Friday 28 July 2017

ILLEGAL BUT NOT FATTENING



From a very simplistic standpoint it’s astonishing that our currency is not far weaker than it is. If the social media is to be believed the very influential Gupta family resident in Saxonwold, Johannesburg are shifting funds offshore as fast as their private jets can refuel. And they are doing so also on behalf of the scores of useful idiots who have arranged satisfactory outcomes and situations for the family. Then there’s the less opaque stuff such as credit worthiness down-grades, the repo rate cut and business unfriendly cabinet decisions which even the mainstream news services are probably reporting correctly. Curious.
The unfriendly stuff seems to be a consequence of two factors which loom large in official thinking (oxymoron alert): shortage of state income and a desire for retribution for increasingly distant injustices. The country no longer has (and actually never really did) the time to do anything else but get every single able-bodied person into productive work; which excludes shuffling papers in a government office. It would be really good if we no longer had debates, meetings, conferences and symposiums about who owes whom what because why.  The recent change in the tax treatment of South Africans working overseas will raise scant income but will discourage many of the diaspora to think fondly of returning one day.
Exchange Traded Funds (ETFs) have been around for a decade or more and still cause suspicion and hostility. They are nothing more than a version of the familiar Unit Trust (grandly aka Collective Investment Schemes) in which the fund manager makes few investment decisions. He or she (actually, it – a computer) merely has to mirror the constituents of a benchmark such as a popular market index (e.g. JSE Top 40). Arguments for and against this “no brains required” investment technique have consumed acres of paper, but the buyer of an ETF pretty much gets what it says on the tin. The NewGold ETF is no longer new but provides convenient exposure to the price of gold in rands. The Krugerrand does this too but is accompanied but the costs and worries of delivery and safe-keeping. Theory suggests that the prices of these two instruments ought to be comparable but in fact the KR enjoys a premium which over the years has ranged from under 5% to over 10%.  Just why this premium is currently at it’s all time high of 11.4% is unknown, maybe it means that NewGold is cheap. Especially if the rand is going south.
The downside to cleansing an organisation of its assorted shysters and crooks is that it is usually very costly. In addition to not doing their jobs properly and honestly the now departing executives have clearly spent a great deal of their very expensive time flipping through the pension fund rule book searching for loopholes. Probably these rules were written in a different age and time when it was never imagined that Mr Molefe’s 15 months of “service” to Eskom could in certain light, be read as 13 years.
It is both amusing and alarming that the country is about to be landed with a so-called “Intelligence Boss” who seems to possess neither skill. He also does not have any documents to support his claimed academic achievements and has asked his new prospective employers to overlook this shortcoming. Why he has not sought duplicates is not explained. The good news for him however is that his alleged criminal record will not be a barrier to entry once he finds his degree certificates.
Not only are there no Australian teams in the Super Rugby semi-finals this weekend but there might also be no Australian cricket team this season. There is, it seems, a disagreement about money. Back home, the folks who run our athletics seem to have encountered a different problem. They can’t rely on simple maths to decide who of the athletes looking for a place in the national squad has set the shortest time or greatest height or distance. They need to have a quota as well, though no one is prepared to say how to measure that. Here on the edge of the Indian Ocean the Currie Cup has seamlessly claimed all rugby fans’ attention and my pleas for someone to help me cheer the Lions tomorrow have been ignored.
James Greener
Friday 28th July 2017

Friday 21 July 2017

WHERE ARE THE CROCODILES WHEN YOU NEED THEM?



The big market theme continues to be the weakening US dollar. And yet the US share markets are at record highs. For the “quants geeks” who believe that maths can help explain price movements, the problem of indices being dominated by a few shares because of their absolutely huge market capitalisations, is a nice discussion point over their quinoa salad and herb tea. The JSE is badly affected by this problem with the added twist that many of the really big constituent shares are listed and priced offshore and so the rand exchange rate is nearly the sole local effect.
Who would have imagined that our market indices would also be testing new highs amidst the growing evidence about how corrupt, incompetent and “owned” our government has become?  Part of the latest surge will be due to this week’s unexpected decision by SARB to drop the repo rate by 25bp. Inflation, they claim, is under control. Prices now are just 5% higher than a year ago? Hmm. Not from where we are standing chaps. But perhaps you are not a beer drinking Durban city ratepayer who likes a braai at the weekend.
Like Pooh-Bah in the Mikado, our smartly costumed Fin Min has a little list. Reportedly our state owns around 700 entities, some of which could be sold to raise cash. He will however need to find buyers with money who don’t kick the tyres too hard or look under the bonnet. Keep an eye on the Telkom share price. If the fellows in Pretoria put their full 40% holding on offer, it won’t hold up that well and a near monopoly business which then won’t be state controlled might present a bargain.
It’s more than a year since the majority of British voters indicated that they really didn’t need or want the extra layer of bureaucracy that being a member of the European Union imposed on them. They instructed their government to “…please take Great Britain out of the EU and restore our sovereignty”. Note they did not ask it to tamper with the essence of intranational agreements: namely the ease of doing cross border deals and business with a minimum or red-tape and regulation. However, the so-called Brexit decision appalled those other UK citizens who didn’t think democracy should work that easily and feared that flows of “free stuff” in their direction would dry up.  Their opposition has been amazingly effective with foolish concepts such as “Hard Brexit” and other handy hashtags. Already some financial businesses are said to be moving their offices from the City. Messy and unwarranted.
Eskom did finally release their results. For those who chose not to download the 7MByte file, the short-form results in the press[1] offered financial statements condensed to a terse 35 lines. To be fair though, they did admit that the independent auditors had issued a qualified opinion and so Eskom was probably rather embarrassed about the numbers. Another section misleadingly headed “Governance” used nine paragraphs to list the movements of directors and senior executives during the year. At times, the hallway at Megawatt Park must have resembled the wildebeest migrations on the Maasai Mara. The section describes how CEO Mr Molefe departed then returned to and then again left the corner office at the behest of the board. It chooses to ignore his very public resignation letter. Nor does it explain the fancy footwork with the rules of the Eskom Provident Fund. Old timers in the bond market will fondly remember when Eskom’s management was so good that the parastatal’s long-dated bond yield enjoyed a deserved 50 basis point discount to the government’s equivalent instruments. Eskom was a quiet dependable provider of some of the world’s cheapest electricity with a quaint attitude towards consumers who did not pay.
Even now at the close of the Super 18 season the shortcomings of the format are ever present. Just a week after beating the Sharks here in Durban the Lions are hosting them in a playoff at Ellis Park. That’s an unfortunate development and there are other oddities elsewhere in the antipodes. Has anyone else noticed how drab The Open at Royal Birkdale seems? Cold too.
James Greener
Friday 21st July 2017


[1] The JSE is about to scrap the rule that compels listed companies to publish notices in the newspapers. Is the transition to electronics so far advanced that companies can safely ignore newspaper readers? Shame.

Friday 14 July 2017

THE BEAR LOSES THE YELLOW JERSEY



There is little more perilous in the commentator’s life than making forecasts. Whether it is the gold price, the next wicket, the rainfall or an electorate’s choice, the chance of being correct remains at a stubborn 50% on average. Last week’s bear has vanished. Buyers are back and the crushing debt burden is today as light as a feather. Eish.
Just two months into the fiscal year and already SARS are worrying that they are going to fall well short of their revenue collection target of R1.24 trillion. Word has obviously gone out to shake down the citizenry and this has spurred that Competition Commission to kick every tree in the hope that profit-making corporates will fall out. The state’s view is that anyone making money by satisfying customers is probably trampling over the “rights” of the poor and needs to be punished and fined. We have remarked before that the money extracted in this way doesn’t in fact seem to reach those who were allegedly robbed by the grasping capitalists. Where exactly it does go is not usually clear and we can all have our suspicions. It is noticeable that nowadays the targeted industries are fighting back against these charges quite strenuously. And so more lawyers build even larger digs for themselves. The suppliers of corporate art are also big winners.
There is something rather concerning about the fact that the National Gambling Board is under administration. For 3 years it has not had a board of directors or a CEO. Nevertheless without any supervision, they have still managed to spend almost three billion rand for a “monitoring system”. For a bit less than that they ought to be able to get someone in the office to learn how to make a spread sheet. Governments everywhere are rather keen of keeping an eye on gambling for the simple reason that there’s a great deal of folding money sloshing about in that industry which the bureaucrats understandably would like to tax. They can disguise their intentions with soothing words about “protecting punters” but just like those gamblers, the politicians too are much taken with getting their hands on all that unearned income.
The annual report of a behemoth like Eskom runs to hundreds of glossy pages and weighs kilos. Last year it was almost 10Mbytes. Compilation and publication is a big thing in the life of the organisation, even though it covers the outcome of events that could have taken place nearly a year and a half before. Cancelling its release just days before schedule is not a trivial event and Eskom has done this. Something big has probably occurred and someone has become very worried about their future if the report sees the light of day in its present form. No wonder the latest financial press headlines are about offshore holders of Eskom bonds getting edgy. Whatever can it be?
The flow of confirmation about suspected malfeasance on the part of the government and its agents continues to build as the sleuths unpack the leaked emails. This is offset by the total lack of interest being shown by prosecuting authorities. But someone, somewhere has become very uneasy and a string of astonishing break-ins and thefts of computers and documents has been happening at significant government offices countrywide. The thieves are not hoping to raise a few bob by selling a used desktop to the scrap merchant. The objective of this crime wave is to find something out. Something which might not even exist.  Perhaps evidence of foreign meddling which is intent on “regime change”. The irony of course is that the foreigners are in plain sight and have already been very successful not in just changing the regime but in totally capturing it. The way back from this mess requires a far greater statesman than any currently on stage.
It’s rather sad that I just don’t have emotional strength to take on the additional job of worrying about the fortunes of the national women’s sports teams. They deserve support and attention and despite missing my supervision seem to be doing well. Excellent, But my plate is already overflowing with the mostly men’s events and even more channel hopping threatens to demolish the remote control. The cascade of possible outcomes from this weekend’s Super Rugby is hard enough to think about even before getting one’s mind around Silverstone, Wimbledon, Trent Bridge and Le Tour.
James Greener
Bastille Day 2017