Friday, October 16, 2009

Random thoughts on the economy



I am a great fan of George Annandale. He is a blogger whose articles are sometimes published in News24.

From his postings I can glimpse a man of high intellect, with a more than adequate knowledge of engineering, finance and commerce.

And he is highly critical of Eskom.

And he has a sharp and wicket wit to go with it.

See some of his articles here:

A-Bright-Light-in-Dark-Africa
ESKOM-LYING-AGAIN
Africas-Economic-Engine
Good-News-Bad-News-2


Yesterday, while browsing the news I got to an article “Rio scraps S.Africa aliminium plans”

I wanted to do a post on it, but in reality was at a loss for words.

So, having confessed that, here I sit this morning thinking about the South African economy in general.

The reason for that is that my wife just got back from South Africa, visiting the family, and we discussed the trip early this morning, on the back porch over a cup of coffee.

Now I am not going into a rant, with price comparisons, spewing my thought on supply and demand, the value (buying power) of the Rand in the international markets, input costs, etc.

All I am going to say is that South Africa today, must be one of the MOST EXPENSIVE countries in the world to stay in.

There is no logical, market related explanation for the high cost of living. Imported and local costs are high.

And then I read George’s blog, see a news article about companies cancelling investments in South Africa, and the realization struck me.

South Africa is NOT a free market economy.

The world recession that had a negative effect on growth worldwide, obviously also had an effect in South Africa. All the bad things that went with it are happening in South Africa. Job losses for instance.

However, because of the decline in demand, and the oversupply of goods, things worldwide have got cheaper. If you work, I have to add, your money has got bigger buying power. An example is the price of oil.

None of these positives of a recession is visible in South Africa.

This is only going to get worse.

And the reason for that should not be sought in the international markets, but rather in the inability of the government of South Africa to manage the country like a business, where it is imperative to keep your input cost low.

A related article can be read here.

I weep for the average South African, black or white.

4 Opinion(s):

Vanilla Ice said...

@AC. You make a very valid point. Although Canada is pricier than the USA, I have noticed prices come down in the last year. And if you shop wisely, there are always fantastic bargains.

Last week, after the articles on boerewors, it stunned me to see the rates of food inflation in South Africa. This week it was electricity.

The hidden costs of doing business in South Africa are so high, that this is reflected in price inflation. I can bet you that Cost of Sales are probably stable or declining (the costs you take into account when determining your GP); it is the other costs that are killing South Africans, the costs of doing business - like inefficiency, incompetence and bribes.

It certainly can't be excessive profits, since this is not reflected in the market earnings ratios.

Angulus Calx said...

VI

Price inflation in a time of recession? Now doesn't that sound wrong?

Somehow or other the "hidden" cost must be reflected above the line as GOGS, and yes the GP must be very thin.

Now another truth about accounting, is that all those numbers reflects real money. This means that real money is going somewhere where it should not.....

Doberman said...

Good piece.

Anonymous said...

When a white girl is killed, we are quick to jump into colour. We have been told time and again, that crime (except apartheid Crime) does not choose colour.

We have seen a number of black people being killed in their own back yards, in black communities and as well in some white communities. We have also seen white folks dying at the back yard of their own communities.

Lets work together to rid South Africa of the crime.