HOW THE LEOPARD LOST HIS LIFE

As one prescient writer put it: “beware the stealth taxes”. And that is indeed what happened in the Budget.  Minister Gordhan tried to divert our attention by stating that the revenue lost by shifting the personal income tax brackets would be R8bn. However, spending in the next fiscal year will amount to R979bn which is about R80bn more than in the current year. Clearly there is more than a little pothole to fill and pages of itty bitty bites at our pocket were then read out. It is definitely going to cost more to live and it will be very suspicious if the official inflation rate does not climb steadily from here on.

On the expenditure side, pensions and child grants will each consume about 4% of the money that the government wants to spend in 2011. This implies that 2.6m old folk and an astonishing figure of 11m children are expected to qualify for those distributions. Presumably disability grantees and war veterans comprise most of the rest of the much discussed number of 15m welfare beneficiaries. It is interesting that war veterans receive a monthly grant of R1160 which is R20 more than we taxpayers give to pensioners. Both groups will, however, certainly be comparing their meagre 5.5% increase this year with what the politicians and bureaucrats managed to pocket.

An even bigger impact on our living standards is resulting from the waves of violence that are sweeping some of the countries that supply large portions of the world’s oil. Oil prices well above $100 a barrel coupled to a weakening rand will have a severe impact on prices of just about everything. And that will not exclude the share prices which might go in the opposite direction as consumers choke.

The King of Saudi-Arabia thought it prudent to return home from sick leave in a hurry and distribute a precautionary R250bn to keep his approximately 20 million subjects focussed. If our President Zuma were to try that trick it would cost us plenty! Mind you he must have spent a bundle on leopard skins for all of his wives who turned up at the opening of the provincial talking shop in a frankly distasteful display of conservation disdain.

From here in the kingdom, the unfolding chaos about the Gauteng toll roads is both amusing and alarming. Undoubtedly this SANRAL outfit also have plans for the east and south west and once the 66 cents per km starts rolling in, they will be erecting their toll gantries in our sea breezes where they can gently begin to rust.. Can you remember when utilities were near invisible entities that unobtrusively went about their tasks of supplying water, electricity, railways, roads and radio to the nation? One neither knew nor cared who was CEO or chairman Now their boardrooms are battlegrounds never out of the headlines where sticky fingered soldiers serve just long enough to find the keys to the cash box before transferring to the next one..

A last word about the Budget. One fifth of the state’s expenditure goes to education. In 2011 that will amount to R190 bn. That suggests that each of the approximately 20 million pupils, students and other “learners” is costing taxpayers almost R10 000 a year.  Whether or not we are getting value for money is a good point from which to start an argument, but it does also display the amazing information provided by the National Treasury Budget Office which so deservedly received the award for the best and most transparent budget in the world.

How about them Lions? Watch that space. Nice start from the Proteas while Formula 1 has been black flagged in Bahrain. The boys who run Kyalami missed a trick there. A lick of paint, sweep the track and a few thousand old tyres and we could have hosted the circus down here on the southern tip.

James Greener

25^th February 2011

THE INTERNET RULES

By this time next week the State Budget will have been presented. It is very worrying that someone has shown the politicians what comes after billion. This week’s headline reported that they are now going to spend a trillion. Rands I think it is. But it is all just waffle in lieu of actually doing anything and spending a hundred to repair a school desk or a hospital bed or something else that they have promised.

Another number this week was 33335. This is the new all time high for the All Share index set on Monday. Once achieved, however, everyone lost heart and the rest of the week has been spent in retreat.

Also retreating appear to be some of the world’s rulers for life who are eyeing the hordes that have pitched up to demand a change of regime. Again I am delighted to see that the new age of instantaneous and mobile communication is causing the elected to fear their electors. It is increasingly difficult to lie about what is happening when people can contradict you with a picture emailed to a website in a heartbeat. It is telling that a spokesman for the ruling party here at home angrily denied any similarity between what is happening up north and some very violent demonstrations about the government’s broken promises of a better life for all. The pictures suggest he is mistaken.

An excellent leader in Business Day asked what it is that the government expects of business. Indeed the haranguing of businesses and the people who run them is almost a national disease. Every government department – and many related organisations - have no hesitation in demanding something. Whether it is money or information or a job for their clueless nephew, the most annoying claim is on time. Even the JSE got into the act by warning listed companies that they need to adopt yet another accounting standard or else. I doubt the Budget will reduce any burdens on the nation’s desperately few and dwindling wealth creators.

The African Exploration Mining and Finance Corporation will be launching its first mine within a month. Leaving aside the question of how one actually launches a hole in the ground, it is sad to see that this state-owned company has already adopted a typical government secrecy attitude. They have declined to say what or where they will be mining.  If, as they say, they already have the mining rights to the deposit, what possible “strategic” reason could there be for not telling us what it is. It will be interesting to see if they ever transform from tax eater to tax payer. Anyway rest assured, much of the work in the forthcoming month will go into planning the launch party.

A desperate pensioner (not a client) has called to complain that Anglo’s dividend announced today is derisory. Their decision to pay just 40 US cents out of earnings of 413 US cents makes one wonder which of these numbers tells the real story. Adding further to her woes is that like all these London listed shares, payment date is way in the future on only 28^th April.  Perhaps by then the rand will be a bit weaker, but still an annual dividend of about 470 SA cents on a price of 37650 cps is just 1.2%pa yield. Not generous. This may be a symptom of the often headlined “regulatory uncertainty” of mining in SA that is perhaps prompting management to keep a lot aside for a rainy day – preferably in another country and currency.

Unless the weather changes it will be brutal playing rugby at Kings Park tomorrow. February in Durban is too early for our winter sport. I have adjusted the TV so as to be able to watch from the pool. I trust the sight of Captain Smith being ferried around the Dhaka stadium is not an omen for SA once again getting carried out at the semis.

James Greener

18^th Februray 2011

STATING THE OBVIOUS

The All Share once again fell back after making another attempt to break the three year record high. It is silly the way we watch this number assail the peak as the weightings and constituents have changed a lot in that time. Many of the heavy-weight constituents of the index are still a long way below their record highs but a few are already probing blue sky.

Never one to miss a photo opportunity, our President was this week pictured waving off the Proteas, warming the co-pilot’s seat in a new SAA aircraft and allegedly working on his State of the Nation speech in his office. The bookshelf in the background of that picture appeared to have been recently looted. The speech as usual comprised mostly of promises and assurances that things that will soon be done. Very little was said about the actual state that the nation was in – mainly I suppose because even the politicians know that that state of the state is not that good and is not that much better than it was a year ago when previous promises were aired. In fact leaders all over the world ought to be banned from making speeches on this topic and instead be obliged to tour their nation regularly. Citizens could then be given the opportunity to point to the state of the things the government is responsible for. No speeches would be permitted except for summary dismissal of at least three layers of appropriate local officials.

Too often I forget my own advice and try to make sense of the avalanche of numbers that crash down on us. Company reporting season is underway and the accounting wizards are hard at work making the books tell whatever story the directors think will confuse the most and reveal the least. About the only entries I look for are in the Cash Flow statement where I am concerned if the company reports that it paid more money to the taxman than to the shareholders. Stats SA issued unexpectedly disappointing news about manufacturing data in December – which turned out to be data about manufacturing - and the civil servant in charge of this outfit exploded in a very uncivil and rude way about a private data collector daring to suggest that the informal sector was a lot larger than his official view on the matter. His next offence was to appear in a yellow suit at the opening of parliament.

Although the daily cost to feed each delegate at last year’s World Youth Festival was a mere R142.38 it has yet to be explained why taxpayers had to foot the bill for the 15 000 youth who allegedly participated in the 14 day jolly. In the days when I still thought it was fun and useful to attend a conference I don’t recall the hosts picking up the tab. Mind you, we South Africans are a hospitable lot. We have been caring for ex-dictator Aristide of Haiti ever since his country tossed him out several years ago. The good news for us now is that he has decided to slip off back home, presumably in the belief that life there is now so miserable that the folk will have forgotten all about him. I wonder what he left behind.

The proposal that the state will operate a data base to match job seekers with job vacancies is an especially stupid idea. This news appeared alongside the stories that the same government is failing to deal timeously with work permits for a relative handful of applicants and also the project to combine various ratepayer databases in Joburg is not going well. Not only is there ample evidence that government is generally unable to manage this kind of project, the real foolishness lies in the believing that there are jobs to be matched with applicants. Any prospective or potential employer will tell you of the queues outside the gate and the reams of CVs in the in mail. The unemployed know far better than any bureaucrat where there might be a glimmer of hope.

Next week's Duzi canoe race is still dealing with the idea of having crocodiles in the river. I wonder if anyone has checked the Midmar dam. It would be embarrassing if we had to send the future Princess of Monaco home with teeth marks in her leg after the one mile swim.

James Greener

11^th February 2011

“WELCOME TO SOUTH AFRICA. THE HOME OF DECENT CASTLE”

The rand has continued to weaken this week. Oddly enough, despite Australia’s quite dreadful weather woes which are hampering their mineral exports, the rand has suffered a particular mauling of almost 5% against that nation’s currency in the past few days. While January was characterised by share prices falling under the pressure of foreign selling, resources in particular have rebounded strongly this month. Presumably it is local interest that has pushed even some of the large cap shares up nearly 10%.

Then there was the news about how the Chinese may be interested in coming along not only to buy our minerals but also to repair and install the infrastructure that will enable them to ship the stuff out efficiently and speedily. Pretoria-watchers are wondering how this will fit in with the state’s grand, laudable but so far unimplemented local beneficiation plans. I too am puzzled what one can do with coal other than burn it.

Similarly the fine folk of the Karoo are getting very worked up about natural gas exploration companies sniffing around their koppies and sheep. I once worked for Soekor, the state owned exploration company which did a lot of geophysics and some drilling in that part of the world. They certainly established that there are some reserves of oil and gas in particular geological layers pretty deep below the surface of that lonely landscape. However the geology of the zones was such that a “gusher” was never going to happen – the stuff could just not flow into the boreholes fast enough; hence the current talk of using artificial methods to improve what is called the permeability of the rock. Unless the technology has changed radically these methods do not require huge volumes of water nor is there a significant risk of contaminating the much shallower aquifers. Since we all rather like driving and flying and using the myriad goods and benefits of the liquid fuels that are sourced from oil and gas I think we ought to let these newcomers try their hand at doing better than we did. But they need to be reminded that Africa is not for sissies.

Did you see that one of the requirements of applicants to fill the Telkom CEO vacancy is that they must have “extensive profit and loss experience …” Yup.

The suggestion that like Germany in the EU, South Africa may need to bail out ailing neighbours Lesotho and Swaziland is very alarming. The political, social and economic implications of such a development are staggering. It is definitely time for the tax man to lose my file. I also really object to any of my money being used to pay R140m to a team of creative posers for a new slogan for the country that actually turns out to be second hand. My (free) suggestion appears at the top of the page.

Meanwhile other people with time to spare have been expressing opinions on the appropriate serving dish for sushi. It seems that wealthy young men are now eating their raw fish and seaweed delicacies off underdressed young women who in turn are draped across expensive sports cars. Some have termed this practice disrespectful on a number of layers. I can’t see why myself. It certainly saves on the washing up.

A more important topic also receiving a lot of attention is the one of getting people employed. Union leaders are convinced that the state should be the employer of last resort. Comparing this view with the report that already one in eight South Africans works for the public sector and on average earn 44% more than employees in the private sector, suggests that the unionists need to do some simple arithmetic before they go much further.

I am not at all sure what the Neo Africa Tri-Series is, but if it delivers results like Lions 41, Sharks 10 it is obviously worth paying attention to.

James Greener

4^th February 2011

RAIN DOES NOT STOP PLAY

A ratings agency – actually a team of ordinary men and women with much the same data as everybody else – has downgraded Japan. In their view there is now a teensy weensy possibility that the Japanese government will be unable or worse still, will choose not to pay back the interest and principal on some of the money they have borrowed. Indeed many of the economic numbers coming out of Japan are concerning and those who haven’t lent them any money will be feeling smug. Actual creditors will undoubtedly have been watching closely and with growing alarm and the formal downgrade adds to their discomfort. Yet, as I have commented before, the alphabet soup of about a dozen successive ratings levels from AAA to D have little to do with the blunt binary situation of pay versus no pay. And further, as we saw most recently in the credit crunch, a AAA credit rating means nothing if the borrower defaults anyway. Nevertheless we can take the downgrade as a reminder that the economic recovery is a slow and potholed road. The JSE All Share index has ended the first month of the year just about where it started.

Is it one of the conditions of the Davos shindig that TV interviews must be conducted outside in the freezing cold? Have you noticed that nearly every talking head appears on screen all bundled up and their words come out in little puffs of steam? Very dramatic!  Also impressive are predictions like the demise of the euro, the certain rebound of the global economy and the suggestion that the prices of commodities especially food need regulation.  The irony of this last idea seems to have been lost on the delegates, many of whom are undoubtedly there mainly for the legendary catering. There’s a sort of regional follow-up Forum in May in Cape Town. Snow is unlikely but hot air will again be plentiful. Already the committees are working on a theme as bland and meaningless as this week’s “Shared Norms for the New Reality”

How about Famous Brands’ explanation for improved business in their fast food venues being due to the heavy rains that chased people indoors to the malls and shops? It sort of makes sense. I spent a few days this week near the mouth of the flooding Umfolozi River. The muddy torrent flowing into the sea was so strong that the waves were completely brown and choked with vegetation washed down from the countryside. Fishing was out of the question but the fridge in the bar to which I retreated was in perfect working order. 

The lack of fishing also gave me time to ponder my entry to the “Name a Prison” competition. Frankly it is an astonishingly bad idea and waste of money to take half page full colour advertisements in national newspapers to call for the names of citizens who need to be revered and honoured by having a slammer named after them. My own list of entries tends towards people who were once convicted and imprisoned for outrageous and appalling crimes against humanity but who are now free. On condition that they return to serve the life sentences so totally deserved they can name their new homes after themselves if they so wish.

And now the chaps down at Durban City Hall are congratulating each other for borrowing EUR100million at 6.7%pa. Payback of the principal (today equal to almost R1bn) is scheduled for 2026 when I think it is a fair to suggest that it might take a lot more than a billion rand to buy EUR100million. But by then very few of the fellows swilling the champagne will be around to face that problem. Borrowing offshore is a pretty fraught affair. Just ask the last SA government.

What I haven’t yet done is study the new Super 15 format beyond pencilling in July 9 as the day the Lions lift the trophy. But I have noted that the ‘bokke will not be playing at the House of Pain in Dunedin at all on their way to the World Cup final. That’s good news.

James Greener

28^th January 2011

THE NUMBER YOU HAVE CALLED IS NOT AVAILABLE

 Well there’s no need to worry about the price of money in the country for a while. The dream team have pronounced that it’s perfect.  And from the various numbers coming in they may well be correct. Inflation is down again, cars are selling like hot cakes and purchasing managers are in expansive mood.  The share market has been churning around, a shade off the all time highs although many individual shares prices have long been up in unexplored territory.

Reporting season is rapidly approaching and the news from the retailers is very good. South Africans are doing their patriotic duty and buying stuff. Unfortunately we are clearly not paying enough for some of it, as some local clothing manufacturers are being threatened with closure because they can’t make enough money to pay their workers the minimum wage.   Add to the mix that Massmart shareholders this week approved Wal-Mart’s arrival in SA, and we consumers can look forward to even lower prices. The trade unionists and socialist politicians are apoplectic with confusion about whether this is a good or a bad thing.

The Cabinet reportedly rejected the finding of their own appointed independent investigation into the impact that four wide ranging bills on labour will have on employment. The answers failed to mesh with the opinion they have of their infallibility in arranging their citizen’s lives. Oh dear. Better they all just resign from those jobs which are paid for with other people’s money and join the rest of us out here competing for a living.

What is happening at Neotel?  Their just published annual report reveals they lost more than R1bn in the year to March 2010. Now, firstly that’s not exactly speedy reporting for a business that is supposed to be delivering the long awaited cutting edge communication services to compete with Telkom. Then the board’s response to the loss is that they are “satisfied that the company has adequate resources to stay in business for the foreseeable future”. Well, if staying in business means having no visible marketing or products then that claim has proved correct for at least 10 months. More puzzling, however, is that one of Neotel’s partners has declared themselves “satisfied with Neotel’s business performance”. Amazing! In the meantime Telkom itself is very excited about borrowing $127m from some overseas folk. Now it is none of my business (in fact most of this stuff isn’t) but I wonder if anyone at Telkom has thought deeply about what will happen to their repayments if the rand does what luminaries like Nobel Laureate Stiglitz demand and falls in a heap? They must be expecting really great performance from their bafflingly named cell phone system (8.ta ?!)

I just loved the piece about the SABC CEO being allowed to resign “with immediate effect and leave with a small payout and his dignity intact – six months after he was suspended”. In what possible way can a resignation after 6 months of suspension pending investigation into “irregularities” be described as either immediate or dignified? The national broadcaster is a dreadful mess. Why, for example, should they need to employ non-English speakers in the English language services?  Job interviews should be conducted by phone with candidates being invited to read a list of words provided by disgruntled licence payers.

I suppose we ought to trust the national cricket selectors – although we can all have grave doubts about their bosses, the clowns who manage the game – but I guess that tonight’s colloquium down in the riverside bar will have a word or two about leaving out local boy David Miller. Goodness, that Cricket World Cup has been a hard one to bring home and I do wish the squad every success. But first they need to tame these Indians at home.

James Greener

21^st January 2011

BAIL OUT

There is something of a shortage of political stupidity this week Maybe everyone is so impressed by the amazing ideas tabled by the president during his Polokwane appearance at the week end that they are silently wishing that they had thought of them. Like getting the state to employ everyone who needs a job and instructing universities to pass final year students who need a degree. The state would pay for these lucky students. It is all so simple. Why didn’t anyone come up with these sorts of plans before? The state can, after all, achieve anything it wants. I am a tad anxious that so far nothing has been said about creating wealth.

Yesterday party leaders were told to stop talking and “devise practical ways of creating jobs”. Today some talking head has told us that the long queues of applicants standing at university gates were indicative of “Draconian” entrance criteria that prevented weak students from getting a place. He went on to suggest that universities ought to offer courses that any student  could enter and pass over perhaps four instead of three years. Without pausing to suggest which employer would find this sort of graduate useful, the talking head went on mystifyingly to describe such a strategy as “respond[ing] to the call of massification.” No, I don’t know either. Even the spellchecker is doubtful.

It will be a pity if implementing these schemes causes government expenditure to resume the unhealthy growth that it has so recently managed to curb. At the end of November the growth rates of both the state’s income and expenditure were for the first time in many years tending towards the quite modest  8.5%pa level.

Mind you, funding government deficits has suddenly become simple it seems. Punters were this week elbowing each other out of the way in order to lend money to places like Spain and Italy. There is always money somewhere if you know where to look and what to promise in return. Do not ever mention the “default” word though.

Proper analysts have not been silent and forecasts of which shares will do best and what level the gold price interest rates and other benchmarks can achieve are filling the pages. They may well be right and perhaps we ought to be buying equities again. My own rather simple investigations regrettably suggest that even those areas which did relatively  badly in 2010 like platinums, healthcare and life assurers are mostly all still offering lowish dividend yields and elevated price to earnings ratios.  By contrast, construction sector shares are not overvalued but almost all of the companies there have been lamenting empty order books while state’s capital project spending apparatus has been clogged up with outstretched hands.

Next week the kaftan queen will waft to the podium and announce the result of two days of deliberations between herself and the team of experts about the price of money (i.e. the repo rate). I doubt she will reverse the recent trend and help us fixed income dependants with a rate rise. But I think that there are enough signs that the economy is gradually and grudgingly starting to tick over a little faster and so can see no reason for a rate cut either. More of the same then?

They played cricket (of a sort) in the Moses basket last week to celebrate the arrival of one part of our rainbow nation on these shores150 years ago. Despite an heroic effort on the one-off pitch there is no getting away from the fact that the stadium is not really suitable for cricket and we Durban ratepayers are going to have to find some other outfit able to help us with the maintenance costs. Perhaps temporary shelter for all the Vaalies who may be flooded out of their homes tonight?

James Greener

14^th January 2011.