Economic review (and some nonsense)

Terminology:

Shadow banking. The term for financial agents that performs bank-like activiies but are not regulated as such. This practice has boomed in China as a way of circumventing the government’s tight controls on lending.

The UN has cautioned that Brexit and Trump are the precursors of a new world order leading to uncertainty which may trigger capital withdrawal from developing countries with open markets such as, amongst others, South Africa.

Last week I commented upon both Mozambique and Zimbabwe being practically broke. It now emerges that Angolan banks have appealed to their government to put up a bail-out package following on liquidity issues, owing to low oil prices. It is reported that these banks carry “troubled loans” amounting to 15% of total credit advanced. Eina.

The Momentum/Unisa SA Household Wealth Index shows a negative trend with a decline of 0.9% in the 3^rd quarter of last year. The main reason for this trend is ascribed to a decline in the real value of household assets.

The Big Mac Index was created by the Economist in 1986 and is an attempt to measure purchasing power parity in countries. On that index, the Rand should be trading at R 5.20 to the US dollar. Economists agree that the Rand is undervalued but probably not by that much.

Donald Trump is a business genius who can apply his deal-making skills to make America great? Shiller, a Nobel laureate and an expert in mania/bubbles, says that the market optimism, based on Trump’s expected influence on the market, is an illusion. https://www.theguardian.com/business/2017/jan/19/trump-us-markets-illusion-dow-jones

Business review

New-car inflation rose to 9.4% in the 4^th quarter of last year. The equivalent for used-cars is 3.3%. It is predicted that, as the supply of good quality used stock diminishes, this will cause a natural shift back to the new car market this year, resulting in a stabilised market.

King fatigue: the 1^st King code, launched in 1994, sparked excitement and enthusiasm around what was then a relatively new take on the behaviour of corporate executives. Twenty two years later the 4^th iteration thereof has sparked little enthusiasm.

Property review

The South African office vacancy rates for the 4^th quarter last year stand at 10.7% nationally. Sapoa describes this sector as fragile and says that there is a probability that vacancy rates will deteriorate further before improving. Interestingly it says that speculative building activity has dropped with developers phasing in developments on a tenant-driven basis. Sandton accounted for 48% of the national office development in the 4^th quarter.

Analysts say that double-digit returns are again possible for real estate stocks this year. The predictions by Standard holds that this sector could produce 2.7% total return in a bear scenario and 14% in a bull scenario.

Loos has predicted that is a residential building growth is expected to remain weak this year. This accords with a prediction of SA nominal house price growth of 5.5% by S&P Global.

He further says that new-house costs are 30.4% higher than that of an existing house.

By-to-let purchases of residential property in the whole of SA slowed to 8.55% of total purchases in the 4^th quarter of last year. In Tshwane, that percentage stands at 14.9% and in Cape Town 12.1%.

An interesting aside I met up with, is an analysis of what is called skyscraper economics: the taller the building, the more space must be set aside for elevator. Skyscrapers devote approximately 30% of the total floor space to elevator, including the shafts, hallways and machine rooms.

Practice review

An interesting trend is mines acting against a chief inspector of mines in the North West where production was suspended owing to (disputed)safety stoppages. The mines intend holding the officials responsible in their personal capacities for losses incurred. This will be interesting.

Another interesting development is that the law firm that advised the SABC board on its affairs, might will be held accountable for the bad advice given. Good. What remains is for our government law advisers to be rapped across the knuckles also.

A keyboard especially for lawyers has been designed: https://lawyerist.com/141345/first-look-legalboard/

Cases

Backdating a contract

In this case a contract was negotiated after an offer to buy had lapsed. In order to avoid complication, the parties backdated the contract so that it fell within the initial acceptance period. In calculating the time for compliance with a suspensive condition that had passed by the contract date, did one calculate from the date in the initial offer or from the date of the subsequent contract? The court held firstly that, irrespective of the lapse date of the initial offer, the parties had contracted on the later date and at that time the deed of sale came into existence. Secondly, the court held that a date for the compliance of a suspensive condition, which fell before the date of contract, was not feasible and calculated the 10 days that was contracted for, from the date of the conclusion of the contract.

Jubi Properties (Pty) Ltd v Boyce http://www.saflii.org/za/cases/ZAGPJHC/2016/338.html

Expert witnesses

In the case below, a dispute as to the testatrix’s mental capacity led to expert witnesses being called who proceeded to contradict each other. The court decided that such experts are there to assist the court and not to be partisan towards the party who engages them. When faced with conflicting expert opinions, the court had to determine which, if any, of the opinions to accept, based on reasoning and reliability.

Van Niekerk v Kruger [2016] JOL 35635 (SCA)

VAT

In a contract for the sale of land, the purchase price was baldly stated without any reference to VAT. The purchaser, naturally, wished to pay only that sum whilst the sellers wished to add VAT to the price. The seller argued that the purchaser had known that VAT was payable on the purchase price as the bondholder had made its consent to the sale conditional upon the payment of VAT. The court held that a 3^rd party could not alter the terms of a contract after the conclusion hereof. Hence the presumption that any price charged by a vendor, is deemed to include the VAT, was applied.

Gerber v Naidoo http://www.saflii.org/za/cases/ZAECPEHC/2016/11.html

Quotables

On enthusiasm:

We have to straighten out our country; we have to make our country great again, and we need energy and enthusiasm. Donald Trump
There is a real magic in enthusiasm. It spells the difference between mediocrity and accomplishment. Norman Vincent Peale
Faked enthusiasm is worse than bad acting - it is bad acting with the intent to deceive. Bo Bennett

Comment

New terminology:

Fake News. Propaganda?
Corrective engagement. Uitk@k parade? (This followed on the ANCYL having been called to order by its mother body following on its derogatory comments on Minister Gordhan).

Manyi gem: that worthy has worked out that our constitution is the brainchild, not of the ANC, but of the Broederbond. Furthermore, he holds that our “constitutional democracy is actually at the centre of producing all kinds of spiralling poverty that we are having in this country, the spiralling inequality, the spiralling unemployment.”

The Economist has ranked South Africa 39^th (out of 165) on its list of democracies, terming our state a flawed democracy. It states that, even if we have problems, basic civil liberties are respected. Of sub-Saharan Africa, Mauritius is ranked 1^st and is the only country in this grouping that is classified as a full democracy. Interestingly the US ranks only 21, tied with Italy nogal. African countries that were labelled authoritarian are, amongst others, Angola, Zimbabwe and Swaziland.

Smoking something? Mr Zuma has said that the ANC-led government had put up many programs to help root out crime and corruption and promote good ethics throughout the public sector. “It is the only organisation and its government… that has fought corruption.” Let the narrative be corrected…

Lighten up

Mugabe on Malema: “A loud-mouthed Gucci revolutionary.” (Can one now declare these two former best friends?)

Question: What's the similarity between a lawyer and a dentist?

Answer: Both do filing and extraction.

Your attorney and your mother-in-law are trapped in a burning building. You only have time to save one of them. Do you: (1) have lunch?, or (2) go to a movie?

A defendant was asked if he wanted a bench trial or a jury trial. "Jury trial," the defendant replied. "Do you understand the difference?" asked the judge. "Sure," replied the defendant, "That's where twelve ignorant people decide my fate instead of one."

A lawyer phoned the governor's mansion shortly after midnight. "I need to talk to the governor, it's an emergency!" exclaimed the lawyer. After some cajoling, the governor's aide eventually agreed to wake him up. "So, what is it that's so important that it can't wait until morning?" grumbled the governor. "Judge Brown just died, and I want to take his place," pleaded the attorney. "Well, its Ok with me if its Ok with the mortuary," came the reply.