Tag: South Africa

What unemployment looks like in South Africa

South Africa’s unemployment rate is getting worse. The latest stats from Stats SA, as well as the opinions of leading economic and labour experts, paint a very dire picture:

  • The unemployment rate increased by 1,4 percentage points from 27,6% in the first quarter of 2019 to 29,0% in the second quarter of 2019
  • The number of people unemployed grew by 455 000
  • The number of people employed grew by just 21 000
  • Government’s failed Industrial Policy Action Plan (IPAP) was supposed to create 350 000 manufacturing jobs
  • 320 000 manufacturing jobs have been lost since 2008
  • Gang violence on the Cape Flats is a direct result of the loss of jobs in the textile industry in the areas
  • 6,7-million people are currently unemployed in South Africa – the size of the entire country of Bulgaria

According to a Business Tech article published recently, chief economist at Efficient Group, Dawie Roodt believes that state spending has increased relentlessly since 2009, at a time when tax collections collapsed – and that the South African economy “doesn’t have a long time”.

“Even if we can somehow wave a magic wand and get rid of all the corruption and incompetence in the state and SOEs overnight, the perilous condition of the state’s finances will need an extraordinary attempt to save us from further economic collapse,” Roodt was cited as saying.

South Africa’s faltering economy can be attributed to:

  • Eskom’s dire financial results, with a record reported loss of R20.7-billion
  • The potential for load-shedding making a return in late August
  • The latest unemployment data: the Quarterly Labour Force Survey for Q2 2019 showed that the unemployment rate increased by 1.4 percentage points from 27.6% in the first quarter of 2019 to 29% in the second quarter of 2019
  • Rumours that international ratings agency Moody’s could downgrade South Africa’s sovereign debt to junk status abound
  • A collapse of fiscal accounts
  • Lack of economic growth – it needs to be at 6%

There are a few ways to remedy this, including:

  • Increasing taxes, such as VAT, by 11 percentage points will get in approximately R250-billion
  • Cutting state spending by a similar amount, and do away with cash-heavy initiatives like the NHI

For many South Africans, retirement is not the life of leisure and financial freedom that it’s made out to be. In fact, the majority rely heavily on income from a salary because their pension income is insufficient to support them.

This is the startling result from the 2019 Old Mutual Savings and Investment Monitor, which has included this audience in its research for the first time.

This annual study, now in its eleventh year, tracks shifts in the financial attitudes and behaviour of South Africa’s working metropolitan population. Criteria for inclusion of retirees into the study, which was released today in Sandton, was that they receive a monthly income in some form of at least R15 000.

“Including this demographic into our study reveals the impact that many households suffer because they are financially under-prepared for their retirement,” says Lynette Nicholson, research manager at Old Mutual. “While one’s sunset years are supposed to be a time to kick back and enjoy the pleasures that life has to offer, this does not appear to be the case for many of those we surveyed. What our study shows is that as many as 92% continue to work because they are dependent on additional income to make ends meet.

The monthly contribution from a pension for nearly 80% of people makes up only 27% of their income, with other investments or savings contributing only 7%.

Nicholson says this highlights the importance of proper financial planning in one’s productive years. For many, a company pension fund is proving insufficient to support them in retirement. She says it is therefore essential to speak to a professional financial adviser who is able to help consumers navigate along a path that reduces this financial pressure later in life.

The survey results show that half of retirees are working for an employer, 36% have started a business post-retirement, while 13% have continued to be self-employed or taken up a position as a consultant.

An important context to the results is that 53% of retirees are still supporting dependent children and or grandchildren, of which 41% are supporting dependents under the age of 12.

A further 9% of respondents are supporting parents or even grandparents, with those most under pressure (26%) being classified as the Sandwich Generation because they are squeezed between supporting older as well as younger generations.

It is no surprise then that retirees are actively cutting down their expenses in order to cope financially. Those polled in the survey are tightening their belts by spending less on clothing and shoes (45%), holiday and travel (41%), eating out and entertainment (39%), electricity and water (38%), entertaining at home (37%) and cell phone air time (36%).

Similar to the results from the non-retiree market, nearly two-thirds of their income is directed toward living expenses, with 14% going to savings. Understandably, the proportion committed to insurance and medical (10%) is double that of non-retirees.

The vast majority of retiree households – 83% – have an emergency fund of some sort. Nearly 80% hold this in a bank savings account, with 35% having this unbanked or in cash. Amongst the Black respondents contributing to at least one stokvel per month 29% have their rainy-day fund in a stokvel.

Most surprising of all, is that 14% admit to having a stash of cash that their spouse or partner is not aware of.

“The lack of preparedness for retirement could be measured to some degree by only 4% of respondents leaving their pension or provident fund lump sum intact and opting to receive a monthly pension,” Nicholson says. “This is the ideal situation as these pensioners should be better equipped over the long term to survive financially.”

“The 21% of respondents who took the entirety of their pension in a lump sum are potentially worst prepared for the future. And the 75% who took a portion as a lump sum and the rest as a monthly pension made a far wiser decision.”

She adds that households that manage to reduce their indebtedness in the later stages of their life are best prepared to see through their retirement in relative comfort.

It is therefore somewhat surprising that 49% of respondents have a credit card and 51% a store card. The 23% who still have vehicle finance should also be concerned about carrying this cost in their retirement.

“Not only is it prudent to reduce monthly expenses when in retirement, but severe financial stress can be reduced by having a long-term savings plan and outlook,” Nicholson says.

Source: Old Mutual

SOE bailouts loom in South Africa

By Gaye Davis for EWN

Finance Minister Tito Mboweni said cash injections for state-owned entities like the South African Airways, the South African Broadcasting Corporation (SABC) and Denel wouldn’t be handed over all at once but in chunks, as certain conditions are met.

Mboweni was on Tuesday replying to debate on the Appropriations Bill, which was before the National Assembly.

The Appropriations Bill provides for budget allocations to all departments and entities and was tabled by Mboweni along with his February Budget.

It included provision for R3.2 billion for the cash-strapped public broadcaster.

The bailout money for the SABC, Denel and SAA would come from the contingency reserve account but Mboweni said it came with strings attached.

“We would not just make that available tomorrow, it would be a mistake but we will release in chunks as certain conditions precedent are met, to make sure there’s progress in improving the organisation.”

Mboweni said chief restructuring officers for each entity would be announced on Wednesday. They would work with the management of the SABC, SAA and Denel to get them back on track.

The minister has warned that the country’s debt to GDP ratio was at an “unacceptable level”: “Thus providing the basis for a serious crisis in the country.”

He said financial management needed to be improved across government and people needed to accept the principle of paying for the services they use.

South African households are under pressure

According to the latest Old Mutual Savings & Investment Monitor report, South African households remain under pressure.

The report is based on 1 000 household interviews among working South Africans living in major metropolitan areas, and shows how consumers are being forced to tighten their belts.

Findings include:

  • A need to to cut back on monthly spending just to make it to the next payday
  • An increase in households under financial stress
  • Middle- and upper-income households are showing strain
  • 42% of respondents said they struggle to make ends meet each month
  • 73% of respondents said they are constantly worried about having enough money
  • 58% of respondents said they do not feel financially secure enough to cover an unplanned emergency
  • 60% of respondents do not feel confident that government will be able to provide for them and their families if they cannot do it themselves
  • Consumers are cutting back on expensive food and clothing purchases
  • Households are cutting back on entertainment and entertaining, reducing how often they go out, or have friends and family over for a social gathering
  • 15% of people indicate they will cutting back on using domestic workers
  • 79% of households indicated they do not employ a domestic worker at all

SA waits on tenterhooks for SONA

South Africa is waiting with bated breath as Cyril Ramaphosa will present the first State of the National Address (SoNA) of the 6th Parliament on 20 June 2019 at 19:00.

The theme for this year’s event is: “Let’s grow South Africa together as we celebrate 25 years of freedom”.

During the SONA, the President will address the nation as both the Head of State and Head of Government. He will present a plan to address South Africa’s needs for the year ahead.

Since it is a Joint Sitting of both Houses, the Speaker of the NA and the Chairperson of the NCOP host the event. All the three (3) Arms of the State, namely; the Legislature, the Executive and the Judiciary attend this event. It is one of the rare moments whereby all three Arms of the State meet in one place. As one of the important ceremonies of the state, it is broadcasted live on national television so that the general population is afforded the chance to see it.

The State of the Nation Address is important for all South Africans because it tells us what government’s Programme of Action is for the year ahead. The Programme of Action is government’s plans for the country and people of South Africa.

By being aware of what government is doing, everyone can become involved and also take part in government’s plans to build a better life for all.

The State of the Nation Address was broadcast live on: DStv Channel 408, SABC TV, eNCA, ANN7, SABC radio stations and Parliament’s YouTube Channel.

SA’s GDP nosedives

The South African economy has suffered its worst quarterly GDP performance in 10 years, dropping by 3.2%.

The downturn has been caused by, among others:

– The failure of state-owned enterprises, such as Eskom and SAA
– A slump in manufacturing
– A major downturn in secondary industries, especially construction
– Year-on-year GDP growth of 0% – meaning the economy is stagnating
– Agriculture lost 13% of its output in the first three months of the year
– A decline in household spending: despite spending more on alcohol, food and restaurants, consumers have avoided buying new clothes (down 12.7%) and skimped on transport costs (down 3.1%)

SA lags behind in tertiary education

By Sizwe Nxasana, chairman of IFSTAP

According to a report released by the Department of Higher Education and Training, only 1 901 people (out of every 100 000) attend tertiary education institutions, the lowest of the five BRICS countries.

The report also highlights the fact that the growth rate in university enrolment in 2016 was 1.6% and that, at this rate, we would fall short of reaching our target of 1.6 million enrolments as set out in the National Development Plan 2030.

One reason stated for this is the lack of access to these institutions by students from lower-middle income households, otherwise known as “the missing middle”.

BRICS
When the Department of Higher Education’s report was compared to similar statistics compiled by UNESCO on the various BRICS countries, South Africa was found to be lacking: 1,901 enrolments per 100 000 citizens, compared to Brazil (4,023), Russia (4,582), India (2,453) and China (3,104).

Relations among the BRICS countries are based on non-interference, equality and mutual benefit, but when faced with these statistics, is it any wonder how we could benefit ourselves, let alone our neighbours or the world at large, when our economic and global competitiveness is compromised to this extent.

The National Development Plan 2030
These statistics bring into sharp focus how much work still needs to be done, 25 years into our democracy.

The National Development Plan, a document written in August 2012, stated in its opening sentence that it: ‘… aims to eliminate poverty and reduce inequality by 2030.’

It goes on to state: ‘This plan envisions a South Africa where everyone feels free yet bounded to others; where everyone embraces their full potential, a country where opportunity is determined not by birth, but by ability, education and hard work. Realising such a society will require transformation of the economy and focused efforts to build the country’s capabilities. To eliminate poverty and reduce inequality, the economy must grow faster and in ways that benefit all South Africans.’

The NDP envisaged a 70% increase in the participation rates at South African universities in order to increase the enrolment to 1.62 million by 2030. 25% of the enrolment should be students enrolled at post-graduate level. The NDP also envisages increases in student throughput and graduation rates to more than 75%. Throughout the NDP document, emphasis is placed on economic growth through the improvement of education quality and skills development. This, according to the NDP, can only be achieved by active citizenry, a concept where the government provides the basic foundation, structure and guidance, enabling the rest of society to make strides in the betterment and upliftment of themselves and those around them. Assisting each other to reach the heights of our capabilities and our fullest potential.

ISFAP
With 10 years remaining before 2030, it will not be possible for the government alone to achieve the objectives of the NDP. The Ikusasa Student Financial Aid Programme (ISFAP) is an organisation aimed to support the objectives of the NDP, especially with regards to the university sector. ISFAP is mobilising the private sector and professional bodies to assist government with the funding of students who are unable to attend tertiary education institutions due to financial constraints.

ISFAP also offers the students support in terms of accommodation, medical services, allowances, life skills training, mentorships, study materials, etc. ISFAP Chairman, Sizwe Nxasana says, “We are focused on significantly improving access, success, graduation and employability for all funded students, especially from the ‘missing middle’. ISFAP specifically focuses on the scarce skills and students who are studying towards Occupations in High Demand (OHDs), which are skills and professions in short supply in our country and are therefore critical to the economic growth of South Africa.”

Growing South Africa’s skills base and supporting students from poor and middle-income families is critical to the growth and development of South Africa’s economy. Both government and the private sector have come together under ISFAP to fund students and help address issues of sustainable employment.

Nxasana adds, “Making sure that these students graduate and then assisting in sustainable employment afterwards, is our way of contributing to the vision as set out in the National Development Plan 2030.

By Riaan de Villiers for BizNews

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

By Roxanne Henderson for Business Day

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

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

Read the full article here: https://www.businesslive.co.za/bd/companies/financial-services/2019-04-24-banks-entice-millennials-with-free-food-and-new-offerings/

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