Economy

South Africa’s Unemployment Rate Drops to Lowest Since 2021 Amidst Job Growth Surge

Construction and Trade Sectors Lead the Way as Unemployment Dips to 32.6% in Q2 2023

Published

1 month ago

August 19, 2023

South Africa’s unemployment rate for the second quarter plummeted to its lowest point since the initial quarter of 2021, defying analysts’ predictions. The latest data from Statistics South Africa revealed a significant decline as sectors like construction and trade fueled job creation, surpassing market expectations.

According to the official report released on Tuesday in Pretoria, the jobless rate declined to 32.6% during the three months leading up to June, down from 32.9% recorded in the previous quarter. This positive trend defied projections by economists in a Bloomberg survey, who had foreseen a more modest decrease to 32.8%.

However, while these statistics present a hopeful picture, a closer examination reveals a more complex reality. Accounting for the expanded definition of unemployment, which includes those available for work but not actively seeking employment, the rate stands at 42.1%. This figure is down from the March quarter’s 42.4%, showcasing a slight improvement.

Also, South Africa’s economy is projected to stagnate this year, largely attributed to severe power shortages, diminished commodity prices, and logistical bottlenecks. The nation is grappling with a distressing series of power cuts, surpassing those experienced in all of 2022.

Eskom Holdings SOC Ltd., the state utility responsible for power supply, is grappling with the incapacity to meet the escalating demand due to aging and under-maintained plants.

As a consequence of these adverse conditions, the central bank’s growth projection for the year has been revised to a meager 0.4%, significantly lower than the anticipated 2% growth without the hindrance of power rationing.

While certain sectors have demonstrated remarkable progress, such as the construction and trade industries that have seen a surge in job opportunities, others have not fared as well. Manufacturing and finance have encountered setbacks in employment growth.

The combination of ongoing power outages and logistical inefficiencies within the freight rail network and ports has caused a substantial increase in business operating costs. Notably, major corporations like Shoprite Holdings Ltd., the largest grocery chain in South Africa, have been forced to allocate a substantial budget of 1.3 billion rand ($68 million) toward diesel-generated power throughout the financial year ending in July.

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Economy

FG Pays N169.4 Billion for Subsidy in August to Keep Pump Price at N620/Litre

Published

2 days ago

September 21, 2023

Samed Olukoya

Amidst President Bola Ahmed Tinubu’s repeated assurances of subsidy removal, it has come to light that the Federal Government disbursed N169.4 billion as subsidy payments in August to maintain the pump price of petrol at N620 per litre.

This revelation has raised eyebrows and ignited discussions about the future of fuel subsidies in Nigeria.

Investigation, backed by a document from the Federal Account Allocation Committee (FAAC), reveals that the Nigerian Liquefied Natural Gas (NLNG) paid $275 million as dividends to Nigeria through NNPC Limited. Out of this, NNPC Limited allocated $220 million (equivalent to N169.4 billion at N770/$) to cover the Petroleum Motor Spirit (PMS) subsidy, keeping it artificially low.

This move effectively indicates a resurrection of the subsidy system, which the government had promised to eliminate.

Under former President Buhari’s administration, Nigeria saw record-high spending on petrol subsidies. Reports from the Nigeria Extractive Industries Transparency Initiative (NEITI) show that subsidies cost N1.99 trillion from 2015 to 2020.

In 2021 alone, NNPC reported a subsidy cost of N1.57 trillion, with an additional N1.27 trillion from January to May 2022. The government had allocated N3 trillion in the budget to cover subsidy costs from June 2022 to June 2023, amounting to N7.83 trillion spent on subsidies during Buhari’s tenure.

Global oil market dynamics are further complicating the subsidy issue. Brent crude prices exceeded $95 per barrel, while the naira depreciated against the US dollar, undermining Nigeria’s pledge to remove petrol subsidies.

Despite higher international crude prices and exchange rate pressures, the government has held the pump price at N620/litre.

The situation has also strained petroleum marketers, who face rising international prices, a weakening naira, and government-mandated price caps. International petrol prices, exchange rates, and additional costs have collectively driven up the landing cost of PMS to about N728.64 per litre.

The government’s strategy to sustain the N620 per litre price involved a $3 billion crude repayment loan with Afrexim Bank to bolster the naira. However, this loan has reportedly stalled due to the withdrawal of other lenders.

While the government claims the subsidy is a temporary measure to ease the economic burden on Nigerians, experts argue that it highlights the need for a functional refinery and currency stability.

Without these factors in place, petrol prices will remain susceptible to fluctuations in global oil markets and exchange rates, potentially impacting the masses.

Economy

The Federal Inland Revenue Service (FIRS) Reports Significant Growth in Nigeria’s Tax-to-GDP Ratio

Published

3 days ago

September 20, 2023

Investors King

The Federal Inland Revenue Service (FIRS) announced that it successfully increased Nigeria’s tax-to-Gross Domestic Product (GDP) ratio from 6.0 percent to 10.86 percent in 2022.

The revelation came during a sensitization program held yesterday in Lagos by the Director of Taxpayer Services at FIRS, Mrs. Saidatu Yero.

Mrs. Yero conveyed the agency’s commitment to further enhancing the nation’s tax-to-GDP ratio, with ambitious targets of 16.5 percent, aligning with the African average and subsequently aiming for 18 percent within the next three years.

Mrs. Yero proudly stated, “The FIRS Management has executed commendable reforms that have fundamentally transformed the landscape of tax administration in Nigeria, leading to a substantial increase in revenue collection for the government.”

The agency reported that its innovative measures have already culminated in the generation of N8.5 trillion as of September 14, 2023, demonstrating its unwavering commitment to achieving N12 trillion in revenue for the year 2023.

Elaborating further, Mrs. Yero said, “One of the primary objectives of the FIRS Management is to prioritize a ‘customer-centric’ approach, recognizing taxpayers as our key stakeholders within the tax ecosystem. To ensure that taxpayers comprehend their tax responsibilities and rights, it is imperative that we continuously inform, sensitize, engage, and educate them, facilitating their compliance without any hindrance.”

Addressing the event’s theme, “The Finance Act as an Innovation in the Nigerian Tax System,” Mr. Temitayo Orebajo, the Director of the Tax Policy and Advisory Department at FIRS, said that the 2023 Finance Act introduced substantial amendments to seven tax laws, four non-tax laws, and a total of 30 sections, signifying a significant leap forward in the country’s tax framework.

Economy

Euro-Area Inflation Eases, Fueling Debate on ECB’s Rate Hike Course

Revised Data Shows Modest Slowdown, But ECB Officials Divided on Further Hikes

Published

4 days ago

September 19, 2023

Investors King

In a surprising turn of events, revised data released today has revealed that inflation in the Eurozone moderated slightly in August, offering fresh fodder for the ongoing debate within the European Central Bank (ECB) on the necessity of further interest-rate hikes.

The latest figures show that consumer prices increased by 5.2% in August, down marginally from the initial reading of 5.3% while core inflation, excluding volatile elements like food and energy remained stable at 5.3%.

While the ECB recently raised the borrowing costs for the tenth consecutive time to 4%, the new data is reigniting discussions on whether this tightening cycle has concluded.

ECB Vice President Luis de Guindos, along with Madis Muller of Estonia and Peter Kazimir of Slovakia, have expressed their belief that the latest data supports the idea that no more interest-rate hikes are needed.

However, President Christine Lagarde has pushed back against such assumptions, and other hawkish officials from Austria, Latvia, and Slovenia argue that further moves may still be required to combat inflation effectively.

Economists, including Maeva Cousin of Bloomberg Economics, anticipate a marked deceleration in both headline and core inflation for September, potentially offering the ECB’s Governing Council the reassurance needed to assess whether the hiking cycle should indeed come to an end.

As Bank of France Governor Francois Villeroy de Galhau noted, the current rate is a “plateau,” and decisions will hinge on how inflation evolves as the economic “illness” diminishes.

In the face of these ongoing debates, patience remains key, with the ECB closely monitoring economic developments to determine the appropriate course of action for monetary policy.