Author: Midcham Newsletters

Slightly Improved Trade Expectations

Trade conditions improved marginally in August 2019 although conditions remained tough. Expectations for the next six months suggest further improvement of present trade conditions.

The seasonally adjusted Trade Activity Index (TAI) improved – about a similar level as in August 2018. The seasonally adjusted Trade Expectations Index (TEI) which improved in August 2019 was better than in August 2018. Respondents expect all trade activity components in the next six months to improve except for sales prices.

Higher sales and input prices in August 2019 were a result of the severe trade conditions, which exerted more pressure on businesses to remain profitable. The slightly lower input prices (costs) continue to put pressure on profitability.  Reduced trade activity caused the backlog on orders to decline notably although stock levels rose as supplier deliveries increased in August 2019.

Apart from trade activity components, respondents mentioned that clients either are not honoring payments or pay late. The weak rand negatively influenced some high import propensity sectors while benefiting some exporters. The notable higher tariffs on water and electricity continue to impact trade costs.

The employment sub-index increased from 40 to 44 index points in August 2019.  Expected employment conditions improved as the sub-index on employment expectations rose to 43 from 36 in July 2019.

Gauteng E-Tolls

BUSA has in previous years recognised the “user-pays” principle as a necessary and proportionate funding mechanism for infrastructure projects, especially where fiscal constraints militate against direct fiscal support. However, BUSA has equally recognised that the adoption of the “user-pays” principle, insofar as the Gauteng Freeway Improvement Project (GFIP) is concerned, was an inefficient choice under the circumstances.

This is not to say, however, that business did not support the upgrades to Gauteng’s highway system or that industry denies the significant economic and social benefits accruing from improved infrastructure. Indeed, business consistently maintains that investing in world-class infrastructure, including roads, not only directly benefits the economy through positive second-round effects (i.e. generating greater efficiencies), but also has the potential to serve as a significant impetus for economic growth in its own right.

The option of the fuel levy (itself a variation on the “user pays” principle) remains both viable and economically sound, with a fuel levy increase of between R0.11 – R0.26 per litre needed to repay the GFIP Bond (including interest) over the next 20 years. In BUSA’s view, increases in the fuel levy to fund the GFIP should be ringfenced to ensure its allocation as intended.

Considering the above, BUSA strongly urges the government to abandon e-tolling as the funding mechanism for the GFIP. It is the view of business that the system has proven unworkable and introduced economic distortions that prejudice compliant businesses. BUSA proposes that the GFIP be funded – where alternative savings within the current expenditure ceiling are possible – through allocations from the fiscus. Any shortfalls from reprioritised government expenditure may be funded through moderate increases in the fuel levy, which remains an administratively and economically efficient mechanism to collect revenue.

BUSA further urges government to work with speed in moving towards an alternative funding model for the GFIP, a move which would go considerable distance in signalling to the market government’s ability and resolve to change course for the benefit of the economy.

Changes to the COID

The NEDLAC Task Team on the Compensation for Occupational Injuries & Diseases (COID) is currently engaged in the proposed Regulations on the New Rates Assessment Model in terms of the COID Act.

The Compensation Fund (the Fund) assesses employers based on the industry they operate in and they are assigned to a specific assessment class for the basis of determining their liability to the Fund (this is the annual assessment fee paid by employers to the Fund for “insurance” for occupational injuries and diseases).

The Fund is in the process of revising its Rates Assessment Model, in terms of which the number of classes has been significantly reduced (from 102 categories) with new assessment rates for each of the new proposed classes.

The new proposed classes have been tabled at NEDLAC for social partners to engage in. A copy of the draft Rates Assessment Model (which has not yet been made public and has only been shared with NEDLAC social partners for engagement), with the new reclassification, is attached to this e-mail.

The Rates Assessment Model will, for some industries, have financial implications in that it has been proposed that some assessment rates be increased significantly and it is therefore important that members give due consideration to the attached.

Members interested in more information or that would like to submit comments to assist the Business Task Team in developing mandated position for the NEDLAC engagements, should contact Letitia Saayman at secretary@middelburginfo.com.

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