There is something of a shortage of political stupidity this week Maybe everyone is so impressed by the amazing ideas tabled by the president during his Polokwane appearance at the week end that they are silently wishing that they had thought of them. Like getting the state to employ everyone who needs a job and instructing universities to pass final year students who need a degree. The state would pay for these lucky students. It is all so simple. Why didn’t anyone come up with these sorts of plans before? The state can, after all, achieve anything it wants. I am a tad anxious that so far nothing has been said about creating wealth.
Yesterday party leaders were told to stop talking and “devise practical ways of creating jobs”. Today some talking head has told us that the long queues of applicants standing at university gates were indicative of “Draconian” entrance criteria that prevented weak students from getting a place. He went on to suggest that universities ought to offer courses that any student could enter and pass over perhaps four instead of three years. Without pausing to suggest which employer would find this sort of graduate useful, the talking head went on mystifyingly to describe such a strategy as “respond[ing] to the call of massification.” No, I don’t know either. Even the spellchecker is doubtful.
It will be a pity if implementing these schemes causes government expenditure to resume the unhealthy growth that it has so recently managed to curb. At the end of November the growth rates of both the state’s income and expenditure were for the first time in many years tending towards the quite modest 8.5%pa level.
Mind you, funding government deficits has suddenly become simple it seems. Punters were this week elbowing each other out of the way in order to lend money to places like Spain and Italy. There is always money somewhere if you know where to look and what to promise in return. Do not ever mention the “default” word though.
Proper analysts have not been silent and forecasts of which shares will do best and what level the gold price interest rates and other benchmarks can achieve are filling the pages. They may well be right and perhaps we ought to be buying equities again. My own rather simple investigations regrettably suggest that even those areas which did relatively badly in 2010 like platinums, healthcare and life assurers are mostly all still offering lowish dividend yields and elevated price to earnings ratios. By contrast, construction sector shares are not overvalued but almost all of the companies there have been lamenting empty order books while state’s capital project spending apparatus has been clogged up with outstretched hands.
Next week the kaftan queen will waft to the podium and announce the result of two days of deliberations between herself and the team of experts about the price of money (i.e. the repo rate). I doubt she will reverse the recent trend and help us fixed income dependants with a rate rise. But I think that there are enough signs that the economy is gradually and grudgingly starting to tick over a little faster and so can see no reason for a rate cut either. More of the same then?
They played cricket (of a sort) in the Moses basket last week to celebrate the arrival of one part of our rainbow nation on these shores150 years ago. Despite an heroic effort on the one-off pitch there is no getting away from the fact that the stadium is not really suitable for cricket and we Durban ratepayers are going to have to find some other outfit able to help us with the maintenance costs. Perhaps temporary shelter for all the Vaalies who may be flooded out of their homes tonight?
James Greener
14th January 2011.
