Corporate Planning Bulletin - 15 January 2024

15 Jan 2024

ECONOMY & BUSINESS

• At the World Economic Forum (WEF) South Africa will present the country’s investment case, which Finance Minister Enoch Godongwana has described as “compelling”, to international investors, despite the challenges the country is grappling with. He emphasised that South Africa’s key focus at the forum will be investment, as this drives growth. He acknowledged that the country had numerous structural challenges impacting on the economy, namely in electricity, logistics, crime and corruption. However, he said there were strategies and roadmaps in place to address these. He highlighted that “as the most industrialised economy in Africa”, with strength in areas such as science and technology, and a strong industrial profile, South Africa still presented a compelling case for investment. Also highlighted during the briefing South Africa’s capacity for renewable energy projects and the considerable private sector interest in it. However, it was repeated that the country needed to strengthen its grid to accommodate these projects. Also mentioned was the opportunity for investment in infrastructure in the public and private healthcare system, with the passing of the National Health Insurance Bill last year, and the need to expand both private sector and basic primary healthcare as well.  

• Volvo Cars has set a new global sales record of 708,716 cars during 2023, an increase of 15% over 2022. The Swedish carmaker saw a significant increase in sales for its electrified cars. Last year, Volvo Cars sold 113,419 fully electric cars, an increase of 70% compared with the year before, and 152,561 plug-in hybrid cars, a 10% increase. Sales of fully electric cars accounted for 16% of all Volvo cars sold globally during 2023.

• Foreign investors exit SA shares: 2023 was the eighth year in a row that foreign investors were net sellers of South African equities. This represents a record uninterrupted period during which stocks worth $8.3 billion were sold. That took the total since 2016 to $53 billion, based on data reported by exchange operator JSE. The past decade has been a poor one for emerging markets with benchmark indexes notching a gain of just over 3%. Yet, the benchmark index in Johannesburg has done worse, losing almost 6% in dollar terms. The rand, meanwhile, has fallen 42% in this time, a contrast with other developing nations where currencies have generally outperformed stock markets.

• The Durban Container Terminal (DCT) Pier 2 has averaged single-digit vessels at anchor over the last two weeks, having earlier ensured that all priority cargo across the retail, automotive, energy and fast moving consumer goods sectors reached shelves at the required time. “We are not out of the woods, but we have exceeded our set targets of clearing the vessel backlog,” Durban Terminals managing executive Earle Peters said on January 11. He added that close collaboration with shipping lines and cargo owners, as well as employee commitment ensured that work continued throughout the holiday season. Original-equipment manufacturers are currently on site, providing technical support and supplying critical spares of handling equipment for repairs. Peters said weather continues to disrupt operations; however, contingency plans are in place. DCT Pier 2 has averaged 3 681 20-foot equivalent units (TEUs) every 24 hours, with a total of 55 219 TEUs moved in the last two weeks. The trucking community has kept the terminal fluid on the landside during this period. DCT Pier 2 continues to engage with shipping lines on the review of surcharges on import containers with improved productivity. “We are confident that the supply chain will soon return to normality as many other processes are involved once cargo leaves the terminal,” Peters said, adding that the rollout of the fourth shift at the terminals since December was yielding positive results.

• The Absa Purchasing Managers’ Index (PMI) closed the year on a somewhat stronger footing and rose by 2.7 points to 50.9 index points in December 2023. Part of the uptick came from an encouraging increase in business activity. Businesses operating through the festive period may have benefitted from relatively less load-shedding in December. Given that new sales orders did not improve further after a solid increase in November, underlying demand for manufactured goods remained relatively weak. Indeed, time will tell whether the improvement continues into 2024. The business activity index rose to 51.4 in December, up from 46 in November, while new sales orders ticked down to 46.3 from 46.6 in November. The employment index also remained stuck well below 50 points at 44.8. Worryingly, the intensifying crisis at South Africa’s ports seems to have contributed to supplier delivery times lengthening even further. The unavailability of inputs required could hurt production abilities and push up costs going forward.

• Presidency calls for delay in retrenchments: Rudi Dicks, head of the project management office in the presidency, has urged big business in South Africa to hold off on planned retrenchments, saying it is staying the course on the energy action plan as well as the logistics turnaround strategy, and measurable progress is expected soon. Dicks said the plan needs consistency, which then will allow for stability and a clear way forward. He said business has partnered with government and must stay the course.

ENERGY

• The latest Integrated Resource Plan, gazetted on 4 January by Mineral Resources and Energy Minister Gwede Mantashe, reveals that power supply will be constrained for the next six years due to an ‘electricity supply gap’, despite efforts to add new supply to the grid. The first timeframe up to 2030 focuses on addressing current generation capacity constraints and what the system requires to close the electricity supply shortage gap.  The second timeframe covers the period from 2031 to 2050, mainly focusing on six long-term electricity pathways to guide policies which will be defined by a diversified mix of coal, nuclear, gas, hydro, storage technologies and hydrogen.

• IRP widely criticised: The draft Integrated Resource Plan 2023, meant to replace the 2019 version, has been criticised widely for lack of detail and failure to provide viable and affordable solutions to South Africa’s energy crisis. Experts say that the plan, a road map for energy planning and private and public procurement of new generation capacity, undermines the country’s aspirations to grow the economy and achieve energy security by speeding up investment in new renewable energy.

• Emergency energy projects on hold: Four projects under the government-backed risk mitigation energy procurement round, with combined dispatchable capacity of 1 400MW, have lost the grid connection capacity that Eskom previously reserved for these projects. They include Karpowership SA’s controversial gas-to-power floating power plants at the ports of Richards Bay, Coega and Saldanha, which have struggled to get the environmental authorisation needed to reach commercial close.

• More power lines needed: South Africa needs to move much quicker to deliver new transmission infrastructure that will connect more megawatts to the grid than envisaged in Eskom’s current transmission development plan, Electricity Minister Kgosientsho Ramokgopa says. He told journalists this week that Eskom’s plans to build 1 400km of new transmission lines over the next three years are not sufficient and that at least 6 000km should be built over this period.

GOVERNANCE & POLITICS

• According to the Executive Opinion Survey (EOS) in the World Economic Forum’s (WEF) Global Risk Report the biggest perceived risk to South Africa in 2024 is load shedding, with fears over a state collapse easing over the last year. The report uses data from over 12 000 business leaders from 113 countries to identify the biggest risks to each country over the next two years. The EOS data is then combined with the data from the Global Risks Perception Survey (GRPS), which uses insights from 1 500 experts across academia, business, government, the international community and civil society. The GRPS highlights a mainly negative outlook over the short term, which is expected to worsen over the long term. Most respondents (54%) said they expect some form of instability and moderate risk of global catastrophes. Only 16% expect a stable or calm outlook in the next two years. This worsens over the 10-year outlook, with 63% having a turbulent outlook.

• ICJ genocide hearing commences: South Africa hopes to secure a binding order from the International Court of Justice this week to force the UN and its Security Council to call for an immediate cease fire in Gaza and stop weapons supplies to Israel. Former deputy judge president Dikgang Moseneke has been appointed as an ad hoc judge to join the 15 regular judges of the ICJ hearing South Africa’s application for Israel’s military assault on Gaza to be declared as genocide. The court will decide whether to order Israel to cease its attacks on Gaza as a provisional measure, pending the later determination on whether its actions contravene the Genocide Convention.

• ANC lied to parliament: ANC secretary-general Fikile Mbalula has revealed that the party had misled parliament to protect former president Jacob Zuma. The ANC and its top officials heavily backed their former leader for the exorbitant funds spent on upgrades on his Nkandla home. Speaking in Barberton, Mpumalanga, on Sunday, Mbalula conceded the party had misled parliament to defend its then-president by claiming a swimming pool was constructed for firefighting. In 2014, then-Public Protector Thuli Madonsela found that Zuma unduly benefitted from upgrades to his private residence and recommended that Zuma pay back at least part of the estimated R246 million spent on the improvements to the property not related to security.

• Collusion case against banks dismissed: The Competition Appeal Court has thrown out the case against all but five of the 28 banks that were accused of colluding to fix the rand in the New York foreign exchange market more than a decade ago. The CAC on Monday dismissed the Competition Commission’s eight-year case against three of the big South African banks and most of the foreign banks. The court found that the commission relied on vague evidence and insufficient facts to support its case of a conspiracy to manipulate the rand. This leaves just the four foreign banks whose traders pleaded guilty in 2015 to charges brought by the US Department of Justice.

• NPA lacks funds to deal with corruption: Justice and Correctional Services Minister Ronald Lamola has again emphasised the National Prosecuting Authority and its Investigating Directorate's lack of funds to deal with corruption and state capture cases. Lamola says while the budget has increased by 5.39% in the medium term, it is still inadequate to deal with the country’s many corruption cases. The minister was responding to a written question by Democratic Alliance leader John Steenhuisen on the annual budget of the NPA and specifically the ID to fight corruption.

• Ramaphosa warns against change: ANC president Cyril Ramaphosa has warned that should the ANC lose power in the next election, South Africa would change for the worse, resulting in the potential scrapping of schemes such as the social grants and student financial aid schemes. Ramaphosa was speaking in Mbombela on Monday, where the party held a cake-cutting ceremony to celebrate its 112th anniversary in the lead-up to its 8 January statement scheduled for Saturday.

ENVIRONMENT

• 2023 hottest year ever: The year 2023 has been confirmed as the warmest on record, driven by human-caused climate change and boosted by the natural El Niño weather event. Last year was about 1.48 degrees Celsius warmer than the long-term average before humans started burning large amounts of fossil fuels, the EU's climate service says. Almost every day since July has seen a new global air temperature high for the time of year, while sea surface temperatures have also smashed previous highs. More than 200 days saw a new daily global temperature record for the time of year. This recent temperature boost is mainly linked to the rapid switch to El Niño conditions, which has occurred on top of long-term human-caused warming.

• Between 1964 and 1994, the government constructed 18 new dams that can store over 200 million cubic meters of water. Between 1994 and 2023, it only built two such dams in South Africa. Put another way, between 1964 and 1993, the government added 22 million megalitre of dam capacity. Between 1994 and 2023, the ANC government has only added 1.7 million megalitres. South Africa has a rapidly growing population that requires more water. Stats SA’s 2022 census revealed that the population increased from 41 million to 62 million over the last 26 years. Households with access to piped water increased from 44% in 1996 to 60% in 2022, which illustrates the increased water demand.

HEALTH

• Shortage of funds to hire doctors: The South African Medical Association Trade Union says despite a shortage of medical personnel at state-owned hospitals, the Health Department has not hired more than 800 qualified doctors in public-health posts because of a shortage of funds. Annually, the department cites budget constraints as a barrier to hiring qualified medical doctors. Yet, Samatu says no substantial measures are evident to solve the funding dilemma, which contributes immensely to the factors that prompt the continuous emigration of qualified doctors.

• Less HIV among SA’s pregnant women: The incidence of HIV among pregnant women attending government clinics in South Africa fell to 27.5% in 2022, its lowest level in two decades, according to a report issued on Wednesday by the National Institute for Communicable Diseases. NICD senior epidemiologist Tendesayi Kufa-Chakeza said that the 2.5% percentage point drop since the 2019 antenatal HIV sentinel survey was very significant and was expected from mathematical modelling of South Africa’s epidemic.

AFRICA

• According to a new report ‘Shared Mobility’s Global Impact’ from global management consultancy Oliver Wyman the size of Africa’s shared mobility market, which includes services such as ride-hailing, scooter or e-bike rentals, as well as car-sharing, will almost double by 2030, creating an additional 550 000 income-earning opportunities. That is supported by data made available from global mobility operator, Bolt. The report highlights the current and potential global economic, social and environmental impact of the evolving shared mobility sector. That impact is set to be particularly strong in Africa, where growth will be driven by rapid urbanisation and a rising middle class. Africa is set to be home to five of the world’s 41 megacities (cities with populations more than 10-million people) by 2030. The sector, currently worth $4.2-billion is set to be valued at $7.8-billion by 2030. This growth should help drive important income opportunities. The majority of these opportunities are within ride-hailing driving, where drivers earn above the wages seen in comparable jobs in Africa – up to 130%-plus more in South Africa and Nigeria, states the report. The study also highlights the mobility sector’s role in supplying affordable and accessible transport, particularly in African countries where car ownership remains inaccessible to many. Additionally, it underlines the need for shared mobility to complement continued improvement in transport infrastructure in African cities. Some of the improvements it recommends include data sharing between operators and authorities; investment in road infrastructure to enable the launch of bike sharing; and the opportunity for shared mobility operators to support vehicle purchasing schemes and the electrification of fleets. “Shared mobility is already set to rise from 3% to 7% of journeys by 2030,” says Oliver Wyman Automotive and Mobility, Climate and Sustainability partner Dr Andreas Nienhaus. “The African market is the most interesting we study. It retains significant challenges, but shared mobility can support ongoing infrastructure development to radically change the journey mix.”

• Sub-Saharan Africa’s growth is accelerating, with Ivory Coast and Tanzania leading the way, even as the sluggish performance of its two biggest economies holds the continent back. Ivory Coast, the world’s largest cocoa producer, is expected to be the star with 6.6% growth while Tanzania will also beat 6%, according to the International Monetary Fund. Ethiopia, rebounding from civil war, will likely expand 6.2%. By contrast Nigeria will grow half that and South Africa less than 2%, limiting the region’s performance as together the two nations account for two-fifths of gross domestic product.  The continent is becoming less dependent on the two regional behemoths, according to research by Bloomberg — five of sub-Saharan Africa’s 10 biggest economies are expected to expand by more than 5%. Already years of sustained growth has seen Ethiopia now accounting for almost a 10th of GDP.

• Kenya visa backlash: Kenya is facing a backlash over the visa-free entry policy introduced for all foreigners this month, with some terming it ‘hectic’. President William Ruto announced the policy last month to advocate for visa-free travel within the African continent. Kenyan authorities have since clarified that while the country grants visa-free entry, visitors need to apply for electronic travel authorisation by submitting documentation and paying a $30 processing fee. The requirement also applies to countries whose citizens previously had unrestricted access to Kenya. By Sunday, Kenya had received more than 9 000 visa applications through the digital platform, authorities said.

• Major investment in Botswana diamond mine: Global diamond group De Beers said it will go ahead with a planned $1 billion investment to extend the life of its flagship Jwaneng mine in Botswana, even as the 2023 downturn in gem demand persists. The Anglo American unit and the Botswana government, which jointly own Debswana Diamond Company, have approved the spending that will convert the Jwaneng pit into an underground operation.

• Botswana Finance Minister named African Banker of the Year: Botswana Finance Minister Peggy Serame has been named by The Banker Magazine, a Financial Times of London publication, as Africa’s Banker of the Year. According to the magazine, the awards recognise officials who have best managed to stimulate growth and stabilise their economies. The Banker’s editors noted that Botswana’s growth has outpaced that of sub-Saharan Africa for six of the past eight years. Other ministers awarded were from Costa Rica, Vietnam, Switzerland, and Jordan.