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What We Do

The word consulting has become something of a catch-all phrase in today’s business landscape. Almost every industry and every firm has their own idea of what it is to be a consultant. For this reason, and to better understand the ecosystem in which we operate, it is perhaps worthwhile explaining the different conceptions of consulting that exist today, and to clarify exactly how Monocle positions itself in this environment.

 

The first conception, or perhaps misconception, of consulting involves the idea of contract work. Contractors – often calling themselves consultants – hire out their services by the hour and forego the security of a full-time employment contract to pursue remuneration for their work on an ad hoc basis. But the time-based remuneration structure of contracting carries with it a potentially significant conflict of interest, in that the successful completion of a project is not necessarily in the best interests of the contractor. At Monocle, we do not believe that consultants merely sell their time. Consultants solve problems.

 

The second understanding of consulting stems from the business model exercised by multinational audit firms, which often run large advisory divisions alongside their main auditing function. These audit-centric consultants work across a broad range of industries and their success often relies on two factors: the perceived power of their brand and these audit firms’ sheer size. Yet, the scope of their services can often be constrained by their audit-focused mindset. At Monocle, we are not auditors, and this allows us the freedom and flexibility to implement change wherever and however it is needed.

 

A third type of consulting involves the work performed by large systems integration firms. These firms focus specifically on integrating new system infrastructure into a client organisation. These multinational IT-centric firms often partner with large software companies to ensure the successful implementation of complex application software into client system architectures. At Monocle, our consultants are experts in many software applications, but we are not an IT implementation company, we are business subject matter experts.

 

The fourth kind of consulting practiced today is general management and strategy consulting. These consulting firms believe – at their core – that the conduct of management and the strategic objectives of large organisations can be altered through the intervention of strategy consulting. Such consultants usually deliver a management or strategy plan as an end product, whilst the actual physical change to be executed is often left for the client organisation to implement themselves. At Monocle, we engage in management and strategy consulting but importantly, we also deliver tangible system-level solutions to solve our clients’ unique business challenges.

 

In the context of these various definitions of consulting, it is important for us as Monocle to amplify the fact that we are different in a number of ways. We do not sell time and we do not sell products. We are not contractors, we are not an IT firm, nor are we auditors. We are an independent management consulting firm with deep technical skills and subject matter knowledge, focused on the financial services industry. At Monocle, we are consultants pure and simple.

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What We Do

For many, the image of a consultant is entangled with the idea of a free-roaming agent, employed by a company or acting alone, selling their products or services to any willing buyer. Such work is very important in many companies and in many contexts, often yielding good returns in the form of commissions and sales target bonuses, as the harder you sell, the more you earn, and the quicker you get recognition. It is a concept used by thousands of companies which rely on pushing their product to as many buyers as possible – often unconcerned whether it will ever solve their problem.

 

In the purest sense, this is not the work of a consultant. In the financial services industry, there are indeed many management consulting firms and large system integration firms that remunerate their consultants based on their sales performance and the revenue they generate, but we at Monocle do not believe in such a paradigm. At Monocle, our consultants are not salespeople. In fact, we do not want our people to sell. Talented consultants should not have to compromise their image of themselves by doing something that is not truly consulting. At Monocle, we are consultants, pure and simple.

 

We recognise that we live in a commercial world, and that we need to be properly remunerated for our work, but we do not believe that our consultants should take direct responsibility for this part of our business. Sales and work proposition at Monocle takes place through very particular channels – only the most senior directors are responsible for sourcing future projects and creating new business, thereby alleviating any sales target pressure on consultants. Not only are our consultants not expected to sell, they are not actually allowed to approach clients to garner work.

 

It would be highly concerning if a doctor were to give every patient a certain pill, because the doctor stood to profit personally from the sale of that medication. In the same way, our consultants cannot be expected to sell a pre-packaged product to our clients. A consultant, like a doctor, consults with a client to identify areas of concern, to diagnose the problem and to treat the ailment. By eliminating the need for our consultants to sell, we ensure the client’s challenge is at the very centre of our business.

 

Some may then ask, “But how do you know if your consultants are being efficient, if there are no individual revenue indicators?” To this we say, as a consulting firm in the purest sense, we are focused on implementing tailor-made projects built from the ground up, to the specification of our clients to meet their unique business challenges. Ultimately, then, the efficiency of our consultants is measured in a far more nuanced and three-dimensional manner than a simple win-or-lose revenue target. Such a crude measure of value is at its core sales-centric rather than client-centric.

 

The success of a consultant at Monocle therefore has nothing to do with achieving a sales target, but everything to do with the successful completion of projects and the extent to which these solutions ultimately add value to our clients’ businesses.

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What We Do

We are not an audit firm. It is not common to define oneself by saying what one is not, but in a world where the distinction between auditing and consulting has become somewhat blurred, this is an important point to make. The conflation of the two has occurred because most consulting work conducted in advanced economies worldwide is actually performed by people who work for firms that, at their core, are audit or assurance firms.

 

It is a requirement in South Africa that all banks undergo both a statutory audit and a regulatory audit to ensure that the multitude of reports submitted to the South African Reserve Bank – in accordance with the Banks Act – are accurate and true. This work is performed by audit and assurance firms, and it is extremely important. It provides the general public, as well as shareholders, investors and other stakeholders in both publicly-traded companies and private firms, some sense of security and assurance that the facts being presented to them are reliable. This work is absolutely critical, not only to the confidence that investors and other stakeholders have in any particular company, but to the confidence they have in the very idea of the free market system itself. Without these checks and balances, the idea of the liberal free market system would rapidly become substantially eroded.

 

In general, however, these assurance activities only account for about half the revenue generated by auditing firms, with the other half generated through separate departments that offer advisory services. Audit firms are, thus, also the dominant providers of consulting services to the financial services industry, although to enhance the independence of their auditing activities, these firms cannot simultaneously provide auditing and advisory services to the same bank.

 

From the outset, we at Monocle made a deliberate decision not to venture into the world of auditing. We do not do assurance work of any kind. We are consultants pure and simple.

 

The decision to specialise in consulting has provided the advantage of flexibility in our work. Because we are not restricted from working with any client, we have the freedom to propose work anywhere, and at any time, as well as the ability to pursue any work that we believe will add value to the fields in which we have expertise. As a result, our consultants engage with a wide range of customers and are exposed to problems that are generally change-orientated, rather than of a business-as-usual nature.

 

The work we do is pure consulting. We endeavour to radically change and advance the manner in which our clients operate, whilst providing our employees with vital experience through the wealth of intellectual property and corporate memory we have developed through years of international and local project experience. There is essentially only one thing we are restricted from doing: we cannot mark anyone else’s homework. But this is how we prefer it, for it ensures our focus remains fixed on our true area of expertise: the business of innovative problem-solving.

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What We Do

At Monocle, our consultants are trained experts in various software and programming languages, such as Microsoft Access, SQL, Excel, VBA and Power BI. In fact, the skills development which is provided to all consultants at Monocle has a strong focus on teaching hard technical skills, delivered through our in-house training programme. In this sense, we invest in our people to make sure they have every tool available at their disposal to do the best work possible for our clients – no matter how technical the task at hand. But even though we are strongly focused on equipping our consultants with these technical skills – in order for them to be effective agents of change and to give our clients a commercial edge in an extremely competitive market – we do not consider ourselves to be an IT company.

 

Whilst a key part of our business is helping our clients to implement systems and processes – often of a digital nature and involving the automation of many of the inefficient manual processes still in place in these organisations – we do not in any way or form sell IT products or install hardware or software. There is no doubt that the many different software applications our consultants use are critical to their roles, but these applications are merely the tools required as the most useful means to analyse, build and improve upon the systems existing at our clients.

 

In the rapidly evolving world of technology, there has been an exponential increase in the amount of data available to organisations of all sizes and industries, and perhaps even more so in the financial services space. To effectively analyse and garner insights from this rushing flood of data, and to ultimately create added value for shareholders, we believe our consultants need to be proficient in the best-of-breed software and applications that allow them to be at the cutting-edge of data and business analysis.

 

This intricate system and software knowledge is doubly important in the world of banking and insurance, as the large financial institutions with which we consult are beholden to deeply complex compliance and regulatory requirements. To assist in the goal of becoming compliant with these ever-changing regulations, as well as in extracting as much value as possible from the markets, it is essential for our consultants to understand both the technical as well as the business landscape of our clients. Not only do we understand the unique landscape of complex products and markets in which our clients operate, we are also able to translate and execute our clients’ regulatory and business requirements into the precise code-level specifications needed to build the state-of-the-art systems that can achieve these objectives.

 

At Monocle, we pride ourselves on the specialised nature of our consulting work. What we do is to consult with our clients to design and deliver fit-for-purpose, full-lifecycle solutions, by analysing and translating business and regulatory challenges into tangible IT- and data-driven specifications.

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What We Do

When you choose to work for a company, it is useful to see the decision as a significant life choice, rather than merely as a job choice.  Work is, after all, where you spend the majority of your time and often where you invest most of your effort.

 

In the past, professionals may have been advised to always put the company’s objectives above their own to secure their professional positions. But, a new generation of employees is proposing an entirely different understanding of the employment relationship, unashamed of their desire to achieve something greater than financial prosperity through their work. In the modern world of work, if a company wishes to attract and retain a talented and ambitious workforce, it is crucial that it articulates a clear value proposition that balances the objectives of the business with the desires of its employees to learn, to grow and to do work that is meaningful.

 

At Monocle, we are deeply invested in the growth of our employees, both as professionals and as people. We believe that there is a minimum set of skills, experiences, insights and, in fact, epiphanies that a person should encounter in their working life. We believe that it is not enough to simply train our employees with the skills necessary to meet the requirements of their immediate job specification. We believe, in fact, that it is our duty to enhance the human experience of our employees overall.

 

We have therefore constructed a unique five-year personal development plan for each and every consultant in our firm, which is tracked continuously on an individual consultant level. This comprehensive programme integrates all aspects of a person’s development through four key dimensions.

 

Firstly, our employees receive training in a wide range of hard skills that are underpinned by internationally-recognised certifications. This includes not only Microsoft Excel and Access training, but also certification in VBA, SQL, a range of BI tools and programming. Secondly, our consultants are provided on-site experience in world-class banks and other financial institutions, working on a range of critical issues in the areas of finance, risk, treasury and compliance. Thirdly, we focus great attention on the development of extensive subject matter knowledge, with extensive formal training delivered by senior executives at Monocle, some of the most experienced consultants in the industry.

 

Fourthly, we teach our consultants the art of engagement, both with colleagues and clients, and more generally with the world. This is achieved through training in soft skills – including communication, negotiation and collaboration skills – and ongoing executive mentorship. Perhaps most uniquely, we also place a strong emphasis on developing critical thinking skills. Through this special dimension of our development programme we challenge our employees to view the world and themselves in a different way – to calmly distance themselves from emotional preconceptions and the archetypes that make us, as human beings, less than we could potentially be. We believe that by challenging our preconceptions of the world, and of ourselves, we can become more fulfilled and enlightened in our work.

 

Monocle’s approach to career development is an holistic one. We motivate our employees to believe they can achieve anything. And it is this confidence, backed by training, expertise and strong consistent mentorship that ensures that we remain the best consultants in the business.

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What We Do

When choosing to work for a company, there are many aspects to consider. One of the lesser-mentioned, but highly important, of these is the attitude the company takes towards the social element of work. Humans are, after all, social beings. So, when we think of our work, we think not only of the objects that occupy our physical space or the tasks that fill our day, but also of the culture that exists in a company.

 

There are many people who believe that work is an isolated component of their lives, and that activities such as sport and engagements that lead to friendships should be kept strictly separate from what they do professionally. At Monocle, we seek to integrate all these aspects and ensure that our employees are well-rounded individuals, capable of making meaningful contributions to both our business, and to society as a whole. We believe in working hard and producing exceptional results. But we also believe in becoming better humans through avenues that are not directly related to our work – in exercising the body, in enjoying life and in forming meaningful connections with people.

 

It is through these connections with like-minded individuals that a sense of belonging is forged within our company. And at Monocle, we ensure that there are ample opportunities to build these bonds. We believe strongly in the power of sport to bring people together and sponsor several teams that compete in both amateur leagues and major events, such as cycling events and triathlons. We host monthly gatherings, which bring our consultants – often spread across several different client sites – under one roof to take stock of the company’s progress, to meet people outside of their direct work teams, and to catch up with friends. We also hold annual events – such as our Family Day – which enable our employees to interact outside of work in a relaxed environment.

 

We believe that a sense of connection is crucial for increasing motivation and dedication among our employees and it is for this reason that we have placed such a great emphasis on developing a strong company culture. We choose to be a company at which work and the endeavour of being human are indelibly intertwined. As such, we value the social and sporting events and interactions that naturally spawn from our ever-changing culture. Each and every one of our employees contributes to our company culture and each of them has the opportunity to change that culture in a positive way by including their personal aspirations in the make-up of what we collectively call our firm.

 

We are passionate about our work, but we also believe that this is not just about work.

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Opinion Pieces

There is a new and growing genre in bookshops that conceptually sits somewhere between Politics, History and Economics. It should properly be called Polemics, but the purveyors of the written word will generally place this new material either on their History shelf or on their Economics shelf – possibly through a misunderstanding of the purpose of the books, or simply because they do not have Polemics as a dedicated section.

 

More likely, however, it is because polemical writing is usually about something, or more specifically about undermining something – such as politics – rather than being something in and of itself. Its underlying topic – if all polemics were to be grouped in their own section of a bookshop – would be a smorgasbord of confusing subjects. You would have Nassim Taleb’s Fooled by Randomness sitting alongside the holocaust denialist David Irving, rather than finding their books in the Economics and History sections respectively.

 

As it stands, Nassim Taleb is generally to be found beside luminaries such as Joseph Stiglitz, truly a case of putting the cat among the pigeons; and Irving’s Hitler’s War, insultingly, will be found sandwiched between David Stevenson’s The History of the First World War and Philip Short’s Pol Pot. Or worse, even in a respectable bookshop, it is not an impossibility to find Irving’s Goebbels: Mastermind of the Third Reich – a study in historical revisionism and a sycophantic nod to one of history’s worst psychopaths – hugging the jacket of William L. Shirer’s The Rise and Fall of the Third Reich, the definitive tome on how it was possible for Germany to allow the dominance and banal evil of Nazism to overcome them.

 

In the case of Nassim Taleb, whilst his books on the surface would appear to be about the financial markets and risk prediction, they are really and truly purely polemical pieces of invective against all – really all – economic modelling, infused with a sociopathic dislike of most economic thinking. They are frustratingly inconclusive and unhelpful in their results, appealing to a mysticism of perspective, and at best invoking little more than fear. In Irving’s case, despite the distasteful position he adopts, there is at least some academic basis, but his work quickly falls prey, both in its arguments, and in its facts, to his undeniable anti-Semitism. His purpose is no different to that of Trump’s advisor Steve Bannon, previously the chairman of Breitbart News, and about as right-wing a commentator as one could find in a liberal democracy at present. His purpose, clothed as academic history, is really a political purpose, a manifesto.

 

It is therefore one of the ironies of bookshop browsing as a casual activity that the observant browser will, on occasion, be able to identify the polemics amongst the historians, the economists, and the politicians. The ‘art’ of vociferous argument, infused with sarcasm, fraught with diabolical assumptions, aggressive in tone, and dismissive of scientific balance as a genre of writing, is often scattered, unbeknown to most, throughout the bookshop, like the spies who were embedded in European cities such as Berlin and Brussels, posing as artists and journalists, and clerks, during the height of the Cold War.

 

To further confuse matters, one needs to stress that there is a distinction to be made within the genre of polemical writing itself. A lot of it is bad, and some of it is good. There is nothing wrong per se, in taking on, right from the start, a strong position in one’s argument, and pursuing that argument with vigour, whilst also acknowledging the existence and roots of the thinking and philosophies one is attempting to undermine. That is a very different matter, however, to writing a pure manifesto, picking one’s ‘truths’ out of context, perhaps even taking things further and engaging in the new and oddly accepted art of ‘post-truth’, exemplified by the phenomenon of President Trump’s tweets.

 

When an esteemed long-in-the-tooth publication such as Time magazine finds it necessary as recently as April 2017 to publish an issue on a solid black background cover, with the words only ‘Is Truth Dead?’ in the colour red, then it is apparent that there is value in making the distinction between good polemics and bad polemics. Good polemics inherit their value from the art of polemical writing, a genre and form of entertainment, and an essential part of the history of academic debate going all the way back to the Forum in Greece three thousand years ago, from bad polemical writing – the writing of unadulterated lies in an effort to justify, and to recruit, and to cloud better judgement. The worst forms of polemical writing are no different to the pamphlets distributed at right-wing rallies, preying on fear, urging immediate and thoughtless action. To a large extent, the trouble lies in the value of truth one ascribes to the published word, irrespective of its true agenda.

 

Good polemical writing has a long history, stretching back to Greek and Roman literature, but in its modern form – post World War II – it finds its most strident voice in writers like Christopher Hitchens. In the passage of his oeuvre one can trace his transformation from war reporter, to essayist, to activist, and polemicist and finally, in his dying days, to biographer. If one is looking for something written by him, one is going to have to look in several sections within the bookstore: to find Hitch-22, his confessional autobiography which eclipses in excellence all his previous work, is easy – just go to Biography. Whereas to find his vitriolic attack on Mother Theresa – titled The Missionary Position just to give an idea of its tone – is far harder. It could be anywhere – in History, in Politics, in Religion, or even in Economics.

 

This is the trouble with the new genre within a genre of left-leaning political writing that has emerged out of the ashes of the liberal agenda – in the wake of the political sharp right turn that has overtaken western democracy in the past eighteen months. It is writing that is infused with the anger that is felt by the democratic middle-class and whose mantle is carried by the left-wing, primarily US-based, academic. One thinks here of Edward Said, whose career has been spent deconstructing the Western notion of the Middle East. It is intelligent, insightful, factually accurate writing – but it is also angry.

 

Another US-based author, whose intelligence and academic credentials allow her to adopt a vitriolic style without descending entirely into the realms of political manifesto is Naomi Klein. Her two most significant contributions have been The Shock Doctrine – The Rise of Disaster Capitalism and This Changes Everything, her diatribe on climate change. In both cases an academic style, rooted in fact and analysis, is not intrinsically directed to add to a growing body of analysis and argument in a traditional scientific sense, but is rather a full-blast attack on our sensibilities, aiming, as per her title, to shock us towards change.

 

The entire purpose of her work is to achieve social and political change through her word, rather than to be canonised in a literary sense. She is capable of the latter, but her purpose is the former. This is a genre that includes at its roots Karl Marx’s Capital: A Critique of Political Economy. To give an idea of the extent to which polemical writing has become mainstream, one only needs to look at the praise The Shock Doctrine received. Tim Robbins as an example said of the book, “It could very well prove a catalyst, a watershed, a tipping point.”

 

When picking up a book like Jane Mayer’s Dark Money: How a Secretive Group of Billionaires is Trying to Buy Political Control in the US, one should ready oneself for a political speech rather than an enjoyable historical discourse or a reasoned argument. Naomi Klein called Mayer’s book “utterly brilliant and chilling”, and that is precisely how we are meant to feel: terrified. The generic argument goes something like this: since World War II and the Bretton Woods Agreement, since the establishment of NATO, since the imposition of the World Bank and the International Monetary Fund and other untold evils imposed upon the world, the rich have got richer and the poor have got poorer.

 

What is worse, Mayer argues, is that we have been duped – we have bought into the notion of capitalism and we have forgotten that it is not necessarily married to democracy, that the two can be separated. And meanwhile – other than impoverishing the Third World, and replacing jobs with robots – we are also destroying the planet. If we don’t stop now, it will all end in Armageddon. Mayer’s take on the topic is to veer towards conspiracy theory and conjecture, digging deep into specific organisations and shaming the individuals who have profited from the political control they wield through economic domination.

 

Reading this type of book can sometimes feel like that conversation you find yourself in with an old friend from university you haven’t seen for a while. They used to be a little intense, but you had no idea that over the ten years since you’d last seen them they had become evangelical – either towards Fundamental Christianity or towards climate change.

 

Climate change evangelists are no less vigorous in their proselytising than Fundamentalist Christians, or Tea Party right-wingers for that matter. You come away feeling that you are given no time to consider your options – agree now immediately and adopt the mantle, or you will be cast away as a victim of mainstream oppression. And there is no shortage of such evangelical and angry writing in the new literature of economics: there is Wolfgang Streeck’s How Will Capitalism End? and there is also Yanis Varoufakis’ And the Weak Suffer What They Must? In Varoufakis’ case, to be fair, his brief stint as Minister of Finance during Greece’s battle with the IMF over the question of austerity is enough reason to give his book more than a cursory glance. Streeck’s book, despite its academic prowess, and its innumerable facts and figures, never actually answers its eponymous question.

 

In this vein of academically-based work, angry and immediate in tone, and on the topic of the apparent failure of capitalism, Paul Mason’s book Postcapitalism: A Guide to Our Future, makes for interesting reading. Rather than focusing on the notion that through exposing the ills and evils of the modern capitalist framework readers will be more informed – and therefore more active in their resistance to capitalist oppression – Mason takes on a far more ambitious task. His book truly is a manifesto: it argues essentially that the battle between socialism and capitalism is already over – that socialism is not the only alternative to capitalism, that capitalism is already failing and is being replaced with what he terms ‘postcapitalism’. He argues that the ideals of postcapitalism can achieve a more equal world only if his specific steps and milestones are followed.

 

The skeleton of his manifesto is clearly laid out in the preface to the book. He writes, “So, I want to propose an alternative: first, we save globalisation by ditching neoliberalism; then we save the planet – and rescue ourselves from turmoil and inequality – by moving beyond capitalism itself.” Whilst it is not entirely clear what this would mean – insofar as moving beyond capitalism is concerned, even in the later chapters – he is at his clearest when describing the forces that will drive this change. The kernel of his idea is that a ‘networked economy’, exemplified in his idea of ‘networked individualism’ rather than in the old notion of the ‘community-based’ worker – and driven by new technology-enabled capabilities – will achieve the benefits of postcapitalism.

 

Once again, these benefits are, at best, opaque – even after a thorough reading. Of course, there are throughout the book the use of broad-stroke statements in respect of reduced inequality, and enhanced individual efficiency and a new kind of government. But there is little that one can really call a defined outcome. Where he is most insightful, however, is in his analysis of the processes he claims as the key driving forces behind postcapitalism. Specifically, in describing the three impacts of the ‘new technology’ on the old notion of the market-driven neoliberal economy, he is fascinatingly original.

 

“First,” he argues, “Information technology has reduced the need for work, blurred the edges between work and free time and loosened the relationship between work and wages. Second, information goods are corroding the market’s ability to form prices correctly. Third, we are seeing the spontaneous rise of collaborative production: goods, services and organisations are appearing that no longer respond to the dictates of the market and the managerial hierarchy.”

 

His third point is palpable already in every aspect of our lives, from the way the consumer purchases goods online, to the rise of peer-to-peer lending, to the use of cryptocurrencies as viable exchange alternatives. Probably the best example of ‘collaborative production’ is Airbnb, which breaks and transcends international boundaries, personal space boundaries, and has significantly upended not only the hotel industry, but also the entire tourism and travel industry. In respect of his second point, it is easy to think of examples in which market prices are no longer correct – at least for periods of time. There are, after all, well-documented cases in which market prices have been significantly manipulated by individuals and firms that have cynically corroded the market system – the prices of oil or aluminium as examples, or LIBOR for that matter.

 

Mason, however, is at his best when dealing with his first point – that technology has radically and permanently altered the nature of work itself. In describing the opacity of distinction between working within a community, and living and existing for oneself, couched in the term ‘networked individualism’, Mason cites the work of London School of Economics professor Richard Sennett. Sennett specifically studies the impact of greater job flexibility within the new highly-mobile hi-tech workforce.

 

Mason, paraphrasing Sennett, writes compellingly: “If work rewards detachment and superficial compliance, values adaptability over skill and networking over loyalty… this creates a new kind of worker: s/he is focused on the short term, in life as in work, and lacks commitment to hierarchies and structures, both at work and in activism.”

 

It is worth going further and quoting Sennett directly. He writes: “The conditions of time in the new capitalism have created a conflict between character and experience, the experience of disjointed time threatening the ability of people to form their characters into sustained narratives.”

 

And this really is the trouble with the new polemicists, and with economic and political writing in general – that one has to sift and wade through mountains of words, most of it banal or arrogant or reductive, to come across this nugget of pure gold. What an especially compelling and insightful observation to bring to the lay reader’s attention: that new technology and the phenomenon of social media, in tandem with the erosion of a stable work environment, has created an individual who lacks character, who is fragmented.

 

And this is why we find ourselves in the midst of an all-out battle to save the ideas at the heart of liberal democracy – choice, freedom, courage, community, empathy, truth – in a world of Donald Trump and Marine Le Pen and Nigel Farage. We are not overcome by political forces that peddle fear, who shut borders, who threaten violence, who feed on distrust – because they have good ideas. We are overcome by them because we have become fragmented by the very technologies and changes that we long ago accepted and embraced.

 

We are an Instagram, selfie generation. We post ourselves and our lives on Facebook, but mainly we post ourselves. If there is any doubt in anyone’s mind of the extent to which this is true, simply observe the following: as of writing the value of Facebook is USD 420 billion, whilst the value of General Electric, which differs in that it is a company that makes many useful things from refrigerators to jet engines, is valued at USD 250 billion.

 

Of course, it would be tremendously naïve to nostalgically wallow in dreams of a previous time. That would be to forget that those same times had their own post-truths – the imminent Russian invasion, the space race, the segregated US South, and of course apartheid – but Mason’s hidden nugget of truth is a blow to the gut. Of course we lack conviction in community, and of course we lack empathy. There really is no space in our lives for activism when we are so enamoured with ourselves in such a fragmented reality. There are various versions of ourselves: the one who goes to work, the several on social media, and the one in which we are part of a community. And in blending them, we have become less significant to others, and more significant only to ourselves.

 

It is a pity really that there is such a plethora of impassioned – yet unbalanced – writing on a topic as important as our political and economic future. And it is a pity too that there is such a dearth of reasoned analysis that would provide cogent proposals for change – proposals that would not necessarily require the adoption of an evangelical stance. There is danger in crowd psychology, and the adoption en masse of simplistic ideologies.

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Opinion Pieces

We arrived by taxi at the track for the Saturday qualifying session and we were late. We had been held up by some poor planning, by breakfast at the hotel, and by the line of traffic that had begun at least three kilometres from the main entrance to the Circuit de Catalunya. Breakfast had been wolfed down at the hotel on the beachfront of Barcelona. In retrospect, we should have just grabbed some croissants and headed out earlier.

 

The Circuit de Catalunya is forty-five kilometres out of Barcelona proper, and sits in the foothills between the Catalan capital and Girona, and it seemed to us that the entirety of Spain had decided on the same itinerary as us – qualifying on Saturday, a tour of the paddocks, and the main races on Sunday. We got out of the luxury sedan we had been provided by the hotel and walked the freeway to the main gate and found ourselves run-walking in childish excitement to just get into the stands.

 

Security queues held us up, but it was no matter. The sheer number of fans for the 2016 MotoGP weekend in Catalunya, and the obsession that the Spanish have for the sport, had us in awe. There were thousands and thousands of people who had arrived on bikes. The sound of the machines ran like a base undertone throughout the Circuit complex, every now and then punctuated with the scream of an unencumbered monster GP bike hitting 320 kilometres per hour down the main straight. Even in the parking lot, it was heaven.

 

When we finally got through security and found our seats, we began to sense an undertone of strange stillness, of sadness. Luis Salom, we learnt, a Moto 2 rider, had perished in the Friday afternoon practice session, inexplicably failing to make one of the last turns of the Circuit, and sliding at high speed into a barrier wall, his heartbeat ceasing on the helicopter flight before even reaching the hospital. He was twenty-four years old.

 

We could feel the sadness of his death hanging over the Circuit – there was something awkward about being there, about celebrating this arena of racing at the very limit of human endeavour, when that limit had already been crossed. I made a comment then to my friend who had joined me in Spain to see the main race and to see Rossi, our hero, that in our world – today’s world – the gladiators are not meant to die.

 

That discomfort had to pass however. We had to see qualifying, as did the crowds around us, and we shuffled along through the retail stands – Valentino Rossi caps, Marc Marquez caps, Lorenzo shirts and caps, Honda Repsol colours, Yamaha colours, Ducati colours and the paddock girls, geared up in heels and make-up and the gaudy unashamed in-your-face marketing that somehow makes the whole image even more alluring, not less. In some ways, I told my friend, it is like walking through a market in Jerusalem – so many conflicting ideas and views of the world vying for our attention. One must just pick one’s hero.

 

Of heroes, for us – as for most – there was and remains only the one. Rossi. His very name evokes meaning – meaning that is decoupled from the naming of the man himself. He is a brand, yes, but he has now transcended even that status. He is now an idea. Of the man Valentino Rossi, we can say this: he is a phenomenon, he has changed the way racing is executed at the highest level of the sport, he is a joker, he is a clown, he is a businessman, he is a beautiful man, and he is nine-times world champion. Of the idea – of the idea we call Valentino Rossi – we can say far more. But to do so would first require that I explain why I love the motorcycle racer called Rossi.

 

There are two things I particularly love about Valentino Rossi. The first is the way he races against his rivals, usually Marquez or Lorenzo through the 2015 and 2016 seasons. He races from behind to beat them through wiliness and through courage and by hook or by crook. He is unrelenting – and for this many despise him. He races to win and he does so without a doubt in his head that he deserves to win, not because he is better than them – because truth be told he is not – but because he is more realised than they are, as a man and as a human being.

 

You can see this in the way he rides: I challenge anyone to deny this. He is racing in a higher state of self-realisation than any of his competitors. He does not arrive at this arena of human courage with the youth and fearlessness of Marquez, nor with the precision and coldness of Lorenzo, nor with the flourish and gusto of Dovizioso – he arrives not for his career, nor even his fans, nor even for himself. This is not what he does, this is who he is. And this is truer in his case, than in any other, regardless of the sport.

 

The second thing I love about Rossi are his brief interviews post-race, and there have been many. In these brief flourishes with journalists waiting by the pits, he embodies the very essence of the Italian man: he gesticulates, he pontificates, he shrugs, he smiles. But behind his eyes is a childish spirit, a primordial joy, a lack of adulthood really, in which one can see – only just see that is – that for him, this whole thing, this whole journey, all his wins and his entire career, and the crowds and the fans, are to him surprising and to some extent – well – funny. He is amazed, to this very day that he gets to do this: to race motorcycles and to be adored for it. His joy is palpable and it is innocent and it is that of a child. And in this he is unique.

 

So those are my two reasons for loving Valentino Rossi. But, like most heroes – like Achilles, like Spiderman, like John F Kennedy – there are faults, there are on occasion moments of hubris; and in Rossi’s case, there is the problem for my friend and I on that particular weekend at the Circuit de Catalunya that Rossi had not won a race for some time.

 

We watch qualifying from an air-conditioned lunch spot that sits three or four stories up across the racetrack from the main stand on the main straight. The riders are breaking 320 kilometres per hour as they pass us, so most of the qualifying is watched on a TV set-up as the bikes blast by behind us like rockets. Intermittently, we go onto the balcony above the track and watch the speed of the machines and the men on the machines as they pass. Just to see the sheer speed of it. It is horrifying and beautiful to see, a flash of colour, and the sound – the sound is awesome.

 

One sees the bike and the man on the bike in that moment as one thing, for if one didn’t – if one separated the two in one’s mind – the danger of it, the proximity to death, would be too much to bear. I want to tell my friend this thought, I want to convey to him this idea, but I balk at the moment I am about to utter it. Because it cannot be said. Not then, not while the spectacle of this all is actually taking place. Perhaps later.

 

Rossi, as it happens, qualifies poorly. At least not too badly, but by no means is he in pole position. Marquez is phenomenal. Marquez may be taking risks, but they are not risks that are visible to us, even in the TV slow motion shots. He appears to be impenetrable. And then there is Lorenzo. Our fear is that if Lorenzo gets out in front on the main straight and is the last to break on the right-hand corner at the end of the straight and he takes the lead, the other riders will never see the front of him again. It would be awful, I comment to my friend, to travel all the way to Catalunya to see such a thing. He nods his agreement. It would be awful, he says. Or for that matter, if Marquez gets out in front, I say. Yes, he says, but it would take a miracle for Rossi to win. He is tempering my expectations. Managing them to the extent he can. Why, I wonder, would I expect Rossi to win in Catalunya just because we have travelled to see him. It is illogical. We are not regular fans. We are connoisseurs of the sport. But still, if only Rossi would just win – why not on this one day, for us?

 

That night we go out and we imbibe in the spirit of Barcelona and we take responsibility for ourselves and for the moment and for the occasion. We do not over-indulge because we wish to reach the Circuit the next day fresh and in full essence and in connection to the track and to the possibility of a Valentino Rossi win. We watch Moto 3 from the stands at the last corner before the main straight – the battle between the fledgling racers whose careers in this division will either end after a few seasons, or will lead them to Moto 2, and then possibly on to the pinnacle of the sport, the sharp end. Where Rossi lives and battles.

 

There are crashes, as there always are in Moto 3 and as we walk along the track to the main stands to our luncheon we hear the voice of Brad Binder and his complaint at the riding style of his competitors and of the disappointment in his loss. We miss most of Moto 2, although we catch the start – the revving of the machines as the riders wait for the red lights to count down, and we see that very moment of clarity that exists at the interstice between stillness and movement, before these monsters of noise leap into action. It is surreal.

 

The balcony from which we watch the start of the main race is too packed to really make out the riders. I find myself jostling for position and I give up and go inside and join my friend in front of the TV. Rossi at turn one is down to fifth or sixth, I cannot recall exactly, but he is at least still in the mix. I am between two worlds: on the one hand, there is the comfort of the Dorna executive lounge, the canapes and the detail one can see of the race on the TV screen; and on the other there is the immediacy and reality of what is taking place just metres away on the balcony.

 

I flurry between both, in a schizophrenic daze, anxious as time is moving forward, the laps and the experience tumbling away, too fast. The crowd roars, I rush outside, there is a sea of green vr46 flags – Rossi’s race number for the past decade – waving wildly on the main grandstand opposite. Rossi has made it past two riders into third place. I am now pumping my fists into the air, screaming Rossi’s name with the rest of the balcony. He takes second position breaking late and dangerously and finally passes Marquez in a gladiatorial battle that goes on for several laps. He takes first position and is able to hold it.

 

I am standing now at the edge of the door to the balcony, on my toes, peering over the sea of spectators to catch a glimpse of Rossi’s green Yamaha take the final right-hander into the main straight to take victory. The commentators on the TV are going wild and the crowd outside is going wild and it is beautiful. We are jumping up and down like children, even the German man travelling on his own whose conversation over lunch has been dry. For some reason I hug him.

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Research

In 1994, airport officials in Rotterdam found it necessary to lodge a formal complaint against a company that they felt had begun to endanger the lives of their passengers and pilots. This company had amassed such a significant volume of aluminium in storage around the Rotterdam airport and sea port that the reflected light off the metal was blinding their pilots on take-off and landing. In investigations that followed, it was found that the actual owner of the aluminium, held through a series of offshore companies, was in fact a well-known, yet surprising entity: Goldman Sachs.

 

What – one may ask – would be the purpose of an investment bank, renowned for brokering corporate take-overs and mergers, and for underwriting equities and bonds, for owning such a tremendous volume of aluminium? The answer lay of course in the fact that Goldman Sachs had significantly ramped up their presence in the commodity trading markets.

 

Whereas within equity and debt trading operations – in which there is no actual physical delivery of the underlying asset – in the case of commodities, should the contract expire, the commodity itself needs to be physically delivered, to be stored at the very least, somewhere in the world. In this case Rotterdam was the port which held the storage facilities that were required by Goldman.

 

This kind of activity – that of taking large volumes of commodities onto their own balance sheets – already a stretch of the concept of banking, had been growing steadily since banks began offering commodity hedging as part of their raft of services to their corporate clients.

 

Should Coca Cola, for example, wish to hedge the future cost of aluminium anticipating price volatility in the metal – a key component of their cost of production – they may wish to enter into a commodity futures or forward contract with Goldman Sachs for a fee. There would seem nothing untoward about this – it being one of the core purposes of financial services, at the service of industry and economic growth in general. In this regard, Goldman Sachs would be engaged simply in the process for which banking is meant: that of financial intermediation.

 

However, over time, the benefits to firms like Goldman Sachs and Morgan Stanley of trading commodities for their own balance sheets – what is known as proprietary trading – far outweighed the margins they were making by providing commodity price hedging services to their clients. In fact, the business of proprietary trading commodities became so attractive to Goldman Sachs that they bought a firm called Metro International Trade Services in 2010, although they had made extensive use of this firm for some time prior.

 

The sole purpose of Metro, now a wholly owned subsidiary of Goldman Sachs, is to store and distribute aluminium. In taking control of Metro, Goldman was then able to slow down the delivery of aluminium from initial storage to delivery from an average of 40 days to an average delivery time by 2014 of 674 days. In order to skirt around the rules that the London Metal Exchange (LME) had put into place to prevent precisely this nature of hoarding – which would have obvious price implications for the metal – Metro, instead of selling the aluminium to desperate end-users such as Coca Cola and Coors, would simply move the metal from one storage warehouse to another. They would do so on behalf of a trade that had been executed with a counterparty who did not wish to take delivery, and who may of course have been a trading counterparty of Goldman Sachs, if not Goldman Sachs themselves.

 

By dominating both the market for the spot and futures trading of aluminium, and by also dominating the market for the storage and distribution of aluminium to end-users, Goldman Sachs was no longer acting as a financial intermediary. In fact, they were acting as a competitor against their own clients, with the advantage of both having inside information in respect of the timing of demand as well as being the master of price determination. It should be noted that this nature of market manipulation, in which investment banks were able to inveigle themselves also into their clients’ businesses and from there to be allowed to radically manipulate prices, was only made possible through regulations that were introduced under the Clinton administration.

 

In 1999, several market observers and regulators had felt strongly enough that the over-the counter (OTC) derivatives market was sufficiently opaque that they should lobby for increased regulation of all OTC trading. Increased regulation would hopefully ensure that counterparties in trades would have to properly identify themselves, and that the purposes of the trades would have to be clearly understood. The derivatives market, after all, had already radically eclipsed the underlying market – betting on market prices had become a far larger business than the making of markets themselves.

 

The response from the Clinton administration to the lobbying for increased regulation, was met with a fierce and somewhat malicious backlash. Larry Summers – one of Clinton’s key advisors at the time – led the charge to introduce a new act, called the Gramm-Leach-Bliley Act, which was quickly shepherded through Congress and ratified into law. Among other aspects of this Act, the law now insisted that there should not be more regulation of the OTC market, but less.

 

This Act also effectively repealed the 1933 Glass-Steagall Act, which had been written out of the ashes of the Great Depression, and which had separated investment banking activities from commercial banking activities. It was precisely the cosy and unregulated relationship between the selling of equities, and the underwriting of equities that US regulators had clamped down on post-Depression – this conflict of interest being identified as one of the principal causes of the stock market Crash of 1929. In fact, it was the Glass-Steagall Act that forced JP Morgan to split into JP Morgan Co. and Morgan Stanley the investment bank.

 

In repealing Glass-Steagall, Clinton and Summers augured in the years of the banking hey-day – in which it was not uncommon for investment banks to make returns on equity of over 30 percent using leverage of over 30 times equity. This was ultimately, in the final analysis, perhaps the key underlying cause of the 2008 financial crisis. Investment banks could now take on deposits, sell directly to retail end users, and most significantly in terms of the crisis, package mortgage-backed securities, as well as sell them to naïve buyers.

 

However, what is perhaps less well known is that the Gramm-Leach-Bliley Act also allowed in certain clauses that were lobbied by the investment banks in the hope of aiding their desire for even greater domination of the commodities trading business. After all, Goldman Sachs and Morgan Stanley were now facing increasing competition from non-banking entities that were on a huge growth spurt, such as Cargill and Glencore. An amendment to the 1956 Bank Holdings Act was easily passed in 1999 that in essence allowed Goldman to do openly what it had for some time wanted to do, and possibly had been doing through broken Chinese walls – to take delivery. Essentially, Goldman could now, through entities such as Metro, control not only the trading of aluminium, but also its storage and release.

 

A further piece of legislative engineering was required however, and this was the ratification of the Commodities Futures Modernization Act (CFMA) in 2000. It is particularly telling that at the dawn of the 21st century, a democratic US president – the leader of the western world, at the helm of a country which sells its brand of liberal capitalism as the only form of political governance worth fighting for – completely deregulated the OTC derivatives market whilst simultaneously legislating that, under the CFMA, the OTC contracts themselves were legally enforceable in a court of law. This is really a case of helping firms such as Goldman Sachs to have their cake and eat it.

 

To clearly explain: investment banking players in the commodities OTC market wished to ensure that they be allowed to make markets, price contracts for clients, delay delivery of the underlying, in a completely unregulated manner; but at the same time wanted the law of contract on their side in collecting on debt. Recall, these investment banks had already successfully argued – in lobbying the Gramm-Leach-Bliley Act – that they should be allowed to do so on the basis that they were in engaged in hedging activities on behalf of clients, and that market regulation of complex derivatives would lead to an absence of liquidity and deleterious effects on price. Essentially, they had argued for the market in OTC derivatives to be entirely free of oversight, even SEC oversight.

 

Naturally, in a world without regulation, authorities would have no way to test whether trades in which investment banks or commodities houses were engaged in were of a ‘hedging’ nature or of a pure ‘trading’ nature. The problem, of course, with having enormous values of pure trading – or betting – on underlying prices in economically-critical commodities such as aluminium is that the price of the actual underlying commodity then becomes more driven by speculation – and specifically by highly leveraged speculation – than by supply and demand factors. By trusting that the free market would not overly speculate, the Clinton administration had not only augured in the financial crisis, but had also opened the door to the commodities price boom of the early 2000s.

 

Just as it is not the job of the police to enforce the payment of bets made at underground blackjack tables, the investment banks could hardly insist on having contracts enforced should they go bad – especially if the purpose of the contracts was not to hedge, but rather to bet, just as one might take a bet on the outcome of a turn of a card on a table in an illegal casino.

 

However, in lobbying for particular clauses to be scripted into the CFMA, the investment banks achieved precisely this: not only could they bet to their hearts’ desire, they could also call on the authorities to enforce the contracts should their counterparties balk at paying up. The investment banks wanted – despite wishing to conduct themselves free of any oversight or rules – to be able to go to court and make use of the institutions of law where it best suited them. One would have to search hard for a more one-sided form of prudential oversight.

 

It is no coincidence that the price of food reached its highest level in 2008, since 1845 – that is, for over 150 years. For it was not only the price of aluminium that had been manipulated, or ‘financialised’ to use Rana Foroohar’s term in her remarkable book Makers and Takers, it was pretty much everything. The extent to which dominant market participants have entered into traditional businesses, obstructed them, and then altered them forever, beggars belief.

 

The sheer cynicism of the banking fraternity, when interrogated by Congress in respect of the specific amendments being made in 1999 and 2000 to the Bank Holdings Act of 1956 – which had been originally scripted to specifically prevent banks from competing against their own clients – was to cite the notion that financial firms engaging in ‘complementary’ businesses could benefit their clients. Credit card services, they argued, could be enhanced by offering travel advice, as an example.

 

To cite travel advice as a reasonable example of complementary business, and to use it as justification for being allowed to take delivery of underlying commodities such as aluminium, is to deliberately miss the wood for the trees. Remarkably, and inexplicably, the congressional subcommittees investigating at the time did not take umbrage at the banality of the argument. It really is – in retrospect – impossible to accept the naiveite of the lawmakers at the time. It is also impossible to accept the lack of accountability that has been taken by those same lawmakers and regulators to this present day.

 

More specifically, there has been virtually no accountability taken by western leaders or their advisors for helping usher in the dramatic run-up of events that led to the 2008 financial crisis. Alan Greenspan, in spite of the criticism that has been levelled against him, at least has the distinction of being perhaps the only economist in the history of western civilization who admitted – albeit in the face of overwhelming evidence – that he might have been wrong. No such speech has yet been forthcoming from Larry Summers, who went on after his years as one of Bill Clinton’s most trusted advisors, to become President of Harvard University.

 

The aggression of firms such as Goldman Sachs is symptomatic of their nature, one could argue. They are what they are – highly competitive players making use of each and every inch of advantage they can find on the field of play.

 

This is simply not an argument one can make in the case of Clinton and Summers. There is no rational argument for not insisting on regulating OTC derivatives, especially at a time when the face value of the derivatives market was doubling every three years.

 

To use a football metaphor: the fact that Maradona made use of the “Hand of God” to help his country win the World Cup, or the fact that Luis Suarez savagely bit Giorgio Chiellini’s shoulder during Uruguay’s game against Italy in 2014, are insignificant infringements in comparison to those of Sepp Blatter.

 

If FIFA is to football what the US and Europe’s governments are to free market capitalism, then surely it is the leaders who should be hauled over the coals, not the delinquent players. Sadly, it took many years of intense pressure before FIFA was finally exposed. One suspects it will take even longer in the case of the financial markets.

 

 

 

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Opinion Pieces

If one were to conjure up a perennial image of apartheid South Africa, it would have to be one of the grainy photographs taken in Soweto on 16 June 1976. There are the shots of the South African Defence Force armoured vehicles in a stand-off with the baying scholars who had formed a roughshod group on the outskirts of Soweto, and there are shots of the crowd in panic after the first bullets had been fired. And then there are the photos of Hector Pieterson.

 

tobaccobeerv1-0smallThese are the images that are conjured, that have been nurtured by the process of history into permanence, that are now indistinguishable from the concept of apartheid itself.

 

I grew up in apartheid South Africa, and these were not the images that I had in my head at the time. The images I had were of large, loosely-fenced properties, of dull brown and grey landscapes in winter, of single-story houses, and of pastel-coloured cars, of Saturday barbecues with neighbours’ children, and of swimming, endlessly, throughout summer.

 

There were of course some small anxieties of things to come. There was the moment when I was told that we should not go to school because it was ‘kill-a-white day’. It would only be many years later that I would come to realise that this day was the anniversary of the Soweto massacre.

 

But they were only ripples. Like any totalitarian regime, there was a bubble that was carefully maintained around us. We had little real notion of the world in which we lived. Our main convictions of ourselves were that we were somewhat politically behind, that the international community was repulsed by us, that we would spend two years in the army, and that we were pretty good at rugby.

 

On Saturday afternoons, having been excluded from international sport, we would watch the Currie Cup games. My father and his friends would drink South African Breweries-made beer, and smoke British American Tobacco-made cigarettes. They would watch the rugby whilst keeping an eye on us in the pool.

 

The extent to which things have changed since the 1970s is dramatic. This country has had, for some time now, the most liberal forward-thinking constitution ever written – in any country, anywhere. Our freedoms are guaranteed. Two decades of self-realisation through the implementation of democratic principles, and our inclusion into the international fold, have made South Africa and its people change enormously.

 

Nevertheless, in spite of these freedoms, and in spite of tremendous structural change, the economic reality for many in this country has altered very little. Frequently, and particularly more recently, stagnant growth and continued stifling inequality is blamed either on externalities or on the idiosyncrasies of leadership.

 

These externalities are often the same kind of externalities that any emerging economy with a heavy reliance on commodities would cite: the pull-back in Chinese demand, the falling copper price, the oversupply of steel. These are the structural arguments; the medium- to long-term reasons given for lacklustre performance.

 

In the short-term, one recognises clearly that the enormous gyrations in the value of the currency, and the immediate impact this has on the ‘markets’ – meaning bond prices and the value of JSE tickers – are primarily driven by the notion that the utterances of leadership itself are events, rather than utterances only. These are not structural impingements, but the fear is that they could become institutionalised.

 

What is not spoken of however, what is analytically absent, is the extent to which the financial markets – in spite of all of the remarkable changes we have experienced as a society – have not changed very much. This is not because the economy has not changed. The economy today is radically different to what it looked like in the 1970s. It is the markets that look distressingly similar to apartheid South Africa. The markets have become substantially, audaciously, out of sync with our economy.

 

Just a few facts elicit this. Looking at the JSE holistically and then drilling down, one notices that SAB Miller and Anheuser-Busch – two enormous beer-making firms that are set to merge after international competition commissions approve their R1.5 trillion deal – constitute 27% of the total value of the JSE. That is remarkable: the brewing of beer is valued by investors at over a quarter of the total stock market. Now add British American Tobacco, another ‘sin-tax’ firm, and we have three JSE firms that make up roughly 39% of the total stock market value of the JSE.

 

Even more absurdly, if one then adds Naspers, the next largest company by market capitalisation on the JSE, that fraction goes up to 46%. Naspers, in and of itself, is worth interrogating. Of its R1.0 trillion market capitalisation, more than 80% of that value is made up of its investment in Tencent, a Chinese messaging app.

 

To put that into perspective consider this: The largest four banks in South Africa employ about 190 000 people, whereas Naspers employs only 24 000 people. The Big Four banks are all considered blue-chip shares, yet their total market value, all together, is worth less than Naspers alone.

 

The party line amongst local and international economists reads something like this: The South African economy is likely to grow sluggishly in 2016 and 2017, afflicted by severe electricity constraints and the downturn in the global commodity cycle. Policy uncertainty, labour unrest and resultant investor uncertainty have also undermined SA’s potential growth trajectory in recent years, although South Africa is actively working to ease electricity supply constraints in the longer-term.

 

What the headline should read is this: Of the R15 trillion value in the South African equity markets, almost one-half is invested in a beer company, a cigarette company, and in a Chinese messaging app. This is because institutional investors are divesting themselves of South African economic exposure and SAB, BAT and Naspers will provide the investor approximately three quarters diversified offshore exposure.

 

As ironic as it is plain: the image in my head of a childhood spent growing up during apartheid in South Africa – men drinking beer, smoking cigarettes and watching rugby on TV – was accurately prescient of the constituents of the JSE more than thirty-five years later. My childhood image however has very little relevance to the broader economic reality that exists within South Africa today: a picture of tepid growth, violence, xenophobia, extreme unemployment, cronyism, and a proliferation of mediocrity in all echelons of utilities.

 

Most importantly however, this contrast between the JSE and the economy displays in the collective investment strategies of just about every investor within the borders of this country, including the State’s own investment arm, a substantial absence of faith in this country.

 

Little real equity investment has risked itself on our future. The distortion between the real economy and the markets – the structures through which the real economy is meant to be funded – is astonishing. In nominal terms, the figures are even more distressing: the value of unencumbered equity invested in the real economy in South Africa is strikingly low – something like a sixth to an eighth of the same ratio in the US.

 

Money has simply gone to what it knows best, its past successes. These are successes that have repeated themselves on a worldwide stage, but somehow only in industries that distract one from the rigours of reality.

 

 

 

 

 

 

 

 

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