Why Vid de Klerk loves Julius Malema

This trader likes Julius Malema

Finweek English Edition - - FRONT PAGE - VIC DE KLERK vicd@fin­media24.com

NEWS­PA­PER HEAD­LINES such as “More peo­ple want to leave the coun­try be­cause of Julius” and “SA’s BRICS part­ners in­vest else­where in Africa” make Trader Vic – a self-ac­knowl­edged scav­enger trader – very ex­cited about the new op­por­tu­ni­ties the me­dia’s fear of Julius Malema is go­ing to cre­ate for this un­savoury species of trader over the next year or two. Please note: I said the me­dia, not Julius or the ANC congress in 2012, when a new leader will be picked.

Over the past 17 years the ANC has done very lit­tle for scav­enger traders like me.

Let me put that dif­fer­ently: the ANC’s sta­ble and sound eco­nomic, fis­cal and es­pe­cially mon­e­tary poli­cies trans­formed ev­ery wolf-wolf op­por­tu­nity of the past into a use­ful profit. That be­gan im­me­di­ately in 1994, when threats of na­tion­al­i­sa­tion made farm land fairly cheap; 20 years later it’s clear over that time the price of farm land in­creased much faster than or­di­nary res­i­den­tial prop­erty, which it­self made a lot of peo­ple rich.

Two other man-made prof­itable op­por­tu­ni­ties for scav­enger traders are still fresh in our mem­ory. In 1998, at the time of the mi­nor cri­sis in emerg­ing mar­kets, the rand came un­der enor­mous pres­sure. The Re­serve Bank Gov­er­nor Chris Stals used all of SA’s for­eign re­serves, to try to bol­ster the rand’s value on world mar­kets.

By June/July 1998 the bank had to ad­mit de­feat when the coun­try’s for­eign ex­change re­serves fell to mi­nus US$25bn and in­ter­est rates rose to 25%. Just then, Gov­ern­ment an­nounced Tito Mboweni, a so­cial­ist, was go­ing to be the Bank’s next Gov­er­nor. Panic! But what a won­der­ful feed­ing op­por­tu­nity for the scav­engers. Per­haps there are still some of my old clients and friends who re­mem­ber the zero coupon bonds we were of­fer­ing at R18 000 per R1m at the time. The bonds are cur­rently worth more than R300 000.

Some time in 2001 the world’s for­eign ex­change spec­u­la­tors de­cided to take on new Bank Gov­er­nor Mboweni and started forc­ing the value of the rand down to US$1/ R13. Un­like his pre­de­ces­sors, Mboweni re­fused to use SA’s scarce forex re­serves to pro­tect the rand ex­change rate. “Spec­u­late if you like and let the ex­change rate go where it will” was more or less his view­point. Re­mem­ber, if the Bank doesn’t want to play along and cre­ate op­por­tu­ni­ties for spec­u­la­tors, there’s not much they can do.

The same Mboweni re­tired as Gov­er­nor about two years ago, when SA’s for­eign re­serves had al­ready climbed to the un­prece­dented level of more than $40bn and the rand had strength­ened to be­low US$1/R8.

Mboweni’s de­ci­sion in 2001 not to in­ter­vene in the forex mar­ket was far more alarm­ing than ev­ery­thing Malema has yet said all put to­gether. So much so pub­lic cor­po­ra­tions such as SA Air­ways went and bought its US dol­lar obli­ga­tions for­ward for 12 years. It later cost the tax­payer more than R10bn to set that right. But a few scav­engers made use of the op­por­tu­nity to buy up SAA as­sets dirt cheap.

Trevor Manuel, later de­scribed by for­mer col­league the late Deon Bas­son, as the best Fi­nance Min­is­ter SA has ever had, be­gan his term with the re­mark: “The mar­kets are amor­phous.” I was part of the au­di­ence that day and it was in­ter­est­ing to see some over­seas traders leav­ing early so they could hur­riedly grab their phones and sell SA Inc short. That was a mis­take. In fact, it was an ex­cel­lent op­por­tu­nity for traders who ex­ploit oth­ers’ fears.

Re­cently I again had the priv­i­lege of lis­ten­ing qui­etly to a dis­cus­sion by news­pa­pers’ po­lit­i­cal com­men­ta­tors on top­ics such as Malema and the ANC. The dis­cus­sion was filled with big names and threat­en­ing events far above my abil­ity to ab­sorb. Luck­ily I didn’t have a lap­top handy other­wise I may well have sold my small par­cel of listed shares.

Back home later, I looked again at the two news­pa­per head­lines quoted above. SA doesn’t nec­es­sar­ily need the BRIC coun­tries. I be­lieve Wal­mart, the world’s largest re­tailer, re­cently ac­quired a con­trol­ling in­ter­est in our Mass­mart. The Re­serve Bank’s bal­ance sheet, as well as its monthly for­eign ex­change state­ment, shows SA has am­ple forex re­serves and that our Trea­sury has al­ready had to ster­ilise around R150bn of sur­plus money over the past five years.

The cost of that ster­il­i­sa­tion and the more than $50bn of for­eign re­serves we’re now sitting with un­nec­es­sar­ily cost SA’s tax­pay­ers at least R5bn/year. I haven’t yet seen a news­pa­per head­line say­ing “ANC’s eco­nomic suc­cess costs tax­payer R5bn/year”.

Keep talk­ing, Malema, so that the me­dia can cry wolf. This scav­enger trader is in fact look­ing for a new op­por­tu­nity now share prices are so high, the rand so strong and there are no more cheap houses at the sher­iff’s auc­tions.


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