Taking the
rand exchange rate as a proxy for the share price of the nation it is
interesting to note that it firmed around 2% in the past few weeks. This could
mean that the “big” money was not unduly concerned about the election result
and was content in the knowledge that the electorate wasn’t going to deliver
any huge and difficult surprises. The bond market too, often (probably
unwisely) thought of as an indicator of what the professional investors know,
has been unchanged over the past fortnight. The equity market however seems a
little spooked by something and many prices are off a great deal.
AB InBev, the
behemoth brewing company that swallowed up dear old SA Breweries doesn’t seem
to have much of a clue about how to sell beer to South Africans. Take for
example the disastrous idea of a 910ml screw top bottle. The beer comes out
flat! The fellows at the bowling club bar are sticking to the Zulu Dumpy with
the proper crown top. This outfit’s latest results show a decline in South
African sales revenue – a rather unusual and alarming piece of news, Then
there’s the departure of Anglo American from the SA gold mining scene, an
unsurprising move given how difficult it is to balance the demands of trade-unions,
government and ultra-deep level mining. As we have mentioned before, the
company results from the equity market are erratic and worrisome. This week, Steinhoff,
the baddest of bad eggs, released some results for the year ended September
2017. It was the failure to publish them in December of that year that caused
the can of worms to burst, and now that the share price has cratered is there
any need to dig through entrails nearly 3 years old? Frankly, what we all want
to see is the crooks in jail.
On average
the government is now, each month, spending 30% more that it collects. This is
the sort of number that ought to keep finance ministers awake at nights. As the
saying goes: those who understand compound interest, earn it. Those who don’t,
pay it. The amount that the nation has to borrow, grows every month and so too
does the interest on that loan. And yet
like foreign policy, the national debt raised barely a mention in the
manifestos of the parties in the election. One fellow in red overalls and beret
even promised to double one of the single biggest items in the Budget (the
monthly social grant hand-out) and this naturally was warmly cheered. Whatever
the rhetoric and grandstanding that we have been subjected to, the reality of
that debt is slowly grinding away and will swamp everything. Government and
indeed most official spending is in desperate need of pruning.
In the
meantime, just minutes before the polls opened, President Cyril sent his
brother-in-law, Energy Minister Jeff Radebe to South Sudan. There, he
reportedly committed some of our tax money towards helping to develop the oil
fields in the globe’s newest country. Beyond the question of why this was a
deal that needed to be done so urgently, if at all, is the scuttlebutt that our
aging refineries would battle to cope with any of that oil which our participation
might produce. All rather mysterious.
Other
interesting numbers came to light this week when the public broadcaster
reportedly explained that it needs R7.2bn a year to operate. It budgets for
almost half that amount to be collected in TV licence revenue, but less than
R1bn is collected in that way, because South Africans are generally loath to
pay for anything that they can more effectively steal. Which leaves a mighty
big gap to be plugged by advertising revenue. And failing that it’s out with
the begging bowl and power-point presentations to potential lenders and the
National Treasury i.e. the taxpayer.
A rugby
aficionado whose opinions I respect, suggests that the evidence shows that the
further away from Durban the Sharks play, the better they do. He therefore
proposes that Kings Park be relocated to Antarctica. A novel but flawed plan if
only for the fact that that continent is way closer to the Umgeni than
Australia.
James Greener
Friday 10th May 2019
