Tag Archive for: Economy

Statistics South Africa has published its latest consumer price index, showing that annual consumer price inflation was 3.2% in November 2020, down from 3.3% in October 2020.

The main contributors to the 3,2% annual inflation rate were food and non-alcoholic beverages, housing and utilities, and miscellaneous goods and service, the statistics body said.

“Food and non-alcoholic beverage prices continued to climb, recording an aggregate annual increase of 5.8%, up from 5.4% in October. Food inflation contributed one percentage point to November’s headline rate of 3.2%.”

Some of the largest annual price increases (November 2019 vs November 2020) were recorded for the following goods and services:

  • Fruit (14.5%)
  • Sugar, sweets and desserts (9.3%)
  • Oils and fats (8.3%)
  • Primary and secondary (7.5%)
  • Books, newspapers and stationery (7%)
  • Meat (6.6%)
  • Hot beverages (6.2%)
  • Milk, eggs and cheese (6%)
  • Vegetables (6%)
  • Water and electricity (6%)

Bread and cereals

StatsSA said that cake flour prices have increased by 11.9% over the last year, while brown bread prices rose by 9,2%, and white bread by 7.9%.

As a category, bread and cereals recorded an annual price rise of 4.2% in November.

Bucking the trend of the category as a whole, super maize meal prices have decreased over the last year, declining on average by 7.4%.

Meat and fish

The meat index recorded an annual rise of 6.6%. as beef products in particular have experienced high annual increases.

Beef steak is 16% more expensive than it was a year ago. Beef mince prices have increased by 9.2%, and stewing beef by 8.6%.

Prices in the fish category registered a 4.5% rise over the last year. However, prices dropped slightly (by 0.2%) in November 2020 compared with October 2020, Stats SA said.

Oils and fats

The annual change in prices in the oils and fats category was 8.3%. However, on a monthly basis prices edged slightly lower by 0.2%.

The price of peanut butter has increased by 6.6% over the last year, though a monthly decline of 2% was recorded in November. Cooking oil prices climbed by 9.3% over the last year, and margarine by 7.9%.

Hot beverages

The hot beverages index increased by 6,2% on an annual basis, but on a monthly basis declined slightly by 0.1%.

Black tea is 10.8% more expensive than it was a year ago, but on a monthly basis black tea is cheaper by 0.7%.

Transport goods and services

Prices for products related to transport recorded an average monthly decline of 0,8% and an annual decrease of 1.3% in November, StatsSA said.

All the main transport indices were lower in November 2020 compared with October 2020: vehicle prices declined by 0.3%, public transport by 0.4% and fuel by 2.0%.

Fuel prices are, on aggregate, 10,4% lower than they were a year ago. As an example, the price of inland 95-octane petrol was R16.08 per litre in November 2019, falling to R14,59 in November 2020.


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South Africa’s economy has staged a solid recovery in the third quarter – with every single sector growing after the devastation of the second quarter, when the country was basically shut down in the first phase of lockdown.

Manufacturing, trade and mining saw strong growth, and there was also a notable jump in construction work, after eight straight quarters of contractions, says Momentum economist Sanisha Packirisamy.

The economy grew by 13.5% compared to the previous quarter, after a massive 17.5% contraction in the second quarter. Still, the latest GDP data shows that, after the first three quarters of the year, the South African economy was 7.9% smaller than a year ago.

Some sectors have been absolutely decimated by the lockdown and the pandemic’s impact on demand, given mass retrenchments and continuing uncertainty. The construction sector, for example, shrank by 20% in the first nine months of the year. Manufacturing (-15%) also contracted while trade, catering and accommodation – which includes the ravaged tourism and restaurant industries – shrank by almost 11%.

There are only two sectors that actually grew in the first nine months of this year: government services (+0.8%) and agriculture, which is now 11% bigger than a year ago. The sector boomed this year thanks to bumper summer crops, strong exports and solid prices.

After a lean 2019 due to foot-and-mouth disease and various droughts, good rains have fallen in many parts of the country this year. The country’s 2020/21 winter barley and canola harvests are expected to be the largest on record, while wheat production is predicted to reach a 19-year high, and the maize harvest is expected to be a third bigger than last year.

Exports of various produce have also been strong. For example, South Africa may export almost 10 billion pieces of citrus fruit this year, in what is expected to be one of the best seasons on record. This was thanks to a solid local harvest – but also strong demand, especially in Europe, for vitamin C as the coronavirus caused consumers to become more conscious of protecting their immune systems.

Maize exports increased by 235% to 963,441 tons in the third quarter, compared to the same period last year, reports Paul Makube, Senior Agricultural economist at FNB Agri-Business. “On the back of a bullish weather outlook with the La Niña pattern having taken hold above 90% chance for Southern Africa, agriculture’s outlook for the year ahead is even more positive,” says Makuba. La Niña, a weather pattern that begins in the Pacific Ocean, usually brings more rain to South Africa.

The preliminary intentions to plant report for summer crops indicates a 5% increase in planted area for the 2020/21 season to 4.15 million hectares. “This is likely to increase further in subsequent reports given the high commodity prices and better production conditions.”


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President Cyril Ramaphosa says that South Africa’s 13.5% rebound in GDP during the third quarter of 2020 shows that a strong recovery is possible, even as the economy remains below its pre-pandemic levels.

However, he warned that a second coronavirus wave in the country could derail recovery efforts.

Commenting on the data released by Stats SA on Tuesday (8 December), the president said that GDP growth in the third quarter surpassed even the most optimistic market expectations.

This coincided with a surprisingly swift increase in economic activity as most restrictions designed to contain the spread of Covid-19 were lifted, he said.

Gross fixed capital formation also increased at a rate of 26.5%. While GDP contracted 6% year-on-year, the strong increase from the second quarter suggests that the economy is recovering more quickly than expected.

“In recent months, encouraging green shoots have emerged which provide a foundation for economic reconstruction and recovery.

“The mining and agriculture sectors in particular have demonstrated robust growth in the context of favourable market conditions. As a result of large trade surpluses, a record current account surplus is anticipated.”

The president said that a strong recovery in economic activity was made possible by the country’s success in bringing the virus under control.

“The strong rebound in GDP growth for the third quarter provides support for the approach that we have taken both to confront the pandemic and to protect the economy.

“Our task now is to ensure that this momentum is sustained, to enable a full recovery of the economy.

“A resurgence of the virus is now the single most serious threat to the economic recovery that is underway. As we move into celebrating the festive season and spending time with our families, we must remain vigilant to prevent a second wave.”

The president called on all South Africans to wear a mask, keep a safe distance from others, avoid crowded or poorly ventilated spaces and wash hands regularly.

“These simple measures are necessary not only to protect ourselves and others, but to support the continued recovery of the economy,” he said.


For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

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This article was written by Olivier Holmey.

A string of high-profile failures in Western markets has highlighted the brighter prospects that lie in continental expansion for many South African corporates.

Fifteen minutes is all the time it took to wipe out New Frontier Properties’ top brass. Anticipating a fight at the annual general meeting on 24 February, the firm’s executives had come to its offices in Mayfair, London, accompanied by a lawyer.

But the chairman, Franz Gmeiner, promptly asked the lawyer to leave, on the basis that only shareholders and representatives of the business could attend. Minutes later, the 97% of the shareholders present, including Gmeiner, voted to remove Michael Riley, the firm’s chief executive, and Patrick Smith, its finance director, as well as two other directors.

Within hours, all traces of the former directors had vanished from the firm’s website.

The shareholder revolt followed months of turmoil at New Frontier, a real-estate investor listed in Johannesburg but mainly invested in shopping malls in the UK. A tumultuous real-estate market, coupled, investors argued, with serious mismanagement, collapsed the value of the firm’s assets from £192m ($239.6m) in 2018 to £70m in 2019, and reduced its share price to virtually nought.

Big bets, big losses

New Frontier’s ill-fated investment in the UK is just one recent example of South African companies betting big on markets outside Africa, only to see the value of these foreign operations nosedive.

In the UK, Brait, an investment holding company owned by South African businessman Christo Wiese, wrote off its investment in fashion retailer New Look, while Famous Brands, the dining group headed by Darren Hele, wrote down half of its bet on Gourmet Burger Kitchen. Clothing retailer Truworths wrote down more than a third of the £256m it invested into the UK shoe chain Office Holdings, while Intu, the owner of shopping centres in the UK, saw its market valuation crash from £13bn in 2006 to about £50m early this year, before going into administration in late June.

South African corporates have struggled in other developed markets, too. In January, retailer Woolworths fired CEO Ian Moir, who had overseen the 2014 acquisition of troubled Australian department store chain David Jones. David Jones’s profits have halved under its new owner, and Woolworths wrote down half of its £1bn initial investment in the business.

Fuel giant Sasol has faced similar woes in the US, where it aimed to transform into a global chemicals player with the construction of a huge ethylene plant. But the $13bn project has been mired in controversy, with costs surging about 50% above estimates and an internal probe revealing gross mismanagement.

Vanity projects

Some of South Africa’s businesspeople, and observers of the country’s corporate fortunes, have come to see the global ambitions of many businesses as little more than vanity projects. Barring a few exceptions – like the restaurant chain Nando’s and the internet firm Naspers – they say that South African companies have tended to fare poorly in developed markets. They also argue that the country’s firms have a far greater competitive advantage in Africa.

“I agree wholeheartedly with that position,” says Junior John Ngulube, CEO of Emerging Markets at Sanlam. “We want to expand geographically, but we are an emerging-market player. That’s what we know, and therefore our expansion will be limited to other emerging markets. Those are the places where we believe we can add value.”

This vision, which many South African businesses now share, has served Sanlam well. Since the mid-2000s, the insurer has expanded into 33 African countries to become the largest non-banking financial group on the continent. A quarter of its net group revenues now originate outside South Africa, predominantly in Africa.

South Africa’s largest banks have similarly expanded their reach. Standard Bank now operates in 20 African countries, Absa in 10, FirstRand in eight and Nedbank in six. In 2019, Standard Bank’s African operations outside South Africa represented 31% of its headline earnings, up from just 10% a decade earlier.

Beyond banking and insurance, examples of successful expansion into Africa abound. MTN’s transformation into a multinational behemoth owes much to its early push into Nigeria, in 2001. Shoprite launched its first foreign operation, in Namibia, in 1990, and today is Africa’s largest food retailer, with a presence in 14 countries outside South Africa. Shoprite is typical of South African business expansion on the continent, which has tended to start with neighbouring countries like Botswana and Namibia.

South Africa’s direct investment into the continent totalled $10.2bn last year, according to EY’s Africa Attractiveness Report, giving the country’s firms a leading role in continental integration. In 2018, Boston Consulting Group identified 75 African firms driving the continent’s interconnectedness. 32 were South African, though their reliance on foreign markets varied greatly – industrial equipment dealer Barloworld (#26), for instance, derived 26% of its revenue from outside South Africa in 2018, whereas MTN derived 67%.

Analysts say these successes demonstrate that South Africa’s sophisticated businesses can more easily fend off competition from local rivals in Africa than they can in developed markets. Why, then, have the UK, US and Australia drawn so many South African corporates over the years? Speaking anonymously in order to share his candid views on this topic, the CEO of a black-­empowered company listed on the Johannesburg Stock Exchange blames the lingering ideology of apartheid. He tells The Africa Report: “Apartheid had a very strong anti-African tint, looking with a lens that viewed the rest of Africa as a black threat to the apartheid government. […] That propaganda pervaded the minds of businesspeople.”

The lure of London

This disregard for Africa’s economic potential, he argues, has led South African companies into markets for which they were ill-prepared. “You’ve seen big South African companies, like Pick n Pay, like Woolworths, like Old Mutual, like Investec – all of them have had a preference for either the UK and Europe or Australia,” he says. “With the exception maybe of the mining companies, just about every single South African company that has tried to go to Australia or North America or the UK has had an absolute disaster.”

Rob Cannavo, a former South African trade commissioner to Angola, Italy and the UK, sees things differently. He defends the validity – and profitability – of South Africa’s commercial ties to the Western world, in particular to the UK. “Love it or hate it, the historical connection is there,” he says. “London has always been the first port of call [outside Africa].” He cites Anglo American, Investec, Mondi and Mediclinic as examples of companies that started off in South Africa and have now become London-listed giants.

One reason the country’s companies have sought to build operations outside Africa is South Africa’s volatile currency, says Cannavo: “A lot of companies are trying to hedge their earnings.” Western investors are also a strong draw. “There’s a huge pool of capital in London,” he adds.

Challenges in Africa too

He agrees that the African continent is South Africa’s most promising foreign market, with the incentive even stronger now, due to weak growth at home.

That is not to say expansion into Africa is challenge-free.

Ikemesit Effiong, head of research at Nigerian consultancy SBM Intelligence and a former communications adviser to MTN in Nigeria, says tensions between South Africa and Nigeria, which flared up last year, made operations very challenging for a number of South African companies in the country.

Effiong says friends and family called him a traitor to Nigeria because he worked for MTN. “It was actually a very stressful time,” he recalls. “A lot of the criticism is based on prejudice and the natural competition that happens between economic rivals,” he says, but “South African operators support a vast ecosystem of Nigerian businesses, Nigerian talent, Nigerian suppliers.”

South African firms have faced difficulties elsewhere in Africa. In July last year, Pieter Engelbrecht, Shoprite’s chief executive, described trading conditions as “relentless”, as currency depreciation in countries such as Angola, Zambia and Nigeria caused the company’s operations in the rest of Africa to suffer losses. “But given our optimism for the long-term food retail opportunity on the continent, we remain resolute in our purpose to be Africa’s most affordable and accessible retailer,” added Engelbrecht.

Cannavo commends that approach.

“This is the view that you need to have in Africa,” he says. “You can’t go in with a quick and short-term strategy; that’s not going to work. […] If you can ride out the slump in one market, you might have a boom in another,” he argues.

Ken Gichinga, chief economist at Kenyan consultancy Mentoria Economics, points out that many South African firms have simply replicated in Kenya the business model that worked for them in their home market. He cites the example of News Cafe, a South African restaurant chain that he says has not, at times, sufficiently taken into account the habits and tastes of Kenyan consumers.

He adds that South African commercials often depict scenes that have clearly been shot in South Africa. “Nobody in Kenya has a white-picket fence, so it lacks authenticity,” he says of one such ad. “That is really the challenge of South African businesses: they seem very distant.” But Gichinga argues that they have learned from these mistakes by increasingly partnering with local firms and hiring local staff.

Sanlam’s Ngulube shares the view that firms cannot succeed in new markets with an approach designed in Johannesburg and implemented by South African teams flown in. The insurer partners with local companies in every market where it operates, and executive staff are drawn from the local talent pool.

That, he says, has proven key to the firm’s success across Africa: “You are not viewed in that country as a foreigner who is coming to grab profits, you are seen as a local entity that benefits the country in a win-win arrangement.”


For information as to how Relocation Africa can help you with your Mobility, Immigration, Research, Remuneration, and Expat Tax needs, email info@relocationafrica.com, or call us on +27 21 763 4240.

Sources: [1], [2]. Image sources: [1], [2].