Latest news with #Sprake
IOL News
13-05-2025
- Business
- IOL News
Dreams of 3% growth and a million jobs unravel as unemployment soars past 32%
South Africa's ambitious goal to grow its economy by 3% this year and create a million jobs faces significant hurdles, as structural economic issues lead to rising unemployment rates South Africa's grand ambitions – through a business and government partnership – to grow the economy 3% this year and, by doing so, create a million jobs is simply not happening as structural economic issues are hindering job creation prospects. In fact, in the first three months of the year, 291,000 people lost their jobs quarter-on-quarter while there was an increase of 237,000 in the number of unemployed people. This has taken the unemployment rate to 32.9%, up from the last four months of 2024 when it was 31.9%. The overall unemployment rate, which includes discouraged job seekers and is a truer measure of the job situation, went from 41.9% to 43.1% over the same quarter-on-quarter analysis, Statistics South Africa said on Tuesday. Dr Elna Moolman, Standard Bank group head of South Africa Macroeconomic Research, said on the back of the data release that 'the quarterly labour force survey reflects a rather bleak picture of employment in South Africa'. Concurring, Anchor Capital economist Casey Sprake said that 'it is clear that South Africa continues to grapple with a relentless rise in unemployment, casting a shadow over the country's recovery efforts'. Frank Blackmore, lead economist at KPMG, added job losses are also a reflection of the cost-of-living pressures as well as the sluggish growth rate of the South African economy. He added that interest rate reductions before year-end could help support economic growth and halt job losses. As an alternative, Blackmore said the country will require attracting greater investment and allowing the private sector economy to create jobs through policy changes that will support the economy's underlying infrastructure. The country's 'unemployment problem is a complex and multifaceted issue that requires sustained and coordinated efforts from all sectors of society to create inclusive and sustainable employment opportunities for all South Africans,' said Sprake. Yet, the current unemployment rate compares well with the record high of 35.3% seen in the fourth quarter of 2021 in the direct aftermath of COVID-19. South Africa saw record low unemployment rate of 21.50 percent in the fourth quarter of 2008, according to Trading Economics data. Sprake said that 'while recent key reform measures point to a more positive trajectory, this progress has not yet trickled down to many South Africans in the form of job opportunities'. Ideally, South Africa should have a gross domestic product growth rate of 3% a year to have what Sprake called 'material job creation'. Last year, the economy grew at 0.6% and Moody's most recent expectation is for it to gain 1.5% this year – a 0.2 percentage point decrease from its previous prediction. 'The economy is simply not growing at an adequate rate to sustainably boost long-term employment prospects for South Africans,' said Sprake. Moolman added that 'we need to grow the economy to justify further employment growth'. Citing issues such as a skills gap, a rigid labour market, and the lingering impact of the COVID-19 pandemic, she said these structural problems have exacerbated unemployment rates, especially among the youth. Statistics South Africa specifically noted that those aged between 15 and 34 years are still the most vulnerable when it comes to the job market, with both work losses and an increase in unemployed youngsters pushing that unemployment rate up to 46.1% from 44.6% quarter-on-quarter. Sprake said, as the economy expands, 'the persistent lack of jobs threatens to widen the inequality gap, undermining social stability and eroding the gains of recent economic advancements'. Many South Africans are simply unable to find jobs, said Sprake, because of a combination of structural deficiencies, such as a lack of skills, limited access to quality education and training, and inadequate job creation. IOL
IOL News
24-04-2025
- Business
- IOL News
VAT reversal: Govt's R75bn hole will affect essential services and developmental objectives
Government will now have to find some other way of plugging a revenue hole of at least R75 billion after bowed to pressure and scrapped an increase in VAT. Government will now have to find some other way of plugging a revenue hole of at least R75 billion after it bowed to pressure and scrapped an increase in Value Added Tax (VAT), which economists said will have adverse effects on essential services such as teaching and nursing. Seemingly overnight, National Treasury reversed course on a proposed 0.5 percentage point increase in VAT, which would have taken the tax to 15.5%. Finance Minister Enoch Godongwana's reversal means that other measures to cushion the poor against the proposed hike will have to be reversed, while 'other expenditure decisions [will need to be] revisited,' the statement said. Old Mutual chief economist, Johann Els, said the fact that VAT would not be increased 'was not necessarily a win because R75 billion needs to be made up in some other way'. This, said Els, could take the form of 'significant cutbacks in spending that was planned, especially in terms of extra nurses and extra teachers, or some of the revenue components that were announced in terms of mitigating the pain of that for taxpayers'. Els said some of the changes could include a petrol levy increase, while there might also be a reversal of additional goods being added to the VAT exempt basket. In the March 12 National Budget – the second tabling of the revenue and expenditure framework after the February one wasn't passed – National Treasury said it would expand the list of VAT zero-rated food items to include more meat and vegetable products. Casey Sprake, economist Anchor Capital, told IOL that scrapping the VAT increase introduced a range of fiscal and economic challenges. While welcome news for consumers, it resulted in a significant deterioration of South Africa's fiscal position, she said. 'Crucially, the social support measures that were designed to mitigate the regressive impact of the VAT hike – particularly for lower-income households – are now redundant and will likely be withdrawn. In their place, the government will need to identify alternative areas for fiscal adjustment, many of which may come at the expense of key developmental priorities,' said Sprake. Sprake added that National Treasury will be compelled to implement expenditure cuts. These are most likely to affect frontline public services and infrastructure investment, which are sectors already under considerable pressure. Els said that the proposed increase wouldn't have been materially negative in terms of consumer spending or inflation, given measures to assist the poor. However, Investec chief economist Annabel Bishop had worked out that a 50bps increase this year as well as one in 2026 would have increased inflation by 0.25 percentage points for each year. Inflation was 2.7% in March, down from 3.2% in February as it continued a declining trajectory. Sprake added that there would be hidden costs for businesses that had begun updating their pricing systems, financial models, and customer communication strategies to accommodate the VAT change. They would now need to 'undertake the same process in reverse,' she said. 'These operational disruptions translate into unnecessary compliance costs, lost productivity, and added complexity for the private sector; costs borne not by the state, but by the broader economy,' said Sprake. The South African Chamber of Commerce and Industry said in a statement that 'we are not yet convinced that enough expert work has been undertaken to investigate and look at expenditure throughout the government service'. Sprake added that 'this episode underscores a recurring concern: the economic cost of policy uncertainty and reactive governance.' National Treasury's backtracking of an increase followed the start of a court case on Tuesday in which both the Democratic Alliance and Economic Freedom Fighters – political polar opposites – took Godongwana as well as the South African Revenue Service to court to get the increase reversed. The parties had argued that the increase would harm the poor. IOL Business
Yahoo
16-04-2025
- Business
- Yahoo
Farmers warn of continued food price hikes due to multiple factors beyond their control: 'Food inflation could increase'
Has your grocery bill left you shocked lately? Across the globe, food prices are rising. In places like South Africa, the increases are sharp and with no end in sight, making it harder for some households to make ends meet. The latest numbers from the Pietermaritzburg Economic Justice and Dignity Group's Household Affordability Index paint a clear picture of the struggle many families are facing. Founded in 2018 "in response to the unjust and unequal political economy of South Africa," according to their website, the organization publishes the HAI monthly. The report analyzes "the average cost of the foods prioritised and bought first in the household food basket," per the South African outlet Independent Online. From December 2024 to January 2025, the report shows that the average cost of essential foods rose by 1%, an increase of 28.49 rands (roughly $1.44 USD at the time of publish), according to IOL. The outlet also noted an increase from the same time last year of 3.5% or R99.07 (around $5.02 USD) for the same grocery basics. Meanwhile, per IOL, the National Agricultural Marketing Council reported a 0.6% increase on the items in its own food basket between November 2024 and December 2024. Extreme weather events are playing a significant role in escalating food prices around the world. Economist Casey Sprake told IOL, "Weather events such as El Niño led to a drop in maize production, primarily white maize, which saw the price hike due to lower local supply and higher demand from Southern Africa." El Niño reportedly charged a record-breaking drought in the region throughout much of 2024, devastating harvests in multiple Southern African countries. To zero in on just one crop, the country has ranked first in Africa and 11th globally in maize production, according to a 2024 report from Business Insider. Hits to this food's production are not inconsequential: The corn industry is a major employer in the region, and corn is a staple locally as well as in many cultures around the world. Indeed, rising food prices are a global problem. Tea, similarly, is a diet staple, a source of employment, and an important export for Turkey, where drier and hotter conditions have recently threatened its yields. Rice harvests have been jeopardized by extreme heat and flooding in Japan and Sri Lanka, respectively — the crop being of cultural and economic significance in both countries. Do you worry about how much food you throw away? Definitely Sometimes Not really Never Click your choice to see results and speak your mind. IOL also spoke with Sprake about meat prices, which he said are influenced by "animal diseases, exchange rates, and seasonal supply fluctuations." It's worth noting that disease spread itself can be compounded by environmental factors, including volatile weather. It might seem easy for some to shrug off a few extra dollars here and there, but these price surges signal much bigger issues. For South African households already facing financial strain, higher grocery bills may only add to the burden. "If pressure on the local currency intensifies, food inflation could increase, as imported goods and global commodity prices would become more expensive," Sprake said. The rising cost of living also highlights the fragility of the country's food systems, which are increasingly vulnerable to extreme weather events and fluctuations in global markets. If these trends continue, more people will struggle to afford basic necessities, contributing to more widely felt food insecurity and economic instability. While the future of food prices remains uncertain, there are efforts underway to help stabilize costs. Local agriculture initiatives and smarter supply chain management are at the forefront of these efforts. Supporting sustainable farming practices and policies that can strengthen local food systems will be essential to keeping prices down and buttressing food security. On a personal level, buying local and supporting farmers in your community can make a real difference. To tackle the root causes — like climate disruptions and currency fluctuations — governments and communities alike need to step up. As we move forward, it's clear that price increases are just one more example of how unchecked heat-trapping pollution and the extreme weather it causes are pushing our planet — and our wallets — closer to the edge. Join our free newsletter for easy tips to save more and waste less, and don't miss this cool list of easy ways to help yourself while helping the planet.
