Yusuf Bodiat’s The Bottom Line asks a question that most South African policy writing tiptoes around: why does a state rich in talent and natural resources, with the formal architecture of a functioning country – constitution, treasury, reserve bank, courts, statistical agency – struggle so visibly to deliver the things states are supposed to deliver?

Part of his answer is that we have a finance and execution problem. Departments spend their budgets in the wrong half of the year. Suppliers go unpaid for 60 to 120 days. Mid-year revenue shortfalls trigger spending halts even on critical services. Conditional grants arrive in tranches that don’t match operational tempo. State-owned enterprises and government departments owe each other money in circular webs that paralyse cash flow. None of this is high political drama. It’s the kind of dysfunction a CFO sees when they walk into a struggling company on day one.

This is one of the book’s real strengths. Bodiat is quite specific about mechanisms, which given his background as a CA and CFO should surprise no-one. Most commentary on the South African state stops at “corruption” or “incompetence” and treats those as explanations rather than as labels for things that need explaining. Bodiat goes a layer deeper. He names the procurement calendar, the in-year reallocation, the supplier payment cycle, the conditional grant framework, the inter-entity liability tangle. These are the operational chokepoints where good intentions die, and they’re invisible to most political analysis because they live in the cash flow weeds where only finance people spend time.

I’d recommend this book to anyone who wants to understand how the state actually fails, day to day. I’d also recommend it to a wider audience the author may not have had specifically in mind: aspiring CFOs, finance managers, and non-executive directors looking for a worked example of how a serious and strategic accountant approaches a system in distress. The lessons and case studies transfer. It may be particularly helpful to consider a setting outside of your own company or industry to take home the principles rather than the specific applications.

Where the lens helps

The book’s strongest moments are the operational ones. The taxi industry case study is honest about how vested interests entrench themselves in the status quo. The discussion of payment delays correctly identifies that small suppliers price in risk or stop bidding altogether, which narrows the supplier base and raises costs in ways that don’t show up on any single department’s books. The treatment of inter-governmental debt – PRASA waiting on departments, Eskom waiting on municipalities, water boards waiting on everyone – is the kind of insight that comes from practical experience of managing cash flow rather than just reading about it.

The case studies of Botswana, Greece, Indonesia, India and the SARS rebuild under Edward Kieswetter are thought-provoking, and Bodiat draws useful lessons from each. The Kieswetter story in particular is a useful counterweight to pure pessimism: institutions can be rebuilt, and the SARS muscle that was hollowed out during the Moyane years has substantially returned. It took a specific person, political cover, and time, but it happened.

Bodiat is also strong on the gap between plans and execution, which he treats as a separate discipline rather than as something that follows automatically from a good document. His National Development Plan case study is a good example: the NDP was not formally costed, lacked binding commitments from departments, came with no dedicated funding lines, and got absorbed into other planning instruments without strong alignment or ownership. Coordination was weak, accountability was unclear, and progress was hard to measure. He’s right that this is the more interesting failure than the headline failure to hit the targets – the NDP didn’t fail because the targets were wrong, it failed because the machinery to deliver them was never assembled. A CFO, he argues, doesn’t only look at where the business wants to go; they ask what resources, systems, and capacity are needed to get there, and they follow up relentlessly. That mindset, applied to public planning, would change the relationship between plans and outcomes.

The book is also right that we have a measurement and consequence problem. Ministers in South Africa rarely lose their jobs because their underlying portfolios are performing poorly. They lose them through criminal proceedings or factional politics. The performance of the state, in any meaningful operational sense, is barely measured and barely reported. Bodiat’s point is that performance management without consequence becomes compliance theatre: plans are signed off, boxes are ticked, and very little changes. Promotions are based on seniority rather than delivery. Underperformance becomes the norm rather than the exception, and the people who suffer most are those who are still trying to do their jobs properly. The call for performance dashboards isn’t sufficient on its own – measurement alone never is – but coupled with real consequence, it would at least begin the conversations we can’t currently have.

Questions the book opens up

Reading carefully, I found myself wanting to follow several threads further than the book takes them. Some of these are probably beyond its intended scope, but they’re worth naming because they’re the most interesting questions the book provoked for me.

The first thread is why the operational dysfunctions Bodiat diagnoses so well are so persistent. Late payments create discretion over who gets paid first. Conditional grants create national-over-provincial control. Front-loaded spending creates patronage windows. Circular debt creates leverage. The political economy literature – Brian Levy on South Africa specifically, Lant Pritchett and Matt Andrews on state capability more generally – argues that these patterns persist because they serve someone, and that institutional reform has to engage with the political settlement that produces them. Bodiat invokes “political will” briefly on page 45, which I read as the moment the framework acknowledges that something underneath it matters. I’d love to see him write more about that layer in future work, because his operational lens combined with serious engagement with political economy would be valuable.

The second thread is the size of the personal income tax base. Bodiat correctly notes that only around seven million South Africans pay personal income tax out of roughly forty million adults. But of those forty million, only sixteen or seventeen million are employed at all – unemployment is 30%+ on the narrow definition and over 40% on the expanded definition that includes discouraged workers. The South African personal income tax threshold is also high relative to the income distribution by design, so the bottom half of earners pay no PIT as a matter of policy. The “small tax base” is therefore as much a labour market story as a tax administration story. Bodiat’s point about the benefits of formalisation is well-taken; I’d add that the binding constraint may sit further upstream, in why people remain in the informal sector in the first place – minimum wages, skills mismatches, transport costs, apartheid-era spatial planning. Different problem, different toolkit.

The third thread is one I think extends Bodiat’s own balance-sheet thinking in a useful direction. The book discusses debt-to-GDP, which is the standard sovereign metric, but a stock-to-flow comparison that focuses only on liabilities. For South Africa, the asset side of the public balance sheet has deteriorated faster than the debt side has grown. Eskom, Transnet, SAA, Denel, the Post Office – assets that were once meaningful have become contingent liabilities that crystallise on the sovereign balance sheet through bailouts and guarantees. Sovereign net worth has fallen by far more than headline debt-to-GDP suggests. The IMF publishes consolidated public sector balance sheet data for some countries; on that basis the picture is materially worse than the standard headline number. This is exactly the kind of analysis Bodiat’s lens is well-suited to, and a natural extension of the diagnostic frame the book establishes.

The fourth thread is one I’d like to see the framework engage with more deeply: not just the level of public debt, but its composition. Two questions matter as much as the headline number. First, who holds the debt? Most South African government debt is rand-denominated and held domestically, largely by pension funds, banks and insurers. That is materially different from foreign-currency debt held by external creditors – there is no currency mismatch and no foreign coordination problem on restructuring – but it is also not without consequence. Domestic debt is a contingent intergenerational transfer with a specific distributional incidence. The people who hold the bonds (older, wealthier, institutional, including pension funds) are not the same people who pay the taxes that service them (younger, working, broader base). In an unequal society, the comforting “we owe it to ourselves” framing hides which “we” owes which “we”. Second, what is the relationship between the real interest rate on debt and the growth rate of the economy? When growth exceeds the real interest rate, debt dynamics are stable even at high levels and well-directed borrowing can be self-financing through future revenues. When the relationship inverts, even modest debt becomes a compounding problem. Both questions sit naturally inside Bodiat’s balance-sheet framing and would, I think, sharpen it. They also touch on territory that Paul Krugman’s A Country Is Not a Company covers well, on why firm-level intuitions about debt break in specific places at national scale.

What I’d have liked more of

Two of Bodiat’s seven priorities for fixing South Africa are education and infrastructure. I think both deserve even more space than they get.

The PIRLS 2021 reading assessment found that 81% of South African Grade 4 learners couldn’t read for meaning in any language – the worst result among participating countries. Matric pass rates have become a textbook case of Goodhart’s Law: when a measure becomes a target, it ceases to be a good measure. Standards have dropped, the 30% pass mark for some subjects is normalised, weak learners are pushed out before matric to flatter the denominator. A current debate about whether to retain Maths Literacy as an alternative to Maths illustrates the same trap: defenders argue that removing it would reduce matric pass rates, as though the matric certificate were the goal rather than a proxy for the underlying competence it is meant to certify. Optimising the proxy at the expense of the substance is how a measurement system stops measuring anything useful.

Education is fundamental to labour force participation, labour productivity, upward social mobility, a sense of optimism and possibility, and economic growth itself. It’s the production function for the next generation of workers, taxpayers, voters and citizens, and it deserves more time in the book.

Infrastructure deserves a similar centrality, particularly transport. Rail and ports are not just government services to be delivered efficiently; they are the multipliers that determine whether the economy grows at all. Public transport, even when it runs at an accounting loss, generates returns through reduced congestion, lower emissions, and labour market access that the firm-style P&L doesn’t capture. This is where the public goods and externalities framing matters most, and where I’d push Bodiat’s framework toward economics-style thinking on positive externalities and crowding-in of private investment.

The verdict

The Bottom Line is a useful book by someone who has thought carefully about how the state fails operationally and who has tools that genuinely apply at that layer. The diagnosis of cash flow dysfunction is specific where most commentary is vague. It sits within a wider case for governance discipline, consequence management, and integrity, and the argument is hard to disagree with: institutions which tolerate poor performance produce it, controls without consequences are theatre, and integrity is the load-bearing element on which the rest depends. The case studies are engaging. The proposed mechanisms – performance dashboards, payment discipline, supplier protections, citizen trust as a flywheel – would all help if implemented.

If there were more Yusuf Bodiats in every department of the South African state, we would be in materially better shape. The fact that we don’t have them, and don’t seem able to put them in place even when we know who they are, is a question the book opens up rather than closes – and that’s a useful contribution on its own. Books that close questions stop conversations. Books that open them well, as this one does, start them.

I’d recommend it to anyone wanting to understand the operational layer of the South African state. I’d recommend it equally to young CAs, aspiring CFOs, and non-executive directors who want to see a serious finance mind at work on a problem larger than any single company.

You can order the book from Exclusive Books or Yusuf’s own site.

This is particularly relevant given the ambition of some InsurTech players to hyper select risks or price on many more factors than are traditionally used in order to gain a competitive advantage.   Thomas doesn’t argue that it will be individual insurers’ interests to allow adverse selection, but if these companies are successful it may then have implications for policy makers.

Incidentally, there are some interesting reasons for insurers themselves (with commercial interests) to be wary of selecting too well, counterintuitive as that may seem, but more on that for another time.

The book itself is a mixture of qualitative arguments and gentle reasoning with enough maths to keep you interested if you are that way inclined. I struggled to finish the book and found the points belaboured after a while.

The main reason I struggled with the book though is that I believe from the start it assumes its conclusion.- that “increased loss coverage is universally a good thing”.  I’m going to explain a little bit of that here. If you are going to read the book, it might be useful to have these thoughts in mind going into it and see whether you agree.

The premise of the book

Loss Coverage is defined as the expected amount of claims covered by insurance. They demonstrate that, under certain pricing and behavioural assumptions, more adverse selection leads to higher loss coverage.

The rationale is that without accurate pricing, some premiums will be set a level too high and some too low for the specific risk. Some good risks who feel the premium overstates their will decline cover. Since more of the higher risk customers are getting a good deal and recognise the good deal, they will retain cover. Since some of those high risk customers will have felt an accurate price was too high, there could be an increase in high risk customers with cover. They contribute disproportionately to loss coverage given their higher probability of claim and therefore overall loss coverage can go up.

These assumptions are not particularly robust and the book even deals with examples “taken to the logical extreme” that show no increase in loss coverage and a substantial decrease in the number of lives covered.

A limited view on the value of insurance

An increase in the loss coverage measure means that more claims are expected to be covered by insurance as a result of allowing some adverse selection. However, this is at the cost of fewer individual risks being covered by insurance in total.

The argument thus neglects part of the value of insurance. Having insurance, even if one is fortunate enough not to claim, allows a less anxious existence, and the ownership and use of precious assets that would be irrational without having transferred the risk to an insurer.

This not merely a “peace of mind” value. The ability to optimise one’s risk budget by reducing certain risks and taking on others allows for risk-taking and economic growth. Insurance exists in the first place because it is not efficient for individuals to bear their own risks without pooling or transfer.

Questionable measures on ultra high probability claims

Why is the “risk greatest for those with the highest probability of claiming”? Under certain definitions of risk that is the case. But it’s not universal. If the probability of claim is 100%, I’d argue there is no “risk” at all. That might be a trivial case, but what about where the probability is 75%?

This reminds me of a product idea I never liked – insurance for taxi tyres. Taxi tyres are a consumable item that are replaced sometimes two or three times per year. The risk of having to replace them slightly earlier than planned hardly feels like a risk worth insuring. The probability of claim is too high and the cost of the claim too low. Would optimal loss coverage have all of these tyres insured?

And the book?

The book should have been a paper. There isn’t enough there to warrant the length or the price, nor is it sufficiently interesting or amusing to want me to finish it.

In some ways I’m surprised more hasn’t come of Flash Boys – when it was published there was some noise about investigations and hearings into the allegations in the book.  I’m not aware that any of that led to anything. However,  my reaction should give you an idea of how explosive the allegations in the book are. I went from misunderstand HFT as a algorithm based approach to trading based on patterns in the data to (probably still misunderstanding) HFT as a parasitic arms race against “regular investors” who are potentially losing money to at least some of the HFT firms without any tangible benefit.

Read the book just to open your mind to the possibilities and for a new appreciation of the speed of light through glass.

The book is called BitCon: The Naked Truth About Bitcoin and it doesn’t pull punches in deriding the would-be currency. If you don’t know anything about Bitcoins, it may skip over some of the introductions necessary to hold your own in conversation. This isn’t a primer on Bitcoins or crypto-currencies, but it also doesn’t spend chapters on involved technical details so you won’t be completely lost.

I described the book as “engaging”. For me, already very sceptical of the long-term chances of success for Bitcoin and specifically  critical of its suitability as real “currency”, it had me nodding in agreement with many sections. Frankly, I don’t know how persuasive it would be to a fervent supporter (not that much anything would be).

I did enjoy the insights into some of the personalities behind Bitcoin and the histories of different supporters and how this has changed over the short time Bitcoins have been around. I learnt more about the Dark Web than I knew before, gaining a new appreciation for how dark the underbelly of the web and Bitcoins are.

Robinson ignored what I think is a key limitation on Bitcoin. Supporters claim its value derives in large part from the limited supply, but without any intrinsic value, other crypto-currencies are near-perfect substitutes. I’ve blogged about this before and was looking forward to seeing another take on it.

I enjoyed the book, reading through it fairly quickly and without wanting to switch to something else, suggesting Robinson hit the target with length and balance of information vs entertainment.

Go grab a copy from Amazon - BitCon: The Naked Truth About Bitcoin.

He lays into business schools, many strategy consultants, academics and anyone in spitting distance.

The good news is that the first half of the book is engaging and fresh, outlining a novel way of understanding the performance of strategy as an area of study and practice.

I slowly found myself wrinkling my nose, tilting my head to one side and thinking “that’s not really a fair comparison”. For example, comparing the rigour of engineering or accounting or even medicine to business strategy I can’t help but wonder if Warren understands the the difficulty in running repeatable, controlled experiments on corporations when virtually no two are alike. The human body is extremely complex, but we have 7 billion examples to look at, all made in mostly the same way with limited evolution in front of our eyes.

I lost interest towards the end of the book as the insights quickly dried up.

Warren has a point. Strategy and strategy consulting is possibly a broken discipline. Academics and consultants and executives need to share what works better. Business schools may not all be perfect. But his book doesn’t provide much in the way of useful answers.

Author, Simon Lack, combines easy reading prose with sufficiently crisp examples to make his points clearly. His time at JPMorgan included a stint evaluating hedge fund managers and their performance, focusing on snagging a share of the fees the managers earn rather than the performance the investors eek out.

His main contention is that from 1998 to 2010, investors would have done better to invest in T-Bills than hedge funds – a truly alarming claim.  I didn’t recalculate his numbers and I’ve heard a few disagree with them [Update, many disagree with some convincing arguments on technical errors. I don’t agree with all the criticisms, but there are enough valid concerns to mean you should take this book with a pinch of salt  aima_research_committee_paper_-_methodological_mathematical_and_factual_errors_in_the_hedge_fund_mirage_-_august_2012]  . However, he backs up this numerical result with a list of the ways in which hedge fund managers can get things wrong. Everything from outright fraud to disingenuous legal contracts and on to greed-induced cumbersome fund sizes.

I’ve read plenty of academic papers before demonstrating how difficult it is to trust hedge fund performance figures (the author touches on these too) but this is the first time I understood the potential practical extent of the problem.

If you’re invested in hedge funds or considering investing in hedge funds, read the book. It’s engaging and will at least prep you with some better questions to ask. At most, it may put you back into a traditional investment vehicle instead.

The rise of the Asian Tigers (and Japan and China included in the wider group) and the role government policies on both sides of the Pacific played there should hold lessons for South Africa.  Hell, even France and Britain are thrown in for good measure, demonstrating the successes and failures of neo-liberal market oriented policies.

This book must really be read in conjunction with This Time is Different as together they reinforce the unavoidable conclusion that overzealous reducing regulation, liberating markets and increasing financial complexity are almost guaranteed to lead to disaster. The Anglo-Saxon mantra for a couple of decades at least now has been that those very things were the answer to our problems, not the cause.

I read the book on holiday. It’s not the traditional rip-roaring holiday read, but the style is light enough to enjoy and doesn’t have the density of statistics and numerical proof offered by This Time is Different. The explanation of how we got to where we are are fascinating and definitely food for thought for South Africa and other emerging markets, but their prognosis of how the US’s power will fade dramatically now that they no longer have The Money is even more evocative. I spent as much time holding my kindle to one side while thinking about the implications as I did reading the words and frantically clicking the next page button to get to the next page.

Buy it, read it and join the conversation on economic policies for South Africa and emerging markets.

Brad de Long has an economics (and a few others things) blog that I read from time to time. I’ve also watched several of his economic lecture videos available freely on iTunes University.  He’s worth paying attention to. I haven’t had contact with his co-author before, but if de Long likes writing with him he’s probably smarter than most people you or I have heard of before.

Three Cups of Tea tells the supposedly true story of Greg Mortenson and the Central Asia Institute (CAI) building schools in Pakistan while on a rip-roaring adventure of Taliban kidnappings amongst other tales. I received it as a present and enjoyed the moving story.

Except that, as it turns out, much of the story is stretched, elaborated and in parts completely concocted.  Jon Krakauer writes, in Three Cups of Deceit, how the seemingly sociopathic Greg Mortenson not only fabricated key parts of the story (and in contradiction of earlier, published articles by his own hand) but also ran the organisation for personal gain.

It’s definitely worth a read, even if it is a little sad to realise that a hero is actually a charlatan.

A point many of Mortenson’s supporters make is that he still did good – he and his CAI did build schools, did educate children and did raise awareness of society building as key methods of improving living standards and understanding in troubled parts of the world.

The problem I have there is that many people who donate money to charities, NGOs and similar programmes will donate the money to a cause anyway. Therefore, a significant portion of  funds that went to the CAI would have gone to other causes if it weren’t for Mortenson’s lies.  Moreover, that money wouldn’t have been squandered on Mortenson, on promoting his book, or on the now-empty schools built in the wrong places without equipment or teachers.

Mortenson redirected money away from good, solid causes and into his own pocket.

It’s chock-full of analysis, numbers, tables and charts showing how as much as things change, the scope for financial crises changes very little.  The comparison of Developed and Emerging Markets is particularly interesting in that the differences, while they do exist, are far smaller than stereotypical views.  Emerging Markets do tend to have more ongoing sovereign defaults, but the frequency of banking crises is little different. Weirdly, some aspects of Emerging Market crises (such as employment impacts) are less than average for the Developed World.

It isn’t really the book’s fault, but this was one of the few books that I struggled with on my kindle – the graphs and charts and captions to figures were particularly difficult to read. Perhaps they would look better on the Kindle DX (the larger model) or even an iPad or something.

Although the book doesn’t focus on the current (still-happening, if you weren’t paying attention) financial crisis, there are several chapters dedicated to it with an analysis of the economic indicators leading up to the crash. Now it’s incredibly easy to predict an event after it’s happened, but I’m still hopeful that the results can be useful in predicting future problems and potentially impacting economic policies and regulations for the better.

Some key conclusions from the book for predictors of financial crises:

• markedly raising asset prices (yes, and in particular house prices given the likely co-factor of increases in debt levels)
• slowing real economic activity
• large current account deficits
• sustained debt build-ups (public and/or private)
• large and sustained capital inflows to a country
• financial sector liberalisation or innovation

That last point was particularly interesting for me – for all the statements that the US economy’s brilliant use of innovation and reduced regulations being a risk mitigant, history suggests this as a cause for the crisis.

For me, what was quite worrying is how well South Africa matches many of these points in the 2000s.  It seems that we either got off very lightly, or there is still an extended period of difficulty ahead.

After banking crises, house prices typically decline in real terms by 35.5% and this slump lasts on average 6 years. Now South Africa didn’t have a bank failure, so it may be that we missed the definition of “banking crisis”. However, given the pullback in credit offered along with international banking crises and property market declines, this suggests we’re in for an extended period of property market stagnation.

Why Purple Cow? Because it’s extreme, it cuts through the oversaturated marketing and product appeals, which Seth describes as required to have an impact in the current competitive environment.

Light reading, thought-provoking and a great conversation piece, it’s a worthwhile read for those in marketing (who should probably have already read it by now) or anyone involved with growing a business again hordes of competitors. I read it a few chapters at a time, which I recommend as a way to absorb the ideas and ponder them before moving on to the next points.

Definitely worth reading.