I tend to write my blogs ahead of time, and let my programmer put them up when he thinks best – so they are now necessarily aimed at something that may have happened that week – because the blog may, for example, have been actually written 6 weeks earlier.  Today’s blog in some respects looks hopelessly out of date – because Bitcoin now trades at $16 400 – but in fact my blog was only written on 30^th October.  I decided to have it put up anyway, without revising the figures, just because to me it illustrates even more the meteoric rise of these currencies!  I would love to hear your thoughts on Bitcoin…..

I would love to know what your opinion on Bitcoin is.  I think I am a little bit older and perhaps too conservative to appreciate its genius.  I have been wrong about some things and right about others and this is one that I really don’t understand, so I have not got involved at all.  

I think by now most people have a basic understanding of how bitcoins are mined and how they work, but to me, where it really gets scary, just from a market perspective, is that on 24 March 2017 you could buy one bitcoin for $935.  That same bitcoin, at the time of dictating this article, was worth $5,600.  That is 7 months later and you have multiplied your money by more than 6 times.  I struggle to believe in anything that works on that basis.  Especially something that is “mined” by a computer and I can understand that it perhaps has quite a bit of value on the black market and yes, a transaction for a house has been done with it, and you can use it here and there, but it is just something I struggle to understand or believe in.  It also soars up and down – for example, on 14 September it was $3,226, 13 days before that it was $4,950 and on 21 October it was $6,013.  So, you can see it is just swinging all over the place, and yes, largely on an upward trajectory, but the ups and downs are massive.  Is it real and does it have any “value” that will endure and increase?

I found the latest statistics from StatsSA with regard to the Consumer Price Index to be fascinating.  They found that the price of fuel, vegetables, fruit, cereal and bread are all down from January.  Fruit was down as much as 8,4%.   All of this is apparently due to the fact that last year, with one of the worst droughts in South African history, prices went up and now with improving crop production, prices are going down.  Another thing that the survey found is that South Africans spend more money on beer than they spend on vegetables.  The city where people buy the most fruit and vegetables is Cape Town and by no small coincidence, the people with the lowest body mass index, according to the Discovery Vitality programme, is Cape Town followed by Johannesburg.  The people buying the most salt and sugar, according to Discovery Vitality, live in Durban and in Port Elizabeth.  That seems to be another one of those surveys where the overall winner, apart from all of us in terms of inflation, turns out to be Cape Town!

A new book that I have been reading recently, and I might deal with again in future blogs, is called "The four – the hidden DNA of Amazon, Apple, Facebook, and Google".  These are the biggest companies in the world at the moment and on the one hand they are incredibly useful to us, and most of us use some of them a lot of the time and on the other hand, not everything about them is perfect.  For now, and without going into too much detail about some of the individual companies, which I will deal with in my blog at a later stage, he points out that for all they do they include:

• A computer company that withholds information about terrorism from federal investigators.
   
• A social media firm that analyses images of your children activates your phone as a listening device and sells the information to Fortune 500 companies.
   
• An ad platform that has 90% of the market, but avoids anti-competitive regulation through aggressive lawyers and by hiring lobbyists.
   
• A retailer that is famous for treating its employees badly, has destroyed hundreds of thousands of jobs in competing companies and refuses, on top of everything else, to pay sales tax.

In other words, there are many different ways at looking at the sites and the companies that you love and we now have four companies that governments and other businesses are almost unable to challenge anymore.  The book goes on to explain how, for example, Apple has put some computer businesses out of business even though those businesses were only charging a 6% profit margin on their computers and Apple adds on 28%.  For those of you who are not all fans of Apple – although remember this applies to all of the companies – he says that people outside the Apple cult see it for what it is – “a rationalisation for something a lot closer to lust”.  He says that the marketing for Apple is essentially that the message of Apple is that it will “make you better than your sexual competitors:  elegant, brilliant, rich and passionate.  You will be perfection:  cool, shit together, listening to music in your pocket and swiping through pics of your latest trip that look professional that you took on your phone.  You will have the ultimate earthly life.”  I will leave you with that taste – where he basically says that buying the Apple phone is irrational when you could have a similar phone for a fraction of the cost!

The Davis Tax Committee is headed by Professor Dennis Davis.  I had the pleasure of having him lecture me when I was at Wits University and I have to say he is an incredibly smart man.  That is not something that most wealthy people are going to enjoy and I do hope, while convening his Tax Committee on taxes for the wealthy, that he thinks about the damage that too many taxes on too few can do as well.  It is quite obvious where they will be looking, to some extent, because in the press release they issued in May they say that estate duty, transfer duty and donations tax are the only wealth taxes at the moment and they contribute only 1% of tax revenue. 

In other words, they must be considering increasing estate duty, transfer duty on houses and donations tax as well.  They also say though that they like to look at a number of possible forms of wealth tax, including – land tax, a national tax on the value of property over and above municipal rates and an annual wealth tax.  Many countries have taxes on property.  It is quite common in America where, for example, and the rate would vary from city to city and from state to state, but it would often be that whatever the value of your house is, as assessed by the local government, you pay 2% taxes a year.  That is obviously one of the considerations they are looking at, which will affect more than just the wealthy, depending on what amounts they bring in with that.  If, for example, they bring in a 1% tax per year on the value of somebody’s house at R500,000, then if your house is valued at R800,000 you will pay R8,000 a year in property tax.  I just give that as a complete random example, but it gets more expensive as your property value goes up.  An annual wealth tax on top of the top rate of 45%, which we already have, sounds astounding.  I cannot imagine what else they would require, but I have a very good feeling what is going to be defined as wealth will be any amount earned above R1,5 million a year.  

My problem with most of these taxes, apart from the damage they do to the economy and the people they chase away, is that there is such high tax evasion in some places that, for example when I was living in Dainfern and Blair Atholl golf estates, numerous people boasted about how they were paying minimal or no tax at all.  There is an absolute culture in South Africa of tax avoidance by many and that is something I will deal with in another blog article at another time.

Many people tend to simply ignore articles in business magazines or on blogs like mine about the growth rate of countries.  One of the reasons they do so is that they don’t tie up their personal tax rates and growth rates together – if they did they would be a lot more interested.  In other words, the fact that South Africa's growth forecast rate was meant to be 1,7%, as per the government's budget in February this year, and is instead going to be about 0,5%, according to the World Bank, means that the government will collect much less taxes this year than they plan to collect.  They will collect fewer taxes because the economy and businesses are not growing as well as they would have hoped.  

What does that mean?  That means they will have to try, as they have been doing almost every year now, to come up with some more taxes.  New ways to tax the so-called rich – I say so-called, because in South Africa what we define as "rich" would not even be the top tax rates in other countries – and while we already have a 45% top tax rate, in countries like the United States they are talking about lowering their 39% top rate to 35%.  So, we are going to try and look at everything we can do, other than tackle something like VAT which the Government seems nervous to do, and try and work out more ways to target the wealthy.  Raising VAT would make the most sense of course.  The more you do that, the more you encourage those individuals to look elsewhere and they are after all the job creators in the country.  This is really becoming a vicious circle and until the government starts listening to people who understand what it takes to grow the economy, the circle will unfortunately get worse and worse with increased taxes, low productivity and more and more successful business people being chased away from South Africa.  I really hope it does not take more than a few more years to pick up the pattern and do something.  Another concern would be, and that is maybe a topic for another blog article, how many people, and I have even seen it with attorneys involved in this field of work, who are just simply dishonest in their tax affairs and the more the government increases the taxes, the more some people simply just ignore taxation.  That too is not a winning recipe for a country. 

I want to find out from you how many of you have a Playstation or an X-Box at home or some sort of game console?  Do you play it?  I have the X-Box, which is now being replaced by the X-Box One X.  It apparently has much better gaming with 4K gaming and 40% more power than any other console.  It is Microsoft of course playing the Apple game, with the every few years dramatic update.  

I have to be honest and say that I’ve had my X-Box for about a year and I used it for about 2 hours altogether during that year.  My kids like it, if they get a chance to play it, but they are not particularly enthusiastic or keen about it and I don’t think it is a have to have in their lives.  I know though when I was 15 I spent a lot of time, particularly on weekends, playing computer games, sometimes all night with friends and despite all the things they say about how you will not achieve anything in your life if you play too many computer games, I seem to have done all right.  Do you have a console?  If so, what?  What games do you play – and I am not talking about games on your phone, which I think is the worst type of addiction because they are not even of the kind of quality that you can play on a big screen.  In other words, if I am going to waste time playing games, I am going to play better games, with better graphics on a dedicated machine with a big screen, like a TV, and not waste my time on my phone.

It is very important, when you see things sensationalised in the media, to understand that the media is just another business.  In other words, it has investors, shareholders, directors, etc.  Their business is to deliver an audience to their advertisers and charge their advertisers for that.    That means their job is to keep you reading their newspaper or watching their TV channel or listening to their radio show.  They have to make everything sound like it is incredibly important and that it is critical for you to keep listening.  The more people watching or reading them, the more they can charge for their adverts.  

Of course, they have to get the facts right as well, and I think by and large they do, even if they over-sensationalise them.  There are various systems and balances in place all around the world if the media don’t get their facts right and I don’t think they do a bad job.  I don’t think they do a great job either.  From a Road Accident Fund point of view, over the years they have always sold the story as simply being a question of attorneys being interested in making more money and the government wants to reduce what they have to pay out to the legal profession.  That is not a completely inaccurate version of what is going on, so it’s not fake news, but it’s not totally true either.  It creates an incorrect impression glossing over many of the problems that led to where we are now and the fact that somebody without an attorney will always be far worse off than somebody with an attorney.

In any event, the point I am making is one I have made in blogs recently and that is when you are watching a hurricane, when you are watching each week’s dramatic news, remember that the media’s job is to convince you how dramatic that is.  There are certain stories that obviously don’t sell well in newspapers and natural disasters, etc or a lion killing somebody in Kruger Park or in a nature reserve sell better than other stories.  For that reason we simply never had the coverage that one needs of the 40 people a day who die on the roads in South Africa.  That’s real news, that’s an ongoing tragedy and we only hear about it in December/January and April every year.