A RHODENT WRITES

 It’s not exactly a roaring bear market (yet) and the all share is off only about 2.5% but it’s a sufficiently large move to require that the talking heads come up with reasons for it. One popular theme is that Yemen is being bombed by its neighbour Saudi Arabia. Now most of us have only the barest ideas of just where these places are and further almost none of us have any idea why they need to be seriously nasty to each other. However, many of the world’s markets have reacted to these developments and so to show how grown up we are, the JSE drifted off as well. Actually it’s unnecessary to look to the Middle East for reasons to be anxious about our markets. There’s plenty going on at home to make one nervous.

The biggest number to worry about is the R1.61 per litre price rise coming next week to the petrol price. This is going to hurt disposable incomes and unavoidably affect retail spending which reportedly is already being hammered by ever stricter interpretations of consumer credit laws. The period of respite granted by a falling crude oil price has been cruelly terminated by a desperate National Treasury and a sagging currency.

Shortly after telling the nation that too many of we citizens are reliant on state handouts, the president promised that about a billion rand would be set aside for low interest loans for businessmen selected by race. Without dwelling on the likely unconstitutionality of that policy, the contradiction is stunning and is a perfect example of the lack of understanding of how economies work. Any business that survives only because of taxpayer subsidies is not adding any value. The president also complained that this step was necessary because commercial lenders were refusing to supply cash to these applicants but failed to spot that this was most likely because the banks saw a low probability that the businesses would be able to repay the loan. Governments of course have no such qualms.

There can now be no one with the naïve view that the migration of land based TV transmissions to a new system would be achieved at the lowest cost and the greatest benefit to all the country’s viewers. At a meeting of the potential manufactures of the so-called set-top boxes, violence ensued and guns were waved. The mentioned sum of R4.3bn clearly has lots of fat well worth fighting for.

Even if we are never able to determine exactly who did what, to whom and when, the indisputable fact is that where we are now is the consequence of every action by every one in the past. Many of those acts were wise or philanthropic and delivered benefits that are still being enjoyed today -- like having a developed nation over 100 years old. But equally, by current standards and context, many of those actions are alarming and deplorable, but most importantly, irreversible. No amount of yelling, poo-throwing, paint-spaying or even quiet discourse can change history and only immature and ignorant people would ever attempt to do so. Attacking and defacing symbols and images of the past is also deplorable even if there are grounds for relocating them. The “students” calling for the elimination of all references to Cecil Rhodes will never know the impact they are having on the contemplated generosity of future benefactors. They might however experience a reduction in the value of their own studies at an institution that bows to demands to deny history.

So with both the soccer and cricket trophy cabinets bare we must all now pin our hopes on the ‘bokke in October. With three out of four wins on the away tour the Lions are making the selectors’ job ever easier. The Sharks meanwhile seem to be intent on collecting a full deck of red cards. Talking of red, when will Ferrari start winning again?

James Greener

Friday 27^th March 2015

MEGARANDS FOR MILLIWATTS

Some analysts feel that they can discern a slight shift in attitude amongst the big official cheeses (aka central bank governors). While  some governors appear to rely on techniques not all that different from throwing bones and sifting through chicken entrails there are hints that rates may have to rise “…..but by just a tiny bit and not right now”. Bolstered by such fearless decisiveness, investors have returned to most markets with renewed confidence that no price is too high. Even the rand and the euro have strengthened.

Is there not a single name in Number 1’s address book who is an admirable member of the human race? It seems that every one of his cronies, appointees and advisors is deceitful, corrupt and dishonest. Even more lethal is that many of them are simply out of their depth, unqualified for and incapable of doing the tasks bestowed upon them by the chief.  After checking the size and date of the bonus payout and looking at the view from the lofty corner office window many of them have no idea what else to do.

Something has gone very seriously wrong at Eskom. Something even bigger than the fact that  less than three quarters of the nation’s generating capacity is actually operating. JZ has announced that he personally will take over the investigation that the chairman of the utility wanted to lead. This probably means that the main issue is not primarily a technical one since Zuma most assuredly has zero skills in that area. Perhaps some carefully crafted personal enrichment schemes have gone awry, “friends” have gone rogue, contractors are getting restive and too many paths are leading back to the presidential desk. JZ needs to move in fast and see what can be covered up and who deserves the blame – if not Jan van Riebeeck then maybe Cecil Rhodes. Is there anyone who has the ability and more importantly who could muster the political support needed to tackle the very challenging situation? Firing all the incompetent seat warmers would be the first step.

 In Greece the politicians are giving poor people free electricity and food. This is after all what they promised they would do if elected to power. The fact that their government has even less money to spend than our own lot doesn’t concern the Greek MPs. The attitude in Athens seems to be that the people who need to worry are those who lent them the money. In a way they are quite right. Back here at home red flags are being hoisted all around Megawatt Park warning lenders that the chance of getting any money back from Eskom is getting slimmer by the moment. Fortunately for most entities in dire straits there are always risk takers who judge that there might be adequate rewards and continue to advance more cash. Notably, however, said risk-takers are usually using other people’s money. In Europe the other people are mostly unhappy German taxpayers. In South Africa electricity consumers who actually pay for their power (as opposed to stealing it) are going to be milked. Hefty tariff increases are on the way.

What a simply splendid story. There are people on the government payroll who think that drones posed a security risk for the people inside the parliament buildings during the president’s recent gabfest. Therefore they installed a radio frequency jammer which unfortunately also jiggered cellphone reception. The real drone danger, however, was from JZ who sent many MPs off to sleep and death from boredom was much more likely than any threat from a model helicopter.

The Proteas’ defeat of Sri Lanka in the quarters was very satisfying. It is amusing to see how many of the other teams claim not to have noticed or cared about the result. Liars.  For the Sharks however, the route to the play off is still long and treacherous. Did anyone else notice the Lions win this morning?

James Greener

Solar Eclipse Day 2015

UNLUCKY THIRTEEN (rands per dollar?)

Just over a year ago we were all fretting that the rand might breach the 11.50/USD level. These days we are a rand worse off. Our currency at present has stalled just short of  12.40 to the USD and it doesn’t really help to say that this is mostly all about dollar strength. The euro is in fact faring far worse than us and the folks there should be bracing themselves for hordes of American tourists this summer. The All Share index is off around 2% so far this month with just the cell phone sector offering a bit of comfort. The miners are a train smash. 

Any pretensions we have to being a grown-up and serious nation must surely have been finally swept away by the events of this week. Yet another CEO of ESKOM, the power utility, has been kicked out almost before he gets to choose the new fittings for his en-suite wash-room. Number 1 put on an Oscar-winning display of hurt and puzzled ignorance of any accusations of his lamentably corrupt behaviour when he ventured back to parliament. And the official opening of a nudist beach on the south coast has run into a thicket.

Also starting to heat up is a stupid and pointless argument about the race of shareholders on the JSE. All kinds of folk have rushed into the fray waving calculators and data in support of their own view. The unexplained part is why or how anyone is able to issue any analysis broken down by skin colour. Even discarding for a moment the fact that very few shareholders are own name individuals, unless the JSE’s client broker accounting systems have changed recently, there has never been a field to record the race of a stockbroker’s client. And of course the race of an institutional account in the name of a pension fund or unit trust or an overseas bank and so on, is meaningless.

The government tripped up on a similar lack of information when it tried to interrogate the land ownership registry recently. It was unable to get the results its ideology was so sure must exist. And does the hopelessly inaccurate eNatis car registration system record the ethnicity of each vehicle owner? How would it classify rental fleets? It seems that most of our asset register systems are sensibly and agreeably blind to the matter of race.

With the rather disgraceful JSE exception of a handful of listed securities restricted (how?) to black shareholders in terms of the wealth destroying BEE schemes, all South Africans actually do have economic freedom to buy and sell any assets of their choice. Juju’s mantra has always seemed foolish when what he actually is demanding is money for himself and his supporters. But a “Give Us Money” party would result in the letters GUM on the red berets and that looks like a glue advertisement.

Who knew that a lowly wheelbarrow could attract duties as high as 32.32%? Apparently the Chinese are dumping these dumpers into our market and local manufacturers are screaming blue murder. Either the imports are flimsy rubbish unsuited to the local task of lugging crates of quarts from the bottle store, or something very odd is happening in the secret world of wheelbarrows.

It’s official. “Durban ranks as the highest city for the quality of life in South Africa.” There’s something wrong with the order of words in that boast from the mayor but the point is made. Now all we have to do is fix the rugby team. The Sharks are sinking fast.

The Proteas will meet Sri Lanka in the cricket world cup quarter-finals next Wednesday. I guess no team that got this far is a pushover and those chaps from Ceylon look very determined and hard to get out. It will be a tough match. Let’s hope AB and the lads carry us through. An unkind email doing the rounds points out that the English team is being carried by a British Airways plane to Heathrow.

James Greener

Friday 13^th March 2015.

FREE AIR?

Even for a physicist this relativity stuff is not easy. When priced in US dollars our currency has lost about 10% of its value in the last 12 months. But in euros it is almost 15% stronger over the same period. Our runt is also up versus the Yen and pretty much unchanged against the Pound since this time last year. This boils down to the conclusion that that there has been steady demand for the US dollar despite all the nasty things that are said about that country. In theory most of us shouldn’t be needing as many dollars as in the past, since oil, which is largely priced in greenbacks, has fallen so much in price in the past year. Indeed the dollar prices of a great many commodities have been falling. And yet folk want dollars.

Despite the deluge of rather good company results, the JSE has lost the momentum it enjoyed since the start of the year and is shying away from a convincing breach of the 53 000 level.

One would have thought that in the wonderful new world of immediate and universal internet communication there was very little that was really secret. The emergence of a tribe of brave whistle blowers has shone a bright and welcome light on all sorts of things that our leaders felt we really didn’t need to know. And yet it seems we have spies doing things. One of our spooks is especially incensed that his cell phone number has been revealed. Surely he doesn’t use his mobile phone for confidential chats? Isn’t there a big red telephone on his desk that connects him to Number 1 to warn him which wife could be adding toxins to his porridge?

South Africa is a party to a global agreement to close down in a few months time all “terrestrial free-to-air” TV broadcasts. This has to be done to release a slice of the broadcast spectrum for another technology and should be straight forward. The affected TV stations will broadcast their programs on other channels but using a digital format. They will continue to send out the signals from the high TV masts which are dotted about the place, hence the term “terrestrial” The very many viewers who receive their TV programs broadcast from these masts will need to acquire a small piece of equipment in order to handle the new digital signal. This “set-top box” is a digital-to-analogue decoder, very similar to the one used by the viewers who subscribe to the services where their programs are transmitted from a satellite. There are two problems that worry the government about this change-over. The first is that many of their supporters won’t be able to afford the set-top box and secondly, the lucrative business of manufacturing these boxes should ideally be parcelled out to friends and relatives.. To help solve the first problem they plan to issue at least 5 million of the set-top boxes for free to selected voters/viewers.. Undoubtedly a secondary market in decoders will immediately spring up and this will not do.  Controlling this, requires that the boxes have some way of being switched on and off remotely. Reaching cost-effective, appropriate and regime-friendly solutions to these and other problems has been the cause of prolonged and fierce squabbling. Despite claims to the contrary they are probably not yet all resolved.

The massive and bulky tomes comprising Minister Nene’s budget have not yet gathered their first layer of dust when one of the constituencies he asked to play along has demanded far more money than he offered. As predicted this “austerity” stuff is unappealing. Since many of the services we expect from our government are already subject to lengthy and error-ridden delays, perhaps the strikes will make little impact on our lives. It will, however, probably mean that the new revenue generators will prove insufficient and this time next year they will have been cranked up yet again. Although not yet enthusiastically promoted by most banks, the new tax free interest paying accounts deserve a close look by all investors.

Hopefully the Proteas’ confidence and momentum will see them very near the top of their pool at the Cricket World Cup. But then the really tense stuff begins because to win the cup they have to win four successive matches. We have never done that at the world cup before. Oh dear. And the Sharks really are going about getting to the Super 15 play offs the long way round.

James Greener

6^th March 2015

DATA WATCHING

For the data geeks who think they can discern the future in the numbers from the past this was a bonanza week. Firstly there was the GDP growth rate for the last three months of 2014  and then there was the National Budget for the coming fiscal year. And then it’s company reporting season and a deluge of financials is flooding the newspapers, despite the JSE saying it no longer requires them to do so. Odd that.

As usual the more one looks into any published data the more one wonders what it is that the compiler of those numbers doesn’t want to reveal.  Minister Nene’s budget speech managed to get by without once using the “austerity” word but in fact this is what is going to happen. So far it has yet to trigger any reaction from the usual suspects but soon they will spot that the government will be taking more but giving less. The fastest growing expenditure item is the cost of paying the interest on the government’s debt. This year it will comprise more than 10% of the state’s total expenditure and of course there is nothing to show for it. Worryingly, even with his finest spin, Nene is forced to admit that this ratio could be over 11% in just 2 years time. No wonder he wants to cut civil servants’ spending on catering, entertainment (what!?) and venues by 8%.  Home Affairs department is to get 18% less than last year. This won’t help us to get all those unabridged certificates that are required.

In defiance of these calls for parsimony, however, the Office of the Premier here in KZN has appointed a consultant to run the “I Do Right – Even When Nobody is Watching” Campaign. Aside from the disturbing grammar, the idea that such a campaign has become necessary and furthermore is underway is dreadful. Why not simply fire anyone not doing right?

Nene’s audience seemed pleased with the announcement that for the first time in many years the income tax rates would need to go up by one percentage point. But how many of those MPs have now gathered that in their salary bracket that translates into about an extra R1000 a month in tax deductions?

Also growing by 10% pa is the sum allocated (R47.8bn) for paying the R330 per month child support grant. That means that we are a nation where more than 12million children (out of an official population of around 56 million) depend on a very meagre state handout to survive. What a scandal and disgrace for this country. The sole hope for these kids is that their parents get employment but the dead hand of the socialism is throttling us all to death.

Another eye-catching figure in the budget was the almost R56n that government hopes to collect this year from the fuel levy. This amount is about R11bn more than the National Roads Authority’s debt and once again it is very hard to understand why the levy proceeds, which have been paid by motorists anyway, can not be used to extinguish that debt and SANRAL can sell those ugly and contentious e-toll gantries around Joburg to a scrap metal merchant.

The 4^th quarter 2014 GDP growth was a very surprising 4.1%pa. The largest contributors to this still unsatisfactorily low figure turned out to be the manufacturing and mining sectors. Representatives from these areas seem bemused by the news. Investors however are thrilled and the JSE All Share soared to new highs so that February’s performance will be around 3.5%. The combined financial and industrial index (i.e. omitting the pesky resources shares) is up 27% year on year. The problem is that average earnings for the companies in that index are up only 15%pa. The valuation string is stretched really taut. Will there be a sharp snap someday? Probably.

The Proteas’ win over the West Indies this morning was very satisfactory. Our progress through the World Cup is reasonably comfortable. The Lions on the other hand are making a very bad start in the Super 15, although it was really unsporting of the Sharks last week to host them in several inches of water. Talk about a home advantage.

James Greener

27^th February 2015

WHERE ARE THE (TAX) BODIES BURIED?

The very entertaining but actually deadly serious standoff between those who think someone else should pay and those who have no interest in being the payers roils on in euroland. Forecasting the outcome of this tussle and then in turn the market response is keeping the talking heads burning the midnight oil. One can be fairly sure that almost no one will guess correctly how the whole shebang unwinds. On the basis of the “follow the money” rule – only in this case there isn’t any – the likely outcome is that the Greek in the street is going to be disappointed and markets will continue to behave erratically. Even the rand has strengthened against the euro.

The news that Arts and Culture Minister Nathi Mthethwa is leading a state delegation to Moscow to repatriate the mortal remains of two struggle stalwarts who died in Russia in the 1970s is rather dispiriting.  Firstly it shows that there really is no proper job for this ministry and its minister to do and like the department of sport needs to be closed down immediately. These are areas when the government needs neither to have any expertise nor to interfere, especially not with full-blown and costly ministries. Secondly it makes one wonder just how many renowned South Africans there are buried elsewhere who are going to be dug up and returned to the southern tip. Is this an appropriate moment to suggest that maybe we should enquire where Jan van Riebeeck is resting and see if he might like to be returned to the shadow of the mountain?

There is something very odd and rather mysterious about this alleged “rogue unit” operating inside the South African Revenue Services. What on earth can they be up to? Surely the only thing a tax collector does is ferret out both people and monies that are hiding from them. Does going “rogue” mean that the fellows in the unit had changed sides? Were they deliberately not looking, or perhaps they have unearthed some juicy prey? Will we ever find out or have they summoned that junior official to make another error and operate the jammer / shredder in order to secure the no-fly zone around the president?

 Now that parliament is underway,  the MPs will at some point be asked to debate and approve something known tortuously as the Protection, Promotion, Development and Management of Indigenous Knowledge Bill. Sadly, whatever it is, indigenous knowledge does not encompass how to run a power utility, create an effective education system, pilot a motor vehicle accurately or bowl a decent leg-break. On reflection the largest body of such knowledge probably occurs mostly in the realm of botany and has long been researched and recorded by the appropriate academic departments and drug research houses world wide. So now are they about to be accosted by platoons of bureaucrats with forms and orders? Cue a serious misallocation of resources when the politicians find out that Petri dishes are not indigenous.

Losing the first game at the start of the Super 15 season is invariably dismissed as “not a serious problem”. However, the lack of points early on has a sneaky way of applying extra pressure at the end when it’s all death or glory time. With both the Sharks and the Lions seeking their first win tomorrow at Kings Park, its going to be a horrid evening for me and I shall watch from the couch with a medical team on hand to open bottles and even switch off the TV if necessary. And then it will be a few snatched hours of kip before resuming the position for the Proteas vs. India match from Melbourne. This will not be a relaxing weekend. Thank goodness I’m not Duzi paddler.

James Greener

Friday 20^th February 2015

RED TEAM RED CARDED

Most of the talking heads seem to agree that last night’s chaos in parliament will mark the start of an ominous and disappointing phase in the nation’s political development. Almost everyone present in Cape Town yesterday behaved badly, even if was just in their choice of clothing. Apparently nearly every rule in the parliamentary book was broken. The ease with which “Honourable Members” are able to quote the number and wording of each paragraph in that book in support of their “point of order” is amazing. Equally astonishing is the firm adherence to the supposedly despised British traditions of gun salutes, mounted police and kilted pipers. The man who lugged the ceremonial mace into the chamber looked suspiciously like that sign language non-interpreter who embarrassed us all at Madiba’s funeral.

The whole unedifying farrago was arranged to allow the president to deliver his annual wish-list. Filled as usual with tortuous grammar to avoid saying anything definitive, he nevertheless appeared to outline many horrifying and blatantly investment-unfriendly ideas. For example, the plea for foreign investors to send us their money didn’t exactly mesh with banning them from owning property. The assurance that the energy shortages were being tackled with a plan to draw up a plan was not reassuring. There was a lot of talk about unlocking and revitalising stuff which should in the first place never have been locked up or allowed to die.  It seemed a sure thing that the markets’ reaction would be a sharp collapse this morning.

But they certainly did not.

The JSE has set a record high and the rand has not noticeably weakened against the US dollar (although it is fading versus the pound). So what the SONA debacle has definitely achieved is a complete disconnect between the fantasy world of politics and the real world of people making their own decisions.

It was rather startling to hear the Eskom CEO, Tshediso Matona boast that after just a few months in the job he now had a full understanding of that utility’s difficulties. Now this is a business in such trouble that it really can’t afford any time at all without a boss who knows what is happening. Even more alarming is the fact that for the three years prior to his new appointment Mr Matona worked as Director-General of the department of energy. What on earth do these bureaucrats do if it’s not learning all about the things they are supposed to control?

Those readers who live in the King Sabata Dalindyebo municipality (no, sorry, don’t know either) will be disappointed to learn that the free catering they have been enjoying at the past 13 development plan meetings may be coming to an end. Some dour killjoy has suggested that the R13m bill was excessive and the policy of “buying groceries” should be reviewed.

Apparently the folk who provide therapeutic massage with fragrant oils to their customers have asked the Competition Commission to allow the costs of such treatments to be covered by medical aid schemes. I shall watch the outcome of this request with great interest because it has long been my contention that the cost of the first cold beer on a Friday evening should also be allowed as a medical claim. If that’s not therapeutic then little else is.

My Canadian guests were delighted to draw my attention to the news that Edmonton has withdrawn from the bid to host the Commonwealth Games in 2022. Durban is supposedly now a shoo-in for that very dubious privilege. Nevertheless almost R100m will be spent on preparing the bid. The games themselves will cost at least R10 billion. The Canadians politely declined to subscribe to my private fund for distressed Ethekwini ratepayers and went on to ask if the violence and scrumming they watched on the TV last night was rugby. They seemed unconvinced when it was explained that the Super 15 starts only tomorrow. It’s also not cricket to have to get up so early to watch the world cup from the Antipodes. Why can’t they use proper time zones like we do?

James Greener

Friday 13^th February 2015