SUSPEND PERSONAL INCOME TAX

When everything is stripped away, controlling the spread of this nasty COVID-19 infection comes down simply to keeping far away from someone else who is infected. This is made difficult because it is not obvious who is infected. Therefore, we have been told to practice so-called social distancing – or perhaps that should be anti-social distancing – and cultivate a fanatical habit of washing hands and not touching your face.

Governments around the world have decided that their citizens will find these simple things too hard to do without coercion and so the lockdown phenomenon has entered our lives and lexicons. Unfortunately, here on the southern tip we have a bureaucracy just itching to crank up its control of the population and the result has been heavily armed and unsympathetic forces harassing and even murdering desperate and hungry people. The measures have been extreme and the bureaucracy heavy. We now have a schedule of 5 levels of the infectability of economic activity decided upon by a committee. But fortunately for our sanity, the ludicrous is also plentiful. Take for example Minister  Nkosazana Dlamini-Zuma (NDZ for short and the ex-wife of a previous president) explicitly banning the sale of “cooked hot food” after her counterpart in the trade and industry department, Ebrahim Patel discovered to his chagrin that some stores were selling rotisserie chickens and warm sausage rolls and pies. NDZ is minister of Co-operative Governance and Traditional Affairs. Not a word about food in that portfolio, although KFC is now pretty much a traditional affair in SA.

Out in the world of markets and prices, the oil price is plummeting for a number of reasons partly to do with the virus and the expected global economic slowdown (when did you last buy petrol?) and partly because big oil producers are having a price war. Commodity Futures are a popular way for participants to gain exposure to these markets and this week certain oil contracts began to trade at a negative price. That is the sellers of the contracts were not only getting out of their positions, they were paying the buyers to do so! Those buyers are brave or else they are actually oil consumers, because if not, early next month a tanker will pitch up at their front door enquiring where to offload several thousands of barrels of crude oil. Which they will have to pay for in full. Messy.

The most significant and important news of the week was the announcement by President Cyril of an economic rescue package totalling half a trillion rands. To put this in context the total annual government income is currently around just three times that, so this package isn’t trivial. It is not yet clear where this money will come from. There was some eyebrow raising mumbling about international institutions without dwelling on the dislike that the communists in government usually have for these money lenders and their usual loan conditions. The distressing thing though is that during this harrowing time for all South Africans, and despite the last decade having shown that this racist policy does not work, the state continues to insist that aid distributions will adhere to BEE conditions. But the biggest problem with this package is that the thieves who have already brazenly stolen so much public money are still at large and not in prison. They are already at work dipping into aid food parcels and hoarding emergency water supply tanks. Citing urgency and novelty of the situation suggests that even the flimsiest of financial controls are unlikely to be exercised over these funds.

So, here’s an idea. Half a trillion rand is almost exactly what the state expects to collect in personal income tax this fiscal year. So why not simply abolish all personal income tax for the next 12 months? That is, leave that money in the public domain without moving it through government agencies. This is exactly the cash flow intended by President Cyril, but without any chance of corruption and zero state interference. The income shortfall in the National Treasury will force the trimming of the state payroll and encourage migration to the private sector and self-employment.

Sushi, however, is still for sale in some food stores. But its not hot and cooked. So that’s OK.

James Greener

Friday 24^th April 2020. Day 29 of Stage 5 Lockdown

THE NUMBERS ARE LOSING THEIR IMPACT

Despite having a President which the biased and toxic so-called social media commentators declare to be awful, dangerous and useless in this time of crisis, the US markets including its currency show that the majority of the world’s money would like to be in the USA. Odd hey?

Pretty much everyone was taken by surprise when the SA Reserve Bank’s Monetary Policy Committee this week again cut the repo rate by 100 basis points. This brings the total drop in that rate since the beginning of the year to 225 basis points. The idea behind this outbreak of interest rate cutting all over the world is that it will encourage and help borrowers better to afford their new and current debt and thereby stimulate economic activity. Interestingly the longer dated “paper” (bonds) didn’t change appreciably in price. An indication that the market didn’t like the cut?

But as in everything – particularly finance – there is the other side of the page. In this case it is the lenders. Also called, almost contemptuously, “the investors”. They are not happy. Monthly interest income before any taxes for these folks has been decreased since January by around 30%. It is time to revive the experiment tried in 1999 and use a market driven auction system to determine the “true” cost of money. This experiment was terminated when it was realised that collusion in the auction between the largest banks was rife and frankly most South Africans are content to have a baas tell them the price of something as difficult and strange as money. Perhaps we now have a few more players and certainly a more eager inspectorate to try again.

I sense that there has been a change in the attitude of both the authorities and the citizenry as we begin the second period of lockdown. The former would appear to be enjoying the opportunity to ratchet up the authoritarianism, despite there being scant evidence that this will help the battle against COVID-19. Most bureaucrats and politicians by and large are losing interest in the battle which seems to be going well but importantly, diverts resources away from schemes and programs which are far easier to loot. For instance, SAA has at last been sent for euthanasia and it was a happy hunting ground for generations.  All those free for a lifetime air tickets for parliamentary bench warmers are now valueless.

 We on the other hand are worried that there seems to be a growing taste for central planning and control. Which may not all disappear even when the virus is just a long chapter in the textbooks. Reportedly, panic broke out in the halls of power when someone caught on that people were buying cooked chickens at Woolworths food stores and eating them! This eating of food that you did not cook yourself is apparently not allowed. Like walking alone on a deserted beach.

It is also very alarming that many ministers are unable to grasp that the growing criminal lawlessness (as opposed to ignoring petty and inexplicable regulations) are the consequence of desperation and not just a craving for a drink or a smoke. We are warned that the complete relaxation of the lockdown will take a long time and needs to be phased in. Ministers, it’s likely that you don’t have much time. People are hungry and angry. And are not interested in flattening curves.

The pandemic is peeling away the screens of privacy that shielded many human activities  from scrutiny. Not least in professional sport in which the personal rewards for supreme excellence dwarf almost every other way to earn a living. Now the bubble inflated by sponsorship, television broadcast rights and egos is deflating fast. Reruns of exciting events from years past are not drawing viewers and therefore advertisers are making painful decisions. Postponing the Olympics by a year must be costing a great deal not least in the dreams of the youngsters who had prepared their whole lives for a few days in July 2020.

Google has reported a huge surge in the numbers of on-line requests for tips on how to cut one’s own hair.

James Greener

Friday 17^th April 2020. Day 22 of the Lockdown

How did the Elvis song go? 40 Days….

The numbers that pour out of the markets unceasingly, suddenly seem irrelevant as the death toll from the virus mounts and closing down economies is the most popular remedy being imposed by the politicians. Perhaps the sole indicators to watch over the next few days are the gold price in one’s own currency and the bulletins of British Prime Minister Boris Johnson’s health as he recovers from the infection.

President Cyril’s brains trust, aka the National Coronavirus Command Council, have decided that it will help the battle against the virus if we have a further fortnight of lockdown.  While this may be the correct move as far as the medical battle is concerned, the economic disaster is perhaps growing even faster. Details of what will be permitted in the second phase of lockdown have yet to be released but it really ought to be more lenient in enabling more people to get back to work. Or else people are going to die of poverty.

We also need a few more freedoms and consistency in what we can do or buy. There is no good reason why booze and smokes can't be sold. They are not illegal products. The current ban has the fingerprints of the prat in a hat all over it. He along with a few other cabinet members is not only rather poor at his job but also appears to have influence over our president. It's not been explained just why Communications Minister Stella Ndabeni-Abrahams was playing courier in taking medical protective equipment from the obscenely opulent home of a disgraced former colleague Mduduzi Manana to some students not that far away. The whole incident reeks of privilege and disdain for the law.

It will be many years after this pathogen has worked its way through the human race that the researchers will be able to piece together where it really came from , how it should be treated and of course how to protect us from it in the future. The economic carnage that it is causing is already with us. The truism on everyone's lips is that the world will be a very different place when it's all over. But none of us have much clue exactly what will be so different.

As legendary investor Warren Buffett is reported to have noted “It's only when the tide goes out that you discover who has been swimming naked.”  In the context of this pandemic we are learning what we really value and need. And it's perhaps not what we thought we did just a month ago. 

What makes South Africa's battle with the virus particularly hard is that there is no money in the National Treasury to spend on all these unexpected costs. Tidemarks drones on incessantly about the fact that the state spends so much more than its income that it is utterly broke and the cost of borrowing to bridge the gap comes in the form of ever-increasing interest rates. These increases are punishment for allowing the growth of a mob of well-connected cadres who have looted both public and private purses secure in the knowledge that there will be no retribution.

Several Relief Funds have been set up by both wealthy individuals and the government raiding the pension and insurance funds of the nation’s workers and they will surely help. Volunteering one third of each cabinet minister’s salary was a nice presidential touch in his speech last night. However, many of the loans and handouts seem to have a few unpalatable conditions attached to eligibility for relief and probably hard to access without internet connections.

There hasn't been much more information about using the location data provided by cell phones to track our where abouts. But aside from leaving our phones at home when going out we should insist that the system should provide we citizens with a constant update of the whereabouts of all the cabinet members and directors general. It would be good to see where they go to top up the booze cabinet. Or if they go jogging.

James Greener

Good Friday 2020

WHO WOULD HAVE EVER GUESSED?

Twenty-five rand to the pound! If the virus doesn’t get you our currency will.

One good thing that ought to emerge from the almighty financial morass that the country and indeed the world and most of its people find themselves in is that we should tell the ratings agencies to take a long walk on a short plank. Their stock in trade is that they help investors to evaluate risk, but their record suggests otherwise. Their analysts are no better informed nor successful at forecasting than anyone else. But they have created a niche in an environment where capital market participants are reluctant to move far without the blessing of a ratings agency. Any decent evolutionary process would normally populate that niche with swamp weed instead of costly fortune tellers.

Inevitably cooping people up at home in an age where there is unlimited scope to communicate with each other is going to have consequences. Not only has the flow of jokes about this deadly germ exploded on the internet but speculation and conspiracy theories have also blossomed.  A particularly alarming development is the vehemence with which the Chinese are protecting their version about the origin and progress of the pandemic. Something looks very odd in the charts from that vast country.

The reality of the obstacles in the path of our government’s awesome attempts to control the Corona virus emerged this week when the minibus taxi industry ignored the regulations about social distancing and returned to the status quo ante. They utterly rejected the limit on passenger numbers and ignored the minister’s despairing bleat that “alright but all passengers must wear face masks”. This is only the simplest illustration of the difficulties faced in trying to enforce a lockdown in a country where for most, crowding, discomfort and danger is a fact of life in their struggle to survive.

Little wonder that there are so many people who just don’t get it. In particular the leaders of the unionised workers in South Africa are being cruelly mendacious by waving the wage agreement documents which have now been utterly overtaken by circumstances. No one is interested in their plight anymore.  The appalling numbers of unemployed people in this land are no longer special or unusual as vanishing customers and clients all over the world are forcing employers to lay off staff in ever increasing numbers. So far government staff have escaped. But not for much longer. The world will certainly look very different when this is all over.

There’s an intriguing fuss breaking out about privacy now that it has been announced that the government can and will track our movements by following which cell phone mast our constant companion is connected to at any time. This Orwellian 1984 scenario has been here ever since the introduction of cell phones. Indeed, there are apps one can use to monitor this information for your own device. The concern, however, is that this information might be abused by the overzealous overseers of our behaviour at this time. After all they are reported to be arresting people for walking in their own gardens (or at any rate the garden of their complex).

While it is probably well known to those who paddle in the murky ponds of remuneration theory and practice, the current dispute about civil servants’ pay has revealed that there are no fewer than 19 grades into which employees of the state are separated  and categorised when discussing status and pay. That partly explains why negotiation season is so tense and fraught. There are just so many nits to pick. And on the subject of pay it appears that even those professional soccer players who are egregiously over-rewarded because of television rights are also now wondering what their industry will look like when the virus is defeated. Have we got used to not having sport to watch? Do we prefer a quiet night at the jigsaw puzzle? Have the sponsors begun to rethink their spending? Is it even possible to live on less that a million a week?

Keep safe please.

James Greener

Friday 3^rd April 2020