DEAD RINGER

Government finance is a very simple process that just about everyone who is not a socialist can understand. The government needs money in order to pay the salaries of civil servants and politicians, buy goods and services from suppliers and make grants to the ever-increasing number of social grant beneficiaries. And it needs cash (lots) to pay the interest and capital on the loans it has taken out. The loans are necessary because, in common with most governments, ours spends more money than it collects in tax.  Over the past 12 months the National Treasury distributed R1.17 for every R1.00 it collected. Many of us would be uneasy about our personal affairs accruing debt at this sort of rate, but the custodians of the state finances are more relaxed mainly because they have the Reserve Bank on speed dial. This is the institution that has the power to change IOUs into money which is a very useful trick that hides behind many different names, including the ludicrous “quantitative easing”.

They are also relaxed because one of the jobs of economists is to find ways to dress up and express “bad” numbers in ways that when viewed “in the dusk with the light behind them” they don’t look so bad. Further our nearly completely Marxist government is delighted to have cause to blame capitalists (conveniently easily identified here because they are white monopolists) and demand radical economic transformation. Ignoring facts and history and mathematics is a fatal trait among these people.

This week, however, Finance Minister Gigaba began to make warning noises. The latest Government numbers revealed that in July the spend was a terrifying R2.52 for every R1.00 of income. The problem is that are now fewer and poorer people supplying the cash. Also known as taxpayers, they and their money are disappearing. Emigration and job loss are the two important factors which have reduced the number of people with an obligation to pay income tax and an ability to spend and incur VAT. Furthermore, the country’s credit score (calculated by the bogeyman ratings agencies) is slipping fast which means lenders are demanding higher interest rates. It’s a real mess by any standard.

Despite his rhetoric the minister sadly is too enmeshed and compromised by the ocean of corruption flooding the nation and its institutions to turn anything around and the nation’s “leaders” have become utterly transfixed by the battle for the leadership of the ruling party.  This means that no one is paying much attention to the muttering about the pile of dosh heaped in the state pension fund which would come in handy for plugging the holes in the cash flow. This is a very bad development.

Tonight, an object of which we first heard of about 20 years ago will disappear for good.  It has twisted and turned and soared and dived, revealing something unexpected with every manoeuvre. No not a politician but a spacecraft. Cassini. Sent off by NASA to explore Saturn all those years ago it has provided data enough to keep planetary scientists (a very special breed) happy and busy for years. Even its plunge tonight out of orbit around the gas giant with its spectacular rings and into the clouds will very likely provide surprises. No matter what one feels about the USA and its politics and policies we are all the richer for that nation’s space programs.

Our nation however is not in any way richer for the Gupta family being here. The story of duplicity, malfeasance, corruption and theft gets longer and deeper with every day. But as always, this country has a huge capacity to surprise and delight. Taking advantage of our amazing freedoms to investigate and publish, investigators have been unearthing sleaze and dirt which is sticking not only to the usual local suspects but also international corporate names like KPMG, McKinsey and Bell Pottinger. The last has already closed shop, embarrassed by revelations of the depths they were prepared to go to secure business. Hopefully there is panic in as yet unidentified vendors of “expertise” worrying if their incriminating emails are in the pile yet to be leaked.

Perhaps after this weekend our rugby teams will be as feared as our investigative journalists.

James Greener

Friday 15^th September 2017

SOEKOR FINDS OIL[1]

It’s alarming that now even SA’s presumed key financial daily newspaper is so dubious of the GDP growth results that it relegates its report to page 2 under the heading of Agricultural Growth. The 2.5% pa headline number was indeed a great surprise particularly when the breakdown reveals that government’s contribution actually declined and was the sole sector to do so. Crucially and worryingly the construction industry is reported to have shown zero growth. We have remarked before the “look and feel” of these quarterly GDP announcements has been deteriorating for a few years now and it is probably unwise to place too much trust in these figures. Regardless of what the flamboyant and entertaining Statistician-General has to say, his department’s product is losing credibility.

But reputation and probity count for little in the corridors of power. The numerous photos of Number One in poses of triumph and victory with his best friends of the BRICS nations at a recent gettogether raise many questions. Like why do the Big Men of Russia and China consent to being seen in the company of a small-time operator like Jacob Zuma. What do they want from us that is not already captured by other shady characters? Has the Saxonwold Shebeen management approved this meeting?

A delightfully irreverent comment attached to a picture of these head honchos simultaneously mashing 5 large starter buttons for some project or other pointed out that it was certain that the SA and Brazilian panels were not connected to anything. Similarly, there must be some doubt if the shiny new R5bn joint deal between the Russians and ourselves to develop oil and gas blocks offshore SA will connect with anything useful. Despite the PetroSA claim that their “guys negotiated the deal well into the night” the winners appear to be the men in the fur hats. Our return in this deal is to find cheap and plentiful hydrocarbons but the likelihood od that is very small.

The one area where SA is right up in the big league is in the terrible standard of available candidates on offer to replace the incumbent. Not one of the half dozen or so hopefuls for leadership of the ruling party and thereafter president of the country looks able to raise the level of honesty and capability currently so grievously absent in our poor land.  The dirty tricks campaigns being waged by the players against their opponents are just as boring and sleazy as any seen north of the equator. At the very least anyone with a single digit IQ and a CV with false claims ought to be refused entry to the contest. A third test of matching their personal balance sheet to the past twenty years of tax returns will surely eliminate the rest. Let’s try doing without a government for a year and see if we are any worse off. We’d certainly save a great deal of money.

Many analysts are now writing about the problem with the JSE market indices. Thanks to the really great investment many years ago into a Chinese internet business by the hitherto rather boring Naspers, this company now dominates the JSE in almost every measure of size and swamps the signals that the All Share and similar indices are supposed to send about the domestic economy and markets. Ground floor investors in Naspers couldn’t care less but those who hope to use the indices for more general analysis are getting annoyed and calling for changes to be made. That this disruptor has arrived more or less as the Exchange Traded Fund products are coming of age is rather ironic and newcomers to investing are getting a lesson that we old timers don’t believe they should be learning! Add to this the fact that bond yields are dropping, the rand is doing OK and it makes investing look so easy.

Bafana Bafana mucked up their world cup chances by probably setting some kind of record goal difference per national capita statistic. The boy racers of Durban’s night time streets, however, are out prove that Ferrari is still the fastest way to wipe out a lamp post and a car despite the ominous Mercedes victory at Monza.    Just how good the ‘bok rebirth is this season will be seen tomorrow when we meet the Wallabies. Fortunately, our fellows will be back in green and gold and it’s an away match so we can start celebrating early.

James Greener

Friday 8^th September 2017

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[1] A much used and misleading headline from the 70s. PetroSA is the new Soekor

BACK FROM THE DARK CONTINENT

During the last month it looks as if the JSE and the rand have behaved quite satisfactorily while bonds have done nothing special. The big loser in August was the US dollar. One now needs about 120 US pennies to buy the much-reviled euro. This is almost 15% more expensive than it was at the beginning of the year. The Dow Jones index of US share prices is up by about the same amount in the same period. This suggests that non-US folk have a much dimmer view of that nation’s future than do the locals.

My just ended trip to that country to experience the total solar eclipse would confirm this impression. The majority of the charming, friendly and helpful people in North America have scant interest or knowledge of very much beyond even their State Line let alone the national border. The place is so vast and seemingly bountiful that non-domestic matters have no impact on people’s lives.

The eclipse event was momentous and its impact in real time and place is impossible to convey to anyone who has not experienced one.

Meanwhile it is pleasing to notice that little has changed back home. Our president’s attitude towards arithmetic and public money is starting to rub off on the youth. The lass who splurged a goodly chunk of the R14million paid to her in error (what?) by the Student Loan Fund is set for high office. Obviously neither the principles of loan finance nor ethics form part of her course work.

And the sports story to catch the eye of this weary traveller is that our national soccer team has to beat the Cape Verde islanders in an away match tonight to help their hopes of getting to the next World Cup. Just for the record that country has a population smaller than a tenth of ours. Bafana had better have some pretty good excuses prepared if they muck this one up.

James Greener

Friday 1^st September 2017