Monthly Archives: January 2019

Showdown at Sibanye


It is no secret that, for this country’s economy to really begin to make progress, the populist power of the union movement is going to have to be curtailed at some point. The unions embody the so-called “structural problems” in our economy which economists constantly and euphemistically refer to for three reasons:

  1. The high unemployment level is a direct result of employers being reluctant to take on new employees because, once employed, it is extremely difficult to get rid of an employee. The labour legislation requires three letters of warning, meetings and negotiations. It is a time-consuming and expensive process. From an employer’s perspective it is often better to simply avoid employing new people. What needs to happen here is that the labour legislation needs to become considerably more employer-friendly to level the playing field in collective bargaining.
  2. At the same time, we have a completely excessive civil service with far too many ministers and far too many people employed by government and quasi-government organisations. Probably, the civil service could be cut in half. Our government cannot afford to pay so many civil servants and ministers – nor does it need to.
  3. And then there is the question of the 200-odd state-owned enterprises (SOE) which are sucking the life-blood out of the South African economy and which are a major concern for the ratings agencies. The simple truth is that many of them do not need to be government-owned and should be privatised as soon as possible. They are a constant drain on the fiscus. We desperately need to return to Adam Smith’s idea of laissez-faire, which is that “the least government is the best government”.

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The Year Ahead


2019 is going to be an interesting year both locally and internationally.

In our view, the American economy is almost certain to continue growing rapidly – and that growth must, sooner or later, be reflected in share prices.

In our last article we suggested that the collapse in the S&P500 index over December was unprecedented and suggested that it was probably due to the temporary shut-down of the US government (clearly caused by Trump) at a time when most investors were away on holiday. We suggested that as soon as they returned, we would probably see a “V bottom”.

That “V bottom” is now well on its way. Consider the chart:

S&P500 Index August 2018 to January 2019 – Chart by ShareFriend Pro

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