Investors world-wide appear to have no doubts. The rand is the must-have currency. At present a single US dollar will buy 680 SA cents. Whatever those investors are choosing to do with the rands – buying shares appears to be one idea – they must be assuming that when the time comes to take their money home, the price of a dollar will be not very different from these levels. However, it tends to be in the nature of markets that this assumption is usually false if only because most people will leave the moment they see weakness developing and then a bit of a scrum forms at the exit. This only speeds up the collapse. Locals who have not yet used up their foreign currency allowances might think about taking advantage of this period of rand strength.
Much of the current optimism in the markets has been caused by the near certainty that the US Federal Reserve will soon launch what is being called QE2. This is not an ocean liner but the second tranche of a so-called quantitative easing program. The innocuous name refers to the process where the Fed prints money with which it buys equally freshly minted bonds issued by the US government. The government then doles the cash out to its citizens in the form of salaries, payment for goods and services and on welfare programs. QE1 failed to launch the US economy into a noticeable recovery so they are going to try again. QE2 is a trillion dollar bet that this time the consumers will be more obedient and spend rather than pay off debt or save. The Chinese with $2.65 trillion in foreign currency reserves must be watching this program of dollar sacrifice with growing alarm.
One of the austerity measures being taken by the UK government has been to shut down dozens of tax eating organisations that provide little value. This is a great idea. Sadly the same cuts are not yet evident here despite being woefully overdue. The National Youth Development Agency has an annual budget of R370m. It pays R11m a year in salaries to a 12 member Operating Executive Committee who rely on input from a 63 member Advisory Board. Just the tea and biscuit bill for a meeting this large will leave precious little money out of the budget for any other youth development – whatever that is. Over at the misnamed Road Accident Fund, which is actually a R43bn deficit not a fund, the CEO was awarded a bonus amounting to almost half his already outrageous salary of R4.3m. Reports failed to indicate the reason for the award but clearly it can’t have been performance. The Competition Commission has delivered an opinion on the staffing complement for the proposed forthcoming merger of two life assurance companies. This change of focus from consumer protection to employment policies is alarming and typical of unchecked bureaucracies. And Stats SA sent a charming young lady armed with a blunt pencil and well used eraser to my house to ask questions and complete a huge census form. She treated my refusal to identify my race group on the grounds that we had stopped all that nonsense 16 years ago with polite amusement and then went on to record that I wear glasses and own a variety of consumer durable items that will undoubtedly catch the attention of any potential burglar who sees the document as it travels through the system. She forgot to ask about the Rottweiler though.
Good news this week included drawings for a ship that could house a brewery which could sail to places where shortages threatened. With my house being just 800 m from the beach I shall keep an eye on this development. Also developing is a black and white blizzard of Sharks support ahead of tomorrow’s semi-final against the Blue Bulls. The early kick-off provides a marvellously long post-match period in which to braai while watching the other game. Expect poor visibility in the Durban region tomorrow evening.
James Greener
15th October 2010.
