Economy & Business News – 06 May 2024

ECONOMY & BUSINESS

• The global oil group Shell is planning to exit South Africa, according to the reports in the Sunday Times and the City Press. The global group will divest its 72% stake in Shell Downstream South Africa. This has led to conflict with Thebe Investments, the BEE partner in South Africa, the value of its remaining 28% stake in the company, estimated by them at R3.7bn. Shell has over 600 forecourts in South Africa and has been granted exploring rights by the Department of Mineral Resources and Energy. It has been operating in South Africa for over a century. Shell’s reported exit comes as other major global brands and companies tied to foundational industries in the country raise doubts about the viability and prospects of investment in South Africa. The Shell company and the department did not comment on the move, telling both papers that they do not comment on speculation, and that engagements with shareholders are confidential. (Source)

• The latest South Africa Fund Manager Survey (SAFMS) conducted by Bank of America Global Research revealed that South African fund managers believe there will be a rally in local stocks after the 29 May elections, with banks, metals and mining, and tech sectors being favoured. Respondents to the survey predict that, over the next twelve months, equities are expected to yield 15%, with R2035 bonds at 20% and cash at 9%. The survey found a notable increase in bond bulls and a decrease in cash bulls. It also indicated an overweight sentiment towards cash, bonds, equities, banks, health, and tech sectors. (Source)

• New vehicles aggregate domestic sales in April 2024, at 38,172 units, reflected an increase of 814 units, or a gain of 2,2%, from the 37,358 vehicles sold in April 2023. Export sales recorded a decline of 7,355 units, or 23,9%, to 23,394 units in April 2024 compared to the 30,749 vehicles exported in April 2023. Overall, out of the total reported industry sales of 30,057 vehicles, an estimated 39,016 units, or 89,9%, represented dealer sales, an estimated 5,0% represented sales to the vehicle rental industry, 2,7% to government, and 2,4% to industry corporate fleets. The April 2024 new passenger car market at 25,972 units had registered an increase of 1,493 cars, or a gain of 6,1%, compared to the 24,479 new cars sold in April 2023. (Source)

• The Absa Manufacturing Purchasing Managers Index (PMI) for April painted a notably brighter picture compared to March, which was attributed to improved domestic demand and higher output. The sector was likely buoyed by the absence of load-shedding, providing a conducive environment for business activity. Despite this positive momentum, manufacturers remain cautious, evidenced by the decline in the expected business conditions index for April. Their apprehension is well-founded, given Eskom’s warning that load-shedding is anticipated to resurface during winter, underscoring ongoing concerns about energy reliability despite the current (welcome) streak of no disruptions. (Source)

• The TransUnion Vehicle Pricing Index Q4 2023. New vehicle price increases are above inflation although several OEMs are offering incentives and discounts. Used vehicle price increases are stabilising and will be forecasted for slower increases in the upcoming quarter. The TransUnion analysis for the last quarter highlights a movement toward more budget-friendly transportation options among economically burdened consumers. The income distribution of new financial agreements had minor changes with lower-income consumers unable to enter the market. As consumer financing dynamics evolve, we anticipate no change in the risk distribution of new open accounts — which further spotlights affordability concerns. To deal with this decline, we foresee the market segmented into new ownership models, such as subscription-based and ‘vehicle on demand’, rental, station-based car sharing, free-floating car sharing, micro-mobility services, as well as mobility on demand like ridesharing and ride-hailing. This in turn may drive financial inclusion and economic empowerment while stimulating economic growth. (Source)