SA producer inflation rises to 5.2%

In March 2021, SA’s producer price index (PPI) rose by 1.3% m/m, higher than the 0.7% m/m increase recorded in February and well above market expectations for an increase of 0.7% m/m (Bloomberg). Headline producer inflation rose significantly in March, coming in at 5.2% y/y, the highest producer inflation rate since June 2019, and well above market expectations for producer inflation to rise to 4.5% y/y. Headline producer inflation has been on an upward trend since June 2020, amid the continued normalisation in economic activity and generally higher food and fuel prices.

Agricultural, forestry and fishing prices continued to moderate in March, growing by 7.2% y/y, compared with 10% y/y in February; 11.3% y/y in January; 9.2% y/y in December; and 12% y/y in November. Electricity & water prices also moderated, with inflation coming in at 7.8% y/y, down from 9.2% y/y in February. In contrast, mining prices accelerated in March, increasing by 14.2% y/y compared with a 11.5% y/y increase in February.
Food products, beverages & tobacco products; and coke, petroleum, chemical, rubber & plastic products price increases were the main contributors to the headline PPI annual inflation rate in March. Prices of food products, beverages & tobacco products increased by 6.8% y/y (contributing 2.4 percentage points to headline producer inflation); and coke, petroleum, chemical, rubber & plastic products prices increased by 4.2% y/y (contributing 0.9 percentage points).


Food producer inflation accelerated in March, rising to 8.1% y/y from 6.9% y/y in February. This is the highest producer food inflation since February 2017, despite the continued moderation in agricultural prices in March which rose by a still elevated 9.4% y/y, down from 12.3% y/y in February. The acceleration was driven by an increase in producer meat price inflation, with prices increasing by 8% y/y in March, compared with 5.7% y/y in February, 6.1% y/y in January, 7.2% y/y in December, 9.7% y/y in November, and 7.2% y/y in October. The price of grain and mill products also accelerated, resuming its rising trend, with inflation rising to 19.9% y/y, the 11th consecutive month of double-digit inflation. Elevated maize inflation continues to be driven by higher demand for South African grain products, and generally higher global grains prices amid high demand from China. This occurred despite a large grain harvest during the 2019/20 production season.
Coke, petroleum, chemical, rubber and plastic products prices moved out of deflation in March, for the first time since the pandemic started. On a monthly basis, coke, petroleum, chemical, rubber and plastic products prices rose by 2.6% m/m in March, becoming one of the biggest contributors to monthly headline producer price changes, contributing 0.5 percentage points. The rise in prices continues to be driven by increasing petrol producer prices, which rose by a significant 4.8% m/m in March. Petrol producer inflation also came in above zero for the first time since March 2020, with prices increasing by 3.3% y/y in March from ‑2.8% y/y in February.
Despite the ongoing acceleration, producer inflation remains under control, coming in within the South African Reserve Bank’s (SARB) target, although this month’s figure was above the midpoint of the target for the first time since September 2019. There continues to be little evidence of any significant long-term build-up of inflation pressures from the production side. There are some inflationary pressures from higher producer petrol and food prices, but these are expected to be short-lived.

An insightful update on global and local economics and markets from STANLIB’s Chief Economist Kevin Lings, and Economists Ndivhuho Netshitenzhe and Laura Jones.

US growth expectations up, euro-area down
Consensus forecasts for US economic growth in 2021 have risen to 6.2%, but for the euro area they have been revised down to 4.1%, as the vaccine roll-out has struggled in Europe.
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Can salaried workers now also claim
home office tax relief?
Due to Covid-19, the work environment was forced to make certain changes more rapidly. 
By Elizabete Da Silva 17 Apr 2021  00:52 
The South African Revenue Services has previously allowed the deduction of home office expenses in the determination of taxable income where taxpayers earn mainly commission or are independent contractors and freelancers.
However due to Covid-19, the work environment was forced to make certain changes more rapidly.
Many employees were forced to work from home, either on a full time or part time basis.
Listen: Working from home? Here’s what you can claim from Sars
With the change in work culture and remote working, the question was raised by South African taxpayers whether they would be permitted to claim a deduction relating to expenditure incurred in respect of their home office, if they were salary workers.

In normal working conditions 
The situation is different for salary workers, whom in order to claim any home office expenses, the below stringent requirements must be met –
  • The part of the home, ie, the office space, for which a claim is submitted must be occupied for purposes of a trade (which includes employment).
  • The office occupied must be specifically equipped for purposes of the trade, e.g. a home study, with a desk, computer, and so forth.
  • The employee must regularly and exclusively use the office for business purposes, i.e. it cannot be used for private purposes. If an employee does not have a separate study or office available in their home, home office expenditure will not be allowed as a deduction.
    Employees who do not earn commission but who spend the majority of their time on the road visiting clients, perform their duties mainly at their clients’ premises and as a result they do not qualify for a deduction.
  • The employee’s duties must be performed mainly, ie, more than 50%, in their home office.
  • The employer must allow the employee to work from home.

The legislation
It is not difficult to show that a home office expense meets the requirements of the Income Tax Act (ITA), to the extent that the expense is not of a capital nature. This is applicable regardless of whether the taxpayer is in employment, or holding an office or other taxpayers.
Qualifying expenditure under Covid work from home
Normal salary employees are allowed to claim for working at home but will be limited the following pro-rated expenses:
  • rent of the premises;
  • interest on a bond;
  • cost of repairs to the premises;
  • rates and taxes;
  • cleaning;
  • other expenses in connection with the premises;
  • phones;
  • stationery;
  • office equipment; and
  • wear-and-tear.
How to calculate your deduction
  1. Calculate the area of your home office as a percentage of the total area of your home.
  2. Apply this percentage to the total expenditure in respect of the home, eg rent, bond interest, water and electricity, rates and taxes, maintenance.
  3. Add any other allowable expenditure, e.g. stationery, wear and tear, etc.
  4. Ensure the calculation is available for SARS inspection, along with all supporting documents (invoices, bond statement, municipal bill, rental agreement etc.).
Capital gains tax (CGT) impact
When selling your home/primary residence, an individual is entitled to what is known as the primary residence exclusion. This exclusion can be used to set-off the capital gain/loss arising on sale, up to the value of R2 million.
It is important to note that when a part of your home is used for trade purposes (ie a home office) and a deduction is claimed for trade expenditure, this part of your home is considered tainted for capital gains tax purposes.
Upon the sale of your home the overall capital gain/loss will need to be apportioned between its tainted and untainted elements. This apportionment is done by taking into consideration the portion of the home being used for business/trade purposes and the applicable period claimed.
The primary residence exclusion can only be set-off against the untainted portion of the capital gain/loss and the tainted portion of the capital gain must be fully brought to account.
In the recent budget address, National Treasury have commented that in light of the significant migration to working from home over the past year, they will be reviewing current travel and home office allowances to investigate their efficiency and equity in application.


UK electric and hybrid car sales hit record levels in March, traditionally the biggest month of the year for motor dealers, as demand for greener vehicles surged despite overall trade remaining lower than before the pandemic. Sales of battery electric cars and plug-in hybrids accounted for a combined 13.9% of the market, up from 7.3% a year earlier – a sign of the accelerating switch to cars with lower carbon exhaust emissions. 

The accompanying graph by Statista shows the demand for petrol and diesel cars has declined by 28% and 47% respectively, compared to 2020. Cars powered to some degree by electricity have weathered the pandemic storm, posting growth of 74% for vehicles powered solely by batteries, 94% for plug-in-hybrids and 12% for hybrids. 


L’Oréal’s newly-created South Asia Pacific, Middle East and North Africa market (internally known as SAPMENA) is set to be a major growth engine over the next decade. This combined geographical zone comes in response to shared consumer trends and new growth opportunities – with men expected to comprise a large part of this growth. Collectively, the region is home to 40% of the world’s population with a median age of 28. In an interview with CNBC, Vismay Sharma, L’Oréal’s President of SAPMENA, noted that nearly half of the consumers in the region are younger than 25, making it “extremely exciting for us and a very strategic market for the future.” 

L’Oréal has held up relatively well during the pandemic, which has boosted certain categories including health and wellness and demand for sustainable products. According to CNBC, male cosmetics have also seen a surge in demand, with Japanese beauty company, Shiseido recording double-digit growth in one of its male makeup lines in 2020, as male consumers became more conscious of their appearance during pandemic-induced video conference calls. L’Oréal expects the interest in male cosmetics to continue, especially in the SAPMENA region. “In the past, men were not using enough beauty products – so penetration was much lower, the per capita consumption was much lower, the frequency of usage was much lower,” said Sharma. Now, “particularly in Asia, we can see that men are much more discerning about their skin, about the fragrances that they wear, about their hair,” he continued. “This part becomes extremely interesting. In terms of growth percentages, we see significant growth coming from this part.” 


According to research by eMarketer, Amazon’s advertising business grew by 52.5% last year, pushing the company’s share of the US digital ad market to 10.3% from 7.8% in 2019. This has strengthened its position as the third largest ad publisher in the US. 

The company’s US digital ad share is still small relative to Google and Facebook, which accounted for 28.9% and 25.2% of the business, respectively, in 2020. But Amazon is quickly becoming a viable competitor – a sign brands are increasingly turning to the e-commerce giant to help them reach an expanding base of online shoppers. 

Amazon continues to benefit as consumers move their spending online and the company’s share of the US digital ad market is expected to grow to 11.9% in 2022 and 12.8% in 2023. 



Earlier this week, Visa announced that Airbnb hosts in certain markets would be able to access their earnings faster by using Visa Direct, Visa’s real-time push payments platform. Through this platform, hosts will have an option to easily move money from Airbnb to a bank account linked to a Visa debit card. “Giving people access to money they’ve earned when they earn it is a powerful driver to support communities and the recovery of the global economy,” said Ruben Salazar, Global Head of Visa Direct. “Visa Direct capabilities on the Airbnb platform can help improve cashflow for hosts, allowing them to focus on welcoming travellers eager to explore the world again.” 

This collaboration is the latest in a series of Visa initiatives to help its financial-institution clients enable buyers and sellers to access the tools and resources they need to build stronger business operations and move money around the world at a time when real-time payments have never been more important. The new solution for Airbnb hosts is expected to be available over the course of the next year. 


Anchor rand view: Current rand strength surprises on the upside

Source: Anchor

The theme of global financial markets during 1Q21 was that inflation was recovering (and possibly overheating), which resulted in global bond yields (predominantly those in the US) surging higher and the US dollar recovering from some previous weakness. However, 2Q21 has now rolled in and market themes have also shifted. Analysts and market commentators are barely talking about inflation and, instead, discussions are around the lower volatility ahead, a reopening of economies, and future US corporate tax hikes. 

The current global theme of lower volatility is great news for carry traders who will feel emboldened to increase their exposure to the currencies of those countries where interest rates are above zero. The rand has long been one of their favourite investment destinations. At the same time, the consensus view on the reopening of economies is that the commodity rally still has legs and therefore investments in South Africa, Russia, and Brazil will remain attractive. Combining these two themes means that the rand will see some offshore support for a while.

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