TAKE TWO ASPRIN AND CALL THE BANK IN THE MORNING

The JSE All Share index is heading for its greatest monthly loss in two years. All of this weakness, however, happened in the first week of June and since then despite a steady stream of events which in normal circumstances should see sellers outnumber buyers the index has held up. As ever, the story is much more complicated with only a few sectors and indeed shares with special situations being responsible for almost all of the upside. By and large SA business is not in a happy place as shown by General Retail sector being down nearly 10% in 2017 so far.

Recently Argentina manged to borrow USD 2.75 billion on which it will pay lenders 7.125% pa interest. The catch is that the capital will be repaid only in 100 years’ time. Famously Argentina has a long history of forgetting to repay creditors. But who is going to be around in 2117 to ask for their money back?

Today is the first ever Asteroid Day which wants to raise our awareness about protecting Earth from an asteroid impact. Just what we could all do to prevent a chunk of rock crashing into our planet and changing our lifestyles is not explained. Probably not very much. Similarly, we all seem powerless to save our beloved country which has already been hit by an object which is indifferent to its citizen’s fears and needs. Almost every day another jaw-dropping expose of theft and corruption is revealed and neither we, nor the institutions we expect to protect us, do anything.

This week the OUTA lobbying outfit published a lengthy evidence list for crimes perpetrated by the leadership. They too hope that there is something someone can do to get Number One to relinquish the presidency. Frankly, it’s doubtful that JZ will go anywhere until he wants to and more importantly until he has arranged a succession plan that will keep state money flowing in the right direction. Which is towards him, his family and of course his chums. JZ has several times agreed that he will fix any corruption or mismanagement problem if he would be presented with evidence of his wrongdoing. This is a breathtakingly insouciant statement which illustrates his utter contempt and dismissive attitude not only towards the ever-growing investigation industry but also to the few brave officials inside his own administration and judiciary. Even the Constitutional Court appears to be sliding into irrelevancy. The Big Man of the nation is answerable to no one.

Today the ruling party will be holding a Policy Conference. The organisers have instructed that "Delegates must refrain from any behaviour which would bring the ANC or conference into disrepute. This includes singing of derogatory songs against a comrade‚ leader and alliance partners or guests. No one should distribute‚ wear or display any material that is deemed to be divisive". Interestingly there is no prohibition of bad behaviour towards other citizens who don’t support that party. In the meantime, it will be interesting if any delegate raises the question of how the National Health Insurance scheme will be funded. The R256 billion per annum cost projection is based on 3.5% economic growth and doesn’t appear to include anything for the thieving vultures who will quickly collect when sums like that are mentioned. Just don’t get sick anyone. Please.

Durban is not a city for the lazy. There’s always packs of folk running, cycling, swimming or paddling to, from and through it. This weekend it will be horses doing the work; but to judge from reports of the preparations for the “July”, racegoers are going to be sluicing and browsing at championship standards too. Perhaps the very satisfactory series win by the ‘bokke will get fans back to the interminable and baffling Super rugby tournament which begins its second session this weekend. For many though, it has become a boring event devoid of much local interest. The Tour de France and Wimbledon however will keep the TV on for weeks to come with the odd peek over at the cricket tests to see if the Proteas have found the plot they keep on losing.

In the meantime, please keep watching the sky for incoming rocks.

James Greener

Friday 30^th June 2017

SPLICE THE KEVLAR FOIL

The eye-catching data item in a week which promised much more is the oil price which is leading many dollar priced commodities downwards. Not many forecasts got this right, focussing naturally on the numbers which suggest that some economies are starting to warm up. But maybe it’s like the sun after this week’s solstice. Even if the sun is on its way back south, the coldest days of our winter still lie ahead.

The claim attributed to Number One that the Gupta emails were deliberately leaked in the interests of transparency must surely be fake news put out by Gupta network “sockpuppet” accounts.  Or merely the response of a confident president? But investigative journalists sifting through the trove of incriminating emails are eliciting fewer “golly gosh” responses. The world is now at the scene of a gory collision between the timeless phenomena of self-serving avarice and instant communication. Even the bona fides of the survivors are suspect and most witnesses are unreliable. The perfidy and unscrupulousness of our companions on this globe is not new. It’s just that we find out sooner and move on more quickly.

Few people really understand how banks work. Most of us still probably cherish the notion that they have vaults piled high with sacks of cash neatly labelled with each depositor’s name. It’s quite a step to appreciate that in fact they have speedily lent that money out to borrowers who pay interest to the bank at a far higher rate than the bank pays its depositors. But it’s far more complex than that and concepts like fractional reserve banking – not to be confused with Central Banking – enable banks to create money that doesn’t actually exist as notes or coins. Lending this type of money can be immensely lucrative, provided of course that the debt is serviced and repaid on schedule. Which is why banking licences are valuable and Number One’s Indian mates have been trying to get one.

Politicans and their staff are particularly unhelpful in aiding a better understanding of the topic. They assure their constituents that it is possible to change banking so that the wealth stored in the system can be given to the deserving poor. History and mathematics shows that this is not possible to achieve sustainably. Fortunately, in South Africa we also have constitutional barriers to tinkering with the Reserve Bank and other important institutions. But the rhetoric does fire up the hot heads who phone the spin-masters for another glib phrase to chant as they dance down town with songs and demands.

This week a terrifying pie chart graphic was released which shows that the number of taxpayers is now less than the number of social grant recipients. Of course, the amount of tax paid is far larger than the total amount of grants made, and that difference is used for civil servant salaries, servicing of the national debt and paying the private sector for providing goods and services to the government. Since looting grants, salaries and debt repayment would be quickly discovered and very unpopular, the pillaging is concentrated on the contracts awarded by tender. A chart illustrating the cash flows in this aspect of our nation would be even more scary.

“Balance-sheet Aid” is a delightful euphemism now being used by the utterly bankrupt State-Owned Enterprises who are in serious need of plain hard cash to pay their bills. The national airline has received a “Dear John” letter from a bank which not only won’t lend them any more, but has even asked that the present loans be repaid now. Panic! Surely it’s time for a “Headcount Cull”?

Someone chose a bad week to tell South Africans about an exciting new T20 global tournament. That’s a format in which many of us are quickly losing interest. A 9-wicket loss to England! Really? It’s also been sad to watch AB reach the end of his glory days with the Proteas. The GP venue in Baku is strangely sterile and without character. How about that odd two-dimensional castle in the middle of the track? Oh well Silverstone and Spa are coming. And if you need something really different what about sailing craft touching 50knots at the America’s Cup. Barely a rope in sight.

James Greener

Friday 23^rd June 2017. Olympic Day apparently.

A PIPSQUEAK WRITES

Another long weekend starts tonight, or even earlier for those affected by the minibus taxi drivers’ strike. They appear to be protesting about the facts of life; like stuff getting ever more expensive. It didn’t get better for those of us who were within reach of the demonstration that the minister of mineral resources has not a single clue about how business works. After ample evidence in the past decade that the political allocation of resources does not work in any way he has simply deemed that there must be even more of the same. It is just too dreadful for the markets, mine workers and the nation.

The Bear that has been shuffling around the JSE is getting bigger and bolder. In some sectors there may even be the faint whiff of panic. The All Share is off more than 5% in a month and the resources counters are chalking up losses of even 15% from their 6 month highs. The rand and bond market meanwhile are both stable and so we are watching a local phenomenon. Is the state pension fund – the county’s largest– starting to liquidate holdings? This is run by a unit under control of the minister of finance and the recent deluge of leaked emails has revealed that the new man in this post (Malusi Gigaba) is quick to do what Number One needs to make his friends happy. And his friends may be running out of cash. The low hanging fruit at most of the state-owned enterprises has now been picked and so another source of cash has to be tapped. That will be really bad if it has even a grain of truth.

What a gift to columnists. The new Financial Intelligence Act is now in place and ready to make the Pips squeak! Pips are “prominent influential persons” who will in future attract “enhanced due diligence” when opening a banking or broking account. It all sounds very praiseworthy but it is also an admission that the existing legislation has failed to stop money laundering. Those of us who are small and insignificant enough for our banks to hassle us, have been hugely inconvenienced over the years with demands to prove where we live and trips to the police station so that a bored constable can certify a copy. Meanwhile the real money did precisely what it liked. Like take overseas trips in big carry-on bags. Much as we would like to believe that the bad guys are going to get caught, our experience and cynicism suggests that not much will change.

A top-ranking business man has come up with a new name for an old idea. Rightly appalled at the utter moral decay of those who claim to be guiding this country, Mr Bonong Mohale, chairman of Shell in SA, wants to try and get us back on track and protect the constitutional order. He proposes a “fund” which will spend its donor’s (or is it investor’s – it’s not entirely clear) money more effectively than they could themselves. The name is The Integrity Fund. Beneficiaries of the fund would be activities which were attempting to put the country on a better path. Contributors would be the usual suspects – business. Sadly, it is very likely that the first casualty of such a venture will be the failure to live up to its name.

It is very odd that New Zealand dilute their All Black brand by selecting a B team on racial grounds. There is something very hypocritical about it all. It prompts most of us to look forward to seeing the British & Irish Lions (vigorous non-racialism there!) give them a hiding this weekend. The problem for those Lions, however, is the amazement expressed by their coach that he has just learned that New Zealand sides play for 80 minutes. Which is something the baby ‘bokke failed to do in Georgia. And the Proteas entirely lost their way in the Champions Trophy as well. Two ignominious early departures from their respective international tournaments was very hard to watch. Reward for loyal SA rugby fans however is possible with the Durban double header starting tomorrow when the Kings Park faithful are being enticed to sample the Moses basket with a rare second string international being played the day before the senior test match on Saturday at the proper venue. I wonder if the soccer stadium management realise the importance of easy access to well-priced refreshments for influencing spectators?

James Greener

Magna Carta Day 15^th June 2017