Economic review

Hope springs: following on our apparent economic recovery is a, still negative but rising, business confidence index. There are even those who speculate that South Africa is on the cusp of a business cycle upswing (Jammine). We shall have to wait as the political storm, that appears to be brewing, has not played out.

Citadel says that South Africa has consistently underspent on infrastructure development over five years. We require an investment of between 7 – 9% per annum; yet have invested only 5.2%. You will recall that infrastructure spending was one of the cornerstones of the State’s turnaround plan for our economy.

Last week’s sell-off of R10.2bn in equities and bonds (following on the fallout between our Finance Minister and other government institutions) was bigger by R2bn than the Nenegate losses in December last year. Our Rand was propped up by significantly lower than expected US jobs data. One can but wonder how this will play out.

Business review

Premium cost: Apple has cemented its niche in the market as the phone to have. Owning such a phone means that using anything other than its proprietary accessories is awkward. Such exclusivity comes at a cost: just the nice-2-have earphones costs in the region of R2000. This means that Applemakes fewer phones with presumably a higher profit margin (heck, someone has to pay that EU tax fine) but loses out to the mass market. Even that erstwhile paragon of desirability, Mercedes, is now making cheaper models….

International passenger numbers for King Shaka airport has grown by 40% per year.

A new regional railway is to link Francistown, Botswana to the Mozambican port of Technobanine and is to be known as the Port Technobanine Inter-Regional Heavy Haul Railway Project. ń Bekvol.

Dumping. The new brining regulations for chicken will kick in shortly. Have you seen the specials advertised by chain stores for chicken pieces; as low as R20 per kilogram? Did you notice that the brine content of the chicken sold off is some 30%?

E-religion: the Norwegian state church saw a record fall in membership after making it possible to join and leave the church electronically.

CEOs from the platinum industry have warned that that supply from South Africa, the world’s largest producer, would “drop off a cliff” next year, as years of under-investment will impact on production.

Property review

Early signs of renewed near-terms slowing in the residential property market has become apparent. This, according to Loos, follows on a PMI fall from 52 to 45 last month. He considers the latter to be a pointer towards slowing manufacturing.

This coming Wednesday, TMJ will hold a training seminar for estate agents at which 3 non-verifiable continuing education points may be earned. This will include a talk on sales to trusts. If this interests you, contact me soonest.

Practice review

I have a summary, from Citadel, on the Davis Tax Committee’s 2^nd interim report on estate duty. Ask me if you wish to receive this. One of the proposals is that the inter-spouse donation tax exemption be withdrawn. A further proposal is that all taxpayers be afforded a R15m estate duty exemption but would be followed by an increase in estate duty over a higher threshold. The bare dominium/usufruct tax dodge will be investigated and all holders of a part-interest in property will be required to submit tax returns, irrespective of their level of income. A further interesting development is the proposal that a trust may be deemed to be controlled by a connected person. Essentially, if you have followed best practice and included outsiders with a blocking vote, this threat may well be avoided. These are just proposals at present.

If you have not read the Law Society circular on attorneys rendering financial advice, ask me for a copy and I shall forward this to you. Essentially, the advice given says that investment in an interest bearing trust account, of client funds, does not amount to financial advice calling for registration under FAIS. If you habitually give such advice, be careful.

Cases

Seller’s duty to disclose excessive commission

This is a really strange case: the Attorneys Fidelity Fund employed an agent to find new offices. Their own agent colluded with the seller to puff up the purchase price. The agent died before the Fidelity Fund could sue him. Did the Fidelity Fund have a claim against the seller? In other words, was the seller under a duty to inform the purchaser of a secret commission sharing agreement which inflated the purchase price? Yes, strangely enough. Worth a read for both estate agents and attorneys!

Attorneys Fidelity Fund Board of Control v Intibane Mediates

http://www.saflii.org/za/cases/ZAGPPHC/2016/699.pdf

Cohabitation and universal partnerships

It oft happens that parties stay together and break up after many years. By that time their financial affairs are quite interwoven, and one of the methods of untangling such a situation is to approach a court to declare the parties having entered into a tacit universal partnership; i.e. where the parties share everything in a certain ratio. This is akin to a marriage in community of property and is thereafter easily dealt with. It is always better for such parties to enter into a formalised agreement; I would recommend that the contract be notarised, so that when death or separation comes, the parties know exactly where they stand.

Vermeulen v Marx (19398/2014) [2016] ZAGPPHC (25 July 2016)

Quotables

The English, he thought, had once conquered most of the known world, but their cooking hadn’t improved as a result.

Comment

History is awash with the destruction of luminous symbols of learning and civilisation. Think the library of Alexandria which was burned down, Carthage was razed and, of late, the library at Timbuktu. Possibly those who torched our universities might as well have salted the ruins and the dreams of others as well. Irrationality reigns supreme. A Minister suggests that the public should fund universities voluntarily. After witnessing this, would you want to?

Jimmy Manji suggested that, given (says he) that universities spend 50% of their expenditure on academic content, professors should write their own content instead of money spent on journals and the like. Vintage Manji drivel (he is the founder of the Decolonisation Foundation). What hurts is that he purports to speak on behalf of the Progressive Professionals Forum. Progressive? Professionals?

And unlikely hero? McBride won against the Minister of police in the Constitutional Court. It was difficult not to applaud this victory. He is certainly a fellow with a flamboyant past.

Wabenzi! “I will not allow public money to be spent on luxury cars, while our people struggle for services, houses and jobs… A Hyundai i120 … can do the same job for a politician as an expensive sedan.” The mayor of Johannesburg. One wonders whether this start will last? The cops must love him: they inherited the luxury BMW vehicles driven by the previous incumbents--to be used as chase-cars.

Our Energy Minister, Joemat-Petterson, will not allow parliamentary scrutiny of nuclear State power procurement plans. Even though they may be sensitive, when one considers the sheer scale of the expenditure envisaged, surely it is not unreasonable that our State representatives are allowed a peek?

We continually see articles on the rise of the right wing, nationalism and, lately, the end of globalisation. Below is an interesting discussion on nationalism. Do take a look.

https://www.youtube.com/watch?v=Nosq94oCl_M

Do you need a working philosophy on how to live? Take a look at this: http://fivebooks.com/interview/massimo-pigliucci-stoicism/

Lighten up

A mathematician, an accountant and an economist apply for the same job.

The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."

Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four - give or take ten percent, but on average, four."

Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says, "What do you want it to equal"?

Three econometricians went out hunting, and came across a large deer. The first econometrician fired, but missed, by a meter to the left. The second econometrician fired, but also missed, by a meter to the right. The third econometrician didn't fire, but shouted in triumph, "We got it! We got it!"

Q: How many central bank economists does it take to screw in a light bulb?

A: Just one -- he holds the light bulb and the whole earth revolves around him.

Q: Why did God create economists?

A: In order to make weather forecasters look good.

I need to declare my interest in this: my son is a macro economist and is into econometrics. It’s great talking to him but I haven’t made any money out of it yet!