Friday, 17 February 2017


The great sport in investing is to mock and deride confident predictions that go wrong. How, for example does one explain the rand on a 12-month high when there are so many (apparently) bad news stories to scare off buyers of rands – and equally -- sellers of dollars. The share and bond market indices (as opposed to the suspect foreign purchases and sales numbers) suggest that it is the latter the foreigners are going for.  Seeking yield perhaps?
Anyone looking for our army must come to Durban. Judging by the number of blue light motorcades whizzing along the freeway, all VIPs including Number One are doing just that. Our city is hosting a military jamboree culminating in Armed Forces Day next Tuesday. There’s great excitement in the town although the troopies billeted in a vast tent city down at the beach front will be hoping that Tropical Storm Dineo doesn’t come too far south and flood them all out. Preparations have included the nation’s submarine cruising past the beaches its fighter jet whizzing past and a flight of seven helicopters circling for hours over Virginia airport. Even the Silver Falcons aerobatic team have turned up after reportedly being grounded last year because of lack of funds for fuel.
Fortunately for the generals, funds for the shindig are coming out of this year’s Budget. The very next day Minister Gorhan will present the 2017/18 budget and this kind of showing off could well be axed. Acres of newsprint and screen space have been devoted to pointing out that there is scant wriggle room on the Revenue side and taxes targeting the “rich” are inevitable. It’s not of course popular to suggest that reducing spending is also a strategy. But the non-job civil servants won’t leave unless there are higher paying private sector jobs. So here’s an idea. Place the lowest paid one third of all civil servants on the much-hailed new minimum wage and reduce the top paid wage bracket to just five times that level -- a ratio much touted for the private sector by the theorists. Use the money saved to train the many who quit to begin filling the 180 000 empty skilled posts.  Let’s see how these liberal notions work in practice hey?
But the alarming development in the real world is the move to raise revenue through punishments and fines for impossibly vague “crimes” by private sector enterprises. Recently there was the attack on the construction industry for supposedly ripping us off while building the many stadia required for the 2010 Soccer World Cup. No one responded to the patient explanation that without at least some co-operation between the companies the huge project was never going to be completed on time. The state was far more interested in  netting the R1.5bn “non-admission of guilt” payments from the players. Shareholders did not do too badly either. Prices at the time rose agreeably.
And now the Competition Commission is shocked to learn that banks have traders dealing in the most transparent and liquid market in the country who are driven by “unbridled greed”. Well yes. That’s how private enterprise works. Admittedly a market trading room is an extreme example and in the absence of honest, experienced and informed supervisors, competitors and clients, dealers will often push their luck. Even if counterparties and competitors are at first complicit in the dodgy deals someone will in the end become even more greedy and blow the show apart. Bank management and shareholders also benefit from ridiculously profitable trades and are reluctant to ask questions in case they get an answer they can’t understand. Banks do have a poor record in detecting rogue traders timeously but they catch up eventually. Interestingly, the SA Reserve Bank and the Financial Services Board have said that they found no evidence of serious and widespread misconduct in the South African foreign exchange market. Is the Commission more interested in a possible multi-billion rand penalty than in facts?
Since it has worked spectacularly in today’s T20 victorym one must not be too scathing about the new pyjama outfit for the Proteas.  But what happened to the green? Why try to make our lads look Australian? Other good sporting news is that it seems certain that the Commonwealth games will not come to Durban in 2020 and the Umgeni is infested with paddlers taking part in the Dusi canoe marathon. It must be hot in the valley though.
James Greener
Friday 17/2/17