Author: Lize Geldenhuis

SAA get billions in Mboweni’s mini-budget

SAA is the only state-owned entity to get ‘new’ money from the government in the Medium-Term Budget Policy Statement. Others, such as SA Express, Eskom and the Land Bank got zip. And Denel — on the brink of collapse — was also snubbed.

Finance Minister Tito Mboweni has caved in to pressure from his Cabinet colleagues to continue supporting state-owned enterprises (SOEs) – including those that are unproductive and guzzlers of taxpayer funds.

This is despite growing warnings from global development finance institutions such as the World Bank and International Monetary Fund for the government cut off support for SOEs at a time when public finances are deteriorating due to the Covid-19 pandemic.

SAA is the only SOE that was allocated new money on Wednesday in the Medium-Term Budget Policy Statement (MTBPS), which outlines the government’s expenditure framework and fiscal policy over the next three years.

Mboweni awarded SAA R17 billion in financial support for its aviation operations, in the form of an equity injection (actual money transfer) and a government guarantee. A guarantee is an agreement that the government will pay an SOE’s outstanding debt to lenders if it defaults on loan payments. SOEs can use government guarantees to raise funds from lenders such as commercial banks and development finance institutions.

The R17 billion allocated to SAA will support its business rescue process, which has been ongoing for nearly 11 months. Without the support from the government, SAA would be in danger of liquidation, which entails the permanent closure of the airline’s operations and a fire sale of its assets to pay the outstanding debt that is guaranteed by the government.

In September, Mboweni, who is against providing SAA with more government bailouts and recently said that the airline should permanently close, faced off with his Cabinet colleagues over the airline’s fate.

At a Cabinet meeting, Public Enterprises Minister Pravin Gordhan, who oversees the operations of SOEs, received the backing of President Cyril Ramaphosa for public finances to rescue SAA again – putting pressure on Mboweni to free up funds for the airline.

New money for SAA

The R17 billion for SAA in the MTBPS is not entirely new money. Of this total, R10.5 billion is new, while the remaining R6.5 billion was allocated in the February national Budget for SAA to pay historical debt and interest to lenders. The debt and interest obligation is guaranteed by the government.

The newly allocated R10.5 billion will fund the implementation of SAA’s business rescue plan, which proposes paying unsecured creditors nearly R2 billion over three years, retrenchment packages worth R2.2 billion to 2,000 workers, and funding the restart of the airline’s flights in January 2021.

Once the R10.5-billion is transferred from the fiscus to the SAA business rescue practitioners, Siviwe Dongwana and Les Matuson, the duo can proceed to restructure the airline and hand it over to its management and board.

Mboweni might face a storm from labour and business circles for supporting SAA by freeing up money through departmental budget cuts.

In the MTBPS, Mboweni announced cuts in government expenditure over the next three years. Expenditure will decrease by R62.9 billion in 2021/22, R92.9 billion in 2022/23, and R150.9 billion in 2023/24.

The cuts will be made in government departments (mainly defence and security), schemes funded by government for employers in SA to upskill workers and salary increases over the next three years for 1.3 million public servants.

Defenders of Mboweni will argue that he is providing money to SAA in a fiscally neutral manner – meaning he is not borrowing new money and, in turn, increasing government debt levels that are expected to reach R4 trillion, or 81.8% of GDP, in 2020/21.

Other SOEs snubbed

Other SOEs, such as SA Express, Eskom and the Land Bank, were not allocated new money for their operations. Funds shown as allocated in the MTBPS had already been pencilled in in the main Budget in February or the emergency supplementary budget in June.

Other SOEs that are on the brink of collapse, such as Denel — the main supplier to the defence force and recognised as strategically important to the country by the government — were snubbed by Mboweni.

SA Express, the second state-owned airline under provisional liquidation after a failed business rescue, has been allocated R143 million in the MTBPS — to repay debt to lenders that is guaranteed by the government. No new funds were allocated to revive its flying operations.

The Land Bank, a state-owned lender that Mboweni recently said was “too big to fail” because it provides 28% of SA’s agricultural debt, was given R74 million to pay outstanding debt to lenders.

An amount of R23 billion was reflected as allocated to Eskom, but is part of the R69 billion allocated to the power utility in February 2019 – funds that it can draw down over a sustained period. DM/BM

South Africa 2020 medium-term Budget Summarised

Tito Mboweni, the minister of finance, tabled the 2020 medium-term budget policy statement before parliament today – revealing strained finance and little room to manoeuvre South Africa’s struggling economy.

Mboweni said that since the emergency budget that was tabled in June, more data has become available regarding the impact of the pandemic and government’s consequent lockdown on the economy.  He said the economy is expected to contract by 7.8% this year.

The outlook for 2021 is more certain.  Current forecasts are that South Africa’s economy will grow by 3.3% in 2021, 1.7% in 2022, and 1.5% in 2023.   Fiscal measures, primarily focusing on reductions to the national government wage bill, will narrow the budget deficit and stabilise debt over the next five years to return public finances to a sustainable position.  The consolidated deficit narrows from 15.7% of GDP in 2020/2021 to 7.3% by 2023/2024/  The Gross national debt is projected to stabilise at 95.3% of GDP by 2025/2026, the minister explained.

MAIN POINTS OF THE BUDGET

Mboweni stated that the country will take years to get back to pre-Covid GDP.  A recession is expected for 2020 before real GDP growth can climb again.  GDP is expected to grow an average of 2.1% over the medium term and return to pre-pandemic levels by 2024.  Mboweni warned that a second wave of infections and a new restrictions on economic activity would have significant repercussions.

The Governments options to stabilise the fiscus are becoming increasingly limited.  The Fiscal environment has deteriorated significantly over the past five years due to debt interest payments absorbing a growing share of limited public resources, underspending, and a deteriorating government balance sheet, which includes state-owned companies and municipalities struggling to pay wages and operational costs.

Over the next three years Treasury will aim to reign in spending over the next three years to the tune of R300 billion.   The largest share of reductions falls on compensation,  Other non-interest spending items will be reduced while protecting funding for buildings, fixed structures, provincial and local capital grants, and the Infrastructure Fund.

An increased tax collection of R40 billion over the next three years.  The aim is to reach a main budget primary surplus by 2025/2026.

THE WAGE BILL

Government proposes growth in the public-service wag bill of 1.8% in the current year and average annual growth of 0.8% over the 2021 MTEF period.  Treasury has not implemented the third year of the 2018 wage agreement while the matter is still before the labour court.  Government is however actively engaging with labour unions to find a solution to more sustainable employment costs.

SAA BAILOUT

R10.5 billion has been allocated to SAA to implement its business rescue plan.  This will be funded through reductions on the baselines of national departments, public entities, and conditional grants.  This allocation is in addition to the R16.4 billion allocated over the 2020 MTEF in the February budget for settling guaranteed debt and interest.  “Our approach is in line with the principle that funding to state-owned  companies must come from within the current framework and reprioritised from elsewhere. We cannot break the fiscal framework,” the minister said.

Total discover more gas

Total announced today that it had made a second “significant” gas discovery off South Africa’s southern coast.  The first discover was in 2019.

The find is expected to bring a much-needed boost to South Africa’s ailing economy, already in recession before the coronavirus pandemic hit.

The gas deposit was found 175 kilometres (110 miles) offshore near another discovered early last year.

“Total has made a significant gas condensate discovery on the Luiperd prospect… in the Outeniqua Basin,” it said in a statement.

“This discovery follows the adjacent play opening Brulpadda discovery in 2019, which proved a significant new petroleum province in the region.”

The find is expected to bring a much-needed boost to South Africa’s ailing economy, already in recession before the coronavirus pandemic hit.

Total exploration and production president Arnaud Breuillac said the second discovery showed “the world-class nature of this offshore gas play”.

In the statement, Breuillac added that Total had acquired “important data” on the reserves that would help the company engage with South African authorities on “possible conditions of… commercialization”.

Total holds a 45% stake in the block, alongside Qatari, British and South African firms.

Top 10 scariest movies ever

For the most part, people don’t like to be scared – at least in real life. When it comes to the movies, however, it’s a different story. Lots of people seem to love being scared out of their wits as long as all the scary stuff stays on the movie or television screen.  As for the true masterpieces of scary movies, many would agree that these are 10 of the very best.

10. NIGHT OF THE LIVING DEAD

Back to the vault we go for this 1968 thriller that features a group of people trapped in a farmhouse trying their best to keep an army of flesh-eating zombies from eating them alive. This movie did a good job of accomplishing what it set out to do (scare people), especially considering that it was made with a low budget and was director George Romero’s film debut.

9. THE SILENCE OF THE LAMBS

It probably wouldn’t be easy to find someone who has not heard the name Hannibal Lecter and this 1991 movie by Jonathan Demme is the reason. The infamous serial killer, sometimes known as “Hannibal The Cannibal” agrees to help track down another crazed murderer that is known for his grotesque fondness for skinning his victims.

8. ALIEN

This one is a bit different from the traditional horror movie that features undead killers or supernatural forces of evil. Alien brings horror to new heights – literally! Space explorers discover something more frightening than their worst nightmares in this 1979 science fiction thriller.

7. THE BIRDS

Legendary director Alfred Hitchcock is still regarded as one of the most highly-respected makers of thrillers in history. A bunch of birds attacking people might not sound all that scary, but this 1963 classic proves that a master like Hitchcock can take almost any subject and find a way to twist it into something that will have people hiding under their seats.

6. NIGHTMARE ON ELM STREET

Freddy Krueger is pretty much a household name thanks to this 1984 file that was written and directed by Wes Craven. Featuring a deranged serial killer who stalks his victims in their dreams, this one may be responsible for keeping more people awake at night than any other horror movie.

5. THE EVIL DEAD

Director Sam Raimi wasn’t out of film school very long when he put this 1981 thriller together and he pulled it off like he’d being making movies for decades. There’s sufficient violence, blood and gore for it to have earned itself an NC-17 rating.

4. POLTERGEIST

Here’s another one that takes us back a bit to the year 1982, and features a television that somehow becomes a portal to another dimension where a lot of evil things exist. Unfortunately for the people in this movie, those evil entities are not shy about crossing into our dimension and stirring up more than their share of trouble.

3. HALLOWEEN

How many Halloween movies have been made? 5? 10? 20? It’s a bit hard to keep track of because this is a concept that has been done and done again. Despite how many times they try to one-up this one, they will never match the original. This 1978 classic was directed by John Carpenter and was responsible for movie theaters full of shrieking audiences around the world.

2. THE SHINING

If you are starting to think that the 1980’s were a great time for great horror movies, you might be onto something. Here’s a movie that could be considered a “classic” even if it was made a year ago. This movie has a “feel” to it that is not easily duplicated, making it a true one-of-a-kind. If, for some reason, you have never made the effort to check this movie out, you are really missing out. The Shining was released in 1980 and frequently shows up on TV movie channels like HBO, Cinemax, and Showtime.

1. THE EXORCIST

This one has easily achieved “classic” status since it was made over forty years ago. Despite the fact that it is getting up there in years, it can still put a good fright into people — especially those seeing it for the very first time. Back when it was first released, it was considered so scary that some movie theaters even made barf bags available to audience members.

 

 

Recipe: Steak Taco Salad

INGREDIENTS

 1/4 c. plus 1 tablespoon extra-virgin olive oil, divided

3/4 lb. steak (such as flank)

1 tbsp. Taco Seasoning

Juice of 2 small limes

1 tsp. ground cumin

1 tsp. dried oregano

Sea salt

1 head romaine, chopped

1 c. corn kernels

1 c. black beans, rinsed and drained

1 c. cherry tomatoes, halved

2 green onions, sliced

DIRECTIONS

  1. In a large skillet over medium-high heat, heat 1 tablespoon oil. Rub steak with taco seasoning and sear until desired doneness, flipping once. Transfer to a cutting board and let rest 5 minutes, then slice against the grain.
  2. Meanwhile, make dressing: In a small bowl, whisk together remaining oil, lime juice, cumin, and oregano, and season with salt.
  3. In a salad bowl, add romaine, seared steak, corn, black beans, tomatoes, and green onions. Season with flaky salt, if desired.

Travel Restrictions forcing Airlines to ‘Leave’ SA

Parliament’s Portfolio Committee on Tourism on Tuesday was briefed by South Africa’s Aviation Industry warning it that the coronavirus lockdown and travel restrictions had a severe impact on the industry.  The Board of Airline Representatives of South Africa representing both international and African airlines, airport operators and other stakeholders, said that South Africa needed a “coordinated and sensitive response” when dealing with the pandemic.

Barsa told the committee that the road to recovery will be ‘long, uncertain and tedious’, and that airlines have a critical role to play in ensuring the recovery of the tourism industry.  According to the group some airlines have reduced the capacity and frequency of flights to South Africa due to the uncertainty around the regulatory environment. It said that some airlines have also threatened to leave South Africa and use neighbouring countries as their new hubs.

Barsa said that losing its hub status would be the biggest risk going forward.  South Africa plays the role of the gateway to Africa and Southern African Development Community countries.  It told the committee that cargo flights are not enough to sustain the routes and that phasing in red-listed countries for leisure tourists is eagerly awaited.

Barsa also called for the relaxing of taxes and tariffs for landing fees, aircraft parking fees and passenger service charges. The committee also heard that domestic travel had become unaffordable as flights to smaller airports are more expensive than those to big cities.  This also affects the geographical spread of tourists.

Although the travel ban list has been adjusted to 22 countries, considerably less than the original 60, the banned list still includes key travel markets such as the US, UK and Germany.  Tourism Minister Mmamoloko Kubayi-Ngubane said that government is hopeful of opening the country’s borders to all visitors by the December holidays.  “We do believe that we have a second chance to try and recover – and anything that can happen (with Covid infections) can literally take us backwards.”

National Wills Week: Why you should have a valid Will

To emphasise the importance of having a valid will when you pass away, Government has proclaimed this week, 26-31 October 2020, as National Wills Week.

While a will is one of the most important documents in your life, fact is that fewer than 30% of South Africans pass away with a will, often with dire consequences for the loved ones left behind. Stories about family members fighting tooth and nail about their inheritance are rife!

Every year the Law Society of South Africa (LSSA) promotes Wills Week to combat the poor wills’ statistic, and participating attorneys offer their will-drafting services for basic wills at no cost to clients.

Don’t delay

All too often we tend to put important issues such as drawing up a will on the back burner, oblivious of the fact that death can knock on our door at any moment. Therefore, it can only benefit your loved ones that you set aside the time to draw up your will to avoid unnecessary conflict and problems after you’ve passed away.

Unless you are an absolute expert in this area, you should rather consult an attorney or an institution specialising in wills/estate planning to draw it up on your behalf.

Attorneys, for example, are professionals qualified in law and can advise you on any problem that may arise with regard to your will. An attorney also has the necessary knowledge and expertise to ensure that your will is valid and complies with your wishes. Often a will is not valid because the person who drafted it did not have the necessary legal knowledge to ensure that the requirements of the law are met.

Be practical

One should also bear in mind that a will should be practical. So you should think ahead. It would NOT be practical, for example, to detail your funeral in your will, as the details of your will will only be made public after your funeral.

Another important aspect to bear in mind is the appointment of an appropriate executor. An executor is the person who will administer your will according to your wishes set out in your will and who must look after the best interests of every beneficiary – an enormous responsibility, hence the choice of an executor should not be taken lightly!

Sometimes the spouse of the deceased is appointed the executor. This would be impractical because the death of wife/husband is an emotional and traumatic event, which may make it difficult for the surviving partner to make sound financial decisions at this time. Moreover, ensuring that your estate is handled professionally, you can be assured of objectivity and reliability.

Revise your will

Equally important is that you regularly revise your will. Over the years, many things in your life – such as a marriage, the birth of children, the acquisition of important assets, the death of a family member and legal changes – will require additions or amendments to your will.

BOX

What happens if you die without a valid will?

If you die without leaving a valid will, your assets will be distributed according to the provisions of the Intestate Succession Act. The provisions of this Act are generally fair and ensure that your possessions are transferred to your spouse and children.

BUT, the following problems may arise if you die without leaving a will:

  • Your assets may not be left to the person of your choice.
  • It can take a long time to have an executor appointed. Moreover, the executor who is appointed may be somebody you may not have chosen yourself.
  • There can be extra and unnecessary costs.
  • There can be unhappiness and conflict among members of your family because there are no clear instructions on how to distribute your assets.

 

Licence System Bribery Worries MEC

Gauteng Transport MEC Jacob Mamabolo on Wednesday said he was worried about corruption and bribery in the licensing system.  The festive season is around the corner and there is already a massive backlog when it comes to license renewals.

Mamabolo called the process a nightmare and acknowledged that motorists have no choice but to bribe their way through the system all the way from obtaining a drivers licence to renewing it and paying for vehicle license discs.  In Gauteng alone, thousands of motorists are driving with expired licences largely due to the backlog created by the closure of license centres during the hard lockdown earlier this year.

“You must take leave from work to go and renew your licence. You need to have food to go camp there,” Mamabolo said. License renewal nightmares is not a new phenomenon and for years it has been a headache for motorists, but now, it has become a migraine.  With less than two months before the festive season commences the usually larger number of motorists driving long distances may exacerbate the issue.

Mamabolo is concerned about the level of corruption in the department saying: “So you bribe all the way, they call it the cost of Coke.”  Howard Dembovsky of Justice Project South Africa said it was no laughing matter.  A smarter and easier way to issue licences must be implemented.  “Corruption is no joking matter and it’s time our officials started taking these crimes very seriously.”

Private Healthcare Facing Future Problems

The Private Healthcare Sector in South Africa is facing a near-term risk of a shrinking population of insured individuals.  The sector also saw a  slower than expected return of patients to hospitals despite high numbers of Covid-19 cases failing to materialise.  This comes at a time when the government is pushing ahead with plans for a universal healthcare system.  The National Health Insurance (NHI) will see both the public and private systems folded into a single entity.

NHI aims to ensure that all citizens are provided with essential healthcare, regardless of employment status and ability to make a direct monetary contribution to the fund.  Sector Head for Healthcare and Hospitality at RMB, Jessica Spira, said: “In March this year, it was reasonable to assume that a global health pandemic would provide a meaningful tailwind for companies providing healthcare services. However, like many surprises in the Covid-19 pandemic, this was not the case for the hospital sector in South Africa. Hospitals had been working towards a model of a sustained high intensity of the crisis, but the country’s peak was shorter than expected. As a result, both private and public hospitals coped well in terms of capacity strain.”

Spira said that hospitals also treated fewer non-Covid-19 patients as many stayed at home fearing infection.  The incidence of seasonal infections diseases such as flu also dropped – partly due to social distancing and greater awareness of hygiene.  Elective surgical procedures were deferred as health care facilities anticipated a deluge of Covid-19 cases.

Even as the world slowly returns to normal private hospitals face an uphill battle as the full impact of the economic slump is yet to be felt.  “Currently private hospitals are running at about 60% occupancy but some of this represents a backlog of deferred procedures not carried out during the lockdown period.  But the insured population in South Africa is under pressure,” said Spira.  According to her, people have been “buying down” on their healthcare plans even before the lockdown.  People are opting for cheaper and less comprehensive options, with many dropping healthcare altogether.

Another problem faced by the heath care sector is the loss of trained and experienced staff.  Many South African healthcare workers are leaving the country amid misgivings around the NHI.  A Feedback questionnaire sent to healthcare workers in both the private and public sector revealed concerns about the proposed NHI.  Only 15% believe that it will be successful.

Meanwhile, though the likelihood of a second wave of infections remain probable, it is likely to be less severe than the first and will be dealt with as efficiently.  “We expect that as South Africans become more comfortable returning to hospitals, particularity for delayed elective procedures that cannot be put off any longer, the private healthcare sector should receive a boost over the coming months. But total recovery may take longer than expected in SA and may only return to pre-pandemic levels in 2022 or later,” said RMB’s Spira.

“And it is not certain what a full recovery will even look like. The Covid-19 pandemic put the spotlight on the healthcare sector and showed where inefficiencies exist – especially in the public sector.  However, the private hospital sector is structurally sound for the long term, provided consumers continue to see medical insurance as a necessity.”

Businesses Closing across South Africa

The 3rd quarter of 2020 saw a sharp rise in liquidations as the coronavirus lockdown continues to impact businesses.  Liquidations increased by 27.4% in the third quarter compared to 2019.  A year-on-year increase of 54% was recorded in September 2020.

A total of 1,395 liquidations have been recorded from January to September with the financing, insurance, real estate, and business services industry reporting the most cases (428).  Unclassified businesses came in second (416) and the trade, catering and accommodation industry in third place (272).  Voluntary liquidations increased with 65 cases and compulsory liquidations increased by nine.

A voluntary liquidation takes place when a business, by its own choice, resolves to “wind-up” its affairs.  This happens when liabilities exceeds assets and the company is no longer financially viable.

Insolvencies have decreased by 61.3% for the three month period ending August 2020, compared to the same period in 2019.  Insolvency refers to an individual or partnership which is unable to pay its debt.  The individual or partnership is then placed under final sequestration.

The closure of business come at a time when South Africans faces an enormous unemployment crisis.  Over two million South Africans have lost their jobs during the heigh of the lockdown.  This is the largest quarter one to quarter two decline since the survey began in 2008.  The formal sector saw the loss of 1,2 million jobs while the informal sector lost 640,000 jobs.  Private households lost 311,000 jobs and the agricultural sector 66,000.

The broader definition of unemployment have recently caused confusion when unemployment stats were released, showing a significant decrease.  It is interesting to note though that the data clearly marks the point where the economically inactive (20.6 million) outweigh the labour force (18.4 million).

The continuing decline of the economy doesn’t harbour well for unemployment rates.

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