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Treasury promises spending restraint despite mining windfall

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National Treasury on Thursday pledged to cut the deficit and curb debt in its mid-term budget, saying it would not commit to new long-term spending despite a windfall from high commodities prices.

Africa’s most industrialised nation was hit hard by the COVID-19 pandemic last year, but its economy bounced back unexpectedly strongly in 2021 as global demand for its exports, such as metals, surged.

The Treasury now sees the deficit at 7.8 percent of gross domestic product (GDP) this fiscal year, versus the 9.3 percent  forecast in the main February budget, and gross debt peaking at 78.1 percent of GDP in 2025/26 versus the 88.9 percent seen in February.

The improved projections were influenced by a GDP rebasing by the statistics agency in August.

The Treasury said it would stick to a disciplined fiscal strategy and set a new target of narrowing the deficit to 4.9 percent of GDP in 2024/25.

The Treasury now sees GDP expanding 5.1 percent this year, compared to the 3.3 percent predicted in February.

“The economy has recovered more quickly than anticipated. Nevertheless, the recent spike in commodity prices, which has supported GDP growth and tax revenues, is considered temporary,” it said in its budget review.

“Government will not commit to new long-term spending in response to temporary revenue windfalls.”

The new pledges come a week after the governing ANC recorded its worst election result since taking power at the end of apartheid, securing less than 50 percent of the vote for the first time amid frustration over poor services and repeated corruption scandals.

The coronavirus crisis has prompted heated debate about whether the country’s already generous social protection programmes should be expanded.

But the Treasury said additional funding for social grants was dependent on revenue outcomes and a decision would be made by the cabinet in time for the February 2022 budget, sticking to the cautious approach for which it has become known.

“In the absence of faster, job-creating growth, it is essential to maintain social protection in a sustainable way,” it said.

The Treasury said it would provide R2.9 billion to state defence company Denel to help it repay part of its debt and that it had provisionally set aside R11 billion for state insurer Sasria in the wake of civil unrest in July.

Duncan Pieterse, a senior Treasury official overseeing asset and liability management, said Denel’s guarantee conditions meant the state had to step in.

Beyond the amounts to Denel and Sasria, the Treasury said there would be no new money for state companies over the medium term.

“We’ve got to practise tough love,” Finance Minister Enoch Godongwana told reporters, referring to efforts to put an end to repeated bailouts to state firms.

Godongwana, who was appointed in a cabinet reshuffle in August, said he was “broadly . . . on the same page” from a fiscal standpoint as his predecessor, Tito Mboweni. – Reuters

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Business

Coca-Cola, government join hands in hunt for young entrepreneurs

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BIZNIZ IN A BOX . . . Coca-Cola Beverages South Africa is running an entrepreneurship competition targeted at young people during the month of June.

Coca-Cola Beverages South Africa (CCBSA), in collaboration with the Free State Department of Economic, Small Business, Tourism and Environmental Affairs (DESTEA) and the Gauteng Department of Economic Development (GDED), has launched an entrepreneurship competition targeted at young people during the month of June.

CCBSA says this youth month, young people with a South African identity document stand a chance to win with CCBSA in partnership with DESTEA and GDED.

The competition, which was launched this week on Lesedi FM, allows listeners who qualify to do a 90-second business elevator pitch live on the Thakgoha Show.

The best presentation chosen by the panel stands a chance to win one of the 10 mobile kitchens valued at R82 000 each.

This competition will run until June 30 on the show.

To be considered for the Bizniz in a Box programme, candidates must be South African and aged 18-35 years old with at least one year of entrepreneurial experience.

Ideally, each applicant’s business should address the needs of the local community like convenience stores, fast-food stores, car washes and shisanyamas.

CCBSA says the collaboration is aimed at tackling the country’s worsening unemployment rate which stands at 34.5 percent for the first quarter of 2022, an all-time high.

The jobless rate for the youth is a staggering 63.9 percent.

It says while the country is slowly emerging and recovering from the devastating effects of the COVID-19, the number of employed people across both formal and informal sectors remains around 1.8 million below the level reached before the onset of the pandemic in March 2020.

“This is an untenable situation and, as CCBSA, we believe in using our industry leadership to be part of the solution to achieve positive change in the country and build a legacy that we can be proud of,” CCBSA managing director Velaphi Ratshefola said in a statement.

He said this has inspired the company to put strong emphasis on economic inclusion, particularly of young people through its Bizniz in a Box (BiB) initiative.

“There is no single entity that can manage this challenge on its own and we are proud to collaborate with the provincial governments to co-create sustainable solutions that will empower young people,” he said.

Ratshefola said the decision to partner with the Free State and Gauteng governments since 2016 was a natural progression towards working jointly to alleviate youth unemployment.

“Through our collaboration to empower small, micro, and medium enterprises (SMMEs) by setting them up in business, we can go further and also provide incubation and support through training and resources to ensure they grow their businesses, to create livelihoods for themselves and other young people. This can change the quality of their lives,” he explained.

During the tabling of his 2022/2023 budget speech, DESTEA MEC Makalo Mohale said: “Key challenges facing the Free State economy remains lack of regulations, barriers to entry, ownership patterns and insufficient access to financial and non-financial support to SMMEs.”

Makalo said DESTEA entered into this partnership with CCBSA because it believes this is a giant step towards youth development, growth, and investment in the province.

Previously, the department supported Free State SMMEs financially and non-financially through its different programmes designed to resuscitate and revitalise the provincial economy.

The MEC said the department is committed to continuing its support and partnering with the private sector to support SMMEs for sustainability, job retention and job creation.

The Bizniz in a Box initiative could not have come at a more opportune time as the Gauteng provincial government uses the month of June to put the spotlight on the province’s youth.

Gauteng Economic Development MEC Parks Tau said: “The department is excited about this initiative and encourages young people in Gauteng to take advantage of it and other programmes aimed at youth empowerment offered by the province, such as Tshepo 1 Million.”

Tau stressed that this was but one among many programmes that would be rolled-out throughout the youth month aimed at connecting young people to opportunities provided by government and the private sector.

In 2021, the initiative supported 118 entrepreneurs across Gauteng and the Free State and the plan is to integrate 135 businesses in 2022 in Maluti-A-Phofung, Dihlabeng, Ngwathe and Setsoto local municipalities as well as the cities of Johannesburg and Ekurhuleni.

“With the staggering statistics, we need to be deliberate about listening and responding to what our communities need. BiB is by no means a handout but rather, a holistic support that will enable them to build their businesses and move to the next level or entrepreneurship,” CCBSA public affairs, communication and sustainability director Nozicelo Ngcobo said.

Bizniz in a Box is dedicated to creating opportunities for young people and integrating them in the economy.

The ultimate aim is to contribute towards revitalising township economies and supporting the country’s development agenda.

It is created to transform aspirant entrepreneurs into fully fledged business owners who can build businesses, create jobs, and provide a livelihood for themselves and others.

For the last six years, CCBSA’s Bizniz in a Box has contributed meaningfully to reducing youth unemployment by partnering with national and provincial governments, local municipalities and development finance institutions.

These partnerships have enabled entrepreneurs to develop businesses, improve their skills, access capital, improve supply chain development and inspire hope. To date, the initiative has trained over 700 entrepreneurs. – Staff Reporter

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Economy

Free State records another drop in unemployment rate

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JOBLESSNESS DECREASES . . . The Free State’s unemployment rate has dropped from 36.7 percent to 31.1 percent.

The Free State’s official unemployment rate for the first quarter of this year has dropped by 5.6 percentage points from 36.7 percent to 31.1 percent.

This is the second consecutive decrease since September last year when the province recorded a 38.1 percent unemployment rate.

The Quarterly Labour Force Survey Report released by Statistics South Africa on Tuesday also says Free State employment increased by 54 000 from 727 000 in the last quarter of 2021 to 781 000.

The expanded unemployment rate for the province however remains high at 40.5 after it fell by 3.7 percentage points to 44.2 percent.

The expanded unemployment rate includes people who have given up looking for work and are not studying or undertaking any form of training either.

Statistician-General Risenga Maluleke said in the report the Free State was among the provinces that recorded the highest drops.

“The largest decreases were recorded in Free State . . . followed by North West (down by 3.7 percentage points), Western Cape (down by 2.8 percentage points) and Mpumalanga (down by 1.1 percentage points),” he said.

Maluleke said Limpopo however recorded the largest increase of 1.7 percentage points, followed by KwaZulu-Natal (up by 0.8 of a percentage point) and Gauteng (up by 0.1 of a percentage point).

Nationally, the official unemployment rate fell by 0.8 of a percentage point from 35.3 percent in the fourth quarter of 2021 to 34.5 percent in the first quarter of 2022.

Using the expanded definition of unemployment, the rate also decreased by 0.7 of a percentage point to 45.5 percent over the same period.

The Nedbank Economic Unit said in a statement the annual numbers showed that the economy has not yet recovered enough to support a significant increase in employment creation, as the unemployment rate remains high.

It said nationally, the performance of different industries was mixed.

The highest number of jobs was created in community and social services, 281 000, and manufacturing, 263 000.

Employment also increased in domestic trade and mining.

Employment in the domestic trade sector was mainly lifted by firmer activity in the hotel and tourism industries.

Private households lost the highest number of jobs, 186 000, over the quarter.

Agriculture, construction and finance also reduced workers.

“The outlook for the job market remains uncertain. The economy had started the year positively, with corporate profitability recovering,” said Nedbank.

“However, the recovery is now threatened by concerns about global stagflation – the dilemma of high interest rates, slow economic growth, and high unemployment.

“Conditions in the sectors that supply the export market are likely to remain subdued as global demand will be restrained by the slowdown in China’s economic growth, the impact of the Russia-Ukraine war, and tighter monetary policy,” said Nedbank. – Staff Reporter

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Free State unemployment drops

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Staff Reporter

The official unemployment rate in the Free State dropped 1.4 percentage points from 38.1 percent to 36.7 percent between the third and fourth quarters of 2021, Statistics South Africa (Stats SA) has revealed.

This means the province now has over 727 000 people who are employed compared to the third quarter which had 720 000 people.

The Free State has a population of about 2.9 million people.

In its Quarterly Labour Force Survey, Stats SA said the expanded unemployment figure for the province — which includes discouraged jobseekers — fell by 1.6 percentage points from 45.8 percent in the third quarter to 44.2 percent in the fourth quarter.

The Free State now has the third highest official unemployment rate after the Eastern Cape which stands at 45 percent and Mpumalanga with 39.7 percent.

Statistician General Risenga Maluleke said in the report the country’s unemployment rate now stands at 35.3 percent.

“The official unemployment rate increased by 0.4 of a percentage point to 35.3 percent in the fourth quarter of 2021 compared to the third quarter,” said Maluleke.

“The official unemployment rate increased in five provinces,” he added.

The largest increases were recorded in KwaZulu-Natal (up by 3.7 percentage points), followed by Mpumalanga (up by 2.2 percentage points), Western Cape (up by 1.7 percentage points) and Limpopo (up by 1.4 percentage points).

Nationally, the working-age population increased by 143 000 or 0.4 percent in the fourth quarter of 2021 compared to the third quarter of the same year.

Compared to the fourth quarter of 2020, the working-age population increased by 578 000 or 1.5 percent.

The number of employed persons increased by 262 000 to 14.5 million in the fourth quarter of last year.

The number of unemployed persons increased by 278 000 to 7.9 million compared to the third quarter of last year, resulting in an increase of 540 000 or 2.5 percent in the number of people in the labour force.

The number of discouraged work-seekers decreased by 56 000 or 1.4 percent.

Most jobs were created in trade and personal services, nationally, where employment increased by 118 000 and 129 000, respectively.

The mining, agriculture and community and social services also added jobs, while manufacturing, construction, utilities and transport reduced employment.

The Nedbank economic unit said in a commentary that the increase in community and social services could be a reflection of a spike in temporary jobs to manage the municipal elections in November last year.

It said employment in the domestic trade sector was lifted by increased activity in the hotel and tourism industries due to more lenient lockdown restrictions.

According to Nedbank, the annual numbers suggest that the economic recovery has not been strong enough to support employment creation.

“Most of the key indicators suggest that the economy is slowly mending,” it said.

“However, the pace of recovery has been too slow to translate into sustainable employment creation.

“Unfortunately, the outlook for the job market remains uncertain.

“The worst of the pandemic seems to be over, which implies that lockdown disruptions would be minimal.

“This, together with ongoing economic reforms, should lift business confidence, encourage investment spending and ultimately support employment growth.

“However, the unemployment rate will remain structurally high in the short term because the economy is still facing many long-term challenges that are hindering jobs growth.”

Nedbank said fundamental structural deficiencies, such as electricity shortages and policy challenges, could take years to resolve and possibly limit growth in private sector investment.

“Employment by the government will be limited by significant budget constraints,” said the bank’s economic unit.

“A large number of discouraged workers will also increasingly return to the job market as economic activity improves.

“All these factors will keep the unemployment rate elevated throughout 2022.”

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