Fuel savings tips ahead of festive season crunch

The festive season is but a few weeks away and while any further fuel price increases are yet to be announced, motorists can start making changes to their driving habits to guard against additional costs.
Vishal Premlall, Director of South African Petroleum Retailers Association (SAPRA), a proud association of the Retail Motor Industry Organisation (RMI), says motorists are already feeling stretched so by adopting fuel saving habits there’s a good chance they can get more mileage for their bucks.
“The first habit to adopt is to accelerate at an even pace in traffic. Short bursts of the accelerator increase fuel consumption. Next, try to drive in a lane which has the least traffic ahead to maintain a constant speed. The engine management system will adjust the most economical settings for the best fuel consumption.”
The first startup after a lengthy stand is the one which has the richest fuel mixture, so prevent harsh acceleration whilst the engine is still cold as this will spike the consumption figure dramatically. “Also don’t idle a cold engine to warm it up, as this will not improve the fuel consumption nor lengthen the life of the engine.”
If you are waiting in heavy traffic, turn off the engine and restart once the traffic starts moving again. Modern engines are now being equipped with this function to aid fuel saving. However, don’t continuously switch on and off as this can drain the battery.
Tyre pressure also has an influence of up to 3% on fuel economy. “Ensure you regularly check your tyre pressure when the tyres are cool and maintain a good tyre pressure. Believe it or not, it can increase your fuel efficiency,” he says.
Premlall also suggests considering car-pooling or public transport and being mindful of using your vehicle less, where possible. “Try and avoid short unnecessary trips with better planning,” he says.
“There are always extra costs before and during the festive season so every cent saved makes a difference. Start now by cutting back on fuel usage and you’ll enjoy the benefits in the weeks ahead.”

How Storage Solution Companies Improve Warehousing

By Fred Albrecht, Managing Director, APC Storage Solutions SA
Because modern consumer demands place greater emphasis on lower prices and faster services, a greater reliance on successful supply chain designs, systems, processes and equipment is needed. It is essential to properly align a logistics and warehouse solution with a company’s promise to its customers.
Storage solutions companies provide a series of professional consultation services that elevate logistics and warehousing best practices to accommodate these industry demands.
For companies looking to improve profitability by either revamping or creating entire supply chains, or by simply building a new warehouse, a holistic logistics planning service is needed.
In the case of Greenfield projects, numerous factors need to be considered, with these companies needing to carefully plot the ideal warehouse location within the supplier and customer distribution network.
Suppliers and distributors that are well positioned in relation to a warehouse generate substantial savings in fuel and other transport-related costs. This service also helps to eliminate bottlenecking in distribution processes, and can optimise for future growth of the supply chain, turning warehouses into enhanced, high-capacity nerve centres.
Consultants need to analyse factors like road conditions, toll roads, peak in- and out-bound traffic times, and property prices, among many others, to determine suitable locations for such nerve centres.
In existing warehouses where overall performance is sub-optimal, solutions companies can assess layouts, operating procedures and management skills. Based on state-of-the-art warehouse mapping software and leading logistics expertise, these companies can make a series of recommendations, re-engineer operating procedures, and tailor-make training packages to address every shortcoming.
It is important to test and measure all components within a warehouse system: checking rust, mechanical damage, and metal fatigue, and correcting faulty racking installations.
For green and brownfield projects, these companies can design and test new racking system layouts to provide increased storage capacity, productivity and safety. Furthermore they provide unique material handling solutions that help achieve maximum warehouse efficiency.
Well-paired warehouse layouts and material handling equipment means that, from receiving ends to dispatch, items travel the quickest and most logical routes avoiding cross traffic and backups. The result is lower cost-per-picks, as time and energy required to move items is kept as low as possible.
Storage solution companies provide all project management and technical support during and after the construction, commissioning, and user acceptance testing (UAT) phases, all in preparation for a successful ramp up process.
Warehouse consultants further consider return-on-investments by creating models and designs that compare operational expenditures with capital investments. Balancing the two expenditures grants warehouse owners long-term productivity and profitability.

Savrala Seeks Legal Advice

“Following the Finance Minister’s announcement to continue with E-Tolling of Gauteng’s freeways in the budget speech on 22nd February, SAVRALA has expressed their disappointment and have now moved to consider a legal challenge to this action” says Wayne Duvenage, Vice President of SAVRALA.
Our position has been made clear over the past whereby the decision taken to toll our urban freeways in Gauteng is nothing short of being dismissive of a number of rights of the citizens of this country. Government’s role is to use its citizen’s taxes wisely, efficiently and to ensure that costs are minimised when providing services and the necessary infrastructure to conduct business. This has certainly not been the case here.
The user pay principal being bandied about as one of the motivations for the government’s decision in this regard is weak, inconsistent and flawed. This is not a case of Gauteng’s roads and Cape Town’s roads and Durban’s roads. These are ‘all our’ roads and we should not entertain this charade around why non-Gauteng citizens should not have to contribute to Gauteng’s roads. Gauteng citizens have no problem with the un-tolled freeway upgrades that other cities have enjoyed in the past. To go down this road means that every other city’s freeway upgrades going forward will suffer the same fate, something we know will not be entertained by our fellow citizens.
Furthermore the expenses to administer and enable e-tolling is extremely costly and an unnecessary burden to the citizens of Gauteng, who by the way, contribute more than their fair share of taxation and revenue to the national treasury and are in effect the funders of other provinces. To suggest that the gantries are up so we must just accept this is tantamount to throwing good money after bad. This is not a done deal.
SAVRALA has now taken further steps and progressed with seeking advice and legal opinion on its position. “Our decision to seek a legal route is not being taken lightly or flippantly,” says Duvenage, adding “We are also receiving numerous calls from other organisations, associations and individuals to support our challenge and are assessing options to incorporate these into a coordinated strategy”. Further announcements in this regard and the developments in our legal challenge will be released as and when these are able to be shared.

BUSA Shares Economic Outlook

Business Unity South Africa (BUSA) shares the realistic assessment in the Budget Speech of SA’s economic prospects and its identification of the major external and internal challenges facing the economy.
In its previous submission to the Committee on 15 February 2012, BUSA outlined the global economic outlook very much along the lines of the latest budget speech – and also saw the international economy presently as one of lower growth and higher risks. The global outlook looks marginally better at the moment but the domestic economy remains vulnerable to a volatile global environment.
There remains, of course, an asymmetric growth performance between developed countries and developing economies like China and India, to which the Minister of Finance also referred. Against this background, BUSA therefore agrees with the Minister of Finance that SA needs to be globally competitive in a changing world. This indeed requires flexibility, innovation and leadership in both the public and private sectors, if we are to create a more adaptable economy.
BUSA agrees that real GDP in 2012 is likely to be about 2.7 percent, with the possibility of rising beyond 3 percent in 2013. While there is always margin for error in such forecasts, it broadly approximates what several institutions and analysts, including BUSA, have suggested for growth in 2012.
Although these are positive growth rates, they remain inadequate to meet SA’s socio- economic challenges. There was a welcome improvement in job creation during 2011, but employment has not yet returned to its 2008 peak and the unemployment rate remains high at 23.9 percent. Most of these jobs have come in the formal private sector and the economy is projected to add about 850 000 more jobs over the next three years – at least 75 percent of these in the private sector. But this will still leave overall unemployment at unacceptably high levels and below the employment targets of the NGP. Accepting this reality, the Budget strategy rightly adopts a stronger pro-growth stance to encourage faster and more inclusive economic growth.
Overall, BUSA views the 2012/13 Budget as credible, broadly balanced and confidence building. We believe that the Budget opens up a range of potential new possibilities for growth and development, which should be implemented or exploited as soon as possible. BUSA welcomes the recognition in the Budget Speech of the “substantial role” that needs to be played by private sector investment to realize the goals of growth and job creation. This again emphasizes why policy direction needs to be certain, predictable and coherent in order to create an environment in which the private sector continues to produce, invest and employ. There should be no ambiguity about the crucial role of the private sector.
Given the fact that we live in a rapidly changing world, BUSA believes that the latest Budget creates a “window of opportunity” to do things differently and better – provided it becomes a truly collaborative effort and that decisions are effectively implemented. The Budget Speech should encourage a longer term perspective on SA’s growth and development and the policy choices that have to be made. Against this backdrop, BUSA will identify certain selected aspects of a wide-ranging Budget Speech.
The debt profile in the 2012/13 Budget appears more sustainable than the picture presented last year but fiscal space remains limited with gross debt levels expected to stabilize at under 43 percent by 2015. The National Treasury should be encouraged to finalise its promised long term outlook study for public finances, drawing on certain accepted principles, and taking into account SA’s demographic trends and socio economic challenges. This would include the appropriate balance between consumption and investment spending by the state.
BUSA supports the commitment in the Budget Speech to take the tough decisions needed to keep the fiscus on a sustainable track. It is important that there is a collective determination on the part of government to control state spending and to phase in fiscal consolidation over the medium term. State spending on recurrent items needs to be brought under control. As the National Treasury points out in the Budget Review the current Eurozone crisis, where out of control government spending played a major part in precipitating it, is a salient lesson for SA.
BUSA is pleased with the central priority that the Budget placed on the expanded infrastructure program. This initiative should not only aid in building modern infrastructure, but will also help to reduce poverty, create decent work and expand employment opportunities. Given the importance of a successful infrastructural programme to South Africa – as well as the amount of money involved – it is essential that these programmes are rigorously assessed and the economically viable and necessary ones are implemented as quickly as possible. All projects need to make economic sense or they will eventually have a contractionary influence on the economy. Infrastructural projects where there are possibilities of contestation should be carried out and funded by the private sector. Where there are so-called “natural” monopolies the state obviously has a role to play but there is still space for private sector involvement.
The Private Public Partnership framework is a sound one in its concept but needs strengthening and extended implementation. Business has recently completed a study on how PPPs could be improved and plans to discuss the report with National Treasury soon.
Partnership with the private sector in procurement is not the only area where the private sector and government can work more successfully together. The challenge for the private sector in supporting spheres of government, especially local authorities, could perhaps be addressed by the establishment of an agreed framework within which companies and organised business chambers could offer support.
We also look forward to the Infrastructure Summit which the President is planning to convene soon. The Presidential Infrastructural Coordinating Commission can play a leadership role in identifying projects and clarifying long term investment plans to drive economic change in ways which remove constraints that inhibit growth.
We welcome further tax relief for small business and micro-enterprises and the announcement that the tax regime for SMMEs will be simplified. It is the small and emerging business sector that has the greatest potential for job creation. Nonetheless, we need to examine why many small businesses remain labour “minimisers” because of other obstacles to employment.
Support for improved competitiveness is rightly referred to a number of times in the Budget Speech. We are aware that government has been working on a new approach to such support for some time and trust that the measures will be implemented this year. The tax rebate for energy efficiency savings which was announced in the 2012/11 budget speech is still not operational. As a year’s worth of data is required to access this rebate it would be a pity to allow another tax year to pass without this being in place.
The Budget rightly emphasized that as a major mining economy we should be taking advantage of the buoyancy in commodity markets internationally. Business supports the anti-fraud and anti-corruption initiatives that aim to combat these offenses through changes to procurement policies and practices. The role of the proposed Chief Procurement Officer in the National Treasury will be crucial in this regard. The introduction of a national price reference system to detect deviation from acceptable prices in the tender system is welcomed. The possibility of using this system to allay fears of line departments who are not comfortable with the designation of locally manufactured goods for fear of price premiums having to be paid, could be usefully explored.
We are pleased to note that government will engage further before implementing the carbon tax. BUSA looks forward to the opportunity of making further inputs during the second round of public comment and consultation on the issue of carbon taxes, as well as engaging on the separate issue of special economic zones.
On the Gauteng tolls, we appreciate efforts to reduce the impact of the programme on the economy, but regret that the matter has now become “non-negotiable”. The issue is not so much around the user-pays principle than the inordinately high administrative costs associated with this particular project. This has not been addressed in the proposed solution.
In view of the fact that about 60 percent of socio-economic delivery takes place at local level, BUSA endorses the emphasis placed in the Budget on support for local municipalities, which will serve to stimulate local economies if effectively implemented.
BUSA recognises that social security reform and the national health insurance are being realistically phased in within a framework of fiscus sustainability.
BUSA welcomes the emphasis in the Budget Speech on finalizing the Youth Wage Subsidy Scheme and hopes it will be implemented as soon as possible. The National Treasury estimates that 178 000 nett new jobs will be created at a cost per job of R28 000. The whole scheme will cost R5 billion over 3 years.
The usefulness of pre-budget consultation was enhanced by the willingness of the Minister of Finance to hold such a consultation with the Nedlac constituencies earlier this year. This proved to be a valuable exercise for both the National Treasury and the social partners.
BUSA therefore views the Budget through the prism of both the New Growth Path (NGP) and National Development Plan (NDP), which outline several of the levers of economic change supported in the latest budget. 2012 needs to be the year in which SA must see more tangible outcomes from key programmes like the NGP and NDP.
South Africa’s headline fiscal ratios appear healthy but this can mask vulnerabilities. State debt costs remain the fastest growing item of state spending. Unless recurrent state expenditure is kept under control, any further accidents to growth (following a global recession, for example) and/or in interest rates (if the rand weakens suddenly) could push the ratio of gross debt to GDP to a danger limit of 50% (the generally accepted rule of thumb for emerging as opposed to developed economies). At these levels a debt trap becomes a significant risk and other development goals could be put in jeopardy.
The Achilles’ heel of infrastructural and other development plans could be an eventual failure to create “a capable state focused on delivery”. Delivery on infrastructural spending is essential, as under-spending has harmed growth potential.
The Minister of Finance has acknowledged weakness in the rollout of large infrastructure projects. BUSA therefore supports the emphasis placed in the Budget Speech as well as in the NDP, on the need for professionalism in the public service. South Africa needs to focus “relentlessly” on building a professional civil service. As the NDP says, “It is necessary to build a skilled and professional public service from both the top and the bottom.” The NDP proposals in this regard require urgent attention, and ways in which the private sector can assist should be explored.
While business supports the need for better infrastructure, the ‘bunching up’ and cumulative effect of excessive rises in administered prices is currently having a negative impact on our economic performance. Pricing decisions appear to have been ad hoc, with responses to individual SOE financial requirements being implemented without adequate consideration of the cumulative effect. We welcome the acknowledgement of the electricity price challenge in the State of the Nation Address. There needs to be a better planned and coordinated approach to the issues of affordability in decisions around administered prices and their effect on the cost of doing business in SA. Unless a better formula can be found for the pricing policies of certain SOEs, there is the risk that excessive tariff increases will further aggravate cost inflation and therefore have implications for interest rate policy.
The Governor of the Reserve Bank Ms Gill Marcus has queried the need for Eskom to be given any further above-inflation increases, noting that “the determination of administered prices should not act as an inhibitor to growth and investment”.
If SOEs are to be effective players in development it is essential that their role be appropriately defined and managed. The expected report from the Presidential Commission on the Performance of SOEs is due shortly and could be of assistance in
taking new decisions about the role and performance of SOEs. SOEs need to enlarge their investor base and develop more cost-effective financing models.
As there is usually no prior consultation on tax changes it is not always possible for the National Treasury to anticipate unintended consequences arising for the economy in general, or for sectors in particular, from tax decisions. The combined impact of the increase in the fuel levy, in the electricity levy, and the imposition of e- tolls could have a serious impact on sectors such as transport, travel and tourism. The Committee will need to interrogate these aspects with the sectors concerned as well as with the National Treasury. Recent changes to tax legislation have significantly increased the complexity of tax assessments.
It remains essential to maintain an effective social safety net system in SA to alleviate poverty and the social grant system has been very necessary in this regard. As the Budget Speech points out, social spending will comprise 58% of government expenditure next year, up from 49% a decade ago. About one third of the population receive a social grant of one kind or another. As the Minister of Finance nonetheless says in the Budget Speech, redistribution is “not a substitute for economic growth and job creation”. The more SA can push up its levels of growth and employment, the less a large proportion of the population will be dependent on welfare.
As the recent debt-ceiling fiasco in the US, the continued haggling in the Eurozone over the Greek and Italian debt crisis and even the long-standing structural problems in the Japanese economy show, the most important lesson is the peril of procrastination. Unless a country uses its opportunities timeously to change its course through structural change, the options of policymakers to tackle the challenges narrow. The NGP, the NDP and the latest Budget must help to create an environment which encourages long-term thinking about SA’s economic prospects by all stakeholders.
Now that the 2012 Budget Speech has been delivered, the next steps are for SA to implement effectively what has been agreed and funded, and to deliver on our promises by building on our economic strengths and addressing our weaknesses. BUSA has pledged itself to assist where it can to improve South Africa’s economic performance and to work in partnership with government wherever possible. That is the overall message that business will promote as we move to the challenges of 2012.

Reconciling Spending, Frugality And Growth

By Cees Bruggemans, Chief Economist FNB
In common with so many other stressed countries today, South Africa has two diametrically opposed constituencies in the form of her electorate and financial markets.
The main demand from our electoral majority is for redistributive spending to address the ills from the past, either in genuine attempts at solutions or simply as compensation for the many inherited iniquities.
The Minister of Finance has the unenviable task of moderating these demands to within reason, relative to what the beast of burden (the economy and the relatively few taxpayers contributing the bulk of the country’s tax revenue) can seriously carry.
Or as a 17th century French Finance Minister put it, how to pluck the most feathers off a goose with the least hissing. There was evidence in Parliament on budget day that the Minister wasn’t quite succeeding on this score.
Be that as it may. As in every budget in recent years, there was again major emphasis on how much government spending would increase, for the first time comfortably cracking the R1 trillion barrier, causing the Minister to tell parliamentarians when they weren’t responsive enough that this was something to applaud him for (never mind inflation doing most of the heavy lifting, something to criticise him for instead).
Over three years, the social spending intentions runs in some instances in the hundreds of billions, with emphasis on satisfying the spending ministers and the watching television audience at home, in the macro assumptions still suggesting over 4% government consumption growth compared to 4.5% in recent years.
Yet while the Minister was trying very hard to maximise the appreciation impact of his spending intentions on his fellow Ministers and electoral majority, he was also doing a few other things.
These are risky times globally, with crises raging in Europe especially, a time to be cautious. This was partly blamed for lowering the expected GDP growth rate for this year to a lowly 2.7%, with exports expected to be underperforming compared to both last year and next year.
This may well turn out to be the case, but more likely due to some kind of oil shock rather than the European crisis. Whatever its true nature eventually, it represents caution on the side of the Minister, which in uncertain times like the present is not misplaced.
The other main reason for low GDP growth expectation is slower expected household consumption growth, also a reflection of less external income support but perhaps more reflecting the many (unexpected) tax bites and higher inflation eroding real consumer income, slower public servant real income growth and slower real growth in transfer payments off a by now very high base.
Then again, such a low growth assumption assists in reinforcing the impression of the Minister having little means and being ever so reasonable (like last year) in demanding some abstinence from spending ministers while advocating a shift in focus away from (salaried) consumption to infrastructure capex.
Thus the Minister expressed the intention to after all keep real spending growth to 2.6% annually, a rather low number, given the macro assumptions and when allowing for how the year ahead may still unfold (wages especially).
Having made his pitch to spending ministers and electoral majority about being supportive for continued high social spending, he changed the emphasis towards austerity, also with his other major audience (markets) in mind.
It turned out all ministers had after all to do with less (projecting 8.8% nominal spending growth in a 6.1% inflation environment) but none more so than the bloated public wage bill, still absorbing over 40% of all public spending and now proposed to grow only by a nominal 7% annually for the next three years (reflecting 5% cost of living adjustment and the rest being notches meant for career progression), translating into 1% real increases.
Also, this limited wage bill space is presumably supposed to take care of public sector job growth, a rather challenging task in these politically trying times.
It is hardly certain that all these objectives will in fact be achieved. Even if spending Ministers keep themselves broadly to the spending limits, unions have reportedly already expressed disagreement with the idea of being limited to only 1% real, while surely government will still want to expand its staff complement by a few percentage points annually, when going by recent years and futuristic promises?
Be that as it may. It is something that will be argued about in time, and then settled, whatever it takes, bearing in mind the presence of a contingency reserve in the budget, a shock absorber for ‘unexpected’ overruns, and also when allowing that in recent years capex underspending has compensated for overspending elsewhere. As things stand, with those caveats, the printed budget looks coherent and contained.
There was good reason for the suggestion of overall spending frugality. For while the electoral majority can be reasonably satisfied that its education, health, housing, security and public administration is well looked after, at least in spending largesse if not always in final delivery, even if spending Ministers may be dissatisfied with the crumbs and public servants unhappy with the intended 1% real, it was necessary to dress the numbers this way with credit markets in mind.
Financial markets worldwide have of late only had one thing in mind, and that is to see budget deficits shrink as fast as possible, arresting public debt spirals and returning national finances to health in the shortest time feasible, serving the security interest of capital.
Not that our national finances ever got truly shot in the tribulations, for we were spared much in recent years (relative to what happened to some other countries).
Still, there was a recession, tax revenue fell away while public spending rose supportively, ballooning the deficit and causing the debt to start spiraling, and this had to be arrested pronto.
Which it was.
The Minister trimmed his total spending growth projections slightly lower while tweaking his revenue projections slightly higher off a higher achieved base, pleasingly improving the critical ratios.
Though this may have sacrificed growth in the short-term, the budget deficit, which only late last year was still expected to be 5.3% of GDP in 2011 came in at 4.8%, this year was projected at 4.6%, next year at 4% and by 2014 we should be back at 3%.
That’s excellent progress, even if the higher tax take and other assumptions (along with higher inflation) cause headwind to growth this year. As a result gross national debt will probably peak at 42% of GDP and net debt at 38%, double its 2007 level, but at least contained at pleasingly low levels compared with many overseas countries in deep trouble.
This the financial markets found enormously pleasing, on the day rewarding the government by lowering its borrowing cost. Also, these fiscal estimates must have send a powerful message to the global rating agencies, which only recently had put us on watch (something that can lead to a credit down-grade if not addressed).
Overall, therefore, when going by media reports, the Minister succeeded in gaining the approval of both the electoral majority (which has reason to remain deeply grateful) and markets (which saw their language spoken).
But that left the third objective, namely growth. Though sacrificing growth somewhat short-term in the name of needed budget frugality, the longer term intention focuses on alleviating supply side constraints and achieving the means to more thoroughly address poverty and inequality, partly through more job growth.
And the engine of choice here, appropriately, is a very ambitious infrastructure wish list, already way behind schedule in energy, rail, ports, roads, municipalities, water and much else, but coming into focus anew.
Our GDP growth has been held back in recent times by severe infrastructure bottlenecks. Addressing these supply side constraints could lift the growth rate, initially through higher fixed investment and afterwards through more exporting and local output, thus assisting with creating more job opportunity in the economy.
Both electorate and markets could see the benefit of that for themselves, but how to present this? The Minister opted for making known the entire wish list of future public investment projects being taken into account, amounting to some R3.2 trill, of which the next three years are intended to absorb R845 bn.
Here is an ambitious infrastructure agenda that might just fly, seeing that so many are talking about it, including the President, various spending ministers and now in the greatest detail the Minister of Finance lifting the veil on the many needs and wishes as well.
Yet there was a humble acknowledgement of limited skills in the public sector to manage such a pipeline, and requiring many years of skill training to be overcome. As it turned out, the Minister showed little evidence of such large additional investment ambitions imminently affecting his financing requirement or fixed investment and growth expectations.
His projected public sector borrowing requirement falls as share of GDP these next three years as the budget deficit comes off, even though there will be some increased borrowing by Eskom and Transnet. Similarly, there is little in his macro assumptions about faster fixed investment growth, averaging only a modest 4.5% these next three years, as compared to averaging 14% annually in 2007 and 2008 at the peak of the last fixed investment boom.
Any infrastructure boom, if there is to be one, may only occur beyond 2014 for she is yet to be shown up in the projected GDP growth or the borrowing requirement. Indeed, the Minister did mention that in later years (beyond 2014) the public sector borrowing requirement may again rise rapidly as public infrastructure investment accelerates.
This may actually have suited the immediate present, for the main priority in the short-term is to keep convincing markets of intended frugality as reflected in improving finances for this year and the years through 2014 to win their continued support in these trying times, keeping government long-term borrowing costs low.
Indeed, the Minister suggested that most such future borrowing will not come via the government’s balance sheet but via public corporations and other entities and may require private participation for which the means and appetite exist.
This suggested a bit of an ideological twist, backing the sentiments of the National Planning Commission’s Vision 2030, if perhaps not quite the spirit of the New Growth Path. The suggestion of more private involvement reportedly already ran into some early polite demurring from involved Ministers and other public servants, preferring public corporations to retain say over such strategic projects rather than government losing its monopoly of being able to own and influence infrastructure.
So not now wanting to tax to find the substantial means needed, not wanting to overburden even as other social demands are just around the corner (such as the NHI for which an extra R6bn annually will be needed by 2014) and not knowing who would be doing the future borrowing, if any, it was easier for now to remain quiet.
Projects were listed and discussed in some detail in the background papers in support of President Zuma’s State of the Nation speech, but the sourcing of funds wasn’t clear while also not boosting fixed investment projections as part of the macro assumptions. Expected GDP growth remains modest at 3%-4% through 2014, thereby being both a relative dampener for social spending ambitions and unions while providing incentive to do (much) more on the infrastructure investment front.
If such higher public fixed investment is going to materialise, it may do so only after 2014, when the present overseas crises may be less intense and risky for us, a beginning may have been made with training more skilled public sector manpower making things a lot more digestible and sustainable AND the government may by then have attained greater internal agreement as to private involvement (whose absence could limit ambitions but whose participation would be a great boost all round).
So, overall, the budget was a remarkable achievement, keeping the electoral majority reasonably happy regarding spending intensions, convincing frugal markets that discipline was being restored to our public finances faster than thought, and that in addition the nation in support of President Zuma’s vision will embark on a great infrastructure expansion, though perhaps not quite soon enough to warrant a showing in the investment and public borrowing estimates.
So we have ongoing redistributive social spending, if contained in places, such as welfare and wages (as expressed intentions). Our public finances will be stabilised faster than imagined and thereby pleasing financial markets. And we are nationally projecting an enormous infrastructure ambition which eventually should start colouring our growth performance, but probably more so in the second half of the 2010s rather than the first half.
And then there await the glorious 2020s, as per Vision 2030, even if still very distant today. Lastly, to ensure that the books kept balancing, the ultimate objective of any Treasury, the Minister needed a few more resources.
We hear that personal income tax will be generating 14.5% growth in collections this coming year (after having absorbed R9.5bn of ‘relief’), abolition of the 10% STC (secondary tax on companies) was only partly compensated with the introduction of a personal 15% withholding tax on dividends (due to the many exclusions), the fuel levy was increased by R4.5bn, the electricity levy and capital gains taxes raised by R2bn apiece, and this all in the name of equity, a thin veneer for simply needing to balance four irreconcilables (social spending, financial frugality, tax reform and investment-led growth).
Along with higher inflation, such tax bites corrode real consumer income and reduce ability to sustain consumption spending, the extent of which may become clearer as the year unfolds, constituting a short-term growth sacrifice in the name of pressing national priorities.
At the same time, the Minister suggested that corporate tax collections will be only 9.7% higher this year, which makes sense relative to a 10% nominal GDP growth number, but seems understated relative to the cyclical recovery in business earnings currently underway. If understated, it provides a nice contingency buffer for the Minister in the coming year, as at times in the past.
Finally, the Gauteng tolling issue was taken to a new level with a once-off injection into Sanral of R5.8bn (borrowed?), with lower discounted toll rates offered to sugarcoat the bitter pill of yet more taxation. But whether this gesture will do it, only the unfolding year will tell, as with so much else.
Overall, this was a budget whose success must be measured by its general acclaim, communication-wise succeeding in nearly every dimension as discussed here, except for the disgruntled decrying the unexpected wealth tax increases being meted out to them, causing the Minister in a momentary flare up of social passion to contrast the far worse possibility of 100% (“like elsewhere”) rather than “only” our 15% (dividends) and 33.3% and 66.6% (individual and corporate capital gains).
It makes one wonder, though, what is still to come in future years as public needs keep expanding.
Follow Cees on Twitter: @ceesbruggemans

Overview: Motor Vehicle Sales Growth in 2011

By Luke Morawitz, senior ratings analyst, Coface South Africa
The local motor industry has made steady gains in recovering from the turmoil caused by the economic disruptions of 2008-2009. Going back two years, the improvement in figures released during 2010 confirmed that there was a turnaround, a fact that has been reinforced by further improved results in 2011.
Vehicle sales saw strong growth over 2011 spurred by an improvement in global economic conditions. Total volumes for new vehicle sales in South Africa saw an improvement of 15,9 per cent for 2011. This was assisted by a low interest rate environment and higher levels of disposable income.
Units sold for the month of December 2011 were down from the previous month to 43 790. This was substantially lower than sales in November which were reported at 49 498. However this is to be expected because of the festive season and shifting spending patterns. Exports for the 2011 exceeded 2010. Sales for January 2012 were up to about 42 000, an increase of 7 per cent over January 2011.
Total vehicle exports were up 11,9 per cent year-on-year but were lower month-on-month in December. It is expected that exports to Europe will continue to decline with the prediction of a return to recession in many of the markets South Africa does business in. The developing world still provides a healthy market and it is likely that more focus will be placed on these countries by the world’s vehicle manufacturers to sustain sales.
In addition to finished vehicles, a substantial volume of components are exported on an annual basis. Again, the bulk of these are sent to Europe. There has however been substantial demand from the United States, Australia and the Far East for locally manufactured parts which should help maintain growth in this sector. Year-on-year growth in 2011 should show substantial improvement and level out over 2012.
South Africa’s healthy motor industry is helped in part by the Motor Vehicle Program instituted by government to stimulate investment in the vehicle manufacturing industry. Improved efficiencies and a continuing focus of skills improvement have also enabled the sector to continue its rapid expansion.
A concern is the inability of smaller firms to make use of the developed logistics chains currently in place. Government has made it a priority to target this high growth sector to position the country as an African automotive hub. Foreign companies will continue to invest in order to take advantage of the growing African market, a market which has recently been receiving much interest.
The motor vehicle manufacturing sector in South Africa will be one of the main drivers of the economy in the future and significant growth can be expected from this sector.

Are Lead Acid Batteries Old Fashioned?

By Tom Cross, Director Business Development at First National Battery (FNB)
Being the oldest of the battery technologies in commercial use today, it’s easy to understand why lead acid batteries are considered “old fashioned”. However, the contrary is true. Every year this industry announces advancements in active material formulations, alloy types or manufacturing processes.
A lot has happened since the first lead acid battery was developed in the 19th century. Their size has decreased, their cost has dropped, and their performance and life increased multifold. The car batteries manufactured twenty years ago would not last in today’s cars, despite the fact that they were much larger then.
New battery types such as nickel-cadmium, sodium metal chloride, nickel metal-hydrate and lithium ion have emerged. All of these have found applications, some less universal than others. Yet, the lead acid battery is still the most widely used, the most proven and the best understood. It is also the most recycled battery in South Africa, and therefore environmentally friendly.
The way forward for electric vehicles
The first battery powered electric cars were developed around 1840. Following Gaston Planté’s development of the rechargeable lead acid battery in 1865, battery powered electric vehicles flourished. A hundred years ago, all the milk trucks in London were battery driven.
So battery driven electric vehicles are not new. Most forklifts operating in warehouses and cold rooms today are battery driven, as are most golf carts. Even the locomotives pulling ore trains in underground mines, and the scoops that load coal in collieries use batteries.
The use of batteries to power electric vehicles is commonplace. The exception has been the automotive industry. Advances over time in internal combustion engines (IC’s), the discovery of crude oil, the proliferation of highways and lifestyle changes resulted in IC vehicles becoming commonplace.
However, clean environmental practices are now demanding reduced carbon emissions from our cars. And while the concept of 100 per cent electric cars for general use is still some time away, lead acid batteries offer a carbon reduction solution.
Hybrid drives
Rather than a completely battery or IC powered vehicle, the trend is toward hybrid vehicles. These comprise smaller IC engines with batteries to assist.
In these applications, the IC engine will switch off when the car stops at a traffic light – in the time it takes a traffic light to change, an IC engine can produce a volume of carbon-monoxide the size of a large room. Then, when the accelerator is depressed, the battery will restart the engine and the car will drive off. During acceleration, the generator previously used to charge the battery will act as a battery powered motor and assist the engine. When the brakes are applied, the generator will act as a charger, using the braking energy to recharge the battery.
The duty required of a battery for this application has therefore changed from simply starting the engine, to regular discharge and recharge. Energy will therefore be moved in and out of the battery on a regular basis. This is known as cycling.
The development of hybrid vehicles therefore necessitates a battery capable of both starting and cycling duty. The spillproof Raylite Ultimate battery with AGM technology, manufactured by First National Battery, is the solution. This revolutionary battery technology has been specially developed for Start/Stop vehicles.
For the same size as the conventional battery, this technology delivers up to 30 per cent more current – ideal for demanding starting applications – plus three times the cycle life compared to a conventional battery. It is designed to actively assist the engine in accelerating, decelerating and minimizing inactive idling, thus reducing fuel consumption and exhaust emissions. The battery design also incorporates high resistance to vibration, which is essential in large diesel-powered vehicles.
While this development was driven by the automotive industry, it also has many applications in the industrial sector.
A battery for each application
The high cycling performance that AGM technology offers longer battery life for solar power systems, where cycle life is important. Before the South African energy crisis a few years back, most reserve power systems required batteries capable of a high discharge rate and a long float life. Today users are looking for batteries with these features, plus frequent discharge capability to match the higher incidence of power failures.
Other applications include home inverters and golf carts. This technology has been used with great success in millions of miners’ cap-lamp batteries, where the battery is cycled on a daily basis.

RMI Assists With CPA Matters

Dear RMI Member,
As you will remember, the Consumer Protection Act 68 of 2008 (CPA) took full effect on the 1st of April 2011. The CPA in certain circumstances has a severe impact on the motor vehicle industry and affects the way in which suppliers in our industry can conduct their businesses – in compliance with the CPA.
You will remember that the RMI has contracted with a firm of attorneys (RTK Attorneys) to assist you in this regard. Part of this service, is the availability of free online training material on the different aspects of the CPA that may affect you as a supplier in the motor vehicle industry. This training material includes topics on all the relevant CPA issues, including the way that you market your product or service, what the consumer’s rights are when it comes to orders, delivery and the quality of the goods and services and many more.
Our understanding is that the claims that have been laid against our members with the National Consumer Commission range from frivolous to serious. This will likely always be the case – opportunistic consumers may take their chances. But you, as a supplier, must also make sure that you know what your rights are and that you understand the dos and don’ts of conducting business in a CPA compliant manner. It is clear that not all members understand all the relevant provisions of the CPA and the impact that it has on warranties, service deliveries etc.
The online training is available from the website www.legaljunction.co.za by clicking on the blue button – “launch application” – you can access the material once you have registered. You simply need to follow the steps to register and then all the material will be available to you to use at your own time when it suits you.
If you require any further assistance with CPA related issues or if you are not sure how to handle a particular situation with a consumer, you can also discuss the situation and take advice from one of the attorneys from RTK Attorneys. You can phone them on 021-671-4645 or send an email to rmi@rtk.co.za
This is an initiative of the RMI to assist members with compliance with this important piece of legislation – make use of it!
Jeff Osborne

The Global Vehicle Sales Recovery

By Tania Barlow, MD Sewells South Africa
There is real and encouraging evidence of a global recovery in new vehicle sales in 2012 and beyond, says Tania Barlow, managing director of Sewells Group South Africa, who has just attended a world automotive business convention held in Las Vegas in the United States.
The 2012 NADA US Convention attracted more than 20 000 new-car dealers, automaker executives and exhibitors – including 1500 dealers from 36 countries. Held in the first week of February it followed record rising car sales in the US since last October, the highest numbers since before the recession.
The Expo trade show which runs in parallel was a sell-out with close to 600 companies showcasing products and services. Most of the presenters to the 100 plus workshops and keynote sessions which we attended were bullish about the motor business being well on its way back to the top.’
Tania said Sewells South Africa had once again assembled a working group of local and overseas automotive retailers to the convention as well as six different evaluation visits to local motor dealerships in Las Vegas.
The study group was co-hosted by Tania with Odette Taljaard of Sewells Group South Africa together with Manish Jar, Sewells Group head of international business who is based in Bangkok. The planning and coordination of the attendance at the convention and the popular dealer visits was facilitated by Mike Paxton, a Sewells Group South Africa specialist business consultant.
The 30 member party included 17 dealer principals from across South Africa, two from India and one each from Kenya, Angola and Zambia.

Transforming Business

The RMI is in the process of establishing a national registry of the broad-based black economic empowerment status of its members, explains RMI CEO JEFF OSBORNE.
The RMI is frequently inundated with enquiries from potential clients such as fleet owners, corporates and insurance companies pertaining to the broad-based black economic empowerment (BBBEE) status of our members. In view of this, we have decided to establish a national registry as a quick reference to determine participating members’ BBBEE status.
Participation in this free marketing exercise is entirely voluntary. All you have to do to ensure that your company’s details are included in this National Registry of BEE Compliant Enterprises, is to download the text box from the RMI website at www.rmi.org.za, print it and then fax the page as well as a copy of your current BEE certificate to 086-568-3995. If you don’t have a valid BEE Certificate, but would like to obtain one, please feel free to contact the RMI4BEE help line on 0861-764-233.
The RMI embarked on an active transformation strategy in 2011. As a first step, we appointed a transformation committee that is responsible for the introduction of broad-based initiatives that will serve the interest of all RMI members in support of transformation.
The purpose of these initiatives is to remove all uncertainty about the national transformation agenda with respect to BBBEE. It also aims to guide our members to make informed decisions about addressing BBBEE in their business through strategic advice, training and specific solutions.
Our first order of business is to gain a comprehensive understanding of the current state of transformation in the motor industry. For this reason we have launched a national BBBEE survey, which will be employed to construct the RMI Transformation Index.
The National Treasury released the revised Preferential Procurement Regulations, which have been aligned with the aims of the Broad-based Black Economic Empowerment Act and its associated Codes of Good Practice. The revised regulations are also in line with government’s Industrial Policy Action Plan.
The draft regulations were published for comment in 2009, a process that resulted in more than 150 comments being received by the National Treasury. The new regulations became effective as of 7 December 2011 to allow enterprises to become BEE rated. This will also allow time to train all supply chain practitioners on implementing the revised regulations.
Please contact us should you require any extra information. In addition, look out for the March issue of Automobil for an interview with Nunben Dixon, Director of Finance and Human Resources at the RMI, who’ll discuss the topic of transformation and the changing composition of the RMI Board.
In order to enable us to construct this index, we ask that you complete the questionnaire on page 48 and return via e-mail to transformation@rmi.org.za or fax to 086-245-2499.