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South African rand sharply drops as Russia attacks Ukraine
JOHANNESBURG (Reuters) – The South African rand opened sharply weaker on Thursday, as investors dumped riskier assets after Russian forces attacked Ukraine.
Investor sentiment was also dampened by Fitch Ratings pointing to difficulties containing spending and warning that recent strong revenue growth may prove temporary, in response to Wednesday’s 2022 budget.
At 0555 GMT, the rand traded at 15.2800 against the dollar, around 0.9% weaker than its closing level on Wednesday.
Global stocks dived, while the dollar, gold and oil prices rocketed higher.
Overnight, Russian President Vladimir Putin authorised what he called a special military operation in eastern Ukraine but Ukraine’s Foreign Minister Dmytro Kuleba said on Twitter that Russia had launched a “full-scale invasion”.
Around 0930 GMT, Statistics South Africa will release the January producer price index (PPI), providing further clues about inflationary pressures in Africa’s most industrialised economy. Economists polled by Reuters predict PPI will ease to 10.5% from 10.8% in December.
From 1030 GMT onwards, Finance Minister Enoch Godongwana will address lawmakers on the budget, which forecast public debt would peak sooner and at a lower level than earlier expected.
(Reporting by Alexander Winning; Editing by Rashmi Aich)
Image credit: Flickr
Top News of the Day: The war has begun
Russia has initiated an attack on Ukraine’s military sites.
Russian troops have invaded Eastern Ukraine while large explosions can be heard in the main cities.
According to Bloomberg, “Russia confirmed it was targeting military facilities across the country, including airfields and anti-aircraft systems. The government in Kyiv called it a “full-scale invasion” and President Volodymyr Zelenskiy imposed martial law.”
Russian President Vladimir Putin said “he had ordered a military operation to support separatists in the Donbas region of eastern Ukraine, and claimed he did not plan to occupy the country.”
Western politicians, including US President Joe Biden, promptly lambasted Putin, promising “severe sanctions would now follow”.
South Africans are still in complete shock following the unexpected death of Riky Rick.
Tributes continue to pour in for the late rapper, fashion designer and entrepreneur Rikhado Muziwendlovu Makhado, known professionally as Riky Rick.
On Wednesday afternoon, family spokesperson, Sheikani Makhado released a statement.
The statement read:
“Son, husband, father, brother and uncle, Riky ‘Ricky’ Makhado (34) sadly passed away in the early hours of this morning (February 23) in Johannesburg.
Affectionately known as Riky Rick across the globe, he was deeply loved by his family, friends and the entire entertainment industry. His love for family, friends, and community is well known. Riky’s nurturing and developing of young musical talent is well documented and will forever be remembered.
He leaves behind his wife, two children, mother, and five siblings.”
The Makhado family has requested privacy during the difficult time of mourning. Details of the funeral and memorial will be confirmed in due course.
Here are the top trending stories of the day.
Headline: Russia’s Putin announces military operation in Ukraine – EWN
Headline: Riky Rick’s family ask for prayers and privacy as they confirm his death – Times Live
Headline: World condemns Putin’s ‘thuggery’ after Russia launches military operation in Ukraine – Global News
Headline: Connie Ferguson, Pearl Thusi ask for more kindness after Riky Rick’s death – The Citizen
Headline: Liverpool put six past Leeds to cut Man City’s lead, Spurs stunned by Burnley – News24
Headline: Man United escape with a draw after Anthony Elanga pegs back Atletico Madrid – News24
Headline: R3 trillion club loses last member as Elon Musk’s wealth tumbles – Bloomberg
Headline: ‘It went well!’ – Amanda Du Pont recovering in hospital after breast augmentation surgery – African Insider
Image credit: Wikimedia Commons
Winners and Losers: Who Pays and Who Gains in South Africa’s Budget
(Bloomberg) – South Africa’s Finance Minister Enoch Godongwana, six months into the job, presented a budget that backs up President Cyril Ramaphosa’s focus on businesses in a bid to add jobs.
The minister announced some tax relief to boost investment and consumer spending, which should help stimulate the economy. However, he had to balance that with measures to stabilize and eventually reduce government debt.
Here’s a short list of winners and losers from Wednesday’s budget announcements.
Winners:
Corporates:
Godongwana followed through on a pledge first made two years ago to cut tax for companies. The reduction in the rate — to 27% from 28% for the year starting April 1 — is the first since 2008. The move that will cost the government 2.6 billion rand in revenue for 2022-23 should boost investment and reduce tax avoidance. It also brings South Africa closer to the Organisation of Economic Co-operation and Development’s average corporate tax rate of 23%.
In a further step to spur companies to help employ young people in a country with a youth unemployment rate of 56%, the government will increase an employment tax incentive by 50% to a maximum of 1,500 rand ($99.70) per month.
Big Emitters:
The Treasury will extend the first phase of its carbon tax by three years until December 2025. That means companies such as Sasol Ltd. and the state-owned Eskom Holdings SOC Ltd. can benefit longer from tax-free allowances and revenue-recycling measures. The carbon price, though, will rise progressively each year.
Motorists:
Car owners, users of public transport and other consumers will get some relief from the Treasury not increasing the fuel and Road Accident Fund levies for the first time since 1990. The cost of a liter of fuel rose about 40% last year due to the rebound in oil prices, pushing consumer inflation to the highest level in almost five years. Taxes make up a third of what motorists pay at the pump.
Middle-Income Taxpayers:
Tax brackets will be increased in line with the 4.5% inflation the Treasury projects for the 2022-23 fiscal year, shielding people who pay personal income levies from so-called “bracket creep.”
Below-inflation adjustments to personal income tax brackets and fuel levies are usually an easy source of extra revenue for the state.
The relief is mainly targeted at people in the middle-income group, the Treasury said.
Welfare Recipients:
Monthly social grant payouts to pensioners, military veterans and people with disabilities will increase by 5%, compared with only 1.6% last year. The child support grant will rise by 4.3%. Millions of people rely on these payments as their only source of income and the adjustment should boost consumer spending.
Losers:
State Workers:
Civil servants will have to accept the Treasury’s hard line on pay increases or face possible retrenchment. The budget shows total compensation will only grow by an annual average of 1.8% for the next three years and while it allocates 20.5 billion rand in 2022-23 to meet the cost implications of a 2021 wage deal, there is no extra funding provision beyond that. This could anger labor unions representing the 1.3 million people employed by the government.
The Wealthy:
People with business interests who pay provisional tax and who have assets worth more than 50 million rand will have to start declaring specified assets and liabilities at market values in their tax returns.
The Treasury says this will “assist with the detection of non-compliance or fraud through the existence of unexplained wealth,” which means the super wealthy may end up paying more.
Sugar Producers:
The struggling sugar industry could face further reduction in demand when the health promotion levy on sweetened drinks increases by 4.5%. That could hurt companies such as Tongaat Hulett Ltd. The government will also start consultations to lower the tax threshold for sugar content and extend the measure that was first announced in the 2017 budget to fruit juices.
Alcohol and Tobacco Industry:
An increase of 4.5% to 6.5% in excise duties on alcohol will add extra pressure to an industry that was hit hard by some outright sale bans and more than two years of trading restrictions as part of South Africa’s Covid-19 regulations.
In addition to increases of 5.5% to 6.5% in the levies on tobacco products, the government proposed a flat excise duty on nicotine and non-nicotine solutions. That will add to the price of vaping products.
© 2022 Bloomberg L.P.
