From Gareth Stokes, MoneyWeek editor,
 
Dear Money Morning Reader,

It’s tough at the top. Chief executives at large companies earn big money but they have to pack their bags if things go awry… Or do they? If you work at one of South Africa’s public sector giants, chances are you collect the gravy whether you do a great job or not. Do you need proof? All you have to do is spend a couple of minutes poring over last Sunday’s Business Times article: State ‘fat cats’ are coining it… with YOUR money! Their huge pay packets aside, top earners at the country’s ‘parastatals’ usually take home performance bonuses in excess of their annual salaries!

Top of the list is ex-Transnet chief executive, Maria Ramos. Last year she banked R4.853m in ordinary remuneration with an impressive R5.790m performance bonus top-up. The article lists her total package as R11.201m. Taxpayers might not take exception to Ramos’ inclusion in the number one position. By all reports she did a sterling job at the state-run transport company. You should, however question how five other Transnet employees earned top dollar too. Second place goes to Shaun Liebenberg, chief executive at perennial loss-maker Denel... Other great public companies to work for include the Industrial Development Corporation (with two names on the list) and the country’s favourite power supplier, Eskom. All but two of the names received annual increases of nearly 30% in a year when inflation averaged 10%!

Are you getting bang for your tax dollar? Can we assume that Transnet, Eskom and the IDC are running like clockwork? Not if you consider an ‘impromptu’ survey carried out by Sake 24 staffers at the Department of Trade and Industry’s annual conference in Johannesburg recently. Conference attendees flagged electricity, skills and transport infrastructure as the greatest stumbling blocks to foreign direct investment! Power supply is inconsistent, electricity prices are going through the roof and the country’s road and rail infrastructure is short billions of rand in infrastructure development and maintenance. It doesn’t matter how efficient your terminal handling facilities are if you cannot move goods inland.

The staggering wage bill increases at Eskom, South African Airways and the SABC over recent years point to large-scale mismanagement. Government-owned institutions have lost sight of their long-term objectives in favour of creating employment opportunities for the well connected. The result is dozens of top-heavy, overstaffed and unproductive state institutions soaking up the taxpayer revenue that could otherwise be put to good use. Is it time for government to offload some of its underperforming assets? We’re sure companies like Denel, SAA and parts of Transnet would attract lucrative offers. But pro-privatisation comments by Public Enterprises Minister Barbara Hogan were quashed earlier this year. Besides, the African National Congress – through its youth league – is once again singing from the ‘nationalise’ hymn sheet.

Despite these inefficiencies investors remain bullish on South Africa. Ask any market commentator what they expect from local asset classes in the next 12 to 18 months and a similar picture emerges. They say you can earn inflation beating returns in equities, listed property and certain corporate bonds. But you will suffer if you stay invested in cash! In today’s feature article we look at prospects for commercial property as South Africa emerges from recession. Can the country’s top property funds maintain high yields through 2010?

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Turning to the markets...

The JSE all share index closed up 0.14% on Friday. The gold mining index gained 2.8%. Resources added 0.85%. Banks and financials weakened 2.32% and 1.33% respectively. Industrials lost 0.1% and the platinum mining index traded up 0.18%.

London's FTSE100 jumped 0.33%. The Dow Jones climbed 0.17% and the Nasdaq collected 0.34%.

Tokyo's Nikkei closed up 0.29%. Hong Kong's Hang Seng gained 1.07%.

Brent crude is currently trading at $76.78 per barrel.

Spot gold's trading at $1,104.69 and platinum was last quoted at $1,357.

And here's how the rand is performing against the major currencies:
R/$7.51
R/₤12.55
R/€11.21