Economy & Business News - 22 April 2024

22 Apr 2024

ECONOMY & BUSINESS

• Electric vehicles (EV). Volkswagen Group Africa, one of South Africa’s biggest auto manufacturers, says it will start manufacturing electric vehicles (EVs) only in about 10 years’ time, since the African market is not ready for them. In a telephone interview this week, the company’s spokesperson, Andile Dlamini, said they would continue manufacturing internal combustion engine (ICE) vehicles at the Kariega plant in the Eastern Cape for the foreseeable future. The EV white paper released by trade, industry & competition minister Ebrahim Patel envisages production starting in 2026. The white paper was finally released in December, after warnings that South Africa’s vehicle manufacturing industry was at risk if the country delayed the transition to EV production. Europe and the UK, the markets for three out of every four vehicles coming off South African production lines, are set to ban ICE-powered vehicles by 2035. (Source)

• Constitutional Court sets M&A precedent. The Constitutional Court delivered a verdict with far-reaching implications for mergers & acquisitions. The Competition Commission accused Coca-Cola of breaching the merger conditions surrounding its purchase of two bottling plants in 2016. Coca-Cola was given the go-ahead for buyout of the companies on condition it did not retrench certain staff because of the takeover. Three years after the buyout, Coca-Cola cut 368 jobs at some of its bottling plants, and the matter was taken to the Competition Tribunal and Competition Appeal Court before ending up in the Apex court. The court has found retrenchments by Coca-Cola Beverages Africa were the result of business requirements and decreed that “substantial compliance” is the benchmark for mergers with attached conditions. (Source)

• IMF sees slow moving economy. The IMF has kept its growth forecasts for South Africa and for the global economy broadly unchanged, saying the risk of a hard landing for the global economy has faded – but medium-term prospects are the weakest in decades. It warns that commodity prices could slide further, with slowing growth in China and Europe weighing on non-fuel commodities such as base metals. The IMF set South Africa’s growth at 0.9%, lower than the Reserve Bank’s latest forecast of 1.2%. (Source)

• Germany’s automakers are in crisis. Electrification and competition from China are booting thousands of highly skilled workers back onto the job market. Luckily, many are eyeing a sector that can’t hire fast enough: defense. Since Russia’s invasion of Ukraine two years ago, arms manufacturers have experienced something of a reversal of fortune. Once associated with the likes of “sin industries” such as tobacco and gambling, these companies are now seen as attractive potential employers – and particularly if they’re helping fight the war in Ukraine. (Source)

• Henley & Partners Africa Wealth Report revealed that South Africa has lost 11,300 (20%) of its dollar millionaires in the past decade, the fourth-most of any African country, as high-skilled workers look for jobs in developed economies. South Africa remains the wealth capital of the continent, with 37 400 dollar millionaires and 5 billionaires living in the country. This is more than double the number of second-place Egypt. Nigeria, Kenya, and Morocco round out the top five.  However, Egypt has two more dollar billionaires than South Africa. Africa’s millionaire population experienced a significant decline in the past decade, losing 8% as many immigrated out of the continent. (Source / Source)

• Annual consumer price inflation (CPI) was 5,3% in March 2024, down from 5,6% in February 2024. (Source) 

• Foreign investors have taken R1 trillion out of South Africa in the past decade, as the country’s assets produce poor returns compared to global peers due to an uncertain regulatory environment. This is feedback from Old Mutual chair and former finance minister Trevor Manuel, who wrote in the company’s annual report that South Africa is struggling to compete for investment globally. Manuel said that the effects of state capture continue to be felt across South Africa, and while there has been an effort to restore institutions and rebuild the economy, more work is desperately needed. (Source)

• Volkswagen invests R4bn. Volkswagen announced that it will invest R4 billion in its Kariega (Uitenhage) plant for the refurbishment of production facilities, local content tooling, quality assurance, and manufacturing equipment. The investment is also aimed at preparing the plant to manufacture a third model, a new SUV, from 2027. The third model, which will be a compact sports-utility vehicle (SUV), will be manufactured on the same production line as the Polo and Polo Vivo. VWA currently produces the Polo for the local and export markets, and the Vivo for the local market. Most of the R4-billion investment will be allocated to capital expenditure for the production facilities, manufacturing tooling, local content tooling, and quality assurance. Nearly R877-million will be spent to enhance automation in the body shop. In the press shop, R418-million will be used to procure new press tooling. The first phase of the plant upgrade will begin at the end of this year, during the facility’s yearly shutdown. (Source)

• Rail system reforms boost investment. The rapid rollout of South Africa’s rail system reforms could open the way to significant and transformative private investment in rail infrastructure as well as in rolling stock, says Traxation CEO James Holley. Traxation is Africa’s largest private sector train operator, which operates trains in seven countries in Africa. Holley says his company has seen first-hand the enormous benefit from the rollout of rail reform, and South Africa is fast moving away from the state monopoly. He emphasised that for the private sector to operate trains efficiently, significant investment would be required to uplift the infrastructure, which includes the lines as well as the signalling and scheduling that is required. That is especially so in Transnet’s general freight business, where rail is at a significant disadvantage to road and efficiencies would be crucial for any private sector operators. By contrast, Transnet’s bulk rail business — iron ore and coal — have a significant price advantage over road, so could price for some level of inefficiency. It is estimated that about R150bn of investment into the track infrastructure is needed. (Source)