Tuesday, 19 December 2017

The lessons that Jacob Zuma can learn from PW Botha

Read the full article by Jackie Cameron in Biznews.com:  https://www.biznews.com/thought-leaders/2017/12/20/jacob-zuma-pw-botha/

The election of Cyril Ramaphosa as president of the African National Congress and Jacob Zuma remaining on as the South African president for a further 18 months, is reminiscent of another era in South African politics.

Almost 28 years earlier, in January 1989, the South African president, PW Botha, had a mild stroke and decided unilaterally and without thinking too deeply about the implications, to separate his position as president from that of leader of the National Party. Ostensibly Botha wanted to ‘lighten his workload’ and to be able fulfill the role as a national ‘unifier’ for all races. He resigned as party leader in February and requested the party to elect a new leader. FW de Klerk’s narrow victory as leader of the National Party on the same day set-in motion a chain of events that led to Botha being forced out seven months later.

The conflict that ensued between De Klerk and Botha was, at its core, a power struggle between two centers of power.  Botha became a president without a power base (except for the one that he believed he had among all “good South Africans”), and De Klerk felt that he had the base to implement his own reformist policies. Over the next few months Botha pretended as if nothing has changed and tried to continue with general policy-making decisions, including issues of national security, foreign affairs, constitutional affairs and the economy, while De Klerk attempted to stamp his authority on the government and began to contemplate some progressive reforms. Clashes ranged from subtle barbs by Botha, challenging his successor’s status and motives, and Botha’s private reception of the still-imprisoned Nelson Mandela without consulting De Klerk. 

The hostility between the two men eventually turned into open conflict over the date of the next general election and matters came to a head in August 1989, when a seething Botha publicly challenged De Klerk on his meeting with Kenneth Kaunda of Zambia. The vast majority of the NP caucus supported De Klerk. Botha had several options – he could fire the whole cabinet, call a general election or resign. After a volatile cabinet meeting where a bitter Botha levied recrimination against his colleagues, he announced his resignation on television the next day. As Botha’s successor, De Klerk then continued to transform the South African political landscape within the next six months.
While the constitutional position in which PW Botha found himself in 1989 differs from that which Zuma finds himself 28 years later, the principle of a weakened leader without a loyal and legitimate powerbase remains the same. Ramaphosa will soon want to change the direction of the country away from the ‘failing state’ that SA has become under the corruption, state capture and incompetence of the Zuma era. While Zuma has everything to gain from the status quo and still has his grip on the levers of power as President, the center of gravity has dramatically shifted to the new leader.

And during his remaining time as President and probably much sooner, Zuma will learn that Ramaposa’s power base has increased exponentially and that he will be directly challenged on all fronts. This includes Zuma’s prerogative to appoint cabinet ministers. Zuma’s short-term salvation might be that fact that 49% of the congress voted for his preferred candidate Dlameni-Zuma, but even this leverage will wear off as Ramaphosa tightens his grip on power. Conflict on policy and administration will emerge between Zuma and Ramaphosa, just like between FW de Klerk and PW Botha. Like Botha, Zuma will be on the losing side most of the time, and he probably has less than six months left as President of South Africa. 

Johann  van Rooyen, for Global Finances and Politics

Tuesday, 5 December 2017

EU crackdown on tax havens

The EU has placed 17 countries and territories on a tax haven blacklist and put a further 47 on notice. This follows the revelations contained in the Panama and the Paradise Papers, and estimates that about $673 billion is lost to governments each year due to aggressive tax avoidance.

The EU blacklist and will be linked to European legislation to ensure these jurisdictions will not be eligible for funds from the EU (except for development aid), but apart from that, no real sanctions were put in place.

The blacklist includes South Korea, Mongolia, Namibia, Panama, Trinidad & Tobago, Bahrain and the United Arab Emirates, Guam, American Samoa, Barbados, Grenada, Macau, the Marshall Islands, Palau, St Lucia, Samoa and Tunisia. Interestingly, only three countries on this list - St Lucia, Grenada and Panama - are also actively engaged in residency- and citizenship by investment programmes.

Hopefully this will further counter the misperception that countries ‘selling’ 2nd passports are necessarily synonymous with blacklisted tax havens or involved in dubious tax practices.


Friday, 1 December 2017

Electric cars cheaper than gas

Electric cars are already cheaper to own and run than petrol or diesel cars in the UK, US (Texas and California) and Japan, taking into account subsidies, purchase price, depreciation, fuel, insurance, taxation and maintenance.

According to an article in the Guardian, if this trend continues, electric cars are expected to become the cheapest option even without subsidies in a few years. Read the whole article below: https://www.theguardian.com/environment/2017/dec/01/electric-cars-already-cheaper-to-own-and-run-than-petrol-or-diesel-study

Sunday, 19 November 2017

Great residency options for HNWIs

https://www.theglobeandmail.com/globe-investor/globe-wealth/real-estate-hot-spots-draw-the-worlds-affluent/article35942457/

Tuesday, 22 August 2017

CROSS BORDER PLANNING FOR THE PRIVATE CLIENT - LONDON 28-29 SEP 2016

I will be speaking at this event on 29th September in London. VIP passes with free attendance are available, should anybody be in the neighbourhood at the time: VIP Code FKW53524SPK.


https://finance.knect365.com/cross-border-planning-for-the-private-client-europe/?vip_code=FKW53524SPK&utm_source=Speaker&utm_medium=Email&utm_campaign=FKW53524SPK-Speaker-Email&utm_content=FKW53524SPK&tracker_id=FKW53524SPK

Monday, 1 May 2017

The end of Jacob Zuma?

Could the broad anti-Zuma protests which are now reaching a crescendo across South Africa, finally be bringing the President close to his CeauČ™escu moment?  

The humiliating and crushing treatment dished out to Zuma at the main Workers’ Day rally in Bloemfontein on the 1st of May where he was prevented from speaking by trade unions members, could finally spell the end of his presidency. This is in addition to several months of calls for his to resignation from leaders across the spectrum, including opposition parties, members of the tripartite alliance – Cosatu and the SACP, ANC veterans, three former South African Presidents and Archbishop Desmond Tutu, and even members of his own cabinet.

The significance of Zuma booed and heckled will have emboldened the anti-Zuma elements both within the ANC alliance and in the opposition, especially supporters of the EFF, a party which is frequently thrown out of Parliament when disrupting Zuma's speaches. His rapidly diminishing support-base is now limited to group of financial beneficiaries, assorted sycophants and the Gupta family. The rousing applause that Vice-President Cyril Ramaphosa received at a similar venue and his open criticism of Zuma, make it unlikely for the two men to ever appear together at a public venue again. 

When Nicolae CeauČ™escu of Romania, Erich Honecker of East Germany were confronted by hostile and resentful crowds and were seen as powerless to do anything about it, the floodgates finally opened and soon led to their downfall. Zuma should keep these examples in mind in case he is considering an authoritarian response to growing opposition to his Presidency, as Matthews Posa warned he might doing.

In either case, South Africa has moved past the point of no-return, where either the masses in the streets will soon bring down Zuma, or his own Party will do so as an act of self-preservation.  

© Johann van Rooyen, 1 May 2017

Also see the author's other blog at  Residency and Citizenship for Investors


Thursday, 20 April 2017

Why oil is doomed

According to Dieter Helm, an Oxford University economics professor with a track-record of correctly predicting oil prices, the oil market downturn has got a long way to run (cited by Jillian Ambrose in the Telegraph 17 April 2017). 

The main reason, he argues, is concern over climate change and the renewable energy revolution, in particular, electric cars. He says that the burgeoning market for electric vehicles is underestimated and 'could radically change' the outlook for oil demand. 

Even BP admits that electric car use could halve the demand of drivers for oil and that the number of electric vehicles could double from previous estimates of 57 million to 100 million in 2035. Even this is probably a vast under-estimation, considering the rate at which car companies are turning out new electric vehicles, Tesla being just one. BMW is planning to bring out several EV models and Chevy's Bolt offers a cheaper alternative with range of 400km on a single charge, comparable with Tesla and gas-powered engines. 


Helm argues that industry shifts to a low carbon future means prices may continue to fall ‘forever’ and so far only BP and Royal Dutch Shell are adjusting, albeit very slowly, away from oil to gas and towards low-carbon energy. He advises oil companies, with total assets of $1 trillion and $300 billion in gas assets to follow a 'ruthless harvest-and-exit strategy', slashing capital expenditure, pumping remaining reserves, cutting cost and paying out very high dividends.

(c) Johann van Rooyen, 20 April 2017

Monday, 12 December 2016

The Chinese Dragon - riskier than you think?

China is in the process of aggressively and rapidly expanding its hegemony around the world and it is building up its military might. However, the biggest risk posed by this superpower lies in the financial sphere and it is resulting in people and capital leaving the country at unprecedented levels. 

China is embroiled in dangerous geopolitical adventures in the South China Sea, making grandiose territorial claims and building artificial islands. It reaches into other countries to silence critics, is becoming more repressive and remains an authoritarian one-party state. It suffers from high levels of pollution and corruption. These tendencies are making many wealthy Chinese anxious and looking for a way out.

China is already the largest source of regular emigrants in the world, with more than half-a-million Chinese immigrants settling in the OECD bloc in 2013 and millions more are waiting their turn.    China is also the largest source of investor-class emigrants and as pointed out previously, in many host countries Chinese make up close to 80% CBI applicants. Chinese buyers now the largest source of foreign investment in the U.S., Canadian and Australian residential property markets, driving prices sky-high. 

10% of China’s billionaires have already emigrated and more than half of its 1.3 million millionaires plan to leave of the country in the next five years - that is about 650,000 or about 130,000 per year until 2020. Whether they will succeed is anybody’s guess, since only 9,000 managed to leave last year.

China is experiencing large capital and migrant outflows - between US$450 billion and US$1.2 trillion of capital left China last year, often in the suitcases the millions of Chinese emigrants and tourists. Chinese emigrants are allowed $50,000 per year, but this is not well-enforced and desperate Chinese emigrants simply smuggle their cash across borders. For example, border guards at the Vancouver airport seized $13-million in hidden currency over the past two years, that is in addition to the $323-million of declared currency (over $10,000) by Chinese tourists.
           
Apart from capital outflows, China has $28 trillion in outstanding loans. Its credit-to-GDP gap is now three times over the danger threshold and much higher than the US subprime bubble. Its total credit of 255% of GDP poses a risk of a full-blown banking and systemic financial crisis, with obvious consequences for  migration flows: The hypothesis is this: the greater the economic risk, the faster Chinese money and emigrants move offshore. The faster they move offshore, the greater the fear that stricter capital controls will be implemented - Which in turn could speed up the exodus in a pre-emptive effort to avoid the clampdown – once the clampdown occurs, there will be a dramatic slowdown of both people and capital. 




Thursday, 10 December 2015

Resources meltdown: Armageddon or an opportunity?

By Johann van Rooyen

With the Bloomberg commodity index (representing 22 raw materials) trading at a 16-year low and billions of dollars having being wiped off the value of mining companies, overwhelming fear and despondency have gripped resources investors worldwide.

Commodity prices are collapsing. The price of iron ore has dropped by 45% this year, that of copper by 27% and other minerals by even more. Glencore and Anglo American have lost more than 70% of their market cap this year alone - the latter just announced that it is slashing its assets and workforce by over 60%. Glencore is selling its assets as fast as it can, BHP has shifted its worst performing assets into a separate company and Rio Tinto has slashed capital expenditure by $1 billion. While the immediate outlook for these relatively financially sounder large companies is dismal, hundreds of smaller resources companies face extinction -  collectively the commodity sector issued $1.9 trillion in bonds over the past five years and there is great concern now for the ability of many of these companies to keep on servicing their debt.

How did it come to this, so fast and so severe, from a commodity supercycle to a complete bust? Basically it is a combination of three things: 
1. A massive over-supply caused by the money printing and low interest rates of the central banks of the United States, Europe and China  - this led to vast-scale borrowing to open new mines and increase supply;
2.  As the dollar becomes stronger, it makes commodities more expensive and reduces demand further;
3.  A slowing Chinese economy and the resulting lower demand for resources from the world’s biggest consumer of resources.  

With all this doom and gloom it is not surprising that virtually all analysts and fund managers are predicting prices to continue sliding and expecting even more of a commodities Armageddon. The ‘get out of commodities’ trade is virtually unanimous and blood is almost literally flowing in the streets of commodity land.

But, the question for the astute and more risk-tolerant investor is whether this then not the time to be a contrarian and go the opposite way, to buy assets of solid companies that are on a sale at a price of 10 - 30% what they cost one year ago?

There are several compelling reasons to consider such as move, least of all outstanding longer term value found in many of the former resources blue chips – most are trading at a 19% discount on net asset values at forward curve prices, according to an RBC analysis. A second reason is that, as mining companies such as Anglo are cutting back supply, supply and demand will reach an equilibrium eventually and any supply disruption could cause panic buying without much warning. Thirdly, China and the Eurozone both have their hand on the stimulus tap and would not be averse to unleash more QE, which could benefit commodities.


Fourthly, the U.S. economy is growing steadily now and it remains the second largest consumer of commodities. Lastly, the strong dollar may have already discounted the pending rise in U.S. interest rates and could eventually adjust to lower levels, which will make American exports more affordable and resource prices cheaper.


It is not often that a potential trade is so much against the overwhelming consensus and there is no doubt that it will be fraught with risk, but for the patient investor who uses cost-averaging, the benefits could be substantial.  
   

Tuesday, 23 June 2015

ANC government destroying South African tourism sector

A  recent report  by the Tourism Business Council of SA suggests that the number of lost foreign tourists due to changes in South African immigration regulations in 2015 will increase to 100 000, with a direct tourism spend of R1.4bn and the total net loss to the South African GDP of around R4.1bn and a loss of 9 300 jobs.

The changes refer to the requirement for all children under the age of 18 travelling to and from South Africa to be in possession of an unabridged birth certificate in addition to their passport and visa and secondly, that tourists from countries that are required to have a visa to now appear in person during the visa application process in order to obtain a biometric visa. 

Not only is the ANC government led by Jacob Zuma corrupt, incompetent and out of control, but it is now downright suicidal by destroying the booming foreign tourism sector and causing irreparable harm to the South African economy. Can the Deputy President, Cyril Ramaphosa wait too much longer before he gets rid of Zuma through a palace revolution?