Economy & Business News - 12 February 2024

12 Feb 2024

ECONOMY & BUSINESS

• Total manufacturing production in 2023 increased by 0,4% compared with 2022. The largest positive contributions were made by the following divisions: basic iron and steel, non-ferrous metal products, metal products and machinery (1,7% and contributing 0,3 of a percentage point); motor vehicles, parts and accessories and other transport equipment (2,2% and contributing 0,2 of a percentage point); and wood and wood products, paper, publishing and printing (1,4% and contributing 0,2 of a percentage point). (Source)

• Bloomberg on South Africa. Incessant power cuts. Fruit produce left to rot in dysfunctional ports. Would-be exports of coal and iron-ore stranded by a broken rail system. Africa’s biggest economy has arguably been throttled by a decade of mismanagement. Now, increasing voter disgust may finally force a sea-change in attitudes in South Africa’s capital. The ruling party’s long insistence on the state providing services and operating infrastructure appears to be shifting, as it weighs political principles against a new-found fear of losing power for the first time since apartheid’s end in 1994. Along with private-sector actors moving to provide electricity they cannot rely on public utilities to get, there’s enough evidence of change underway for one longtime observer of Pretoria to declare that South Africa has reached its nadir, with the economic outlook now on the rise. “It’s a bold statement. But we think we’ve turned the corner,” says Goolam Ballim, chief economist at Standard Bank, the continent’s largest lender.

• South African Car of the Year (Coty) 2024 announced 18 finalists for in eight categories. The contenders will undergo testing by Coty jurors in early March before the overall and category winners are announced in May. The Ford Ranger made history as the first double cab bakkie to win the SA Car of the Year title in 2023, and this year it is back alongside the Toyota Corolla GR, BMW M2 and the Honda Civic Type R. In the electric vehicles there are two battery-powered cars in this year’s finalists: the GWM Ora O3 compact hatchback and Mercedes-Benz EQS luxury sedan. The Motor Enthusiast's Choice (public vote) returns for the 2024 Coty competition. The vehicle with the most likes will win and three voters will secure an off-road driving course. The finalists and categories are: Budget and Compact: Suzuki Fronx and Citroen C3; Compact Family:  Omoda C5, Suzuki Grand Vitara, Toyota Urban Cruiser; Family: BMW X1; Budget and Compact: Suzuki Fronx, GWM Ora 03; Premium: Mercedes-Benz GLC, Lexus NX; Luxury: BMW 7 Series, Mercedes-Benz EQS; 4x4 Double Cab: Volkswagen Amarok; Adventure SUV: Lexus LX, Mahindra Scorpio N; Performance: Toyota Corolla GR, BMW M2, Honda Civic Type R, Ford, Ranger Raptor. (Source)

• Sibanye-Stillwater CEO outspoken over poor leadership. Sibanye-Stillwater CEO Neal Froneman said in an interview at the Mining Indaba that the anti-crime initiatives in which business and government are involved are only treating symptoms and not the underlying cause of the country’s high crime rate. He blamed South Africa’s poor leadership and the ideology of state control, saying that business and civil society should be a lot more outspoken about the high cost of state failures. (Source)

• The SACCI Business Confidence Index (BCI) for December 2023 reached a notable 112.1, marking the second-highest level for the year, surpassed only by the January 2023 peak of 112.9. Throughout 2023, the BCI maintained an average level of 109.6, consistent with 2022, and higher than the 108.5 recorded in 2021. Although the BCI experienced a dip in the middle of 2023, it rebounded in the fourth quarter, concluding the year at 112.1 in December. The December 2023 level of 112.1 increased marginally to 112.3 in January 2024, potentially indicating a sustained elevation in business confidence. Comparing January 2023 to January 2024, the BCI experienced a minor decline of 0.6 index points, in contrast to the month-on-month improvement of 0.2 index points in January 2024. While these changes were relatively small, they suggest a degree of stability in the BCI. Inward tourism emerged as the only sub-index making a significant positive impact over the year to January 2024. Less severe negative effects were attributed to reduced real values of building plans passed, lower volumes of merchandise imports, a weaker and volatile rand exchange rate, and a decrease in the number of new vehicles sold.  However, the economic landscape in South Africa presents several challenges for both the economy and the business community. (Source)

• Volkswagen Group South Africa is investing R55-million to generate 3 MW in additional solar energy for its assembly plant in Kariega, in the Eastern Cape, says MD Martina Biene. The panels will be installed on the car ports in the employee car park. VWA production director Ulrich Schwabe says this means the local arm of the German vehicle maker will have 6.3 MWp in solar energy installed by the end of this year, in an investment totalling R89-million, across its facilities in Kariega, as well as in Centurion and Sandton, in Gauteng. The generator will provide power to the plant during loadshedding and other outage periods. VWA’s plant is not exempt from loadshedding, and experiences it from level five and upwards. Schwabe says the generators are to provide security of energy supply when the sun is not shining, as well as at night. “Last year we were hit quite hard, with 23 shifts lost, or 11 production days. “As the now sole supplier of the Polo, our order book is completely full for the next two years. We can now securely run the plant for the next two years. This answers the trust the brand has given us. “It is not a cheap exercise, but it is much better than losing trust and not being a reliable supplier,” says Schwabe. VWA currently produces the Polo and Polo Vivo for the local and export markets. Biene announced this week that VWA will become the sole supplier of the Polo to all global markets, except China, from June this year. VWA last year exported 101 557 Polos from Kariega – 3 500 more than in 2022. The expectation is that the Eastern Cape plant will see a 10 000-unit production increase this year on the back of the added Polo numbers. (Source)

• Debt. The number of South Africans crumbling under debt has increased dramatically this past month, and experts warn this is a result of living through the most difficult year in almost two decades thanks to stagnant salaries coupled with interest rates, food price inflation, increased fuel costs, and load shedding. In January 2024, DebtBusters, the largest debt management firm in South Africa, reported a concerning rise in demand for debt counselling services. “Year-on-year DebtBusters have seen a significant increase in debt counselling inquiries, jumping 41% in January 2024 compared to last year,” said DebtBusters’ head Benay Sager. Sager noted that several factors had driven this increase, but one is that “2023 was the most difficult year financially for South Africans in the last 15 to 20 years“. This surge in demand is attributed to the high cost of living, which has made it difficult for many people to make ends meet. Additionally, there has been a significant increase in the use of payday loans by consumers seeking to supplement their salaries. Sager noted that South African consumers took a beating in 2023, and this is evident across multiple industries. (Source)

• The S&P Global economy-wide PMI suggests muted private sector business activity in January. Demand levels in the South African private sector continued to worsen at the start of 2024, as the latest PMI signalled the sharpest drop in new order volumes in a year. Output also contracted as firms faced further supply side challenges driven by the port crisis in Durban, although a stabilising of staffing and inventory trends supported overall business conditions. Positively, purchase price and staff cost inflation eased, supporting another relatively soft increase in selling charges. The Absa manufacturing PMI, which dropped to its lowest level since May 2020, at 43.6 in January, also driven by lower demand and output. (Source)

• Business Against Crime South Africa (Bacsa) has been confirmed as the primary point of contact for business interaction with government on crime and corruption through government structures, including the National Priority Crime Operational Committee (NPCOC). This comes amid estimates that crime costs the economy at least 10% of gross domestic product every year. Bacsa has supported the government’s anti-crime efforts across the criminal justice system and with businesses large and small across the country. Bacsa operated as a division of Business Leadership South Africa (BLSA) since June 1, 2020, until recently, but has now been established as a separate legal entity following BLSA board approval. This is what has paved the way for Bacsa to become the primary point of contact for the government's interaction with B4SA’s Crime and Corruption focal area, which is co-chaired by Sibanye-Stillwater CEO Neal Froneman and Remgro CEO Jannie Durand. The joint initiative between business and government will be operationalised through the NPCOC. The organisation will continue to rely on BLSA for administrative support and will remain located in BLSA’s offices for the foreseeable future. (Source)