Already the threats posed by the virus are causing
huge reactions and readjustments in human activities not least of which are the
markets. The rand is probing three and a half year lows but how much of that is
due to scepticism about the Budget rescuing us for further ratings downgrades
is impossible to know. What is undeniable is that sellers are dominating most
markets and buyers are looking away. The JSE has lost all of last year’s gains.
Equally alarming is the US 10-year bond yield, way down around 1.3%pa as money
seeks a “last resort” home. Naturally the gold price is soaring. But oil is
collapsing on the expectation of massive cancellation of travel plans. Its
deeply difficult and concerning.
A few days before Minister Mboweni delivered
his Budget Speech, President Cyril, who obviously had been granted a sneak
preview used the word “robust” a few times to describe what he saw. He wasn’t kidding.
Tito broke all the alleged agreements that have been made with the civil
service about their salaries and security of tenure and bluntly told them that
the country needs a fewer of them on the payroll. So far, the reaction of the
Union high-ups has been sardonic disbelief that any threat like that either has
the support of the Cabinet or would ever be carried out. I doubt that even the
most cantankerous old bull in President Cyril’s prized herd of very expensive
buffalo has ever behaved the way the workers will protest when it sinks in that
this is for real. Assuming that it is.
While this welcome and overdue attempt to
address and curtail state expenditure is undoubtedly the biggest take away from
the Budget, we number crunchers have still been prodding away at the calculator
keys in order to find the inconsistencies and improbabilities. In order to have
a slightly more friendly starting point for the forecasts of next year’s
figures, Tito’s team have been squeezing the numbers for the last three months
of the current fiscal year very hard indeed. They believe that National
Treasury will reach R1.5 trillion in total revenue for the fiscal year ending
in about 32 days’ time. Their forecast for the critical expenditure figure is R1.85trillion.
This yields a deficit of R350bn. Which is a whopping R100billion more than
their forecast a year ago. Note this pesky “small differences of large numbers”
phenomenon catching everyone unawares.
For the record and before your eyes glaze
over, their predictions for the 2021 fiscal year are R1.6tr, R2.0tr for revenue
and expenditure respectively. Implying a deficit of R400bn. Where is the robustness?
But this may not be as serious a problem as the fact that 18 million people now
receive social grants, a number expected to grow by a million in the coming
year. Now this is something that is truly unsustainable.
It’s interesting that attempts to slim down
the state work force by offering early retirement packages have not been very successful.
Undoubtedly the target market for this program have been watching with growing
the alarm the notion that the pension fund to which they all belong should “invest”
by lending heaps of their cash to Eskom to help it with a huge and growing cash
flow crisis. It’s obviously way better, even for those nearing retirement, to remain
on the state payroll (where there are 29 000 of them earning more that R1million
a year) than rely on a pension paid from a fund making such foolish investment
decisions.
The Dusi canoe marathon from Maritzburg to
Durban is in progress It is however raining hard and steadily so if the Umgeni River
comes down in flood the winners may be unable to collect their medals at Blue
Lagoon before being washed straight out into the Indian Ocean.
James Greener
Friday 28th February 2020 (Some
doubt if women can propose today or if they must wait for 29th)
