NFB FINANCIAL UPDATE Volume58 Oct 2011
FROM THE CEO’s DESK
J
ust as we, the SAS's (South African sceptics), began to discount the fact that Julius would get away scot-free the ANC has gone and done it again. They are hammering him, apparently having let him measure out his own noose. Whilst all is not well in our economy and we remain hamstrung by the rather frustratingly entrenched issues of poor productivity, crime and crazily low levels of both savings and education, we can reflect on certain critical political issues and wonder if we give the ruling party enough recognition for its somewhat pragmatic approach to progress. I was at a breakfast presentation and listened to the enigmatic JP Landman (well known economist, lecturer and husband to Carte Blanche's Ruda) who succinctly reminded the audience of some of these key issues, and of our initial, and typically, fear infused reactions followed by a whole lot of worry, waiting for the inevitable, but which frustratingly doesn't happen. Until next time the sceptics remind us, of course! What are the key issues I am referring to? Well for starters, the Malema process, followed by the mining and farmland debate which has moved from an ideological to a pragmatic process. Also the fear of a major move to the left, forecast after Polokwane resulted in no policy change of any substance within the body politic. Another issue was labour's insistence that labour broking be banned. The Minister has now said that there is a need for labour brokers to be accommodated in the system. The jury is still out on the very controversial Protection of Information Bill, but watch this space for a softer landing than we fear. Actually, as an aside, I sometimes agree that with the shoddy quality of information and the continued need for retractions and apologies from the media, an Act of this nature or some form of censure might get Editors delivering accurate and responsible reporting. As I have noted before in previous editorials, I am not politically active and regard myself as a pragmatic capitalist. What we need to do is support that which makes long term sense and oppose that which destroys value, confidence and capital. This brings me to my next point. The debate, both
in the world and in South Africa, has moved from that of poverty to that of inequality. Look at Egypt, Syria, and Libya and elsewhere, including the Southern European nations and we see social disquiet previously seen at Tiananmen Square, where the fabric of communities and countries play second fiddle to basic needs of families and communities. This social risk exists wherever the gap between the rich and struggling classes is large. South Africa is a classical example of this situation and this suits the Malemas of this country down to the ground. The ANC are very mindful of this risk and we can see this sensitivity in, amongst other ways, the Central Banks reversal of monetary policy, where rates might be dropping as opposed to firming. This is intended to have a dual effect, one of lightening the burden on both corporate and individual borrowers, stimulating the economy by increasing disposable income, and secondly to make the incredible foreign flows into SA cash investments, brought about by our attractive and competitive interest rates, slow down or reverse, thus weakening the rand and supporting industrials exporting goods and creating local jobs. So, in summary, all is not bad on the local front. However, globalization is a reality and it is appropriate to note that the last two meltdowns our markets have suffered have both been the result of exogenous events, the first in 1998 as a result of the Tequila Crisis in South America and the last as a result of the Global Toxic Debt meltdown of 2008/9. Now is not the time to get greedy or too smart with capital. Having said this, it is also true that corporate earnings have been good and corporate balance sheets are pretty robust, and a healthy debate exists when discussing local vs. offshore investments. I would advocate a clear understanding of investment needs, duration and tolerance to volatility before committing money. Value is to be found, but the markets remain incredibly volatile and we would welcome discussing existing and potential new investments with you. Mike Estment, BA CFP® CEO, NFB Financial Services Group
IN THIS ISSUE From the CEO’s desk Retirement Annuities (RA's) - much maligned and underrated South Africans need disability cover
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