Category Archives: Economy

  • 1

In a post-Zuma SA, sacrifice will be needed

In the wake of the Gupta leaks, polarisation in SA has increased significantly with a strange alliance of free-market (mostly DA), populist (mostly EFF) and disgruntled ANC voices (often repressed) on the one side with Zuma and Gupta defenders on the other side. The current discourse often ignores the elephant in the room, which is that with a sky high unemployment rate, faltering economic growth and poor education outcomes, serious changes are needed in SA, regardless of who is at the helm. If we do not aggressively address the inequality in our country, exacerbated by these factors, we are at risk of a populist uprising, which could set us back significantly. Sacrifice will be needed.

The Zuma and Gupta defenders faction is aggressively employing a strategy of shifting focus away from the accusations of corruption and weak delivery toward the ills of what they call White Monopoly Capital. On the other side, you find a strange union of populists, who want Zuma out of the way to deliver genuine redistribution, aided by nationalisation and seizure together with ardent supporters of the free market, many of whom are fed up with funding an often inefficient government and yearn for the days gone by.

Because of the polarised environment, these two factions often misunderstand each other and may be talking across purposes. Firstly, not everyone who is concerned about the influence and ownership of the white population on the SA economy are simply taking this stance as a way of defending Zuma (and the Guptas). Many of them have valid concerns, including the extreme inequality in our country (to a great extent along racial lines), the high unemployment and the low economic growth.

Secondly, not everyone who is calling for the ouster of Zuma and the removal of Gupta influence is a closet racist secretly yearning for the return of Apartheid. Many of this faction are genuinely concerned that the country is poorly run and recognise that for the long-term success of SA, we need better education outcomes, increased employment and higher economic growth.

What is plain to me though is that whatever happens to Zuma, whoever succeeds him and whoever wins the 2019 general election, serious issues need to be addressed in SA and it will take sacrifice from especially the wealthy in the country. Even if the DA manages to secure a victory (outright or through coalition) in 2019, they will have to continue with and implement new more aggressive redistribution policies in addition to dealing with the existing challenges of our country, including poor education outcomes, crime, healthcare, unemployment and weak economic growth. Even if the new government manages to enhance efficiency (reduce corruption) and achieves better bang for the taxpayer buck, this is unlikely to be enough. To fully address the growing challenges of our country, especially in the light of a rising debt load, pressure on exports and credit downgrades, whoever takes over will have to seriously look at the tax dispensation.

The aim of the new government should be to enhance its tax revenue through higher tax rates and possibly a wealth tax (which will put direct tax pressure on wealthy citizens and corporations), but in exchange to deliver improved services (which could reduce the indirect tax burden, including school fees, private health costs and security); to drive skills development to make the populace more employable; and to create a conducive environment for economic growth and job creation.

Any party who claims that they can create a stable and growing economy, which provides opportunities for all and reduces inequality, without raising taxes, may be fooling themselves. At the same time, any Zuma and Gupta opponent that thinks that their removal and replacement will usher in a golden age of growth and wealth creation without sacrifice, will be hugely disappointed.

We are facing some serious challenges. Our first phase of redistribution (from the mid-1990s to the late 2000s), which resulted in significantly improved service-delivery, the creation of a large and growing black middle class, the transfer of meaningful corporate ownership through BEE and the introduction of a basic (albeit insufficient) safety net through grants, occurred during a period of almost unprecedented asset appreciation, commodity price increases and economic growth.

These tailwinds are gone now. We cannot depend on rising asset prices to lead to almost all BEE transactions being successful and creating an effective transfer of wealth. We cannot depend on high commodity prices to buoy our exports and support our tax receipts. We cannot depend on low interest rates to allow us the freedom to drive lending-based growth.

We have to find a solution that will be effective in the world we live in. Part of this solution will necessitate a South African New Deal, where the haves pay more in tax, which is utilised to upskill the have-nots, to employ them through infrastructure programmes and to provide them with many more opportunities to increase their economic participation across the board.

At the same time, steps should be taken to kickstart economic growth, including liberalising labour markets, creating an attractive tax environment for selected globally competitive (or potentially competitive) industries, selective public private partnerships to explore growing industries (Eskom in the renewable energy sector stands out), less stringent immigration requirements to allow us to attract more skills and much increased government efficiency where we get much more value for the tax rands spent.

It is my view that the majority of privileged South Africans as well as the corporate sector would be more than willing to make the necessary sacrifices as long as they see the long-term benefits that could emerge and the risks that could be moderated. Those that do not, should seriously consider the alternative, which is rising populism, increasing economic disruption and growing polarisation.

Really successful companies are not scared to invest for future growth and sacrificing short-term earnings in exchange for a more certain stream of growing earnings going forward. The average well-off South African should have a similar view. Rather sacrifice income and consumption in the short-term, in exchange for a less uncertain and brighter future. What is of course vital is that whoever increases the burden on South Africans does so from a position of zero tolerance for corruption and at the same time, significantly increases the efficiency of how tax rands are spent. Those who are currently unwilling to sacrifice may soon change their minds if they see concrete delivery. That is at least my hope.

Do you think that the removal of Zuma and Gupta influence will automatically lead to a better life for you and your family? Are you prepared to sacrifice when asked by new leadership who promises improved delivery and a more secure future? Do you think you can have your cake and eat it or are you more realistic? I would love to hear your feedback.

In the mean time, keep your talking straight!

#GuptaLeaks #WhiteMonopolyCapital #NewDeal

 

Marius Strydom is the CEO of MLAX Consulting

https://www.facebook.com/straighttalkingstrydom

https://twitter.com/Marius_Man


  • 0

Let’s hope Trump is a con

Today was a huge day for the USA and the world. Donald Trump was elected president, against expectations and what polls told us. We were entertained, we were glued to our screens and our social media, we were amused at the absurdity of the whole situation, but we did not expect this to become real. But it did. We had our 9/11. Now the millenneals have their 11/9. All we can hope for is that Donald Trump is a con. That he galvanised feelings of bigotry and racism (in addition to feelings of disenchantment with Washington and the economic direction of the US) and said many horrible things, simply to get elected. Let us hope that now he will follow sensible policies and that his reign will not result in global uncertainty and a reversal of hard-won freedoms for those most vulnerable.

Trump’s acceptance speech was nothing like his utterances during the hard-fought election process. There was no talk of a wall between Mexico and the US; he said nothing about a ban on Muslims; he did not talk about defunding NATO, allowing more countries to get nuclear weapons, bombing ISIS families or starting a trade war with China; and he did not hint at prosecuting Hillary Clinton. Instead, he praised her for her efforts in the campaign and her meaningful contribution to US politics. This was a different Trump, a Trump that had achieved his goal (no matter the cost), a Trump looking for reconciliation, a magnanimous Trump even.

So maybe we will be lucky. Maybe most of the extreme things he said during his campaign were simply uttered so that he could ignite the heartland of America, the rustbelt, the South, the social conservatives, the evangelicals to support him. Maybe he did not really mean these things. Maybe it was all a con to achieve his ends, which was to occupy the White House. Not everything he said was predicated on hate of the foreign, distrust of the unknown and a yearning for a return to simpler times (at least for white people). Much of what he said was aimed at those middle class and working families that have seen their economic exclusion grow over the past 30 years. A grouping that have become exasperated and tired with the way that Washington operates. This is the same group of people that Bernie Sanders was targeting.

So if Donald Trump has just pulled off the greatest con in US political history, what are we to expect? Walls, bans, hate, trade wars, buffoonery and groping? I don’t think so. I see no wall being built and I see no ban on Muslims. Current immigration vetting is already very strong and I would not rule out an amnesty for illegal immigrants.

I would think that his presidency would have an internal focus with much less attention given to global diplomacy. He is unlikely to deviate from current US involvement in conflict areas such as Iraq and Syria, but would likely be pro reducing involvement over time. New hotspots will likely be left to sort themselves out – a new period of US isolationism.

A quick win in the US would be to commence a large (and much overdue) infrastructural spending programme, creating jobs and rewarding his base for their votes. This will likely lead to ballooning debt, but is a price that he may be willing to pay. Tax cuts will likely also be on the cards, but may be phased in over time, especially in the light of large infrastructural spend.

On the trade front, we may see a more protectionist attitude with the Trans-Pacific Partnership being the first victim. The biggest downside of such an approach would be rising inflation in the US, which could also usher in the end of quantitative easing and finally lead to a rise in US interest rates.

Interestingly, even though (Republican) Trump will have a Republican Senate and House to theoretically support his policies, it may not be that easy with many representatives not agreeing with his approach. We may find him having to build coalitions across the aisle to enact some of his plans.

On the positive side (for Republicans), the dismantling of the Affordable Care Act (Obamacare) is likely to commence shortly after his inauguration. However, it is not clear whether it will simply be rolled back or whether something else will be put in its place. Ironically, many of his (non-traditional Republican and even traditional Republican) supporters will probably favour some alternative rather than nothing at all.

On the negative side (for Republicans), Donald Trump may not be as conservative as Republicans would like in appointing Supreme Court judges. His progressive New York values (as Ted Cruz referred to) probably puts him on the side of at least maintaining the recently won (marriage equality) and entrenched (woman’s right to choose) freedoms. If I am correct (and he was conning his base), he may once again have to build a cross-aisle coalition to affirm his nominees.

If we are very lucky, he may even address inner city decay (as promised) and support reasonable gun laws. This may be overly ambitious, even if he conned the base, but we can hope. Global warming may be the biggest (and most serious) issue that is left unaddressed, regardless. On this topic, all we can do is to continue agitating.

If, however Donald Trump is not a con. If he meant what he said during his election campaign, the US and the world is in for a rough ride and the most vulnerable in the US and the world will suffer most. So, let’s hope that Trump is a con. Let’s hope that now that he has the position he sought, that sanity will prevail. Let’s hope that he does not do too much damage. And maybe, just maybe, he could do something good.

 

Are you exasperated after the US election? Are you scared of what a Trump presidency may mean? Do you think that maybe he was just conning (at least some of) his supporters to get the position and that his policies will be more reasonable than we expect? I would love to hear your feedback.

In the mean time, keep your talking straight!

@realDonaldTrump #USElection #119 #NotMyPresident

 

Marius Strydom is the CEO of MLAX Consulting

https://www.facebook.com/straighttalkingstrydom

https://twitter.com/Marius_Man

Photo by DonkeyHotey


  • 1

Investment boycott is perverse

Following the halting of lending to six state-owned enterprises (SOEs) by Futuregrowth, there has been increasing calls for an investment boycott or even a tax strike in SA. I believe such steps would be perverse, considering the fact that even during the worst days of Apartheid, no such steps were implemented by SA firms or taxpayers. An investment boycott or tax strike would be very damaging to the SA economy and risks fuelling the flames of division within our country even further.

The aim of an investment boycott or tax strike would be to force the government to take a number of steps supported by some opposition parties and some sections within big business. These steps would likely include the cessation of the actions against Pravin Gordhan, the halt of the nuclear project, increased oversight of SOEs, seriously addressing corruption and probably the resignation of President Jacob Zuma.

In my opinion, an investment boycott or tax strike would represent the nuclear option for SA, which would be very damaging to our economy and to our most vulnerable citizens. It could limit the government’s ability to deliver on its promises: including the National Development Plan; it could put pressure on infrastructural spend; and could even limit its ability to fund budget increases, which could put pressure on areas such as education, health, etc. In addition, it could damage the country’s reputation if it were to lead to a reduced ability by the country to finance its debt. If we are looking for a credit rating downgrade, an investment boycott or tax strike would go a long way to achieving it.

In addition to the damage that such actions could cause to our economy and reputation, it also is not guaranteed to succeed. Even overwhelming participation in such actions (which would be needed, but is unlikely, in my opinion), may lead to the opposite reaction from the ruling party than is desired. It is much more likely to unify the ANC and cause it to close ranks. If this were to occur, the pain experienced by our country would be extensive and long-term.

In addition to the economic and reputational damage that an investment boycott or tax strike could cause, it could also be very harmful to the social fabric and our desire for unity and equity. It would serve to flame the fires of the “white capital” narrative that is increasingly being bandied around in our country and is creating increasing divisiveness. And it would be correct to do so. The plain truth is that the same people and institutions who are calling for an investment boycott or a tax strike, were silent on these topics during Apartheid.

There is no doubt that international sanctions against the National Party played a meaningful role in leading to the demise of Apartheid. However, it was never supported by SA business or by SA opposition parties. Not even the Progressive Federal Party (PFP) who was the precursor to the DA supported these actions. No large SA corporates became involved in sanctions and none of them came even close to an investment boycott. This was despite significant human rights abuses and disenfranchisement perpetrated by the Nationalist government. There was also no real talk of a tax strike by South Africans.

We can see the lack of action by SA big business, opposition parties and white citizens in the 1980s and before as complicity. We can choose to believe that they were happy to live under Apartheid and for many, I am sure this is true. However, we must not under-estimate the impact that fear could have had on inaction. An investment boycott or tax strike by SA big business and white citizens would likely have led to a substantial crackdown by the NP government, which was too ghastly to contemplate by many. And here is the rub. We lived in a police state during the 1980s, under an almost constant state of emergency. We lived in a country that was not free, even for the beneficiaries of the system. That has changed.

Say what you will about recent actions by the ruling party, about corruption, about lack of accountability, about our President being seemingly untouchable, we still live in a free and democratic country. If you have any doubts about this, go and have a look at what newspapers write every single day about the government and the ANC, without fear or serious reprisal. Go and have a look at what people have to say on social media and how many of them are arrested for it. Gone are the days when you had to watch what you say, who you interact with, who you gather with, who you protest against. Gone are the late night knocks on your front door, the arrests, the detention without trial, the “suicides” of those in custody. If you are still not convinced, go and have a look at who governs Tshwane, Johannesburg and Nelson Mandela Bay metros. If we were not substantially free in this country, if we did not have a vibrant democracy, this would never ever have happened.

In addition, go and have a look at what ANC loyalists and previous leaders have to say about the SARS wars, about Nkandla, about the constitutional court ruling and about electoral losses. The vast majority of South Africans and leaders on both sides of the aisle can see what is going wrong with our country and are adamant to make it better. The majority of people are on the right side of history and we will see positive changes in the near term. I am confident and optimistic.

However, if you want to divide people, if you want the racism card to be played more often, if you want the “white capital” narrative to grow, if you want to devastate the economy, if you want to hurt the most vulnerable and if you want to damage the country’s reputation, then you must support an investment boycott or a tax strike. I seriously hope that this is not what you want.

I therefore call on opposition parties to speak out against these voices looking to damage our country. Refer back to your and your predecessors’ arguments against sanctions in the 1980s. I call on big business to distance themselves from these moves. Remember what side of the argument you were on during Apartheid and consider what this could do to the economy. I call on ordinary South Africans to be patient. We are moving in the right direction and forces for change are gathering momentum. Trust that the hard-won democratic process allows for your voice to be heard.

Are you a supporter of an investment boycott or tax strike and why? Are you not concerned about the negative impact this could have on the economy and ordinary South Africans? Would this risk the hard-won unity that is developing in SA? Would it not add fuel to the “white capital” narrative and racism allegations? Should you not have the same approach as when you were against sanctions in the 1980s? I would love to hear your feedback.

In the mean time, keep your talking straight!

#InvestmentBoycott #TaxStrike #Futuregrowth #SARSWars #Sanctions

 

Marius Strydom is the CEO of MLAX Consulting

https://www.facebook.com/straighttalkingstrydom

https://twitter.com/Marius_Man

Photo by twicepix


  • 2

Brexit could be reversed

On 23 June, UK voters decided to leave the European Union (EU) in the much touted Brexit referendum. The fall-out was immediate and severe, both politically and economically. Buyers’ remorse prevails with UK voters having the worst electoral hangover in recent history. Unlike most elections, there are very few people who are celebrating and an increasing number who are ruing their decision. The question now is, whether there is any way to reverse this increasingly unpopular decision? I believe so. The actual exit from the EU will only commence once the UK invokes Article 50 of the Lisbon Treaty of 2009. If there is sufficient public pressure, enough political will and a clear mandate for the UK to stay in the EU, this may never happen. It may be embarrassing for the UK and its leaders, but it may well be the best thing for its citizens (especially the young), the EU and the wider World.

Following the Brexit vote, the British Pound declined by over 10% to the dollar and hit a 30-year low over the past week. By last Tuesday, global equity markets had lost more than $3 trillion following the vote (although there has been some recovery since). On the morning of the vote result, the UK Prime Minister, David Cameron, announced his resignation and the leader of the Labour Party, Jeremy Corbyn has been under immense pressure from within his own ranks. He will likely not survive.

It is no wonder that the fall-out was so extreme. Britain’s proposed departure from the EU has created huge uncertainty and is expected to be very negative for the economy. In addition, there are concerns over what this means for the stability of the EU (already parties in other countries have called for similar votes), what this means for the stability of the UK (Scotland is asking for another referendum on independence and in Northern Ireland there are talks of uniting with Ireland) and what this means for relations with foreigners in the UK (with a number of reported racist incidents following the vote).

Support for the Leave camp of Brexit emanated across different UK political parties and regions. The main party that wholeheartedly supported it was UKIP under Nigel Farage. The Conservative Party was split with the Prime Minister, David Cameron supporting the Remain side whilst Boris Johnson (previous mayor of London) supported the Leave campaign. The Labour Party purportedly supported the Remain side, but many believe that its leader, Jeremy Corbyn was ambivalent and did not provide strong enough support for this side. As a result, many labour MPs and supporters voted Leave. Three areas that overwhelmingly supported Remain were Northern Ireland, Scotland and the City of London. Another grouping that supported Remain were the young people in the country with polls showing that only 19% of people between the ages of 18 and 24 supported a Brexit.

A strong theme that has emerged post the results is that the Leave vote for many people (and even supporters) was a protest vote and not necessarily the outcome that they desired. An online petition to rerun the Brexit referendum has already attracted more than 4 million signatures. The question now is whether there is any way for these protest voters who now regret their decision to be given another opportunity to vote? I believe that this is possible.

As it stands, no political leader is willing to contemplate another referendum. David Cameron has said that another vote is “not remotely on the cards” and Boris Johnson has said that there will be no general election if he wins the Conservative Party Leadership. However, at the same time, Cameron is not willing to invoke Article 50 yet, which is a prerequisite for negotiations towards an exit to commence.

Many UK leaders may be hoping for informal negotiations with the EU to commence to provide more clarity prior to invoking Article 50. The EU, however, are adamant that no discussions will occur until Article 50 is invoked. They are playing hardball and are unwilling to make this process any easier for the UK. They want immediate action so that they can move forward without uncertainty overhanging the future of the EU. This line from EU leaders could put additional pressure on UK politicians during a period of uncertainty.

Within the next three months, we will see a new leader of the Conservative Party and likely a new leader of the official opposition, the Labour Party. It is highly likely that these developments will put increasing pressure on leaders to hold a general election so that a fresh mandate can be obtained from the electorate. Even if Boris Johnson wins the Conservative Party race, he may not be able to stop the increasing pressure for a general election. If Theresa May (the other main candidate) wins, a general election would be very likely, in my opinion. She was a strong supporter of the Remain campaign.

If a general election is called, there is little doubt that the campaigns would focus aggressively on the UK in the EU question. The elections may turn into another Brexit referendum by proxy. If I am correct and the recent uncertainty and remorse from Leave voters shifts support convincingly to the Remain camp, the winners of the general election may well have a fresh mandate to not invoke Article 50.

This would inevitably lead to another Brexit referendum, which the Remain side would likely win. Article 50 would then never be invoked and the UK would remain in the EU. Although this would be embarrassing for UK leaders, it would be good for their citizens, the EU and the wider World. It may also lead to further negotiations that could improve the way that the EU functions and how the UK operates within it. The post-Brexit hangover can then finally subside.

I was a strong supporter of the Remain side. I believe that the EU is a very important institution to help drive a peaceful future in Europe and the World; that a weakening of the EU would be negative for race relations and the immigrant question; that the EU is positive for the global economy and markets; and that the EU is an important force for good when it comes to the sharing of progressive ideas. I recognise that there are shortcomings, but I believe it is better to address them as a unit than for countries to go their separate ways. As a result, I would be overjoyed if the UK reverses its Brexit decision. Fingers crossed.

 

Were you shocked by the Brexit decision? Were you surprised by the pressure it put on currencies and the markets? Do you think it is a good idea and why? Do you think there is a chance that it could be reversed? Would that make you happy or angry? I would love to see your opinion.

In the mean time, keep your talking straight!

 

#Brexit #UK #EU

 

Marius Strydom is the CEO of MLAX Consulting

https://www.facebook.com/straighttalkingstrydom

https://twitter.com/Marius_Man


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