Are e-tolls Imminent?

Engineering News reports that e-tolls on Gauteng freeways are just a signature away. Once President Jacob Zuma has signed on the dotted line, implementation can be triggered. ZA Confidential sought reaction from our Panel of Experts…

Wayne Duvenage from OUTA:

It’s one thing to sign off on regulations and new laws; it’s another to govern and enforce them. E-tolling is not sustainable. It is too costly, extremely inefficient and too onerous to apply. For these reasons, it has lost the trust and support of society at large. This will result in high levels of non-compliance, which will bring the system down in a short period of time. It is not too late to halt the system and switch to more efficient funding mechanisms that exist in government policies.

Mike Schussler from Economists.co.za:

Well, it is coming. But with consumers under pressure, it is bad timing, as the economic cycle is just on an even par. If extra money also goes to tolls after huge petrol increases and electricity increases, Gauteng retail sales are going to suffer in the next month or two.

Dawie Roodt from the Efficient Group:

The huge public outcry against the toll roads is probably a form of tax revolt. The tax burden has been increasing in recent years, yet capital expenditure was totally insufficient while social expenditure was emphasised. Now that our capital infrastructure needs more money, additional funds are required – which is nothing other than an increase in the tax burden.

Business Leader Michael Tatalias:

My concern would be that they pleaded to the Constitutional Court in August last year that they would start in two weeks if the injunction (to prevent e-tolls) was overturned. Why haven’t they started already? Are they technically able to? Why the delay? Or are they having second thoughts? They should see that the people are dead set against it.

Conclusion:

There are strong doubts that the e-tolls will be easily enforceable if enough people fail to register. There have been reports that the toll levels may again be reduced prior to implementation. If so, the campaigners will have achieved a long delay and lower tolls. This might make the system more palatable, but high costs of petrol and other running costs have made motoring increasingly expensive. The tolls will just add to the misery.

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Should we be Selling More Wine to the Chinese?

Hong Kong trade officials report that ZA is targeting the Hong Kong and China mainland markets for wine exports. We recently looked at this issue in the context of a possible trade war between the EU and China and the opportunities that might offer to our exporters. But should we not already be on the front foot in seeking to sell more wine to China? ZA Confidential sought the views of some of our experts….

Expert Comment:

Mike Ratcliffe from Warwick and Vilafonte Wine Estates:

I think China’s current solar panel and cellular electronics dispute with the EU could be opening doors for our wine, and perhaps cheese as well – the EU may see some of its products becoming not quite as popular. Our wines have done well in general around the world when there is a wine glut. We need to put a few more things into place such as a China-SA wine expo and perhaps a business-to-business chamber in the food industry. But already plenty of SA wines are doing well in China. We need to look at other industries with urgency now that gold and platinum are off the boil, and make use of the weaker rand. Wine is well placed, as are the tourism and food industries.

Dr Martyn Davies from Frontier Advisory:

China undoubtedly presents great opportunity for increased wine exports from SA. We’ve been rather slow to market ourselves consistently in China and have lost the early-mover advantage to our competitors, but I am nevertheless optimistic about the prospects for SA wine in China.

Jeremy Sampson of Interbrand Sampson:

Any effort to enter potential wine markets is to be welcomed. But is this too little, very late? And is it focussed on bulk wine – i.e. cheap and cheerful – or the branded, and, more profitable, end of the market? The Chinese wine market is all about red wine. Marketing campaigns come and go, but does SA have a physical presence in China, are partnerships in place, and so on – making it a sustainable exercise? As I recall, China’s main beer brand by volume is Snow, owned and managed for the last couple of decades by SAB. They understand that to succeed in new, especially emerging, markets you need partnerships. And it takes time.

Duane Newman from Cove Advisory:

The rand value of exports of wine and other alcohol products is on the increase. This will be due to increased marketing, and also the weakness of the rand. According to the South African Trade Statistics the exports of wine and related products increased by 54% from R446m in April 2012 to R688m in April 2013. This is an amazing rise, and I am sure some of this will be due to the increase of exports to the East, especially China. I do expect the exports of SA wine to increase even more with the focused marketing efforts of Wines of South Africa. With the drive to ban alcohol advertising in South Africa I am sure alcohol companies will have available budget to market to newer regions.

Independent Economist Ian Cruickshanks:

SA’s existing modest wine exports confirm the industry’s inability to form a co-ordinated marketing effort – rather than the current fragmented – mostly individual producers’ – foreign sales push. However, the expected record harvest, weak rand and rocketing Asian demand provide an opportunity which should benefit the domestic industry. A potential repeat of recent labour unrest and illegal arson in the vineyards renders reliable projections difficult, but the new basic wage agreement should contribute some industry stability. China’s estimated economic growth rate provides a huge marketing opportunity for SA wines for an industry initiative, which will also hopefully attract support from the Department of Trade and Industry.

Conclusion:

There are a lot of Chinese people, and the growing affluence of the Chinese does represent a massive opportunity for exporters of all sorts of South African goods and services. China welcomed us into the BRICS group of emerging nations. How better for them to toast our ever-closer friendship than with a few glasses of fine Cape wine?

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Die Vine Intervention Wine Tasting Podcast: Graham Beck Game Reserve Chenin Blanc 2012

Michael Olivier and John Fraser try the Graham Beck Game Reserve Chenin Blanc 2012 with guest tasters Malcolm MacDonald and David Bullard.

Is Free Wi-Fi a Worthwhile Marketing Tool?

The hotel group Tsogo Sun won some positive publicity this week with the news that it is to offer free Wi-Fi to guests. But will this be a draw card? Would you stay in a particular hotel or hotel group, or visit a particular coffee shop or cafe chain to benefit from a free Wi-Fi connection?

Expert Comment:

Tsogo Sun CEO Graham Wood had this to say:

Wifi is becoming an increasingly important choice in local and international travellers consideration of which hotel to stay in. High speed connectivity is of absolute paramount importance, which is why we at Tsogo Sun have invested in the latest technology to ensure a consistent and reliable high speed WIFI service. In time Wifi will become a commodity such as soap or shampoo in a room!!!!

Jeremy Sampson from Interbrand Sampson:

Tsogo Sun’s offer of free Wi-Fi is to be welcomed. For some time, where Wi-Fi is charged for, it has been seen as onerous, even a bit of a con. In many parts of the world, as costs come down, it is now offered for free. The UK for the most part is a glaring exception. Will it change my booking habit? If I am on the road travelling it certainly becomes a factor. The other question is: how will the competition respond?

Duane Newman from Cova Advisory:

I have stayed at various Tsogo Sun hotels and the recent offering of free Wi-Fi is a move in the right direction. I believe all hotels need to offer this. It initially was a differentiator; now it is expected by customers. If you don’t offer it, I believe it irritates customers and could result in you losing customers. I recently installed it in my wife’s coffee shop to offer convenience to clients, especially business people who use the shop as a temporary office. We did take a while to offer the service as it does increase the fixed cost base of the coffee shop, but it was a worthwhile investment – in upgrading the IT infrastructure, and the increased monthly fee. While there are conditions to using the free Wi-Fi and it is secure through the use of codes which are only valid for an hour, it does ensure the coffee shop does not lose customers. I am not convinced it results in new customers.

Mike Ratcliffe from Warwick and Vilafonte Wine Estates:

In this interconnected age, access to the Internet is a key criteria for travellers as they all require connectivity. While Internet provision does not come free, it is as important as good food and a comfortable bed. The above is especially true in Africa given its low Internet connectivity rates and the high price of broadband and mobile Internet. The Tsogo Sun move is consistent with international trends. The key question is whether they will be able to harvest the valuable data that this opportunity presents.

Duncan McLeod from TechCentral:

Yes. I work on the road a lot and I definitely go to places like Mugg & Bean where I can find an AlwaysOn Wi-Fi connection. So, yes, Wi-Fi availability plays a big role in my movements. I’m less sure I’d pick a local hotel based on Wi-Fi, though it’s always nice to have it. If it’s not available, I default to using my 3G wireless hotspot device.

Chris Gilmour from Absa Investments:

Absolutely! In a country where internet access is poor, unreliable and outrageously expensive, many people are attracted to free Wi-Fi in a variety of areas in order to supplement their meagre and expensive allowances from internet access providers. So, for example, any hotel that doesn’t offer free Wi-Fi to its guests is operating at a distinct disadvantage. It has become the international norm, even if it is only offered in the public areas rather than throughout the entire property, or if it is capped either in time or by usage. Coffee shops such as Thyme on Nicol, for example, offer 2hrs or 200Mb of data per day to their patrons. Virgin Active offers something similar in its health clubs. Airport lounges also offer free Wi-Fi. These types of offering are especially useful to people who are grabbing a quick bite, chilling after a workout or catching up en-route to a new destination. Mango Airlines apparently offers free Wi-Fi in its aircraft and that should be a big draw card, relieving the monotony of flying

Malcolm MacDonald from Tersos:

Our South African Wi-Fi providers have taught me up to now not to rely on Wi-Fi, so I have invested in cellular data bundles. I am a member of two Wi-Fi services that give free roaming access at many Wi-Fi hotspots. The problem is that the bandwidth available behind those Wi-Fi connections is often so slow, that using my mobile phone is faster – especially since the advent of LTE. I have used a few restaurants’ internet access, and it was adequate to update my Flipboard articles while having lunch, but I had to go to the front desk to get a logon key. The standard amount of free internet bandwidth that hotels offer is neither fast enough nor large enough to stream a movie or TV show – only enough to check some emails. I cannot understand why a hotel charging R1500+ per night cannot do better than 50MB free internet access.

Lavan Gopaul from 28e:

A Wi-Fi offering has become commonplace in recent times. We take it for granted that any establishment will offer connectivity and expect a generous download allocation. Google has recently provided free Wi-Fi and generous download capacity to a few blocks in Manhattan as a test case. This is a pre-cursor to a major US roll-out of a similar offering. Today’s Tsogo Sun Wi-Fi showboating is already becoming a minimum standard worldwide.

Conclusion:

In this age where phones, tablets and computers are all hungry for data usage, it is a welcome development to receive free Wi-Fi. I am writing this from the gym where – you guessed it – my Wi-Fi consumption is more consistent than my work outs.

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Half Term Report on the ZA Economy

We are now into H2 of 2013, and we have recently been bombarded with an array of economic data. Are we in trouble; are we OK? ZA Confidential sought the views of some of our experts….

Expert Comment:

Ettienne Le Roux from RMB:

Most recent statistics suggest the pace of growth in real GDP accelerated slightly compared to the poor first quarter annualised rate of 0.9%. Still, for the year as a whole, growth should come in lower at around 2%, against last year’s 2.5%, and 3.5% in 2011.Consumers remain under pressure, companies are hesitant to invest, and growth in emerging markets – key trading partners of South Africa – is slowing. All the while, room for further fiscal and monetary policy relief domestically is limited. Interest rates are already at record low levels and public finances are stretched. The picture for this year is not rosy at all……

Craig Pheiffer from Absa Investments:

The South African economy is not an island and our current low rate of growth can partially be attributed to the slow rate of growth in the global economy. Slowing growth in China and recessionary conditions in Europe, two of the largest importers of our goods, have hurt exports and domestic manufacturing production. Slower global growth has also translated into a lower demand for commodities and commodity prices have fallen. That’s further hurt export revenues but it’s also made for less profitable mining production, mining closures and retrenchments. Lower domestic consumer confidence and business confidence in an uncertain global and domestic economic environment has meant that consumers have postponed purchases of big ticket items while business has postponed expansion and hiring plans – adding to the general slowdown. The highly indebted nature of households has exacerbated the situation in that even in a historically low interest rate environment, consumers are running out of capacity to borrow more (and hence demand more goods and services). The result is that the production side of the economy is weak (mining and manufacturing) and the consumption side (household demand) is weak. With the country running a substantial current account deficit as well as an on-going budget deficit, there is little room for government to stimulate demand through looser fiscal policy (a chief concern of the ratings agencies). It is unlikely that lower domestic interest rates will have a significant impact on demand either. Growth forecasts for SA are being revised lower across the board and it seems we will only get some respite once the global economy picks up pace again. We need to have our house in order then to benefit from that uptick, when it eventually comes.

Gerhard Lampen from Sanlam iTrade:

Our economic indicators point to a sluggish economy. The PMI is still above 50, but only just. Slowing vehicle sales point to slower retail sales, always an early indicator. Our trade deficit and Balance of Payments are still in dangerous territory. On the other side of the coin, we had a lower inflation number, but only because of a petrol price decrease. With the increases in June and July it is pretty certain we will overshoot the 6% upper band. This will be temporary, though. There is nothing the SARB can do. It cannot cut, as CPI is at the upper band of the CPI bands. The currency and wage demands pose a threat to inflation. It cannot increase rates because the economy is losing traction. Rates will be on hold until both CPI and GDP recover, probably in 2015.

Hein Kruger from Kruger International:

I am most worried about something that everybody is trying to forget about – and that is the household debt to disposable income ratio of 75,4% at a time when imported inflation on the back of a deteriorating rand is fast eating into the shrinking living cost budget of the average consumer, with Bernanke’s looming rising interest rate threatening to knock a large part of middle class South Africans out of the ring – with Banks inheriting excess properties and cars instead of outstanding payments. The government will also lose a large part of its 80% income base when this starts to happen. This is what happened in the USA in October 2007, and in Europe in 2009.

Conclusion:

There seems to be sense of realism that the economy is not buoyant, but is not in deep trouble either. Q2 2013 must show some signs of dynamism, or this will not be a year to remember, with any fondness anyway.

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Why do ZA Supermarkets have barmy booze bans?

Why can you buy a bottle of wine in a South African supermarket, but not a bottle of whisky, or port, or sherry – or a beer, for that matter? ZA Confidential sought the views of some of our experts….

Expert Comment:

Dawie Roodt from the Efficient Group:

I am a child. At least that is what my government thinks. Unlike other governments that allow me to buy my salami and vodka at the same place, my government has decided that I am not allowed to do so. I have to get my food and booze at different outlets. In fact, I am not even allowed to grab a beer at an informal stall next to the road – well not officially. Unofficially I can get just about anything anywhere but should I get caught my property will be confiscated and the poor entrepreneur could end up getting a criminal record, because he needs a licence. Those kleptocrats that decided that I am not allowed to buy all my groceries at the same place will probably say that they are protecting me. Protecting me from what is not entirely clear, but the answer is probably that they want to protect me from myself. And I also have to pay for all this protection; salaries of kleptocrats, cost of red tape and the extra petrol to go from food shop to booze shop. All this protection is bankrupting me.

Mike Ratcliffe from Warwick and Vilafonte Wine Estates:

Did you also know that it is impossible to buy a bottle of wine with more than 14% alcohol in a ZA supermarket? You can purchase these wines in any other wine store, but not in a supermarket. Some of the top wines in the country have been legally de-listed from supermarkets as a result of this ludicrous legislation. I would suggest that a lot of wines are (possibly?) re-labelled to reflect a lower alcohol to bypass this bureaucratic nonsense – leaving even more questions unanswered. So, the broader thesis is that restrictive (read: Neo-Prohibitionist) liquor legislation is somehow designed to appease an electorate that are apparently anti-alcohol as a result of the broad alcohol abuse in our ZA society. The real issue that should be resolved is enforcement of the existing alcohol laws by a toothless SAP. The South African public is not well served by the current South African liquor legislation.

Leon Louw from the Free Market Foundation:

Having travelled to around 100 countries (half of all countries) and having a special interest in the role of government, I’ve been struck by the immense diversity of regulations. It is commonly observed that there is no pure free market, socialism, fascism, communism or any other “ism”, but there is also no pure mix, no “mixed economy” or “middle road” for instance. The world is a chaotic admixture of regulations. Theoretically, differences are readily identifiable by desk research, but in-situ experience and travel reveal stuff that is simply not apparent from remote observation. The problem is twofold: there is enormous inconsistency of enforcement. One of the most conspicuous examples (by virtue of its visibility) is prostitution. In some places where it is theoretically banned, it plainly visible either everywhere (Senegal) or curiously localised (SA). In others where it is lawful (such as some Swiss cantons) it is discrete and scarcely visible. What this global diversity suggests is that there is no coherent or logical regulatory order or paradigm; no two people for a wholly or partially regulated society agree on the mix. Not only does the mix vary, but enforcement varies even more. Extreme variations in liquor policy and policing are an example. In some central European countries, there is no regulation and/or no enforcement; liquor is sold everywhere freely, even from suburban gardens over fences to passer-by. Saudi Arabia is an example of a country with total and effective prohibition. What characterizes countries where liquor has some or other dedicated/discriminatory regulation -i.e. most countries? The degree to which liquor is regulated is the degree to which there is (at least in that context) a nanny state – that is a government arrogant enough to think it knows better than its citizens what is good for them. The anomaly or contradiction of nanny state regulation is that people considered clever enough to vote for the government are considered too stupid to run their own lives. Liquor regulation (where it is found to a significant degree) takes various forms – such as trading hours, a distinction between “on” and “off” (site) consumption, age restrictions, drunk driving, the licensing of premises or places or events. Discrimination between types of liquor of the kind we have here is not commonplace, and in this SA is abnormal. We have a particularly puritanical, draconian and arrogant Minister Against Health, Aaron Motsoaledi. He repeatedly makes such self-evidently absurd statements as “smoking has no benefits”, and should therefore be banned. He proposes and is considering far-reaching bans and controls, none of which are based on any empirical evidence published by his department as to efficacy. What he has proposed and his department is known to be considering ranges from tobacco prohibition, through banning liquor ads/marketing, to regulating salt, “junk” food, sugar and dairy products. He seems to be motivated by a kind of blind belief in his virtue and paternal mission on earth, the kind which philosophers have observed is the most dangerous because it is unconstrained by conscience and energized by unstoppable messianic passion. How this applies to the question of what is and is not sold in supermarkets is that we have discriminatory laws regarding liquor. The origin of allowing wine to be more readily available is that the wine industry was a major Apartheid regime constituency and funder. Some of the original sophistry was that wine was more “sophisticated” and less commonly associated with “abuse”. But by that argument, whisky and port, for instance, should also have been allowed in supermarkets. That liquor sales are still banned (in some places) on Sundays is anomalous under our new secular constitution. Instead of repealing this anachronism, he wants to ban all consumption on Sundays. Why Sundays? Heaven help us! It could not possibly be, as asserted without evidence, to get people to work on Mondays. Sunday is, after all, a day on which there is less partying. Maybe the minister is a devout Christian and wants to force people into church, or at least ensure they’re sober and attentive when they get there for morning service, not having gone to drink liquor in some place that serves breakfast. Of course people should be free to buy and sell whatever liquor they wish, whenever and wherever they wish. The way to stop abuse is to ….well, stop abuse (drunk driving, occupation disruption, family violence etc). Abuse of other people, as opposed to “liquor abuse”, should be stopped regardless of whether it is liquor-related. “Liquor abuse” is, of course, a misnomer. Have you ever seen someone punching beer, or whipping wine, or stomping on cowering vodka? People and only people are abused …… by some people who happen sometimes to be drunk, but more commonly and ubiquitously by liquor laws made by people some of whom sometimes happen to be drunk. Incidentally, if someone is going to abuse you, you have a better chance of defending yourself if they are drunk. There is little or no evidence to suggest that people who abuse do so because of liquor; liquor is in some cases a substitute. It is a “downer” thus having a sedative effect. It is also an un-inhibiter, thus leading to abuse that might have been restrained by a sober person. In short, it has countervailing effects, and no simplistic assumptions are justified.

Dino Fagas from Pretoria’s Prosopa Restaurant:

You can probably blame it on Verwoerd, like Zuma blames everything. Only this time it would probably be true. I agree, why should you not be able to?

Mario Pretorius from Telemasters:

Had the world been run on principles, we would never be able to purchase that insidious poison, the family destroying monster, alcohol. Us being the irrational and irresponsible inmates that we are, we’re happy to kill others and ourselves for profit and for pleasure. Since good Queen Bess stopped the church ale sales as a Popish exuberance, we’ve been fighting our better and worse instincts from Prohibition to binge drinking. The Scandinavian state supply monopoly hasn’t cured their Viking thirst, but that and SAB’s lessons in rural distributions made the point: a handy cold beer will find a willing throat. As illogical as a wine/beer display and a hard tack ban in a supermarket may seem, the amateur alcoholic and the professional one do not sup on the lighter stuff. Logically then, to please everyone, all alcohol types should be available at all supermarkets and petrol stations – only on the first Monday of every month. If you can’t plan ahead, you’re not mature enough to be imbibing luscious golden ambrosia – it’s too dangerous for you.

Chris Gilmour from Absa Investments:

This is an apartheid relic. Under the old regime, wine growers were favoured and as a result one could (and still can) buy wine in supermarkets. But one cannot under any circumstances buy beer or spirits in a supermarket. This is utterly incongruous and has no logical underpin at all. What would happen if wines and spirits were allowed to be sold in supermarkets? Apart from the convenience that would be enjoyed by shoppers, absolutely nothing. Would minors be able to buy these items in supermarkets? No. Would people drink more just because of convenience? No. Already one can buy wines and spirits under a separate roof by walking literally a few metres to the liquor store operated by the supermarket. So for example, Spar has “Tops” as its liquor chain and Shoprite/Checkers and Pick n Pay also have stand-alone liquor outlets. Not Woolies, though. So why not amend the law to allow the full range of beers, wines and spirits to be sold in supermarkets? One reason not to do so lies in the fact that about 30% of all South Africans are absolutely teetotal. These people have a vote. Allowing a “free for all” when it comes to selling all types of alcohol in supermarkets would infuriate these people and could, conceivably, result in them not voting for the incumbent government. The bottom line is that what is logical is not always politically acceptable.

Business leader Jeff Osborne:

I think that opening up the licensing to others would create a more competitive market. However, perhaps there should then be limited hours for the sale of hard liquor. Which begs the question: do controls really work? The American system, which rigidly requires ID for sales to youngsters and is draconian in the event of non compliance, might be the answer.

Russell Lamberti from ETM:

You can’t buy a bottle of whisky or gin or port or sherry in a South African supermarket because the government enjoys imposing arbitrary nannying regulations that play to some remote and capricious sense of ‘morality’. Being a lingering hangover from the meddling white supremist Nationalist government, booze regulations only underscore the fact that black nationalists are not altogether too different from white nationalists when it comes to wanting to control their citizens’ behaviour. That you can buy wine in a supermarket (but not on Sundays in some places of course), only proves further how ridiculously arbitrary these regulations are. Of course, the more arbitrary regulations decreed by government fiat, the more chance of the citizenry falling foul of them, which forces the citizen into the utterly coerced position of paying fines or bribes to state officials with an insatiable appetite for lucre. Silly, arbitrary, unnecessary regulations are nothing more than an architecture of state extraction from the private, productive citizens, and the bureaus that administer these regulations are merely extraction nodes; more ways for the parasitic unproductive sector to leach off the dynamic, productive sectors. Should we be able to buy the broad range of liquor in supermarkets? Well, of course we should, but the better question is: why are South Africa’s citizens still allowing themselves to be governed under such arduous nanny statism?

Conclusion:

There seems to be some rigid belief that the way in which liquor was sold during the no-TV, no porn, no-fun, no-integration Apartheid days made some sense. It does not, and it is a shame that the current debate over booze sales focuses on the times and days of sale and not on widening the range of products we can conveniently buy from our local supermarket.

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