Friday 23 February 2018

NEXT YEAR IT WILL BE BETTER. PROMISE



It was common knowledge that our government would have to extort more money from us than last year. That it would increase the effective taxes, levies, duties and other euphemisms for theft by so much was a surprise. This year’s Budget has revealed that citizens will cough up an extra R137bn. Much of it with new and higher stealth taxes. The increase in the VAT rate as well as to fuel and booze levies are particularly nasty. The sugary beverages tax has made a quiet entrance. The medical tax credit system will receive below-inflation adjustments to fund national health insurance, but this will be noticed only in 18 months’ time when the 2019 income tax assessments begin to arrive.
This works out at an average R20 000 more for each of the 7 million or so taxpayers in the nation. That really is a lot of money for anyone to find and hand over without much hope of any visible return. Particularly when not very much is being said or done about reductions on the expenditure side of the budget. For example, the Budget Review (a 300-page doorstopper of a book) has charts that show the huge growth in government employee numbers over the past few years but depict only trivial planned reductions in head counts in the future. There is not one line in the Review about the possibility of selling off state assets (privatisation – dread word) to raise the cash so desperately needed. The view from the Union Buildings is a sea of upturned palms belonging to all the people who have become conditioned into believing that the government must and will and can provide. Anxiously watching this show from the side-lines are the investors and savers who have lent money to the government and are now wondering about the safety of their capital. Their palms are also open.
This Budget is the inevitable consequence of decades of retributive and unimaginative socialist policies increasing state control in all spheres of human endeavour. National Treasury is deeply concerned that the rich might not be paying their share towards keeping this leaky tub afloat and seeks on every page to identify these culprits and punish them. Therefore, the zero-rated VAT status on Rye and low GI bread has been removed. Cosmetics, electronics (particularly “smart phones”), golf-balls and motor vehicles are deemed to be luxuries unused by the poor (really?) and therefore the ad valorem excise duties on these items are to be increased “in-line with the progressive tax system”. “Sin” taxes are up. A rather trivial use of this word considering the crimes that are being committed with our money.  Why do we have to pay the salaries of the mental midgets who spend their days coming up with this dross?
Adding to the fear and scepticism that this budget isn’t seizing the real nettle is the realisation that its modest targets will be attained only if some rather optimistic economic growth takes place immediately and forever.
A lot has been said about how well National Treasury has fielded the “hospital pass” lobbed at them by JZ as he sidled towards the Exit. This was the assurance that poorer families will not be expected to pay university fees in future. So this year R57bn will be provided for so-called Higher Education where perhaps 2 million students spend about 4 years each, studying subjects many of which have limited value for prospective employers.  Meanwhile just R230bn is allocated for supplying a dozen years of schooling to around 15 million youngsters. (Amazingly, no one is sure about this number.) Since SA now consistently comes last in almost every international educational ranking, it should be clear to everyone that these ratios are wrong. Obviously, the authorities don’t know how to fix it so maybe that most of the education budget ought to be returned to the taxpayers to let them decide how to educate their children?
A satisfactory Lions win over the Sharks last weekend will ensure grumbling at the bowling club bar this evening about who was doing what wrong. Meanwhile flicking over to watch the Proteas labouring to bowl out the Indians, there are so many new faces that one feels like a stranger in one’s own country. Which takes us back to the Budget.
James Greener
Friday 23rd February 2018

Friday 16 February 2018

AT LAST JZ GETS TIME IN HIS FIREPOOL



As the popular saying has it. “My, but that escalated quickly!” JZ has gone. Arrests have been made. Dodgy characters have vanished. And all on Valentine’s Day, while the rest of us were dealing in roses and chocolates and basking in a spirit of love and tenderness. A president who, if nothing else, has just one wife is a great improvement and the markets are enjoying a burst of exuberant optimism. It’s really unkind to suggest that JZ’s rather sudden departure long before the time frame he seemed to have in mind only last week has anything to do with his notorious inability to count.
President Ramaphosa already has a packed diary and a huge task ahead of him doing what the Americans have termed “draining the swamp.” Most of us believe we can identify the ministers and officials who ought to get an immediate and large boot. However, Cyril will have to be careful about how many enemies he can afford to make. Further, finding competent replacements will not be simple. Anyway, just as soon as he makes a start, there will be a nice government contract out there to supply new framed portraits of the top guys for thousands of government offices. Apparently civil servants need the beady eyes of their superiors peering down at them from the wall in order to carry out their job of being servile and civil.
It’s surely too late for the new man to have any influence on the contents of the Budget due to be delivered on Thursday. The finances of the state are so dire that drastic measures are needed immediately and there’s probably scant wiggle room even for someone who understands finance.  It will take several years of prudent and incorrupt presidency to get matters back under control. The current Minister of Finance is either so clueless about the situation or resigned to being fired soon that he is comfortable whiling away the long boring hours in parliament playing computer games.
Anyone who takes a look at the motoring supplement of the newspaper must surely be struck by the fact that there are about 1700 new car models on offer in SA. And a very high proportion of these, based on price alone, are undeniably in the super luxury class. There are nearly 40 different models of Porsche, 14 Maseratis, 13 Bentleys, 9 Aston Martins, 9 Rolls Royces and 8 Lamborghini for the well-heeled to consider. Not to mention the literally dozens of Mercedes, BMW and Audi models available. Obviously, the world’s car manufacturers have pegged SA as a hot target market for wheels that mere wage earners can never even think of.   Juxtaposing these observations with the many guilt-inducing measures of just how desperate and poor most South Africans are, leaves one wondering about the depth of the pool of ill-gotten gains.
Frankly the compromise reached by the Olympic high-ups to permit sportsmen and women from Russia to compete in the Winter Games provided none actually says they are Russian, is hypocrisy of the highest order. Why was this ruse not used 40 years ago when South African athletes achieved Olympic qualifying standards but were banned from attending because the world wanted to “punish” the government?
So far, the winner by a country mile for the noisiest winter sport is women’s curling. Two teams of 4 girls on a rink in a hall with 4 rinks adds up to bedlam. Can all that shouting really alter the course of a large lump of stone sliding majestically over the ice? And the Super 15 season opens with that allegiance-testing match between the Lions and the Sharks. Usual compromise: Lions cap, Sharks shirt and a nice bottle of wine for the host. Did someone mention cricket?
James Greener
Friday 16th February 2018

Friday 9 February 2018

AN AWARD CEREMONY WE ALL MISSED



The rather spectacular collapse in the price of Bitcoin has had some interesting repercussions on the value of other securities which also depend a lot on being worth what their originators and custodians say they are. As the Steinhof debacle shows, the valuation of even ordinary shares depends upon the trustworthiness and honesty of the people who run the businesses and more importantly in the ability and professional integrity of those we expect to audit them. The view that a Krugerrand in the hand is worth more than a dematerialised share certificate in a central share depository is certainly archaic and the JSE has a proud record of converting to a paperless securities market with minimal glitches. However, nothing is really risk free and it’s important to recognise that and price it accordingly. With the almost 10% pull-back in many share markets experienced this week, breathless commentators have been calculating gleefully how much the vile capitalists have lost. Unfortunately for their narrative, the bounce back suggests that those capitalists just added to their holdings at the lower prices
One of the difficulties for believers in free markets is the presence in high office of people who think they know what the price of everything and especially money, should be. These central bankers (for it is primarily, they) fiddle incessantly with interest rates, adjusting them up or down in tiny increments, in the hope that the gigantic economies they think they command will respond appropriately. The very simple fact that we still experience periods of boom and bust, shows that either their measures are largely ineffective or else they don’t know what they are doing. If all the expert advice was just that, shouldn’t we all be educated, employed and content?
Astonishingly, there is a monthly periodical named Central Banking (what else?) which is apparently essential reading for the sort of people who wear a suit AND tie (or smart frock) to work. This is the journal that has declared our very own SARB Governor Lesetja Kganyago to be “Governor of the Year”. An accolade of which he must be very proud. But it doesn’t explain why citizens are being warned to expect very serious tax hikes in the forthcoming budget. Obviously taxing the proletariat into perdition is not a bad thing in Central Banking circles.
 It should be admitted that experiments with letting the markets set prices have not all worked. Often, powerful players (e.g. individual traders with dozy and greedy managers) contrive to operate a cartel and move prices to their own advantage. [viz. The LIBOR scandal!] This is a failure of the supervisors and regulators to exercise their powers with sufficient scepticism and diligence, not of the market.
The only people to be disappointed by the postponement of Number One’s  State of the Nation speech are those who have been taking their credit cards for strenuous outings around the malls. SONA has grown into a lavish social event for the P-list[1] celebrities to display their trappings earned as servants of the people. This gathering in parliament has during JZ’s term revealed little except sycophantic adulation of the benefactor of most of the cast. The real story in the postponement is that, to no one’s surprise (well maybe a few), having two different people as presidents of the ruling party and nation respectively is not working. JZ reportedly has agreed to an early departure from his post but first he wants to say good bye to some people like his cabinet. Since there are more than 70 of them and each will doubtless be very keen to get assurances about their place in the cash flows this farewell might take some time. Like through to 2019 perhaps, which is anyway the scheduled date for JZ to retire.
My understanding of winter sports appears to be similar to the knowledge the Proteas have of the ODI record at Newlands. Bowling first is as dangerous as putting on skis on with the pointy end backwards. And now that Alistair Coetzee has been asked to return the poisoned chalice to SARU who will they find to give it to next?
James Greener
Friday 9th February 2018


[1] Politicians and Pests