Archives

More blog posts

10 May 2012 09:56

Opinion: Why buying gold is speculation for SA investors

Current events challenge its hedging value.

JOHANNESBURG Investors this week firstly digested indications that the euro crisis is deepening and secondly news that China's government transition may be delayed.  Emerging market currencies have softened yet gold has failed to rally. Investors who hold gold as a hedge should see this as a signal to test their assumptions. 

A balanced portfolio of shares and bonds offers considerable diversification benefits under many  business cycle scenarios. Holding a position in gold can provide further protection under some extreme circumstances. Recent events are suggesting however this may not work well over the next few years despite gold's stellar performance as a long-term hedge during the dot com, subprime and earlier phases of the euro sovereign debt crises.

Read full post

02 May 2012 10:56

Opinion: Excessively priced lending is reckless

The Reserve Bank's perspective is dangerously narrow.

JOHANNESBURG – Former Fed Chief Alan Greenspan and current Fed Chief Ben Bernanke both missed the sub-prime loan threats. European regulators also missed those dangers and then encouraged their banks to invest in soon-to-be-downgraded sovereign loans. 

Many of the SA's unsecured loans are no doubt fine. A simple test: if the effective interest rate is many times the prime rate, the loans are toxic - whether they are repaid or not. 

US sub-prime over indebtedness dangerously migrated from funding homes to current expenditures. SA's lenders are headed in the same direction. They are discouraged from making low-income home loans as dealing with communities and the courts in foreclosure, eviction and resale processes can be extremely expensive. It is much more attractive to make short-term unsecured loans at extremely high rates.

Read full post

20 April 2012 14:26

Why Blade is right about unsecured lending

It undermines micro growth platforms.

JOHANNESBURG - The insights of non-mainstream areas of specialisation often travel odd paths to achieve broad recognition.  Development economics is a complex field with insights that frequently elude top decision makers.  Hence the impact of low-income unsecured lending on SA's troubled economy is poorly understood by leaders in key fields as diverse as manufacturing, financial services, government and the unions.  That exposing this threat is left to the general secretary of the SACP is however particularly odd.

Many still believe that if only the country can grow at, say, 7% or 8%, that the nation's unemployment and broader ills will largely resolve themselves.  But in the four or five years leading up to the global financial crisis, SA - as well as many other countries currently experiencing severe challenges - enjoyed  high growth rates with questionable long-term benefits.

Read full post

13 April 2012 16:42

Blade vs Reuel

The general versus the doctor.

CAPE TOWN - Most countries are challenged to achieve dialogue among business, government and labour.  In SA such prospective meetings of the minds must accommodate the tripartite alliance dynamics which, although a poor substitute for robust political energy, is SA's centre of non-commercial power.  Yet there is much potential for business to find common ground with each faction and the tripartite alliance as a whole.

Just as commercial organisations are largely defined by their evolved cultures and histories, the alliance continues to reflect its struggle roots.  Blade Nzimande, secretary general of the SACP responded forcefully to Dr Reuel Khoza, chairman of Nedbank, having criticised the character and capacity of many senior government officials.  Whereas Khoza sought to contribute through legitimate criticism, Nzimande's reflex was to defend through attacking.  Both men's public positions reflect the nation's current lack of effective dialogue between business and the tripartite alliance.

Read full post

05 April 2012 15:09

Opinion: Nedbank’s chair scratches the surface on leadership

Why Reuel Khoza struck a raw nerve.

LANGEBAAN - Reuel Khoza again criticised government in his letter to shareholders as chairman of Nedbank. He had done so in prior years but what was different this time is that media and government responded.  Khoza's many criticisms of SA's ruling elites are valid but they stop well short of unpacking the core problems and his proposed solutions are clearly insufficient.

The ANC leaders have lived in a cocooned environment where their daily dramas are shaped by disputes and scandals among comrades mixed with the pomp and pageantry of official events. The secrecy bill is largely an attempt to maintain their cocooned existence.  But real world events are intruding with increasing regularity reinforcing growing concern - inside and outside of the party - that the ANC's style of government and policies are destined to undermine the party and the national economy.  Hence Khoza remarks have struck a raw nerve.

Read full post