WORLDVIEW: Take advantage of EM fashion that has raised all ships. It won’t last.

I get a lot of email. Which is a very good thing in my line of work. Because every correspondent acts like another pair of eyes, helping scan the environment for clues on what is really happening – and providing the nudges we need to adjust accordingly..Last week one of my regular pals sent me a copy of the latest Allan Gray presentation to financial advisors. It was full of insightful material, some of which I "borrowed" for inclusion in yesterday's inaugural webinar on the SA Champions share portfolio..The graphs illustrate very clearly that South Africa is in a hole and its political leaders still have shovels in their hands. Best of them for me is the graphic below showing Government debt as a percentage of GDP..___STEADY_PAYWALL___.This graph should be scaring the pants off every South African taxpayer..It clearly shows the frightening growth in Government debt. After steadily falling in the first decade and a half of democracy (take a bow Trevor Manuel) the SA taxpayer's liability has been rising in a straight line since mid-2009. It is now at a record 52% of GDP – above the peak of the Apartheid era..This surge in debt coincides perfectly with the ascension into the presidency of Jacob Zuma, the deeply compromised ANC loyalist. A succession of well-intentioned finance ministers have been fighting a rearguard action against the innumerate Zuma's worst spendthrift excesses. But after the firing of Pravin Gordhan, all needed restraint has now gone..Financial markets afforded Zuma's newly appointed Finmin Malusi Gigaba the benefit of the doubt. That won't last. Any of the forex desk jockeys who bothered to read Gigaba's address to an investment conference in Ekurhuleni on Monday, would reassess. Pretty smartly..It is well known within SA that Gigaba is no rocket scientist, a fact documented by a succession of blunders in previous portfolios. Also, the natty dresser quite plainly lives well beyond his official means – after the #GuptaLeaks emails the nation now has a pretty good idea how those extravagances are funded..But those deficiencies pale by comparison with the damage threatened at a policy level by his arrogant economic illiteracy. An alarm which screams at us from the pages of Monday's speech..In it Gigaba talks of "our aspirations eventually to become a developmental state" quoting the Asian Tigers as role models for this path. This is pure, unadulterated idiocy. The Asian Tigers, China included, are the antithesis of developmental states. Their success has been achieved by freeing the private sector from State interference. The flagbearers of the development state, by contrast, are disasters like Venezuela, Cuba, Zimbabwe and Argentina (under Kirschner). Any Econ 101 student understands this..The new finance minister also has the temerity to criticise the world's successful market-driven economies, justifies the wastefully inefficient and badly haemorrhaging SOEs and then instructed his audience that SA "needs massive industrialisation in the secondary sectors." This is breathtakingly foolish..Instead of playing to the country's undeniable strengths – tourism, professional services, banking – Zuma's deployed cadre is determined to waste the nation's scarce resources by continuing to fund sinking State ships and new ones which have long sailed..Gigaba is either ignorant of, or simply ignores the reality of the Fourth Industrial Revolution. This is lunacy on the scale of an idiot who, ignoring how the internet has transformed the sector, would today invest in newspaper printing presses..I could go on but won't because that would only depress you. In the circumstances, the only sensible response to a Gigaba at the head of Treasury is to ship as much capital out of the country as quickly as possible. And invest what is trapped by exchange control in Rand hedge stocks. Take advantage of the Emerging Market fashion that has raised all ships. It won't last forever.

WORLDVIEW: Take advantage of EM fashion that has raised all ships. It won’t last.

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