It has been a slightly boring, workmanlike and restrained budget.  The first such from our relatively new finance minister.

In Nhlanhla Nene’s 2015 budget speech, he announced:

• A one percentage point jump in personal taxation for those on more than R181 900 a year, and an increase in the fuel levy by 30.5c a litre, alongside a 50c rise in the Road Accident Fund Levy. The boost to personal taxation and to the fuel levy are expected to raise an extra R16.8bn.
• Business taxes are revised, so qualifying firms with a turnover of below R335 000 a year will pay no tax, and the maximum rate is reduced from 6% to 3%.
• Excise taxes on alcohol and cigarettes are being boosted.
• Transfer duty will only apply properties above R750 000, with higher rates for properties over R2.25m.
• There will be “revised monthly ceilings” for e-Tolls, and the Minister suggested a higher government contribution, without giving much detail – although he did say in his Press Conference that Sanral needs to be able to discharge its responsibilities.
• Contributions to the UIF will be reduced for a year, thanks to a current surplus of R90bn.
• There will be a tightening up of education expenditure, aimed at clamping down on waste and corruption.
• A central database will be compiled of suppliers to government.
• Eskom is to apply for “adjustments towards cost-reflective tariffs. The government’s capital injection of R23bn will be paid in three instalments, and further help may be given through an equity conversion “of government’s subordinated loan to Eskom.”
• Support is also being provided to SAA and to the Post Office.
• The Carbon Tax will be introduced in 2016, with draft legislation being tabled later this year.
• The background to the budget is the need to consolidate public finances in the context of slower growth and rising debt.
• GDP growth is expected to rise this year to just 2% (down from October’s estimate of 2.5%), following an estimated 1.4% in 2014, with 2.4% next year and 3% in 2017. The cut in projected growth is mainly due to the energy crisis.
• Total government spending is estimated at R1 243.4bn in 2014/15, R1 351.0bn in 2015/16, and R1 448.8bn and R1561.7bn in subsequent years.
• Total budget revenue is estimated at R1 091.0 in 2014l15, increasing to R1 188.9 the next year, followed by R1 331.5 and R1 439.5.
• Budgeted expenditure over the next two years has been reduced by R25bn across national, provincial and local government.
• A budget deficit of 3.9% is forecast for 2015/16, falling to 2.5% in 2017.18.
• R10.2bn has been allocated over the medium term to manufacturing development incentives and support and support for services, such as business process outsourcing.

Conclusion

No doubt accountants are sending their abaci into a frenzy, working out what all this means.   The poor may get slightly richer, and the rich will almost certainly get slightly poorer.  With Eskom putting the brakes on the economy it is deeply concerning that GDP growth is not going to be soaring.  Nene has come over as a humourous, capable and competent politician with a budget which fails to inspire.  Let’s hope that when it comes to the ratings agencies and global investors, it fails to frighten either.

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Johannesburg is ZA’s commercial capital, and yet some companies seem to believe that they can hide under the shadow of Table Mountain, snubbing the very large analyst and media communities in Gauteng.

I was frankly rather annoyed when I confirmed this week that there would not be a face-to face presentation of Woolworths’ latest financial results in Gauteng.   Instead those of us who are not within spitting distance of the sea, or of Parliament, and who wish to checkout Woolies’ updates, were offered written stuff, webcasts and conference calls.

This is really below par. The company is an important player in the retail economy, has had important reputational issues with the protests against the Israeli produce it stocks, and it is just not possible to have those chummy chats with someone on the other end of a conference phone line, or to really read the body language. And for many, a trip to CT for the live show is just too time-consuming and expensive.

But what do I know?   Here are the views of a few of our experts:

Chris Gilmour from Absa:

Woolies stopped presenting to a Jo’burg audience last year, after many years of successfully presenting in their store environment to enthusiastic audiences. This is the latest in a depressing line of Cape-Town based companies which take the view that face-to-face presentations will only be performed in Cape Town. This practice began a few years ago when Truworths stopped presenting in Johannesburg. Clicks followed in quick succession, and now Woolies. Foschini last presented in Jo’burg, to my almost certain knowledge, sometime in the early 1990s. Interestingly and refreshingly, Spur will be presenting in Jo’burg at the end of this month after only presenting in Cape Town for many years. Hopefully this may herald the beginning of a turnaround in thinking. The only large Cape Town-based retailers that make presentations in Jo’burg are Pick n Pay and Shoprite.

So what IS the thinking that deprives Jo’burg investors of presentations by most of these Cape-based companies? Cost is obviously an element, as taking a large contingent of management up here to present is expensive, not just in direct costs such as venue and catering but also in management time. Allied to the cost factor is the fact that almost all of these companies’ shareholders are Cape Town-based. Only a tiny fraction of financial institutional money is Jo’burg-based, and these investors will make individual arrangements to see the companies shortly after the results release. The big losers are the Jo’burg-based private clients, but I guess the companies concerned feel that a webcast is sufficient for their needs.

Simon Brown from justonelap:

Agreed that a conference call is not nearly the same as in person. That’s why we have lunches. If just using the telephone was perfectly fine then we’d never leave the office (and life would be a bunch more boring). But further, the financial hub of SA is Johannesburg, not Cape Town. Sure, they get the Mining Indaba – which in itself is strange as they do zero mining in Cape Town 

Conclusion:

Woolworths is an important listed company, which makes a hell of a lot of money in Gauteng. I have always detected a smugness in its media relations team, which is annoying, but tolerable if journalists are granted the right degree of access, and frequent interaction with management. However, it seems that the very large investor community, and other stakeholders, are being short-changed by this reclusive retailer. Its stance would be more credible if all other listed companies took the same view about their Gauteng stakeholders, but they don’t. Time to swap my Woolies card for a red card.

Tweet of the Day:

Fake Dispatch (@Fake_Dispatch): Janitor at the Large Hadron Collider finds several new particles while sweeping up after a party.

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Intrepid globetrotters Glenn Silverman and Chris Hart, both of Investment Solutions, have completed their tour of the five BRICS nations, have written a book about it (Half Way There), and today drew some lessons for South Africa from their observations.

Glenn Silverman kicked off, with a warning that the local economy is far from healthy. We have been a high inflation, low growth country since 1960s “and we seem to be going back to the bad old days.” Based on world rankings, he described SA as a schizophrenic country, with big strengths in the corporate sector and financial services sector, but worrying weaknesses in labour-employee relations and education. He suggested we should set regular goals to improve our position in global rankings, in those areas where we are weak. SA has a slow puncture – a slow deterioration in some vital areas. The way forward is to reduce unemployment, to boost growth, improve education, and protect the rule of law, institutions and property rights, while putting the focus on the private sector and reducing regulation.

Chris Hart suggested that the SA government has very high expenditure plans – with 4 expenditure bombs. These are the public sector wage bill, parastatal funding, the planned nuclear deal, and the intended National Health Insurance scheme.   He said: “The money has to be earned before you spend it, but not in this bizarre world.   Debt is going up and the deficit is rising.”  Looking ahead to the budget, he suggested that “the government doesn’t need more money. It needs more efficiency.   We have fallen down the rankings in terms of being an easy place in which to invest and do business.   In the budge, we should spend where there are results. There was no return on World Cup stadiums. Do we put money into education without fixing education? You should not spend more where you have failure – the budget should be frozen.”   And his budget prescription: “I would like to see taxes being cancelled or cut on capital gains, dividends, taxes on interest earned, dividend taxes… I would rather see a luxury VAT, to eliminate these other taxes, the wrong taxes, which target the rich, and shut down the chance of upside in the economy.” 

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The really fun part of writing ZA Confidential comes when other people write it for me.     In response to my recent piece blasting moronic government plans to outlaw all drink before driving, my good chum John Mare, a retired diplomat of some distinction, sent me this note, which I really should share…..

“This is a crazy idea which will finish restaurants, shopping centres, tourism, the restaurant sector, and our quality of life. Possibly only corrupt cops will benefit.   It is bad enough that they are already thinking of new laws to inhibit, or even stop, advertising for cigarettes, alcohol and so on – thereby inhibiting freedom of expression and diversification in life quality, along with damage to the SA restaurant and tourism sectors. I wonder how I can get people to understand that wine, for example, is part of gracious living – and red wine is prescribed by doctors (in moderation as with everything).   They think no one can discipline themselves, but this argument could be extended to many other areas.   In particular, they cite the link between alcohol and drunken driving.   But – wait for it – they allow motor car companies to blatantly advertise how fast their cars can go! How is it possible to sell or advertise cars that go up to 240 kilometres per hour in a country where the speed limit is 120 kph?   Surely they should only be allowed to sell cars that can reach speeds of, say, less than 140 kph?  Maybe all car adverts should be banned, and all cars – driving to a maximum of 140 kph – should be uniform proletarian dull grey, with no insignia?   Think of it….   The spotlight is supposedly focused on drunk driving, but bad driving at high speed in non-roadworthy vehicles kills many more. And no one wants to tackle the real root of the problem.”

ZA Confidential is a subscription newsletter.   For subscription details, invitations to grown-up events with edible food and drinkable wine, or any other communication, please contact:   zaconfidential@gmail.com     Follow us on twitter: @zaconfidential