TAX AND BEND

Yesterday the JSE turnover reached nearly R24bn  as one of those mysterious close-out rituals took place when computers appear to trade with each other for a couple of hours. On Tuesday the wind gauge outside this office clocked a gust at 51km/hr. I don’t think the events were related but there is certainly weird stuff happening which most people have never seen before. Demand for the rand and gold is surging. The All Share index is more than 40% above the March low but the big banks continue to warn about severe and lengthy contraction in their businesses. Bears are baffled. Patience is no longer enough.

It is both amusing and infuriating to watch the responses of the politicos to the realization that they are collecting a whole lot less tax than they hoped for. Ideas for new and sexier taxes are sprouting everywhere. There was even some very confused waffle about prostitution being a viable employment (and presumably tax generating) enterprise. Almost completely absent has been any suggestion that they might like to compensate for the shortfall by trimming back on the costs side of their business. After all, that is exactly why tax receipts are slowing. Employers are cutting back on wage bills and consumers are cutting back on spending. Government needs to follow suit. Why not start with the big ticket items? For example, lop 15% off the salary of every civil servant earning over R50 000 a month, and another 10% off salaries over R75 000 a month. The usual bleat that the state and its various agencies need to pay this sort of money in order to retain top talent and prevent it defecting to private industry deserves to be tested. My guess is that there are very few people who are currently driving desks and BMW’s on the public payroll who will be swamped by calls from the head hunters. The latest figures from National Treasury reveal that while Revenue receipts are growing at a disappointing 4%pa, the figure for the Requisitions side is 20%pa. Minister Gordhan himself has noted that it is the larger of these numbers that needs attention.

Equally silly ideas for changing the face of South Africa for the benefit of its people include turning game farms and golf estates into mielie lands. I am pretty sure that the rates and taxes currently paid by both those types of enterprises are now far greater than they ever were in the past and certainly create far more wealth than any mielies which might survive on them in the future. The reason for being able to say this is that simply the desire to maximise income and return will have guided the private landowner’s choice of use for the property.

However, someone close to government did this week take a giant step in the war against obesity by airing the idea of complete nationalisation of all food production. In a related move their colleagues over at the Competition Commission are taking a close look at the supermarkets. Rest assured the moment that the bureaucrats start to interfere, food will disappear and we will once again be a thin and fit nation. This will in any case be very necessary if we are to mobilise an army able to start a third world war as threatened by some dimwit, who has managed to escalate a terribly sad incident caused by incompetent sports administrators into a international mocking contest.

It is reported that each soccer world cup venue will need the services of 100 chefs on match days. Their task will be to revive with tempting viands the high Pooh-Bahs of FIFA who arrive at the suite shocked and exhausted by the unaccustomed horrors of life on the southern tip. They might even have glimpsed a rogue sign for a non-approved beverage or credit card that the local authority had failed to purge from their so-called protocol route. Just how big was the fee and to whom was it paid, that has permitted FIFA to drape the rest of this country over a barrel?

James Greener

18^th September 2009.

DANCING WITH DATA

So Governor Mboweni feels that “SA labour laws are good”. How on earth can they be considered good when so many people in this country are without jobs? Only when pretty much anyone who needs paid work can find it, may any government congratulate itself on getting things right. Ironically it is probably only when bureaucrats and their interfering laws are largely absent from the process, that full employment becomes possible.

To the extent that any economic data is reliable or accurate it does appear as if the things are not deteriorating quite as fast as previously. However, I was worried by the announcement that ABSA are prepared to grant mortgages to the value of 110% of the house to be bought. Furthermore these products will be available only to those earning below a certain quite modest amount. Now isn’t this almost exactly way that banks in the US and UK triggered the whole credit crunch in 2008 with so-called sub-prime mortgages?  After congratulating ourselves on more or less avoiding this problem in SA, are we now about to play catch up?

The strike by the minions at SARS added a quite unnecessary extra twist to the irritation I experience each year when gathering the numbers required for completing the tax return. Someone, however, is still working at Revenue House as I have received SMS messages reminding me of the exquisite torture that awaits me should my form not be on time. The brouhaha about supplying suitable cars for the three dozen ministers also has come at an inopportune moment for us taxpayers. Not only do I see my money going to provide high-end in-car entertainment systems for people who should be taking a moment in the quiet between meetings  to catch up on paperwork. It now emerges that a bling set of wheels is particularly necessary for visiting the comrade voters to deliver the services they were promised. Anything below the super luxury standard and the citizens will not take you seriously.

 The news that Winston the pigeon was able to transport a data chip across the kingdom faster than the Telkom network could transmit the same information has generated plenty of comment not least from Telkom who thought the stunt was a cheap shot. Well of course it was but it was still very funny. But what caught my eye though was the fact that there is a company that collects so many gigabytes of data every day from recording phone calls. Presumably there are many other similar organisations also collecting this sort of data. And presumably further, there is a demand for it. If Winston had been nailed by a Peregrine Falcon who knows who might have got their hands on all that information. Why does the phrase Identity Theft keep popping up in my mind?

The dollar gold price tried on four figures this week after a long break and is looking quite natty and comfortable. Isn’t it a pity that the fellows at Eskom don’t have similar standards of fineness and quality for the coal they buy for their power stations? Some of that organisation’s huge loss was caused by paying for “mud and rocks” which was delivered instead of coal. The most of the rest arose by getting on the wrong side of a derivative trade. Now where have we heard that before? If by some slender chance the trade had worked out in Eskom’s favour, would we have avoided the 30% plus electricity price increase?

At least two cultural dancing events are scheduled to be held this weekend. Both are intended catch the attention of non-dancers and both involve near naked people. Up the road it will be the Reed Dance featuring hundreds of young maidens selected for their beauty, modesty and purity. In New Zealand, 15 burly lads of somewhat less unsullied reputation will perform the Haka in an attempt to shock the ‘bok coach out of his boredom. If the ‘bokke win properly you can be sure that even more dancing will break out here on the southern tip. Probably without reeds though.

James Greener

11^th September 2009.

ASYLUM IS NOT FOR SISSIES

Negative interest rates are an odd concept. Deposit money in the bank and once a month the bank charges interest, which they deduct from the deposit so now the deposit is less than before. If this goes on for long enough the deposit falls to zero. Not a good investment idea. In some places commercial banks are now being charged negative interest on certain funds that they have on deposit at the central bank. The powers that be hope that this penalty will encourage the banks to take up a sort of reverse crime and anti-mug their clients by stuffing folding money into their purses and wallets. The next step of the plan calls for the bank clients to return to their old habits and become consumers once again. But that is not what is happening. People are paying off debts and building up savings instead of spending. Large and chunky spanners are appearing in the works.

Almost all indicators of growth are still getting worse, although in some cases at a slower rate. As I write, the talking heads on the screens are getting very excited by a US data release about how many jobs were lost last month. Whether the number was better or worse than expected tells us no more than that the expectations were wrong! The real point is that fewer people are at work in productive jobs and it may be a long time before that situation reverses. It will be even longer before the situation regains the old peaks. Investment bears like myself are pretty sure that the time is coming when the markets realise that they are priced for an altogether much happier and quicker outcome than is actually taking place and they need to go through a big correction again.

The Handbook that reportedly allows for a minister to spend upwards of a million rand each on a brace of cars is in dire need of revision. The current tax regime ensures that most ordinary folk have to fund their own wheels, so why not a cabinet minister. By all means have a smart landau and four round at the state stables for the odd ceremonial jaunt where you want to expose yourself and your guests to the exciting sights, sounds and smells of an African city. But for tooling over to the ministry from home (also state provided) why not one of these Rea Vaya things or maybe a Corolla that you can wash in the driveway at weekends? Only when, as they all claim, their meagre packages expose them to temptation of being lured away from the sweat and toils of public service, should they experience the joy of true executive travel, including charter jets that do not run short of fuel. What exactly happened there in the DRC to our Dep. Pres. Coming back from a junket in Libya? Did the Colonel refuse to accept the national petrocard?

Forget the Niagara Falls. The Canadians have opened a much bigger deluge. What’s the saying about lunatics running the asylum? That Brandon Huntley chap has found one warming a chair up there in the 51^st state  who clearly had little clue about where or what South Africa is. I’ll bet he is finding out now. The courier services have had to lay on extra flights to Toronto to handle the applications that are pouring in from the southern tip. Not mine though. I have seen the photos of the thermometers pointing at the big negative numbers and think I’ll stay here in the kingdom thanks. It was well over 30 degrees here on Tuesday. But maybe what we are seeing is a ploy that will allow Canada to field a rather more threatening rugby team at the next world cup and someone who will understand Victor’s line-out calls.

I am a bit alarmed by the rather boastful claims about sheer perfection that are coming from the ‘bokke camp. Let’s wait for the clean sweep chaps, before getting that cocky.

James Greener

4^th September 2009.