As usual at the end of last month I was playing around with the national revenue and expenditure numbers released by National Treasury. In the last 12 months they have collected R351bn of income and spent R375bn. So that’s a shortfall of R24bn or R2bn per month. By now most of us would have received a rather anxious call from the bank manger. But governments worldwide seem always to be confident that someone somewhere will lend them the cash to bridge the gap. And astonishingly they are right! Bond yields are way down; in some cases at multi-year lows. These low rates have of course caught the eye of other borrowers and this morning we learned that Eskom will soon be looking for R56bn so they can build some sorely needed new power stations.
Lenders must be confident that this debt is not of the African sort that is being asked to be forgiven. Some USD300bn of it if the Archbishop is to be believed. I do hope that the forgivees will be writing polite notes to the taxpayers of the G8 thanking them for their very kind gifts.
Actually SA has these past dozen years been rightfully increasing its credit rating as a borrower in the international markets. So much so that the new boss of the World Bank, who popped in here after calling in at a few less comfortable places up north, stated that his organisation would really love to lend to South Africa. I’ll bet! People who understand interest collect it, not pay it.
But to get back to those Treasury numbers. As I have commented before, the combination of a consumer spending splurge and an ever more nosy tax man has seen the state’s income growing currently at 11.6%pa. However, Treasury have been doling the stuff out at a rate approaching 12.6%pa. There’s little wonder that wage negotiations for single digit increases are not gaining widespread support. After all suddenly there are these 7000 new mouths to feed as the prisons throw open their doors.
Here in the JSE market there was a complaint from one of its executives that not enough companies were coming to seek a listing. The very next day the JSE’s computers failed to cope with the long anticipated June futures closeout and the market was suspended right in the middle of this very critical session. Tempers in the dealing rooms are getting short and I expect that shareholders of the newly demutualised JSE will want to go short of them as well. To-night’s close out party could get messy.
The government very courageously went short of its vice-president this week and this news almost certainly helped the rand back off from breaking through the R7 per USD level. However, the currency is still weak enough to keep the resources shares cooking.
Wise investors will wait until the long weekend is over before looking to see where the survivors are.
The long weekend is of course the reason why this week’s jottings are going out early. Early jogging will be the preoccupation for all the Comrades marathoners clogging the road to Durban tomorrow. And on Saturday the ‘bokke will be trying to silence the crowing of the French.
James Greener
15th June 2005
