Petrol price hike set to hit South Africa

Source: Supermarket & Retailer

Following a tumultuous first trading week of 2022, global equity and bond markets were calmer last week. There was more action in commodities, with the one-month Brent crude oil future ending the week more than 5% higher, the group said in a research note on Monday (17 January).

“A combination of oil demand holding up despite the Omicron-driven surge in Covidinfections (especially in the US) and supply disruptions boosted the oil price,” it said.

“After some reprieve on the domestic fuel price front in January, the renewed rise in the oil price is likely to result in another hefty fuel price increase in February.”

Rate hike

There will also be a significant focus on inflation data this week ahead of the South African Reserve Bank’s interest rate decision on 27 January, the BER said.

“We expect the headline CPI to increase by 5.8% y-o-y (consensus is at 5.7%), up from 5.5% in November. This is courtesy of a projected 0.4% m-o-m rise, driven by the more than 70c/litre rise in both the petrol and diesel price at the start of that month, as well as the quarterly survey of rental costs.

“As a result of the seasonal rise in meat prices, the food category should also add to the overall monthly CPI increase.”

South Africa is likely to see at least three interest rate hikes in 2022 as the South African Reserve Bank (SARB) has indicated that it will begin unwinding its accommodative monetary policy stance, say economists at Momentum Investments.

In a research note on 4 January, the group said that the SARB’s quarterly projection model calculates a steep interest rate hiking cycle – resulting in interest rates of 5.75% by the end of 2023 and 6.75% by the end of 2024.

“In our view, well-behaved inflation, anchored inflation expectations, and a pedestrian growth outlook advocate a more moderate interest rate hiking cycle,” Momentum said.

“We expect the SARB to hike interest rates thrice by a cumulative 75 basis points in 2022 and a further three times by another 75 basis points in 2023.”

Electricity hike

The National Energy Regulator of South Africa (Nersa) is also expected to table its 2022/23 price determination in parliament at the end of February or the beginning of March.

Eskom chief financial officer Calib Cassim has confirmed that the state-owned power utility has applied for an electricity price increase of 20.5% for its 2023 financial year, set to take effect from 1 April 2022.

On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was subsequently implemented on 1 April 2021. A hike of 17.80% for municipalities was implemented on 1 July 2021.

Cape Town mayor Geordin Hill-Lewis has warned that similar increases would simply be unaffordable for most South Africans this year.

“Like the majority of South Africans, many Capetonians are struggling to make ends meet. The pandemic and national lockdown led to the closure of hundreds of businesses in our City and the loss of thousands of jobs. Our residents are faltering under the burden of the rising costs of energy, fuel, food, and basic consumer goods.

“The consumer price index (CPI) is currently stated as 5,5%; this would have been a more reasonable tariff increase for Eskom. The price of electricity has risen by 307% over the past 13 years, far exceeding inflation. Despite paying more for power, South Africans have experienced an unreliable electricity supply — 2020 and 2021 were two of the worst load shedding years on record.”

 

The businesses hardest hit by liquidations

Statistics South Africa has published its latest report on liquidations and insolvencies, showing how South African businesses fared in 2021.

Liquidation refers to the winding-up of the affairs of a company or close corporation when liabilities exceed assets and it can be resolved by voluntary action or by an order of the court.

According to Business Tech, the data shows the following:

  • From January to December 2021, there were a total of 1 932 reported liquidations in South Africa
  • Total liquidations decreased by 29.2% in the fourth quarter of 2021 compared with the fourth quarter of 2020
  • There were a total of 2 035 liquidations in 2020
  • There was a year-on-year decrease of 20.3% in December 2021
  • Financing, insurance, real estate, business services suffered 625 liquidations
  • Trade, catering and accommodation suffered 414 liquidations
  • Community services suffered 157 liquidations
  • Gauteng and KwaZulu-Natal lost a combined 323 000 jobs during Q3 2021
  • A total loss of 660 000 employment opportunities occurred in the third quarter of 2021
  • South Africa lost 2.24 million jobs during 2020 Q2
  • South Africa lost a net 742 000 jobs during the first three quarters of 2021

 

By Carol Paton for Fin24

Eskom defended its proposed 20.5% tariff increase for 2022/23 on Monday, arguing that most of the cost increase was driven by two factors outside of its control: the requirement to increase purchases of energy from independent power producers and the increase in carbon taxes.

Together, these two factors accounted for 13.8% of the proposed price increase, while increases in operating expenditure accounted for only 7.5% and cost escalations in primary energy for 6.5%. SA introduced a carbon tax in 2019, which is to be increased gradually. IPP costs for Eskom are set to rise as more producers come on stream.

Due to large increases in these and other areas, in its application Eskom requested a negative return on assets of 6.38%, to prevent the overall increase rising too high.

CFO Calib Cassim presented Eskom’s revenue application to the National Energy Regulator of SA (Nersa) on which the utility’s annual tariff increase is based. Nersa decides the tariff on a legislated methodology, which determines how much Eskom can justifiably earn from consumers, assuming Eskom operates efficiently.

The regulator has seldom granted Eskom its full request, as its scrutiny of Eskom costs has almost always found that a large a portion of costs be ruled out due to inefficiency. Eskom, has in turn, regularly succeeded in clawing back some of the costs retrospectively through a mechanism called the regulatory clearing account. Retrospectively allowed costs are then added to future tariffs, making for a complicated and constantly changing price determination mechanism.

While the determination of Eskom tariffs is extraordinarily complicated at the best of times, this year’s application – which will put in place new tariffs on 1 April for non-municipal customers and 1 July for municipal customers – is even more complicated. This is because the application was drawn up a year ago but had not been deliberated on by Nersa.

In September, well after the application had been completed, Nersa informed Eskom that it intended to change the methodology for determining allowable revenue, requiring a new application. In December, Eskom approached a court and secured an order that Nersa consider the 2022/23 application immediately to put new tariffs in place by 1 April.

On Monday, Cassim presented Eskom’s tariff application which was compiled a year ago. However, much has changed in both Eskom and wider energy supply industry over the past year and Cassim will be given another opportunity on Tuesday to revisit the assumptions in the application.

While the balance between the various factors contributing to the price application will change, the global amount of 20.5% is expected to remain the same.

‘Not affordable’

But while Eskom tried to justify its application, stakeholders and interested parties at the Nersa public hearings appealed to Nersa to ignore its methodology and refuse to award the increase on the basis that consumers could not afford them.

Among them was mayor of the City of Cape Town Geordin Hill-Lewis who said the proposal was “unaffordable, unfair and unjust”.

“The point of departure should not be what Eskom’s maximum return on assets should be, but what people can afford. It would in line with inflation at around 5.5%,” he said.

The Nersa methodology should be set aside on the grounds that it is not rational to award high tariff increases in the prevailing economic environment, he said.

Other groups, including community, faith-based organisations and business organisations made similar appeals arguing that it was immoral to force consumers to pay for Eskom’s and government’s mistakes and excesses of the past.

Members of the Nersa electricity panel told presenters that while they sympathised with their plight, their hands were tied by legislation methodology.

 

Matric results must be published, says court

By Zelda Venter for IOL

The Minister of Basic Education Angie Motshekga must release the 2021 matric results in the public domain.

The Gauteng High Court on Tuesday morning ordered that the results must be released by the minister to be published on media public platforms, as was the practice in previous years.

The results will also, as per usual, be made available to the various schools so that learners could also get their results at their schools.

The urgent application launch by Anlé Spies, who wrote matric last year at a school in Waverley, Pretoria, AfriForum and Maroela Media, only lasted about 10 minutes in court, as the minister over the weekend indicated that the department will abide by the court’s ruling.

Hardly any argument was presented, but Advocate Quintus Pelser SC, acting for AfriForum commented that the application had “panned out very satisfactory as the minister did come to the party.”

Judge Anthony Millar also commented that all the parties have acted in good faith. He said this matter is in the public interest and he wished that more parties would act (in other cases) in such a non-litigious manner.

The order granted by the court means that all the matriculants who are not near their schools would be able to either access their results online, or via newspapers.

The Department of Basic Education’s (DBE) earlier announced that it would no longer make the results available in the public domain, as it reasoned this would encroach on the Protection of Personal Information (POPI) Act.

But it was pointed out in court papers by the applicants that only the unique exam number of the students who wrote matric appears alongside their results.

Only the students themselves know their exam number.

 

No Mango buyers have adequate proof of funding

By Carin Smith for News24

None of the potential investors who expressed an interest in Mango has provided an “acceptable form of proof of funding” and they have been given more time to comply.

This is according to a letter from the airline’s business rescue practitioner, Sipho Sono, to those who had indicated an interest in the low-cost subsidiary of state-owned South African Airways (SAA).

If no suitable buyer is found, the airline could end up being liquidated.

Sono’s letter is dated 14 January 2022 and has been seen by Fin24. The potential investors’ names have not been revealed.

Mango’s business rescue plan stipulates that any buyer will have to show it has access to at least R200 million to enable Mango to resume operations and provide the necessary working capital. Proof of funding is a peremptory requirement in order to proceed to the next phase of the bidding process.

The original proposed rescue plan for Mango wanted to use some of the funding from SAA to have Mango restart operations. SAA and its shareholder, the Department of Public Enterprises (DPE), however, stipulated that the funding could not be used for Mango to resume operations.

Sono therefore began searching for an investor to get the airline off the ground again.

An original letter of invitation to potential bidders was sent out at the beginning of December 2021. The aim is for the chosen bidder to acquire the entire issued share capital and certain claims against Mango as part of the restructuring of the airline.

“None of the submissions provided the full and complete suite of documentation or information required by the rescue practitioner in order to evaluate compliance with the qualifying criteria,” states Sono’s latest letter. “In particular and amongst other things, none of the potential bidders [has] provided an acceptable form of proof of funding.”

The potential investors now have until 4 February to supplement their original expressions of interest with the necessary documents, failing which the rescue practitioner reserves his rights to disregard any noncompliant bids.

Sono has indicated that that, in his view, there is a reasonable prospect of rescuing the company and delivering a better outcome for creditors and SAA than if the airline were placed in liquidation.

In his latest status report, Sono said he had received several expressions of interest from potential investors.

Due to the negative impact of the Covid-19 pandemic and related travel bans on the aviation industry, Mango went into voluntary business rescue at the end of July 2021 and has not flown since. It owes R2.85 billion to creditors, and also has about R183 million of un-flown ticket liabilities. The airline cannot resume operations until and unless it secures a new investor to relaunch the airline.

Offers will, among other things, be evaluated on criteria including price offered, certainty and speed of closing the proposed transaction, the extent of the changes proposed to the agreement, how the price will be paid, confirmation of funding capacity and source of funding, operational capacity, B-BBEE status, support from Mango management, impact on staff, and existing potential conflicts of interest between the offeror and Mango.

The selection of the final, chosen investor is at the discretion of the business rescue practitioner.

Sono was approached for comment regarding the lack of proof of funding submitted by bidders, but declined due to “confidentiality issues”.

 

By Bridget Mpande for Mpumalanga News

In a management plan towards schools opening and being ready for the 2022 academic year, the Mpumalanga Department of Education has stated that it is mandatory that all learners must have the stationery in their possession by January 12.

According to the Mpumalanga MEC for education, Bonakele Majuba, learning/teaching support material was distributed to all schools in November and December.

“The schools are expected to hand over the material to all learners equally before January 12 to enable teaching and learning to start in earnest from the first period of the school year. This includes stationery, workbooks, stationery for new schools/ grades, special schools and e-learning. The department has spent R266m to achieve this.”

Some parents have raised their concerns and they are facing challenges, saying they do not understand how some schools can refuse to comply when they are public schools.

According to them, they had sent their children to these schools to collect their stationery, however, they returned empty-handed. According to a person who wished to remain anonymous, her Grade 11 sibling was told that she would not receive her stationery until her fees were paid.

“This is not easy for us as a family, because our mother is unemployed and we do not have money. We were told that she needs to pay R450, but my mother managed to raise R300. We had hoped that the school would allow her to get school material. Our worry is that it is a public school and from what we know, they are not supposed to demand school fees before handing out stationery.”

The department said it has developed a deployment list for public representatives to visit various schools today to monitor the opening, to welcome all role players and to support the teaching and learning process.

The department remains adamant on its position that it is essential that all learners should have stationery in their possession by January 12. It had not given its response to the parents’ concerns by the time of going to press.

Huge licence backlog as printer remains broken

By Rapula Moatshe for IOL

The Department of Transport has come under fire from the Organisation Undoing Tax Abuse (Outa) for keeping the public in the dark about the time frame for repairing a printing machine for driving licence cards since it broke down in November last year.

The machine breakdown had reportedly caused a massive backlog of 383 000 licence cards as of December 1.

On Tuesday 11 January Transport Minister, Fikile Mbalula, announced that the driver’s licence print machine is currently in Germany for repairs. “The license machine is in Germany, it has broken,” Mbalula said. Minister Mbalula also mentioned that he will announce measures for temporary licences.

Outa chief executive, Wayne Duvenage expressed shock at the manner in which the department failed to avoid the backlog of licence renewals by securing a back-up machine.

“To think that we have one machine that makes licence cards in this country and then that machine breaks down and three months later it is still not fixed. This is serious,” he said.

He also questioned the previous explanation by the department that the machine broke down as a result of flooding.

“Ain’t this machine protected? We don’t even know whether that is the real reason. It was an old machine and probably not maintained, but whatever it is, it is not an excuse,” he said.

In 2019 the department apparently ignored a warning by DA MP and member of the transport portfolio committee Chris Hunsinger about the lack of a back-up plan during an oversight visit to the Driving Licence Card Account facility.

At the time, Hunsinger cited that R640 million of the 2018/2019 transport budget was not spent and could have been used to replace the machine.

Duvenage also slammed Mbalula for the delays in switching the country to a new driving licence card.

“So we hear a lot of talk and no action. And we are not surprised that we find ourselves in this sort of situation where there is now a backlog of driving licences,” he said.

Department spokesperson Lawrence Venkile didn’t respond to questions on the repair delay and the backlog.

Duvenage said: “How long does it take to fix a machine? Unless it is so outdated and so old that its parts don’t exist anymore.”

Mbalula had previously said the machine was older than 20 years. The department had also undertaken to issue a contract for procuring a new machine in the 2020/2021 financial year.

Duvenage attributed the situation to bad administration and no accountability in the department.

“They don’t keep society informed and they don’t update us about what is happening,” he said.

Outa has also reiterated its call for the grace period to be extended beyond March 31 this year in order to deal with the backlog.

The organisation has written a letter to Mbalula to consider the possibility of extending the grace period.

Duvenage also said the country should consider extending the process of renewing licences to every 10 years, instead of five years.

“There are many examples of licences being renewed after every 10 years, even in South Africa it was discussed some years back. I think in 2013 it was agreed to by (then) minister Dipuo Peters, and then there was an about-turn and the whole plan was scrapped,” Duvenage said.

 

Source: EWN

The days of frantically looking up matric marks in newspapers each year is over and many have welcomed the decision.

The Department of Basic Education made the announcement on Tuesday.

Instead, pupils will have to go to their high schools to collect their results to find out whether they have passed or not.

The department cited the introduction of the Protection of Personal Information Act (POPIA), which came into effect in July last year as the reason behind the decision.

It added that this was done to respect the right to privacy to protect against unlawful collection, retention, dissemination and use of personal information.

Most members of the public have welcomed the decision, especially as a way to protect the mental health of many children who feel overwhelmed by the publishing of results.

Electricity price hike looms

Source: Supermarket & Retailer

The National Energy Regulator of South Africa (Nersa) has invited stakeholders to comment until Friday (14 January) on Eskom’s proposed tariff increases for the country.

Eskom chief financial officer Calib Cassim has confirmed that the state-owned power utility has applied for an electricity price increase of 20.5% for its 2023 financial year, set to take effect from 1 April 2022.

However, analysts have raised concerns as to what increases will actually be pushed through, with Nersa’s tables showing hikes of as much as 40% depending on how outstanding debts are clawed back.

On 5 March 2021, Nersa approved a hike of 15.06% for Eskom’s direct customers, which was subsequently implemented on 1 April 2021. A hike of 17.80% for municipalities was implemented on 1 July 2021.

Presenting Eskom’s interim results on 15 December, chief executive Andre de Ruyter warned that the seasonality of Eskom’s performance means that there is considerable cost pressure in the second half of the financial year, driven largely by summer maintenance requirements and costs associated with ensuring the security of supply.

He said that while the phased easing of Covid-19 lockdown restrictions has led to an improvement in financial performance during the first six months of the year, ongoing risks for Eskom’s sales and revenue include supply constraints, load shedding and load curtailment, as well as a constrained economy.

The chief executive said that to achieve independent financial sustainability, remain a going concern and meet debt service requirements on a standalone basis, the price of electricity in South Africa must migrate towards a cost-reflective tariff.

“We have to emphasise that the power system is unreliable and unpredictable due to insufficient maintenance of generation plant over many years. Maintenance outages take around 24 months to plan, and take from three to six months to execute.

“The response to the pandemic prevented us from doing as much maintenance as we would have liked, while prevailing liquidity challenges continue to constrain funds available for maintenance,” he said.

“To date, we have released funding of R8.3 billion for outages during the 2022 financial year, and R8.2 billion for those in 2023, against a requirement of R10.7 billion next year.”

By Xolile Mtembu for IOL

Several South African companies have announced that they will implement a vaccine mandate. Under this policy, workers who do not want to vaccinate will not have access to their employer’s premises. While some of the companies said they might retrench employees who refuse the jab, others said they would not.

Discovery was one of the first companies to reveal its plans to introduce mandatory vaccinations. In September, chief executive Adrian Gore said their mandatory vaccination policy would include all the group’s properties across the country. “Based on the science and public health imperative, we see it as our responsibility to materially increase the country’s overall vaccination rate.

“We hold ourselves to the highest standard in this regard. This is crucial both ethically, given the scale of immune-compromised people in our country, and practically, given the degree of vaccine hesitancy currently being observed,” said Gore.

In the same month, Sanlam, Africa’s largest non-bank financial services group, announced that it would join Discovery in imposing mandatory Covid-19 vaccinations for all staff from 2022, although it said it won’t fire workers who refused to be inoculated.

Private education group Curro also said at the time that it would require all staff be vaccinated by year-end. Its chief executive, Andries Greyling, said mandatory vaccination was aimed at creating a safe teaching and learning space. The company may consider retrenching those who fail to oblige.

MTN Group announced that its vaccination policy will go into effect from January. Group president Ralph Mutipa cited science as the reason for the mobile telecommunications company’s decision to require its workers to get the jab.

“The science is clear. Vaccination against Covid-19 reduces rates of serious infection, hospitalisations and death. As an employer, we have a responsibility to ensure that our workplaces are guided by the highest standards of health and safety, and that has informed our decision to make Covid-19 vaccination mandatory for our staff,” said Mutipa.

Old Mutual’s vaccination mandate starts from January 2022. The company will require all their workers to provide proof of vaccination. The insurance company’s chief executive, Iain Williamson, said: “Across the world, vaccinations are proving to be the key to unlocking economic activity, returning life to a more normal rhythm, preventing severe illness and death, decreasing transmission rates as well as reducing the emergence of new variants of the disease.”

Standard Bank said its vaccine mandate would begin on April 4, 2022. Every employee of the bank would be expected to be inoculated but those who had a reason for not being vaccinated could lodge an objection on constitutional or medical grounds.

Retailer Game also backs the government’s call to get more South Africans vaccinated through its Vaccination Appreciation Wednesday venture. The company offers a 10% discount to customers who produce proof of vaccination or a valid ID. This discount is available to those who purchase goods up to R10 000.

Big Concerts International announced that South Africans wanting to attend its events in future will be required to show proof of vaccination against Covid- 19. This follows the news that Canadian superstar Justin Bieber will perform in the country in September and October next year, as part of plans to restart arena events in the country soon.

Big Concerts says all music fans eligible to be vaccinated should have received the jab as a prerequisite to enter its concert venues. It says the only ones exempted from this are those whose age group had not yet been called upon to get vaccinated by the time of the event.

The National Economic Development and Labour Council (Nedlac) yesterday recommended to government that vaccine mandates should be implemented at workplaces and that some venues be only accessible to vaccinated persons.

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