I attended a presentation by one of the SA asset managers recently…it was a good job that there were no sharp knives around. It was real slit-your-wrists stuff!
Their view is that SA is pretty much stuffed and that unless there is a significant change in ANC leadership that we are on the “low road” scenario. The reasoning is as follows:
- SA stuck is in a no growth-low inflation scenario. The only reason the Reserve bank is not cutting interest rates is due to political risk fallout.
- The global search for yield has kept the ZAR strong (for now) – they see it considerably weaker over 3 years, especially if we get the Moodys’ downgrade on local debt (it seems inevitable at this stage).
- SA consumers are very stressed with much higher than normal variance in the payday compared to mid-month purchasing patterns (there is a massive spike at pay-day compared to mid month and this is much higher than normal). In addition to this, people are switching away from brand names to “no-name” products.
- SA food retailers have noted significant change in the composition of the average food basket – food inflation as measured by retailers is very different compared to what is measured by Stats SA.
- One of the SA retailers reported that for every R100 they are lending consumers, there is an additional R1700 in unsecured credit! Unsecured credit demand has increased radically.
- Another SA retailer has reported worst figures in 20 years.
- There are 17million people on social grants and this number is increasing rapidly…government is running out of money to fund this.
- SA facing poor consumer confidence (reduced spending), poor business confidence (reduced investment in SA) and poor employment numbers.
- The revenue (tax) base is shrinking, SARS is missing money due to incompetence.
- SARS (and treasury) have been haemorrhaging skills and there is a significant loss of expertise at both organisations.
- Tax payer non-compliance has increased as a result (and will continue to increase) thus worsening government revenue.
- Government is going to be desperately short of funds!
- The risk of a return to “prescribed assets” for pension funds has increased and along with this a limit on moving funds offshore and possible cancelling of asset swap capacity for local funds!
It’s a good job that there were no sharp knives around…having said this though, they are still positive medium-to-long term IF the Zuma faction is outed from government.
I have come across a few situations recently where we have had to help people who are in major life transitions – retrenchment and retirement – and it amazes me that most of the people we have been asked to help have no idea of their income needs (budget).
I was also chatting with a group of business people recently who have all been running businesses for over 15 years and yet a common theme seemed to be that they “had no money”.
I dont hold myself out as a role model and dont believe that I have “all the answers” but one thing I do know is that the “secret” to running a succesful business or to getting your finances in order is positive cashflow. And that always starts with a budget.
You cant plan if you dont know what’s coming in or going out. It may be boring and tedious and for some it may seem too simplistic, but the key to getting on top of your financial position is a budget. And more importantly, a budget where the expenses are less than the income!
We have always found it easier to use an excel sheet to list and track expenses and if anyone would like a copy of the sheet just drop me an email.
Drawing up a budget is not difficult but it can take many months to get it to balance.
Tis the season to be jolly…well almost if the shop decorations are to be believed. And I have also had two calls from people looking for advice re magazine articles they are writing for January editions on “how to avoid over-indulging” during the month of December. So perhaps it is fitting to start thinking about it and planning now before it is too late.
One of the biggest issues we face is the length of time between the November, December and January pay cheques – traditionally the December payment comes mid-way through December, 15-20 days after the November salary. About 45 days later (after the longest month in the year) the January salary arrives…only problem is that because of the usual December over-spend, January’s salary already has its hat and coat on by the time it arrives.
So what could you do differently this year?
Plan ahead…I know it’s boring and not really the stuff of exciting articles but then again, as with most financial issues and indeed with life, it is mostly about common sense. Since you know that there will 2 salaries within 20 days and then a further 45 days between the next pay cheques, put aside some (most) of the January salary in a savings account. Plan your Christmas/holiday spend and put the rest into a savings account for January (Capitec bank will give you 7% interest on amounts under R10000, else use a money market unit trust for this purpose). And a really good thing about a separate account is that old “out of sight” principle.
One of the people I spoke to also had a great idea about creating a “December-fund”. This would be money that you put aside each month so that you can spend it in December – much like creating your own 13th cheque. Again, an account like Capitec would work really well for this – at R200 pm you would have an additional R2200 to spend if you started in Jan.
On top of this, in the same way that we are advised never to go food shopping on an empty stomach, you should also not go Christmas shopping without a list/plan…the temptations are just too great and there are too many “cute” things that just have to be bought (for someone). So make a list and better still, if finances are tight (and they are for many people) then chat to family and friends and either agree to limit what you spend per present or maybe agree to put all the names of people attending your Christmas function into a hat and then each draw one name and buy one present. That way you could buy a really nice gift but also spend a whole lot less.
It is probably also a good time to sit down and review your budget as you think ahead to creating/setting New Year’s resolutions. And one of the areas that you can really save on is bank fees – if you are paying more than R70-80 per month then you are over paying. A simple change of bank could result in a saving of more than R1000 in a year (that’s half of your December fund).
Anyone living in Cape Town and with a bit of spare cash and a pre-paid electricity meter would probably do well to buy electricity before the 25% increase on the 1st July.
By doing this you will effectively be buying electricity at a 25% discount to the new price…a tidy return on your money indeed. A couple of caveats first though:
- You need to make sure that you remember to at least “top-up” your account each month to pay for that daily service fee that is levied. Failure to do that could land you with a nasty surprise in a couple of months when you get no electricity next time you buy because all of the money went to cover arrear service fees…
- I have no idea what happens if you buy the electricity and something goes wrong with your electricity box – it does not happen very often but I guess it could and if Murphy is around it will happen just after you have charged up – so make sure you keep your receipts so you can at least “prove” that you had the electricity if there is a problem.
- Make sure you dont forget to make provision for electricity in your future monthly budgets – i.e. if you have bought enough for 3-4 months, dont forget to budget for electricity in the months after that..
That’s all for now – I need to top-up with electricity.