SCOTCHED

Even with perfect hindsight there are many things which remain puzzling. Like why US share markets are up 25% since Donald Trump became president? According to the main stream media, Mr Trump is despised and mistrusted by everyone. Except apparently by those who believe that businesses will thrive and make money while he is in the Oval Office. Almost all valuation tools and historical comparisons indicate strongly that share prices in the US and in many other places are far too high but the buyers stubbornly don’t seem to care and are prepared to offer sellers ever higher prices.

Although on a shorter timescale even our markets too are resilient in the face of mounting evidence of Armageddon levels of corruption and larceny by nearly everyone on the state payroll.  Of course, the main indices are dominated by shares whose prices are set offshore and as we have remarked before, much of our performance is rand hedge behaviour.

Next week sees the government finance equivalent of the half-time interview when the head coach and Minister of Finance will doubtless say that the first half was tough but then it wasn’t his strategy anyway but the lads are hopeful of a big turnaround in the second half.  But Minister Gigaba’s impeccable ensemble highlights the suspicion that the government is increasingly spending far more than it is collecting. The latest information from National Treasury is that the 12-month rolling deficit has climbed to an all-time high of R210 billion. Severe squeezing of the numbers and taxpayers might just see this number fall below R200bn by the end of the government’s budget year in March. But this is still R30bn more than what previous Minister Gordhan hoped for when he delivered his last Budget eight months ago. And the most recent bail-out of SAA doesn’t yet figure in these numbers.

But why are we worried?  The boss is innumerate and far too interested in his own future to pay much attention to how the peasants are scraping along. And most of the rest of the cabinet are playing musical chairs, taking calls from Saxonwold, Dubai and Moscow and nervously checking that all the bodyguards are in place. The cabinet shuffle that scared the rand a bit confirmed that Number One has no intention of addressing either the financial or social woes of our nation. He is a very shrewd and experienced campaigner who ensures that it is he who never gets any unwelcome surprises. The news that the ANC has an Integrity Committee is astonishing, but they must be a sad and frustrated group of cadres with very low job satisfaction levels.

The South African reaction to the news that the folk at the big telescope in Sutherland had witnessed a huge accident was to watch for tow-away trucks and private ambulances speeding up the N1. Fortunately, not only was no one injured, the event took place 130 million years ago and the noise has only just reached Earth. Nevertheless, the simultaneous observation of both gravity and light signals from the collision of two neutron stars is a breath-taking scientific event and achievement.  Also in the realm of science is the news that our new Minister of Energy has an honours degree in biochemistry. He now will have to think in Megawatts rather than units a billion times smaller, but perhaps Russian roubles will be his currency of choice as he seems to have been selected by Number One to close the nuclear power station deal with Mr Putin.

It’s that time of year when the glossy ads for outrageously expensive booze drop out of the newspapers. So far, the leader is a 50-year-old Balvenie single malt whisky at R650 000 a bottle. The 40-year-old is a mere R110 000. Now it doesn’t exactly work like this but putting away a bottle of the younger one for 10 years seems to offer a handsome 17%pa return. That’s if you can keep your friends in the next decade from exploring the deep recesses of your bar cupboard once the Amarula runs out!

Currie Cup semi-finals allow for a possible Sharks vs Lions final which will once again call for the red cap and black shirt and a certain coolness in the bowling club bar. I’m also cooling off on Formula 1 which seems to have become less interesting now that Bernie has gone.

James Greener

Friday 20^th October 2017

OFF THE RADAR

There’s a piece of financial folklore that maintains that when the big news magazines feature the words Bull Market on their cover, then it signals that the bear is in the wings about to bound into centre stage. The Economist magazine’s bull is benign and decked in flowers. Oh dear. This crash is going to be really bad and central bankers the world over are going to be instructed by the politicians to do something to keep the voters happy. It will be difficult though. They have been setting the price of money so low for so long that their powder is both running out and damp. Is this what’s driving up the price of Bitcoin, the cryptocurrency which might provide refuge from government? Notably, Krugerrands are also at the year’s high. The JSE’s All Share is up almost 5% this month despite very few companies reporting that level of earnings growth.

SARS says it is satisfied with the billion rand that their Special Voluntary Disclosure Program has raised from taxpayers with previously undisclosed offshore assets. Some sources suggest they were hoping for four times that and others are wondering if they had a look under G for Gupta and Z for Zuma in the Dubai phone book. Less happy, however, are the nation’s 3 689 rated research scientists who are facing dramatic funding cuts of up to 90%. This is probably unavoidable given the extremely dire state of government finances and its expenditure commitment to salaries and social grants. It will, however, probably be the death knell for virtually all science research in South Africa.  Even some of the socialists in the cabinet should see this as a real calamity.

Durban was hit by another one of those rain-bombs this week. It came as a great surprise to everyone including the official weather forecast service who used the event to complain that some of their kit was more than a decade old and not working. It will never be known if the tragic loss of life caused by the storm could have been prevented if SAWS had the resources they say they need to do the job properly. But some of the havoc was surely due to blocked and insufficient storm water drains and exacerbated by the tendency for most of us to make poor decisions when beset by natural hazards. Even if the radio channels had been blaring timeous warnings, the desire to get home often overwhelms the need for patience and assessment.

Film makers must long for the chance to be able to make “fly-on-the-wall” documentaries during meetings of the South African Cabinet. On one side the Department of Communications is insisting that the lack of a board of directors for the SABC is not having a material effect on operations. But simultaneously National Treasury are complaining that the national broadcaster has far too many temporary executive appointments.  Then there’s the squabble about selling the state’s shareholding in Telkom to bail SAA out of its bottomless  pit of debt. Meanwhile, the police minister is inciting his staff to break the law and torture suspects and the minister of the grossly misnamed Public Service and Administration department is having a hissy fit because her staff won’t let her spend money on unbudgeted jaunts. And all of this takes place under the eye of Number One at the head of the table giggling gently. Award-winning comedy material indeed.

The sequel could be the parliamentary investigation into the controversy over upgrading Zuma’s private home at Nkandla. However, the part where the panel members each get handed a copy of the 92 000-page affidavit produced by the investigators might get a bit tedious. Ink and paper suppliers to parliament are surely planning bumper Christmas bonuses.

The news that the T20 Global League project has collapsed is probably the first time that most of us have bothered to find out what it was supposed to be. Apparently, this pet project of Haroon Lorgat the recently departed CEO of Cricket SA did little more than allow him to jet around the world, seeking support which in the end he failed to do. Sadly, many sports administrators appear to devote more time to creating lucrative deals for themselves than to battling evils like match-fixing and political interference which discourage players, spectators and crucially sponsors from having mutually rewarding fun.

James Greener

Friday the 13^th October 2017

CHAIRING A MEETING

Suddenly it’s all looking and feeling a bit different. Some reasonably long lived trends are reversing and our poor rand is really battling to hang on. Exchanging one today will buy you fewer US cents or UK pence than at any other time in the past 12 months. The compensation for this is that so-called rand-hedge shares are touching all time highs and that is dragging the indices higher and causing wide eyed excitement amongst the TV pundits.

The video footage of a political meeting held earlier this week is remarkable for the number of plastic chairs which can be seen sailing high in the air from one end of the hall to the other. While far less deadly that the appalling shooting incidents that are growing in number as the ruling party tries to find a new leader, the chairs undoubtedly also cause great harm and add nothing to the debate. Deputy President Cyril Ramaphosa, who is a candidate in this contest and who must be feeling very insecure said “we must rid our movement of flying chairs and stop the spate of killing.” Indeed sir. Indeed.

Developments in South Africa recall that incident when a bishop is murdered in his own cathedral “Will no one rid me of this meddlesome priest?”  This week the eternally irritating and meddlesome Competition Commission failed to see the irony as the nation’s biggest abuser of dominance in levelling that charge against Vodacom. Now no one for a moment suggests that the bureaucrats and politicians who ceaselessly hassle any corporate or individual who appears to be successful should be carted off in a tumbril to the steps of the Union Buildings and beaten with rolled up copies of the accused’s tax return. A long journey in a crowded minibus taxi on a dirt road to some rural enclave with no internet should be sufficient. The puzzle is that the fusspots are worried that Vodacom’s success has partially arisen from winning an open tender to provide a branch of government with services. For goodness sake. It was indeed a good and tasty contract to win and was large because that’s what the client specified. Just leave the private sector alone please.

It is disheartening that the government’s obstinate refusal to acknowledge that their racist employment policies have denied the newcomers to the workforce an opportunity for mentoring and accumulation of the “institutional memory” so important to customer service. The state’s first reaction to any challenge to their own interpretation of the increasingly byzantine and convoluted legislation is to rush to the courts seeking punishment of any who dares to question them. Reportedly many of the new laws are so hastily and sloppily framed that the lawyers taking part in the argy-bargy sessions are starting to rival the Guptas in wealth. Ours!

So it wasn’t the pension savings of government employees that were looted for the latest bale-out of SAA. It was current expenditure programs which will soon run out of money before they run out of month. The cash was siphoned off the General Revenue Fund which as we have explained many times has far less dosh in it than has been budgeted for distribution. What is it with despots and their national airline?  They’re all destined for the scrapyard anyway as Mr Musk, the Man from Muckleneuk predicts we’ll be able to fly to anywhere on earth in under an hour. That sounds exciting but can he also do something about the long queues to rid passengers of their nail scissors and water bottles and check their ID for the 10^th time. Mind you, the sort of acceleration required to meet that schedule will pretty much pin everyone to their chair on the way up and into their seatbelt on the way down. No opportunity for the baddies to threaten the pilot there.

That tomorrow’s test might be the last at Newlands is sad. Apparently the power to choose a venue has moved up the line to the SA Rugby Board itself and they could choose Bathurst or Baltimore if they thought it would work. It’s a funny old world.

James Greener

Friday 6^th October 2017