I SEE NO SLIPS

The JSE reached 60 589 on Tuesday and breaching a level with four zeros in it (60 000) gave everyone something to write about in a market that is very hard to explain. The fact is that year on year growth in earnings of the main non-mining sector shares is almost zero. In simple terms the average business is making about the same amount of money as a year ago. Yet rents, costs and wages are all rising. The outcome is less fun. Unless one is on a gravy train of course.

News broke of yet another huge data leak. This one was dubbed The Paradise Papers because it originated from a tax consultancy firm located somewhere exotic and with imperfect IT security. Frankly these leaks are getting pretty boring and commonplace. There is just one theme. People everywhere mostly resent paying tax and devote much time, energy and money to avoid doing so. The largely left-leaning media journos find this attitude an affront to civilisation and deem it worth splashing all over their pages and websites. As the old saying had it: Never do anything that you would not want to read about next month on the back page of the (South African) Sunday Times.  Today that warning extends to not recording your dodgy doings on a computer which is connected to the internet. This of course is virtually impossible and inevitably leaks will happen.

The huge furore which overtook the Paradise Papers story was about the publication of a book which claims there is evidence that Number One himself is also not a keen or compliant tax payer. Which means he’s just like the rest of us except on a grander scale with a generous serving of hypocrisy

Author Jacques Pauw’s tell-it-all book is a welcome relief from the stultifying petty squabbling that’s taking place ahead of the ANC’s conference to find a successor to JZ. If the conference is held at all and if it produces a victor not to the Big Man’s liking, there could well be some serious court-room shouting and the legal fraternity will be on the phone to their architects to order further lavish office extensions. Further reasons to resent paying tax.

A feature of inquiries conducted by some external parties into alleged naughtiness at state entities is the clinical disinterest shown by the investigators for anything they deem to be outside of their terms of reference. Not for your average forensic lawyer or accountant to show the slightest curiosity about something odd on the page opposite the one they have been tasked to read. It’s like stepping over a dead body on the way to see if the toilet’s blocked. And then reporting to the client only that a better grade of paper will solve the problem. Sticklers for process they are. Move along folks. Nothing to see here. What dead body? In fact, charge more for having to look away.

In the meantime, state and provincial education departments are working up a piece of legislation which will surely even further trash what little hope remains for the nation’s school pupils. The government has decided that parents and governing bodies are not competent to choose new principals and that such appointments will in future be made by bureaucrats at head office. Undoubtedly this process will be used to further the government’s race preferment policy and reward party lackeys. It will not necessarily appoint competent school principals. This centralisation of decision making is a calamity.

These four back-to-back outbound tests for the ‘bokke are brutal. The sole bright spot is that they meet Ireland, the All Black slayers, at the start of their tour tomorrow. The rumour that team management have chartered a flying ambulance to remove injured players from Europe and deliver fit ones may not be true but let’s hope that for the survivors it will indeed be a merry Christmas with some nice scalps hanging in the trophy cupboard.

The tide will now be out until mid-December since it time for me to go to the bush.

James Greener

Friday 10^th November 2017

NO CHANGE? NO CHANCE!

While we sit around waiting for the flow of bad news to abate just a little,  the share markets are soaring. In the US the bull market in equity prices compared to bond prices is entering its eighth year and the relative outperformance is almost 3 times. Although it has strengthened a tad towards the end of the week, our poor currency is not looking forward to a bumper Christmas season. A rand will buy you just 5 British new pence or 7 US cents. And for those of us contemplating offshore excursions or purchases these are awful conversion factors to keep in mind.

It’s usually worrying when our president says he has applied his mind and this time his pronouncements about the country’s need for more nuclear power stations is no exception. When a man who finds large numbers a challenge, starts to talk about Megawatts and other tricky units it quickly slides into incomprehension. Having an innumerate and non-technical leader is not a problem if there are savvy aides close by. However, there are very few cabinet colleagues with either the knowledge or the courage to venture a discrete cough and offer some guidance on the difference between a Gigabyte and a Gigaba for example.

Mind you the deputy pres. offered the opinion this week that the national airline SAA could return to profitability. This would require some very fancy number footwork and would it be after repaying the taxpayers the tens of billions we have poured into keeping this very sick puppy alive? Any guessing game about just how much the government would get from selling SAA must include zero as a price.

Zero percent is the opening offer for a number of civil service category pay rises. So far this is almost the only shot fired in the direction of controlling government expenditure but it’s going to fall well short of its target. Armed with Eskom’s utterly unreasonable and cynically mendacious claim to be allowed to increase electricity prices by 19% the unions are onto the 0% idea like a pack of hounds. A similar number being demanded by students as the amount of the next fee increase also has no chance of success.

Bets are being laid on the possibility that the ANC will postpone or even cancel their much-anticipated December conference at which Zuma’s successor as party leader and therefor state president will be elected. In common with many processes designed by liberals eager to demonstrate that total democracy is possible (it’s not), the selection process is very messy and open to endless challenges from unsuccessful hopefuls. Political commentators can feel all grown up and cosmopolitan by rattling on about districts being “sown up” and “delivered to” this or that candidate. But right up to and beyond the coronation, the violent and deadly infighting will continue. Here in KZN large numbers of party office bearers have been assassinated, with the death toll there being equally as unacceptable as the utterly shocking number of white farmers who are being murdered.

Also in Natal, the Pietermaritzburg municipality courageously ordered a count of their movable assets and reported the results. It’s puzzling that no official spotted that the valuation of R494 000 placed on 5 missing firearms seemed incompatible with a similar number of lost fire engines worth just R700 000. And that’s before enquiring how one can lose even one fire engine. A delightful aside in the report is the remark that many staff members had “disrespected the verification process by locking their offices”. The enumerators had therefore been prevented from counting air conditioners, computers, cabinets, cupboards and chairs. Wowee

I was treated very kindly by the locals in The Station Pub in Franschhoek last Saturday. Especially once the Sharks fell into their usual second half torpor and when the noisy Province supporters had satisfied themselves that referee Jaco Pyper’s alleged bias against them was not evident.

James Greener

Friday 3^rd November 2017

AND DON’T EVEN MENTION THE RUSSIANS

Minister Gigaba told us very little that we did not already know about the poor shape of the government’s finances. However, his unusual approach was actually to say as much and while he has been praised mightily for this, the market reaction has been severe. The prices of South African bonds and currency have plummeted. Those among us who over the past few years have been able to send a few sacks of cash to Dubai for safekeeping with our mates are probably feeling very relieved and smug. The frustrating but telling thing, however, is that all the hand wringing has been directed at the failure of the income side of the budget to live up to expectation. Not very much at all has been said about the expenditure side of the equation. Given that there really are few untapped sources of significant tax revenue left it is obvious that the axe must be taken to the spending.

Some astonishing charts have been published highlighting just how much higher almost all public-sector salaries are, compared to private sector pay. Multiply this by the massive increase in the number of state employees and to the casual observer, not needing to influence voters, it seems obvious what needs to be done. Understandably any threat to their jobs will at the very least prompt massive strike action. And this should be met by the second leg of the program which is to make starting a business and hiring (and firing) staff so much simpler and easier. That is, create a way to soak up the talent and experience that will come onto (and is already unemployed in) the job market. But that’s two impossible things to believe on the day before the Currie Cup final.

The unwelcome consequences of deficits are debt and the cost thereof (aka interest rates). This is where the irritatingly influential ratings agencies pop up to scrounge a living, and so they are back in the news again. These analysts are no better than any others (see next story) yet because of where they work they assume unearned mantles of authority and infallibility. And because the minister offered some home truths they have (way too late) gone all angel of doom on us and are expected to downgrade South Africa yet again. The nation’s debt service cost is approaching panic station levels. It needs more than Gigaba to start talking specifics about what our government is going to do. To stop looting the public purse and dismiss all felons and thieves would be a good start and a way of sending a great message

News of an interesting competition came to light recently. Four teams of trainee investment analysts drawn from different business schools were each asked to take a close look at a listed company and decide whether to recommend a buy or a sell. Each team approached the task in a different way using both published data and hands-on investigations of the firm’s products and markets. This resulted in the perfect balance of two buy and two sell recommendations. Anyone who thinks that this lack of consensus is a sign that the students clearly have a lot more to learn from their courses, should realise that this is the norm even after graduation. Anything published by a company (which, by the way, they do only because they have to) is very carefully massaged and managed. Obviously while shareholders and creditors need to be kept happy and informed there is a competing desire to keep competitors and the taxman in the dark. Consequently, it is quite understandable that two different teams can draw conflicting conclusions. It’s the old glass half empty versus glass half full story. Oh, the company they analysed? Distribution and Warehouse Network [Dawn].

Events are such that I’ll be wearing my Sharks shirt in Franschhoek in the Western Cape at the time of the Currie Cup final that will be played the Shark Tank here in Durban tomorrow. I have asked my hosts if we will be able to watch at a Sports Pub but they are dubious if I’ll be welcome. But I have every faith in the hospitality of all South Africans even when we hoist the Cup. [Apologies to the WP supporter who was offended last week at the suggestion that the Lions might win their semi]

James Greener

Friday 27^th October 2017