IMF goes back to basics to improve its relevance
March 10, 2009
The latest report from the International Monetary Fund (IMF) is without doubt one of the most interesting it has released in recent years - perhaps indeed in its 63-year history.
The contents of the report are reminiscent of the original Keynesian thinking behind the establishment of the IMF back in 1946. Back then the failure of a lightly regulated market system was evident. Equally evident, however, was the need for collective global action because countries were interconnected.
That was how the IMF began. But it was not long before the market fundamentalists dominated IMF thinking. Their particular approach was reinforced by the fact that the market-driven US was one of the IMF's primary funders and emerging markets were the recipients of much of those funds.
Fast forward 63 years and we are again facing dramatic evidence of the failure of lightly regulated markets. We also face the dangerous reality that the globe is considerably more interconnected than it was back in the 1940s and we need a powerful global player to deal with that reality
At 63 years of age, it is perhaps appropriate that the IMF should be contemplating its continued relevance. Its latest report, which deals with the causes of the latest crisis and presents some solutions, may be one step towards proving that it can play a role in the current financial crunch.
But it will also need to get considerable buy-in - both political and financial - from the leaders of some of the emerging markets to whom it has given less-than-effective advice over the years.
And now would certainly be a good time to terminate the ridiculous practice of insisting that the IMF head comes from one of the so-called developed economies. Trevor Manuel would of course be ideal, but we need him so, sorry, look elsewhere.
Amap loss hides value
At first glance the results of electronic goods and kitchen appliance importer Amalgamated Appliances (Amap) look terrible, but they bear closer inspection. While its first-half loss ballooned from R14 million to R49 million, Amap did manage to generate cash from operations.
Of course, Christmas sales in the cyclical electronics categories were poor but it was the company's additional write-down of its power inverter stock by a whopping R75 million that dragged it into the red.
This was after a previous madcap idea to take a huge bet on the power cuts in January 2008 to trade itself out of an already tight spot. This was after it had found itself overstocked in categories hammered by what was then already a consumer downturn, but still not a recession.
The electricity was turned back on and nobody wanted power inverters anymore. Presumably they are now selling the stock at such marked-down prices that there will be demand in another African country where power cuts are a daily feature of life.
While Amap has always had a steady business selling electrical appliances such as kettles and toasters the electronic goods segment, such as televisions and hi-fis, has been a problem in down cycles. As a result it carried less inventory over the festive season, particularly the low-margin television category. In electronics it is also moving to outsource warehousing and repairs.
Already, carrying lower stocks and improved collections from retailers resulted in cash generation from operations of R72 million, compared with a previous cash utilisation of R80 million.
The group now has net cash on hand of R43 million versus a previous R16 million. Furthermore, since the period to December 2008 it has agreed to sell its Cape Town television making property for R35 million. It is also in talks to sell the manufacturing business on the property. If successful, this will see Amap lose the manufacturing albatross and become a pure importer.
Beyond garlic and beetroot
Barbara Hogan has been in the job of Health Minister about six months now and has learnt quickly that obfuscation simply doesn't crack it.
Asked yesterday about progress made on the national health insurance scheme, which is broadly aimed at providing access to universal health care, and the projected costs and funding of the scheme, she was brutally honest. "I would like to give more details," she said candidly, but did not.
She did not mention an upcoming election - in which matters of costs of grandiose schemes are likely to come under focus - but said her department was doing "intensive work, looking at costing and what it would entail. Forgive me for not talking about it now."
She added that health service funding faced "serious challenges" and that the department faced the problem of provincial health departments overspending.
In a National Assembly debate at the end of January 2008 she said the issue of inequity of access was key.
"We cannot have a well-funded private sector and a poorly-funded and under-performing public sector."
That was why, she said, the national health insurance system "becomes an important policy initiative". Once again she said she could not "go into details" about the system "but let me assure everybody that on this initiative, we will be consulting broadly. We have to get this right. We cannot afford to get it wrong."
She noted that a national health insurance system would only work if the public sector - the hospitals and clinics - was brought up to speed.
Somehow it did not seem appropriate to ask her whether garlic and beetroot, so loved by her predecessor, would be an integral ingredient of the insurance system.
Asked about the extension of the grant system to include a chronic health grant, her director-general, Thami Mseleku, noted that an HIV positive person was put on a temporary disability grant, which fell away once the patient's health improved.
The department was looking at a permanent grant.
"It is still under discussion."
Edited by Peter DeIonno, with contributions by Ann Crotty, Tom Robbins and Donwald Pressly
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