SPORTING RIGHTS

Major world equity markets have bears everywhere. Losses of 10 to 15% are commonplace and inevitably the talk of buying opportunity is starting to be heard. Remember however that at the bottom of the 2008 bear market the non-mining shares on the JSE were on PE ratios lower than 10. Today they are just under 20!

Yet again an ANC cadre stumbled at the hurdle where he ought to have told the nation that the gravy train was not only to be discontinued but also that the rolling stock will be sold for scrap and that any shortfall still outstanding thereafter will be billed to every one of the passengers who have been aboard in the last decade. Finance Minister Tito Mboweni (Yes, a previous Governor of the Reserve Bank) did make a tentative reference to a need to do something about the expenditure side of the equation instead of just squeezing ever harder on the income side, but then he totally ruined the mood by doling out more bail-out cash to the likes of SAA and other hopelessly insolvent and atrociously managed State-Owned Enterprises. Unsurprisingly the government’s debt spirals ever higher. It is frustrating to note that simple economics can still suggest the stringent remedies that are probably capable of fixing this mess. However, history shows that politicians ahead of an election have a blind spot in this area.  

Deep in the hallowed halls of the Wits University campus one can presumably find a door,  behind which lurks Professor Loren Landau who occupies a Research Chair on mobility and the politics of diversity, migration, urban transformation and inclusion. Aside from fretting about the amount of paint consumed in the signage necessary to guide humble students to find this learned sage, one does wonder if this research is helping to make SA great (to borrow a phrase). Do the graduates of such departments actually find gainful employment working for and with the nation’s policy makers? And if so, is their advice working? And if not, shouldn’t they be doing something else?

The economic freedom of a nation is an actual thing which can be formally measured. SA is now ranked 110 out of 162 in the world. The official ranking depends on scores in 5 areas: size of government (big is bad), legal structure and security of property rights (Expropriation without Compensation is very very bad), access to sound money (the rand is one of the world’s weaker currencies), freedom to trade internationally (possibly OK) and regulation of credit, labour and business (far too much regulation, especially the last two). In this country there is a political party named the Economic Freedom Front (EFF) that seems to have deliberate policies that aim to weaken our score ranking in each of those five areas. But perhaps it’s a different economic freedom they are after?

One could almost feel sorry for the SABC. It is required to broadcast (TV and radio) coverage of 22 different sporting codes or else face a half million-rand penalty per missed sport. Apparently SABC lose massive amounts of money trying to meet these regulations and want them changed. That seems fair.  But for many sports, selling the broadcast rights is a major source of income. And for some of those, meeting the salary bill demanded by the overpriced “stars” can’t rely on ticket sales alone. Hence the ever-rising cost of broadcast rights. In the mind of this free marketeer there is no doubt that public money has no place in funding sport which is primarily an activity freely entered into by individuals who must either do something else to make a living or find a sponsor. It awful when hugely talented stars of minority sports cant afford to attend competitions in the next town let alone the Olympics. And there is undoubtedly value to the country when a team or person excels on the broader stage. So, a sensible official response should be for individual and commercial sponsors to be allowed meaningful and effective tax rebates equal at least to what the socialists believe should be the state’s support for sports (and cultural activities). Or even better, equal to what the sponsor believes is their benefit from such largesse. The multiplier effect of private sector efficiency will far outweigh the cost of individual government ministries to allocate state funds.

James Greener

Friday 26^th October 2018

CHANGING THE CHANNEL

Re-treading a previous Governor of the Reserve Bank and fitting him up as Minister of Finance has been well received by the currency and bond markets. But the share market is fretting about other stuff that investors think Tito Mboweni can’t influence in the medium term. The All Share (without resource shares) has weakened more than 10% in recent weeks and is testing a 12-month low.

The latest word to be misused and shorn of its meaning by the kleptocrats is “bank”. Very simply a bank attracts depositors to put their cash with them in return for regular interest payments and at the very least their capital back. Borrowers approach the bank for loans and expect not only to pay interest on the money borrowed but also in due time repay the capital. The bank profits from an (ahem) modest difference between deposit and lending interest rates. The possibility of failure to perform on either side of this transaction is coyly referred to as “credit risk”. The VBS Mutual Bank debacle is setting new standards for this phenomenon. Neither most of the lenders nor some of the borrowers have any right to be dealing with a mutual bank and huge sums of money have gone missing. Unsurprisingly it was VBS Bank which supposedly granted a mortgage to President Zuma when he was instructed to pay back the money spent on his private home.

The technical aspects of the internationally agreed changeover of the method of broadcasting the meagre content of our nationally owned TV stations from analogue to digital are at all difficult. But a political fly in the ointment, together with an opportunity to divert money in unusual directions blew this project up into the so-called set-top box debacle. Politicians fretted that without this piece of equipment, voters would be unable to see them! The government therefore decided that they would give boxes to many tens of thousands of households identified as poor, despite them owning a TV set, having an electricity supply and presumably paying for an annual TV licence. The contracts to make and supply these boxes obviously provided an opportunity for a spot of cash-flow harvesting. But the far bigger prize in the broadcasting business lurks in the money that viewers are prepared to pay for good new content like movies, series and sport. However, the providers of this lucrative content will sell it only to those broadcasters capable in turn of identifying and charging their own customers. Multichoice (DSTV) is currently the sole South African broadcaster able to do this and their charge of almost R1000 a month for the “full bouquet” of content is well worth defending. Allegedly, Multichoice have long been involved in frank and meaningful discussions with ministers and bureaucrats about keeping encryption (the tool that gives DSTV the power to control who can see what) out of the set-top boxes. This of course would perpetuate their monopoly on selling desirable content. But now, at just the wrong time for everyone contemplating monopolistic practices, the internet has begun to upset the status quo. Copious and cheaper content can now be delivered directly to viewers without the need for dish antennae and decoders or the infamous boxes. Watch this space!

The profile on the SARS website for Mrs Mmamathe Makhekhe-Mokhuane, their Chief Officer: Digital Information Services and Technology is quite impressive. But in two TV interviews on Wednesday, not so much. Among a slew of non-sequiturs, unanswered questions and alarmingly clueless rambling she demonstrated also that her understanding of choral ensembles needs some tuning. She lamented that since its formation in 1967 the Drakensburg Boys Choir had not yet included a single woman. What relevance this has in supporting her demand for R2bn to fix the IT mess she claims to have inherited is unknown. But with that kind of thinking this lady must be a gift for even the most inept salesman with a tax system to sell. Meanwhile the rest of us are uncertain whether to be delighted that the tax collection system is allegedly on the brink of collapse or terrified to contemplate a nation where government salaries and state grants are not paid timeously.

Is the Currie Cup a league format or a knock-out competition? Judging by the turnouts last week, fans don’t much care for domestic rugby by this stage in the season anyway.

James Greener

Friday 19^th October 2018