Economics
Economics is the painful elaboration of the obvious ….
Last week I attempted to entertain you with bos-sums, which led to rather dismal conclusions and the usual unfortunate comparison with Zim. What now? An SA economist pointed out that only two avenues of action remain, when painted into a financial corner:
sharply reduce state spending; or/and
encourage inflation to erode the value of South African debt.
I don’t believe that our state has the b@lls (and given the need to maintain social spend, the leeway) to attend to the first, which leaves one with the realisation that things are going to become much worse in future. Don’t retire – keep working. Of course, we all want believe that history does not repeat itself – those in charge quite possibly have fallen prey to the syndrome that this time it’s different: it’s not. Take a look: Reference (it’s worse – after the 2008 GFC our GDP dropped to -1.5%; this time our GDP is expected to drop to approximately -14%).
Of course, one could argue that there are other avenues left to those in power, such as encouraging business growth (neva gonna happen) or raising taxes…only R130bn of the CV19 spend will come from our current budget – the balance must be sourced elsewhere. Speaking of increased taxation – why is tax on a wheat smoothie referred to as a sin tax? Seriously?
SWMBO’s Grandpa was employed after WW1 at half a crown per day erecting fences alongside railways: the result was simultaneously creating jobs and infrastructure building. If one wants to give a subsistence allowance to all, there’s no reason why those, who are able, should not work for it.
Our Central Energy Fund is running out of oil reserves – it’s reserves has reportedly fallen from R24bn to less than R1bn: the fund is not asking for a bailout but… for support from the government (I’m tempted to be ruder than usual). This is truly a farce; oil has not been as cheap in donkeys years and now we have its chairperson saying of that which he leads that any organisation without leadership is bound not to be able to function well.
Business
ShopRite will reportedly ditch exclusivity clauses in its shopping centre leases, following on the Competition Commission leaning on it.
Drilling for gas in the Virginia gas project has commenced. Rah Rah!
Predicted job losses following on lockdown are: formal sector losses – 370,000, with an unemployment rate rise from 29% to 34%.
OUTA (I still think this an unfortunate acronym) has started a petition against property rate increases – understandable (why should municipal workers have a raise this year?).
Invest2000 was a donation-based crowdfunding proposition which offered great returns – think helping others whilst making killing. Business Maverick posted an extract of their teaser: clearly a Ponzi scheme.
Property
The predictions are that:
with incomes waning there will be a trend towards multi-generational households (think broke);
residential rentals will drop – TPN estimates that about one third of residential tenants will not pay full rent this year; Loos said that, by the end of 2008 only 54% of tenants were in good standing and, we all know that this time around will be worse;
commercial rentals will likewise take a beating; in the first quarter of this year only 65% of office properties were fully let (SAPOA) – it may be better to tie rentals to turnover or some other measure of performance rather than a fixed sum to accommodate fluctuations in the economy;
central developments will do better than those in outlying areas – rising vacancies are first filled in primary areas, leaving secondary areas vulnerable (property360);
approval rates for bonds have dipped – MDW reported that one financial institution had approved only 8% of home loans received in March – it is predicted that the May and June approval rates may be even lower.
E4 has circulated a note on the Msunduzi municipality rates operations at level IV lockdown – ask me for a copy if this interests you.
Practice
The Labour Court agreed that the SAA business rescuers cannot retrench workers without producing a business rescue plan: when you are dealing with one of the most hotly contested financial/legal issues of late, and cannot get this right…
ANCs executed in early March may not necessarily be registered within the 3-month period allowed for valid registration after execution if they have not yet been lodged. Do check – fixing these can be quite expensive and embarrassing.
Afriforum is reportedly appealing the judgement prohibiting the gratuitous display of the old SA flag. I have great admiration for what that organisation has achieved in the past and I think they do wonderful work – however, being right in this instance will do it few favours.
BusinessDay reported that 63% of legal practitioners had lost 60% of their income during April (heck most of us lost all!). Some 24% were unable to pay any staff salaries, 40% could partially pay and only 35% paid full salaries to their employees. This has, no doubt, led to the Black Lawyers Association petitioning the Fidelity Fund to establish a R1bn fund to assist small law firms to cushion the financial burden (De Rebus). The merits of their suggestion is debatable but I could not support any initiative that uses money generated from us all for the support of only some.
FISA reported on two cases this month:
The Wills Act provides that a will in favour of a spouse who is divorced is null for the first three months after divorce from that spouse. In this case the spouse argued that this provision is contrary to the Constitution as deprivation of property. The High Court accepted that in most cases divorcees would not wish to benefit an ex-spouse and that the provision was proportional to the result – the applications fell upon stony ground. Reference
in the case that follows the Appellate Division a divorcee was not entitled to the capital invested in the living annuity but only the income stream produced by the capital. What is a report says that a living annuity does not form part of a divorcee’s pension interest in terms of the Divorce Act. Reference
Whilst this is hardly new, there may be some who would be interested in the taxation of trusts: I hold an article by v/d Spuy on this topic. Ask me for a copy.
Comment
Gatvol: the irrationality behind much of lockdown rulings and state conduct has robbed our government of the support it initially had following the hard lockdown route; consider the following –
past irrationalities lead us to react sharply about future nonsense – for instance, we hear discussions about being able to buy goods but limiting the hours, alternatively buying dop by surname;
our state embarking on mass testing without being able to process the tests (state laboratories take seven days to push out results and, even worse, we are now short on test kits);
we are told about the science behind decisions, really? It appears that the science relied upon is hotly contested and we do not see all sciences being drawn in: i.e. we see the Prez flanked by virologists and so on but we never hear from state economists (does ideology speak loudest?);
the Prez tells us that we have saved 200,000 lives; BS, we have only postponed those deaths. The original intent of flattening of the curve of infections has morphed into lives saved – which does bolster the belief of the unthinking that we did the right thing;
we discovered that the state withheld information that it does not want us to know – for our good of course.
The examples above have led to a rash of memes, videos and cartoons taking the p!ss out of the government (think the zol song), indicative of restlessness and outright abandonment of the legitimacy of the lockdown by many. Conspiracy theories hold that the government is using the crisis to drive so-called racial nationalism or the national democratic revolution and so on (the fact is that most of us don’t care about ideology – we just want things to work). I believe less in thought than our government stumbling upon opportunity, if any such conspiracies are even remotely true.
Until now our common enemy has driven us into negative integration (and some positive integration – the Prez saying South Africans overcome all and so on) but this show of unity may well vanish if the two South Africas are again split – consider this: the wealthy ou wants to go overseas but cannot because his town is under lockdown cuz the poor ous will not/cannot toe the lockdown line. This can only lead to a reinforcement of an us/them view in an already divided society.
If this “pandemic” has you running scared – you are in good company: it appears that lockdown/fear/uncertainty has resulted in an avalanche of (what is politely termed) mental health needs.
We lived so well of late that we forget we are not bullet-proof: my mother (born in 1912 and a missionary/nurse in Malawi/Northern Rhodesia) used to speak of cleanliness being next to godliness. This phrase is attributed to a Wesleyan sermon in 1778 but can be traced back to biblical times, if not earlier. We used to have to wash our hands before we ate, a practice which, until a few months ago, was all but forgotten.
Quotables
To beer or not to beer… What was the question?
