The Hon. Minister of Finance delivered His Majesty’s Government’s budget for the financial year beginning April 2022. Let’s not drag with this one. We start with 36%. I was sweating as soon as the Minister disclosed that there was a proposal to be tabled that, if approved, would see the upper tax bracket being raised from 33% to 36%.
When I have to go to the store to buy something I cannot whip up myself in the house, which is most things, I am left with a bad taste in my mouth when I process how much is going to the tax man. It’s sizeable and we’re still just talking about 15%. I don’t even want to know what 36% looks like, let alone feels like. I have been online pricing bicycles since the petrol hike. While that was going on, the central bank hiked interest rates in the the first month of the year, before we had even taken our seats. Now tax is also featuring. How many weapons must be formed against us?
Tax is necessary and citizens generally appreciate this fact. Civil servants do valuable work and they need to be compensated. Roads need to be built and maintained. The security forces and emergency services are also paid for in money and tax is the ancient and modern way to meet these obligations. There are no problems with that. The noise only starts when citizens lose confidence and are not sure if the money they contribute towards the services mentioned is indeed utilised for the purpose. The Minister himself admitted that there had been “leakages” and economic policies that had “failed over years of misuse.”
The Government also spoke about consolidating some parastatals. Most income-earning emaSwati have to stretch their income to take care of several people because our unemployment levels are perpetually in the stratosphere. What does shutting down half the parastatals mean for staff affected and their families? Also, interestingly, the Sibaya National Dialogue is expected to cost us E22 million. That’s quite an expensive conversation, isn’t it?
There were other interesting points that were raised including potentially listing sovereign debt on the JSE. The tax conversation just discombobulated me. I would’ve loved to link the entire budget speech but at the time of writing, it was yet to be uploaded to official pages. The most current upload was the 2019 budget speech.
Julius Malema
Is Julius Malema the most quotable man in politics? He has been an influential figure for a long time and if you’re living in southern Africa, you are likely familiar with his blunt rhetoric. He even influences the (little) politics in my country. He is in the news again. He is in court again. This time it’s over the trauma that “dubul’ibhunu” is causing some South Africans according to AfriForum.
Dubul’ibhunu is a catchy anti-Apartheid song that directly translates to “shoot the Boer.” That is the lyrical content in its entirety. It is sometimes interpreted to mean “kill” the Boer, but I think we can agree that it’s not exactly a love song. AfriForum believes that these lyrics are traumatic for those that have had family members killed on the supposed basis of just being white and owning a farm. AfriForum’s story is that these acts by black people against white farmers are inspired by songs with lyrical content like “shoot to kill.”
It’s the same argument I’ve heard before about how video games are making children more violent. There is no human in the history of humanity that has ever committed an act of aggression and upon being called to answer cited “it was Grant Theft Auto that made me do it.” Study after study have failed to prove that there is any long-term aggression that is nurtured by PlayStation. I am living proof. Do you know how many missions I’ve completed on Call of Duty wearing U.S. fatigues with orders to retrieve certain items through a live battlefield? It’s a staggering number and yet I’m the biggest coward I know. Playing a game as a soldier doesn’t make you one. I’ve tried!
Julius asserted that the use of the word “trauma” was only applied when the victim was a white person. He argued that the trauma of the black people of South Africa is far more severe. The lyrics of a song are the least of his worries and he will not apologise, nor pay any fine for singing struggle songs.
Storm Eunice
The United Kingdom has been hit by a storm of biblical proportions dubbed Eunice. This hun is blowing down buildings. Even the famous O2 Arena couldn’t withstand the 200 kph gusts and is partially topless as you’re reading this. The devastation is happening all across the United Kingdom affecting many in various ways and to various degrees.
There are people who have found the lighter side of the natural disaster recording themselves in racing contests in the storm. Some on foot and others on contraptions on wheels powered by Eunice and clever use of plastic bags. I’ve found myself laughing watching these Eunice olympics. On the opposite extreme we find what storms are known for, gloom. About 10 deaths have been reported at the time of writing and it will be days after the calm when we arrive at the final count.
Scientists were forecasting Eunice as early as a week ago. It was not obvious how big it would be nor the path it would trace but the conditions were ripe for a storm and this was clear to capable scientists days in advance. By Wednesday, there was enough certainty about the storm’s impending cyclogenesis in the Atlantic Ocean that warnings were already being broadcasted. Eunice finally hit on Friday and has been compared to the worst storms to ever hit the UK and northern Europe.
There is a telling difference between the disasters of old and those of today. The world of today is so rich in knowledge and technology that it can see into the future and issue out warnings well ahead of time to minimise damage and disruption. This saves countless lives. Our progress in collecting data and drawing insights is invaluable. If I’ve never said it before, I’m saying it now. Nerds run the world!
What I’m Reading
I was reading a book titled “Why Aren’t They Shouting?” authored by Kevin Rodgers, a retired banker. The book is a first-person narrative on Kevin’s long and successful banking career. He details how the banking sector’s aggressive adoption of technology can weaken a financial system.
Kevin Rodgers was a career trader specialising in foreign exchange contracts. He had a stint trading commodity derivatives but he would return to foreign exchange before his retirement. Kevin retells how, in the old days, trades were concluded in a noisy and excitable trading floor. Traders were engaged in an unending series of back and forth intense gesticulations to make their point and to sign off on deals. The trading days before computers were wild and you wouldn’t have known how important the work being done was from just looking. It could only read as chaos to an onlooker.
The author writes about this one particular day. His office was entertaining several executives and he was requested on the eleventh hour to play tour guide as the substantive office guide had gone MIA. So, while Kevin was showing the suits around his trading floor one woman executive interrupted him with the question, “Why aren’t they shouting?” referring of course to the casually dressed dealers populating the trading floor. A question, Kevin writes, that was baffling at first instance. He gave an answer that he could conjure up on the spot and continued with his tour. After his hosting duties had ceased, he went back to his office to be haunted by that question, “Why aren’t they shouting?”
Computers! The introduction of computers into banking is what ushered in the new age of pandemonium-free dealing rooms and trading floors. The pandemonium, instead, would appear again elsewhere. The traditional dealing room was manual and for customers to trade any financial instrument required the express contact of a broker. This process was a bottleneck to price discovery and depended too much on human interaction. As you and I know, humans get tired. This limitation means that complexity of human activity can only progress to a point. On the other hand, computers are not subject to such a limitation. Combine the tireless nature of computers and the insane processing speeds that are characteristic of modern machines and you have an opportunity to create complex financial instruments that nobody fully understands, especially the regulators. This is exactly what happened. Banks stopped vying for the street smart sales people and started hiring IVY league graduates with fancy degrees in physics, engineering and mathematics.
This new blood conspired to craft up the most exotic financial instruments leveraging computing power. The banking industry harnessed this limitless power and hubris, inevitably, began to fester. They felt that they could do anything and understood everything. They fooled themselves into thinking that they were in full control. Then out of nowhere, hello 2008 financial crisis.
Rodgers believes that the financial crash of 2007 to 2009 was due to the increase in complexity in banking which only came to be because of computing. Financial markets are more fragile now than they were before. Trillions of dollars can be wiped out from the system without any discernible changes to fundamentals. You will remember the flash crash of 2010 as a case in point. 36 minutes was all it took for a trillion dollars to be wiped off from the face of the earth because of a buggy algorithm at 1 firm.
Rogers gives a detailed account of the Russian default of 1998 as well along with other interesting anecdotes that punctuated his career. The contents of the book are rather esoteric and would only be enjoyed by people in finance, economics and banking. The author does a great job at explaining concepts, simply. He writes in a conversational tone. It’s a breeze to read. I think it’s within reach for anyone but I do not know if you will enjoy it much if you’re not interested at all in trading and financial crises.
PS: If you’re wondering what happened to the Count of Monte Cristo and whether I read to the end or not. I have an answer. I think it’s impossible to finish this book, but I will try. I’ve been reading it since December and I’m only 40% through. Maybe we will pick it up again next week or, like this week, I’ll find something else to read. Who knows?
If anything else happened this week, I missed it. Till next Sunday 👋🏾.
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