GIVE THAT RAND A STEROID

It is time for the suits to assemble at the Reserve Bank in Pretoria, squabble about the seats with a view and the choicest biscuits on the plate and decide what to write on the price tag for money. If these decisions actually do have an effect on the economy, they surely take a very long time to be felt. Only the youngest and keenest of analysts will watch the broadcast announcement and call clients with suitable snippets of autobabble in the hope of getting an order. Frankly the rand’s steady slide signals that inflation is likely to become a problem again in the next year or so and quarter point rises in the repo rate will have negligible effect in arresting that. The name of the game is rand hedge investing and reducing pure currency holdings while the government continues to show as few clues about what is happening and what to do about it as a (brine filled) headless chicken.

The man who coined the acronym BRIC worked for Goldman Sachs.  Then South Africa felt offended that it had been ignored and excluded from this club unfairly and shouldered itself into the group and supplied the terminal S. This week that investment bank closed its BRICS fund after a record of losing spectacular amounts of the investor’s money. Happily, no fund managers were harmed in the event as fees were still collected. It turns out that despite the catchy word there are few linkages between the economic fortunes of those countries and busts and booms were more or less unsynchronised. Probably the main lesson to be learned from this incident is that investment ideas are seldom as good as they sound. Another slick phrase that cost innocents dearly was the utterly dishonest “too big to fail” adage.  Lenders who indeed were about to fail because of ignoring every prudent rule of client adoption, were rescued with truckloads of taxpayer’s cash. Naturally this move was warmly received by the errant banks.  Now this thesis too is under investigation. Despite the earnest endeavours of the world’s do-gooders it is not possible to rid the planet of risk and things will go wrong and people will lose money. Also being shut down is the not so sleekly named Kopano ke Matla investment company. This was supposed to make money for Cosatu, the troubled trade union federation but reportedly things have gone seriously awry. Even communists find it hard to pick the winners.

Aeroplanes have been much in the news recently. The national airline, already effectively utterly insolvent, has apparently ignored a government instruction and has signed a deal to buy a fleet of Airbuses. There’s far too much haste and glib hand waving happening here for this to be a clean deal. It is after all nearly Christmas time and lavish presents are in order. Hopefully someone in Europe will take notice. Now presumably these aircraft will enjoy a luxurious first class cabin and so that makes the suggestion that the air force has spent an egregious sum of money to buy another personalised jet for Number 1 all the more annoying. As usual his response is that it had nothing to do with him because the decision was made by the military. Yet more evidence that JZ’s ranking as the worst value for money president in the world is richly deserved.

What do the students actually want the universities to look like after the transformation they demand? Do they want higher standards, harder courses and exams and longer terms so that they can compete more aggressively in the international job markets?  Do they want the salaries of the academic staff that deliver this education to be frozen or even reduced? Do they want the grounds and premises they trashed while making these demands to be restored and maintained? Do they want the laws of gravity, thermodynamics, supply and demand and the country repealed?  But that transformation word has such a different meaning here in SA that it is unlikely they will get any of these things for a very long time.

Anyone who can recall the ladies (?) who emerged from the eastern bloc to claim the gold medals in the bad old days will be unsurprised by the claim that the Russians are once again busy with their chemistry sets. It’s all about the money. As it is with the Kings who again have not been paid salaries. Obviously despite the government’s insistence, the nation is just not yet ready to have 6 sides in the Super Rugby tournament.

James Greener

Friday 13th November 2015

COUNTING CALLERS

There was scant good market-moving news this week. Just about every tale told of falling sales, collapsing harvests and the increasing difficulty of running profitable enterprises. Not only gold but that very mysterious cyber-currency, Bitcoin has been getting plenty of attention from the talking heads. Anything that governments can’t easily see and tax and importantly control is becoming increasingly interesting as the fear of rampant inflation seeps into investor’s minds. We do indeed live in interesting times.

Getting fined $5.2bn is not a trivial matter. This sum is what the Nigerian government reckons will make them feel better about some administrative function that MTN, the South African cell phone company, failed to carry out. Indeed, the task of keeping track of the tens of millions of customers that mobile phone operators have is nearly impossible, and perhaps it would have been better if the two parties had scheduled a quiet chat before salvos of this nature were fired into the air. It spooked the shareholders badly and everyone from parliament down had something to say. It is unkind of course to suggest that the oil price slump is causing the Nigerian state a bit of a cash flow crisis, and prompting them to feel down the back of every chair.

But keeping tabs on the customers is presumably behind the new local rule that insists that a proof of residence is produced when renewing a driver’s or a vehicle licence. It is terrifying to think how many reams of paper, rooms of filing cabinets and hectares of “server farms” are being used simply to record where we live. As usual this newest piece of bureaucratic idiocy has triggered a wash of complaints and queries about what people should do if they do not actually have exactly the right pieces of paper. For those souls crammed into squatter camps the problem is particularly thorny and the official reply that they need to seek a rubber stamp from some local headman is quite pathetic. And sadly there is no evidence that this thirst for records has yielded any improvement in service or reduction in crime.

The leader of the Economic Freedom Front political party, crowned with his traditional red beret marched around Joburg a week ago handing out letters of demand to institutions such as the JSE and the Reserve Bank. Intriguingly none of his targets is these days headed up by a pale male – once upon a time the baddie of choice – and so the confrontations were rather less photogenic than he would have liked. Also interesting is the sober and reasoned reaction and analysis that many commentators have applied to those lists of demands. It has become good form to read them closely and treat them seriously.  Like the student demands however, most of the rhetoric betrays a woeful lack of understanding about where the government gets it money. Inevitably the proposals for structural reform of the private sector will reduce profitability and hence taxes, with dire consequences for the deficit.

Ironically everyone in South Africa already enjoys near total economic freedom to fight for a place in the sun. However, what so many people don’t have is the financial independence to take the first steps. Hence the ubiquitous demands for money shops (aka banks) who will fund everyone in need. The missing part of course is that banks can’t forever lend money they don’t have and in due course need some repayments to keep the thing afloat. Affordability receives no mention and too little has been said about where the nation spends it resources without return. Clearly those students reading economics are too busy protesting to attend the lectures on that topic.

The dreadful drought now widespread in the nation is exposing shortfalls in planning and managing resources that are probably decades old.  But doing this sort of hard and unglamorous work is no fun especially when it also exposes that most of the current incumbents have little knowledge of what to do beyond designing t-shirts and hard hats for the next grand opening of a pump station or pipe line.

Presumably the idea of QEII handing Ritchie McCaw a gong at the next medals parade will soon be raised again. The Decorations Officer, or whoever is responsible for these things must of course ensure that it comes with several Offside Bars.  It doesn’t look as if the Proteas’s first test against India will run the full five days. Pundits will no doubt moan about the pitch. I think it’s more to do with going out too soon.

James Greener

Friday 6^th November 2015