Tag: economy

Source: EWN

Eskom announced on Tuesday afternoon (28 June) that load shedding would be escalated to Stage 6 from 4 pm until 10 pm on both Tuesday and Wednesday.

The beleagured power utility says it’s under increased pressure because of an illegal strike at some of its plants.

This had already resulted in an escalation to Stage 4 power cuts from last week.

Public Enterprises Minister Pravin Gordhan has now said an agreement’s been reached with unions to bring the strike at Eskom to an end.
Stage 6 load shedding equates to at least six hours without power per day, possibly in two-hour cycles.

The first and only time South Africa last endured this level of power cuts was in December 2019.

Chris Yelland, MD of EE Business Intelligence, emphasises that the current load shedding pre-dates the industrial action at Eskom.

“Before the industrial action we were already having Stage 2 to Stage 4 load shedding. The industrial action, according to Eskom, has put a further 4,000MW at risk which translates into four stages of load shedding. If we were having Stage 2-4 load shedding before the industrial action, this extra four stages would take it to Stage 6 to Stage 8 and we are in the midst of Stage 6 right now – I’m having four hours at a stretch… This 24-hour period is going to be eight hours [in total] of power off for me.”

Yelland notes that Eskom itself made it clear during today’s media briefing that there is a risk of Stage 8.

The return to wage negotiations announced earlier is certainly an encouraging sign, he says.

While the effect on the economy is dire, much depends on how long Stage 6 load shedding lasts says Mhlanga, and even the lower stages.

“Just to give you a sense of what this might mean, if the Stage 6 lasts for a cumulative 24 hours… the different power shortages that would accumulate… it means the economy is likely to lose about R12 billion,” says Isaah Mhlanga, chief economist at Alexander Forbes.

“I’m not saying this going to last for a full month… but just to quantify the magnitude, if were to have Stage 6 for a cumulative month that’s R367 billion or 15 600 jobs at risk.”

Looking at the situation from a foreign investor perspective it is difficult to see such an investor looking to establish a large manufacturing entity here, coming to South Africa relative to other countries he says.

“A lot of jobs are now part-time [latest stats]… which means corporates are taking a dim view of the future economic prospects of the country… Those workers are quite vulnerable… All it means for consumers is, whatever cash they have, hold onto it,” says Mhlanga.

Source: News24

South Africa’s economy was stronger than expected in the first quarter of 2022, with real gross domestic product (GDP) growing by 1.9% from the previous quarter.

The size of the economy is now at pre-pandemic levels, with real GDP slightly higher than what it was before the Covid-19 pandemic, Statistics SA said.

Last year, the South African economy grew by 4.9% as it started to recover from a 6.4% slump in 2020 due to pandemic-related lockdowns.

The median expectation among economists polled in a Bloomberg survey was for growth of 1.2% in the first quarter. The economy grew by a revised 1.4% in the fourth quarter of 2021.

The manufacturing sector saw strong growth of almost 5% in the first quarter, driven by a rise in the production of petroleum and chemicals, food and beverages, and metals and machinery.

But construction and mining activity declined compared to the previous quarter.

Household consumption increased by 1.4% in the first quarter, with a sharp 6.5% increase in spending on restaurants and hotels.

Second-quarter GDP is expected to be hit by the impact of flooding in KwaZulu-Natal and increased load shedding, as well as the knock-on effects of the Ukraine invasion, particularly higher food and fuel prices. In addition, higher interest rates are also expected to weigh on growth.

The SA Reserve Bank expects growth of 1.7% this year.

It seems counterintuitive that a mass resignation trend would coincide with a global pandemic but the so-called “Great Resignation” is set to become one of the key economic features, or effects, of Covid-19. Referring to the phenomenon whereby people are voluntarily quitting their jobs en masse, the Great Resignation raises many pertinent questions about the value and nature of work, and deserves to be interrogated as both an economic and social occurrence.

The trend began in the United States in 2021 but quickly spread to many other parts of the world. In South Africa too, there have now been numerous reports of a similar trend emerging as employees re-evaluate their personal and professional priorities in the wake of the pandemic.

Important to note is that this trend appears to be limited to skilled employees – a contingent who typically have the skills, experience and resources that allow them more career options and flexibility around, for example, working hours. Equally significant to note is that more and more experts and commentators are calling it the “great reset” and suggesting the trend be viewed as an opportunity for workers to better align their skills and expertise with their personal goals and values, and for companies to take a more robust and streamlined approach to the skills they hire for.

A Harvard Business Review article on the topic recommends that companies “get on the same page with employees by reconceptualising what it means to be part of their organisation”. Experts from three industries share their views around an effective reset.

Reset with a hybrid workplace model

David Seinker, founder and CEO of serviced office space offering, The Business Exchange, has been championing hybrid work models since long before the pandemic accelerated the adoption of alternative work models. He believes the Great Resignation too is an opportunity for us to reevaluate the nature and nuances of skilled work and to make the necessary adjustments to benefit both employees and employers.

“For some two years now, employees have proven that work can happen independently of a specific location and set working hours, which means that the office is now viewed as a destination rather than the default. Companies can’t afford to mandate employees to simply go back to the office in the traditional 9 to 5 sense without considering how experiences of the physical working environment contribute to employees’ job satisfaction,” he shares.

Seinker explains that hybrid work models offer a best-of-both approach that the post-pandemic employee is likely to insist on and businesses concerned about retaining talent need to at the very least consider more flexible working arrangements.

Reset with a robust working environment, dynamic opportunities

“Talent retention, particularly in the creative industries, has been a challenge for a while now, which is why we’ve been committed to exploring ways to ensure we can offer the best people the best working environment, whether that be on a permanent or freelance basis, where the emphasis is on harnessing their unique skills and expertise in a way that satisfies their professional goals as much as it does our needs,” says Reagen Kok, CEO of Hoorah Digital.

Interestingly, research by the Boston Consulting Group Johannesburg has found that money alone isn’t the only thing that attracts tech and digital talent in Africa, but that the “right workplace culture and values, and the learning and skills training they offer” still plays an important role in employee retention.

Kok shares that, in his experience, highly skilled and talented people are seeking more dynamic opportunities that align with their personal values. “The pandemic forced many of us to deeply reevaluate how we spend our time and we’re taking the steps to ensure there is more alignment between what we want from life and what we’re doing at work. Our role as employers is to step up and meet employees somewhere along this journey, or risk losing them to the companies who are.”

Reset to become more people-focussed, lead with empathy

A reset necessitates the prioritisation of the human before the employee, acknowledging that workers are people before they are talent, skills or resources. And humans thrive in trusting, empathetic environments.

This is something that is high on the agenda for public relations and integrated marketing agency Irvine Partners, who remain committed to building trust and leading with empathy as some of the ways it seeks to mitigate the potential impact of the Great Resignation. Listening to employees’ expectations, whether through formal or informal channels, is key. “Employees want — and deserve — to feel heard, acknowledged and recognised. Operating from the point of view that your employees are your most valuable resource is imperative, and needs to underpin the company culture at large. As an example, this year we hired a senior team member who left a major agency because they refused to even consider remote working. He was spending hours a day in traffic and his employer didn’t see anything wrong with that. Even if they’d met him halfway with a hybrid, he would’ve stayed. They lost a talented and hard-working team member as a result. While all companies have different realities, there is always a middle ground,” says Hayley van der Woude, MD. She adds that it is the leaders in the organisation who need to drive an empathetic focus on people.

Writing in Business Day, Johann van Niekerk, MD of Outsized for Africa, says that those companies who see the great resignation as the great reset and adjust their strategies accordingly, “could increase the range of available skills and therefore the company’s competitiveness and output”.

By Siphelele Dludla for IOL

The South African economy shrunk by 1.5 percent in the three months to September following four quarters of consecutive growth, eroding some economic gains made since the Covid-19 pandemic started.

This was the first quarter of contraction since the second quarter of 2020.

Statistics South Africa (StatsSA) today said this was due to the pressures of tighter Covid-19 lockdown restrictions during the third wave and a spate of civil unrest in July.

The country was on Alert Level 4 lockdown from 28 June to 25 July, impacting growth in the tourist accommodation sector, as well as constricting restaurant and catering trade.

This latest gross domestic product (GDP) reading means that the economy in the third quarter of 2021 was on par with the first quarter of 2016.

“The economy is 3.1 percent smaller than it was before the Covid-19 pandemic,” StatsSA said.

StatsSA said 6 of the 10 industries recorded a decline in production in the third quarter, with agriculture, trade and manufacturing the hardest hit.

The agriculture industry recorded its biggest drop in production since 2016, contracting by 13.6 percent.

Together with a decline in the production of animal products, the industry in KwaZulu-Natal was dealt a major blow by the civil disorder in July.

Maize, citrus and sugarcane farms recorded losses from fires set during the upheaval.

The trade industry shrank by 5.5 percent, with all trade sectors reporting losses.

Wholesale, retail and motor trade were negatively affected by the widespread looting and destruction that gripped KwaZulu-Natal as well as Gauteng.

StatsSA said a cyberattack that disrupted operations at South African ports also dealt a further blow to motor trade.

The manufacturing industry declined by 4.2 percent, dragged lower in the main by the civil disorder and global shortages of raw materials.

However, four industries managed to keep their heads above water, with the finance industry increasing economic activity by 1.2 percent.

Personal services saw an uptick in economic activity on the back of increased spending on private healthcare and the roll-out of COVID-19 vaccines for those aged between 18 and 35 years. General government expanded by 0,4%, attributed to a rise in employment in local government and extra-budgetary accounts and funds.

What South Africans owe on their credit cards

Source: Supermarket & Retailer

The findings of TransUnion’s Q2 2021 South Africa Industry Insights Report covers a period where unemployment was still rising, but prior to July’s civil unrest and peak in the third wave of Covid-19 cases.

The report shows that a number of the trends, seen immediately after the outbreak of Covid-19 more than a year ago, have continued to advance with some notable exceptions, especially when looking at delinquencies.

Understanding the delinquency picture

Delinquency rates during the pandemic have been influenced by a number of important factors, the credit specialist said. Deferrals, payment holidays and other accommodations by lenders have helped borrowers in need. A decline in new borrowing in the past year since the onset of the pandemic has also shifted the overall ratio of good versus bad debt within lenders’ portfolios.

While a general increase in overall debt has been apparent, the total number of new loans and accounts has decreased as a result of the decline in originations. This means that while the numerator in the delinquency equation (i.e., existing accounts with delinquencies) is rising, the denominator is not growing at the same pace, said TransUnion.

Add in other drivers for which accounts financially distressed consumers choose to repay – e.g., prioritising product utility such as credit card functionality for online payments or car loan payments to ensure you can avoid public transport- and it’s clear that there are often multiple drivers for changes in delinquency levels, the group said.

Typically, delinquencies have often followed wider macroeconomic trends such as GDP growth and changes in unemployment.

In the latest Q2 2021 figures, although there were improvements in most of the major consumer credit categories, unsecured personal loans recorded a significant increase in balance-level delinquencies – bank personal loans were up 260 bps YoY and non-bank personal loans 700 bps.

A higher delinquency rate for non-bank personal loan providers is to be expected as they have historically targeted higher-risk consumers who are more likely to default and will be less resilient to sustained financial hardships, such as those caused by the pandemic.

“Finding and funding resilient consumers becomes even more crucial during challenging economic periods when looking to maintain a healthy portfolio delinquency ratio.

“The key is to fuel new credit growth by finding good consumers, who are likely to perform within lenders’ target thresholds and in return can help maintain a healthy bad-to-good ratio for longer-term lending growth,” said Carmen Williams, director of research and consulting at TransUnion South Africa.

Credit demand in a post-pandemic world

Throughout the pandemic, TransUnion’s data has shown reduced appetite from both consumers (demand) and lenders (supply) for new account openings (as measured by originations), and this continued in Q2 2021.

“However, with the world economy slowly starting to reopen and vaccination programs gaining pace, the future shape of the consumer credit market will depend on a number of important variables,” it said.

Historically, macroeconomic conditions have been an important factor in the pace of credit growth. Equally, consumer sentiment also has a significant bearing. Although the latest IIR data is for Q2 2021, TransUnion also conducted its regular Consumer Pulse Study in August 2021, which was post the civil unrest and the initial peak of wave three Covid-19 infections seen in early July.

This study showed a number of important trends relevant to potential future demand and direction of the market in South Africa, the credit specialist said.

The number of South African consumers anticipating in August that they would apply for new credit or refinance existing credit within the next year was just under a third (31%). Personal loans (43%) and new credit card (35%) applications continued to be top of the list, said TransUnion.

“There continues to be significant turbulence in the South African consumer credit market, with a number of potential new trends emerging, especially in the delinquencies space. Wider economic and political news continues to impact consumer sentiment and outlook, and these will shape the recovery as it continues to emerge,” said Williams.

“Lenders need to constantly monitor for shifts in consumer behaviours and adapt to the changing demand and future preferences of consumers if they are to succeed. There is no doubt the road to recovery will be a bumpy one, but by being informed, lenders will have the best possible chance to compete and succeed.”

Credit card is the only credit product to show high levels of continued origination decline since the beginning of the pandemic (down 23% YoY in Q2 2020, 63.2% YoY in Q3 2020 and 48.6% YoY in Q4 2020 and 42.7% YoY in Q1 2021). This is largely due to lenders implementing tightened credit-granting policies in the midst of economic uncertainty, said the credit specialist.

Lenders remain focused on extending credit to existing customers rather than onboarding new borrowers. Average balances increased by 17.6% and total credit limits increased substantially by 15.2% while new loan amounts increased by only 2.2%.

Outstanding balances for credit cards (up 10.6% YoY) have been driven by consumers’ need to balance household budgets, maintain liquidity, and finance subsistence purchases, especially where incomes have been negatively impacted. However, increases weren’t evenly distributed, and a clear generational divide has emerged.

Younger consumers increased their outstanding credit card balances more than older generations. The Q2 2021 YoY change for Millennials (born 1980-1994) was 9%, compared to 6% for Gen X (1965-1979) and only 3% for Baby Boomers (born 1946-1964).

Younger generations tend to transact more online, and the utility a credit card provides is fundamental to this activity. Credit card account-level delinquencies were down 50 basis points (bps) from their peak in Q2 2020, and in Q2 2021 stood at 12.3%, and were at the same level as Q2 2019.

This improvement provides further evidence that credit cardholders are protective of and value the revolving functionality that this product holds, TransUnion said.

Financially strained South Africans cut spending

Source: Supermarket & Retailer

South Africans under financial pressure due to the Covid–19 pandemic are cutting spending on non-essentials such as restaurants and take-aways, and TV subscriptions.

These were the findings of Santam’s Insurance Barometer report for 2020/21.

Its findings were in line with the Old Mutual Savings & Investment Monitor (OMSIM) released in August which also found that women were cutting down on shopping at premium grocery stores like Woolworths.

The Santam Insurance Barometer showed that the challenging economy, political unrest, the pandemic impact on businesses, cybercrime and climate change are among the top risks highlighted by consumers, intermediaries and corporates polled.

Santam said that some of the most notable trends among South African consumers over the past 18 months were that 50% of consumers reduced the number of kilometres driven each week by an average of 44%, from 162km to 90km per week.

This was likely brought on by the increasing work-from-home trend brought on by the Covid–19 lockdown in South Africa.

On the technology front, 16% of consumers upgraded their computers and connectivity to enable them to work from home. Three in four people reported an increase in their use of technology.

In addition to measuring the concerns of individuals and organisations related to short-term insurance, the survey also asked respondents regarding their spending habits.

Consumer respondents said they targeted the following areas when looking to reduce expenditure, in the following proportions:

  • 59% — restaurant outings, food take-aways when looking to reduce expenditure
  • 45% — travel and petrol, clothing, footwear, and accessories
  • 33% — hobbies, sports and gym expenditure
  • 28% — groceries
  • 23% — TV subscriptions
  • 19% — domestic travel
  • 15% — cellphone contract
  • 10% — repayment of debt
  • 10% — school fees

BusinessTech noted that Santam’s findings were in line with those from the Old Mutual Savings & Investment Monitor (OMSIM) published in August.

In addition to showing that consumers cut back on spending, the OMSIM also showed that South Africans adapted their lifestyles.

The top ways households reduced expenditure was by switching to cheaper supermarket brands, and downgrading DStv and streaming services.

While OMSIM specifically mentions Woolworths in relation to people switching to cheaper supermarket brands, it is interesting to note that Woolworths reported an increase in sales at its grocery stores in its latest financial results.

South Africa’s economic growth at 1.2%

By Prinesha Naidoo for Bloomberg

South Africa’s recovery from a coronavirus-induced contraction quickened in the second quarter as restrictions to contain the pandemic were eased.

Gross domestic product expanded 1.2% in the three months through June from a revised 1% in the previous quarter, Statistics South Africa said Tuesday in the capital, Pretoria. The median estimate of four economists in a Bloomberg survey was for growth of 0.9%. The agency no longer reports an annualised growth rate and now uses 2015 as the base year for the data.

South Africa’s economy is slowing recovering from Covid-19 damage

The economy grew 19.3% from a year earlier — the first year-on-year increase in five quarters. That’s up from a low base in the second quarter of 2020, when a strict Covid-19 lockdown shuttered most activity, and compares with the 17.8% median estimate of 14 economists in a separate Bloomberg survey. Output remains below pre-pandemic levels.

While the quarterly outcome supports forecasts that predict Africa’s most industrialised economy will recover from its biggest contraction in at least 27 years, it’s likely to be revised after the statistics agency was forced to use an estimated value for missing mining data. That’s because the Department of Mineral Resources and Energy failed to provide it with timely information needed to calculate mining production and sales figures for June.

The economy is likely to contract in the third quarter after deadly riots, looting and arson erupted in July and weighed on activity in the eastern KwaZulu-Natal province and the commercial hub of Gauteng — the two biggest provinces by contribution to GDP. A cyber attack at the state-owned ports and rail operator also hobbled trade at key container terminals and led the company to declare its second force majeure in a month.

“The economy has overall shown itself better at recovering in the past year than initially expected — either at the start of Covid-19 or into this data — but there is still significant uncertainty over the impact the unrest will have in the short term and longer term into lower investments,” said Peter Attard Montalto, head of capital markets research at Intellidex.

Risks to outlook
A fourth wave of Covid-19 infections that’s due in early December and could prompt stricter lockdown measures amid vaccine hesitancy, electricity-supply constraints and the slow pace of structural reforms could further weigh on output for the second half of the year. It could also hinder job creation in a nation where more than a third of the workforce is unemployed.

The second quarter outcome translates to annualised growth of nearly 5%, said Joe de Beer, deputy director-general of economic data at Statistics South Africa. The National Development Plan, the government’s 2012 economic blueprint co-authored by President Cyril Ramaphosa, targeted an annual growth rate of more than 5% for sustainable job creation.

South Africa’s economy is stuck in its longest downward cycle since World War II and hasn’t grown by more than 3% annually since 2012. That’s as a policy paralysis and weak business sentiment weigh on fixed investment spending, with private-sector companies wary to commit large sums of money to domestic projects. Gross fixed capital formation rose 0.9% from the first quarter.

Growth in household spending, which now accounts for about 63% of GDP, increased 0.5% in the second quarter. Data released Monday showed consumer confidence remains depressed and that temporary welfare measures, retrenchment and life insurance payouts are among the factors propping up household finances.

Poor sentiment among consumers and data that shows the economy is not yet “firing more consistently across all sectors” means the central bank is unlikely to raise borrowings this year, Montalto said. The bank’s monetary policy committee is due to announce its next interest-rate decision Sept. 23.

 

SA economy grows by 1.1% in Q1

By Siphelele Dludla for IOL

The South African economy grew by 1.1% in the first quarter of 2021, translating into an annualised growth rate of 4.6 percent, Statistics South Africa (Stats SA) reported on Tuesday.

However, the first quarter growth was lower than the revised 1.4 percent, or an annualised 5.8 percent, rise in real gross domestic product recorded in the fourth quarter of 2020.

Stats SA said economic activity has increased in line with easing lockdown restrictions in the period, with real GDP rising to R761 billion in the first quarter of 2021.

Despite this being the third-consecutive quarter of positive growth, Stats SA said the economy was 2.7 percent smaller than it was in the first quarter of 2020.

“This level is roughly comparable to what the economy was producing in the first quarter of 2016, and is 2.7 percent down from the R782 billion recorded in the first quarter of 2020.”

StatsSA said eight of the 10 industries recorded positive gains in the first quarter of 2021, with finance, mining and trade making the most significant contributions.

The finance, mining and trade industries were the main drivers of output on the production side of the economy, while household spending and changes in inventories helped spur growth on the expenditure side.

The mining industry had a positive quarter too with annualised growth of 18.1 percent, boosted by the production of platinum group metals, iron ore, gold and chromium.

Manufacturing output increased at an annualised rate of 1.6 percent, mostly driven by strong growth in the production of motor vehicles, parts and accessories and other transport equipment.

Stats SA said load shedding and a decline in the supply of water contributed to the contraction in the electricity, gas and water supply industry.

The agriculture, forestry and fishing industry also performed poorly in the first quarter in comparison with the previous quarter, dragged lower by weaker production figures for field crops and animal products.

 

Rand surges against the dollar

By Siphelele Dludla for IOL

The rand yesterday rose to a one-year high amid a subdued dollar in spite of rating agencies maintaining their junk status and negative outlook on South Africa’s sovereign debt.

The domestic currency strengthened 0.03 percent to R13.91 against the greenback by 5pm, its highest level since early January last year, on a positive growth forecast.

The South African Reserve Bank (SARB) last week upwardly revised its 2021 growth forecasts to 4.2 percent, from an earlier projection of 3.8 percent.

The rand appears to want to stay below the R14 mark around which it traded last week, despite an increase in global risk aversion.

Investec chief economist Annabel Bishop said the rand continued to benefit from the dollar’s weakness, as investors fear increasing interest rates in the US.

She said the rand was 5.6 percent stronger since the start of this year, leading several other emerging-markets currencies.

Bishop said South Africa would likely record a marked current account surplus in the first quarter of this year because of the boom in the commodity markets, which would boost the rand.

“Absent the global commodity price boom, the rand would not be seeing the degree of strength it has experienced this year against the US dollar,” Bishop said.

“And indeed, the second quarter looks set to record a current account surplus as well.”

On Friday, S&P Global Ratings and Fitch affirmed South Africa’s sovereign rating to sub-investment grade with a negative outlook because of rising government debt and low economic growth.

However, Fitch revised upwards South Africa’s economic growth, saying it would rebound to 4.3 percent this year supported by the base effect and the rise in commodity price, in line with the SARB forecast.

The SARB last week cited an upturn in near-term economic performance and improved public finances.

The bank also unanimously kept its benchmark repo rate unchanged at a record low of 3.5 percent as the Consumer Price Index rose 4.4 percent in April from a year ago on base effects.

Old Mutual Investment strategist Izaak Odendaal said although food inflation was at its highest level since mid-2017, the outlook was better.

 

By Siphelele Dludla for IOL

South Africa’s economy shrank by 7% last year compared to 0.2 percent growth in 2019 amid the devastating impact of Covid-19 and lockdown restrictions, Statistics SA said.

This is the most significant economic downturn in 75 years, but was not unexpected following months of economic slowdown due to lockdown restrictions.

’’If we explore the historical data, this is the biggest annual fall in economic activity the country has seen since at least 1946,” Stats SA said.

“The second biggest fall was recorded in 1992 when the economy contracted by 2.1 percent.

“At that time, the country was struggling through a two-year-long recession, mainly the result of a global economic downturn.”

Stats SA said the annual real gross domestic product (GDP) growth rate of -7 percent last year was primarily led by decreases in manufacturing, trade, catering and accommodation; and transport, storage and communication.

The agriculture, forestry and fishing industry, however, escaped the effects of the pandemic relatively unscathed, expanding production by 13.1 percent last year.

The government also grew marginally in the year, up by 0.7 percent.

Stats SA said expenditure on GDP also decreased by 7.1 percent last year as household final consumption expenditure decreased by 5.4 percent.

Meanwhile, the fourth quarter GDP recorded positive growth as economic activity resumed after lockdown restrictions were lifted.

Stats SA said GDP lifted by 1.5 percent in the fourth quarter of last year, giving an annualised growth rate of 6.3 percent, and easily beating market expectations of a 5 percent rise.

The largest positive contributors to growth were the manufacturing, trade and transport sectors.

The manufacturing industry increased at a rate of 21.1 percent in the fourth quarter, as nine of the 10 manufacturing divisions reported positive growth rates in the period.

Stats SA said expenditure on real GDP increased at an annualised rate of 6.5 percent in the fourth quarter of last year as household final consumption expenditure increased at a rate of 7.5 percent.

 

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