Friday, 11 March 2016


Over in the workshops at the European Central Bank the financial engineers are standing back, wiping their hands on an oily rag and discussing where to go for a beer. They have this week completed their latest session of tinkering with the economic engine. Their handiwork is intended to make that engine run swifter and smoother. Only properly trained economists understand precisely what the engineers have done, but simply and crudely they have made it even cheaper to borrow money. Alarmingly the cumulative adjustments of the last few years have pushed certain interest rates to below zero and into negative territory. This means that the lender pays interest to the borrower – a phenomenon that has spawned a blizzard of academic research.
Based on track records, the likelihood that these alterations will have the desired effect is low. What those desired effects might be, is rich material for cynics. Furthering and rewarding the careers of politicians and bureaucrats is the unspoken one. Stimulating growth and reducing unemployment is the headline reason.
Again, crudely, what they appear to want is first and foremost a bit of inflation Not too much mind you, but enough to erode the real value of outstanding debt. There is absolutely no chance that the capital amount of all the debt in the world will ever be paid off (nor, some would argue, is there any need to) so the idea of letting it shrivel by eating away at the value of the currency is popular. Especially amongst debtors. Zimbabwe is a recent example, however, of letting this method run amok. Lenders (savers) were obliterated.
The hot topic of the moment is “state capture”. This catchy phrase is a tad obscure but apparently refers to the phenomenon of private sector elements getting themselves into a position to exert significant influence on government decisions. In other places it is called lobbying. Many analysts believe that there is ample evidence to suggest that the Gupta family and their associates (which include at least one of Jacob Zuma’s relatives) are calling the shots in a number of critical areas. As always the simple technique of “following the money” suggests that the mining ministry is completely captured. The brief but noisy spell of musical chairs at National Treasury earlier this year was probably a capture attempt that was (for the time being) repulsed. Less visible but just as damaging infiltrations are taking place into the state owned enterprises. Hence the unhappiness and high staff turnovers. The attackers enjoy a massive advantage by having the name of the president on their team sheets. It can be noted that some senior party officials are starting to get very edgy about this development.
The recently founded New Development Bank (Brics Bank, to its friends) is supposed to open its doors with starting capital of $50 bn. Our one fifth share of this is around R150bn. So far, we have sent off just R2bn. In the meantime, the bank has announced plans to lend R30bn which shows that at least some of the other four have been rather more generous with their EFTs. Presumably the reason Number 1 said he would send poor old ex-finance minister Nene off to a corner office in this establishment is that he has to ensure that we claim a decent chunk of this loan (at least R2bn) or else it doesn’t make any sense. So far, however, Nene’s letter of appointment seems to have gone missing in the post.
It is hard to say this but those Aussie T20 players all seem to be able to grasp strategy and do sums in their head. Unlike some of our lads who don’t seem to appreciate just what it means to give away 19 runs in an over or play stylish shots for a single when the desired run rate looms large. The Proteas will need to up their arithmetic and planning skills if they are to bring home any silverware from India. The opening matches of that tournament have introduced some very unexpected country names, but it would be both interesting and sad if all the players and officials lined up in groups of country of birth. I reckon there might be enough South Africans there to field at least three teams.

James Greener
Friday 11th March 2016