State-owned enterprises drag SA to the brink of junk

Written by Ciaran Ryan. Posted in Journalism

This story first appeared in Finweek.

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SA’s persistently weak growth and the stench of failure in its state-owned enterprises (SOEs) has dragged the country to the brink of junk status.

Last week Moody’s issued a credit note warning that a credit downgrade was on the cards unless government embraced reforms needed to put the country back on the growth path, and placed five SOEs on downgrade watch. Moody’s warning merely restates facts already on the ground: bond investors are increasingly steering clear of SOEs such as SA National Roads Agency (Sanral), Eskom and Transnet. In other words, a downgrade is already priced into SOE credit instruments.

The medieval state of SA’s home repossessions industry

Written by Ciaran Ryan. Posted in Journalism

This story first appeared in Moneyweb.

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A recent study of home repossessions puts SA among the worst in the world. The enthusiasm with which SA banks rush to repossess homes is described as ‘medieval’ and cruel.

SA might claim to have one of the most liberal constitutions in the world, with supposedly strong legal protections against arbitrary deprivation of property, but tell that to the more than 5 000 people booted from their homes each year by the banks, and the 15 000 served with sale in execution notices, which is a prelude to sale at auction by the sheriffs.

Did Standard Bank lie and cheat to get its hands on computer programme?

Written by Ciaran Ryan. Posted in Journalism

This story first appeared in Noseweek

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Did Standard Bank lie and cheat to steal an idea worth billions? When atm and internet fraud started seeping into public consciousness in the 1990s, Joburg-based software development company Advertising Digital Services (ADS) came up with a novel solution to a growing problem: hackers had found a way to secretly install a program on computers that would record keystrokes and mouse-clicks when users were logging on to sensitive websites. With this information, they could empty a bank account from anywhere in the world. ADS’s solution was to remove the keyboard as a point of entry to the computer and replace it with an on-screen virtual pin-pad that, each time it was used to input a password or PIN number, would rearrange the digits on its virtual keyboard. ADS director Johan Reynders wanted to patent the system, but was advised against it because, in any event, the system was protected by copyright for 50 years.

To avoid any ambiguity about ownership, however, he uploaded it to the internet in the 1990s so that people around the world could download it free, but only with his permission and provided they acknowledged that the intellectual property rights remained with ADS. Importantly, he says, he chose not to provide any information on the uses and applications of the product so as to prevent software developers coming up with rip-offs. He knew the industry had not yet woken up to the threats from hackers. When it did, he planned to introduce his solution to potential clients.

Residents fight back against banks’ eviction tactics

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Groundup.

A group called Lungelo Lethu Human Rights Foundation is preparing a class action suit against the four major banks for what it says are the unlawful evictions of thousands of South Africans from their homes.

MeetingOnEvictionsMethodistChurch-CiaranRyan-20151202 (1)The group is being led by King Sibiya, who has waged this fight before. “What we are seeing now is no different from the human rights violations that we fought against during the apartheid years. The difference now is we are fighting the banks. And it is not just black people who are victims of the banks, white people are too. This case shows that justice is for the haves, not for the have-nots.”

The Constitution provides protection against arbitrary deprivation of property, but Sibiya says this is routinely flouted by the banks.

How SA slept through the BEE revolution

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

When the term Black Economic Empowerment (BEE) first floated into the South African business and political lexicon in the early 1990s, there was some hopeful discussion that it would last just 20 years and then be phased out.

Well, 20 years have come and gone, and if anything, BEE has morphed into something more oppressive and outrageous than even the original architects could have imagined.

In the foreward to Anthea Jeffery’s book BEE: Helping or Hurting?BEE Helping or Hurting, author Rian Malan writes that most journalists missed the most important story of the post-apartheid era. “By the time I reached the halfway mark I was trembling with outrage and bombarding friends with distressed SMSes and emails. Are you aware, I said, that the ANC government has drawn up a ‘final policy proposal’ allowing it to expropriate 50 per cent of farmland without compensation being paid to the farmers concerned? And that the Constitutional Court has already given its indirect blessing to such a move?”

South Africans of every colour need to face up to some harsh realities: white South Africans need to admit that they unfairly benefited from apartheid race laws that kept blacks out of the race; black South Africans need to recognise that the laws being drafted by this government in their name have the capacity to destroy our society “just as surely as the Xhosa nation was destroyed by the Great Cattle Killing of 1856 to 1857.”

Is there a better tax system than the monstrosity currently in place?

Written by Ciaran Ryan. Posted in Journalism

This article first appeared in Moneyweb.

Is there a better tax system than the monstrosity currently in place?

Our-Land-our-rent-our-jobs-book-cover-1-500x361Stephen Meintjes, analyst at Momentum SP Reid Securities, and the late Michael Jacques, authors of Our Land, Our Rent, Our Jobs certainly seem to think so. What if we could replace income tax, VAT, customs duties, excise, sin taxes, fuel levies, the Unemployment Insurance Fund (UIF), skills development levies and every other ‘tax it if it moves’ impost with a simple-to-collect tax based on land value?

There is so much invested in the current tax system that it is hard to imagine an alternative. The cost of administering SA revenue systems is about R10 billion a year, and there are an estimated 2 000 registered tax professionals lumping another R1 billion on top of that as fees. A far greater cost is the combined hours and expense incurred by companies, executives, lawyers and the courts dealing with tax matters. That’s a stubborn oak to cut down. But cut it down we must if we want to unleash the true potential of the economy, say the authors.

White expat South Africans returning in record numbers

Written by Ciaran Ryan. Posted in Journalism

passport photoMore than 400,000 white expat South Africans have returned to the land of their birth since the apex of the financial crisis in 2009, according to research by Free Market Foundation economist Loane Sharp. This is based on extensive analysis of job candidates on the database of the country’s largest recruitment firm, Adcorp.

Sharp says SA’s white population of working age (15 to 64 years) peaked at 5.9 million in 1973, but declined steadily to 3.9 million in 2009. Since then, the white population has risen to 4.3 million, a net gain of 400 000 over six years. That’s a substantial brain gain for the country, since most of these returnees bring vast international experience in finance, engineering, medicine and other professions.

Some employment agencies are specifically targeting expatriate South Africans to fill highly skilled positions in sectors such as engineering, mining and construction, and that is accounting for some of the migration back to SA.

The story of SA in two depressing charts

Written by Ciaran Ryan. Posted in Journalism

Two charts tell the story of South Africa Inc. One shows that SA companies cannot invest outside the country fast enough, and the other shows that the JSE All Share index, measured in US dollars, is unchanged since 2007.

Old Mutual economist Rian le Roux put together the following chart which shows SA companies invested abroad to the tune of R80bn in 2014, and more than R60bn on a rolling, cumulative basis up to the second quarter of 2015. Back in 2012 the figure was zero.

Capital flight from SA

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Old Mutual chief investment strategist David Mohr says the rate at which SA companies are investing abroad suggests they are nervous about the current operating environment in SA, and see better returns elsewhere.

Lessons for SA from South America

Written by Ciaran Ryan. Posted in Journalism

Two South American countries – Colombia and Venezuela – offer lessons in governance that we would do well to heed. Colombia is now one of the fastest growing economies in South America. Venezuela, ravaged by a drop in oil prices and poor leadership, is moving in the opposite direction.

I highly recommend the Netflix series Narcos for some background on what Colombia has been through during the reign of drug kingpin Pablo Escobar. Also worth watching is the Spanish-language (with sub-titles) Palbo Escobar – El Patron del Mal (Pablo Escobar – The Lord of Evil). This provides some excellent context to the recent resurgence of Colombia as South America’s third largest economy.

This article first appeared in Moneyweb.

South AmericaColombia, once the drug den of the world and now one of its fastest growing economies, has a few lessons to teach SA. This is true also of its neighbour Venezuela, now the basket case of South America. In Venezuela’s case, the lessons are tragic.

Like most neighbours, Colombia and Venezuela haven’t always seen eye-to-eye. The two countries nearly came to war in 2009 when Colombia arrested four Venezuelan soldiers who crossed the border, and has repeatedly accused its neighbour of harbouring Marxist FARC guerrillas.

Relations have improved since then, but in most other respects the two countries are headed in entirely different directions.

Colombia, once the regional hub for drug traffickers and kidnappers, has undergone a remarkable transformation in recent years. Its economy is the fastest growing in the region after Bolivia, clocking an average 4.3% growth between 2001 and 2014. It also ranks second in the 2015 Economic Freedom Index, behind Chile, the result of vast improvements in labour, trade and investment freedoms.

How SAA shot down its rivals with taxpayer money

Written by Ciaran Ryan. Posted in Journalism

Competition never sat easy with SAA, which used R30 billion in taxpayer-funded bailouts over the last decade to shut down a string of competitors, from Sun Air to Trek and tiny Flitestar. No competitor was too small to overlook. Now its demons have come to haunt it in the form of two court challenges that could cost the airline over R6 billion in damages.

Noseweek Oct 2015 coverNational carrier SAA, amidst ongoing senior managerial disorganisation, is currently facing two massive claims, amounting to around R6 billion after tax, one for R1 billion by Comair and the other for R2.2 billion from businessman Robert Watson, owner of Rethabile, BEE minority shareholder of now-defunct Sun Air. Add interest to that lot and the claim could well exceed R6 billion. As we previously explained, the claim relates to charges that SAA conspired with Safair to take Sun Air out of operation, then gobble up its share of the market.

The alleged conspiratorial agreement between SAA and Safair only came to light years later, and forms a crucial component of Watson’s claim. What seems to have happened is that SAA purported to take majority control of Sun Air, baulked when it came to paying for its shares, and promptly shut it down. This, says Watson’s court documents, is one of several frauds committed by SAA.