I hadn’t noticed the announcement, but apparently this has been national “foot in mouth” week. Governor Mboweni led the way with a suggestion for a business model involving zero margins. He is reported to be unhappy with banks lending money at interest rates higher than they borrow it at. His research reveals that the current spreads are just “convention” and have “no theoretical or clear market basis”. Widespread adoption of this business practice will have interesting implications, not least of which will be a massive but brief surge in South Africa’s competitive position as all costs and taxes vanish, immediately before those businesses vanish as well.
And then we had Deputy President Mlambo-Ngcuka offering the opinion that “Rand strength (was) above desirable levels". Recalling that she did not fund the R700 000 “drop in the bucket’ cost of her recent family holiday in Dubai from personal resources, her claim is perhaps understandable. Folk who do not buy their own travellers cheques miss out on learning what a strong currency is worth. The rand briefly popped above 6.20 to the USD but soon ignored the DP’s opinion and the currency is still one of the better performers this year so far.
More worrying were the official statements about large scale expropriation of land and the view that the “willing buyer willing seller” principle was no longer valid. The assertion that this will remove any uncertainties that farmers, banks or investors (have) about the agricultural sector seems optimistic if not totally foolish.
And in our own markets the telecoms sector shares displayed great volatility as stories about who was selling what and who was talking to whom whirled around. I suppose that getting the punters to call each other up and exchange gossip is a great way to increase the turnover in the business.
Overall market uncertainty and confusion was also widespread this week. We have enjoyed several days when the daily range of the all share index has exceeded 2.5% of the index level itself. Wednesday and Thursday both reported daily turnover of more than R10bn. The bull appears to have lost his way in the noise. Some uncertainty is being caused by folk trying to gauge what impact next week’s budget speech might have on the investment climate. My guess is that Minister Manuel will do his bit for the 6% growth target and we might all be allowed to keep more of our money to spend as we like. There will probably be a long list of projects on which he would like to spend the money that he doesn’t let us keep. I doubt exchange control will rate much more than a mention. I think the budget will be good for the market in that it should keep the consumer well supplied with cash.
I am trying hard to rekindle my interest in sport after the Protea’s ignominious departure from the triangular tournament. Rugby season is upon us. I am puzzled by the fact that when we spread our nation’s rugby talent amongst three teams we failed to make much impact, but now that same talent is to be spread across four teams in the new Super 14. Who is the winner from this inflation of the Super 12? Is this question my own contribution to foot-in-mouth week?
James Greener
10th February 2006
