• I have been out of action for a while as I was traveling to visit family in the USA. In light of the current Tariff tantrums taking place, this visit has been enlightening for me.
• Firstly – The US is spectacularly expensive. Granted, my visit took me to California which is notoriously expensive relative to other states in the US, but some of the prices made my eyes water (with tears).
• Things have become quite expensive here in sunny South Africa, but California is in another league altogether.
o cup of coffee – that’ll be R150 please
o breakfast bagel – R450 if you like Salmon.
o Beer – a cool R200.
o Red meat – sell a kidney.
• Secondly, everyone wants a gratuity. Not just the waitron or the taxi driver – everyone. Pop into the local pharmacy and the cashier has no qualms about demanding a tip for the privilege of handling your credit card. And it’s not one or two dollars – tipping generally starts at 22% and in some places, a cool 40% is not out of the ordinary. The word “extortion’ came to mind once or twice.
• In South Africa we spend so much of our time haggling about political ideology that is so far past its sell by date. We have little idea of how much time we are wasting.
• In California, they are grappling with how much power to allow Artificial intelligence engines. Every second billboard is advertising some form of AI benefits. Some are going so far as to ask “why employ humans? Our AI can do everything better, faster, cheaper”
• Where we were, it seems everyone has an electric car! Which causes some problems for jaywalking Saffer’s because you can’t hear them coming. And then if that’s not enough, many of them are driverless.
• It’s quite weird ordering a driverless taxi. The thing rocks up at your door, you tap in a pin and the door opens and you slip into the back seat, and there is NO ONE in the driver seat. It follows the rules, stops at red lights, and can even play the music you like. I was left wondering how well this would work in South Africa… no prizes for guessing my conclusions.
• Here in SA, we are going to spend almost a billion rand on a “national dialogue”. In California, you may land up spending a similar amount on a light lunch. In SA, you may order an Uber and wonder why the traditional taxi drivers are following you. In California, there is no driver to discuss local politics with.
• Speaking of politics – man alive, the US is a divided nation. California is a blue ‘liberal” state and it goes without saying that most of Joe Public are not Trump fans. But you do find them. And the distance between RED and Blue in the US is vast. And the media? As they say in the classics “forget about it”.
• There is simply no agreement on anything.
o Israel/Iran
o Russia/Ukraine.
o Inflation/growth
o And on and on it goes.
• Which brings me neatly to tariffs which have recently kicked in.
• Trump and his followers loudly shout from the rooftops – Billions of dollars are flowing into the US.
• Let me shout equally loudly, this is blatantly false. The US’s trading ‘partners’ are not paying (additional) cash into the US’s coffers. Tariffs are nothing more than a variable sales tax. The US consumer is the one paying – this is not a topic for debate. However do not try to debate this with a MAGA supporter….it’s really pointless.
• So, you may ask then – why all this panic about tariffs? If the US consumer is the one left paying the price, why should we in SA get our knickers into a twist? What do we care? Why is all the media concerned about lost jobs and export earnings?
• Let me say equally loudly that this is a problem for South Africans – even if we are not paying the billions of dollars (not) flowing into the USA.
• Let me use a simple example.
• Assume you have a productive wine farm here in the Southern Cape. You have contracts with US retailers that buy your product …so far so good. You produce a bottle for R50 (the price of a bite of a salmon bagel) and sell it to the retailer for R100. To get it across to the US, it costs you R25 leaving you with a nice profit margin of R25.
• Your main competitor is producing wines in Chile at a similar cost base but with a slightly cheaper transport cost given its proximity to the US market. But of course, our wines are of better quality, so there is more demand for our product.
• Suddenly the US imposes a 30% tariff on South African products – but does not do the same for Chile. Immediately, the South African product is economically uncompetitive simply because the equivalent Chilean product is cheaper. And boom, your consumer disappears and your business is down the proverbial.
• This is why it matters and for a small trading nation like ourselves, dependent on foreign markets. It is a big deal. Forget about who to blame – forget about who told Trump what. Jobs and livelihoods are at stake. Forget about monopoly capital and political rhetoric. Who cares about a rich wine merchant?
• In a country with 40% unemployment, every job counts. And to compete with global manufacturers like China and others, we need to be able to sell our goods on the international stage as competitively as possible.
• The ideologues will say it's all fine – we simply need to find other markets. To this I say – if it was that easy, do we not believe we would already be selling to those very markets?
• Anyway, that’s enough from me. It's great to be back in SA.
• Let's see what the future holds – two things seem self-evident.
1. Real Inflation in the US isn’t coming down anytime soon.
2. We had better get our act together here in SA – I’m not sure an expensive national dialogue is the way to do it.
• Oh and football season and international rugby season kick off soon – go bokke, YNWA.