Economy & Business News - 11 March 2024

11 Mar 2024

ECONOMY & BUSINESS

• Adjustments to the earnings threshold that applies to the Basic Conditions of Employment Act (BCEA) were done by the Department of Employment and Labour – meaning any workers whose salaries have increased beyond R21,200 a month in 2024 will lose certain automatic protections. The earnings threshold is the level at which workers in South Africa lose automatic protections under the BCEA, related to things like ordinary hours of work, overtime and public holiday pay. As of 1 April, the new threshold will be R254,371.67 – an increase of R3,261.08 from the 2023 earnings threshold of R241,110.59. The threshold equates to just under R21,198 per month. (Source)

• Fuel price hikes. Motorists were hit with fuel price increases across the board in March. The retail price of 93 and 95 octane petrol increased by R1.21/l while the wholesale diesel price rose by R1.06 (0.05% sulphur) and R1.19 for (0.005%). Illuminating paraffin increased by 64c/l. The latest increases follow fuel-price hikes in February and are attributed to a weakening rand and higher international oil prices. (Source)

• Eighty20 has released its 4Q 2023 Credit Stress Report in collaboration with Xpert Decision Systems (XDS). Quarter four 2023 CSR report outlines developments in the credit space as well as the economy overall. The 3Q 2023 analysis brought a glimmer of hope to South Africa's credit sector for the first time in years. This optimism was short-lived as 4Q highlighted a blend of both positive and negative indicators with the unemployment rate increasing slightly, inflation creeping up, and consumer confidence dipping down again. Despite this, there was a significant improvement within the credit sector as the percentage of loans in arrears decreased by a full percentage point. The average outstanding balances decrease was 0.7%. Over the past two years, total loan balances for vehicle asset finance (VAF) among the Middle Class have been declining, resulting in 100,000 fewer Middle-Class individuals holding VAF loans during that timeframe. The total value of home loan balances experienced its first decrease since the onset of the Covid lockdown. In December, retail sales delivered a surprise by increasing 2.7% year-on-year (YoY) before inflation. However, overall, 2023 saw a 1% decline compared to 2022 in real terms. During this quarter, there were 1.25 million new retail loans. The average ratio of monthly instalments to net income for all South Africans is currently at 47%, indicating that nearly half of the income of the average credit-active individual is allocated to debt servicing. Among the Middle Class, this ratio is nearing 80%, marking a 14.5% increase over the year. (Source)  

• The RMB/BER business confidence index (BCI) reading fell in 1Q 2024 from 31 to 30, still depressed below the neutral level of 50. All five categories of business confidence readings are depressed. The 70% of businesses are dissatisfied with prevailing conditions, and so profitability. Manufacturers turned even more pessimistic about both investment and business prospects later in the year. 

• SA’s general election is likely to mean there will be less focus on the “hard yards” of fixing the economy and more focus on electioneering, but the country cannot continue with economic growth as low as it is, especially given the public sector’s large funding needs, outgoing Nedbank CEO Mike Brown warns. Brown was speaking after the big four banking group reported a stronger than-expected 11% increase in headline earnings to R15.7bn for the year to end-December, prompting its share price to jump more than 3% against a near-1% decline in the banking sector overall. With the government borrowing about R2bn a day, excluding weekends, Brown has long warned that SA’s public debt level is unsustainable. Banks have already raised their ownership of government bonds to levels that the Reserve Bank has flagged as a risk to financial stability. There is growing concern among bankers that they will come under pressure to do more in coming years to fund government, through measures such as taxes on their balance sheets or increased reserve requirements or pressure to fund ailing state-owned enterprises. (Source)

• Gross domestic product expanded 0.1% in the fourth quarter 2023, compared with a contraction of 0.2% in the third quarter. South Africa’s economy escaped a technical recession in the fourth quarter as fewer rotational power cuts helped energy-intensive industries including mining and manufacturing rebound. Growth for the full year was 0.6%, compared with 1.9% in 2022. Other sectors that contributed to growth in the fourth quarter included finance and transportation. The weak economy’s performance last year was partly caused by logistical challenges at state-owned port and rail operator Transnet that hobbled exports and held up materials and goods needed for production. The logistical constraints and almost daily power cuts will likely continue to weigh on economic growth in the near term. The National Treasury expects the economy to grow 1.3% this year — insufficient to address unemployment and poverty. (Source)

• South Africa is hosting the African Organisation for Standardisation Technical Committee 59 (ARSO/TC 59) this month to discuss technical standardisation within the African automotive  industry. The four-day event includes the participation of technical experts from the automotive industry across continental national standards bodies.  ARSO/TC 59 is being held with the objective of reaching consensus on the adoption of international standards and harmonisation of standards for the region in support of the African Continental Free Trade Area (AfCFTA). ARSO has a membership of 42 countries, representing 77% of the continent, with more than 80 ARSO TCs that cover numerous industrial sectors of standardisation. “The African landscape for automotive requirements is changing rapidly as the demand for fuel efficient and low-carbon emissions grows,” adds South African Bureau of Standards (SABS) acting CEO Lungelo Ntobongwana. “South Africa is leading the continent with 931 new fully electric vehicles (EVs) sold in South Africa during 2023. Continental growth is expected to increase, [and] the SABS is at an advanced stage of offering a certification scheme for components of EVs.” (Source)