As we all know, the final rating agency - Moody’s - which for all this time had not downgraded SA, finally made that decision on Friday.  It came at a time when our currency had already been hit very hard by all the troubles of Eskom, SAA and then Covid-19 which hit all emerging economies.  In some ways I guess it is a sense of relief – it was inevitable, and we no longer have to worry about whether it will be the next time or now.  It is done and perhaps it will not turn out to be as bad as we thought, given that lots of people have sold out of emerging economies in the first place and presumably there is not that much more money invested in SA government bonds that still need to be sold by funds that cannot hold junk.  We join countries like Russia which already had junk status and SA has far tougher challenges to deal with in the past than something like that.  It probably means that at some point interest rates will have to increase, because to attract funds we will have to pay more interest to make up for the risk that the companies are taking in investing in South Africa.  As I say, we have all expected this for a long time and on the plus side we got the bad news out of the way.  I personally think that the Rand is worth a bit of a bet to improve.  I don’t say it will go back to R14 to the Dollar, but I don’t think it will stay as consistently low as R18 for the next 12 months either.

I don’t always do blogs on the topics of the day, especially one where what we know changes every single day.  What is obvious to me though is that short of everybody in the world staying inside their house at the same time for 6 weeks or whatever it takes, there is no way to stop the spreading.  The Governor of California has already said that he expects 25 million Californians to have this disease within 8 weeks. That is a State that is vastly more sophisticated and educated than South Africa and I don’t see that there is anything that anybody in South Africa can do to stop the spreading to those types of numbers.  I also don’t see the governments of the world all getting together and organising that everybody goes into a complete and utter lockdown for 6 weeks, so I think there is going to be a limited success.  In other words, I think that what will happen now is that they will definitely slow the spread of diseases but not stop it.  People will have to go to work or the entire middle class will be devastated for years.  You cannot have people indefinitely sitting at home and 21 days isn’t going to stop it spreading or make it “safe” after the 21 days!  

I don’t know what the future holds, but I do think though in many ways society will change permanently.  Let’s be honest, shaking hands is just really something that does not make sense.  I understand we need human intimacy, but how many times is the person shaking hands with you a con artist trying to do the whole lean over with a big white teeth smile and a handshake to get somebody’s confidence.  Its just a routine, an act meant to inspire confidence or create an impression of friendship when often it is nothing of the sort.  It is a routine that has obvious health risks, not only now, but with flu and all the other infections that we will no doubt see in the years ahead.  It is not the first coronavirus and it will not be the last, particularly if people continue to eat and interact with wild animals and all sorts of creatures that human beings should really be leaving absolutely alone.   I guess in that regard, yes, I am talking about China to a large extent.  I think people will learn to do a bit more gym and exercise at home and of course, with human beings, there will be bigger worries and concerns that we don’t know about yet that we will come up with in future years. 

It appears that the 29.1% figure we all talk about, as to the official unemployment in South Africa, is totally wrong.  It excludes all those, after years and years of searching for jobs, have given up and accepted that they are not going to find a job.  If you include those people in your statistics, and of course one should, then the official unemployment rate in South Africa would be 36.9% which is more than one out of every 3 people who want a job and cannot find one.

It actually makes no sense to exclude from the statistics those who have given up looking for jobs.   That means a total of 9,6 million people in South Africa don’t have employment, even though Stats SA claims that to be 6,7 million people by leaving out those who have given up hope.  The Reserve Bank apparently estimates that South Africa lost 200,000 jobs during 2019 and obviously the problems with Eskom and the damage it does to so many businesses, including my law firm, should not be under-estimated.  The last thing we need right now is something to impact our largest trade partner, China.  The coronavirus is certainly not going to help the South Africa economy or indeed the Rand.

I must say, I found the Budget to be quite a surprise.  I was really expecting a VAT hike and possibly a dividend tax hike as well.  Obviously, some of it depends on the R160 billion cut in the wage bill over the next three years which the Trade Unions have not bought into.  At some point they will have to stop bring inflexible and start doing what is right with South Africa, but let’s not exclude the possibility of people overturning rubbish bins in the streets, etc again as government employees go on strike when they start realising the impact of that R160 billion cut in the government wage bill on their own salaries.  There was of course all the normal sin tax increases, which I think should have been higher and the growth forecast for South Africa was reduced down further to 0,9%.

Banks like JP Morgan are predicting that we are likely to see some dramatic interest rate cuts in SA which will obviously ease the pressure on consumers, particularly in terms of your loans on a car or a house.  The current forecast that the banks are making is that the interest rate will decrease in SA by the end of the year by a total of 0,5% with possibly two 0,25% reductions.  One of the positives pointed out was the increase in platinum prices, and that is obviously very good for South Africa.

According to the DA, medical negligence claims in Gauteng increased to R29 billion in the 2018/2019 financial year.  Before that, they totalled R21,7 billion and it means now that what is paid out for medical negligence claims is more than half of the total budget for the Gauteng Department of Health which totals R50,8 billion. 

Claims in the Western Cape apparently only total R110 million which would suggest that firstly, the hospitals there are better run, but I do think that personal injury attorneys are also much more active in Gauteng – touting in particular has risen to record levels and it does not appear that the Legal Practice Council is doing anything about it.  The bottom line though is that the state of healthcare in Gauteng is very poor and there are numerous vacancies for positions to be filled in the Department, shortages of equipment and of course some terrible treatment of clients including the client, Martha Marais, who was tied to a bench while waiting at the Mamelodi Hospital last year. 

It is not surprising that South African Airways is finally cancelling flights.  It after all already has Mango flying to a number of the destinations and with its financial problems things have to change.  The fact that there are no longer any flights to destinations like Durban, East London and Port Elizabeth though does sound rather dramatic and only the profitable Johannesburg to Cape Town route will continue.  A lot of the flights to other destinations were not full and there is simply no basis to have continuous routes to places like Luanda, Munich and Sao Paolo.  South African Airways has been a continuous money sucking machine for taxpayers in South Africa and for years we have been promised whatever the most recent bailout has been would finally sort out the problems – then the next year we are again expected to pay out more towards it. 

It is very easy for all of us to sensationalise which countries have coronavirus and which don’t. However, if you read the articles a little bit more closely it is clear that any country that had people travelling to it from China or South Korea has undoubtedly already got people within the community who have the coronavirus.  The concern is whether or not those countries are actually testing for it?  In other words, if people in South Africa have the coronavirus that have not been diagnosed or tested for it, then we can be blissfully unaware of the extent of the virus within the community even though it is actually there. 

This is not as far-fetched as it seems – America itself does not have enough tests for the virus.  The first few people that have been exposed to the virus have in many cases either be turned away by hospitals, not tested for coronavirus or simply have had a milder form of the disease or thought it was just the common flu and stayed at home. The bottom line is this disease is already spreading around the world and to imagine that South Africa really does not have somebody with the virus right now would be a stretch of the imagination.  I wonder how ready we are for this and how many hospitals and laboratories even have coronavirus testing? 

The national minimum wage will increase to R20,76 per hour for ordinary hours worked from 1 March 2020 which is an increase of 3,8%.  That increase of course is in line with, if not slightly below, inflation.  Unfortunately, farm workers, people working for the public works programme and domestic workers will not get those amounts with the minimum wage from 1 March for domestic workers being R15,57 or just under $1 per hour.  That means that the minimum wage for an 8 hour day for a regular worker would now at the recent Rand rates be the equivalent of $11 per working day when many States in America already have a minimum wage of $15 an hour.  Of course, that varies from country to country and it also varies from city to city within America relative to the cost of living and the job market in that city as is also the case in South Africa. By way of example, you would have lots of people who want to work at the Disney and Universal Theme Parks in Orlando and would be lining up to work for $10 an hour whereas in a city like Seattle, where things are a lot more expensive, there are apparently adverts outside restaurants for dishwashers at $18 an hour and barmen and bar ladies earn about $22 an hour which is more than the vast majority of attorneys in South Africa actually earn on a monthly basis – that $22 an hour is about R56 000 a month.  Of course, the other side of the coin is that the cost of living in South Africa is extremely cheap compared to most of Europe and most other countries with particular regard to the things that you actually need in life such as water, fruit and vegetables, etc.