Friday, 31 October 2014


Is that it?  Has the bear turned out to nothing more than a cute and cuddly stuffed teddy with a button for a nose and a squeaky tummy?  There’s the All Share index soaring back to 50 000. Last month’s loss of 2.5% seemed to promise that we were in for a good solid October-style walloping. But despite some pretty steep and sharp excursions which must have really scared the day traders, this month’s All Share total return will be pretty much flat; much like the reputation of the pessimistic wing of the investment analyst’s society.  Mind you, the spread between the sectors is huge. The mining indices have been hammered. The Resources index has lost around a fifth of its value in the past three months as the different mining sectors have in turn taken a battering from just about every possible direction including, notoriously, their own government.
Just this week the mines would have been among the major industrial consumers of power who received a call from Eskom instructing them to cut electricity usage by 10%. The magic phrase being thrown about by the utility this time is “outage slips” which is code for “the ratio of engineers to administration staff in this place is way too low”. Naturally the politicians in charge do not appear to have noticed or even remarked on this severe and outlandish impediment to growth.
It also doesn’t help a resource exporter like South Africa that the prices of most commodities both agricultural and mineral are falling. Perhaps the most significant and interesting market at the moment is oil, where a happy and largely unpredicted collision between increasing supply and falling demand has overwhelmed even a powerful producer cartel like OPEC. The oil price is at a four year low in US dollar terms. Since the beginning of the year, oil producers must now sell 30% more barrels of crude oil in order to afford the same amount of gold bullion. Undoubtedly this is having an impact in many decision-making chambers. Pleasingly this is one ratio where SA is on the right side for once. We need less gold to buy the same amount of oil.
We are however not on the right side when it comes to getting people employed The latest official report to reveal this sad and desperate story has and will trigger official reaction and promises “to do more”. These are the same officials and reactions that appeared when the previous report was published and which have had no discernable effect. The sole sensible but rather diffident remarks came from Econometrix, a private sector think tank who suggested that there might be a link between having prescribed minimum wage levels and the number of people being paid those wages. Simple maths, however, is not a strong suite among ideologists.
The postal strike is affording us the opportunity to discover the true cost of getting items delivered. Fees charged by the delighted courier companies offering a replacement service are multiples higher than the price of a stamp. The real debate is not about postal worker’s wages but about the extent to which taxpayers ought to subsidise such a service. It’s a tough one taking place all over the world.
Market forces are indeed savage and indifferent to the needs of an individual or the wishes of a bureaucrat. In the sporting world at the moment there are at least two interesting examples of this. In Formula 1 and in West Indies cricket lethal combinations of regulation and price setting are changing the landscape. This weekend’s Grand Prix in the USA and this summer’s incoming cricket tour are both showing evidence of that.
James Greener
Halloween 2014