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.

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

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.

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

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.” 

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

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

The bad news is that we may be in a crisis.

The good news is this may be just what we need.

This was the message this morning of award-winning economist Mike Schussler of economists.co.za to the Northcliff Investor’s Club, at a breakfast session sponsored by PSG.

Mike suggested that with a cabinet war room having been set up to deal with the power problem, with joblessness increasing, with levels of unhappiness that lead people to block roads – the crisis is here.

Meanwhile, SA’s crucial water and electricity infrastructure “seems to be letting go.”

But it is not all negative.

Schussler suggested that in a crisis, things can get moving and we can unlock things.

“Crises are often needed,” he argued, looking back to the transition period from apartheid to democracy.

And he had one bright forecast – that better-controlled inflation might lead to an interest rate cut later this year.

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

It really is awful enough living under a kleptocratic, corrupt and inefficient government.  But at least we can occasionally pop out for a nice meal, to watch some sport at the pub, to a dinner party with some friends.  No more.

If The Star is to be believed, the Department of Transport bullies have decided in their infinite stupidity that no alcohol at all will be allowed to be ingested before you drive. None.

Now, I am not advocating that any of us should get sloshed, get driving, and pose a danger to ourselves and anyone within target range of our cars.   But let’s be sensible about this.

A few drinks are not going to lead to mass carnage on the roads. No drinks are going to cause massive economic losses.

Those trips to the pub, to the restaurant, to see friends, to those increasingly rare corporate and media events where they treat their guests as adults and offer a glass or two of booze. All of these would be threatened.

How could I gather people for our Die Vine Intervention podcast wine tasting recordings, knowing it would be illegal for them to drive away afterwards?

The impact on the pub and restaurant business would be massive, with many closures and a lot of job losses. Indeed the only real winners would be the convoys of corrupt cops who would rake in massive bribes for keeping drivers out of trouble if they are caught with a thimbleful of cough mixture or some other dangerous alcoholic beverage in their systems.

And what about the Winelands?   Disaster.   Many estates have diversified to offer not just tastings (ILLEGAL) but also meals with a glass of their own wine (ILLEGAL).

This is a growth industry, and an important tourist industry, and it brings jobs and prosperity.  And  a lot of pleasure to a lot of people.

Of course, there are alternatives to driving yourself.   You can have a designated driver, use public transport, or one of the services which will drive you – such as Uber.

But this should not be necessary, is inconvenient, irritating and expensive.   It is bad enough they call booze levies ‘sin taxes’. Now they want to err ever so far on the side of caution with desperately offensive new legislation which will do a hell of a lot more harm than good.

There is an active campaign to kill the e-Tolls.   This government garbage on outlawing a drink before you drive deserves just as much derision and opposition.

Tweet of the day

Ellen DeGeneres (@TheEllenShow): How long does it take to eat a tire? A good year. #ClassicJokeFriday

 

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

It was useful for ZA Confidential to attend today’s media briefing by acting SAA CEO Nico Bezuidenhout, even though the message was a stark one. An emergency plan is underway to try to prevent a financial crash of the airline, and Finance Minister Nene also attended the event at SAA HQ. The airline is technically insolvent, and is reliant on government guarantees of R14.3bn to borrow the money needed to keep going and avoid business rescue. As the acting CEO put it: “We keep on chasing our tail, so to speak.” Minister Nene said government would continue to support the turnaround of the airline, but only if moved toward financial soundness, and he said there would be no increase in government debt. As previously announced, the state is to sell non-strategic assets to support ailing parastatals. There was no fresh detail in this. A 90 day fix-it programme by SAA is being regularly monitored. Nene confirmed that government has approved the cancellation of the SAA China route, to Beijing, on which the airline lost close to R1bn over 3 years. Air China will run services to replace SAA ones. Routes to India and North America also face pruning.

Hospitality

Maybe it was a sign.   Today’s SAA results news conference took off 15 minutes late and landed 45 minutes late. It was presided over by some functionary who clearly considered himself to be very amusing, and this pompous patronising prat seemed blind to how badly things were organised. TV cameras on tripods were allowed to pollute the seating areas, which meant that people like me who had been seated at the back could not see the presentation properly, as our view was blocked.   We were told that if we wrote too slowly, it didn’t matter, as the presentation would be available on departure on a memory stick. It wasn’t. To be fair I was e-mailed a media release. Unless I missed the small print, bizarrely there was no mention in it at all of my mate Nico. And the CFO, a nervous chap who kept crashing the power point and apologising, changed slides with frightening speed – when he got it right.  Maybe a good way of preventing the full scale of the airline’s financial mess from being properly grasped?    Not that this is an accurate analogy, but dealing with the media in this way is a bit like telling passengers there are life belts under the seats when there are none. The final nail in the credibility coffin came when SAA’s chairman decided to call for a round of applause after she had delivered a few assurances.   Never, ever, ever, ever in almost 40 years as a journalist have I attended a news conference where a speaker called for applause. The smart-suited execs and lackeys at the back were happy to oblige the dear lady. I was not. I will not dwell on the acting CEO expressing anger that he had been previously attacked for being under-qualified and that there had been reports that he might have misrepresented his academic achievements. He was clearly unhappy to be quizzed on this again, and insisted he was blameless.  Suffice to say that when I was discussing this as I left with a colleague, an SAA employee suggested I had been unfair to point this out, along with the fact that the airline has an acting CEO with the real one still suspended. I asked if I had my facts wrong, and was told I hadn’t – but the boss is doing a good job. Shame about the PR team, then.

Catering

The food was more disgusting than anything I have ever been served on a plane. Ever. Or a train. Maybe at school, but they were careful to avoid child abuse charges. Yep, it was that bad. Unidentifiable fried muck and under-ripe fruit.   At least the soft drinks and bottled water had not been ruined by the cook. So an airline which prides itself on glamour and efficiency couldn’t rustle up an edible snack for a lunchtime media briefing.   SAA has just announced it isn’t serving Champagne any more, and will stick to local bubbly. An astute branding or marketing team, or folk with a generosity of spirit, would have ensured a few bottles of this excellent Cape booze would be served to we VIP media guests. It seems SAA is in such financial doo-doo that it can’t afford either the bubbly or the trained professionals. Not so much Economy Class as No Class.

 

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

ANC Secretary General Gwede Mantashe has succeeded in shooting himself in both feet with just one utterance.

First came his attack on foreigners, saying they should not be allowed to own land in ZA. Not great timing when foreign shop-owners in SA’s townships have been the victims of looting – some of it conducted by uniformed police officers – as well as beatings and murder. Kick a man while he is down. As long as he is foreign, why don’t you?

The sheer stupidity of Mantashe’s suggestion boggles both sides of my brain. Look at the US, the UK, Singapore, Australia and – yes – South Africa too.   All of these countries achieved economic success and growth thanks to immigrants.   And no. I do not condone racism, apartheid or slavery.   There are modern examples around the world of immigrants who have enjoyed equal rights and who have excelled. As there should continue to be in ZA. And the right to own property is a basic human right, regardless of your passport or the land of your birth. It should apply to foreigners in South Africa, even to wine farm and game lodge owning parasites like Richard Branson, who we all know was shunned by Nelson Mandela for his lack of support for the birth of democracy in this country. How quickly we forget….

Then, having displayed his populist poltroon credentials towards foreigners, Gwede the unsteady turned his attention to his own people, or rather those who have managed to really prosper. He has decided there should be a ceiling on land ownership for South Africans.   Property rights are the bedrock of building business confidence, are a basic human right, but not for Mantashe. Oh, no.   You can’t be seen to be too successful in this country, even though the party’s leaders were seen pimping themselves to successful business leaders at a recent gala dinner in Cape Town. And what about Zuma’s sprawling Nkandla estate? Maybe he will be exempt from Gwede’s axe because he has so many wives? No stench of hypocrisy there.

Of course we all know why Gedede has taken leave of his senses and come up with this populist poop. He is scared of the rising popularity among the masses of Julius Malema’s EFF (Economically Fucked-up Fools). Malema cannot be seen to be the only one making false and foolhardy proposals to the electorate, because the masses may be unemployed, hungry, squalidly housed and disgruntled – but they do have one important attribute. They can vote.

For this reason, while we may not like the offensive tripe being touted by the ANC Secretary General, we do understand where he comes from. He is not as stupid as he sounds.

Tweet of the Day

Rand Daily Mail (@rdm_za): ANC moves to ban foreign buyers and limit ownership to “two farms” ow.ly/I80Fc

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

A new report, entitled Broken Blue Line 2, will make every citizen of South Africa shudder with concern, for it highlights the alarming extent to which our police officers are involved in violent and serious crime.

It was launched today by the SA institute of Race Relations and AfriForum at a bizarre news conference during which representatives of the police were more active than many of the invited journalists.

Think tanker supreme Frans Cronje, the CEO of SAIRR, presented the results of the report, which confirmed 100 cases of police involvement in serious crimes – such as rapes, murder, armed robberies, and violent assaults – although there may well be hundreds, if not thousands more.

Cronje suggested that police recruits arrive in an environment infested with corrupt behaviour.

A few stats from the survey…..

• 20 of 32 murders involved the use of service pistols. 6 of 32 involved the spouse of police officer.
• 9 of 26 of the rapes occurred in police stations or police vehicles.
• Often cloned police are associated with genuine police officers, who take part in their activities.

This was the second such investigation, and Cronje said there is no evidence of any decline in police criminality. He suggested you don’t find anything on this scale, say, in the UK.  We in South Africa have a systemic problem.

He insisted that police efforts to deal with the problem falls short – and suggested there must be a degree of infiltration of the police by criminal gangs.  It is with good reason that the public are afraid of the police, particularly in poor communities.

Among measures suggested is a new investigative agency to identify, hunt down, prosecute and jail corrupt officers. This will be a powerful deterrent.

The news conference involved an exchange of claims between Cronje and a police representative.    The SAIRR claims it tried to get the police involved from the start of the investigation, without success.  This was countered by the police, who questioned the methodology of the report.

Conclusion

The most chilling sentence in the report highlights the extent to which the public is being let down: “Certainly women travelling alone and at night have particular reason to fear the blue lights in the rear-view mirror.”     Frightening and alarming.

Tweets of the Day

Funny Tweets (@Funny_TweetsQ): I used to think I was un-photogenic. Then I found out I was just ugly

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