Zuma Budget Hole Leaves South Africa With Tough Tax Choices

South Africa may have a new finance minister soon following the replacement of its president, but whoever replaces Malusi Gigaba will still face a 50.8 billion-rand ($4.4 billion) hole in the nation’s finances.

With growth in Africa’s most-industrialized economy lagging that of peers after its second recession in less than a decade, tax collections have dwindled. That’s intensified the difficulty faced by Gigaba at the National Treasury in striking the balance between finding more revenue and not choking off the country’s fragile recovery.

In October, his officials estimated public debt will exceed 60 percent of gross domestic product by 2022. The next month, the government pledged to cut spending by a further 25 billion rand over the next three years to avert another downgrade of its rand debt to junk.

Since then, Moody’s Investors Service has warned it might deliver just such a ratings cut, and an uncosted pledge by former President Jacob Zuma for free higher education for poor students added 12.7 billion rand to the country’s financial needs.

Time to upgrade South Africa’s credit rating

The likelihood of further downgrades of South Africa’s sovereign credit ratings during 2018 appear to be remote in the light of recent political developments, including the election of Cyril Ramaphosa as the new president of the country.

According to prominent researchers at the University of Pretoria and the North-West University, current positive sentiment and expectations of economic and political stability should prompt rating agencies to seriously consider upward adjustments of their ratings of South African sovereign debt.

Prof Riaan de Jongh, director of the Centre for Business Mathematics and Informatics at North-west University, said that credit rating agencies should seriously consider an upward adjustment of the current rating for South Africa, or at least changing the outlook from ‘negative’ to ‘positive’ due to the ‘forward looking nature’ of the sovereign rating.

According to De Jongh, it will indeed be hard to justify an upward adjustment if credit rating agencies focus largely on historic data and do not recognise fundamental shifts in the future economic outlook for South Africa.

“The state of the nation address by newly elected President Cyril Ramaphosa is clearly the start of a new beginning and a dramatic turnaround in how the government is going to address deficiencies in exactly those factors that will form the basis of the analyses that the rating agencies use”, de Jongh said.

According to Dr Conrad Beyers, Barclays Africa Chair in Actuarial Science at the University of Pretoria, political risks were the driving force behind the decisions by some rating agencies to downgrade South Africa to “junk” status in 2017.

Now that politically related risks such as large scale corruption and financial mismanagement is expected to have less of an impact on the economy, these rating agencies should fundamentally review their ratings, Beyers said.

Beyers pointed out that the decisions by those rating agencies (Fitch and Standard & Poor’s) that downgraded South African sovereign debt to sub-investment (“junk”) grade may be seen as untenable considering indications that the probability of a South African debt default event decreased significantly.

The decision by Moody’s to follow a wait-and-see approach before downgrading South Africa to junk status appears to be largely vindicated in terms of the credibility of their ratings decisions.

According to both Beyers and De Jongh, it will be welcomed if rating agencies are open to explain their modelling and ratings decisions in a transparent and scientifically robust manner.

The researchers recognise that significant downside risks associated with the South African economy remain, including challenges regarding state-owned enterprises and uncertainty regarding the future of property rights.

However, current developments point to a significantly lower likelihood of a South African sovereign default event. On the contrary, a more business friendly environment, non-interference in the South African financial system, as well as guarantees of the independence of the judiciary and National Treasury can be seen as significantly credit positive.

Why a higher rating for South Africa?

When deciding on a country’s sovereign rating the credit rating agencies consider the strength of a country in terms of economic, institutional, and fiscal factors, as well as its susceptibility to event risk. Although the assessment is largely based on historical performance, the rating should be sufficiently forward looking in nature.

In addition, it is universally recognised that credit ratings decisions contain significant subjective elements such as political risk and other socio-economic considerations.

Hence, if there are significant changes in future economic expectations and the political environment, there could be sufficient justification for ratings reviews. In the case of South Africa, it appears to be indeed the case, the

Potential short term effect of upward ratings adjustments

Through upward adjustments in their credit outlook for South Africa, rating agencies will add to the positive sentiment that is currently flooding through South African, and in the process encourage the international community to consider investing in the country.

One should consider that credit rating agencies typically rate all institutions within a country at or below the sovereign rating.  A few exceptions exist, but then the institution is not ranked higher than at most two notches above the sovereign rating.  The main reason is that sovereigns are viewed by the agency as the lowest risk credit in their local market or currency.

Although rating agencies deny the strict application of sovereign ceilings to the global credit ratings of corporates in the particular country, it is typically not the case.

Therefore, the South African economy can benefit much from an upgraded sovereign credit rating.

SOURCE: businesstech.co.za

South Africa: A new beginning…

“I see only hope for our Country, and that is when white men and black men, desiring neither power nor money, but desiring only the good for their country, come together to work for it”.

Reflecting on these words of Reverend Theophilus Msimangu in Alan Paton’s, ‘Cry, the Beloved Country’, I write this piece for the love that I have for our beloved country.

Our nation has experienced the most tragic decade since the fall of apartheid. How did we, the beloved rainbow nation, full of potential and the promise of a bright future sink into the abyss of immorality through greed, corruption and the inhumanity of a few individuals?

For almost the entire past decade we have lived our lives amidst a national tragedy. How is it possible that our beloved rainbow nation could have disappeared into an abyss of sadness, greed, corruption and inhumanity?

I do not have the answers to the questions. But each of us, as South Africans, have to use our rights as enshrined in our Constitution, to take more control of our destiny. We have to do this as a nation united, and we have to do it now. We owe it to the young people of our country and future generations.

Our new democracy was built on the Freedom Charter and is guided by the Constitution. These documents codified the principles that were to guide our democratic order. Unfortunately, the principles of these sacred documents have largely been put in the back burner by many, including some of those who helped create them. So quickly they forget. These documents should continue to guide us as a nation, now and forever.

I write this from Pyeongchang in South Korea. It is fascinating to observe from a distance the transformation now taking place in South Africa as Jacob Zuma resigned and our nation enters a new phase of recovery and, once again, of hope. I commend President Cyril Ramaphosa, and all those involved, including opposition parties, in peacefully navigating this process, and again we hope, we all hope, that this time events will ultimately result in an outcome beneficial to all the people of our country.

SOURCE: enca.com

Isuzu to bring Fortuner competitor to South Africa

Isuzu Motors South Africa says it will bring its latest SUV model to South Africa – the MU-X.

The MU-X, which is already available in Australia and parts of Eastern Asia, will boast a 3.0 litre turbo diesel engine that produces 430Nm of torque, terrain command 4×4 system supported by a 5-link rear suspension, and a luxury seven-seat interior.

The model will be available in 2×4 and 4×4 configurations, with further pricing details and specifications expected closer to when the vehicle launches in the second-half of 2018.

In addition to being Isuzu’s first competitor in the SUV for over a decade, the MU-X also forms part of the company’s future commitment to the country.

Isuzu Motors announced the official launch of its business operations in South Africa on Friday (16 February), following an announcement last year that it would purchase the light commercial vehicle operations in Port Elizabeth and also the balance of shareholding in its Isuzu Trucks South Africa operations.

Speaking at the event which was held at manufacturing plant in Struandale Port Elizabeth, the president and representative director of Isuzu Motors of Japan Masanori Katayama said that Isuzu was committed to growing its business in South Africa.

“This is the first commercial and light commercial vehicle manufacturing operation outside of Japan in which we have acquired a 100% ownership. We are represented in 30 countries outside of Japan and successfully operate 47 manufacturing plants in these countries with joint venture partners.”

“Our decision with regards to South Africa demonstrates the confidence we have in this market and also is indicative of our longer-term view that South Africa will serve as an important base for our future growth on the African continent.”

SOURCE: https://businesstech.co.za

Mining Charter court bid put on hold as Ramaphosa steps in

The day before it was supposed to start, an application by the Chamber of Mines for a judicial review and setting aside of the reviewed Mining Charter has been postponed.

“I am certain we will be able to resolve the current impasse and agree on a Charter that both accelerates transformation and grows this vital sector of our economy,” President Cyril Ramaphosa said in a statement.

The application was set to be heard in the North Gauteng High Court starting on Monday. But on Sunday evening both the mining advocacy body and the Presidency put out statements saying that negotiations would again commence.

“The Presidency has indicated that the president is committed to resolving the impasse over the Mining Charter and to facilitate a process of developing a new Mining Charter, inclusive of all stakeholders and in the interests of the industry and the country as a whole,” the Chamber said in a statement on Sunday afternoon.

“In line with the spirit and the tone of the message as stated by the President during SONA on 16 February, the Chamber of Mines is agreeable to the request by the Presidency to give negotiations a chance.”

“The Chamber of Mines wishes to reiterate its position that only a negotiated Mining Charter taking on board the views and inputs of all key stakeholders will enjoy the support and endorsement of all stakeholders.”

Space for engagement 

In a statement issued by the office of the presidency, Ramaphosa said that postponement would allow the Chamber and the Department of Mineral Resources “space to engage and find an amicable solution”.

“The Presidency and the Chamber of Mines have approached the seven other applicants, as well as two amici curiae, namely the National Union of Mineworkers and Solidarity, to advise them of this development, and have encouraged them to similarly postpone their applications,” his office said.

“This is in line with President Cyril Ramaphosa’s commitment during the State of the Nation Address to intensify engagements with all stakeholders on the Mining Charter to ensure that it is truly ‘an effective instrument to sustainably transform the face of mining in South Africa'”.

SOURCE: fin24.com

Sona delay causes headaches

Mninwa Mahlangu, South Africa’s ambassador to the US, flew into Cape Town early last week ahead of the now indefinitely postponed state of the nation address (Sona).

Mahlangu is one of Parliament’s guests and was invited in his capacity as a former chairperson of the National Council of Provinces. Now waiting indefinitely, he is one of Parliament’s presiding officers who were invited to the event. Other guests include former presidents, current heads of the Pan African Parliament and members of the Southern African Development Community Parliamentary Forum.

Parliament is paying for Mahlangu’s accommodation as well as his local transportation costs.

The occasion brings to Cape Town heads of the judiciary and provincial legislatures, an imbongi who Parliament flies in and accommodates if he or she is from outside the Western Cape, eminent persons including nine radio competition winners – one from each province – and school children who form the civil guard and junior guards. The latter are generally from local schools.

Kwaito star Arthur Mafokate, who frequently attends the event, took to Twitter on Wednesday morning to offer the platform’s users the use of his hotel rooms, for which the hotel wouldn’t refund him. While it may be too early to quantify the costs of this week’s unprecedented postponement of the annual address, Parliament has been negotiating with suppliers to cap the costs at the rate they would have charged had the event gone ahead on the intended date.

Parliament spokesperson Moloto Mothapo said the institution had asked travel agencies to negotiate with hotels and airlines for tickets to be held, without the extra charges that are normally imposed in similar circumstances.

The legislature is negotiating with the City of Cape Town to ask for a week’s extension to keep up the parliamentary banners that line the streets in the central business district, at no extra cost.

City Press understands that Parliament sent hundreds of text messages to its guests this week, informing them about the postponement.

“We have sent SMSes, emails and called every guest to apologise for the inconvenience caused and to notify them that a new date will be communicated. We did that on the same day, swiftly,” said Mothapo. Parliament budgeted R4.3m for the event and is hoping not to exceed this.

On Tuesday, Parliament’s presiding officers: National Assembly Speaker Baleka Mbete and National Council of Provinces chairperson Thandi Modise announced that Sona was being postponed amid expectations that President Jacob Zuma would resign or that the ANC would remove him from office. Modise and Mbete said they came to the decision after reading “the mood of the country” and to accommodate unfolding political developments.

They hoped that Sona would not be postponed by more than a week and said they would take into account the scheduled tabling of the national budget on February 21.

On Thursday, Mothapo said everything was being done to make sure the budget was not affected. The chief whips came to the same decision at their weekly meeting.

“There is a general agreement in Parliament including among the presiding officers, that the budget will not be shifted,” Mothapo said.

The Sona delay has affected the holding of all nine state of the province addresses. Several provincial legislatures have already invited guests and prepared venues and other logistics. The legislatures will wait for the Sona date before announcing theirs.

Meanwhile, sources in the ANC have speculated that the party may use section 90 of the Constitution to install Cyril Ramaphosa as acting head of the state. The section makes provision for the deputy president to act as president in the event that the president is out of the country, is unable to fulfil his or her duties, or if there is a vacancy in the office of the president.

SOURCE: Andisiwe Makinana – City Press

Jacob Zuma will be a very rich man, thanks to taxpayers

Political parties and officials have been calling on President Jacob Zuma to resign and have even threatened to oust the President.

If he resigns though, he will still live a comfortable life and enjoy several benefits.

Zuma will reportedly be paid his annual salary of R2 989 845 after stepping down for the rest of his life.

In addition to this hefty salary, he will also enjoy a security team and an official vehicle.

He will be given an office, secretary and be entitled to free domestic flights on the national airline.

These benefits have likewise been enjoyed by former presidents, FW de Klerk and Thabo Mbeki.

The entitlements that these former presidents are granted is outlined in the Presidential Handbook.

List of benefits given to all former state presidents in South Africa:

– Personal security that will protect him, his entire family and immediate family.

– A home which the state will either contribute towards partially or fully, dependent on Zuma’s safety requirements.

– Health insurance and special treatment at military hospitals .

– An official salary of R2.87 million which was approved in 2016. An increase in this salary is subject to government gazettes.

– An indirect line to government. This will permit the former president to apply his services at diplomatic functions which is ultimately at the discretion of the incumbent president.

However, whilst still occupying office, Zuma and his family benefit from family medical cover.

Zuma and his family receive healthcare services which are billed to the surgeon-general through the South African Military and Health Services (SAMHS) of the South African National Defence Force (SANDF).

Zuma’s vehicle and maintaining costs are also borne by the South African Police Service (SAPS). Meanwhile, air transport costs are for the account of the SANDF using state-owned or privately chartered aircraft.

When using an aircraft, the Presidency however has to foot the bill of catering costs.

Zuma further has to liberty to occupy official residences in Cape Town, Pretoria and Durban.

All furnishing, maintenance and even the provision of flowers is billed by the Department of Public Works.

However, household staff are employed by the Presidency which also pays for special advisers “as needed”.

The first lady also bears benefits, such as being entitled to services of a private secretary‚ a state-owned vehicle and driver or protector. These costs are borne by SAPS.

The spouse of the president enjoys “reasonable support” with day-today arrangements of dependent school-going children”.

The pensions for retired presidents were previously calculated on 75% of their annual salary. However, since April 2008, this was amended to 100% of a president’s annual salary.

According to former president FW de Klerk’s spokesperson‚ Dave Steward‚ a former president is entitled to receive an official vehicle for life. The former president could also be awarded an armoured vehicle, depending on the security assessment done around the former head of the state.

“They also have security for life, which is determined by the security assessment done by the relevant police unit and receive free flights on South African Airways inside SA‚” said Steward.

Mbeki and De Klerk currently have an annual pension of about R2.1 million which is not much less than what Zuma will be receiving.

SOURCE: iol.co.za