Friday 13 November 2009

CIVIL SERVANTS GET UNLUCKY

Although it is just mid November there are already a few Yuletide markers showing up in the shops and the market. Durban temperatures are at last edging up towards the 30s, and so tinsel and canned snow are putting in an appearance. On the JSE, the average daily trading range of most of the indices is contracting, which suggests that traders are starting to worry more about holiday plans than trying to chase prices up and down. However, the All Share index level itself in the last few weeks has been setting the year’s high and is 50% above the March low point when the 2008 crisis was declared to be “over”. At that time the gold price was at a record R10 000 an ounce, presumably an indication that the metal was being used as a safe haven. As the year wore on, however, the price declined substantially to just R7 000. Bears are eager to point out that the price has recently edged back to above R8 000 an ounce and the local sponsors of the NewGold  ETF had to buy 120kg of the yellow stuff and issue another 400 000 units to satisfy demand this morning. Is fear making a comeback?
 The president’s welcome move to rein in government salary increases by a whole 1% is more form than substance but assuredly there will be bleating noises about the counter attractions of the private sector and how the talent will leave the rigours of public service unless properly rewarded. Mind you, the average civil servant’s idea of how things operate out here is a bit fuzzy. This week the State Diamond Trader -- a government organisation with a socially laudable but commercially naïve structure and purpose – requested a return to the cosy fold of tax-payer funding. The model that the Trader would become a self-supporting interloper in an industry that is notoriously opaque and exceptionally price sensitive, proved unworkable. Costs exceeded income and the Trader’s customers were altogether too worried about prices! Well, yes. Life is like that.
 On Tuesday we get to watch our first central bank governor, who does not wear a tie, tell us about her plans for interest rates. For many years my research has shown that the colour of the governor’s tie was an accurate indicator of whether the change he was about to announce was up, down or unchanged. It will take a few appearances of Governor Marcus in front of the cameras before we can identify where she will wear the coded message. The widespread view is that rates will be left unchanged. I wonder if she might not like to start her job at The Bank with a worker friendly gesture and cut rates. After all, lopping 100bp off the repo rate might just give the rand the weakening nudge that many are seeking. And please the over indebted.
An international rating agency sliced a few gold stars off the report cards of most of the local banks this week. Myself and others are not overawed by the alleged prescience and skill of these self appointed super analysts. The fact that the one being rated is often the one paying for the rating does raise a few questions. Nevertheless the appalling games of musical chairs being played out in the executive suites of so many parastatal organisations at the moment will make even the most hardened Africa watcher amazed and fearful for his money. Locksmiths and IT teams have been kept busy changing locks and passwords to ensure that the latest departee can’t change his mind and wander back in to the office. In the meantime no one seems to be running the show.
Recycled Bafana Bafana coach Carlos all but agreed that the only way the national side will beat Japan in PE this weekend will be if the visitors obey the security advice to remain in their hotel and not venture out at all. Leicester it turned out was a very dangerous place for the ‘bokke. And isn’t Toulouse where they would have made the planes we cancelled a few days ago? No friends there tonight either.
James Greener
Friday 13th November 2009.

Friday 6 November 2009

DUELLING COMPUTERS RUIN THE RAND

It is very worrying that the newest hot button topic among the leadership is the concept of nationalising anything and anyone who catches their eye. What exactly is it that these excitable politicians have in mind? My understanding of the process of nationalisation is that the state identifies an enterprise which they believe is either too vulnerable or too valuable to be left in the hands of mere private citizens. The bureaucrats, almost none of whom have any skill or experience in working for a living, one day declare that they are offended by an organisation selling goods and services at prices which exceed the costs of creating and providing those goods and services. This practice is declared to be not “in the public interest” and it is “policy” that the state should gain control of that business. The price negotiations will be rich with irony and vested interests. The buyer is using public money which includes tax paid by the business and its employees. The sellers will include many cronies who had the foresight to pile into the shares before the announcement. The chorus will demand that the capitalists be punished.  You know how it ends.
So then how does one nationalise an individual?  Do they plan a deal where the state pays money to the families in return for these fellows becoming some kind of government slave?  Curious. Perhaps the word they were looking for was confiscation not nationalisation. Even more alarming.
But then of course another bunch of suits denied any knowledge of the government having plans to nationalise anything.
However there is widespread agreement that far too many people in the country are unable to find employment. The disagreement arises in how this ought to be fixed with many putting a lot of faith in policies that were agreed to last year at a talk fest in dusty distant Polokwane. So far however, the only obvious policy enactment has been to attack the practice of labour broking which does actually enable some folk to find some work. Nevertheless a rash of ministers announced with satisfaction that their frameworks, charters, targets and programs were in place and ready for implementation. None of them, I’ll bet, conclude that less intervention is required. Instead they will be tasks that the government wants carried out by people who already have jobs trying to satisfy paying customers. The tasks will probably result in costs that will ultimately be passed to the customer who will be tempted to go elsewhere, leaving no one better off. Central planning is a seriously bad idea.
It turns out that somebody forgot to switch off the computers when they left for the night and after hours the little devils decided to trade the rand all on their own. Before anyone could stop them, one was happily selling rands at more than 8 to the dollar and that triggered a whole lot of other computers to panic and start selling as well. It was only when the cleaners opened up the next morning it was found that the nation’s currency had been trashed and they turned the thing off at the wall. Happily real people are now back at their desks and the rand is around seven and a half to the dollar again. However the trade union’s insistence that interest rates be set at 3% will see a bit of a race for the exits again.
There were also scares in the equity markets with some heavyweight bears being granted airtime and terrifying the punters. This lightweight bear is also unable to assemble any reason to be fully invested right now and the sight of Nedbank’s very negative trading statement deepened the mood.
Now I had better go and look up Leicester on the map to see where the ‘bokke have been sent to. Is it like Bloemfontein, but wetter?
James Greener
6th November 2009.