Friday 30 September 2016

BYE BYE SAB



It will be strange on Monday watching the JSE open without SA Breweries on the board. This company has enjoyed a long and close relationship with every aspect of life in SA. And to end it all is the impact that this world record-setting deal with AB InBev is having on everything from our currency which is holding firm, to the sponsorships where Castle has become conspicuous by its absence. Shareholders and beer drinkers view the future with trepidation. Naturally government, which is spectacularly bereft of any business acumen and skill, has had its say about the deal with instructions about who should dispose of which divisions and brands “in order to protect the interests of the consumer”.  We consumers would also like to be protected from civil servants taking obscene bonuses and payoffs please.
The Competition Commission have also decided that the shipping industry might be operating a cartel and have raided offices to collect evidence. This is deeply ironic action from a state which, because it has a monopoly, operates among the most expensive ports on the planet. The two dozen or more ships loitering in the roadstead offshore Durban are clear testimony to the fact that no skipper wants to tie up in dock before he has to.
Suddenly the wealth-destroying BEE deals are back in the news with companies publishing fiendishly complicated notices about how their particular one will work. There are many objections to this program of political allocation of resources, the biggest of which is that a quarter of a century after SA scrapped racial classification, the state still uses skin colour as a policy tool. Equally damning is that the BEE program has failed to deliver wealth or the promised jobs except to a small number of the usual suspects. Similar official ignorance about how businesses are formed and make money and opportunities for owners and investors is hinted at in the plan to open a stock exchange devoted to help small-business operators in the townships.
But the finest example of ignoring what a financial report from an organisation should contain can be found the current offering from the SABC. Admittedly it is a strange business with income from licence fees, tax-payers and advertisers and a product that is free. But the presentation of the report with whizz-bang graphics more or less obliterates that it spends way more than it receives and is run by rapacious crazies. First prize for crass foolishness in the full page newspaper spread is shared between the league table of how often the accounts have been qualified and the complete absence of any conventional financial schedules beyond the bald statement that the loss was R411m. Like so many of the state owned enterprises this sad institution needs to be flogged off, and quickly.
Virtually every incident involving an official not doing their job seems to end up in a court of law. Very few, even when caught with their hand in the cookie jar or waving a fraudulent certificate depart swiftly and in disgrace. Instead all parties race off to that most colonial of institutions -  the law.  More often than not, both sides of the dispute are state entities or employees and the taxpayer has to pick up both tabs as the wrangling winds its way up through ever higher courts. Rarely does the learned judge at some level dismiss the whole thing as a vexatious waste of court time and send everyone packing with a sharp slap on the wrist and a bill of costs. The state money spent in this way would undoubtedly fund a great many students – with the proviso of course that they read something useful like science or engineering. No soft liberal arts stuff please, the nation already has enough of those.
The Ryder Cup is being played in the USA this time, so the exciting result-determining rounds will be broadcast only late on Sunday evening.  But by then we will be exhausted with our celebrations of wins by the Proteas, the ‘bokke, Ferrari, and the Lions/Sharks (select as appropriate).
James Greener (the optimist)
Friday 30th September 2016

Friday 23 September 2016

BUT WAS THERE SPACE FOR THE SHOPPING?



Both the US and our own central bank left their key interest rate unchanged this week. One day this announcement will deliver unexpected and startling news and markets will respond long and hard. But in the meantime it’s all rather pedestrian. Even the claims that Brexit would trigger the end of the world as we know it have mostly turned out to be wrong. Now the talking heads are fretting about whether Britain’s exit from the EU will be “hard” or “soft”. Reportedly the legions of Eurocrats who make a living from knowing the rules are ensuring that it is all as messy, difficult and as drawn-out as possible. The ultimate Eurosceptic position is that once Britain actually withdraws, the rest of the community will fragment causing huge unemployment amongst the paper shufflers of Brussels. And cries of woe from most other parties who wished they had thought of leaving first.
The SA Democratic Teachers Union seems to have scant idea about either democracy or teaching. The union is very concerned by the proposal from the Western Cape Government to send school assessors around to see what is happening in the class rooms. The Union claims that this will take education “back to the archaic times”. Which might be no bad thing as in the present times the teachers have so failed the pupils that SA now languishes near the foot of all international education ranking tables. Perhaps with a bit of prodding and persuasion from an assessor system with the power to instil a bit of “archaic” fear in non-performing teachers, many more school leavers will have useful and employable skills.
This in turn might result in more young people having the self-confidence to move on without insisting that they need to attend university from which so many of them currently leave without any qualifications and with huge debts. Meanwhile the students who do have places are causing all kinds of mischief. They are demanding that universities must be decolonised. Whatever that means exactly is not clear but it often seems to require arson. Even more mystifying was the gathering of people looking very colonial in scarlet doctoral robes and black cow-pat bonnets holding posters bearing messages such as “Education is a right, not a commodity.” So far no reporter has had the courage to ask who it is that should grant that right nor to suggest that actually education is a commodity with an easily determined price.
A foolish check-in clerk at SAA refused to allow Tyrone Pillay, the silver medal Paralympian, to take his prosthetic leg on board a local flight. In trying to apologise for this mistake the SAA spokesman made a memorable gaffe himself. He expressed dismay that Tyrone’s “customer experience got spoiled on the last leg of his journey back home”.
Number One presumably had a good customer experience when he and the selected wife were downgraded from the presidential jet to SAA for a recent jaunt to yet another international knees-up. Now that it has been demonstrated that the national carrier can do the job maybe the plan to buy him a new private jet ought to be quietly dropped. Hopefully the presidential wallet-bearer paid for the tickets quickly because that airline is in serious need of the cash. SAA’s 2015 financial results are months overdue and still some last minute calculator work uncovered a 25% error not previously noticed. The stated loss is a breath-taking R5.6bn.
Apparently in the 22 years since it came to power parliament has passed 1000 new laws. But despite being crafted by the finest socialists and communists on the planet, huge unemployment and inequalities persist. Undeniably and thankfully of course the standard of living for many citizens has been improved in these past two decades, but all those laws have still failed to reduce dreadful inequalities and unemployment. Enjoying great freedom of speech and movement is scant compensation for most of our citizens. It time to fillet the statute books.
Thank goodness we don’t have to watch that haka thing this weekend.
James Greener
Friday 23rd September 2016. (Happy Birthday Philip)

Friday 16 September 2016

“WHO YOU GONNA CALL?”



Someone in the US who might have an influence on these things -- i.e. Federal Reserve Governor Janet Yellen – muttered that the price of money in the USA might just perhaps be a tad low. This sparked a mild panic in several markets including the JSE and sellers dominated proceedings for a few days. No big deal yet but it does reveal that markets and economies are rather anxious. The past decade at least has seen massive interference and intervention in the pricing of risk by self-confident politicians and administrators. Hazardous concepts such as “too big to fail” and “bad bank” and practices such as “quantitative easing” have had strange consequences. Not least of which are negative interest rates where the lender pays the borrower for the privilege of making a deposit. The message that someone is trying to send us is that saving is useless and will we please all just get back into the shops and do our civic duty and buy stuff.
Central banks have fire-hosed massive amounts of cash into economies, all with the objective of getting consumers to spend. For reasons which are unclear to most of us (but will provide research topics for graduate students in the coming years) the interventions haven’t much worked and the global slowdown has been very painful. Even Richemont, the SA-owned seller of luxury goods, has recently reported that profits are down by almost half. Normally their customers are largely immune to difficult times but the suggestion that a clamp-down on corruption in the Chinese government offices is having an effect, leads one to wonder about developments closer to home. Keep an eye on luxury car sales numbers.
Despite the electoral successes of the political party with the same name, South Africa has slipped 12 places in the Economic Freedom rankings. The point here, however, is that the compiler of the ranking table and the red-overalled politicians almost certainly have different views about what economic freedom means. As they say: It’s complicated.
Whenever one watches a news report where government panjandrums are out and about, most of the party will have a cell phone pressed to their ear. Even when gravely inspecting the site of a tragedy they are often simultaneously talking to someone (presumably) far away. Who, for goodness sake? So it’s not really much of a surprise to read that the state spends R3.2bn annually to provide its 1.3 million employees with telecommunications services. This amount includes the costs of data connections for computers and those fixed-line phones that ring incessantly and unanswered in empty offices. But it still seems like a lot of money for a business that usually demands that most of its customers present themselves in person.
There was quite a bit of excitement this week when it was revealed that Number One had paid the government the R7million odd that it had been decided should be his somewhat risible contribution towards the costs of the substantial improvements to his private home in Zululand. The tale of the journey to this point and amount is very long and reeks of bad faith and corruption and now the refund itself is extremely odd. Reportedly the president – despite having friends and relatives for whom this sum is merely “walking about money” -- has borrowed the cash from a small and unknown Mutual Bank (one of only 3 in the country) in the form of a mortgage bond. Just what terms our president was able to negotiate are rightfully confidential. Nevertheless, it’s fun to run the numbers which suggest that JZ may be paying a very large fraction of his current pre-tax salary every month, right until he is 94! Curious. And it’s odd that the ANC haven’t complained that the Banks’s logo is an elephant, because the party has form in worrying about stuff like that.
For many reasons the Paralympics events can be hard to watch but it seems as if most participants are having a great deal of fun even while achieving astonishing personal and global milestones. The South African medal count is currently 13 versus 18 by New Zealand. ‘bok supporters would be almost grateful if we manage this score line tomorrow morning in Christchurch.
James Greener
Friday 16th September 2016 (Harvest Moon lunar eclipse day)