In a few hours,
the hoopla will be over and the chair in the Oval Office will have been adjusted
for a much larger frame. Now comes the hard part and the markets will be the
first to signal public reaction to how the new president is doing, Keep a very
keen eye on that US ten-year bond yield in the coming weeks. If it starts to
shoot up the verdict is bad.
Meanwhile
back home a rather less sensitive indicator is nevertheless starting to signal
that the Zuma government is getting into difficulties. Tax revenues are slowing
down sharply.This is a new and very worrying development. The 12-month deficit
is approaching R200bn compared to the budgeted R154bn. Those fancy #Feesmustfall
hash tags are going to be disappointed.
It’s all
turning very messy rather quickly. Most of it is very old news but now the
events are being revisited in a sea of confusion, bad grammar and indignant vengeance,
all fuelled by the vain expectation that the state might be able to get its
hands on some sorely needed cash (see above). More than two dozen years ago,
the now very extinct Trust Bank was doing what badly run banks have done
through the ages. It was lending money to people who were never going to be
capable of paying it back. So when Trust Bank’s inevitable sticky end
approached, the government, very mindful that many of the bank’s owners (in
itself a messy story) and clients were Nationalist Party supporters, made the
foolish and probably illegal decision to launch the infamous “lifeboat”.
Taxpayers money was loaned to the ailing bank at a very low rate on the
condition that it be used to buy much higher yielding government bonds and
other instruments. The capital amount was probably therefore never at risk, but
the net interest flow was from the lender (the government) to the borrower
(Trust Bank). An interesting early example of negative interest rates.
Just what
became of the “lifeboat”, and what its potential recovery value to the state
might be has long concerned the curious. In particular, the rash of bank
amalgamations that have taken place since those days have complicated the task for
at least four investigations into the mystery. The now leaked Public Protector’s
is just the latest attempt to follow the money. One investigation even was
carried out by a commercial British outfit, who as well as charging a very
large upfront fee in pounds, got the new government to agree to pay as much as
10% commission on any “recovered” funds. Fortunately, it seems they recovered
nothing, not least because ABSA, which undeniably is a distant descendant of
Trust Bank, strenuously insist that they acquired no liabilities arising from
that particular wreck. The cold fact is that the money – actually now in today’s
terms a rather modest amount – is gone. Yet another memorial to every
government’s desire to carry out political allocation of assets.
And now the
latest banking mess is just starting to sprout shoots. Following the 2008
financial crisis our regulators were delighted to adopt so-called international
best practice which it was claimed would ensure that such things never happened
again. FICA was born and box-ticking compliance officers appeared on the scene.
Since then there has been no obvious decrease in financial frauds but repositories
have been filled with useless certified copies of every document a client could
produce (and several they couldn’t!). Sensible prudent organisations had long practiced
a far more personal “know your client” policy which was far friendlier and also
quite good at spotting risk. Amusingly, however, the FICA axe has recently been
wielded to deny banking facilities for a family of Number One’s special friends
which the banks claim is dodgy. But no problem. Friends of the friends may have tracked down a
South African banking licence which is for sale and so JZ’s mates may soon be
back in the game. Watch that space.
Two puzzles
today. What really is happening with AB de Villiers? Will he ever again play
for the Proteas? And when will the Aussies grasp that Open doesn’t have to mean
no roof on the stadium. Those tennis players are really tough.
James
Greener
USA President
Trump Inauguration Day 2017
