). The bank does not recognise crypto as legal tender but also has not banned or prevented trades related to cryptocurrrencies. The bank announced in April that it would create guidelines for cryptocurrency markets in the country. It has also tested an inter-bank settlement system called Project Kohka, which hopes to use the Ethereum blockchain in order to speed up payments.

A Bitcoin ATM in Nelson Mandela Square, Sandton. Credit: LinkedIn

Also, in South Africa, a number of companies including banks are starting to set up operations relating to cryptocurrencies. Baclays Bank has also said that it will host a number of events to help audience understand benefits and risks of cryptocurrencies.

By Sam Mkokeli, Mike Cohen, Paul Vecchiatto and Amogelang Mbatha for Fin24/Bloomberg 

South African President Cyril Ramaphosa appointed former central bank Governor Tito Mboweni as his finance minister on Tuesday, replacing Nhlanhla Nene, who lied about his meetings with the Guptas.

Mboweni, the nation’s fifth finance chief in less than three years, will have to oversee an economy that’s fallen into recession and help Ramaphosa rebuild confidence battered by almost nine years of mismanagement under former President Jacob Zuma. He must also reassure investors and credit-rating companies of credible plans to stabilise debt and revive growth in the mid-term budget on October 24.

“In the wake of Mr. Nene’s resignation, I have decided to appoint Mr. Tito Mboweni as minister of finance with immediate effect,” Ramaphosa said. “Mr. Mboweni takes on this responsibility at a very critical time for our economy.”

Mboweni, who trained as an economist, served as head of the South African Reserve Bank for a decade until 2009 and for four years as labor minister in former President Nelson Mandela’s cabinet. His major achievement at the central bank was building the nation’s foreign-exchange reserves to almost $40 billion from less than $10 billion.

The rand gained 0.6% to R14.76/$ by 16:51 in Johannesburg, reversing an earlier decline of as much as 1.4%. Yields on benchmark 2026 government bonds fell six basis points to 9.22%.

Source: IOL/Bloomberg

The business cycle in South Africa, where the economy entered its first recession in almost a decade in the second quarter, is in its longest downward phase since records started in 1945.

It entered a 58th straight month of declines in September, central bank data showed Tuesday.

The regulator monitors about 200 indicators representing economic processes such as production, sales, employment and prices to determine the direction of the trend.

By Carin Smith for Fin24 

Research by Momentum and Unisa shows that 73.5% of SA households were “financially unwell” in 2017.

The research found that, while some households did very well during 2017, others just muddled through, while a large portion struggled immensely.

According to the study, one of the more concerning findings was that the proportion of financially well households was virtually unchanged between 2016 and 2017.

Even more concerning was that the proportion of financially well households was virtually unchanged since 2011.

However, there was a bright spot: The research found that while a large proportion of households was still financially unwell, it also found that these households were not as financially unwell as they had been previously.

Decline in net wealth

The study looked at various factors influencing the financial well-being of South Africans.

One was a decline in the net wealth to disposable income ratio of households, caused by a decrease in assets to disposable income ratio.

The decline was mainly due to negative growth in house prices and real investments in residential property increasing by less than 1% compared to 2016.

In addition, the real value of financial assets was lower during the first half of 2017 compared to the same time a year earlier.

Skills gap

The research further showed many households just don’t have the means and skills needed to take control of their finances.

While more people completed secondary and tertiary qualifications, social capital levels remained low due to feelings of disempowerment, low levels of subjective well-being, financial vulnerability and low consumer confidence in the economy.

There are indications that, although the SA educational system delivers a growing number of matriculants and graduates, the students predominantly acquire academic knowledge and not high-level cognitive, social and communication skills.

It furthermore looks like an improvement in education did not translate into a proportional increase in income, the study suggested.

This can, to a large extent, be explained by low labour demand growth due to a skills mismatch in the SA economy.

Control

Factors over which households have little control include macroeconomic factors such as low economic growth, high levels of unemployment, political and policy instability, and low levels of business confidence.

The factors over which households do have control include the educational levels of household members, their financial literacy and capability levels, their work statuses, the degree to which they conduct debt and financial risk management and financial planning, the amount of money they earn, and the level to which they save and accumulate their net wealth.

The results of the study have shown that, although households do have control of these factors, they generally don’t budget, conduct very little debt- and financial planning, and generally have very low financial literacy and capability levels.

Intervention

The research findings suggest that a comprehensive intervention is needed for financially unwell households to become financially well.

Such a comprehensive intervention should be more multi-faceted than merely providing social grants, social housing, free services and financial products, according to the report.

Putting households on a path of financial wellness growth will require high-quality education, an enhancement of their financial literacy and financial capabilities, and improving their understanding of financial planning and other financial services.

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