It is time to resuscitate my theory that amongst the huge array of numbers that are available for us to use and analyse, the exchange rate of the currency is just about the most reliable and largely free from sustained manipulation. I think it pretty well tells the story of what is happening in the country, and it is presently telling a rather bleak story. This week it has lost more than 6% against the Japanese yen and it is down almost 3% against even the Australian dollar. Versus most major currencies is has lost somewhere between those two levels. This means simply that there have been considerably more sellers of rands than buyers.
An important cause of this exodus has likely been the warning from the country’s power supplier that it would be unwise for anyone to plan to build any new major project that required a supply of electricity to operate. Now that pretty well rules out everything from aluminium smelting plants, deep mines, metro systems and most factories to probably even floodlit sports events. Our economic growth over the next few years will therefore have to rely on small scale market-gardening and hand-written poetry. Even candle making requires power!
The only good news about this announcement is that it is probably true. Their previous attempts to blame the power shortages on damp coal and misplaced bolts were obviously nonsense. The worrying thing now, however, is that while undoubtedly the growth in electricity demand is pushing up against the inadequately planned supply, the extent of the present program of “load shedding” indicates that something far more serious has happened. Eskom have decided to not to tell us what that is. Even the politicians and bureaucrats have twigged on to this and no one is sure how worried they ought to be! Only the sellers and installers of emergency generating sets are having a good time. The rest of us have been kept in the dark.
Other sellers of the rand have been the foreign shareholders who have decided that the JSE is not immune to the very large bear that is savaging most of the world’s markets. The declines in share prices are substantial and if they continue at their present pace, January 2008 will be in contention for being one of the worst months for the JSE on record. So far, the All Share is down 8% this month. This fails to tell the whole story, however. Savage intraday swings of almost half this size, in each direction, have sent short term-speculators stumbling from their screens, fingers burnt and bleeding. I am sure that the bear is not finished with us yet. While there are pockets of seeming value staring to beckon here and there, I feel that it would be best to wait until the gloom is universal and the headlines proclaim the end of the JSE. Then we shall go shopping for the bargains.
In the meantime, we can occupy ourselves by arranging for our homes to be inspected by the FIFA Bed Police. These people will decide if the accommodation is up to the standard demanded by an English soccer hooligan. Apparently, anyone offering bed and board to visitors to the World Cup, who has not registered with and paid for an inspection and grading by these officially sanctioned busy-bodies will be guilty of some yet to be invented crime. Culpable hospitality?
Have a safe and pleasant weekend and may you not encounter an intersection in the clutches of a metro police officer directing the traffic during a power cut. You will find yourself wondering about the actual meaning of “load shedding.”
James Greener
18th January 2008
