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my new newsletter......South Africa on Balance

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Not applicable
In most instances, my newsletters fly over the heads of most readers; not for a want of intellect but merely because they just do not have the time to analyse global macro economics and social paradigm shifts. Most of us are just too imbedded in the rat race, with tunnel vision on sighting the checkered flag generally in the guise of bond repayments, medical aid and school fees. I have had numerous requests to write a newsletter about how I see South Africa's future without my meanderings into technical economic jargon, but from an average citizen's point of view in plain English. So here goes... I once read that historically a country's chances of complete social breakdown and anarchy is directly proportional to the number of unemployed, uneducated, young men in its social ranks. If true a drive past any intersection in South Africa should be very disconcerting when one looks at the ever growing number of such men manning the sidewalks, thumbs in air day in day out, hoping for a paying days labour. The question is, what do these men do when despite trying, there is no work available? When you couple this phenomenon with the growing discontent amongst the civil servants across various governmental sectors including the police and defence force you get a very dangerous boiling cauldron of potential social anarchy where any sequence of seemingly unrelated events can topple it over. Consider this..our police and defence force decide to strike over pay and at the same time Cosatu plans mass action and marches throughout the country based on service delivery and wages..what do you think will happen?? In my opinion the dye was caste many years and short of an outright miracle, South Africa is now on track to an inevitably bleak future. There are two primary reasons that have lead me to this conclusion namely a culture of selfish consumerism and poor management. In just the last 20 years we have become a society of consumeristic fiend's hell bent on material accumulation irrespective of the means of achieving it. Basically we have adopted the corporate motto for our individual lives ie. Profit before anything else. Our politicians being a natural part of human society also adopted this motto with no thought being given to their mandate to the people. What I can only describe as colossal extravagance and egotistical arrogance seem to have ruled the hallways of power especially during the economic boom years earlier this decade. Even though the chickens have come home to roost and the fact that we are in a major economic recession doesn't seem to bother the political elite who seem unperturbed in their lavish personas. I am convinced that 99% of the political elite do not understand economics 101 and don't even think it possible that a state can enter bankruptcy. I have always considered myself a supporter of the ANC, but an ANC of an era gone by. There is only so much any brand can do to retain customer loyalty, once the integrity and reliability of its products are called into question, there is no turning back. The unquestionable morality of the ANC old guard that enabled them to build an organization second to none in its constitution, enveloped in justice, equality and brotherhood for all has steadily been chipped away by a new breed of leadership, one that sees the colours of the ANC through green tinted glasses, and I do not mean environmentally friendly ones. Most of the recent membership just view the organization as a stepping stone to personal enrichment and of this, the proof is plentiful. The really devastating blow however is that this cancerous mentality has spread throughout the entire organization down to grass roots. Everybody is in it for a buck, from the minister signing multi-national deals to the ward councilor "selling" RDP houses. Obviously I am generalizing here as there will inevitably be some "good apples", though few and far between. Even the supporters at grassroots have changed. Have a look at one of the ANC marches during the apartheid era, there are no laughs, alcohol and looting accompanying the toi-toying. There was an air of fraternity and seriousness against one of the most tyrannical and oppressive regimes known to man. Fast forward now and amidst the guise of politics lies a criminal intent. Most recently was the charging of "toll fees" to workers wishing to go to work in Standerton and the looting of various local spaza shops throughout the country when any demonstration is held. Despite my criticism of the current ANC leadership, I think President Zuma has his heart in the right place, unfortunately for him, this is not going to suffice going forward. His ascendancy to power however has not gone unnoticed. What Zuma has demonstrated is that with the desperate masses on your side, you have absolute power. This explains why most of the strikes these days generally call for someone's head, someone who the chief organizer of the strike doesn't like or whose position he wants. In my opinion it is only a matter of time till the people are turned against Zuma and the tripartheid alliance is already showing tentative signs of this. This service to self and profit is evident throughout all of society. Ever wonder why your parent's 50 year old house doesn't show any cracks while your 2 year old Mc Mansion is hemorrhaging all over?.....tis all boils down to profit with no semblance of personal or professional pride (and I'm not gonna even go into healthcare!). Even though this commentary pertains to South Africa, it is applicable the world over wrt our current mindset and when history judges us, we would probably represent the low point on the human evolutionary scale. The poor management skills of our government have been aptly demonstrated time and time again. Hindsight has proved that the appointment of a significant number of senior government officials has had a seriousness negative impact on service delivery as these individuals were clearly out of their depth to start with. The problem with our government is that they want to adopt western socialistic principals in a country where not more than 20% of the population pays tax and unemployment sits close on 30%. A basic mass balance equation will illustrate that one cannot impose higher and higher taxes on the 20% without eventually putting them into poverty themselves. Eskoms new hair brain scheme bears testament to this thinking wherein 20% pay 135% more over the next three years and 80% get their free electricity threshold hiked up to 100kw. What happens when the 20% simply cannot afford to pay??? Yes we have (or at least in principle) free basic housing, sanitation, education and healthcare, but how the hell is this sustainable in a recessionary environment when only 20% of our population is contributing??? What happens to all the grand social plans if this recession morphs into a full blown depression as I suspect causing tax revenues to fall off a cliff. Where does government get money then?? Most municipalities in South Africa are already on the verge of bankruptcy due to years of corruption and mismanagement. In line with current thinking trends, they probably feel they can just hike up rates and taxes to balance their books as they can soon forget help from national government whose coffers are also quickly running dry. Mathematics is a language that's alien to our government, however I am afraid it's telling us that things are about to get a lot worse. As usual with these newsletters here are some predictions for South Africa which I sincerely hope I am eventually proved a pessimistic fool 1. 2009: The ANC tripartheid alliance will begin to dissolve. The economy will "hover" with the rest of the world. Service delivery protests will intensify. 2. 2010: Nothing spectacular prior to the world cup, thereafter however will be another story. Municipalities will line up for bankruptcy proceedings. Service delivery protests will become uncontrollable. The 20% funding populace will slowly be eradicated due to emigration or poverty. Swine flu will prove a major global catastrophe. 3. 2011: Due to falling revenues and an ungovernable populace the government will embark on mass nationalization of key industries. Xenophobia will explode together with crime (even by South African standards) 4. 2012-2015: We become another African "failed" state. 5. 2016: Just like post war Mozambique, those of us left will unite to build the South Africa we've always dreamt of.
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18 REPLIES 18
DEP
Super Contributor
Interesting reading... Who's the writer?
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Russ
Super Contributor
I suspect you are not finished yet.A good read.Do you write Helen Zille's newsletters by any chance?Much of what you say is not new,although no doubt your own thoughts.The question is,can anything be done to stem the accellerating descent of our country into anarchy,lawlessness and chaos?What can we who are still concerned about the preservation of first world values and standards do?
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SimonPB
Valued Contributor
two thorts .. only 20% pay tax is way wrong, vat and tax on fuel hits almost 96% of the population .. ya you meant income tax .. but well ..
"society of consumeristic fiend's hell bent on material accumulation irrespective of the means of achieving it. Basically we have adopted the corporate motto for our individual lives ie. Profit before anything else" .. this applies equally to the entire planet .. hence the entire rock is trashed ??
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Not applicable
Have'nt changed eh....and we not even talking gold...Yes u technical #$%%, I meant income tax;-)) WRT ur 2nd point i said "Even though this commentary pertains to South Africa, it is applicable the world over wrt our current mindset and when history judges us, we would probably represent the low point on the human evolutionary scale"..so yeh the whole rock is #[email protected]^* except we here in SA moreso.
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Not applicable
Dude if u have any suggestions I'm all ears as from what I can see, power lies in numbers and there ain't many of us rational folk around anymore!!
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NJ_1
Frequent Contributor
The problems you describe are universal to Africa. Africa doesn't seem to understand that production needs to exceed consumption for consumption to be sustainable. What is surprising to me is that you at one point thought that the ANC government would be different from other sub-Saharan African governments. What made you believe that they would be different?
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SimonPB
Valued Contributor
Africa doesn't seem to understand that production needs to exceed consumption for consumption to be sustainable .. surely applies to the whole rock, witness what happened last year ??
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SimonPB
Valued Contributor
dude I am too old to change and too old to buy gold (unless I am closing a short of course) ..
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NJ_1
Frequent Contributor
Absolutely correct, it is a global problem, but it is clear that it is a far bigger problem in Africa. Spending like there is no tomorrow is a different story when you actually have some solid production backing it up vs hardly any production at all to speak of.
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Not applicable
Nothing like a nice positive artice and a good bull market to add cheer to the weekend....NOT!
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topgun
Super Contributor
Yip, no country especially one as relatively unproductive as SA can absorb a 400% increase in electricity costs over a 5-year period without incurring severe structural adjustment and hardship - this is economic sabotage on a monstrous scale..terrorism? SA municipal debt is now R50bn and counting..the culmination of years of non-payment and no effort at recovery. The local demographic tsunami (worsened by the uncontrolled influx of economic refugees) is only starting to impact available infrastructure. What planning is the "planning minister" going to do without an electricity reserve margin over the next 4 years..and what prospects for growth to sustain govt. spending and increased social welfare spending? The NHI is the depth charge that will blow the SA(S) Titanic... An optimist in SA is indeed a financial illiterate.
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Not applicable
I thought there was hope due to the inherent expertise in the country. Furthermore the ANC top brass were in exile in many foreign lands and hence exposed to "out the box/africa" thinking which they aptley demonstrated during our peaceful transition...
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SimonPB
Valued Contributor
disagree entirely .. but time for drink so we'll leave it there ..
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topgun
Super Contributor
An ave. of 20,000 homicides a year since 1994 incl. 3089 dead farmers (at last count) is not a peaceful transition in my book...
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Not applicable
Topgun, are you short any positions long term? Just curious as you as well as others here appear to be very negative on the economy going forward. Just curious.
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sponono
Super Contributor
One day we will go to a museum of electricity to see how electricity used to make life easy in South Africa. On a more serious note, I'm looking at Remgro and I see a double top but I need sister stock and industry group confirmation. Which other stock(s) can I look at.
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NJ_1
Frequent Contributor
Fair enough on your erstwhile optimism. I agree with Topgun re the transition not having been peaceful. Agreed re 2010 being a watershed year: after the party the bills will have to be paid ...
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jack12
Super Contributor
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