Mini Budget; Maxi Headache

A few highlights/lowlights from today’s mini-budget, delivered in Cape Town by Finance Minister Nhlanhla Nene.

  • GDP growth estimate for ZA for this year at just 1.4%, a feeble level, and down from 2.7% estimate in February.
  • Minister Nene says a turning point has been reached due to the difficult economic environment.  There is pressure on the fiscus with revenue insufficient to cover our expenditure.  So he is proposing a package of fiscal measures on the revenue and expenditure sides.    This will have a mild dampening effect on growth in the short term
  • So government is proposing a fiscal package to reduce the expenditure ceiling and boost tax revenue over the next 2 years.  Savings of R22bn in 2015/16 and R30bn in 2016/17
  • 2015 budget to generate extra revenue of at least R27bn over the next 2 years. It seems taxes are to rise, but no detail yet.
  • Gross tax revenue for this current year has been revised down by R10bn, due to underperformance on corporate income tax, customs duties, VAT and the fuel levy – and downside risks remain.
  • Government consumption spending to be moderated, and more public-private sector partnership is to be encouraged
  • There will be cuts in government communication, staff freezes, spending on consultants, and expenditure on venues and catering
  • Government recognises the need to shore up the balance sheets of the parastatals, but this will be funded through the sale of property, direct and indirect shareholdings in listed firms, non-strategic government shareholdings in state-owned companies and surplus cash balances in public entities.
  • Private investment in parastatals will also be explored.  More detail by the Feb budget
  • For Eskom in particular, borrowing of R250bn over the next 5 years, supported by existing guarantees from government. At least R20bn will be raised to support Eskom through the sale of state assets.  An existing R60bm government loan could be partly converted into equity.  There will be more focus on cogeneration.
  • If public sector wage increases outpace inflation, government is warning  they will trigger a cut in social spending, or capital budgets or cuts in staff numbers

Tweets of the Day:

Ellen DeGeneres (@TheEllenShow):  It’s National Pasta Day and #ClassicJokeFriday! Anyone know any good pasta jokes? A penne for your thoughts.

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Die Vine Intervention Doran 2012 Chenin Blanc and Shiraz

Food and wine legend Michael Olivier introduces two wines from Doran to Jeremy Sampson, Duane Newman and Sommelier Miguel Chan.
The 2012 Chenin Blanc won praise, but the panel was divided on the merits of the 2012 Shiraz.

Why is a ZA Bank Showcasing French Wine Exports?

I may sound ungrateful, but that is a risk I will just have to take.  Absa very kindly invited me to the recent Absa Champagne Festival at Summer Place in Johannesburg. It was a lavish affair, with delicious nibbles and table after table of French bubbly. The tasting samples were a bit stingy, with a hell of a lot more air than champagne in each glass, but as you could taste dozens of different champagnes, it was quite possible for guests to still get quite sloshed if they wanted. Personally, once the MC for the evening started bubbling uncontrollably, trotting out stale quotations about champagne, I headed out the door, to enjoy a glass of South African red.

And that is my concern. At this champagne festival, sponsored by a South Africanish bank, the main attractions were the bottles of champagne. No local and lekker Cape bubbly.  Both my chum Malcolm and I reached this conclusion independently, so either we are both paranoid or we have a point…?

Of course, this is not the first time SA has lost out to the French. The fact that we are not allowed to use the word ‘champagne’ to describe local sparking wine was an early concession to the land of our President’s beloved and lucrative Eiffel Tower.

I was told by one of the wine experts at the event that no Cap Classique was allowed, because it isn’t champagne. Klaar?

Now champagne is a French export and Absa is a South Africanish bank. So why is Absa promoting and sponsoring an event to promote a French export sector at the expense of the local wine industry? Does it have no local wine lovers and producers among its stakeholders? I doubt that.  Snobbish stakeholders, maybe?

I have no quarrel with people buying and drinking champagne, and am happy to do so myself, especially when I am a guest at a function and someone else is paying for the corks to go pop.

But as listeners to the Die Vine Intervention podcasts I do with the legendary Michael Olivier will know, I like and admire, worship and promote, South African wines, spirits and the absurdly named Cap Classique bubblies. It is a title foisted on the local wine industry, but you don’t hear it as often as the Parisian prats might wish. Local sparking wine is often equally as good as, and frequently better than, many champagnes. And unless you have a generous Absa overdraft facility, it is also a damm lot more affordable than the imported stuff. Particularly with our local currency drowning in the global spittoon.

So…. What about a more locally-focused SA bubbly event on the same lavish scale as the Champagne one? Surely this is an opportunity for a bank – not headed by someone who got married to a former trade minister on a wine farm in the Cape – to show its true patriotic colours. And if you are looking for an organizer or an MC, let me know. My jokes may be awful, but at least they are mainly original, and I don’t lift them all from a vintage book of crappy champers quotes.  Or gush with more enthusiasm than an over-gassed bubbly bottle as it is opened.

By coincidence, I have just received an invitation to a Cape Town event called ’The World is Your Oyster’ at which both champagne and Cape bubblies are to be served. It is sponsored by Ultra Liquors and will be held at the Waterfront. So it can be done: with local sparkling wines being showcased at a classy event. I am not sure the champagne is strictly necessary, and I would give the oysters a miss, but at least local producers will be given equal or better billing.

While on this hobby horse, I was browsing through the alarmingly premature Xmas catalogue of an Illovo bottle store, and spotted that the first several pages were devoted to another import – Scotch whisky. There were other whiskeys, but while I was glancing through the catalogue, I failed to spot the local Bain’s Cape Mountain Whisky – a personal favourite. Not saying it wasn’t there. Just couldn’t see it through my tears. On the Brandy page, the Cognacs got the best show, but there were some local brandies as well, at far better prices. Including some KWV award winners.

My own approach is simple. I will get far merrier at Christmas with a few bottles of Cape wines, whisky, brandy and absolutely fabulous local bubbly. The quality will be superb, and the savings I will make over the imported imposters will allow my (non-Absa) bank manager to sleep a lot better as the New Year austerity begins to bite.

Tweets of the Day:

Fake Dispatch (@Fake_Dispatch): “Boss? I can’t come to work today. Turns out I talked to a guy who went to high school with a girl that was on the plane with Ebola girl.”

Funny Tweets (@Funny_TweetsQ): Yes officer, I saw the “speed limit” sign, I just didn’t see you.

ZA Confidential is a subscription newsletter.   For subscription details or any other communication, please contact:     Follow us on twitter: @zaconfidential

Competition Probe Into Auto Parts Industry

Ever worried that you are paying too much for vehicle components – either directly or through higher insurance premiums? Well, the news today that the Competition Commission is taking a look at the vehicle component sector may be long overdue.  At a media briefing today, Alexander Forbes Insurance’s Gary Dombo welcome the probe, saying there is merit in the Commission looking at this industry.   One reason why insurers are battling is that parts prices are so high.   Dombo said that another reason for high premiums is that around 60 percent of motor vehicles on SA roads are not insured – that’s around 8 million vehicles.   Dombo wants to see compulsory 3rd party auto insurance, but admitted that the industry can be more effective in how it lobbies government on this.  The industry has commissioned a study, to help bolster its case.

Tweets of the Day:

Male Thoughts (@SteveStfler):  My neighbor obviously doesn’t watch porn. She asked me to come fix her sink, I been here for an hour and i’m still fixing the damn sink.

Sly (@slyoung5):  Every single day I question my sanity and every single day, it has an alibi.

Male Thoughts (@SteveStfler):       me: for christmas i want a dragon

santa: be realistic

me: ok i want girlfriend

santa: what colour do you want your dragon.

Funny Tweets (@Funny_TweetsQ):  I don’t care what people think of me… at least mosquitoes find me attractive

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Follow us on twitter:  @zaconfidential

Two Beer Treats

Man for all seasonings Michael Olivier hops from wine to beer this week to introduce two satisfying craft beers from The Beer Keg – the Keghouse Bottle Blonde and Jolly Pumpkin Ale.
Brewer Vincent Le Roux joins John Fraser in the Johannesburg studio, along with Chris Gilmour and Malcolm MacDondald.
There is also a chat about the delights and dangers of home brewing.

The High Road Classique and Director’s Reserve

Food and wine legend Michael Olivier presents two rich and elegant 2011 red wines from the High Road – the Classique and the Director’s Reserve

John Fraser is joined in the Die Vine Intervention Johannesburg Studio by Vincent Le Roux, Chris Gilmour and Malcolm MacDonald.

‘When Money Destroys Nations’ A new book.

Hyperinflation?  Unless you have lived through it, you probably don’t realise how scary it can be.   We know that with the relatively mild inflation we have in South Africa a lot of things become steadily more expensive.   But look to the north at Zimbabwe: it is very recently, less than a decade ago, that the country’s currency accelerated into ruin, with banknotes having so many zeroes on the end of the number that it was a source of ridicule and amusement.  Unless you were living there, watching your savings being eroded, having too little value in your banknotes to buy food and support your family.

‘When Money Destroys Nations’ by Philip Haslam and Russell Lamberti was launched this week, and is an accessible, well researched and terrifying look not just at what has happened in the past – in Zimbabwe and elsewhere – but also at the causes of hyperinflation – governments spending above their means and printing the money to meet their obligations.

It is easy to dismiss Zimbabwe as a joke of a country, run by a brutal and increasingly barmy dictator.  But the United States has the largest world’s reserve currency, and it, too, is printing money far too fast – to fund spending which is far too high.   And the same financial folly can be seen elsewhere, too.

As the authors conclude:  “Hyperinflation is the ultimate in economic chaos and disorder, leaving in its path economic ruin.”

This is an excellent and informative book.  Send it to your ministers, bureaucrats, economists and economic commentators.

The horrors of Zimbabwe were not unique and a similar scenario elsewhere may be far closer than we think.

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Follow us on twitter:  @zaconfidential

Die Vine Intervention: Diemersdal 2013 Grüner Veltliner

Michael Olivier introducers a first for South Africa. The 2013 Grüner Veltliner, an unusual but enjoyable white wine from Diemersdal.
John Fraser is joined in the Jo’burg studio by analyst Chris Gilmour, Tersos’ Malcolm MacDonald and brewer Vincent Le Roux from the Beer Keg.