The cost of debt rose in Spain and Portugal yesterday because of problems that surfaced in Ireland at the weekend. Analysts raised concerns on Monday about the ability of Ireland’s government to repay its debt.

That country is now negotiating with EU and International Monetary Fund officials about a bailout to “shore up the state’s finances, as well as enable it to inject capital into the country’s banks”, according to Bloomberg.

Troubles in Ireland spell trouble elsewhere. It’s called contagion.

And we have seen this movie before. Last time it was the chickens coming home to roost for profligate Greece that had that country begging to be bailed out.

Now Portugal is next in the firing line. The Portuguese finance minister has complained that his country is facing not only its own problems but the problems of Ireland and Greece. Portugal and Ireland are paying twice as much for debt as the UK.

But the UK is also exposed to Ireland’s problems. Bloomberg says Lloyds Banking Group has £27 billion (R302.6bn) of unresolved Irish loans. And the Royal Bank of Scotland owns the Ulster Bank.

More exposures may surface around the world as the week progresses.

If the situation in Ireland is not soon resolved, the contagion will spread as it did in the southeast Asian crisis of 1997/98.

South Africa and other emerging markets will feel the fallout.

Finance Minister Pravin Gordhan warned on Monday that the capital inflows that have been boosting the rand can suddenly turn around and flow out.

When risk aversion rises, investors head for the traditional safe havens of US bonds – ironic as it sounds.

Gordhan was trying to get through to those asking for action to curb the rand’s gains that different situations need different policy prescriptions.

A strong rand today may be gone tomorrow – and the weaken-the-rand brigade will once again be calling for a commission of inquiry to investigate a conspiracy to weaken South Africa’s currency.

Chair today, gone tomorrow

It is likely that the ANC in Parliament tomorrow will announce the new chairpersons of the portfolio committees left vacant by the advancement of previous chairpersons to the national cabinet or provincial legislatures. But it is unclear whether some of those remaining in their posts since the cabinet shuffle will continue to hold on to their chairs.

Yesterday the indomitable Vytjie Mentor, the chairwoman of the public enterprises portfolio committee, presided over two sessions dealing with what remains of the pebble bed modular reactor programme and the relatively new state-owned entity, Broadband Infraco.

There was a bit of a hoo-haa about the fact that the latter had not been granted a licence by the Independent Community Authority of SA (Icasa) that would allow it to serve the public directly – and not just act as a wholesaler.

Mentor argued that it was a bit of a contradiction that in the act establishing Broadband Infraco it was mandated to serve the public but the cabinet had, nevertheless, rubber-stamped the Icasa decision on the licence, which effectively prevented it from carrying out that mandate.

She pledged to hold the executive – particularly the former communications minister Siphiwe Nyanda – “accountable as individuals and as a collective”, which is probably quite a brave thing to say, given that Mentor owes her position as committee chairwoman to the party leadership, most of whom are in the national cabinet.

DA MP Pieter van Dalen quipped that a test of her political bravery would probably be dependent on “how much longer you want to sit in the chair (of the committee)”.

Mentor, without blinking, said: “I was not born on this chair, I will not die on it.”

The fiery MP also said that she had not received a report on directors of parastatals who did not regularly attend meetings. She suggested MPs should receive a report from the Department of Public Enterprises before the end of the year.

Bankers’ pay

FirstRand’s decision to defer part of the performance bonus due to its executives is to be welcomed because it indicates an effort to introduce some restraint into the highly controversial issue of bankers’ pay.

According to media reports, the decision to defer the payments for up to two years is designed to encourage the executives to focus on strategies that promote long-term growth.

And there you have it. Not quite the attention span of a goldfish but… where else in the world is two years considered long term?

The obvious answer is in every boardroom around the globe.

Every remuneration committee across the world apparently believes that two years is long term. And if you happen to be part of the remuneration committee of a financial institution then two years is probably equivalent to a few lifetimes.

So, well done to FirstRand for attempting to grapple with this thorny issue.

There might, of course, be a few squeals about how extremely competitive the industry is and how FirstRand risks losing some of its executives to competitors who are prepared to pay out bonuses even before performances are achieved.

No doubt some of these competitors will employ consultants to tell the board just that.

And so, perhaps, it is time for the SA Revenue Service to step in and support the brave move taken by FirstRand.

The revenue service could reconstruct the tax rates in such a way as to encourage the staggered and “delayed” payment of bonuses, while ensuring that the receipt of “early” bonuses is discouraged even by the recipients.

Such a move would not be without international precedent.

It would also be entirely justified on economic terms, given that the economy at large can no longer be held hostage to the machinations of people who believe that two years is equivalent to a few lifetimes.

Edited by Peter DeIonno. With contributions from Ethel Hazelhurst, Donwald Pressly and Ann Crotty.