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Ramaphosa’s government is finally making hard – and necessary – decisions

Hi there and welcome back to Verationality!

After a short hiatus, we’re back with weekly simple news summaries for busy people. 

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Let’s dive into the news you really need to know from the week that was with our 01 March 2020 edition. 

If you’d prefer to listen to the update, hit play below. If you’d rather read it, keep scrolling.

Here’s our top stories for the week:

EMOJI NEWS INDICATOR:

  1. Tito Mboweni delivered the budget we needed but will it be enough? ?
  2. Civil servants are getting a huge pay cut. It’s both good and bad. ?
  3. How the Coronavirus affects you – it’s not what you think ?

And for our Inspiration of the week, we take a look at an African first produced proudly in South Africa: Queen Sono, the first African original production on Netflix has everyone talking from the New York Times to Time magazine. 

So let’s dive in!

Budget 2020

The big news of the week was, of course, the budget speech. An annual event, the budget speech is delivered by the finance minister to announcing government’s spending priorities for the year. Think of it like you taking a realistic look at what you’re earning, your debt and what you need to spend on for the year – and how you’re going to fund it. And then explaining that to the entire nation. 

There was a lot of anxiety ahead of this speech. We only have one credit agency that still has us at investment grade and there is widespread expectation that they will downgrade us too, which would be a bit like all the banks in South Africa refusing to give you a loan because your credit score is so bad. 

Everyone was a bit terrified that Mboweni would increase taxes and maybe even value added tax on purchased goods because what else could he do?? SA’s wallet is short by over R50-billion. Where was he going to find the extra money? Cutting the bloated wage bill for government employees didn’t seem to be an option with unions threatening war. And we’ve already taken out so much debt that debt repayments account for 15% of government’s spending. Ouch. 

But in the end, Mboweni took the difficult step of facing down unions to make those cuts and in doing so spared squeezing taxpayers for further increases for the first time in years, plus other nice things like encouraging us to invest and buy property with tax incentives. 

It’s what Moody’s, the last credit rating agency that has us at investment grade, wanted to see. The economy is growing so slowly that there really wasn’t any other choice. Analysts have noted that it is the friendliest budget speech to the taxpayer. Things are still going to be very tough but treasury is finally being allowed to the difficult and obvious decisions. 

Both Mboweni and head of the SA revenue services, Sars, have noted that there simply isn’t any more room to squeeze taxpayers – and I’m sure you’d agree! Both made the excellent point that persecuting those of us who are already paying our taxes by asking for higher taxes just didn’t make sense. Instead, Sars needs to go after those who are refusing to pay tax or not paying what they should. 

SARS commissioner Edward Kieswetter also added something interesting, which speaks to how opportunities can often arise out of crises: We all know Sars technical competency was gutted during the state capture years – Sars lost thousands of employees with important technical skills. Kieswetter says it’s so bad it makes him want to cry. However Sars is looking to data and technology to make up for some of these losses – and it’s already working. One simple AI solution has already helped the revenue service trace people hiding their rental income, which has brought in R500-million already this year. 

I find this encouraging. We lost so much during the state capture, but we have the opportunity to rebuild and think innovatively while we do so. 

Civil servants wage cut

We’ve decided to delve in deeper into government’s plans to cut South Africa’s public workers’ wages, as this was the biggest news of the week. But, what does this really mean and who is losing out? The truth is, this is one of those thorny issues where there is always going to be a loser, one way or another. 

Finance minister Tito Mboweni announced in his budget speech on Wednesday that the government plans to reduce the public sector wage bill by R160 billion over three years. This decision was celebrated by the business and investment community mostly because it will help keep money in the economy and it could save South Africa from losing its last investment-grade credit rating from Moody’s. On the one hand this is good news. South Africa’s public wage bill is relatively high compared to other countries and public servants wage increases have outstripped those in the private sector. Borrowing money to pay these expenses is indefensible.  

But as with everything, there’s the flipside. When you think of overpaid civil servants you probably think of some fatcat official sitting in a comfy office, playing solitaire. But the reality is about 85% of public servants are health, education, police and prison workers. They are working for the vulnerable in our society, in already strained systems.

While voices to the right of the economic spectrum have praised the move, those on the left have been absolutely scathing. Cosatu and the unions are naturally angry over their worker interests. But one academic took it further, noting the cuts “amount to the treasury wanting public servants to pay for Eskom bailouts directly from their current and future salaries.”

Pretty harsh. Whether such a dim view is warranted or not, the reality is President Ramaphosa and Mboweni had to choose. South Africa cannot afford to pay its public servants large increases that were previously agreed upon. Even when some of these are warranted, and match what’s happening elsewhere in the world where social services are expanded, we can all agree it’s not exactly managed well and the country is not getting value from these services. 

Coronavirus 

How does the Coronavirus affect you as a South African? 

Nigeria is the first African country to have confirmed a case of the virus and so far, South Africa seems safe… but it’s difficult not to worry given the casualties across the world. 

There have been over 87 000 cases of infected individuals globally, while nearly 3000 people have been confirmed dead. China, where the virus originated, accounts for most of the deaths, followed by South Korea. 

So the health implications are scary and easy to panic about, but the more likely risk to South Africa is a lot more prosaic… trade. 

China South Africa’s largest trade partners and that relationship has come under strain thanks to the virus. Some of the goods from China include machinery, live animals, vegetables and some other non-edible stuff. 

Aside from China, a number of other countries have been put on the radar for the virus, so naturally, our trade with these nations would be affected too. 

Given this scenario, you as a consumer can expect to see less of the following on the shelves: peanuts, blankets, heaters, and electronic equipment. 

In addition to this, a report by audit company, PwC reveals that the delivery of construction materials from Asia has been delayed, while mobile operators, automotive manufacturers and some retail and hospitality establishments will also take a hit. As a result, South Africa’s GDP could also take a bit of knock if trade conditions with China do not improve.

This comes at an already testing time for South Africa’s economy, but considering the stats relating to the global death rate from the virus, we think South Africa is slightly better positioned healthwise. Let’s be grateful for small mercies. 

To try to keep it that way, here’s a list of things you can do to keep you and your loved ones safe from the dreaded disease. Instead of wearing a surgical mask, it’s pr

  • Wash your hands frequently
  • Maintain social distance
  • Avoid touching your eyes, nose and mouth 
  • Seek medical attention if you have related symptoms
  • Stay informed

This is courtesy of the World Health Organisation. While there’s been a run on surgical masks experts say it’s better to rather wash your hands frequently in a public space as the virus is more likely to be spread via contaminated services than tiny droplets in the air. 

Inspiration

And now for our weekly dose of inspiration. Local production house Diprente Films in partnership with South African actress Pearl Thusi have created Africa’s first original Netflix production in Queen Sono. The six part series dropped on the streaming service on Friday and it’s a beautifully shot take on the spy genre, with incredible African and South African references and locations. The story and plotting are fairly standard but seeing such a refreshing take on a classic genre, with African faces, locations and languages on an international stage is thrilling. The show has landed coverage across the world and received praise for telling a unique story. 

Week ahead

Here’s what to keep an eye on in the week ahead: 

  1. Recession?

Tuesday will reveal just how much South Africa’s economy did or didn’t grow at the end of 2019. Did South Africa spend enough over the last quarter of 2019 to grow our GDP? If our growth was less than it was the previous quarter, that means we would have entered a technical recession as the third quarter of 2019 was also down compared to the second quarter which saw the economy rebound. 

2. You’re going to pay less to travel 

Fuel prices are expected to fall by 19 cents a liter on Wednesday, while the price of wholesale diesel will fall by 54 cents a liter. 

The decision comes as global oil prices decline as fears relating to the coronavirus increases. 

3. What is South Africa doing in the wake of the coronavirus? 

This is probably the biggest question concerned South Africans are asking. 

Well, parliament is due to debate this and South Africa’s readiness to contain the virus on Thursday. The World Health Organisation last week raised the level of the virus’s alert to the highest level. This is a cause for concern, but don’t panic too much. Just take the necessary precautions. 

That’s it for this week! Thanks so much for engaging with this channel. ??‍♀️

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Till next week, goodbye!.