StatsSA Releases Latest Producer Price Inflation (PPI) Figures
The following producer price inflation (PPI) statistics were published on 28 April by StatsSA, reflecting the inflationary pressures being felt throughout the world.
Final Manufactured Goods
Annual producer price inflation increased to 11,9% in March 2022, from 10,5% in February 2022. The main contributors were:
- Coke, petroleum, chemical, rubber and plastic products increased by 26,8% year-on-year and contributed 6,4 percentage points
- Food products, beverages and tobacco products increased by 7,6% year-on-year and contributed 2,0 percentage points
- Metals, machinery, equipment and computing equipment increased by 13,0% year-on-year and contributed 1,9 percentage points
The month-on-month PPI increased by 2,5%. The main contributors were:
- Coke, petroleum, chemical, rubber and plastic products, which increased by 6,2% month-on-month and contributed 1,6 percentage points
- Food products, beverages and tobacco products, which increased by 2,6% month-on-month and contributed 0,7 of a percentage point
Intermediate Manufactured Goods
- Annual: 18,6% in March 2022, compared with 19,3% in February 2022. Basic and fabricated metals contributed 10,0 percentage points; chemicals, rubber and plastic products contributed 7,6 percentage points; and sawmilling and wood contributed 1,6 percentage points
- Month-on-Month: Increased by 0,4%. Basic and fabricated metals contributed 0,7 of a percentage point, and sawmilling and wood contributed 0,4 of a percentage point
Electricity and Water
- Annual: 13.8% in March 2022, compared with 12.9% in February 2022. Electricity contributed 12,6 percentage points and water contributed 0,9 of a percentage point
- Month-on-Month: Decreased by 0.3%. Electricity contributed -0,3 of a percentage point to the monthly rate
Mining
- Annual: 7,7% in March 2022, compared with 6,4% in February 2022. Coal and gas contributed 6,1 percentage points, and non-ferrous metal ores contributed 1,2 percentage points
- Month-on-Month: Increased by 4,3%. Non-ferrous metal ores contributed 2,6 percentage points, gold and other metal ores contributed 1,2 percentage points, and coal and gas contributed 1,1 percentage points
Agriculture, Forestry and Fishing
- Annual: 14,9% in March 2022, compared with 8,0% in February 2022. Agriculture contributed 14,0 percentage points, fishing contributed 0,5 of a percentage point, and forestry contributed 0,4 of a percentage point
- Month-on-Month: Increased by 3,9%. The main contributor to the monthly rate was agriculture at 3,8 percentage points
The Bounce Back Support Scheme Comes into Effect
The Bounce Back Support Scheme, a loan guarantee mechanism of R15 billion which was first highlighted in the February 2022 budget speech, has come into effect in April 2022.
The scheme will provide loans to businesses with a maximum turnover of R100 million per annum, and has built on lessons learnt from the 2020 Covid-19 Loan Guarantee Scheme to provide for greater take-up of Development Finance Institutions (DFIs) and non-bank Small and Medium Enterprise (SME) finance providers. A complimentary equity linked tool of R5 billion is also expected to be introduced later this year, facilitated by National Treasury and DFI’s.
The maximum loan amount will be set at R10 million per businesses, and a minimum loan amount of R10 000, granted at a preferential capped rate (repo plus 6.5%). In the case of small and medium enterprises, non-bank lenders can provide for a maximum amount of R100 million per non-bank lender subject to the approval of the lender. The loans will be accessible through participating banks, who will also facilitate access to loans from DFIs and non-bank SME finance providers in order to perform due diligence in accordance with regulatory standards.
Loans are required to be repaid over a period of up to five years, after any deferred interest period agreed to by the lenders. In the event of businesses being initially unable to make repayments, lenders will also have discretion over any rescheduling options for up to ten years from the first draw down. Government and lenders are sharing the risk of non-repayment of these loans with government taking the first 20.5% of losses.
South Africa Launches National Green Finance Taxonomy
South Africa’s Sustainable Finance Initiative, chaired by National Treasury, has launched the country’s first national Green Finance Taxonomy in April 2022.
This responds to recommendations from National Treasury’s 2021 Technical Paper: Financing a Sustainable Economy, which calls for the development or adoption of “a taxonomy for green, social and sustainable finance initiatives, consistent with international developments, to build credibility, foster investment, and enable effective monitoring and disclosure of performance.”
The Green Finance Taxonomy reduces uncertainty by providing an official classification that defines a minimum set of assets, projects, and sectors that are eligible to be defined as “green” or environmentally friendly. Investors, issuers and lenders and other financial sector participants can therefore use the taxonomy to track, monitor, and demonstrate the credentials of their green activities in a more confident and efficient way.
The Benefits of the Taxonomy Include:
- Providing clarity and certainty in selecting green investments in line with international best practices and national priorities and standards;
- Helping to unlock large-scale capital for climate-friendly and green investment in South Africa by increasing the credibility and transparency of green activities;
- Reducing financial risks through enhanced management of environmental and social performance;
- Reducing the costs associated with labelling and issuing green financial instruments;
- Supporting regulatory and supervision oversight of the financial sector;
The Intergovernmental Sustainable Finance Working Group, including South African regulatory authorities like the Prudential Authority and Financial Sector Conduct Authority, will provide oversight and governance to update and expand the taxonomy over time, and inform the development of future regulatory instruments.
The working group will also draw on emerging international best practices and approaches, such as the comprehensive global baseline for sustainability‐related disclosure standards led by the International Sustainability Standards Board. These will ensure that investors and other capital market participants have the requisite information on companies’ sustainability-related risks to help them make informed decisions.
The taxonomy’s development has been overseen by a Taxonomy Working Group under South Africa’s Climate Risk Forum, a multi-representative group drawing from the national government, financial sector regulators and the financial services sector, chaired by National Treasury and hosted by the Banking Association South Africa. the IFC, through IFC’s Green Bond Market Development program, in partnership with the Swiss State Secretariat for Economic Affairs (SECO) and the Swedish International Development Cooperation Agency (SIDA) have also provided support, with technical input provided by the National Business Initiative (NBI) and Carbon Trust.
Force Majeure And Property
A general “force majeure” (or “act of God”) clause is often included in lease agreements, and in most cases, its definition is termed broadly. Such a clause will only apply in circumstances which are beyond the parties’ control, which human foresight could not have anticipated, and which make performance in terms of the contract objectively impossible.
Over the past two years, whether the outbreak of Covid-19 and the resulting National Disaster (and lockdown regulations), were categorised as such an event, and thus deemed a “force majeure” depended on each case’s specific circumstances. For example, where furniture and fittings remained on the premises of a restaurant, even although the restaurant was not trading during the lockdown period, the landlord may have been able to show that the tenant had partial or total beneficial occupation, and gained some form of value or benefit from the occupation. The fact that prevailing circumstances (lack of income) made performance (payment of rent) uneconomical or difficult does not necessarily mean that it had become impossible to fulfil the terms of the contract.
For a reduction of rent in these circumstances, due to “force majeure” the determining circumstance is a loss of beneficial occupation as a direct result of the “force majeure”, and not the loss of income used to pay the rent. The reduction in rent would be proportionate to the extent that the tenant has been deprived of the beneficial occupation and use of the premises.
If a lease agreement provides that the premises is being leased for a specific purpose, then beneficial occupation is in relation to that purpose only.
If a lease is entered into or renewed during the “force majeure” event, liability for performance will not be escaped. It is recommended that parties opt to make express provision in their lease agreements for future “force majeure” (or “act of God”) events, such as the Covid-19 pandemic or any future similar events.
In the event that a lease agreement does not contain any clause relating to “force majeure”, then the common law relating to supervening impossibility may come into play. The parties may rely on this principle to suspend their obligations under the agreement, but only if it has become objectively impossible for them to perform under the agreement as a result of this unforeseeable and unavoidable event.
Sincerely,
