What comes to mind when you read the following statistic: In the US the top 0,1% of people own as many assets as the bottom 90%? Or, that unemployment in South Africa has surged to 32,2%? You may start contemplating the following quote by Wolfgang Munchau of the Financial Times: “If liberal democracy fails to deliver economic prosperity for a sufficiently large portion of the population over long periods, it ends”.
Is it any wonder, then, that the ANC has just made the following announcement? “The ANC lekgotla has reaffirmed its position that a comprehensive land reform programme that enables equitable access to land will unlock economic growth by bringing more land in South Africa to full use, and will enable the productive participation of millions more South Africans in the economy.”
Of course there is a political motive behind the redistribution of land but it is very difficult to argue against the theory of giving unproductive land to someone who can make it productive and in the process alleviate poverty and unemployment.
The financial impact of a change in the constitution to expropriate land without compensation will, however, be negative initially. There will be renewed pressure on the rand as foreigners sell their properties and take their money back home. There will be further pressure on property values as farmers and people with multiple properties sell at any price and there will be pressure on banks holding mortgages over such properties.
The upside will be that lower property prices will give new homebuyers an opportunity to enter the market, but that will not happen if they do not have a job. It is very clear that the restrictive labour legislation in South Africa is not helping to create jobs. As an employer in SA, we think twice before employing someone because once we do, we cannot get rid of the employee again. The arguments for a much less restrictive labour policy is that, if you can hire and fire at will and pay what you want to, more people will be willing to give a job they can do themselves to someone else. Also that such workers will give 100% because they know they can lose the job if they do not perform. The counter to that argument is that, because South Africans are so desperate for a job, they will be abused. Whatever the case, the current system is not working.
And now for something super exciting: Artificial Intelligence. At a recent Coronation presentation, the Google engine’s word-learning accuracy was discussed. It currently stands at 95%, which makes it viable for a machine to interact with a human. It is now possible for a person to phone a machine and interact intelligently by, for example, making an appointment for a haircut. You can tell the machine what you want done and when and it will be like interacting with another human. On top of that, Google’s autonomous driver division has travelled more than 8 million miles (12,8 million kilometres) driverless since 2009. That means 200 times around the Earth and it can travel close to 9000 km without anybody touching the steering wheel.
Alphabet (the owner of Google), has 7 platforms with more than a billion users each (Google, Google maps, YouTube, Android, Gmail, Chrome and Google play). The share is expensive on a price-earnings basis (PER26), but grows at around 20% per annum. So even if you do not want to own the share (which would be like not wanting to own Ford Motor Company in 1903 when they incorporated, but preferring to invest in horses), your life will be exponentially impacted by them and similar companies like Facebook, Apple, Netflix and Amazon.