Economy
Can Dr Doom be right again? Roubini, a New York University Prof, sprang into prominence when his 2006 warning, that the US housing market would collapse, proved true. He now predicts a post-CV19 economic rebound, followed by a collapse beneath the weight of the global economies’ accumulated debts. More specifically, he predicts that the private debts accrued during both the 2008 and CV19 will durably depress consumption.
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South Africans too, are not in a great space: the Magic Money (something out of nothing) lecture by the Governor of our Reserve Bank, attracted much attention this week; the sting of that lecture is in the conclusion at the very end – we are slipping backwards. In 1960, South African incomes were around 26% of those in the US – these are now down to 13%. Our then incomes were 128% of Brazil’s and are now down to 65%. He says that our post-1994 achievements have faded and that we are sitting on the highest debt pile in our history, arguing about ideology. If you read only his conclusion, this is worth your while: https://www.resbank.co.za/Lists/Speeches/Attachments/563/The%20SARB%20the%20coronavirus%20shock%20and%20the%20age%20of%20magic%20money.pdf
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Our Dickensian adventure continues – everyone wants (and seem to get) more:
- the minnows i.e. the taxi industry, are not happy with R1bn; they want/no they deserve Really, why?;
- our undead public leech, the SAA is set to stagger forward with the unions (one suspects supported by Mr Gordhan) not understanding that one cannot perpetuate something that does not work and miraculously expect the same organisation to do better next, next, next time around. Concurrent creditors are said to expect 7.5 cents in the Rand – heck, no court would deign to sequestrate this entity, as the value thereof is so small that concurrent creditors would practically receive no benefit;
- Eskom is different, right? Yes, in that its demise would cause great harm and that its saving will cost 20 times more than SAA. No, in that, once given time, it becomes clear that there are other sustainable sources of electricity which can be explored by many of us. A Sisyphean nightmare, if ever.
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Namibia, 100-years dependant, cutting itself loose from the sinking mother ship? This country has decoupled its interest rates from that of South Africa.
Business
More? uMgungundlovu councillors sought a 4% increase in their salaries: disallowed by Cogta. In Johannesburg, councillors want 6.4% – one hopes that this will be disallowed also. Entitlement by politicians? Conveniently forgotten, is that in most smaller towns and many cities, this job attracted a stipend rather than a salary until 1994. Cosatu and the Public Service Unions want the increases promised in better times; accepted is that CV19 does not change anything, does it?
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What makes a profession different – after all it is only another business? KPMG is in the process of salvaging its reputation and one must enjoy the wonderful terminology employed: phrases such as upgrading management systems and exiting dubious clients are bandied around. Undoubtedly, dubious practices and dubious clients came from the need to make profit: why should a professional practice be different when it comes to profit? After all, everyone, these days, is a professional, down to those who work in my garden. Heck, the latter is honest as the day is long – one might expect no less of an accountant?
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More (or less): private companies are recapitalised; listed companies issue rights. Really just borrowing (it’s an investment, right?) more to keep afloat. A casualty which got less. and the passing of which will take with it a piece of history Durban history is that grand dame of Durban, the Edward hotel.
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One piece of news that shocked me (which is not that easy of late) was a report that 2,000,000 L of petroleum had been stolen from our pipelines in 26 fuel theft incidents. Hacking open a pipeline is hardly petty theft.
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The saga of inheritance tax, philanthropy and silver-spoon birth continues: https://www.702.co.za/articles/387098/how-the-dead-can-solve-south-africa-inequality-bizun
Property
The result of lockdown and post-lockdown go-slows is that the issuing of rates certificates by many municipalities have slowed to a crawl: in Tshwane this has led to great public unhappiness, but most of the major cities are undoubtedly in the same position.
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In Cape Town, conveyancers had gone to war with the Deeds Registry owing to the partial reopening of the Registry and the backlogs that inevitably followed. Undoubtedly this will become a problem elsewhere, with Deeds Registries not firing on all cylinders. A further problem is the over-rigid sanitisation rules which currently apply, and which must certainly paralyse these in future. The fact is that so-called deep cleansing is probably not necessary and serves more as prophylactic against union demands than actual need.
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The Land Bank is restructuring and hopes to raise R3bn (termed an equity solution): it has now appointed RMB as its financial adviser en route to a more sustainable maturity profile. Gobbledygook.
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We love describing our institutions as world-class: “Our vision is to be a sound and trusted world-class regulator that is responsive to and surpasses its stakeholder expectations” (CEO EAAB). Yet the performance that institution of late does little to bring this vision to life. Think CPD grudge purchases, registration and deregistration hiccups, audit stuff-ups, delays, navel-gazing during the lockdown – the list continues. World-class, my ass.
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An evergreen issue is the commissioning of documents, required for registration purposes, where the signor does not have ready access to a Commissioner of Oaths. A note in the current De Rebus deals with such issues and offers a solution – worth reading: http://www.derebus.org.za/wp-content/uploads/2020/06/De-Rebus_Classifieds_Risk_Alert_June-2020.pdf#page=24&zoom=100,0,0
Practice
Looking up from the here and now: Prof Devenish noted the counter-majoritarian tension ( ) between legislation and the judicial oversight thereof: when does judicial overreach occur – to what extent should judges be allowed to intrude on the domain of Parliament? The review of hasty and illogical legislation by our courts is a burning issue, as politicians turn to courts to seek results that cannot be achieved via parliament.
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Does force majeure apply to an employment relationship? This issue was hotly debated in a recent case (http://www.saflii.org.za/za/cases/ZAGPJHC/2020/136.html ) and the court has been criticised for its decision:
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Not my field at all, but worth noting: the Labour Appeal Court has found that unions do not have to have a ballot before a strike: https://www.politicsweb.co.za/politics/lac-confirms-no-ballot-needed-before-strike–numsa?
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Another judgement which made the news and which would be welcomed by farmers under land claims which appear to hold no merit, was delivered by Justice Meer in the case that follows: in essence communities are represented by the state free of charge – an abuse of this procedure will be punished: http://www.saflii.org.za/za/cases/ZALCC/2020/2.html
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A case against the Minister Of Forestry and Fisheries and Environmental Affairs dealing with air pollution around coal-burning power stations on the Highfield, has the potential to produce an order with enormous financial repercussions. Amongst other things, the Minister is accused of being in breach of her statutory obligations to prescribe regulations dealing with air pollution in this area.
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A recent Concourt case, dealing with the enforcement of a contractual term of lapse of a rental, even if such enforcement gives rise to an unduly harsh result, may be found at: http://www.saflii.org.za/za/cases/ZACC/2020/13.html
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A new proposed conveyancing tariff will apply from 1 July. Do check if you have not received this.
Quotables
We have used up the legacy of low debt levels. Fortunately, we have achieved low
inflation. We cannot squander that achievement on the quixotic belief that if we just
engineer higher inflation, somehow growth will permanently rise. Our own experience
shows that belief to be wrong, and we can set out now on a new path with low interest
rates if we guard and value them. We have nearly all the ingredients needed to get
permanently stronger economic growth, create jobs, and rid ourselves of poverty and
inequality. But we need to choose, as a society, to do these things.
Lesetja Kganyago
Comment
Last weekend, the luxury of having some time to burn, presented itself: two talks by Barry Schwartz, a psychologist, drew my attention:
- The first deals with why one works and how we are employed. I know of several attorneys’ practices which are organised like an assembly line – very efficient and the upside of this is that you do not have to employ the bright lad to do filing which saves costs. Adam Smith is quoted on this model as saying such employment generally becomes as stupid as it is possible for a human being to become. Perhaps the reason why persons rise in revolt is that employers expect less than the employee can give. https://www.ted.com/talks/barry_schwartz_the_way_we_think_about_work_is_broken?referrer=playlist-counterintuitive_career_advice#t-461288
- The second deals with the paradox of choice: freedom equals choice, right? Schwartz argues that the proliferation of choice produces paralysis and eventually reduced satisfaction. If you have two choices, and pick the better, at worst you will blame the system. If you have hundreds of options to choose from, whatever you pick will be imperfect as your choice could possibly well be better, leaving yourself to blame.
https://www.ted.com/talks/barry_schwartz_the_paradox_of_choice?referrer=playlist-how_we_make_choices
Lighten up
Jack Ziegler in a boardroom cartoon: When examining these new contracts, gentlemen, please note that in paragraph 48 the word “golden” has been replaced by “plywood” and “parachute” is now “toboggan”.
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So, why are the Oirish different? A recent discovery of genetic material, extracted from human bones in Ireland’s famous Newgrange tomb, come from a Neolithic man, likely a king, whose parents were probably brother and sister. Now you know…
Author: Dr Daan Steenkamp
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