Friday 28 March 2014

WHO REMEMBERS THE FAT CONTROLLER?



The Industrials and Financials indices are at new highs. It’s Resources that are preventing the All Share from a similar record. But it’s very close. The bears are deep in their lairs, paws over ears, whimpering. This demand for shares at any price is unceasing.
There were six Chinese executives assisting Brian Molefe, the Transnet CEO to sign a R50bn deal to buy 1064 locomotives from them. This big turnout on the sell side makes one suspect that the price was probably in their favour. Mind you at R47m per loco, that’s barely the price of a decent fire pool. Mr Molefe later explained that a benefit of the Chinese deal is that not only would the chaps at Transnet actually be involved in making “the frills” for the new engines but that the Chinese have agreed  to show them  how to build the difficult bits. So in due course maybe we could even make our own. Does he not know that Union Carriage in Nigel started producing fine locomotives in 1964? And that today there is a least one major local producer of locomotives which is listed on the JSE. (Grindrod).
The human tragedy in the communities affected by the ongoing platinum mine strike must now be surpassing the commercial and fiscal damages being sustained by the industry. And yet amazingly the labour leaders continue to attract support for demonstrations and marches. And the state appears to do nothing. Are the people who warm the seats in the Cabinet totally incapable of grasping the economic realities here? Union leaders who make utterly unrealistic promises to their members about what they can deliver, need to be reprimanded by at least a minister. If they don’t do so that means that government too believes that the wage demands could in fact be met by the employers without the destruction of the industry. Surely they don’t believe that do they? Or maybe they just can’t do the sums.
Very brave souls are starting to invest in the sector, convinced that one day a recovery is inevitable. A new mine listing is even on its way.
The government has hatched a plan to identify those teachers who show contempt and disrespect for their colleagues and pupils by failing to turn up for work. They want to install sophisticated electronic biometric clocking devices at schools to catch these culprits. The obscenity of even considering such a system when not every school yet has power, water and sewerage services leaves one breathless. Why not just give supervisors the power to dismiss instantly anyone not interested or capable? Knowing that your job is always at risk, changes behaviour enormously.
Except for some rather nice foreign travel for the president and his cronies there was never the slightest justification for pretending that we were in the same league as the four countries identified as the BRIC nations by a New York banker in a fit of analytical whimsy. Tagging ourselves and an S on to this lot was cheeky. The news that his good friend Putin had more or less seized Crimea must have had our man Zuma flipping through the atlas in the Nkandla library and wondering how to chide Vladimir for interfering in the internal affairs of another country. Perhaps it is time to forget that ill-starred friendship and start to worry about be labelled as one of “The Fragile Five”. (SA, Turkey, Brazil, Indonesia & India).
My DSTV decoder blew up at a critical moment on Saturday and so I am pleased to accept the Lions win over the Reds without having to wince about the referee. Sadly the decoder reset just in time to show the Sharks losing the plot and their game. Their injury list places the rest of their campaign in jeopardy somewhat but it does provide an opportunity for some unknown stars to shine. The Sevens Rugby is as nerve wracking to watch as the T20 cricket. One missed tackle or bad over and all seems lost and hopeless. These narrow victories are terrifying. Another Formula 1 GP this weekend or “economy run” as one critic puts it.
James Greener
28th March 2014

Thursday 20 March 2014

ISN’T HONEST GOVERNMENT A HUMAN RIGHT?



One report this week suggests that the South African currency is being used as a “safe haven” from the crises that are washing over the rest of the world.  You do have to wonder just how many people affected by developments in, for example, Crimea, have pulled out their school atlas and thought: “South Africa! Now that’s a good place to send my money.” Admittedly the runt has firmed up a tad but if the cash is flowing into the markets those buyers are being choosy about the prices they want to pay. The All Share bounce is fizzling out somewhat and the bull is looking tired.
The great excitement this week concerned a long awaited report about who had ordered and who had paid for all the improvements to President Zuma’s private home in the heart of Zululand. Of course it was us taxpayers who coughed up nearly a quarter of billion rand to upgrade the presidential chicken run and cattle kraal. Actually all of this information was known even before the commendable and fearless Public Protector Miss Thuli Madonsela published her report. The puzzling thing is that the property owner (i.e. Number 1) seems not to have had the slightest curiosity about why his place was overrun with workmen for so long. All he knew is that he wasn’t paying.
By a strange coincidence a quarter of a billion rand was also the income that the toll road operator collected in three months from travellers using the new roads around Joburg. This is only a third of the amount that SANRAL needs to service its massive debts but nevertheless the spokesman thought that bond holders and ratings agencies should be pleased with the news. Well, maybe but also perhaps not. The alarming part of the story, however, is that all those gantries with cute sounding bird names in fact counted traffic flows that should have yielded almost a billion rand in the period. This means that comparatively few motorists are bothering to pay and the operator must have tens of thousands of “customers” who in total owe them about R700m. Wow! This will be a challenge for an organisation which admits that it has made no provision for bad debts.
Given the appalling numbers of people out of work how did The National Union of Metalworkers have sufficient resources and chutzpah to hold a 3 day conference in the middle of a working week to discuss what demands they will be making on employers this year.  One of those employers is the Russian owner of Evraz Highveld Steel & Vanadium who has been mulling the idea of closing the struggling plant. Despite this, the union representatives from that business told their conference that they would be insisting that the average salary for their members should be raised by almost 70 % to R10 000 pm. They are probably soon to learn the meaning of “Nyet”.
Did the promoters of the new law about enforcing gender equality think it through completely?  The legislation allows the state to jail a CEO if he fails to move towards and achieve a quota of 50% women in decision making structures. What if that CEO is a woman? It’s asinine legislation anyway.
So this was the warm-up session for our Autumnal season of low productivity four day weeks. There are three more next month and then in May we defy global practice with the general election scheduled on a Wednesday. That event has been proven to cause huge lethargy and ennui amongst the electorate who will probably need to rest for several days thereafter. Democracy is demanding you know.
I am pleased to report that the Lions are second in the SA Conference log after the Sharks. However the news that SA Rugby is still campaigning for the competition to be enlarged to 18 teams is as disappointing as the gentle purr that the new Formula 1 motors are emitting. Grand Prix is all about noise and atmosphere and to hell with the cost.
James Greener

Friday 14 March 2014

WHO KICKED THE BEAR?



Whoops. What’s happening here? The All Share has shed nearly 2000 points since this time last week. Bears have been spotted taking an exploratory swing of their claws in many other markets as well.  Is there just the merest hint of panic in the air? Can this be the beginning of the end? Probably not. Buyers are a resilient breed and the temptation to buy shares a few percent cheaper than they  were a week or so ago is hard to resist even if  earning are not going up at nearly the same rate as the prices seem to do. Good news is that the rand price of gold has recovered a year of losses.
Lots of fingers are suddenly being pointed at China where it is suspected that their ongoing demand for the world’s minerals is not as large as it ought to be. As with all data prepared and released by anyone with an agenda it is impossible to separate the facts from the propaganda and it is only when the orders fail to be placed will suppliers know just how bad life is going to be. Anecdotally I can tell you that there seems to have been a marked decline this year in the number of ships waiting in the ocean outside Durban port.
Apparently being without electricity for a couple of hours isn’t very serious. Minister Gordhan described it as “an ankle kick”. Leaving aside the fact that some ankle kickers can leave quite a lot more than a nasty bruise, it should be appreciated that we domestic retail and office consumers are being inconvenienced only after many of the really large industrial customers have been shut down for days and in some cases years. Simply put, even if a dodgy supplier sends a load of duff wet rocks labelled “Coal” round to the power station now and then, Eskom just does not own enough generator capacity to meet the real unrestrained demand that this industrialised country desperately needs. It doesn’t help that former US vice-president Al Gore has been down here for a beer and a braai and of course waffled about renewable energy sources – his pet topic. Our sole dependable source of economically effective power for many years is going to be coal with small and possibly growing contributions from nuclear and gas. In the unlikely event that Africa becomes economically and politically mature and stable, hydro power from the centre of the continent is also a possibility, Wind and sun are ideas to amuse the scientists but wont bother engineers who have demanding customers.
The government took time off from compiling their electoral list of unappealing, woefully ignorant, generally untalented and frequently corrupt buddies to push through another piece of dreadfully inimical mining legislation. The argument of who wins and who loses will rage on but once again, grappling with government interference diverts energy away from doing what is already a very high risk business of exploring and exploiting minerals. The minister was pleased to tell parliament that investors she had addressed recently had accepted the reasons for the new legislation. It turns out however that she was speaking in Canada at the time.
I would have thought that compressed natural gas is a fairly inflammable commodity and not something you want leaking out at a motor vehicle accident scene. Nonetheless some entrepreneurs are setting out to convince a large number of minibus taxi owners to convert their vehicles to run on the stuff, and have already commissioned a service station to sell it. The major attraction is the price of the fuel which is several rands per litre cheaper than petrol although nowhere in the reports of the venture is there any mention of fuel consumption and engine performance. Taxi drivers are unlikely to want to use any fuel which does not get their fares down the emergency lane at any speed less than 100kph.
Fantastic. Grand Prix season starts this weekend and there are all the new cars and teams to get used to. I can’t however get used to losing to the Aussies at cricket even if it is a ridiculous pyjama game of just 14 overs.. The good news is that there is no rain expected at Centurion for the final game this evening.
James Greener
One day before the Ides of March 2014

Friday 7 March 2014

DISCRIMINATION CAN BE SPELLED WITH A Z



So the rolling blackouts have resumed. Eskom, who prefer the term “load shedding” has been muttering something about damp coal but it must surely be more than that. However, the prospect of the country having insufficient electricity for everyone all the time has caused great optimism amongst the bulls who have been bidding with ever increasing prices for what some of us think might in fact be lower earnings as a result of the lack of electricity. The All Share index has soared to within a whisker of 48 000, which means it has gained 10 000 points in 8 months. The greatest contributor to this performance has come from the financial sector. Perhaps it is thought that it will be the banks that will make the most money with higher interest rates then.

Related to the Eskom issue is the news that Chancellor House has sold its stake in Hitachi for R50m. It paid just R6m for this holding 8 years ago. That’s a very acceptable capital gain of R44m. Shortly after the investment was made, Hitachi was awarded a major contract in the construction for Eskom of two desperately needed power stations. The contractor has reportedly failed to deliver satisfactory work on time and budget and so perhaps few, if any, dividends were paid in the last few years. The capital profit is therefore very welcome to the investor even if the presumed absence of earnings growth makes it hard to figure out how the valuation of the holding could have soared so dramatically. Readers may not need to be reminded that this investor is the so-called “investment arm” of the ANC. The money after capital gains tax of course will come in very handy with an election coming up. It has not been mentioned if Hitachi are now again looking for a replacement Black Empowerment partner. Surely they can’t afford another one.

Rather quietly and without anyone noticing much, the various global indices that reflect the cost of commodities like food, fuel and minerals are rising quite sharply. Some of this will be due to the softening dollar perhaps but these are very discomforting moves for consumers. After so many years when the inflation monster looked as if it had lost some of its teeth, government policies designed to avert deflation at all costs might just be having some effect.

Mark Zuckerberg, the multi-billionaire developer of Facebook, must be very grateful that he never tried to pursue a career of being a provisional liquidator practitioner in South Africa – assuming of course that he has even heard of either the job or the country. The government department that appoints such people has added another bizarre layer to the supremely racist and sexist criteria that it applies in appointing candidates to these posts. White males will be considered for only every tenth vacancy and then only in alphabetical order. Doubtless numerous real applicants named van der Merwe, van der Walt or even Zille are learning that their country doesn’t want them. It’s a massive tragedy.

Feelings may run a little high at the bowling club this evening when I wear my new Sharks shirt as well as my old Lions cap. This rather despicable display of perfidiousness is going to be impossible to explain and maybe I shall lie low until the weekend is over. Even if the Proteas had lasted for a further 27 balls, we would all have known that a draw was not the result we needed against Australia. And that same night Bafana, the soccer ‘boks, let in 5 goals and scored none versus Brazil. The only good news on the cricket front is the magnificent performance of the under 19 squad who are now the proud holders of the World Cup for that age group. Some of those lads had better keep their cell phones charged and close to themselves as the forthcoming T20 series with the Aussies unfolds. It’s a funny game, cricket.

James Greener
7th March 2014