Economy & Business News - 05 February 2024

05 Feb 2024

ECONOMY & BUSINESS

• New Chinese car manufacturer coming to South Africa. GAC Motor has signed a strategic partnership with Salvador Caetano to commence the distribution of its cars in South Africa. GAC is a subsidiary of Chinese state-owned Guangzhou Automobile Group, the fifth-largest vehicle manufacturer in China with 113 000 employees and shares in both Honda and Toyota. “Dedicated to the automotive industry for years and present on three continents, GAC Motor has accelerated the process of international business. This partnership with Salvador Caetano Auto in South Africa is the startup of the cooperation of both parties,” said Wang Shunsheng, Deputy General Manager of GAC Motor. GAC Motor currently has 12 models in its global vehicle portfolio covering the sedan, SUV, and MPV segments. The company has yet to reveal which of these will be coming to local showrooms, but judging from other Asian brands that entered our market in recent years, GAC will likely focus on rolling out its SUVs in South Africa first. In this popularbody shape, it has the GS3, GS4, GS5, GS8, and Emkoo which vary in size and specification, and they are all driven by automatic petrol powertrains. The entry-level GS3 retails for AED59,900 in the Middle East, which equates to approximately R307,000 at current exchange rates, while the most premium starts at AED169,900 (R871,000). (Source)

• Offer for MultiChoice. French entertainment giant Canal+ has made an offer of R46.5 billion to buy out Africa’s largest pay TV operator, MultiChoice, with the aim of creating a global powerhouse by combining the two entities’ businesses. Canal+ confirmed that it has submitted a letter to the board of MultiChoice with a non-binding indicative offer to acquire all the issued ordinary shares of MultiChoice that it does not already own, subject to obtaining the necessary regulatory approvals. (Source)

• Steel giant reconsidering closure. ArcelorMittal SA is seriously considering reversing its decision to close its long steel operations, potentially giving a lifeline to thousands of workers whose jobs are on the line. The steel major sent shock waves to the economies of Newcastle in KwaZulu-Natal and Vanderbijlpark in Gauteng last year when it announced plans to mothball its long steel units. Stakeholder groups have been applying pressure since to try and save 3 500 jobs. (Source)

• The Absa Purchasing Managers’ Index (PMI) reflects a very poor start to the year for the local manufacturing sector. The headline index declined to 43.6 index points in January 2024, down from 50.9 in December. Worryingly, the decline came on the back of a sharp deterioration in demand and activity. Outside of the global financial crisis in 2008/09 and the pandemic-induced lockdown period of 2020, the index has only fallen to this low level a handful of times. Following an encouraging uptick in December, the business activity index plunged to 37.1 index points in January. The deterioration was despite relatively less load-shedding in January compared to most of 2023. The decline in output was likely driven by a sharp decline in demand as the new sales orders index fell to 37.2 index points. Some respondents referred to demand being lower than usual. Furthermore, export orders stuck below 50 for a third month, which does not happen often. A lack of materials and goods required in the production process may have also held back output. The inventories index declined once more, to 37.7 in January, and reached the lowest level since mid-2020. (Source)

• New vehicles sales. The lingering effects of cost-of-living increases, dampened consumer and business confidence combined with the country’s port challenges and persistent load shedding continued to undermine the new vehicle market’s recovery path”, says Mikel Mabasa, Naamsa CEO. Aggregate domestic new vehicle sales in January 2024, were 41 636 units, reflecting a decline of 1 658 units, or a fall of 3,8%, from the 43 294 vehicles sold in January 2023. The trend continued the five consecutive months of decline up to the end of 2023 in the new vehicle market. Export sales recorded a decline of 442 units, or 2,1%, to 20 242 units in January 2024 compared to the 20 684 vehicles exported in January 2023. Overall, out of the total reported industry sales of 41 636 vehicles, an estimated 35 108 units, or 84,3%, represented dealer sales, an estimated 11,5% represented sales to the vehicle rental industry, 2,2% to industry corporate fleets, and 2,0% to government. The January 2024 new passenger car market at 28 790 units had registered a decline of 2 073 cars, or a loss of 6,7%, compared to the 30 863 new cars sold in January 2023. Car rental sales accounted for a sound 15,0% of the new passenger vehicles sales. (Source)

• South Africa’s early-stage entrepreneurial activity has declined to below pre-pandemic levels, with fewer people than ever before considering starting new businesses, according to the latest ‘2023 Global Entrepreneurship Monitor South Africa’ (GEM SA) report. The report highlights that the biggest motive among South Africans to become entrepreneurs is driven by necessity and to earn a living considering jobs are scarce, particularly among men.  Other motives include making a difference in the world, building wealth and continuing a family tradition. These key findings of the report raise concerns that the country’s weak economy and an insufficient enabling environment for business are hampering the potential of entrepreneurship to contribute to economic growth, job creation, innovation and technology advancement, as well as social cohesion. (Source)

• Private sector credit keeps on growing. South Africa’s private sector credit grew in December, surpassing market forecasts and increasing by the most since July 2023. Reserve Bank data released on Tuesday shows private sector credit grew by 4.94% year on year, surpassing market forecasts of a 4.1% increase. The outcome also marked the 30th consecutive month of growth in private credit. (Source)

• Expected fuel price increase. The latest report from the Central Energy Fund’s unaudited fuel data shows that petrol prices are set to increase across all forms in February. Early Automobile Association predictions indicate an increase of 11 to 14 cents for unleaded petrol while diesel is expected to go up by 9 cents a litre. According to Reggie Sibiya, CEO of the Fuel Retailers Association, the latest conflicts between Israel and Palestine and attacks on ships in the Red Sea, are contributing to the increase. (Source)

• Mercedes-Benz South Africa (MBSA) has appointed SA's former deputy president Phumzile Mlambo-Ngcuka as an independent non-executive director, effective from 1 February. "Dr Phumzile Mlambo-Ngcuka brings a wealth of experience to the board, having excelled across the private and public sectors, as well as within civil services in South Africa and abroad," board chair Wilfried Porth said in the statement. "Her depth of expertise will undoubtedly and aptly contribute to the corporate governance of MBSA as the company navigates its automotive transformation, ensuring its long-term success." (Source)

• Renault scrapped plans to list its electric-vehicle business. The French carmaker blamed “market conditions”. Growth in EV sales has slowed in recent months. Meanwhile Toyota retained its crown as the world’s top-selling carmaker for a fourth consecutive year in 2023. The Japanese firm sold 11.2m vehicles, around 2m more than Germany’s Volkswagen. (Source)

• IMF drastically reduced SA growth forecast against positive global outlook. The IMF almost halved South Africa’s growth forecast to just 1% for 2024. The international lender said South Africa’s logistical challenges, its debt burden and high borrowing costs are increasing brakes on the economy and called for the country to implement reforms and lower its budget deficit. In its World Economic Outlook Update the IMF took a more positive view of global prospects than it has for some time, saying the global economy had begun the final descent to a soft landing, with inflation declining steadily and growth holding up. (Source)

• The BankservAfrica Take-home Pay Index (BTPI), which tracks the average nominal take-home pay among approximately 4 million salary earners in South Africa, ended the 2023 year on a slightly better note as salaries and private pensions performed slightly better than in previous year.  “The average nominal take-home pay was 5.6% higher at R15 409 in December 2023 compared to the R14 596 recorded in December 2022,” says Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements.   However, the average nominal take-home pay in 2023 was only slightly better than the averages noted in 2022 and 2021, suggesting a sideways movement over the past three years.   With inflation on the rise during this period, salary earners have been worse off in real terms for the third consecutive year.   “This pressure on disposable income is evident in the dwindling retail sales growth, with real growth for the eleven months to November 2023 at 1.5% lower than the previous year, while passenger car sales have also contracted in 2023,” says Elize Kruger, Independent Economist.   The BankservAfrica data confirms that ongoing economic challenges have hampered companies’ ability to pay inflation-related salary increases over the past 18-24 months. Significant increases in the operating cost environment, partly due to the impact of load shedding, as well as global factors, have taken a toll on companies’ profits.   After declining for three consecutive months, annual growth in the average real take-home pay was flat in. (Source)