Economic review


The new normal? There are a number of economic indicators and commentators that all seem to be pointing in the same direction, economically speaking:

  • Our total vehicle sales in May declined by 10.3% yoy-- this is reinforced by the YTD decline of 9.8% in such sales. Most disturbing was that light commercial vehicle sales in May were down 8.9% YTD. Conventional wisdom says that when bakkie sales start falling, our economy is going south.
  • The drop in commodity prices appears to have stabilised but it is said that the highs achieved in the past years are, for the time being, over. The Africa rising narrative has given way to greater pessimism as Africa will need to be rescued by structural change rather than external factors such as rising commodity prices and the like.
  • Our State response to our economic woes is hardly radical despite its say-so. Control spending and raise tax – logical. Taking a closer look at the spending curb, it appears that is focused primarily on government travel, accommodation and vehicles. Tender processes in State-owned entities and government departments will be controlled. This hardly addresses the major issues in State spending. As far as raising tax income is concerned, the cynical view is that we should wait until after the elections.
  • Resultantly, South Africans import less and we start racking up a trade surplus. If one has faith in classic economic theory, the pendulum should swing back towards a correction, with greater savings, a strengthening of the exchange rate and so forth. Business seems less convinced. For the first time ever, the top 40 JSE-listed companies are earning more than half their revenue off shore. Individuals are not convinced either. Hedging in overseas stocks is a standard part of every investment portfolio. If it were not for the restrictions placed on overseas holdings by retirement funds, the proportion is held by local investors in overseas stocks would be much greater – despite the real growth in overseas investments being very modest.


Globally it is said that the World economy is slipping into a self-fulfilling low-growth trap and much is said about distortions, negative feedback loops, loss of potency and so on. Most of us (and I would warrant economists also) don’t really understand the mechanisms at work, given the complexity of the problem. Factually, few countries lack the foresight, expertise and political will to address the issues at hand meaningfully.


Another interesting comment that I had come across was, that the immediate past represented a period in which the return on capital has outstripped the rate of economic growth consistently. This results in an almost biblical view that those who have will attain greater wealth, and that those who have not, will become poorer.


Business Review


The Black Business Council has struck a deal with the Treasury in order to hasten State payments of overdue accounts to the private sector. Yawn, again!


A minor change to the National Credit Act passed almost unnoticed: the threshold required in terms of section 42 (1) was dropped from R500,000 to 0. Pragmatically speaking, this means that if you wish to give credit you must either register as credit provider in terms of the Act or make sure that the loan agreement falls outside the National Credit Act definition, generally by avoiding interest on the capital lent. By way of example, if you sell a property/business and the full purchase price is not paid in one go, you either have to register as credit provider or charge no interest.


I’ve got plastic: a new meaning to the term will be given when the Bank of England issues its first plastic banknote, a £5 note this September.


Most of us heard the rather grim news, heralded as an improvement, that most of our municipalities are bankrupt. This is par for the course elsewhere also: Rome is bankrupt also and is under central government control.


Property review


The FNB house price index recorded a 7.4% yoy increase in May. Not great, but still: in theory, house prices should, generally speaking, not grow beyond our inflation rate. The only reason why our house prices have been pushed up consistently for some time is that we have a shortage in supply. In theory, this shortage should only occur at the bottom end of our market where the population growth is burgeoning and at the fringes of the middle class where one (still) has upwards mobility.


Practice review


I attended a Law Society seminar on the future of trusts. This topic has been a hobby horse of mine for the past 30 years or so. What is become abundantly clear was that the good practice of yore; drawing in the planner’s accountant, has become imperative. The law and the applicable tax regime is essentially simple, the application of especially the tax results, is another matter.

Some of the pitfalls that one needs to consider are:

  • one should watch the capital allowances by trusts and recoupments: consider holding capital and distribute income only;
  • be careful of distributing cash received from a company - especially where the beneficiary is another company that does not hold a vested right in the distributing trust. A similar problem will arise with employee trusts where the effective tax rate would be higher than if the beneficiary had received the money directly.

The result of all this boils down to two recommendations:

  • one will need substantive investments in a trust and associated structures to warrant the costs of running in these; and
  • the preferable structure would be a trading company held by a trust. This (as is currently the case) allows the reinvestment of income at a lesser rate in the company together with the associated protection that the trust offers.

The proposal that loan funded transfers of assets to trusts will be penalised by adding the property at current value back into the seller’s estate, will probably be implemented.


As guideline, when one earns R500k per annum or more, it becomes more efficient to extract money via a company rather than in one’s own name.




Section 129 notice ito NCA


The following case held that, if the notice in terms of the above section is not delivered within the area of jurisdiction of the magistrate’s court area out of which the creditor sues, then that court does not have jurisdiction to hear the matter.

Blue Chip 2 SCA case 499/15


Abuse of rights


The mere fact that one has rights does not mean that one can willy-nilly use these to stymie development (of a property) by another. If you do this, you may well held responsible for damage to that person whose development you have held up.

Koukoudis SCA 20747/14


Mistake in contracting: reliance theory


The theory holds that if they decide’s take on the death one is led to contract, following on a material mistake, there is no actual consensus and the contract fails if the other party reasonably relied on that impression. One cannot rely on your own mistake to avoid a contract if you are solely at fault – even though the mistake was material.

Botha SCA 463/15


Floor plan agreements: estoppel


Floor plan agreements may be described as an agreement by a financier (bank) that it purchases vehicles for a retailer to sell and reserves the ownership of the vehicle’s until paid. This is done to ensure that the financier is paid. The public is generally not aware of this arrangement. In this case, the usual result occurred in that the bank was not paid and tried to repossess. The respondent (in this case a dealer – which is an important distinction as one would expect it to know of such an arrangement) argued that, by allowing the vehicles to be displayed as if they belonged to the retailer, the bank had created the impression that the retailer had ownership of the vehicles and could sell them at will. The bank held the view that the purchaser knew that, without the registration documents, NATIS documentation and so on, the retailer would not be able to effect registration of the vehicle in its name, as was the case. The court held that the bank had not made any representation upon which the purchaser could rely to prove its case of estoppel.

Knysna Auto SCA 266/15




When you are dead, you won’t even know that you are dead. It’s a pain only felt by others.

Same thing when you are stupid




Driving up the local content of SABC programs sounds quite patriotic. The ramifications are, I would warrant, less clearly understood. Pragmatically speaking, most of those who are able, have migrated away from State-offered television and what remains is radio, where a meaningful alternative for those who would not want mostly local content, does not yet exist.


Monarchial Democracy: this term was coined by Swaziland’s current king. His current dictatorship is being rebranded by allowing populace to vote for some of the councillors who advise him. I confess to having lost my faith in democracy, at least in Africa. Democracy merely elevates a great number of people to the point where they are able to influence others without necessarily adding any real expertise to the pot. Perhaps a benign autocracy is the way to go?


Rebranding history: I loved the response by Turkey, to Germany deciding that Turkey’s hundred-year-old Armenian massacre, was a genocide-- surely the Germans are no less guilty of this than they?


Lighten up


I was thinking about how people seem to read the Bible a whole lot more as they get older. Then it dawned on me:  they are cramming for their finals.



  • Never try to tell everything you know. It may take too short a time. —Norman Ford
  • Never trust a man when he’s in love, drunk, or running for office. —Shirley MacLaine
  • Never board 
a commercial 
aircraft if the 
pilot is wearing 
a tank top. —Dave Barry


What is the difference between Capitalism and Socialism?

Capitalism is the exploitation of man by man

Socialism is the exact opposite.


Nothing changes: “Today's public figures can no longer write their own speeches or books, and there is some evidence that they can't read them either.”

Gore Vidal


And finally it is clear that our election difficulties are not uncommon: