Friday, 21 July 2017


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.