So far the deterioration (almost 9% since
March, with half of that this month) in the All Share is similar to that
experienced in 2011.But it’s showing every sign of needing to go down a great
deal more. And the weak rand signals that foreign buyers are not showing up. All
that’s happening is that locals are swapping scrip for cash at ever lower
prices. Only the very nimble and brave should try to squeeze trading profits
from the market in these circumstances.
The South African government is now
paying anyone prepared to lend them rands for a period of 10 years, a yield
which is over 600 basis points greater than the yield that the US government
is paying its similar period dollar creditors. Even this record high difference
is failing to stop rands fleeing the country at 13 to the dollar and 20-something
to the pound. Clearly there is a fear that whatever money is returned to rand investors
in 10 years time won’t be worth collecting. Alarming.
Worth noting, however is the fact that
despite the dollar gold price plunging more than a third in the past three
years or so, the local price of that metal as reflected in Krugerrands and the
gold ETF is off only about 5%. Not exactly a perfect store of value but a
reasonable defence against the rand’s collapse.
Despite all our deepest scepticism and
suspicions it has to be acknowledged that according to the monthly figures
published by National Treasury the government is slowly bringing its spending
rate down while increasing its collections rate. After applying the friendliest
of averaging techniques these growth rates turn out to be 7.9%pa and 10.1%pa
respectively. Mathematically at least, and if trends persist, this significant
difference implies the elimination of the fiscal deficit within a decade. The
resulting surplus could then be directed to extinguishing the rather worrying
debt that has accumulated. The list of things that could derail this thesis
would run over onto the next page and so we must be content with just keeping an
eye on these numbers. Next week the second quarter GDP results will be released
and ought to be a little better than the awful March 2015 result of 1.3%pa.
Mind you there have been precious few company results published in the last few
months that signalled resurgence in growth. Few of our supposed leaders seem to
grasp what a tight-rope we are walking.
Hopefully no one boarded a flight to New York from SA on
Monday clutching a copy of Business Day. For that news paper carried a
financial notice addressed to the shareholders of Oceana, a fishing company. And
emblazoned along the top of that “tombstone” advertisement was the curious and
pointless injunction that it was not to be seen by any one in the USA, Canada
or even Japan.
Few people will remember why regulators thought it was important to protect the
sensitive investors in those places from news about rights issues here on the
southern tip. but anyway the internet has
made those ideas a nonsense.
To the delight of some and consternation
of many, “hackers” have breached the security around an internationally used
website purporting to offer a service for those seeking a bit of “skelm”. For
non-South African readers this is the delightfully evocative local term for an
extramarital partner. Fervid reporters are pawing through the now published client
lists from the site and it seems that SA civil service email addresses are strongly
represented, which confirms what we suspected these folk do with most of their
time. Expect a rash of explanations along the lines of “It is not me. I was not
there.”
Apparently the decision to send the
‘bokke out to play dressed in white jerseys last week was a “commercial”
decision. Excuse me? It was definitely a very stupid one ignoring not only
traditions but also the laws of optics. In the fading Argentinean afternoon
light the light blue and white hoops were almost indistinguishable from the
‘bokke’s strip. These decision makers display the same understanding of rugby
that Number 1 has of finance.
James Greener
Friday 21st August 2015
