Analysis

Manipulation Of The Rand And Interest Rates, Unfair Taxation And The Concomitant Silence Of Law Makers

By Sam Ditshego

Have you ever wondered why Members of Parliament do not care when commodity prices go up such as, for example, petrol, electricity, food, and when the rand slumps or the economy shrinks? It is because they get paid handsomely and do not feel the rising prices of commodities. They bark at each other in Parliament like poodles – and they are poodles of the West – but at the end of the month they go laughing all the way to the bank. Whatever happens to the poor they do not give two hoots because they are not affected. They enjoy tax-free perks that include travel expenses by way of air fares, petrol and accommodation. The South African government collects exorbitant taxes but they don’t benefit the people of South Africa, especially the poor. South African taxes are squandered in corruption. An examination of the salaries of MP’s will be in order.
What do MP’s earn?
National assembly Speaker and National Council of Provinces Chairman. The highest-paid MP’s are the speaker of the national assembly and the chairman of the national council of provinces (NCOP). Those positions are held, at present, by Baleka Mbete and Thandi Modise. Both are members of the ruling African National Congress (ANC).
As of 1 April 2015, both earned R2, 716,798 a year, according to the government gazette. That averages out to R226, 400 a month.
Their salaries are the same as the deputy president’s, an indication of how senior they are. They also earn more than cabinet ministers, who get R2, 309,262 a year, or R192, 439 a month.
National Assembly Deputy Speaker
The next highest-paid MP is the deputy speaker of the national assembly, who earns R1, 901,726 a year, which is the same as a deputy cabinet minister. That works out to R158, 477 a month. At present, Lechesa Tsenoli is the deputy speaker.
House Chairman The house chairman comes next on the pay scale. This is currently Cedrick Frolick, who earns R1, 765,935 a year.
Senior MPs
After him comes a group of senior MPs – the chief whip of the majority party, the chief whip of the NCOP, and the parliamentary council president and deputy president – who earn R1,494,192 a year. The leader of the opposition, currently Mmusi Maimane of the Democratic Alliance, is also among this group. Their monthly average works out at R124, 516.
Committee Chairs
Members chairing parliamentary committees earn 1,358,399 per year, or R113, 200 per month.
Minority Party Leaders. Leaders of minority parties, such as Julius Malema and Bantu Holomisa from the UDM, earn R1, 222,606 a year or R101, 885 a month.
Regular MPs. The lowest salary an MP in the national assembly or NCOP earns is R1, 033,438 a year, or R86, 120 a month. (Source: Africa Check published 8th June 2016).
I am saying that South African MP’s are poodles of the West because South Africa and the South African government are registered as a corporation at the US’s Securities Exchange Commission https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000932419&owner=include&count=40&hidefilings=0
As a voter, you have the right to seek answers from your organisation/political party, whether or not it is represented in Parliament, to explain why South Africa and the South African government are registered as a corporation and what about your country’s sovereignty. You also have the right to find out from your MP why he/she does not raise the manipulation of the rand in Parliament which raises interest rates thereby affecting consumers, especially the poor and the workers. Trade unions are colluding because they do not want to bite the hand that feeds them.
In an article in Fin 24 published under the headline, “SARB may hike interest rate if weak rand boosts inflation,” https://www.fin24.com/Economy/South-Africa/sarb-may-hike-interest-rate-if-weak-rand-boosts-inflation-20180619 central bank Deputy Governor Kuben Naidoo said the rand’s plunge to the weakest in almost seven months against the dollar may push up South African inflation and necessitate interest-rate increases.  “While the SA Reserve Bank (SARB) doesn’t target a specific level of the rand, it responds to second-round effects on prices from currency weakness, Naidoo said in an interview with Bloomberg TV in Sintra, Portugal, on Tuesday. “If we do think there is a risk of second-round effects, we will have to act,” he said. Inflation was 4.5% in April, in the middle of the central bank’s target range. “But if it rises and if it’s forecast for rise, we will have to act.”
RT Naylor wrote in his book, Hot Money and the Politics of Debt, published in 1987, that: “In the late 1970’s governments in the major Western countries declared war on inflation. Inflation usually won.”
Kuben Naidoo, Reserve Bank Governor, Lesetja Kganyago and the South African Reserve Bank seem not to be winning the war against inflation. Will they now stop increasing interest rates because they are not winning?
When interest rates go up they create a “credit squeeze”. This is unfair. It benefits lenders and speculators. Naylor says that only crank academics will subscribe to the doctrine that to control inflation it is sufficient to control the supply of “money”. He says behind the revival of this formula there is a long discredited political theory – that debtors, whenever possible, will use their allegedly superior political power to increase the money supply in order to inflate price levels, thereby reducing the real burden of their outstanding debts, which could be repaid in a depreciated currency.
Richard Blackwell, a Canadian writes that a return to the sky-high interest rates of the 1980’s isn’t likely in today’s economy but it wouldn’t take much of a hike to play havoc with the finances of today’s homeowners. He says while a return to such heights is not a likely prospect, economists say, it wouldn’t take much of a hike to play havoc with the finances – and the psyches – of today’s homeowners.
Five-year fixed-rate mortgages were more than 15 per cent for about two years, from the fall of 1980 to the fall of 1982, peaking at just over 21 per cent in the second half of 1981. The Bank of Canada was cranking up its rates at the time, to try to stem the runaway inflation that was playing havoc with the Canadian economy.
Why are there no five-year fixed-rate mortgages in South Africa for more than 15 per cent for about two years? Why do the South African Reserve Bank and commercial banks in South Africa not emulate the Bank of Canada and Canada’s commercial banks or be forced to do so by the government? I mean South Africans have been paying high interest rates like Canadians for a very long time now. There must be a moratorium on interest rates in this country. But home buyers in Canada had to endure relatively high rates for much longer than just that stretch. Five-year fixed mortgage rates never fell below ten per cent for a full 18 years – from 1973 to 1991.
There are people in Canada whose current mortgage is at 3.2 per cent. The return to a high-interest-rate scenario would send shivers up the spine of any person who bought a house or a condo and is paying 2.79 per cent for the privilege of borrowing half-a-million dollars or more.
There are a number of reasons why rates – when they do start to rise – are unlikely to climb to the levels of the 1980’s. First of all, “central bankers now have 20 or 30 years of experience fighting inflation,” and they are not as likely to “overshoot” in their attempts to stop inflation by jacking up interest rates too sharply.
There is also less chance that inflation will gain ground in the first place, as the globalisation of the past few decades has been a significant disinflationary force. Low-priced imports from developing countries have helped keep domestic prices down, and that situation is not likely to change significantly in the next while. Canadians concede that globalisation has been a significant disinflationary force in the past few decades and that low-priced imports from developing countries have helped keep Canada’s domestic prices down and that that situation is not likely to change significantly in the next while. Why has South Africa not benefitted from the significant disinflationary force brought about by globalisation like Canada has benefitted and why do we import our commodities for a song to developed countries such as Canada?
Bank of Montreal chief economist Doug Porter said he would rate it as very, very unlikely to go back to those kind of high interest rate levels [of the 1980’s], at least in the foreseeable future.
One crucial structural reason for that, Porter noted, is that Canada’s demographics have shifted. In the years leading up to the 1980’s, the huge baby-boom cohort was entering the labour force, buying houses and becoming big borrowers. A spike in oil prices, and high wage demands, helped push inflation even higher.
Now, an older population means a lower demand for funds and thus less upward pressure on prices. Unions also have less influence, and thus less power to get substantial wage increases, Porter said.
Overall, that means Canada “is less amenable to both inflation and high real interest rates,” he said. It would take a global shock that dramatically boosts inflation to produce a big upward blip in rates, and “frankly I don’t see the circumstances right now that would trigger that.”
Even if inflation does begin to raise its head, or the economy heats up to a degree that makes the central bank begin to worry, a small rate rise would probably be enough to cool things off. In that case, the disease of interest-rate sensitivity would also provide the cure. And when rates do go up, the Bank of Canada is likely to move very slowly, testing the waters with incremental increases and carefully monitoring the impact.
Essentially, the neutral rate of interest is not as high as it used to be. Ten per cent back then is maybe 5 per cent today. It is a totally different era.
Homeowners who have stretched themselves financially to buy expensive houses, even a small increase in rates could be a shock. It doesn’t have to go back to ten per cent to have a significant impact.
The reason why small increases in interest rates could be so damaging to borrowers – especially mortgage-holders – is that Canadians now have far more debt relative to their incomes than they did in decades past.
In the early 1990’s – as far back as the Statistics Canada numbers go – Canadians, on average, owed between 87 and 95 per cent of their annual disposable income. Since 2012, that ratio of debt to disposable income has risen to 163 per cent.
That hasn’t crippled families though, because low interest rates have kept payments reasonable. The debt-service ratio – the interest actually paid out relative to disposable income, has fallen from about 10 per cent in 1990 to less than seven per cent today.
If rates go up – and not even remotely close to the levels of the 1980’s – many people will be paying out a far greater proportion of their income in interest, possibly forcing some to abandon their houses or declare bankruptcy. And a correction in the housing market would be an inevitable corollary.
Fortunately, it looks likes rates won’t be turning upward for some time yet. The long-term bond market has adopted the view that lower rates are here to stay for a very long time. The government of Canada can borrow money for 30 years for less than 2 per cent.
Why is this not possible in South Africa? It is because South Africa is not a sovereign state, it is registered as a corporation and law makers are happy with serving foreign interests just like the ANC government as long as they get their fat cheques at the end of every month.
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One Comment

  1. Great article Cde Ditshego. I knew that they were highly paid and enjoyed a lot of perks but I was not aware that their salaries are so high. Which begs the question : why are they always so quick to cry ” foul ! ” when they conduct their Inquisition against officials in state-owned companies? This holier than than thou attitude of our senior politicians leaves a very bitter taste in mouth…..As for the Governor of The Reserve Bank and his deputies , the least that is said about him the better. I hope to get enough money one day to buy each of them Paul Tuckers book, “Unelected Power”; that is assuming that they will have enough courage to even examine their conscious. To Governer Kganyago, who like myself is Catholic, can he summon enough courage to pray the great prayer of the Catholic church, the “Confiter”, which in part reads,
    “..mea culpa! mea culpa! mea culpa ” which is Latin for
    “..through my fault! through my fault! through my most grievous fault ..”
    or in IsiZulu ‘
    “…icala lami! icala lami! Icala lami elinzima!”
    I know that I have grown unpopular for these kinds of statements, but I simply don’t care. I will carry on writing but in addition thereto, also praying for those whose actions visit untold suffering on the poorest of the poor while they purport to uphold the mantle of holiness.

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