Economy & Business News - 15 April 2024

15 Apr 2024

ECONOMY & BUSINESS   

• Capitec vs SARS. The Constitutional Court ruled unanimously that the recovery of VAT on irrecoverable loans is a legitimate financial practice, overturning a Supreme Court of Appeal (SCA) judgment that Capitec had warned would have ripple effects in the financial sector. The court has sent the matter back for reassessment by Sars, which will have to determine whether it will grant the full R72m deduction or a portion. It cannot reject the claim entirely. The ruling sets the record straight about the interpretation of the VAT Act, dispelling the clouds of uncertainty that have hovered over the issue and bringing clarity that could potentially influence the costs and operational dynamics of the banking sector. The full extent of its impact is likely to become clearer as vendors and tax authorities digest and implement the principles laid out by the court. (Source)

• WeBuyCars listed on the JSE after it was unbundled from Transaction Capital as part of the ailing JSE-listed taxi financing group’s plan to raise capital to reduce debt. WeBuyCars plans to open more warehouses in towns and cities as the demand for pre-owned cars grows. It has plans to nearly double the number of vehicles it sells to 23,000 a month in the next five years. It also plans to introduce a car leasing or subscription model to its portfolio for customers who don’t want the cost burden that comes with car ownership. (Source)

• SACCI’s Business Confidence Index (BCI) remained steady at 114.7 in both February and March 2024. This upward trend has been ongoing since November of the previous year, marking the highest level for the BCI since January 2018, which coincided with the election of new leadership within the ruling party. The month-on-month movement between February and March 2024 indicates a stabilization of business confidence at an improved level. During this period, ten out of the fourteen BCI sub-indices either positively contributed to the BCI or remained unchanged, while four sub-indices had a negative impact. The notable short-term positive influences were observed in global trade and foreign tourist service-related activities. Additionally, the SACCI BCI showed a medium-term improvement as it rose by 3.4 index points year-on-year up to March 2024. The enhanced BCI suggests a business environment that remains stable to positive, despite external factors and local economic challenges that may not be conducive to business operations. This positive shift in the SACCI BCI reflects businesses' adaptability to adverse circumstances, partly attributed to positive international economic and business relations involving South Africa. Despite South Africa’s foreign political relations, international economic and business engagements have significantly contributed to the country's economic well-being. These engagements play a vital role in supporting local business activities and influencing the overall business climate. Moreover, they not only bolster business confidence but also enhance investor confidence among foreign non-residents and local businesses alike. (Sources)

• Manufacturing production increased by 4,1% in February 2024 compared with February 2023. Seasonally adjusted manufacturing production decreased by 0,3% in February 2024 compared with January 2024. The largest negative contribution was made by the motor vehicles, parts and accessories and other transport equipment division (-11,9%). Seasonally adjusted manufacturing sales increased by 1,0% in February 2024 compared with January 2024. (Source)

• The BankservAfrica Economic Transactions Index (BETI), which measures the monthly value of interbank electronic transactions processed by BankservAfrica, showed signs of a slight recovery in March after a disappointing February.  The BETI reached an index level of 133.4, improving by 1.3% compared to a year earlier and 0.8% up from the previous month. The suspension of load shedding towards the end of March most likely had a positive impact on economic activity in the final week of the month. However, the index was only 0.7% higher than the average measured in the last six months. According to Elize Kruger, Independent Economist, this confirms that economic activity has largely moved sideways in South Africa.  Load shedding and the crippling logistical challenges at ports and railways, and renewed upward pressure on fuel prices, have added to the ‘more of the same’ narrative for the economy. The slow growth momentum continues to have a negative impact on unemployment and social-economic challenges. Additionally, an extra dose of uncertainty and volatility in an important election year have made the situation even more taxing. (Source)

• Mining production, according to the latest release from the Stats SA, increased by 9,9% year-on-year in February 2024. The largest positive contributors were iron ore (42,9% and contributing 5,1 percentage points); coal (14,6% and contributing 3,7 percentage points); and chromium ore (20,6% and contributing 1,0 percentage point). Seasonally adjusted mining production increased by 5,0% in February 2024 compared with January 2024. This followed month-on-month changes of -0,4% in January 2024 and -4,8% in December 2023. (Source)

• Electric vehicles. Tesla delivered just under 387 000 vehicles this year to March, 8.5% lower than the same period last year and 20.2% below the previous quarter. Analysts had expected a figure of around 454 000. Growing competition from the new EV-makers, especially Chinese ones, partly explains the slump. Shares in the American firm have dropped by almost 30%. (Source)

• New vehicles sales. Naamsa said that the constrained business environment amplified by weak consumer demand and the recent Easter holidays have impacted on the new vehicle market’s performance in March 2024. Aggregate domestic new vehicle sales in March 2024, at 44 237 units, reflected a decline of 5 877 units, or a fall of 11.7%, from the 50 114 vehicles sold in March 2023. Export sales recorded a decline of 8 975 units, or 27.1%, to 24 161 units in March 2024 compared to the 33 136 vehicles exported in March 2023. Overall, out of the total reported industry sales of 44 237 vehicles, an estimated 39 016 units, or 88.2% represented dealer sales, an estimated 6.0% represented sales to the vehicle rental industry, 3.5% to government, and 2.3% to industry corporate fleets. The March 2024 new passenger car market at 26 577 units had registered a decline of 5 024 cars, or a loss of 15.9%, compared to the 31 601 new cars sold in March 2023. Car rental sales accounted for 7.8% of new passenger vehicles sales during the month. Domestic sales of new light commercial vehicles, bakkies and mini-buses at 14 870 units during March 2024 had recorded a decline of 672 units, or a loss of 4.3%, from the 15 542 light commercial vehicles handled in South Africa has declined significantly over the past few years, with the country’s ports now ranking among the worst in the world. (Source)

• Possible airport fuel shortage. Airports Company SA has sounded the alarm over a potential crisis in jet fuel supply as a result of maintenance at a refinery and an industry dispute. The planned seasonal shutdown of the Natref inland refinery as well as a tax dispute between authorities and petroleum companies could lead to disruptions of fuel supply to airports in the country, the airports management company said in a statement yesterday. (Source)

• Economic outlook. Financial services firm PwC revealed this in its South Africa Economic Outlook for March 2024, which focused on the country’s stagnant productivity. The firm said that reliable infrastructure is the foundation of any modern economy and is a significant contributor to worker productivity. Reliable infrastructure and well-maintained equipment can boost productivity, while a lack of adequate infrastructure investment will weigh heavily on productivity. In the case of South Africa, capital investment declined every year from 2016 to 2020, while capital formation contributed just 0.5%, on average, of the country’s real GDP growth in 2021-2023. (Source)

• Plastics & industrial chemicals sector to be investigated. The Competition Commission has initiated a new investigation, this time focusing on the plastics and industrial chemicals sector due to concern about the concentration and lack of productivity in the polymers market, which relies heavily on exports. The recently published polymer inquiry draft terms of reference state that although South Africa has low production costs for polymers, the plastic sector in the country does not appear to have gained any advantage from this. (Source)