SAME OLD, SAME OLD

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 10^th May 2019

SARS IS SMOKING

There are a few conclusions to be drawn from the great success of Nedbank’s “green” bond issue. The first is that there was at least R5.5bn in cash sitting around awaiting a more rewarding home than a bank account. It will not have gone unnoticed by other potential borrowers that Nedbank accepted only R1.7bn of this sum. Secondly that investors are shy about lending directly to the developers of the feel-good, solar, wind and renewable energy projects and prefer to let a bank take the risks. The old days of lending to the once upon a time blue-chips of Eskom, Transnet and other parastatals are long gone. There are a (dwindling) number of Tidemarks readers who will remember the Eskom E154 long dated bond trading 50 points below the government R124. [Stop weeping please]

A feature of election result forecasts all over the world in the past decade is how often they are wildly wrong. Pollsters are clearly being misled, but why voters choose to do this is uncertain. Perhaps it is us “little guys” pushing back against the repugnant attitude of politicians who promise so much and, in the end, deliver so little. However, there are predictions of the outcome of Wednesday’s general election which are causing so much concern in the ANC camp that campaigners for that party are being reduced to begging to be given another chance. It seems most likely that “coalition” will be the hot topic this time next week when the oddest of bedfellows might be cosying up to each other in a quest for a majority and a ticket for the gravy train. Hopefully the winners in this battle will include a candidate or two from the Purple Cow Party (aka the Capitalist Party) whose position on having far less government interference closely matches with mine.

In the meantime, the internet is once again delivering to the electorate and of course also the revered “foreign investor”, sights and sounds that the SABC and other politically influenced media are reluctant to publish. Not only do these scenes of public disorder and inflammatory speechmaking by skilled rabble-rousers annoy, scare and alienate law abiding tax- and rate- paying citizens but it inflames and encourages other desperate citizens elsewhere in the country to similar acts of violence and carnage.  Here in Durban, the municipality allegedly decided to amend pay scales and reward anyone who was a member of the guerrilla forces opposing the previous regime with a higher salary. Mayhem has ensued with once again the inexplicable habit of strewing rubbish, breaking and burning things in full force. Not a welcoming sight for attendees of the Africa Travel Indaba happening here this week.

Another victim of the prying eye of the internet  was Blade Nzimande who in his current role as Minister of Transport  recently explained that his department would be boosting its efforts to curb driving under the influence with a gadget that could detect how much blood a suspect might have in his alcohol stream.

Apparently, the tax man depended on cigarette manufacturers to tell him how many fags they were turning out and the taxes due were based on that number. This was obviously a poor idea and it revealed that ex-president Zuma was not the only one who had difficulty with big numbers.  Now that SARS have sent inspectors who can count into the cigarette factories, an extra R10bn a year in tobacco tax collection is confidently expected. This is a staggering amount of money which of course does depend on those smokers who have become used to buying their fix at impossibly low tax-avoiding prices not giving up the habit. They will undoubtedly be disappointed and annoyed at this loophole being closed though. Come on SARS. There are plenty more gaps like that to plug.

This Tidemarks is being written as The Sharks tie with Crusaders at home. What a result!  It’s the time of year for the Wells Fargo golf competition in Quail Hollow in North Carolina. What a delight that this name from our romantic movie memories of the wild west should still survive.

James Greener

Friday 3^rd May 2019

PARTY TIME

There is little sign of pre-election nervousness in the local markets. The currency is off a shade but no more than caused by an injudicious remark by someone who should know better. Company results are all over the place with seemingly similar businesses having very different experiences with similar customer bases. Sadly, the threat and suspicion that even a set of audited financials is likely to have been massaged remains a factor when assessing company reports. An analysis published this week highlighted what seems like an excessively wide pay gap between a CEO of a South African company and the other employees of the business. But then one remembers the floods of undeserving mendicants, nosy shareholders, trouble makers and clueless officials who appear at the door and one wonders how they cope.

Evidence that the benefits of becoming a politician outweighs the nuisance of having to pretend to serve the electorate can be seen in the number 48. Amazingly, that’s the number of parties that has registered to take part in the upcoming elections. A goodly number of these parties have been formed only since the last election in 2014 and many only in the last few months and that illustrates an interesting aspect of proportional representation election systems. Which is to have any chance of a seat in parliament you need to be at the top of a party’s “list” and that is best achieved by forming one’s own party. 

Now it is true that, despite the frantic claims to the contrary of the current opposition party, a vote for any party whose candidates will never consider coalition with the ANC is a vote for the opposition. And if the sum of the votes for all the anti-coalition parties approaches or even surpasses the number of votes for the leading party, we will have a very much healthier democracy. Mind you, even if the maths says it’s OK, a vote for The African Content Movement formed by Hlaudi Motsoeneng sounds like a bad idea. Yes, the chap who broke the SABC. Whatever happened to the “lose their deposit” disincentive?

This phenomenon is the opposite side of the same coin that is causing so much anguish in the Brexit debacle. There the tax-eaters in London and Brussels are trying hard to ignore and reverse the clear message sent by the British voters that having two layers of politicians and bureaucracy is costly, unnecessary and a severe irritation. Patronage is probably the chief cause for public employee bloat around the world. In South Africa the problem is made worse because beneficiaries are largely incompetent at and uninterested in their tasks. There’s an awful collision happening between fulfilling the ever-growing list of civic obligations proclaimed by the regulators and the shrinking number of officials with the wit and will to provide the necessary service.

It’s the hospitality industry’s turn to face disruption of their business from the internet’s ability quickly to match customer and supplier. The cause of the unhappiness is likely expressed as too many beds and too few travellers. Typically, however, our government has failed to spot this simple reason and instead has penned a couple of hundred pages of new legislation to address a different and non-existent problem. The state’s proposals are unsurprisingly mostly ridiculous and costly for all involved. But what actually is needed is for them to work at making all of South Africa an attractive and safe place for every type of traveller in need of a place to sleep. Only the hospitality industry itself has the need, interest and capacity to solve its own problems. Especially if it’s a nice one caused by a surge in travel and tourism and demand for rooms.

The answer to the question about whether the Sharks have a coach is “Not really. One of the Dads just helps out” is cruelly observant. And by the end of the last bottle of wine the other evening some of us were admitting that watching Super Rugby is not very entertaining and the English Premier Soccer League can while away boredom. Provided the ref is harsh on the “divers”. Meanwhile the Proteas squad for the Cricket World Cup may not comprise the best players the country has produced but we wish them well and hope never again to see the word “chokers”.

James Greener

Friday 26^th April 2019