Friday 29 August 2014

PAY BACK THE MONEY



For a moment it felt as if August might actually see the appearance of a large and fierce bear. However, the All Share will close today probably only half a percent down on the month. Most of the damage was caused by the platinum mines and the so-called mining houses. Investors are alarmed by the clear signs that most of these enterprises are arranging their affairs to minimise the often lethal and frequently energy-sapping effects of South African state interference in their industry. On the bull side, the telecommunication sectors, both fixed line and mobile, enjoyed a wonderful month. The banks largely survived the obliteration of one of their number. Bears will just have to wait some more.
For all the apparent domestic problems in that land it seems as if the rest of the world is regaining confidence in the idea that the USA offers a safe haven for their money. The dollar is at a one year high against the euro, the yield on the US 10 year bond is sliding ever lower also to a one year record. Wall Street indices are sniffing all time highs. Money is obviously being sent out West as extremism and intolerance sweeps the planet.
After all, what can be wrong with a nation whose president spends so much time on the golf course and where the national pastime would seem to be emptying buckets of icy water over each other? Americans clearly have very little to worry about.
A bunch of MPs behaved rather badly in the National Assembly last week and the Speaker has written them each a letter inviting them to explain why they should not be suspended. Surely Madam Speaker has no illusions about what sort of replies she will receive and indeed already threats of court action are flying about. The next stage apparently is that an investigation will be mounted. It is all rather wonderfully courteous and old world. Possibly even colonial. Horrors.
The irony of the whole mess is delightful and endless. The chant of “Pay back the money.” has quickly become a mantra with widespread application. President Zuma missed a trick when he should have used it back against the leader of the noisy bunch who himself is reportedly catching up with his tax shortfall by making regular payments which, puzzlingly, are considerably greater than his monthly parliamentarian’s salary. So far, no one has yet used the phrase against the Chief of the Defence Force General Solly Shoke, who rather understandably failed to resist the temptation of booking himself into one of the ultra luxurious first class cabins aboard a flight to the Far East. After all if the airlines offer these facilities who else but high ranking government employees can afford to use them? And it was a terribly important meeting he was going to.
The big problem with that sort of consumption expenditure though, is that not even the most skilled spokesman can convert it into that universal currency of “jobs created”. Here in the kingdom, a proposal to place a 10% levy on the tourism industry was expressed in units of job creation in order to fend off criticism. The money will apparently be used to fund a project of enticing and inviting grand and prestigious events to use this eastern coast as a venue. The idea has all the hallmarks of bureaucratic ignorance of how the real world works.
By some sleight of hand, Stats SA produced the positive second quarter growth rate result that was needed to avoid the first half of 2014 being declared an official recession. Like the ‘bokke results against Argentina it was not a pretty thing but enabled the responsible officials to preen a little and claim that the things will improve “going forward”. However, that ODI win by the Proteas over Australia was highly satisfactory.
James Greener
29th August 2014

Friday 15 August 2014

THIS IS A CERTIFIED COPY OF TIDEMARKS



There is a feeling of unease in the JSE markets. Firstly one of the market darlings has disappeared in a flash of absent funds. Then an unsettling number of companies are muttering about results which are less than exciting and a slew of overseas and local indictors seem to have gone off the boil. The message seems to be Keep Calm but Keep Careful Watch. Note for example that the German Dax index is almost 8% below its July peak and that money is flowing into the US which appears to be regaining its reputation as a safe haven. The dollar and the US long bond are both enjoying price increases. On our own JSE the All Share has remained inside a very modest 700 point trading range for most of the week.
The SA government, however, does not share the view that our economy is fragile and persists in bludgeoning survivors. Gold Fields, for example were this week reminded that they have still not built the clinic and bakery that were supposedly conditions for them being granted the right to mine the technically very tricky South Deep ore reserve. The international airlines have warned that the inflexible and overzealous new visa arrangements for children are already impacting tourism bookings. Nevertheless, they have been dismissed with a flippant reminder to concentrate on their core competency (which) is to ensure that people travel so that they (the airlines) can make a profit.
One of the more dismal developments of the week is the news that “Compliance is now a recognised profession”. There is now such a large and odiferous pile of regulation and legislation that businesses are obliged to hire people to ensure they don’t forget to tick one box, certify one ID or confirm one place of residence. Bureaucrats promise each other that one day they will create the perfect rule which, when complied with perfectly, will reveal everything about everybody and from that information they will be able to save everyone from everything. However, events both deliberate and accidental will forever appear unannounced and ill timed to demolish even the most careful formed strategy and plan. All any enterprise can do is rely on vigilance, honesty and integrity throughout its workforce, customers and suppliers. A room full of signed and compliant documents will never be proof against frauds, losses and simple mishaps nor is it much help against the South African mantra. “It was not me. I was not there.
This will doubtless be the defence offered by robbers who visited the home here in Durban of the Deputy Minister of Science and Technology and made off with half a million rand in cash. The high rank of the victim is perhaps the reason for the amazing haste and skill shown by the police in quickly apprehending the half dozen suspects, although their claim that DNA profiling was used is barely credible. But more interesting would be to learn just how and why the honourable Ms KaMagwaza-Msibi managed to acquire and store so much petty cash. Even in R200 notes that’s a big chunk of change that will require an extremely large purse when going to the shops.
Another politician with a nasty problem he probably never foresaw is Police Minister Mkosinathi Nhleko. He has been asked to determine how much money his boss, President Jacob Zuma, needs to repay to the state for tarting up the Zuma family compound at Nkandla. Now this is a hot potato of note and no one will be surprised if he chooses his superior over the whines of a few taxpayers who probably never voted for him anyway.
Two Pumas teams to watch this weekend. The ones from Nelspruit are coming to Kings Park this evening and so the bowling club bar will empty early. And tomorrow the ‘bokke open their Rugby Championship campaign hosting the Argentineans at Loftus. Two satisfactory results are confidently expected. 
James Greener
National Relaxation Day (USA)

Friday 8 August 2014

BIG BANG THEORY



There were two huge bangs felt in South Africa this week. The largest one was a very unusual earthquake which happened about 10km below the surface right in the heart of the country near the Free Sate gold mining region. It is rumoured that government have set up an investigation to see whether or not the damage and fatalities (mercifully few) can be laid at the door of the previous regime. The second report was caused by the inevitable collapse of a business model founded on lending money to people who are always very close to the point of being totally unable to pay it back. This is what caused to so-called credit crunch in the USA and other places in 2008.
Disguised behind fancy names like “unsecured lending” and “micro lending” and drenched in good intentions – while charging eye-watering interest rates – far too many of African Bank’s  borrowers come from communities badly impacted by the loss of wages and jobs loss through strike action. And so this week it had to disclose that there was an R8bn hole in its accounts. Now the Bank’s funding model has little direct exposure to the savings of the man in the street and so the country has been spared the sight of depositors queuing to withdraw their money. However, the big financial institutions who have been lenders to and investors in African Bank are obviously going to have a very bad weekend doing some nasty sums and working out what to tell their own clients. One of these institutions with the largest exposure is the Government Employees Pension Fund and so assuredly the aftershocks will rumble on for quite a while longer. Politicians will become involved and that’s lethal.  It all happened so quickly. For detached observers it was fascinating to watch the speed and scale of the collapse of African Bank’s share price. Whether the person who bought at 689 cps on Monday was the same one who sold at 28cps yesterday we shall never know, but the spectacle has been a terrifying reminder of how savagely markets can work.
There is a really interesting story brewing over how the nation will get to watch the national soccer team on TV once the present contract between the SA Football Association and the national broadcaster expires in April 2015. Reportedly SAFA have sold the televising rights thereafter to an outfit called Siyaya TV for a billion rand. Opinions will differ about whether  this is the right price for watching Bafana Bafana but it is strange that SABC failed to renew the contract. Siyaya TV was licensed just a few months ago and is a brand new entrant to the pay TV business in SA. It intends to service its subscribers using digital signals sent out from conventional land-based antenna and reportedly will be far more affordable than the well established digital satellite TV service that excludes many soccer fans because of its cost.  But despite a frequent and repeated government assurance that roll-out of this technology is imminent it does not seem to catching on very fast. There is not a great deal of time left in which to get every soccer fan fitted out with the necessary decoder and contract. Once again there is a strong sound of money flowing in unusual directions.
This week a small space craft named Rosetta, which left Earth 10 years ago, reached Comet 67P/Churyumov-Gerasimenk. Now in orbit around this 4km sized lump of rock, Rosetta is taking a good look preparatory to landing on it. The pictures which are coming to us from 400m km away are of breathtaking clarity. As a planet we should all be very grateful that there is a nation which, for the time being anyway, has the resources and the skills to carry out such wonderful pure science.
Summer might be here. The first Yellow-billed kite swooped over the garden yesterday and soon it will be time to blow up the pool toys and crank up the ice making machine. The one concern of course is that the Currie Cup rugby season is only just starting and will run on all the way into October with a fiendishly complicated format that only the guru at the bowling club bar seems to understand. And then the Tests against the All Blacks and Wallabies. Perhaps it isn’t really summer after all.
James Greener
8th August 2014

Friday 1 August 2014

AUGUST HAS ITS UPS AND DOWNS



No one has yet actually spotted the bear in the camp site. But the evidence that he is close is mounting up and some of the more nervous campers are rolling up their sleeping bags and stamping on the campfire embers getting ready for a hasty exit. The markets around the world reported an astonishing range of different experiences in July. Russia and Germany both posted fair sized pull backs - though perhaps for very different reasons. Hong Kong and China both polled better than 5%. In SA the fellows down in the Cape of Storms were obviously too busy bailing out their offices to pay much attention to the market and the JSE All Share ended the month less than 1% up.
The jumpiness has become very evident  in the last few days when this index both set a new high (above 53300) and then plunged almost 3%. It is the resources shares which are responsible for most of the damage. Historically on the JSE, August is the month in which some of the most extreme performances have been experienced. A few readers may recall the 30% collapse in August 1998 and fewer still the 17% rise in August 1982. Records are set to be broken! However please don’t put too much money on the upside record being threatened in 2014.
Other numbers which allowed the scribblers to fill a few column inches were unemployment, inflation and the trade gap. This last is one of the more volatile of the monthly statistics that really tell a useful story only after heavy long term averaging. Unfortunately it is clear that we are not managing to grow the value of our exports very much at all while our demand for shiny and new stuff made by foreigners is insatiable. The reasons for the results on both sides of this equation are numerous and often complicated.
Ensuring that our exceptionally fine network of national roads is maintained and extended ought to be a task that is done quietly, competently, and more or less invisibly. Distressingly, however, our outfit with that responsibility, SANRAL, appear to be unable to do anything without a great deal of fuss. The e-tolling debacle in Gauteng looks as if it may infect the Western Cape, but no one is allowed to know because it is all a great secret. Clearly money flowing in unusual directions must be at the heart of the mess. It really is time for the fuel levy to be ring fenced in the National Revenue Fund so it can be  channelled to the purposes for which it is raised. It must not be used to help fund events like a R200 000 fly past at an inauguration.
Isn’t everyone being rather too casual about the 87 000 ounces of gold which a new accounting system at Rand Refinery allegedly managed to obliterate?  The implication is that the old accounting system was frankly useless and now the shareholders (the four big gold mining businesses) have obligingly filled the hole with R1.2bn in cash. Perhaps they hope that the next accounting system will find the gold and refund their money?
Another accounting wonder concerns the R7bn profit reported by Eskom accompanied  by incessant whining that they are not allowed to charge enough to cover their costs for the electricity they supply. Why do the simple sums never add up?
Gracefully I accept that the Proteas are back as Number One Test Playing Nation and that the Aussies should be sending the Mace back home where it belongs as soon as possible. However the Sri Lanka two-match series was not really satisfying and the Proteas need to notch up some proper victories in much longer series. In the meantime didn’t those Sevens fellows do well in Glasgow? The best part has been the New Zealand press grumping about the whole affair.
James Greener
International Girlfriend Day