- South Africa to Raise VAT for First Time in 25 years
South Africa will increase value added tax (VAT) for the first time in over two decades, the Treasury said on Wednesday.
The Finance Minister, Malusi Gigaba, said while presenting the budget plan before parliament that VAT would increase to 15 per cent from 14 per cent effective April 1.
VAT had remained unchanged since 1993.
“This is a tough, but hopeful budget,” Gigaba said.
“We decided that increasing VAT was unavoidable if we are to maintain the integrity of our public finances.”
A VAT hike ran the risk of adding a heavy financial burden on the poor, but Gigaba said poor households would be cushioned through a zero-rating of basic food items such as maize meal and beans.
The Treasury said the budget deficit was seen narrowing to 3.5 per cent of gross domestic product (GDP) by 2020 from 4.3 per cent in the 2017/18 fiscal year.
Expert said the increase was President Cyril Ramaphosa’s government aim to cut the budget deficit and stabilise debt after years of slow economic growth.
Ramaphosa took over as leader of South Africa last week after Jacob Zuma stepped down on orders of the ruling African National Congress, bringing to an end nine years of corruption scandals and economic mismanagement.
Zuma has denied all wrongdoing.
The rand extended gains to 0.81 per cent against the dollar, government bonds firmed, while retail shares on the stock exchange due to the new three years budget outlay.
Crude Oil Rises Above $43 Per Barrel on Improved Demand
Crude Oil Rose Above $43 Per Barrel on Improved Demand
Global oil prices surged on Wednesday as global demand for the commodity improved.
The Brent crude oil, against which Nigerian crude oil is priced, increased from $42.68 per barrel it traded on Tuesday to $43.48 per barrel on Wednesday during the New York trading session.
The surge in prices was after OPEC and allies, known as OPEC plus, announced on Wednesday that they would restore part of capped crude oil production back to the oil market next month.
“As we move to the next phase of the agreement, the extra supply resulting from the scheduled easing of production cuts will be consumed as demand continues on its recovery path,” Saudi Energy Minister Prince Abdulaziz bin Salman said at the start of an OPEC+ video conference on Wednesday. “Economies around the world are opening up, although this is a cautious and gradual process. The recovery signs are unmistakable.”
OPEC plus had capped production by 9.7 million barrels per day in April and later reduced it to 7.7 percent earlier this month as more economies reopened for operations.
However, while the number of new COVID-19 cases continues to surge in the United States, the world’s largest economy, OPEC plus said demand for its commodity has risen in recent weeks, hence, the need to increase oil production.
South Africa’s Inflation Dips to 15 Year Low of 2.1% in May
South Africa’s Inflation Rate Declines to 15 Year Low in May
South Africa, Africa’s second-largest economy, said its inflation rate moderated to a record 15-year low in the month of May.
According to South Africa’s national statistics agency, Consumer Price Index, which measures inflation rate, moderated to 2.1 percent year-on-year, below the 3 percent to 6 percent range targeted by the central bank.
This, experts attributed to drop in fuel cost and the slow down in general spending due to COVID-19 lockdown.
Busisiwe Radebe, an economist with Nedbank, said “This number won’t be a surprise to the Monetary Policy Committee (MPC). Inflation will have to surprise in a major way to what they have in their forecasts. What they will be concerned about most is growth.”
In May, the nation’s central bank had lowered the interest rate to a record low of 3.75 percent to stimulate the recession and lockdown ravaged economy. The bank did strike a cautious tone, warning monetary policy alone could not spur economic growth.
“At the May meeting, the feeling was the bank had reached the trough in rate cuts. So they’ll probably hold rates,” Radebe said. He added that a shift in the central bank’s 7 percent GDP contraction would be key indicator.
Barclays Tell High Net Worth Investors to Shun Africa and Other Emerging Economies
Barclays to High Net Worth Clients, Stay Off Africa and Other Emerging Economies
Barclays, one of the world’s largest investment banks, has started advising high net worth clients to stay off Africa and other emerging economies.
According to Barclays, despite the recent recovery noticed in emerging-market stocks, investors are better off avoiding the risks that still abound in emerging nations. Barclays Plc, however, advised high net worth clients to focus on U.S equities despite the S&P’s breakneck rally.
The investment bank said emerging economies do not have enough fiscal buffers to spend their way out of the COVID-19 pandemic and will likely continue to struggle in the near-time compared to the US with 12 percent of gross domestic product fiscal-support.
It said the huge US stimulus may halt rebound in emerging-markets stocks as more money is expected to flow into the world’s largest economy and its European counterparts.
“Compared to the U.S., emerging-market economies appear more vulnerable,” said Haider, the London-based managing director and head of global growth markets. “Their central banks have less room to maneuver, their governments may not be able to provide unlimited support and equity markets, given their sector mix, can be more challenged by an economic slowdown.”
Barclays added that even after 33 percent rebound in stocks of emerging markets since the panic selloff subsided in March, stocks are still down by 9 percent from year-to-date while the US S&P 500 stocks are up by 45 percent. Presently, their stocks trading at a 36 percent discount to US stocks, up from 25 percent three months ago.
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