Economy

Broke: a year ago, our economy was trundling along without any great prospects but with cracks starting to show. It took a decent crisis, exacerbated by decisions that would probably not be taken again in hindsight to highlight the fragility of our state finances, the parlous state of our governance, the dissonance in our society and the absence of rational, informed leadership in those who govern us. This has led to an accentuation of a great many ills that had lurked under the cloak of normality. Rationalisation (read lack of funds) aimed at improving service delivery, has become the go-to political mantra. The exposure of the warp and woof of our society leads one to question how and why we do things, from how we move people to how we bury them; our political system and the reasoning behind policies which appear to fail. The fact is that we are broke not only in pocket but, crucially so, in ideas. Whilst disturbing, these are also interesting times. A few of the markers of where we find our schools are-

• last year Unisa took in 77840 first-year students; our Minister of higher education wants to limit this to 20,000 as NSFAS has run out of money: the vision of education for all (leading growth and prosperity) is shattered;
• we need to cull 130,000 civil servants (read the state as employment provider);
• the World Bank expects a dramatic drop in South African living standards – one can see this already on our streets;
• on a more mundane level, not to speak of other state institutions, our Post-Office is, again, on the brink of financial collapse;
• on a broader front, retail sales are down.

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So, what to do?

The obvious and easy solutions are to raise more taxes or to borrow more money – the latter becoming increasingly difficult. The first has already raised its head in that a once off wealth tax is again on the cards, with pundits estimating that this can arise R160bn – a seemingly easy solution but hardly repeatable if the gain is squandered. The difficulty with raising wealth taxes is that those who are targeted already pay the general equivalent of what is colloquially termed a black tax (financial support that black professionals are expected to give to their extended families). Consider this: those who can pay for water and electricity and support others who cannot or will not pay; those who can, will over-pay for CV19 vaccine to fund those who cannot. Essentially, these are taxes imposed on the wealthy for the privilege of staying in a poor country.

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On a wider scale, Africa requires help and asks this of other nations (lately by calling for a reduction in the price of CV19 vaccines – specifically for Africa). One may legitimately ask why one person is obliged to assist another and why one nation should fund another? Theories abound, but I have not been able to find any theory that supports such conduct other than essentially self-interest. Much fun, however, may be had, if this interests you: try, for instance, listening to the following pod cast by a Yale professor on Malthusian economics (45 min!) https://podcasts.apple.com/us/podcast/02-thomas-malthus-and-inevitable-poverty/id431187212?i=1000092883386

You could also try searching why are people poor – there is a range of reasons that present themselves which, I suspect, allows one to pick according to one’s political and world view. Those in need of help would argue that man is a social animal and that we are predisposed to hold society together; those who would be called upon to give such assistance might point out that poverty is self induced, is the result of bad choices and so on. On a local level, one might ask why one should train up a competitor or a BEE enabler.

All of which is educational but hardly presents a single valid solution.

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A sop of sorts is news that in terms of purchasing power (Big Mac Index), our Rand should trade at R5.92 to the US dollar; at once an indication of how others view us and providing a reason why one would want to stay here. Yet, increasingly, those who can are leaving our country or dysfunctional centra, evidenced by an exodus of the able and a rash of second-passport applications.

 

Business

Vaccination of all would halt the CV19 pandemic in its tracks and is probably cheaper than the cost of lockdown and loss of life. The swirling debate on the topic is focused on laying blame rather than looking forward. The burning questions are s who will pay for the vaccine roll-out and why the state should control this. After all, why should I not be able to privately source a vaccine – it is nobody’s business what I pay for such a shot and when I get it. A part-answer to this is that the state would want to guarantee my purchase for my own good (as it would sanction the use of any other drug in South Africa), but an increasingly plausible answer is that the state needs able buyers to subsidise others (tax). So, why would you not, on your next business trip, buy the vaccine elsewhere rather than wait for it arrive locally? The cost of a shot vaccine is in the order of a few dollars which, together with administration and transport costs would result in a price range of R200 to R1000 a shot. A snip if you can afford it. In this case, subsidising others to ensure your own health might well make sense?

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Shorts:

• our short-term insurers are still ducking full payment of Business Interruption policies: a recent radio-talk on the topic, by a UP professor, suggested that these entities might well not be able to afford full payment;
• our Minister of Communications wants to extend payment of TV licence fees to DStv and Netflix: chickens coming home to roost – can you remember the political decision not to encode TV signals so as to restrict reception to only those who pay (presumably not to tick off voters?). I confess to having little sympathy – drive by any squatter camp and look at the number of dishes strung up on telephone poles;
• this year is predicted to see the roll-out of African Union passports which should enable one to travel freely at least in Africa. And even more novel concept is that a CV 19 identity system is also on the cards. Lastly, whilst on identity, a third gender category is on the cards for South Africa, i.e., transgender (I can’t imagine this being given at birth so one would presumably apply for such categorisation on reaching the age of majority?);
• the Labour Appeal Court ruled against the unions on the promised public sector wage increases, based on the contract with the state having been entered into in contravention of public service regulations. Amazingly (or predictably?) this omission was missed by our ministerial cadre and its legal advisers. A subversive take on this dismal state of administration would be that the state could not argue affordability in its defence of not payment after having dropped R10bn into the SAA black hole and that this was a last stand argument despite the risk of being portrayed as turkeys;
• to progress one needs to be innovative? Not that easy – look: https://hbr.org/2019/01/the-hard-truth-about-innovative-cultures

 

Property

Much of the property news is old hat:

• Rode’s fourth quarter report attributes the miniboom in property transactions to favourable interest rates and a catastrophic drop in prices owing to negative economic growth;
• many of the buyers above (up to 64%) were tenants who elected to buy at what they were paying for rental;
• the result of the above is a dramatic drop in the age of first-time homebuyers, whose salary growth had outstripped house-price growth, over the past few years (and obviously a hiatus in the assumption that property would increase at the rate of at least inflation);
• one in four tenants is in arrears and there is a surge in housing-vacancy rates;

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Much more interesting are the following:

• twenty-nine South African professional, contractor, supplier and other bodies have united into a forum named the Construction Alliance South Africa (CASA). This alliance developed a coordinated response to the CV 19 pandemic and is leading thinking on our national economic recovery plan;
• Deeds Office delays has become the norm – the latest brake on conveyancing is that, despite having many months’ notice, our on-the-ball SARS neglected to notice that it’s transfer duty platform would not work when Flash was discontinued. You must love this response: SARS is “currently working on resolving the matter and will advise once the problem has been resolved”. In fact, it says that it had been working very hard at converting its services over the past 3 years! Hau – 3 years and still going!
• An interesting note by BusinessTech was on so-called vendor finance: if your purchaser cannot afford the price that you ask then the seller extends an (interest-free?) loan rather than drop its price. There are two notes that need to be made on such agreements –
  • I have little doubt that sellers will seek to build in interest (which most sellers would not be entitled to charge) by raising/maintaining the capital price;
  • if the purchaser does not sink sufficient of its own equity into the purchase, the seller might have a problem recovering the outstanding balance when payment becomes due;
• a note by real estate assessor James Otto attracted my attention: he said that the problem facing most black candidates, is not passing the estate agents’ entrance exams, but earning a living from real estate after passing these. Despite a majority of potential black purchasers, conversion of these into clients who would support their own race, is blamed on a dysfunctional market sector and punitive cash flow model. I confess that I’m not convinced.

 

Practice

A raft of interesting but useless information has presented itself over the past two months:

• you may now officially not require a candidate attorney to have a driver’s licence as this is anti-transformative. It is idiocy to force one to hold that all must be on equal footing when they are clearly not.
• Eskom may not cut off electricity to municipalities, who do not pay for this, owing to its constitutional obligation to provide basic services: http://www.saflii.org.za/za/cases/ZASCA/2020/185.html
• one of our banks habitually include disclaimers in their wills (I think this is despicable and this on a fly-now, pay-later scheme!); I have now seen this in an ANC (pay-now, pay later…)!
• RAF: an application to force the government to come up with a plan to rescue the RAF and to prevent sheriffs from attaching RAF assets, to enforce payment, will be heard in Pretoria shortly. Solomon, in all his wisdom, would have difficulty with this one – unless, of course, you re-allocate the RAF shortfall of R7bn from the SAA R10bn bonanza. But then the moral problem is that the dirty lawyers would profit?
• Our Constitutional Court has found that the financial control of the Judicial Inspectorate of Correctional Services, by Correctional Services, to be unconstitutional: http://www.saflii.org.za/za/cases/ZACC/2020/26.html
• The Constitutional Court has also found that section 1 (1) of the Intestate Succession Act is unconstitutional insofar as it excludes the surviving life partner in a permanent opposite-sex life partnership from inheriting. The word spouse is replaced by the phrase “or a partner in a permanent opposite-sex life partnership in which the partners had undertaken reciprocal duties of support and been committed to marrying each other”: http://www.saflii.org/za/cases/ZAWCHC/2020/111.html
• Schadenfreude: an order attaching R102m of ANC assets, in a payment dispute with Ezulweni Investments, was granted in the Johannesburg High Court. Perhaps the Prez is more successful in combating backhands than one would think!

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More topical are the following:

• a ruling in the Land Claims Court held that a farm dweller may be compelled to reduce his livestock numbers to prevent overgrazing; http://www.saflii.org.za/za/cases/ZALCC/2020/19.html
• the Law reform Commission published a discussion paper in which it proposes recognition of protected relationships, marriages, and life partnerships, entered into by parties, regardless of religious, cultural or other beliefs of the parties or the manner in which that relationship was entered. https://businesstech.co.za/news/lifestyle/460332/new-marriage-laws-proposed-for-south-africa

You might also wish to look at the recognition of Muslim marriages at https://www.africa-legal.com/news-detail/muslim-marriages-recognised/

• is an oral settlement agreement in a case, contrary to a Shifren clause in the contract at the heart of the dispute, valid? In the case at hand the court decided, no, this was a compromise of pending litigation. Worth thinking about though: http://www.saflii.org/za/cases/ZAWCHC/2020/121.html

 

Quotables

Go with mean people and you think life is meant. Then read Plutarch and the world is a proud place.

Emerson

 

Comment

Son Who Knows Everything had me wade through Diamond’s Collapse: essentially a treatise on four factors which cause the collapse of a society and what successful societies do prevent this. One ends up thinking about sustainability and how to achieve this. This, in turn, let me to issues of sustainability and I refer you to a talk on the topic by Mann: https://www.ted.com/talks/charles_c_mann_how_will_we_survive_when_the_population_hits_10_billion

This, in turn led me to wonder about the sustainability of democracy in Africa (as an aside, a commentator had suggested that the ANC needs a sustainable model of wealth extraction!). I suspect that the adoption of democracy in Africa served as a vehicle to shift the control of African societies from the then colonial masters to local societies which would aspire to similar political control. The question is whether African nations which could, in terms of sophistication and cohesion, emulate those who had controlled them. Would democracy be a sustainable political system in African society, given that its diverse societies were and are ill-suited to taking sophisticated decisions when compared to the much more homogeneous Athenian society which gave birth to such rule? Democracy is certainly not a quick fix for the ills of colonialism and not necessarily suited to African society.

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Some years back I bemoaned the level of corruption in South Africa to a Croat friend. He was quick to point out that corruption is a human condition and not limited to Africa: he said that the liberation party in Croatia had, like South Africa, traded on its liberation status to loot those led in favour of the liberators. Really good to know!

More to the point, how does one stop corruption in Africa? A part-answer is given in the following talk by Magatte Wade (not the best I have listened to but the point is well made) in which she holds that one needs to make it easy to do things which will prevent others from capitalising (in the sense of facilitating at the cost of a backhand) on that constraint: https://www.ted.com/talks/magatte_wade_why_it_s_too_hard_to_start_a_business_in_africa_and_how_to_change_it#t-494184

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CRT: Critical Race Theory. Pres Biden is punted as giving increasing emphasis to CRT, which is described as an anti-capitalist ideology that mobilises around racial identity to polarise and divide, exaggerate the importance of racism and blaming white supremacy for all black-white disparities (if you are presumably right-leaning). Whatever: the fact is that his reign will probably usher in an era of increased redress.

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On the topic of redress/BEE, the SA Institute of Race Relations, described in Wikipedia as one of the oldest liberal institutions in South Africa, has weighed in quite dramatically against BEE and is worth looking at: https://irr.org.za/media/chilling-assessment-bee-has-de-industrialised-sa-pushed-it-backwards-in-time-biznews

I confess to having been quite surprised as the sentiments expressed there are scathing on the implementation of that system in South Africa. Worth debating but, speaking for myself, I shall hold my head firmly below the parapet on this!

 

Lighten up!

What’s the difference between a good secretary and a personal secretary?

One says, “Good morning, boss!”.

The other says, ” It’s morning, boss!”

 

(Okay, okay I’ll behave myself! I did, once, have a secretary as fierce as that in the cartoon below – but, for some reason, humorous secretarial stories don’t exist – they all seem to nudge the boundaries of respectability.)

 

 

Author: Dr Daan Steenkamp

 

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