Logic Breakdown

My apologies for the post below in which I wrote that a 8% erosion of the world's GDP will necessarily put any country growing slower than 8% into a recession. 8% of world GDP is simply a fraction of total growth, and not necessarily a direct effect. That said, it will be interesting to calculate at what level they [oil prices] will make growth impossible. That level will no doubt have a critical impact on Stock Exchanges, Banks, Economies and the whole chain gang further down the line.

Do Newspapers have a future in South Africa? And An American Perspective

The good news is that they most certainly do (in South Africa). The bad news, is that online media almost certainly does not have a future.

South Africa is distinctive for having a very low internet penetration in terms of the overall population. Just over 10% (less than 5 million South Africans) have access to the internet, and a large amount of these users have work-only access. On the other hand, the vast majority of South Africans have access to newspapers. Far more people in South Africa read newspapers, or get their news from the radio, than the internet. Meanwhile, what about the penetration levels of mobile handsets. Is it 70% already, or more?

But the macro-economic factors now in play – inflation, interest rates, contraction and recession – are quickly eclipsing South Africa’s Promised Internet Land. Just as South Africa is about to free itself from a service monopoly that has strangled its ability to innovate and grow online for years, just as an undersea cable is about to connect us to the rest of the world, those hopes and dreams have been essentially amputated by prohibitive costs of living. These include the costs of eating and moving around. And what would you rather have? Food to eat, or Google? The lights working, or email?

Most South Africans with internet, that are on a sort of borderline, will probably cut back on unnecessary expenditures, and the first of these include exorbitant communication costs, including internet subscriptions, magazine subscriptions, expensive cell phone subscriptions in favor of cheaper options. Expenditure is about to become far more functional and practical.

Meanwhile, on the other end, the production side, finding online advertising revenues is going to become more difficult, and the small flows that already exists are going to have to be spread even thinner. This does not bode well for companies who have only recently anticipated high market growth, and increasing yields, and responded only over the last couple of years. That market – the internet market – is about to be frozen in its tracks.

Where internet networks exist and are to some extent entrenched, these are likely to thrive. But those who have recently been set up are likely to be shed, as consumers find their choices (and their cash) far more limited. So if all the various websites in South Africa were sodas, we’re going to say goodbye to Fanta, and Schweppes, and Mellow Yellow, and Spar Letta and all the rest. All we’re going to be left with is Coke and Pepsi.

Elsewhere in the world, the internet is likely to be a vital resource for news and information, and in many advanced economies, will take over completely from paper, as environmental concerns and costs become ever more critical. Power outages in South Africa will also have a dampening effect on local internet use, and as users attempts to remain connected become more frequently frustrated.

There remains though tremendous opportunity in South Africa to provide effective news to mobile handsets; something which even the poor carry around with them wherever they go. What is certain though is that the future, especially for the poor in South Africa, is becoming less and less certain.

An American Perspective

Last week I spoke to Californian Katharine Euphrat (pictured above). I wanted her view of the Media, and the day I spoke to her was her third day on the job,and her first front page artcicle (‘Soap stars brutal assault on women’). She says newspapers won’t be around 50 years from now,and in some countries, sooner than that. In America she says people her age never buy newspapers. Katharine says she consumes some news from newspapers that her parents buy (the San Diego Union Tribune), but otherwise consumes – and I found this surprising – by far the most news off her cellphone (whilst on the bus or other public transport).

Katharine said that in the USA paper news is hard news, and dying because of that. In South Africa we are seeing more and more Entertainment-based news making front pages. One of the few exceptions to this – in my opinion – is The Star.
Katharine spoke about how ubiquitous news is online in America, and also how useful it was to browse news on her iPhone. She said in her spare time she spends 70% of the time on the internet using her iphone, and 40% on her PC. When she arrived in South Africa it was immediately difficult even to find somewhere to use the internet, and also, she found it agonizingly slow, even our broadband.

I asked her about her first impressions of South Africa and she said, "When we said we were going to South Africa they tried to scare us. They said you’d arrive at the airport and see someone being raped on your left, someone robbed on your right, and someone being murdered right in front of you. But Johannesburg could be anywhere in the world.”

I know that whenever I have returned to South Africa from an overseas visit I am astonished at how empty the place is, like: Where is everyone. In many western countries there are cars everywhere. It’s not like that here, in South Africa. Katharine said she was surprised to see large patches of countryside.

These large patches of countryside are analogous for the large, barren wasteland that is the Undiscovered Internet Country in South Africa. It will turn out that Telkom’s drag effect on the rollout and uptake of the internet in South Africa is likely to be a permanent injury and one which the country cannot recover from going into an austere future. A small niche internet population will survive, but it will be even smaller than the present one as work-place users are shed (both through stricter regulations at work and through increased unemployment as a local recession kicks in). It will also not be worth much as a revenue stream, but it may have some value in terms of the service there will be to communities that remain plugged in.

In the end, (even in a general sense) those companies that have not entrenched themselves, will lose ground and fail, and only the strong and hardy and well established will survive.

Mark Mobius: US recession will not hinder those emerging market stocks

MM: Regardless of how the current situation develops, we can take comfort that any bear market will not last long.

NVDL: Interesting observation. I suppose on planet Mobius, there is a doughnut centre filled with an endless supply of cheap oil. Mr Mobius, cheap energy predicates growth, and growth predicates an increased use of energy, and yet in your article, you don't mention this limit to growth a single time. And Horton hellooooo, it's clear that the game has changed fundamentally. Food, energy, everything is more expensive. That's in the developing economies too.

MM: US recession will not hinder those emerging market stocks

Moving at a snail's pace in the Dubai traffic surrounded by the sparkling lights of construction cranes, I am forced to contemplate the recent fall in various emerging market stocks.

It seems that there is strong dissonance between what is happening in emerging markets and the frightening subprime news coming out of the US and UK markets

So how can I reconcile the doom and gloom I read about in the daily newspapers and hear about from any economist I want to listen to?

My recent month-long tour of Latin America does not seem to indicate an imminent disaster.

Businessmen I talked with in Brazil, Argentina, Chile, Peru, Panama and Mexico were saying that business was good and they were planning for growth. Even in Mexico where the impact of a US slowdown is bound to be felt more than other Latin American countries the mood was sanguine.

More.

Shock for food prices as wheat futures rocket

THE price of wheat on the JSE futures exchange broke through R4000 a ton yesterday to a new record on supply concerns, making increases in the price of bread and other foodstuffs inevitable.

More.

Harder Rain, More Snow

Meteorologists See Future of Increasingly Extreme Weather Events
While raising average global temperatures, climate change could also bring more snow, harder rain, or heat waves, meteorologists say. Computer models based on climate data from nine countries indicate every place on the planet will be hit with extreme weather events, including coastal storms and floods.

Computer models based on nine different countries' climate data indicate every country will be hit with climate change throughout this century. Meehl says: "If extreme heat bothers you that can be a problem. It could affect your utility bill. You might have to think about getting air conditioning if you don't have it."

For more, including a video, go here.

NVDL: How does that song go? The Heat Is On? Except we can also add: cold, snow, storms etc. And when we drive home today and drive to work tomorrow, we add a little more to the burgeoning storm. Bit by bit, day by day, we engineer our own collective doom. This is the price we pay for collective addiction, collective delusion.

North Sea surge brings flood risk (BBC NEWS)

A storm in the North Sea has left Britain and the Netherlands facing the worst flood threat in decades with tidal surges predicted early on Friday.

Flood defences have been put on alert on the entire Dutch coast and flood warnings are in place for the eastern and northern coasts of Britain.

A tidal wave in 1953 killed more than 2,000 people in both countries.

Parts of UK struck by tornadoes
Thousands evacuated in flood zone
New insect species arrives in UK


Oil platforms have been closed off the Norwegian coast and gales are expected in Germany and Denmark.

The Dutch transport ministry said this was the first time since 1976 the whole North Sea coast was under alert.

Maritime traffic in Rotterdam was halted, as the authorities closed the giant Maeslant barrier that guards entrance to the largest port in Europe for the first time since its construction in the 1990s.

It took half-an-hour for the two doors of the barrier across the Nieuwe Waterweg to meet, spanning a channel 360 metres wide.

Rotterdam will remain closed until 1700GMT on Friday, a port spokesman said.

One-third of the land mass of the Netherlands is under sea level.

Flood warnings

In Britain, the Thames River and Dartford Creek barriers are being shut as waters are forecast to surge 1.5 metres (5 feet) above normal sea levels.

Families along the Norfolk coast have been protecting their homes

UK government warned large areas of Norfolk and Kent coasts were at risk of severe flooding and the Met Office warned of gusts of up to 145km/h (90mph) for the Orkney and Shetland islands in Scotland.
The storm surge is expected to peak around dawn on Friday, and several hundred people have left their homes near Great Yarmouth in Norfolk.

Severe gale warnings were issued in Germany and Denmark, with wind gusts of up to 125km/h (80mph) expected.

In Germany, regions around the Elbe and Elm rivers were under flood warnings.

The North Sea storm affected oil industry in Norway, the fifth largest exporter of crude in the world, with the closure of oil platforms off its coast.

Norway's oil production of 220,000 barrels per day is expected to be slashed by 10% possibly leading to increases in the price of crude, already at record levels, experts say.

NVDL: The UK is basically the world's canary in terms of climate change. It has thrived so far thanks to an exceptional belt of warming water being diverted towards its shores - we all know the schpiel. We know that polar melt will shut it down. Since ice sheets the size of South Africa (or Texas and California combined) have melted and not frozen back, it's logical to assume that it is only a question of time before the British Isles reverts to a more Ice Age type of climate. That said, perhaps we will first see a temporary phase of extraordinary warming, as we are seeing in Canada, and extreme storms, as is also the case in Canada (spewing tornadoes and the like).

Once again we have this apparently unique situation where the world's weather has an impaqct on global fuel prices, and that has an effect on every person. The next time you catch yourself wondering where you fit in, in all this, remember that every time you drive your car, you and everyone else is doing your bit to inject energy (heat) into the atmosphere. We're now at a point where there is so much energy in the atmosphere, that extreme weather becomes the convention.

Yesterday I submitted HOLIDAY to PanMacMillan. It's obviously encouraging to hear that one person who read my book, then read it again 3 times. Another woman who read it had nightmares. A teenager read it within 2-3 days. It basically paints a picture of living in the world where weather patterns have gone beyond tipping point, and we see the atmosphere basically transitioning into a slow chemical reaction.

$100: Welcome to a New World

Sleep well tonight because you may well wake up tomorrow, and find yourself in a different world; a world where everyone - including yourself - finds the world to be an entirely different place. A place of reality, consequence and purpose. A place where you can no longer get something for nothing. A place where reality TV somehow has a very ironic, black humor ring to it. A place where attrition is the order of the day. A place where oil prices of $100 will seem benign tomorrow, a place of rapid change, a place of chaos and uncertainty, of unrest and contraction, and the beginning of our collective plunge, our descent, into austerity.

This being the case, what can we do?

Control what you can. What you eat, exercise, and your consumption. Learn to be a good neighbour, you're going to need each other. It may longer be a choice to change, but the choice that does remain is HOW MUCH. Our inner decency will answer this question on each individual level. Let's hope that will be enough.

Tough December coming for consumers

South African consumers face a double-whammy of increases next month - Economists are predicting another hike in lending rates, while motorists are expected to receive a nasty surprise at the petrol pump.

Although early in the accounting period, the under-recovery of petrol is already 51.5 cents a litre.

This means that consumers are paying less for oil-rated products than the ruling price.
A big worry came out on the world markets today, with the price of Brent crude oil hitting an historic peak of 95.09 dollars per barrel in trading amid concerns over tight global energy supplies. Earlier, New York’s main contract, light sweet crude for December delivery, hit a record high of 98.46 dollars per barrel.

For the rest of this Sowetan Online article, go here.

Oil Marches Toward $100 (ECONOMIC ANALYSIS)

Right now, Brent Crude is:
Brent Crude Oil :91.46
Rand - US Dollar: 6.6100

Oil prices breached the $96 before retreating marginally. Analysts are now saying that $100 is an 'easy target'.

Meanwhile, from South Africa's point of view, the prices of Brent Crude are less of a concern given that the dollar has depreciated down to around 6.50. Had the dollar been at around 7.50, we'd have been in big trouble.

The question is, why has the Rand strengthened so much, and is it good for the country. The $5.5 billion deal - the largest ever overseas investment in South Africa - between the world's largest bank (based on China) and Standard Bank, represents a massive capital injection into the relatively small pool of South African capital. This is the main reason behind our stronger currency. The deal was timed very fortuitously indeed.

Meanwhile the strengthening Rand is bad news for exporters. Since South Africa derives plenty of its income from exports - especially minerals - the currency fluctuation remains a concern.

Today decision makers will come together to decide whether there will be a fuel increase for motorists, and if so, how much it is likely to be.

ALERT: Manuel forecasts lower growth

From Sowetan Online:
Finance Minister Trevor Manuel today forecast lower growth on the back of global uncertainty, announcing he will hoard some surplus revenues to absorb future shocks.

Presenting his medium-term budget to parliament, Manuel said instability on the major markets, dollar depreciation, volatile commodity prices and rising oil and food inflation are hurting South Africa’s growth projections.

“One of the first issues that arises is .. a very moderate revision downwards by 0.1% of growth this year, a more significant downward revision by 0.7% for next year and then it starts picking up again but is still down on our February forecast for the third year,” said Manuel.

In his main budget in February, Manuel had predicted economic growth of just over 5% per year up to 2009, which he now put at 4.9%, 4.5% and 4.8% for each of the three years.
For the rest of this Sowetan Online article, go here.

NVDL: Lower growth = fewer jobs = more poor/disgruntled/disenfranchised/disempowered people = more crime.

10 businesses facing extinction in 10 years

Determining which industries aren't long for this world may seem easy enough. But some types of businesses, such as telemarketing, are surprisingly hard to kill.
And then again, other industries, probably the ones you're sad to see go, can't find a way to survive.
So start setting up your office pool, because here are our picks for 10 businesses facing extinction in 10 years.

From Entrepreneur.com
By Geoff Williams

Record stores

Record stores are closing in, well, record numbers. One of the most prominent music retailers, Tower Records, shut down all 89 stores last year after concluding it couldn't withstand the onslaught of online music stores and chains like Wal-Mart, which can offer lower prices and sell other items to offset the smaller number of CDs being sold.

Odds of survival in 10 years: Great, if you consider Wal-Mart a record store.

Camera film manufacturing

This probably isn't the best business to get into right now. According to The Chicago Tribune, from May 2006 to May 2007, the volume of prints made from digital cameras grew by 34 percent. Film camera sales, meanwhile, fell by 49 percent, while digital cameras sales continued to grow — by 5 percent. Of American internet users, 70 percent own a digital camera; another survey shows that 70 percent of Canadians now use a digital camera. Odds of survival in 10 years: Some entrepreneurs who specialize in making camera film for amateur photographers could possibly make a living.

Crop dusters

They'll be around in 10 years, but likely not in their present form. The average age of the typical crop duster is 60, the number of crop dusters is dwindling, and the profession can be dangerous. Just several weeks ago, an Arkansas crop dusting company was ordered to stop flying in Iowa after spraying farm workers with a fungicide; 36 farm hands in a cornfield had to be decontaminated by a hazardous materials crew.

Odds of survival in 10 years: The type of crop dusting plane that chased after Cary Grant in "North by Northwest" will have almost certainly gone south. Farmers say that they'll always need crop dusters, even though new technologies have made them less important than in the past. But commercial airlines are increasingly taking business away from the small, independent crop dusters.

Gay bars

As The Orlando Sentinel noted in a recent article, around the country gay bars have been going out of business as gay men and women have been gaining greater acceptance in society. What used to be a hangout for people who felt unwelcome elsewhere is becoming less necessary.

Odds of survival in 10 years: As with many industries, the very best of them will endure; the rest won't.

Newspapers

Some people thought they were through when radio and TV news came about. Even after the fax machine revolutionized offices, some people predicted that everyone would have their news faxed in, since that would be quicker than relying on a newspaper. But the numbers have been falling precipitously since the 1990s when the internet came on the scene. In the past year, the Audit Bureau of Circulations twice has posted drops averaging 2.1 and 2.8 percent over six-month periods. Newsrooms across the country have been hemorrhaging staff.

Odds of survival in 10 years: They won't disappear; they'll be on the internet. We don't recommend startups investing a lot of money into a printing press plant.

Pay phones

In 1997, there were more than 2 million pay phones in the U.S.; now there are approximately half as many. There are probably always going to be certain places like airports and hotels that offer pay phones, as long as there are people who don't own or can't afford cell phones. Because phone kiosks on the streets are a favorite for drug dealers, who don't want to have their own numbers tapped and tracked, cities are shedding them.

Odds of survival in 10 years: They'll be around, but won't be anything to call home about.

Used bookstores

They've been closing fast, and those that are still open are relying on what's making them obsolete: the internet. A used bookstore used to be the place to find that beloved, out-of-print children's book you used to read 17 times a day until your little sister flushed it down the toilet. Now you just type that title in a search engine and order it within minutes. Odds of survival in 10 years: Some of them will still be eking out an existence, but the handwriting is on the wall.
Piggy banksYou may chuckle, but as we continue gravitating toward a paperless society, it's not difficult to imagine a day when piggy banks no longer exist.

Odds of survival in 10 years: Sure, they'll probably still be a few around — in antique shops.

Telemarketing

The good news for people who hate telemarketing calls is that the industry may finally be dying; the bad news is that it may take a while. Telemarketing has been hit hard by the national Do-Not Call list that was established five years ago, and sales have been stagnant, but the industry still managed to bring in $393 billion in revenue last year. Some of this is due to clever marketing. This includes holding raffles at shopping malls; when you sign your information, you agree to accept calls from the company running the contest and its partners. Cell phones are exempt from automated telemarketing calls, but not from individuals calling. Then there are occasional windows of opportunity: The national Do-Not Call list is set to expire in 2008, unless you remember to register again.

Odds of survival in 10 years: They'll be here. Humbled, more impotent, but probably still here.

Coin-operated arcades

With Nintendo Wii, casual gaming online and the Xbox 360, the video game arcade industry is thriving, but not the standalone brick-and-mortar arcades. For those of you who thought arcades were already dead, they still exist — at movie theaters, miniature golf courses and other touristy spots — but it seems only a matter of time before they vanish from the landscape. Ten years ago, there were 10,000 arcades in the nation, and now the number is close to 3,000, according to the American Amusement Machine Association. Revenue from arcade game units brought in $866 million last year, which sounds good until you consider that in 1994, the industry was pocketing $2.3 billion and that the profits are only still high because it costs so much to play a game.

Odds of survival in 10 years: Game over.

NVDL: The grass can't stay green forever. Interesting on this list are newspapers, record stores and gay bars. Not sure if I agree with the crop duster idea. If you buy into the philosophy that the world is about to unflatten, unshrink, become far larger, we'll see the end of a lot of industries: the hypermarket, parking lots, malls, drive thru, fast food, airline alliances like Star, the convenience store at a gas station etc.

We'll see a return of cottage industries like the butcher, the baker and the candlestickmaker. We'll also see the demassification of schools, from the current prison lookalikes, to private and home tutoring and also smaller, friendlier, more community integrated buildings.