Economic review

Depressing news: Reserve Bank figures show that private sector investment in South Africa contracted in 2015 in real terms: corporate South Africa is not investing more than it has to in order to maintain existing capacity. Corporate investment continues to expand into other markets, mostly outside of Africa. Why? Uncertainty and somewhat hostile local conditions discourage foreign direct investments, as it does for local businesses.

Foreign direct investment has withdrawn back in to developed economies, which currently receive 55% of global cross-border investments. FDI in Africa fell by 7% last year. Noteworthy is the mega grouping into which we fall; Brics (as a group) took last place for overall positive FDI flows in 2015. Great grouping!

The BER retail survey shows that business confidence amongst retailers is at its lowest level in 15 years. Stats SA has shown that retail sales have slowed by 2.9% year-on-year in March and 1.5% in April. This is the slowest pace of growth in 2 years.

I do not have the time to engage this issue but one must ask oneself why the world economy, generally speaking, is not performing. The article in the following link seeks to provide an answer. Do take a look… http://www.nytimes.com/2016/06/19/upshot/one-economic-sickness-five-diagnoses.html?smid=pl-share&_r=1

Zimbabwean irony: Mugabe claims that Zimbabwe is a bastion of the struggle against imperialism and anti-recolonisation. By adopting the US dollar as primary currency, Zimbabwe in a certain sense was re-taken by the US. Lately Zimbabwe has plunged again into recession and must become ever more dependent on Western powers that its government loves to loathe. This week state-paid salaries have again been delayed on the cusp of the government printing own money to ease its cash shortage. Will it again suffer from inflation fuelled by its government printing money? Incidentally, Mozambique is not far behind with CPI rates of 18% for May. The Metical has dropped by 21% against the dollar this year.

Business review

This week the Post Office will be hit by a strike. Management says that those who strike represent8% of the workforce and it is not overly concerned about the threat. Perhaps; but that institution is virtually on its knees. There is a malaise in our para-statals which reaches further than the intended strike. A colleague of mine has witnessed the closure of a South Coast Post Office owing to non-payment of rentals. The nearby police station and vehicle safeguarding units have had their electricity cut off, also for non-payment. This month, a local NGO delivering social work services (as it has for the past hundred years), was unable to pay some salaries owing to the non-receipt of subsidies. Neglect such as these undermine the credibility of our government and eats into the backbone of services which took many years to build up.

Skivers charter and self-certification? In the UK, GPs are lobbying a proposal that workers should be allowed to sign themselves off sick for 2 weeks without a GP note. They believe employees can be trusted to declare themselves unfit for work…. Sure, absence owing to illness already costs that the economy £15bn annually.

Tax-free savings? We have a system whereby each South African taxpayer may save R30k annually free of income tax on the interest. Intellidex says that R2.6bn was invested in such accounts since the introduction of the system in March last year. Perhaps Treasury needs to revisit the limits of this system in order to foster savings?

Property review

An interesting article written by Ntuli, ex UCT, deals with the leasehold system which the Ingonyama trust presents as a land-tenure system for our rural citizens in KZN. He calculates that, over 40 years, a residential lease for undeveloped land costing an initial R3000 per month, with a 10% annual increase, ends up in a total rental payment of just less thanR1.5m. His take on this is that this essentially converts a type of existing land ownership to tenancy. The Trust now promises full title in due course, but will retain the existing leases. This, in his view, is akin to the entrenchment of Bantustan policies. Eina.

Construction activity in May improved noticeably. This upswing is ascribed to state spending to preserve budgets, rather than sustainable growth.

I have come across an interesting diversion of views on property investment: on the one hand, at the SAPOA conference held in sentence last week, it was said that our property companies are looking to acquire sizeable assets overseas, given the lack of buying opportunities here. On the other hand one finds the view that one should stick to what one knows. Both are probably valid points of view.

Municipal electricity tariffs have increased by 86% since 2008; this and other municipal costs which are set to increase in line with a drive by municipalities to raise tariffs at a faster pace than the CPI. This has contributed to housing losing ground as investment option in South Africa. Despite this, the FNB real house price index was 61% higher in the real terms than in early 2001.

Should one buy and then sell or the other way around? The risks in selling first and buying thereafter are:

having to rent whilst finding the right property; and
prices might rise while you are looking for a replacement property (presently unlikely!).

The advantages of selling first are:

it places the seller in a stronger negotiating position when buying, having funds available;
the prospective purchaser will not be carrying two mortgages; and
the prospective purchaser will know exactly what he can spend on a new property;

The listed property sector has again outperformed the all share index in the year to date, in terms of total returns, at 7.3%. The all share index stands at 5.9%. Yet, these are said to be the hardest times for the listed property sector since its emergence in South Africa.

Practice review

The South African Law Society has warned members that the company Proxi Smart Services (Pty) Ltd, which intends to provide ‘administrative services’ for property transactions, is impinging on work reserved for attorneys. As a consequence, members are cautioned against participating in that company’s initiative.

Once-off credit agreements: A week or so ago a note that I had written the previous week, was queried by a colleague. The result was that I took time off to research the subject and the result is contained in a short article that may be of interest to you: http://www.tmj.co.za/News/Read/90102

Essentially, lending money against credit will become much harder in future.

Cases and such

Payment of levies for unsold properties within a development

A developer inserted a condition in the constitution of the body corporate of a scheme which stated that the developer would not be liable to pay any levies with regard to any unsold properties within the development at hand. This is an unusual clause and was protected in the constitution of the homeowners association by stating that it could not be amended. The effect of this was that the members in that scheme paid the levies of the remainder of the property which was undeveloped. A meeting was held and the offending clauses removed. The developer and the City Council, which had proved the relevant constitution, objected. Stripped to its bare minimum, the issue was whether the constitution of the Homeowners Association, as approved by the city of Cape Town, was voluntarily accepted by purchasers on becoming members of the Homeowners Association and bound them. It was decided that the constitution of the Homeowners Association formed the basis of a contract between the developer and the individual homeowners. As far as the city of Cape Town was concerned, once it had exercised its discretion and approved the constitution of the Homeowners Association, it had no more say in the matter.

Tre Donne HOA http://www.saflii.org/za/cases/ZAWCHC/2016/69.html

Informal property transactions

Attorneys are very often faced with unsatisfactory arrangements regarding fixed property. A typical example is where father improves the erf of his son by erecting a flat. The son moves and sells the flat together with the erf. What now? This case is an example of such a problem and is based on a written deed of sale in terms of which a subsequently deceased parent sold an erf to a child of hers with the purchase price payable on transfer. The erf was transferred but the price was not paid. The executor sought to recover the unpaid purchase price. The child pleaded that she had entered into an oral agreement with her mother before her death that the purchase price had been fully paid. The court would not uphold this oral agreement as our law provides that deeds of sale of land must be in writing and signed.

Bester http://www.saflii.org/za/cases/ZAECGHC/2016/37.html

Judicial authority

A court cannot authorise a party before it to exercise a judicial function in its own case. The facts of this case is not that important: a prior court gave an order that an MEC should appear before it and, if the MEC was of the view that he should not be held personally liable, he should identify who was. This order was held to be unenforceable.

MEC Gauteng CCT 156/1

Labour law review

CCMA settlements

According to the CCMA’s Annual Report, 70% of all cases heard were settled. In light of increasing challenges to settlement agreements, this statistic is extraordinary. One would love to see what the Rand value is that has been paid out by employers, and what percentage of that amount was paid out as “nuisance” settlements. It would be interesting if we could determine of the monetary amount paid out, what percentage would have been awarded had the arbitrations run.

Vicarious liability for sexual harassment

The High Court, in Erasmus v Ikweni Municipality, held the employer vicariously liable for the damages caused to an employee who was sexually harassed by a Manager. “It was because of the nature of their employment relationship that the opportunity presented itself to second defendant (manager), in the course of carrying out his duties during his hours of work at his employer’s facilities, to abuse his authority and to take advantage of the vulnerability of the plaintiff.” Further on managers, the Court found “when an employer places an employee in a special position of trust, the employer bears the responsibility of ensuring that the employee is capable of trust.” The damages have not been quantified. Manager and employer were held jointly and severally liable. Practically, employers need a policy; they need to train people properly and allegations can never simply be swept under the carpet.

Unfair discrimination in the absence of EE plan and targets

In Solidarity obo Pretorius v City of Tshwane, the Labour Court has again found that the exclusion of employees on the basis of race, in the absence of an EE plan, targets and goals, amounts to unfair discrimination.

Comment

Brexit: Hogg mused that the English have an inherent preference for moderation. The British leaving the EU is therefore somewhat surprising. Perhaps their having survived as an island over several millennia is behind this move.

I have an enduring admiration for the English for doing the “right thing”; Cameron’s resignation, is just that. We could learn from them.

Hero to ass….? Oscar is reported to have said that “I would like to believe that if Reeva looks down to me from above that she would have wanted that I live that life,..” in asking for a sentence of community service rather than prison. Ja, right.

The latest hoo-ha relating to the custom of virginity (with a call on culture) testing and so on is, at best, disingenuous. Any custom which is harmful has no place in culture.

The tension between Renamo and Frelimo in Mozambique has escalated to armed attacks in the North. The causa belli is said to be the governing party’s enrichment of itself at the expense of the country. So yesterday.

Lighten up (more or less)

A real patriot is the fellow who gets a parking ticket and rejoices that the system works. Vaughan

Patriotism is a kind of religion; it is the egg from which wars are hatched. Guy de Maupassant

A patriot must always be ready to defend his country against his government. Edward Abbey