David Bullard writes on Khumbudzo Ntshavheni's fingering of the real culprits behind the slide in the rand's value
OUT TO LUNCH
Seventy thousand containers bobbing about on the ocean waves outside Durban waiting to be unloaded. The return of stage 6 loadshedding with up to eleven hours of no electricity in any twenty four hour period.
Obviously much depends on whether there is any electricity to be returned once the loadshedding ends and friends in Johannesburg (a world class city) were without electricity all over the weekend in what used to be known as the fashionable northern suburbs due to a ‘fault’ in the area.
These faults are apparently pretty common now in Johannesburg and when you report them you eventually receive an SMS message saying the fault has been attended to and yet the electricity is still off so you have to go through the whole rigmarole of reporting the fault all over again.
Bankrupt and non functioning municipalities scattered all over the country presided over by mayors driving very expensive cars paid for by the taxpayer. Violent crime at ludicrous levels, a corruption pandemic and an apparent complete breakdown in the judicial system where well connected cadres are concerned. And who is to blame? Well, apparently it is the private sector. ___STEADY_PAYWALL___
The competition among ANC bigwigs to win the coveted ‘stupidest political remark’ award is always keenly contested with plenty of favourites. When he isn’t dressing up as a bumble bee or taking photos of himself on yet another sponsored freebie Fikile Mbabula is a regular front runner and his position as Secretary-General of the ANC now allows him more time to make speeches around the country where he can spout nonsense. Last week he was in Durban at some waffle shop where he chided black businesses for not financially supporting the ANC.
Then there’s Gwede Mantashe, Blade Nzimande, Bheki (Shaddup) Cele, Nkosazana Dlamini-Zuma, Lindiwe Zulu, Pravin Gordhan and a host of other comrades pursuing the Venezuelan Nirvana who can be guaranteed to say something really stupid on a regular basis.
But this week’s prize for sheer idiocy has to go to the rather grandiosely named Minister in the Presidency, Khumbudzo Ntshavheni who spoke at a post-Cabinet briefing on the alleged manipulation of the rand by a consortium of banks.
"It [currency manipulation] is a very sad state. We have maintained over the period that the performance of the rand and sometimes the performance of the economy has been manipulated by [the] private sector, [which] has no interest in the development of this country,"
She went on to add that the private sector: "engineer and do machinations to ensure the government collapses".
So all those terrible things that are happening to South Africa at the moment are the result of private sector sabotage?
Apart from displaying a woeful ignorance of the workings of the financial markets and particularly the currency markets, Ntshavheni’s paranoiac claim that the private sector’s (aka ‘big business’) chief aim is to sink the government with profitability coming a very distant second shows how truly moronic this minister’s comments were.
Let’s take the so-called manipulation of the currency markets first. Obviously, I am not in possession of all the relevant facts but twenty five years in financial markets makes me very suspicious when I hear words like ‘collusion’ bandied about. For a start, banks are in competition with one another and a trader’s annual performance bonus depends on reading the market correctly; so sharing your trading strategy with other banks seems unlikely.
Volatility is the name of the game in financial markets so if the rand improves significantly against the greenback then that’s fine for all those long of the rand. Since there have to be two sides to the deal the sellers of the rand in this case would be on the wrong side of the deal. Maybe they weren’t in the collusion loop if indeed one ever existed.
But currency markets aren’t driven purely by speculation but by genuine demand or otherwise for a currency. So if the banks had a whiff of a large tranche of dollars coming into South Africa to be invested in government stock (this actually used to happen in the days when we were viewed as a stable investment haven) then they might possibly ‘front run’ the transaction and make a quick trading profit.
They would almost certainly not have shared that intelligence with other dealing rooms I suspect. Front-running is frowned upon as is ‘insider trading’ but those accusations are often very difficult to prove which is presumably why the Competition Commission’s investigation into price collusion dragged on for more than two years and no doubt went down quite a few blind alleys.
The fact that Standard Chartered Bank wants to get this albatross off their shoulders and has paid a fine of R42.7 million seems to have caused great excitement among certain commentators. The sum of R42.7 million rand equates to roughly $2,274,000 at today’s exchange rate. Since Standard Chartered declared annual profits of $2.55 billion the derisory amount of $2.274 million is probably half a morning’s work on a quiet market day. It’s all a matter of perspective.
Standard Chartered has offered to snitch on other colluders and there is talk of individual traders being prosecuted but probably not in this lifetime given the expertise of the National Procrastinating Authority. The reality is that manipulating the performance of the rand and therefore the economy on an ongoing basis (as Ntshavenhi alleges) is likely to meet with the same degree of success as Canute holding back the waves.
However, it’s Ntshavenhi’s absurd and quite illogical claim that the private sector is a sort of loosely affiliated anarchic terrorist organisation seeking to overthrow the government and ensure chaos that deserves attention.
Business has sort of responded in its terribly wishy-washy way with BUSA CEO Cas Coovadia saying he hopes the minister will “reconsider her comments”. My question is, where was Frogboiler and why didn’t he immediately issue a statement saying he was hugely embarrassed by this asinine comment and has sacked the minister with immediate effect? That’s the sort of thing that tends to happen in places like the UK when a minister makes a fool of him or herself.
Instead Frogboiler, lamenting the omnishambles that Richards Bay has become, suggested that:
“The private sector is going to play a critical role through either concession and co-operation on a number of nodes on this precinct where they, together with Transnet, will be able to run certain aspects of the operations that take place here”.
Would that be the same private sector that his Minister in the Presidency accused of wanting to collapse the government a few days prior to this visit I wonder? Yet more proof that Frogboiler and the ANC haven’t a clue what is happening in the real world and have no solutions other than to promise that “heads will roll”.
Checking the Wikipedia entry for Ms Ntshavheni I wasn’t in the least bit surprised to learn that some ‘controversies’ have dogged her political career and that Chief Justice Raymond Zondo recommended that she and other board members of Denel be investigated by law enforcement with “a view to possible prosecutions”. There was also a small matter of campaign funds moving in unusual directions. This has become almost a rite of passage for those who run this country so don’t expect any action there.
Most surprising though was the claim that Ntshavheni obtained a Masters in Business Administration in 2008 from Bradford University. This is in addition to the undergraduate degree from Rand Afrikaans University and the two honours degrees she was awarded after. If these are indeed her post-graduate qualifications this makes her comments last week about private sector sabotage even more worrying than I initially thought.
Finally, as somebody said to me this week over a glass of Ken Forrester’s finest Chenin Blanc, “If you’re just an ordinary, law abiding, tax paying citizen, living in South Africa feels increasingly like being held hostage under the ANC”.
(Explanation: Front Running - this refers to a situation when a large client places a buy order for something that you know will move the market price. So you buy a few for yourself first. Example: a large financial institution gives an order to buy 50 000 shares in Dodgy Deals Ltd. Dodgy is trading at R15 but the buy order is likely to drive the share price up to at least R18. So you buy a few for your own account first. Oldest trick in the broking book.)