Economy
Silver bullet economics: post-election economic debate has centred on job creation and the Reserve Bank. Calls are made by a variety of worthies for the Reserve Bank to be privatised, and for it to drop interest rates, create jobs, release its reserves and initiate QE. Red herrings by idiots who know little about what they are tampering with:
- technically, the ownership of the Reserve Bank is not the issue, the issue is its mandate; who owns it is largely irrelevant. The concern is that, if state owned, it would lose its independence;
- a drop in interest rate is probably debatable and might well prove only a short-term stimulus to growth – the difficulty with this is that low interest rates could lead to future inflation;
- reserve banks cannot sustainably create jobs, governments can. These worthies deflect the focus from a government, incapable of its function, to an institution whose function is ensuring stability;
- the Reserve Bank reserves are held in order to provide liquidity if needed. To make this available to a government which is bankrupt at all levels, is an act of desperation which will leave the cupboard bare and expose us in hard times;
- QE? This, say those in the know, should only be considered when interest rates are close to zero and when the inflation rate is very low. (As an aside, it was suggested in Business Maverick that large economies embark on QE; the likes of us simply print money!)
The fact is that our government is desperate and needs to apply itself to the basics of why no jobs are available rather than mess with an institution which still works.
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Our labour situation in South Africa is almost comical: it is a fact that our para-statals are overstaffed, as are most government departments – a result of using the government to create jobs. We need to shed jobs from the government and create them outside government – a virtually impossible task in our unionised state. An example of this being messed up seriously, is a recent offer that teachers over 55 may retire. On the face of it not a bad idea, except that we have a shortage of teachers and encouraging your most experienced teachers to leave is, at best, a questionable strategy.
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Speaking of desperation: imagine being a broker managing pension funds in South Africa. Our bourse has reportedly returned a -0.8% return (Ryk de Klerk) with income reinvested; a cash deposit, on a pre-tax basis, has outperformed equities over the past five years (Luke, are you reading this?). The fact is that our financial outlook is grim and that one should consider “diversifying” (I love this term) one’s investments.
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Mr Modi has been returned to power on the back of his statements that the Indian economy grew like never before during his reign; indications are that Indian economic growth is slowing down substantially. China’s official growth rate is 6% but it is whispered that its real growth rate is 3% and probably less.
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Locally the SARB leading indicator has been negative, and accelerating downward, since October 2018. This does not auger well for our economic future.
Business
The big four supermarket chains account for 72% of market share in South Africa. Long-term exclusive lease agreements (by way of example: supermarket A agrees with the mall-owner that it will lease inside the mall, provided no one else in the mall is allowed to sell groceries) by those wielding disproportionate market power, has been targeted by the Competition Commission and are probably on its way out.
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We buy from Eskom and sell to the community at a loss. Bruntville is an NDP township in Mooi River; the town itself has little to sustain it and jobs simply don’t exist. The situation typifies what our thrust, to provide housing to the poor, has resulted in. The poor now I have the services but cannot pay for those services. The municipality, in turn, simply cannot pay its bills and the whole system grinds to a halt. What to do? The government at first and second tier level has run out of money and it will become increasingly risky to increase taxes to those who can pay.
Property
So, the elections are past; where is the predicted property upturn? The answer, suggested in the latest Property Professional, is that the ongoing economic structural issues will not allow an upturn. The result of this is that rentals are moving sideways, commercial developments have become risky and development will slow.
https://propertyprofessional.co.za/2019/06/06/property-downturn-had-nothing-to-do-with-elections/
Practice
Legal Fees, a topic dear to practitioners and which strikes fear into the hearts of clients:
- Section 35 of the LPA deals with fees for legal services. The LPC has initiated a debate on conveyancing tariffs and how these are to be dealt with in future. Yawn – whatever. The fact is that in our current system conveyancing fees are, relatively speaking, expensive and justifiably so. Whatever the tariff, practitioners will simply charge what they need to in order to justify providing the service.
- On a more parochial note: the recent increase in conveyancing fees included the customary interprovincial tariff – essentially what a conveyancer at the seat of a deeds registry would charge another in order to lodge and register an outsider’s deeds. This amounts to approximately 15% of the full fee (although I see increasingly that conveyancers not practising from the seat of a registry add such expenses to these fees rather than including them in the full fee). Maritzburg/Durban practitioners have had, since 1982, a local arrangement in terms of which Pietermaritzburg conveyancers, charge the non-Pietermaritzburg conveyancers, approximately 10% of the fee charged by the non-Pietermaritzburg conveyancers. With the demise of the LSSA, this grouping will have to renegotiate this arrangement. Technically, Pietermaritzburg conveyancers could well charge 15%, except that the Durban firms might baulk at paying. What to do?
(My practice charges 10% for lodgement services rendered to non-Pietermaritzburg conveyancers, as opposed to the standard 15%. I don’t understand why an extra-provincial conveyancer must pay me more than an intra-provincial conveyancer. And, thank you, we are doing very well on that basis).
Not new but deserving of consideration: a recent report in Business Day dealt with the LLB curriculum – again: lawyers complain that law graduates “are of poor quality”. The suggestion is that the LLB should again revert to a fit-for-purpose five-year course. This debate has, to my knowledge been up and down since the early 80s. The initial call (from our then newly instated Chief Justice, Mr Chascalson, in the early 90s, was for men in the trenches, delivery of legal services to the poor. That was achieved (in the sense of delivering a greater number of potential practitioners) at the cost of quality; an entirely predictable result. Now that the public has access to legal services, often of debatable quality, the call goes out for higher quality. That very same issue led to attorneys in the late 1980s requiring an LLB and not a B. Proc, as it was felt, like now, that 4 years was not sufficient time to prepare a practitioner for practice. Yo-yo standards, which necessitate asking when a practitioner qualified in order to determine the standard of his education – to have to ask a professional how high the hurdle was that he had to cross, in order to do gain access into practice, is an insult.
The fact is that quality legal services are expensive as it takes a great deal of education and training to bring a practitioner to the level required. Eventually one gets what one pays for. Get used to it.
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The Times reported on a Gauteng High Court computer crash that had the system down for 7 weeks. The problem has been resolved but the backlog has not been sorted out.
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A first: this week past judge Frank Kroon apologised to the SARS Illicit Economy Unit, the so-called Rogue Unit, after having concluded that it had been a mistake to declare this unit unlawful. Commendable and refreshing. This does leave the prosecution of Minister Gordhan with a problem?
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Qui prior est tempore est potior est iure: Prof Sonnekus discusses this, starting from Caesar Caracalla’s decision on two competing rights against land. Interesting and probably required reading for those dealing in commercial and insolvency law. Afrikaans. Ask me for a copy.
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This week past I was confronted with several issues regarding Antenuptial contracts. One of them dealt with the values, declared by parties in an accrual regime ANC, which the would-be divorcee now alleges to be incorrect. Generally speaking, when a document is executed before notary, there is a presumption that every statement contained in the document is true… (Elliot & Banwell); this question caused me to doubt whether this statement held true where parties appear before an attorney (who is not a notary) or even a paralegal for advice on an ANC; a power of attorney is drawn up and sent to a remote notary to execute on their behalf. In theory there is no difference as the remote appearer acts on behalf of the parties involved; in practice, the parties simply cannot receive the (presumably) expert guidance that they are entitled to.
Quotable
A critic is a man who knows the way but can’t drive the car. (Jip, that’s me on economics – but, what the hell, if a union leader can debate the issue, so can I!)
Tynan
Comment
Hell hath no fury like a (small beer) councillor disrespected: you must love this – Msunduzi Municipality will be giving R550K (whoopee!) to the Comrades Marathon Association annually for three years. For this our councillors expect a red carpet and prime seating. Heck; reports hold, for instance, that last year’s marathon injected R700m into just the Durban economy. I suspect that the total cost of this event is such as would make our generous contribution appear…. slim?
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Incels may be described as persons who are involuntarily celibate. Googling the term is quite disturbing: https://en.wikipedia.org/wiki/Incel
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Author: Dr Daan Steenkamp – Attorney