FUTURE EXCHANGE

Thinking of the currency exchange rate as a sort of share price of the country is quite handy. And it shows that sellers of South Africa outnumber buyers at the present. Rands are on offer and it takes more of them than it did ten days ago to buy a dollar or a pound or a euro. Nearly 5% more! Which of the many dreadful tales doing the rounds has tipped the balance against our currency and was it one big seller that started the run or a host of small trades that appeared unfortunately simultaneously?  Certainly, the story that follows is worrying. But it’s not new.

This weekend the hapless contributors to and beneficiaries of those funds managed by the Public Investment Commissioner (PIC to their mates) may learn that the hopelessly bankrupt and very badly run national airline (SAA) has been identified as just the right sort of investment for their money.  Another once reasonable company also seeking bail-out money is the national broadcaster (SABC) which is so bust that it’s even considering no longer spending money to televise the funerals of prominent people. Now there’s a splendid idea anyway! In fact the total sum of money desperately needed by a long list of state-owned deadbeats is probably close to R100bn and the PIC-managed funds are one of very few place where that kind of dough is laying. And while the gate keeper to this cash is bleating his refusal to hand over the keys, the wolves are well connected and very large.

Stats SA published their quarterly Labour Force survey recently. Just over 16 m people are in employment but this dire and bleak statistic is sliced and diced by gender, province, age, occupation and even by race to fill 133 pages. Alarmingly 3.6m -- almost a quarter -- work in the community and social services sector while 2.4m shuffle paper and peck at keyboards in finance and business. Just 1.8m work in manufacturing. There’s a problem right there. While the survey is mute on earnings, the press helpfully told us that the Principal Officers of two state employee medical aids each pocket a salary of almost R10m a year. This sounds like far too much. As does the half a million present given to Collen Maine the youth leader who facilitated a coal deal for a grateful sponsor. Did he report this short spell of employment to Stats SA under the correct category?

Another new exchange for dealing shares and similar securities opened this week. These developments are similar to the Uber, Airbnb and Bitcoin phenomena. They are understood and used by those who are interested in the outcome and have little interest in the process. Over the years the established bourses have wrestled with the problem of ensuring that trades done are settled to the satisfaction of all parties as to cost and delivery. It took hundreds of years to create and refine paper based transaction registers, certificates and cheques. But now in just a few years their electronic replacements have gained the trust of nearly everyone. It is only regulation which requires intermediaries and their commission charges to be part of every deal. Drop these and also the taxes and investing will simply become an information business deciding what to buy or sell at what price. All the rest will be done by the machines and no one cares whose computer the trade went through. Some careful thought shows that the notoriously fee-intensive capital raising efforts will soon go the same way.

Many readers and the author of this letter have felt for many years that there is not much chance of finding economic quantities of gas onshore in SA. This is because we worked at Soekor in the old days at the time when it moved its exploration efforts offshore after pretty much declaring the mainland worthless. While the fracking process does usually help to extract more reserves from a single well, the likelihood is that there very little to recover and so the Karroo and other equally picturesque landscapes are unlikely to be ruined by a natural gas industry.

There’s a tone of frantic desperation in the press forecasts about the ‘bok test against the Wallabies tomorrow. No one dares mention the zero in their last outing against antipodeans. Who knew they played test cricket in Potch? The ground is a good looking oasis in the drone picture. With about as many people visible as you’d find in any desert.

James Greener

Friday 29^th September 2017

IMPORTANT INNOVATIONS

How dare the World Bank accuse SA of a lack of innovation. Just for a start our minibus drivers can turn any piece of unused veld into a highway. And there is nothing that can’t be bought from a vendor at a traffic light. Fanta is the magic remedy for making insistent officials vanish and semi-automatic weapons can reportedly be hired by the hour. We have a Police Intelligence Unit and this week the National Treasury convinced foreigners to lend us USD 1.5bn for 30 years at a rate of just 5.65%. When you see what happened in the past 30 years here on the southern tip, these must be mighty brave lenders. We have a government policy that transfers wealth from people who earned it to a handful of well-connected cadres and our military airports can be used for private weddings. Not innovative? Bah.

This week, Sasol’s Inzalo scheme which required stock brokers to classify their clients by race became submerged in a veritable flock of roosting chickens. Other shareholders got badly burned. And anyone who positioned themselves to profit from a cut in the repo rate was surprised when the Reserve Bank’s Monetary Policy Committee decided that the price of the nation’s money needed no adjustment.

 At about the same time, Federal Reserve Governor Janet Yellen, a kindly-looking granny figure, similarly surprised the self-appointed experts in these things. She suggested that it might be time to sell off some of the trillions of dollars’ worth of assets acquired by the US Central Bank when they were easing things in a quantitative manner. Numerous and large fortunes were made from this program and the prospect of it unwinding has set off alarm bells.

All of these events are examples of intervention by officialdom who believe that they have the skill and duty to price risk correctly. Invariably they cannot and so in the transactions that follow there is always a winner and a loser whose benefits and losses are underwritten by public money. This means that there are fewer resources to cope with real unforeseen natural disasters like earthquakes and hurricanes. Bailing people out of trouble caused by nature is a legitimate and welcome use of public funds. Bailing them out of trouble caused by their own cupidity, gullibility and foolishness is not.

And now it turns out that even the bean counters have a different result depending on who is paying for their services. This may not be a new development but finding out about it so soon after the event is, and it is yet another outcome of the internet.  The instant and ubiquitous dissemination of information both real and fake is causing us all to recalibrate how we live our lives. Obviously, we all need to tighten up our filters and raise our levels of scepticism and disbelief. Thereafter we need to appreciate just what the stuff that is probably real is teaching us. Which is that even in the hitherto mostly sacrosanct halls of professionals, academia and public office, affairs are far more rotten, suspect and corrupt than we ever imagined. However, the internet has torn down the curtains of respect and reverence for authority and revealed that self-interest is virtually the sole driver of most human behaviour. Sad but somewhat liberating knowledge.

While we have amazing freedom to criticise and castigate our risibly poor and dangerous political leaders in their running of the country we have to depend on the All Blacks to point out what’s wrong with SA rugby. Which is that the 15 best young rugby players eligible to pull on a Springbok jersey may not and cannot be selected because, like the economy, the nation’s leaders don’t believe in free markets even for the voluntary enterprise of playing a sport to earn a living.

James Greener

Friday 22^nd September 2017. Vernal Equinox (S hemisphere)

DEAD RINGER

Government finance is a very simple process that just about everyone who is not a socialist can understand. The government needs money in order to pay the salaries of civil servants and politicians, buy goods and services from suppliers and make grants to the ever-increasing number of social grant beneficiaries. And it needs cash (lots) to pay the interest and capital on the loans it has taken out. The loans are necessary because, in common with most governments, ours spends more money than it collects in tax.  Over the past 12 months the National Treasury distributed R1.17 for every R1.00 it collected. Many of us would be uneasy about our personal affairs accruing debt at this sort of rate, but the custodians of the state finances are more relaxed mainly because they have the Reserve Bank on speed dial. This is the institution that has the power to change IOUs into money which is a very useful trick that hides behind many different names, including the ludicrous “quantitative easing”.

They are also relaxed because one of the jobs of economists is to find ways to dress up and express “bad” numbers in ways that when viewed “in the dusk with the light behind them” they don’t look so bad. Further our nearly completely Marxist government is delighted to have cause to blame capitalists (conveniently easily identified here because they are white monopolists) and demand radical economic transformation. Ignoring facts and history and mathematics is a fatal trait among these people.

This week, however, Finance Minister Gigaba began to make warning noises. The latest Government numbers revealed that in July the spend was a terrifying R2.52 for every R1.00 of income. The problem is that are now fewer and poorer people supplying the cash. Also known as taxpayers, they and their money are disappearing. Emigration and job loss are the two important factors which have reduced the number of people with an obligation to pay income tax and an ability to spend and incur VAT. Furthermore, the country’s credit score (calculated by the bogeyman ratings agencies) is slipping fast which means lenders are demanding higher interest rates. It’s a real mess by any standard.

Despite his rhetoric the minister sadly is too enmeshed and compromised by the ocean of corruption flooding the nation and its institutions to turn anything around and the nation’s “leaders” have become utterly transfixed by the battle for the leadership of the ruling party.  This means that no one is paying much attention to the muttering about the pile of dosh heaped in the state pension fund which would come in handy for plugging the holes in the cash flow. This is a very bad development.

Tonight, an object of which we first heard of about 20 years ago will disappear for good.  It has twisted and turned and soared and dived, revealing something unexpected with every manoeuvre. No not a politician but a spacecraft. Cassini. Sent off by NASA to explore Saturn all those years ago it has provided data enough to keep planetary scientists (a very special breed) happy and busy for years. Even its plunge tonight out of orbit around the gas giant with its spectacular rings and into the clouds will very likely provide surprises. No matter what one feels about the USA and its politics and policies we are all the richer for that nation’s space programs.

Our nation however is not in any way richer for the Gupta family being here. The story of duplicity, malfeasance, corruption and theft gets longer and deeper with every day. But as always, this country has a huge capacity to surprise and delight. Taking advantage of our amazing freedoms to investigate and publish, investigators have been unearthing sleaze and dirt which is sticking not only to the usual local suspects but also international corporate names like KPMG, McKinsey and Bell Pottinger. The last has already closed shop, embarrassed by revelations of the depths they were prepared to go to secure business. Hopefully there is panic in as yet unidentified vendors of “expertise” worrying if their incriminating emails are in the pile yet to be leaked.

Perhaps after this weekend our rugby teams will be as feared as our investigative journalists.

James Greener

Friday 15^th September 2017