Economy
SAL has reduced its liabilities from R38bn to R2.6bn and has cut its workforce by almost 80%. The question now is how it will operate and whether it will really be viable, given that air traffic is expected to remain depressed for years and now it needs working capital. The government remains coy about outsider investment which leaves the taxpayer as likely victim.
Dead: the Land Bank is tasked with funding black commercial farmers but cannot do so as its financial management is, put mildly, poor. Enter the IDC, knight on a black horse, which will be given R1bn to use as blended finance (partly grants?) to fund black-owned farming enterprises. You must love the talk: the funds must be applied to black-owned producers that align with the IDC’s objectives of expanding long-term, high-value horticultural crops and other agricultural commodities. YES!
SAMWU represents workers across to 157 municipalities: it met and decided that it wants a R4000 wage increase across the board for all workers with a minimum wage of R15 000. It also wants housing allowances for all workers, an 80% medical aid contribution, 6 months maternity leave, a 25% employer contribution towards pension funds and, most wondrous of all, an ex-gratia risk allowance, backdated to the initial lockdown. These guys obviously occupy a different planet to ours.
When our stock market fell through the floor when Covid struck, I asked my broker why it had not moved some of my investments into cash as it was obvious that this would happen. I received replies but no answers. Now questions are being asked why our equity markets are doing so well, given the lousy underlying economy. The answer appears to be simple, investors believe that they will receive better returns from equities than from bonds. The problem with this herd instinct is just that everyone holds the same belief.
Positive news is that the SARB composite leading business cycle indicator is on the rise –a portent of improving economic conditions. I confess that I would be in favour of the Prez not being lenient in his coming address if vasbyt were to spare us another lockdown.
Business
Businesswise there is not particularly great news – presumably because there’s more bad news than good? Some of those worthy of interest are –
one has but to look at the Duvha coal tender to understand why Eskom is in trouble: the hooha about procurement has bred more inefficiency and paralysis. The root of all this is that Gigaba, better known for his big .. ahem .. and saga with his ex than governance, insisted that Eskom’s coal suppliers be 51% black-owned and not just the 26% required by BEE legislation.
In August last year, the Infrastructure Fund was founded, intending to secure R100bn in infrastructure investment over the next 10 years. Treasury allocated R18bn over the next three years but the thrust of the project is that private investment will be sought for bankable projects. The laconic comment from its CEO was that there was a need to expedite implementation. Just so.
Fishermen are not able to obtain permits to fish as the Department of Agriculture, Forestry and Fisheries’website, which is supposed to take in electronic permit applications, has not worked for 14 days. Surprised?
Magda Wierzycka, outspoken CEO of Sygnia Asset Management, has resigned for what appears to be the right reasons. She says that founders tend to hold onto their positions beyond their skill set. If the company forges on, she deserves recognition for rare business acumen.
BEE trusts are regularly used to hold shares in a business and would typically represent multiple (black) employees who are its beneficiaries. The current comissioner had questioned the legitimacy of such schemes and had said that such beneficiaries were not regarded as stakeholders. However, the Department of Trade, Industry and Competition, at the end of last year, had said that it affirmed the recognition of such broad-based ownership schemes but had not moved to formally confirm this position. The fact is that such schemes are a method of ensuring participation by employees in ownership but are often not very functional.
An interesting note on the origin of Excel, probably the most used spreadsheet in the world: Reference
Property
The necessity of obtaining development consent is an ideal opportunity for social engineering: the proposed 80/20 policy, in terms of which developers will be compelled to provide a minimum of 20% low-and middle-income housing units in each new residential development, is both a tax on the developer (in that the lower-end housing will be funded by the higher-end housing) and is partly aimed at the integration of socio-economic classes. The merits of this policy is debatable.
The EAAB maintains that the court order, compelling it to issue fidelity fund certificates coupled with a punitive costs order, was unnecessary as those estate agents who were not provided with such certificates, are to blame in that they submitted incomplete or duplicate applications. Like the attorneys’ LPC, this is not a representative body but a controlling body; ‘nuff said.
The new fees of office for Deeds Offices will be enforced this week.
Practice
Practice news is thin: the only cases that have presented themselves for attention are –
Tomlinson, which I found interesting if only for the statement that one may sell something that does not belong to oneself, as long as you are able to deliver it. This case is an interesting exposition of the situation where a spouse sells property of which half is still in the prior joint estate of the deceased partner – a very common occurrence. This case is worth reading if only for this – it should be noted that taking transfer of one half of a property from the estate of your deceased spouse and thereafter selling/transferring to a purchaser is more expensive than electing to sell out of the estate. Selling out of an estate is also quicker as one does not need to finalise the estate first. Reference
The Getbucks case is interesting primarily for those in the lending market. Regulation 44 in terms of the NCA, prescribed maximum monthly service fees, which regulation was struck down for non-compliance with the Act (courtesy adv Crots): Reference
Equality before the law? Not a damn: this week a 16-year-old girl was jailed for 90 days for a no-show in a Magistrate’s Court. Compared to Nummawan’s no-show; a mere peccadillo.
Many moons ago, when studying for my admission as attorney, van Blommenstein was the go-to book on professional conduct. It had a whole chapter on maintenance and champerty: which together was defined as the unlawful maintenance of a suit in consideration of some bargain to have part of the thing in dispute or some profit out of it. Strictly verboten.
What attracted my attention to this, was an article in GoLegal put up by Taurus Capital in which it puts forward litigation funding as an asset class: Reference
It punts such an investment as having an asymmetrical return profile, meaning that the gain potential is far greater than the possible loss.
Clearly directed at so-called astute investors.
A more balanced version of the current state of affairs may be found here: Reference
Quotables
We’re seeing an element of Darwin at work. Survival of the fittest… The remaining businesses have trimmed excess fat… As the bad news ends, life becomes much easier for them… We’ve got superfit companies that have only known tough times, and suddenly there’s no headwind…
Warren Ingram, Personal Financial Advisor – Galileo Capital
Comment
A side-note by the Grumpy Economist records that, as governments support low-income households, their labour force participation collapsed. It would be quite interesting if anyone had statistics dealing with this issue in South Africa? This is topical as our government (the ANC) is presently considering permanent payments to all those who are indigent.
A somewhat lurid headline in BusinessTech, announced that our middle-class is being wiped out –CV19, rising municipal costs and the like are clearly to blame. This resonated with me as you might recall that the Apartheid Government desperately tried to foster a middle-class in South Africa which would buttress the government against the needy majority. My impression has been that our civil service has created a black middle class as it did for the Afrikaner community when the Nats took over in 1948, and that this trend was accelerating.
