Ruminations of a Grumpy Unfashionable Older South African

Aweh dearly beloved fellow ruminants & groupies in day 660 of re-modified lockdown Level 1 with Alcohol, no curfew, and slowly decreasing omicron hysteria.

Period as a semi-retired pensioner: 288 days

As is the case with many of you I am on several WhatsApp and social media chat groups and an article by another grumpy older South African, Magnus Heystek, crossed my virtual desk this week. https://www.biznews.com/sa-investing/2022/01/07/magnus-heystek-south-africa. His message is that over the last 10 years or so South Africa has been a terrible place to invest your money. Don’t get side-tracked by some of the companies listed on the JSE such as BHP, Anglo or, AB Inbev whose South African business is insignificant but look within South African borders. In the last 10 years the JSE has returned about 3% per annum while the S&P 500 has been growing at 16% over the same time. South African commercial and residential property has also performed very poorly.

So, what of the future? Are South African assets undervalued and will there be a big turnaround? To be fair let me provide a positive reference. https://www.capetalk.co.za/articles/436282/not-all-doom-and-gloom-for-sa-inc-int-investment-going-ahead-in-some-sectors.

I’m afraid I’m not buying the positive talk, partly because I’m grumpy overall. Much has been written about South Africa’s problems and I will focus on only one being the collapse of infrastructure and the collapse of municipalities in South Africa. The City of Johannesburg (COJ), as it is called, is a dysfunctional mess. Apart from Eskom load shedding there are regular, sometimes lengthy, power outages caused by crumbling electrical infrastructure. I covered this in a previous blog. https://ruminantpinkfriday.com/2021/10/29/further-ruminations-on-living-in-3rd-world-johannesburg/. On a positive note, I can report that after pestering and annoying City Power about the dangerous and non-compliant transformer supplying our street, they replaced it in December. Although this is a positive development it only scratches the surface. In the Saxonwold and Parkwood area represented by the resident’s association there are 72 transformers in total. Most of these are very old and they are not being maintained. Although the entire crumbling water infrastructure in Saxonwold was replaced in 2020 the larger water infrastructure in Johannesburg is in a dire condition leading to regular water outages some lasting for days. Then there are the many potholes and traffic lights that don’t work.

My brother who grew up in Johannesburg and now lives in Cape Town comments on how it is visible that Johannesburg is decaying. So, we have semigration where people, who can afford it, move to the Western Cape where the ANC does not run the municipalities, infrastructure is maintained, and services are delivered much better. In the recent municipal elections, the ANC lost their majority in Johannesburg and now we have an (unstable) DA-led coalition. Let’s hope things get better.

We bought our house in Saxonwold in 2009 for R4 million and did renovations of about R1.5 million before moving in during 2010. The current municipal valuation of our house is R6.36 million ($410 000) and it is debatable as to whether it could be sold for that price in the current market. It has not been a good financial investment. Empty 2000 m² stands (if you can find one) in Saxonwold sell for around R4 million. It would cost a lot more than R2.36 million to rebuild our house. The insurance value of the buildings, reflecting building costs, is R6.9 million. This means that if our house was destroyed by fire, it would be significantly better for us to clear the site and sell the stand. I have several friends and colleagues who are semigrating to the Cape and are really struggling to sell their houses in Johannesburg. Infrastructure matters a lot and if it decays sufficiently your house can become worthless. The infrastructure backlog in the city of Johannesburg runs into the tens of billions of Rand. Municipal rates and taxes and utility costs have been steadily increasing above inflation for a decade and bad debts are proliferating. Squeezing further funds out of Joburg’s residents is not an option.

Then there is Southbroom, which is in the unfashionable South Coast of KZN and is run by the corrupt bankrupt ANC controlled UGU municipality. In July (2021) we pulled the trigger on some renovations in our Southbroom house. I have forgotten why we did that. https://ruminantpinkfriday.com/2021/07/16/ruminations-on-looting-impunity-defiance-and-hope/. In a nutshell, the project has not gone smoothly. Objecting neighbours, bad weather and the builder suffering a very bad dose of Covid are just some of the issues that transpired. Both cost and schedule have suffered, and the project is not complete but will hopefully be completed in the next couple of months and be fabulous.

KZN is unfashionable for good reasons. Apart from being the epicentre of the July 2021 rioting and looting, there is widespread municipal collapse. https://mg.co.za/environment/2021-01-19-r100-billion-needed-to-staunch-kzns-water-woes/. Although the South Coast of KZN has abundant water the water supply infrastructure has collapsed and there has been a water supply crisis for more than 6 years. To maintain the viability of our house as a tourist destination we were forced to install a 5000-litre tank and pump to deal with regular water outages which last days. Some permanent residents have 20 000 litres of tanks, and we may still need to add another tank. No tourist will tolerate a holiday without water and tourism is vital for the local economy. Poor people in KZN go without water for weeks and months. A better life for all?

Having said that Southbroom is a beautiful well-maintained village, but it is the extremely dedicated permanent residents that are responsible for this not the municipality. Houses are much cheaper than the Western Cape.

For now, we are soldiering on living in the unfashionable parts of South Africa. Is this wise? Perhaps not. We could sell both our houses and semigrate and become fashionable once more. Will we then have to mingle with fashionable people? That, in of itself, is a compelling reason not to semigrate. In addition, I can continue annoying and pestering the local authorities to make small improvements. At least it’s something to do other than blogging. I will try to do what little I can to make things better and volunteer for community organisations.

Although I have focussed on municipal and infrastructural collapse this is just one issue. There are many others each of which would require a separate blog but just an incomplete list in no particular order for now:

• Endemic corruption and state capture
• The electricity crisis which started in 2008
• A complex and business unfriendly regulatory environment
• Ongoing noise about expropriation without compensation
• Extremely poor basic education particularly maths and science
• The radical economic transformation (RET) faction of the ANC
• Rioting, looting and violence
• Black Economic Empowerment (BEE) legislation which has facilitated corruption and created a wealthy elite extracting rents from legitimate business
• Extremely high unemployment and a growing poorly educated and unemployable underclass
• Endemic crime including violent crime
• Etc.

While we will continue to live in the sun in South Africa our money will be kept in the shade where white monopoly capital is wanted, gets a return, and belongs. Feel free to comment or call me unpatriotic or any other pejorative term. I do not have a right not to be offended. Happy to debate on the facts. Not that interested in ideology.

Thank you very much for your comments and suggestions and please keep them coming.

Regards

Bruce