Friday, 22 January 2016


Number One, plus a pretty large retinue of countrymen and women, were in Davos this week to show off their sponsored fur-lined clothing selections. It is doubtful if any of our official delegates at this annual World Economic Forum were able to make many useful contributions to the theme of this year’s jamboree which is “The Fourth Industrial Revolution”. It’s not at all certain that we down here on the southern tip have even completed the first three.

Somehow JZ must have dodged his minders and managed to seize a microphone and podium to assure everyone that the South African economy was not only open for business but was also “resilient”. His understanding of that word seems to be in the same league as his command of large numbers and commodity price drivers. Poor. Most talking heads think that our sad drought-stricken country will fail to grow by even 1% this year. Although great rains are forecast to arrive soon, it’s already too late for grain harvests and prices of most foodstuffs are setting all-time highs. 

What undoubtedly will not be poor, however, is the catering arrangements at the parties which take place as a reward for attending the conference sessions. Squadrons of economists, politicians and head honchos take it in turns to show off their Power Point skills and score points for how many in the audience stay awake. The talking heads stand in the snow and ask silly questions in front of the cameras. The real story at Davos is networking to Olympic standards.

It is doubtful that any of our financial markets have reached their nadir yet. That is the rand can still weaken further, share prices can fall lots more and interest rates are certain to rise. The few special situations like the Breweries deal do provide the odd spark of light halfway down the tunnel but it looks as if the All Share index is headed for a really bad monthly decline of well below -5%. Several sectorial indices are already into double digit declines. Fairly shortly the December year end companies will start to publish their results and the extent of the damage will become clearer. Already the aggregate price earnings ratio of the 100 largest market cap shares on the JSE has fallen to around 13. A decline in earnings of only 10% by most of those companies could see that ratio fall to single figures – a much more interesting level for buyers.

A consequence of the very weak currency is that the rand value of offshore held assets has grown pleasingly. This is exactly what a rand-hedge strategy is designed to achieve. However, this means that the percentage of offshore assets compared to total portfolio value can exceed the limits imposed by the Reserve Bank’s foreign exchange department. The sole but alarming remedy would be to sell offshore assets and repatriate rands – a process which seriously prejudices the local portfolio owner’s interests. This is a development to watch and those managers with capacity for further offshore investment could well see inflows.

Just three weeks into the year it is very dispiriting to be a South African sports fan. Without saying another word about the cricket where only the politicians could be satisfied with their efforts, even the forthcoming Super Rugby season looks bleak. Not least of all is the uncomfortable conference structure foisted upon us as a result of both New Zealand and Australia telling the suits to leave them alone and billet the Japanese and Argentinians elsewhere. And there’s a different bonus point system to be implemented this year. Add to this the fresh claims for the disappointing but somehow inevitable revelation that no sport is immune to financial inducement for a particular outcome. Perhaps even the women’s Beach Volley-Ball at Rio will be rigged. But I have no idea where they tuck their bribe money.
James Greener
Friday 22nd January 2016