The Benefits of Financial Literacy

But it isn’t just a matter of scoring well on a test; financial literacy brings with it a host of benefits. Here’s a short list of the advantages you’ll gain.

Increased Ability to Intelligently Evaluate Your Organisation

Do you really know if your organisation has enough cash to make salary and wage payments? Do you know how profitable the products or services you work on really are? When it comes to capital expenditure proposals, is the return on investment analysis based on solid data? And is it even the right measure to base your decision on? And, by the way, how is it even calculated? Boost your financial intelligence, and you’ll gain more insight into questions like these. Or maybe you’ve had nightmares in which you worked or were on the board of Enron, or South African Airways, or maybe Steinhoff. Many of the people there, including board members, had no idea of their companies’ precarious situations.

Suppose, for instance, you worked at the big telecoms company WorldCom (later known as MCI) during the late 1990’s. WorldCom’s strategy was to grow through acquisition (that is, buying other companies). Trouble was, the company wasn’t generating enough cash for the acquisitions it wanted to make. So, it used shares as its currency, and paid for the companies it bought partly with WorldCom shares. That meant it had to keep its share price high; otherwise, the acquisitions would be too expensive. It also meant keeping profits high, so that Wall Street (the main financial district in the US) would give it a high valuation. WorldCom paid for the acquisitions through borrowing. A company doing a lot of borrowing has to keep its profits up; otherwise, the banks will stop lending it money. So, on two fronts WorldCom was under severe pressure to report high profits. Add to that the fact that top management are rewarded mainly for delivering on the corporate strategy.

That, of course, was the source of the fraud that was ultimately uncovered. The company artificially boosted profits “with a variety of accounting tricks, including understating expenses and treating operating costs as capital expenditures”, as BusinessWeek summarised the US Justice Department’s indictment. When everyone learned that WorldCom wasn’t as profitable as it had claimed, the house of cards came tumbling down. But even if there hadn’t been fraud, WorldCom’s ability to generate cash was out of step with its growth-by-acquisitions strategy. It could live on borrowing and stock for a while, but not forever.

Or look at Tyco International. For all the news stories about Dennis Kozlowski’s (former CEO of Tyco, who was later convicted in 2005 of crimes related to his receipt of $81 million in unauthorised payments, and so on) elaborate birthday party and zillion-dollar umbrella stand, there is another story that wasn’t widely reported. During the 1990’s, Tyco also was a big buyer of companies. In fact, it acquired some six hundred companies in just two years, or more than one every working day. With all those acquisitions, the goodwill[1] number on Tyco’s balance sheet[2] grew to the point where bankers began to get nervous. Bankers and investors don’t like to see too much goodwill on a balance sheet; they prefer assets that you can touch (and in a pinch, sell off). So, when word spread that there might be some accounting irregularities at Tyco, they effectively shut off Tyco off from further acquisitions.

Now, I’m not arguing that every financially intelligent manager would have been able to spot WorldCom’s or Tyco’s or Steinhoff’s precarious situations. Plenty of seemingly savvy Wall Street or JSE types were fooled by the three companies. Still, a little more knowledge will give you the tools to watch trends at your organisation and understand more of the stories behind the numbers. While you might not have all of the answers, you should know what questions to ask when you don’t. It’s always worth your while to assess your company’s performance and prospects. You’ll learn to gauge how it’s doing and to figure out how you can best support those goals and be successful yourself.

Better Understanding of the Bias in the Numbers

What will understanding the bias do for you? One very big thing: it will give you the knowledge and the confidence – the financial intelligence – to challenge the data provided by your finance and accounting department. You will be able to identify the hard data, the assumptions, and the estimates. You will know when your decisions and actions are based on solid ground.

Let’s say you work in operations, and you are proposing the purchase of some new equipment. Your boss says he’ll listen, but he wants you to justify the purchase. That means digging up data from finance, including cash flow analysis for the machine, working capital requirements, and depreciation schedules.  All these numbers – surprise! – are based on assumptions and estimates. If you know what they are, you can examine them to see if they make sense. If they don’t, you can change the assumptions, modify the estimates, and put together an analysis that is more realistic and that (hopefully) supports your proposal. Sibongile, for example, likes to say that she’s a veteran finance professional and could easily come up with an analysis showing how her company should buy her a R30,000 computer. She would assume that she could save an hour a day because of the computer’s features and processing speed; she would calculate the value of an hour per day of her time over a year; and presto, she would show that buying the computer is a no-brainer. A financially intelligent boss, however, would take a look at those assumptions and propose some alternatives, such as that Sibongile might actually lose an hour of work a day because it was now so easy for her to surf the net and be on social media.

It’s amazing, in fact, how easily a financially knowledgeable manager can change the terms of discussion, so that better decisions get made. When he worked for Ford, Khaya had an experience that underlined just that lesson. He and several other finance people were presenting financial results to a senior marketing executive. After they sat down, she looked straight at them and said, “Before I open these finance reports, I need to know… for how long and at what temperature?” Khaya and the others had no idea what she was talking about. Then the light went on and Khaya replied, “Yes, Ma’am, they were in for two hours at 400 degrees”. She said, “Ok, now that I know how long you cooked them, let’s begin”. She was telling the finance people that she knew there were assumptions and estimates in the numbers and that she was going to ask questions. When she asked in the meeting how solid a given number was, the finance people were comfortable explaining where the number came from and the assumptions, if any, they had had to make. The executive could then take the numbers and use them to make decisions she felt comfortable with.

Absent such knowledge, what happens? Simple: the people from accounting and finance control the decisions. I use the word control because when decisions are made based on numbers, and when the numbers are based on accountants’ assumptions and estimates, then the accountants and finance people have effective control (even if they aren’t trying to control anything). That’s why you need to know what questions to ask.

The Ability to Use Numbers and Financial Tools to Make and Analyse Decisions

What is the ROI of that project? Why can’t we spend money when our company is profitable? Why do I have to focus on accounts receivable when I am not in the accounting department? You ask yourself these and other questions every day (or someone else asks them – and assumes you know the answers!) You are expected to use financial knowledge to make decisions, to direct your subordinates, and to plan the future of your department. I will show you how to do this, give you useful examples, and discuss what to do with the results. In the process I will try to use as little financial jargon as possible.

For example, let’s look at why the finance department might tell you not to spend any money, even though the company is profitable. I’ll start with the basic fact that cash and profit are different. I’ll explain later why, but right now let’s just focus on the basics. Profit is based on revenue. Revenue, remember, is recognised when a product or service is delivered, not when the bill is paid. So, the top line of the income statement, the line from which you subtract expenses to determine profit, is often no more than a promise. Customers have not paid yet, so the revenue number does not reflect real money and neither does the profit line at the bottom. If everything goes well, the company will eventually collect its receivables and will have cash corresponding to that profit. In the meantime, it doesn’t.

Now, suppose you’re working for a fast-growing business-services company. The company is selling a lot of services at a good price, so its revenues and profits are high. It is hiring people as fast as it can, and of course it has to pay them as soon as they come on board. But all the profit that these people are earning won’t turn into cash until thirty days or maybe sixty days after it is billed out! That’s one reason why even the CFO of a highly profitable company may sometimes say, don’t spend any money right now because cash is tight.

Although this course focuses on increasing your financial intelligence in business or in a not-for-profit, you can also apply what you’ll learn in your personal life. Consider your decisions to purchase a house, a car, or a boat. The knowledge you’ll gain can apply to those decisions as well. Or consider how you plan for the future and decide how to invest. This course if not about investing, but it is about understanding company financials, which will help you analyse possible investment opportunities.

Better Career Prospects

A demonstrably better understanding of the numbers can’t hurt your career prospects. Imagine the shock on your boss’s face if you made a case for a raise – and part of your case included a detailed analysis of the company’s financial picture, showing exactly how your unit has contributed. Far-fetched? Not really. The same goes for when you apply for that next job. Hiring experts always job seekers to ask questions of the interviewer – and if you ask financial questions, you’ll show that you understand the financial side of the business. You might also save yourself some pain by analysing the financial position of your next employer, and perhaps finding out that its not such an attractive prospect after all.

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[1] Goodwill comes into play when one company acquires another company. It is the difference between the net assets acquired (that is, the fair market value of the assets less the assumed liabilities) and the amount of money the acquiring company pays for them. For example, if a company’s net assets are valued at R1 million and the acquirer pays R3 million, then goodwill of R2 million goes onto the acquirer’s balance sheet. That R2 million reflects all the value that is not reflected in the bought company’s tangible assets – for example, its name, reputation, customer lists, and so on.

[2] You’ll learn about a balance sheet later, but it is part of the financial statements of a company and reflects the assets, liabilities and owner’s equity at a point in time. The balance sheet is called such because it balances – assets always must equal liabilities plus owner’s equity.

No More Thumb Suck - Estimating the Cost of Capital

The Risk-Free Rate

Most risk and return models in finance start off with an asset that is defined as risk free and use the expected return on that asset as the risk-free rate. The expected returns on risky investments are then measured relative to the risk-free rate. But what makes an asset risk free? And what do we do when we cannot find such an asset? These are the questions we will deal with next.

The Cost of Equity

Firms raise money from both equity investors and lenders to fund investments. Both groups of investors make their investments expecting to make a return. The expected return for equity investors would include a premium for the equity risk in the investment. We label this expected return the cost of equity. In other words, the cost of equity is the rate of return investors require on an equity investment in a firm.

As you may know, the risk and return models need a riskless rate and a risk premium. They also need measures of a firm’s exposure to market risk in the form of betas. These inputs are used to arrive at an expected return on an equity investment:

Expected return = Riskless rate + Beta(Risk premium)

This expected return to equity investors includes compensation for the market risk in the investment and is the cost of equity.

In the Capital Asset Pricing Model (CAPM), the beta of an investment is the risk that the investment adds to a market portfolio. There are three approaches available for estimating these parameters: one is to use historical data on market prices for individual investments; the second is to estimate the betas from the fundamental characteristics of the investment; and the third is to use accounting data. We will look at all three approaches next.

Calculating the Cost of Debt

The cost of debt measures the current cost to the firm of borrowing funds to finance projects. In general terms, it is determined by the following variables:

•   The riskless rate. As the riskless rate increases, the cost of debt for firms will also increase.

•   The default risk (and associated default spread) of the company. As the default risk of a firm increases, the cost of borrowing money will also increase.

•   The tax advantage associated with debt. Since interest is tax deductible, the after-tax cost of debt is a function of the tax rate. The tax benefit that accrues from paying interest makes the after-tax cost of debt lower than the pre-tax cost. Furthermore, this benefit increases as the tax rate increases:

After-tax cost of debt = Pre-tax cost of debt(1 – Tax rate)

Estimating the Default Risk and the Default Spread of a Firm

The simplest scenario for estimating the cost of debt occurs when a firm has long-term bonds outstanding that are widely traded. The market price of the bond in conjunction with its coupon and maturity can serve to compute a yield that is used as the cost of debt. For instance, this approach works for a firm like AT&T that has dozens of outstanding bonds that are liquid and trade frequently.

Many firms have bonds outstanding that do not trade regularly. Since these firms are usually rated, we can estimate their costs of debt by using their ratings and associated default spreads. Thus, Boeing with an AA rating can be expected to have a cost of debt approximately 1.00 percent higher than the Treasury bond rate, since this is the spread typically paid by AA-rated firms.

Some companies choose not to get rated. Many smaller firms and most private businesses fall into this category. While ratings agencies have sprung up in many emerging markets, there are still a number of markets where companies are not rated on the basis of default risk. When there is no rating available to estimate the cost of debt, there are two alternatives:

1.     Recent borrowing history. Many firms that are not rated still borrow money from banks and other financial institutions. By looking at the most recent borrowings made by a firm, we can get a sense of the types of default spreads being charged the firm and use these spreads to come up with a cost of debt.

2.     Estimate a synthetic rating. An alternative is to play the role of a ratings agency and assign a rating to a firm based on its financial ratios; this rating is called a synthetic rating. To make this assessment, we begin with rated firms and examine the financial characteristics shared by firms within each ratings class. For instance, the Altman Z score, which is used as a proxy for default risk, is a function of five financial ratios that are weighted to generate a Z score. The ratios used and their relative weights are usually based on empirical evidence on past defaults. The second step is to relate the level of the score to a bond rating.

What is Debt?

The answer to this question may seem obvious since the balance sheet for a firm shows the outstanding liabilities of a firm. There are, however, limitations with using these liabilities as debt in the cost of capital computation. The first is that some of the liabilities on a firm’s balance sheet, such as accounts payable and supplier credit, are not interest-bearing. Consequently, applying an after-tax cost of debt to these items can provide a misleading view of the true cost of capital for a firm. The second is that there are items off the balance sheet that create fixed commitments for the firm and provide the same tax deductions that interest payments on debt do. The most prominent of these off-balance sheet items are operating leases. Consider what an operating lease involves. A retail firm leases a store space for 12 years and enters into a lease agreement with the owner of the space agreeing to pay a fixed amount each year for that period. We do not see much difference between this commitment and borrowing money from a bank and agreeing to pay off the bank loan over 12 years in equal annual instalments.

There are therefore two adjustments we can make when we estimate how much debt a firm has outstanding.

1.     We can consider only interest-bearing debt rather than all liabilities. We would include both short-term and long-term borrowings in debt.

2.     We can also capitalise operating leases and treat them as debt.

Weighted Average Cost of Capital (WACC) or Cost of Capital

Since a firm can raise its money from three sources - equity, debt, and preferred stock - the cost of capital is defined as the weighted average of each of these costs. The cost of equity (k_e) reflects the riskiness of the equity investment in the firm, the after-tax cost of debt (k_d) is a function of the default risk of the firm, and the cost of preferred stock (k_ps) is a function of its intermediate standing in terms of risk between debt and equity. The weights on each of these components should reflect their market value proportions, since these proportions best measure how the existing firm is being financed. Thus, if E, D, and PS are the market values of equity, debt, and preferred stock, respectively, the cost of capital can be written as follows:

Cost of Capital = k_e[E/(D + E + PS)] + k_d[D/(D + E + PS)] + k_ps[PS/(D + E + PS)]

Familiarity and contempt - A tale of the Sheep and the Wolf

Long, long ago animals feared the sheep. With its woolly body, it appeared fearsome. And, of course, the sheep cultivated this image.

Obviously, this kind of image was terribly advantageous.

None of the animals had seen the teeth of the sheep, and the sheep successfully continued to conceal them. Finally, the wolf could not take it any longer, and devised a clever plan. The wolf organised a party for all the animals and served alcohol. The wolf made sure the sheep had had enough to drink, and started telling jokes.

All the animals began laughing, including the sheep. Of course, in laughing the sheep exposed very small teeth that are only suitable for grazing on grass and greenery, and not for biting or fighting fiercely.

The wolf immediately pounced, and from that day no other animal feared the sheep.

The Biblical Israel Question - Concluding Remarks

It is true that God made Abraham a father of many nations (Gen 17:4-6), and indeed he bore more than one son. However, it is also true that the son of the promise was Isaac and the promise was again reconfirmed to Isaac’s son, Jacob (Israel – Gen 32:28).

Therefore, in a strictly literal and legalistic sense, God’s covenant was with the descendants of Israel (Jacob – see above), despite that other nations also came from Abraham. By the way, you may be aware that Arabs claim descent from Ishmael and were/are, therefore, brethren with the descendants of Isaac and Israel, the Israelites.

But Ishmael was born of a mistake, a lack of faith or misunderstanding by Abraham, which is probably why in the end he and his mother got sent away, probably to protect the promised child of Sarah and, more importantly, to protect the promise God had made. Not much significance attaches, also, to the other children that Abraham subsequently had. I should mention, in passing, that God did not abandon Ishmael, as he blessed and protected him (Gen 21:13-20).

It would, therefore, be dishonest of me (indeed, probably of anyone) to hang onto the fact that Abraham was/is a father of many nations and to use that to attempt to deprive Israel/Jews of their special old covenant status as the descendants of Jacob/Israel, the son of the son of the promise. You may notice, as an aside, that Isaac was not the first born son of Abraham and neither was Israel (and by the way, neither was Abel, the brother of Cain); however, God blessed them according to His will and plan as God, regardless of their status in the family hierarchy!

Therefore, the spiritual approach taken by Apostle Paul, which I dealt with in my first ‘paper’, is much richer and it overcomes and trumps the legalistic approach.

To conclude. My view, therefore, does not negate nor does it minimise the old covenant. I confirm it. Having done so, however, I argue that that old covenant was superseded by a new covenant, which came/comes about through the birth, death and resurrection of another son of the promise, Jesus. Indeed, one may arguably also trace this promise to Abraham. The Angel told Abraham that, “In your seed all the nations of the earth shall be blessed…” (Gen 22:18). I would posit that this message was/is a foretelling of Christ, through whom (the seed of Abraham) all the nations of the earth shall be/have been blessed.

Further thoughts on the Biblical Israel Question

Paul’s style was very intellectual. The early Christian church had many issues to deal with: debates about its tenets; inconsistency of belief and practice, especially between Jews and Gentiles; cultural practices brought over from Judaism and paganism, etc. In his epistles, addressed to each church and in each focussing on issues plaguing that particular church, Paul set out to address these issues.

So, Paul’s style is to expose these inconsistencies by positing hypotheses and premises, and then proceeding to show how inconsistent with Christ’s teachings such hypotheses and premises are. He poses rhetorical questions and then proceeds to answer them. Key among the issues he dealt with were:

1.     The Jews or Israel being a special people and the old covenant. He starts off by putting that forward as a given, and then proceeds to show that if this were so, it would be a negation of Christ’s teachings and of the whole purpose of Christ coming to earth and dying and being resurrected. He shows that, although the Jews/Israel may have been special, by their rejection of Christ they are rejecting God and, therefore, will not receive salvation. He shows, however, that not all Jews/Israel have rejected Christ, that like he (a Jew) there are some who have accepted Him and will, therefore, receive salvation.

2.     The question of the law of Moses. Early Christians who were also Jews/Israel believed that even under Christianity the law of Moses had to be observed (see also below). Again Paul, as indeed did Peter and the elders after much debate, shows that this is not necessary and would, in fact, be an imposition on the Gentiles because the law of Moses was only given to the Jews/Israel. In fact, the continued insistence on the observance of Mosaic laws, even by Jews/Israel themselves is inconsistent with being a Christian and amounts to a ‘betrayal’ of Christ’s mission on earth.

3.     Salvation by grace because of faith, instead of observance of the law or by works. Christian Jews/Israel continued to regard salvation as coming from observing the law, as opposed to grace by faith in Christ, and they continued to believe in works as they did in Old Testament times when they fell short of the law. Paul, as did the elders, shows that this is incorrect and inconsistent with Christianity.

4.     Circumcision. The belief and insistence of the Christian Jews/Israel that Gentile converts to Christ should be circumcised. Paul shows that this is not necessary and emphasises spirituality, over physical circumcision.

5.     Cultural practices. Jews/Israel and Gentiles brought their past cultural practices into Christianity. Paul shows that “the old has gone, the new has come” and exhorts them to abandon their baggage and create a new Christian culture. They are born again, new creations. However, he also argues that even though there is freedom in Christ, in exercising that freedom they should be sensitive to existing sensibilities, for instance on the issue of food.

In reading Paul’s epistles, therefore, it is important to read the whole letter, but in particular, follow a particular argument or point to its conclusion. Selectively looking at chapters or verses may lead to a wrong and dangerous or fallacious conclusion. For instance, in line with what I have argued above is Paul’s style, the passage you have proposed is only part of the argument, which continues in 10 and concludes only in 11. It is therefore necessary to read 9-11 and not just 9 only. My contention is, therefore, not contradicted.

Regarding John’s Revelations. Revelations as a Book is difficult. There are various interpretations of the symbolism contained in there, whether to see it literally or purely symbolically. My own view is middle of the road. Far from confirming a special status for Jews/Israel, I believe there is an element of symbolism aligned with what I pointed out in point 1. Above, namely that there will be a “remnant” of Jews/Israel that turns to God and are, therefore, saved. The fact that there is a specific number according to the twelve tribes, I believe, is purely symbolic. The notion of the remnant of Jews/Israel appears in various parts of the Old Testament starting with Isaiah, through Jeremiah, Ezekiel, Joel and Zechariah and is also mentioned by Paul in Rom 11:5. It essentially refers to Jews/Israel that gets saved at each stage of their history, in relation to bondage and sin. In Romans Paul puts their salvation as arising from grace, not a special status.

In conclusion, let me also say, though, that the Bible, even in the new testament, clearly states that God is God, He saves whomsoever He chooses. Purely on this basis, and not necessarily a specific special status, if He chooses to save the 144 000 Jews/Israel, who am I to argue with that?

Barefoot doctors

The concept of “barefoot doctors” originated in China. Although the barefoot doctors programme was institutionalised after 1965, following Chairman Mao’s healthcare speech, and subsequently integrated into national policy, barefoot doctors had been around for a few decades before then.

What are, or were, barefoot doctors? According to Wikipedia, these were “farmers, folk healers, rural healthcare providers, and middle or secondary school graduates who received minimal basic medical and paramedical training and worked in rural villages in China. Their purpose was to bring healthcare to rural areas where urban-trained doctors would not settle. They promoted basic hygiene, preventive healthcare and family planning, and treated common illnesses…. Barefoot doctors continued to introduce Western medicine to rural areas by merging it with Chinese medicine. With the onset of market-oriented reforms after the Cultural Revolution, political support for barefoot doctors dissipated, and healthcare crises of peasants substantially increased after the system broke down in the 1980’s”.

Indeed, the success of the Chinese barefoot doctors’ programme was part of the inspiration behind the World Health Organisation (WHO) and its member countries adopting the Alma Ata Declaration (or Primary Health Care Initiative) in 1978.

It is clear that, particularly for emerging and poor nations, a programme of barefoot doctors can radically change the health and mortality outcomes for a nation. The programme could be further enhanced with Cuban-style home visits.

A policy and system of barefoot doctors can address a number of issues for a nation, such as:

·      Rapid production of primary healthcare providers.

·      Cost-effectiveness at the training level.

·      Cost-effectiveness at the provision level.

·      Assistance with adherence to treatment regimens for debilitating illnesses, including HIV-AIDS, diabetes, TB, etc.

·      Rapid improvement of the health status of the poorer sections of the population.

·      Reduction of unemployment in poorer areas such as rural areas, townships and informal settlements.

The need, and potential benefits, of barefoot doctors, are particularly apparent during a pandemic such as Covid-19. If a country like South Africa had barefoot doctors, the response (and outcomes) to Covid-19 would have been radically different. Not only the population as a whole would have been better mobilised, the healthcare system would have had people in closer proximity to communities in townships, informal settlements and rural areas to immediately inform and encourage adherence to health guidelines such as hand-washing, social distancing, mask-wearing, and undertaking testing.

Given the experience of the lack of preparedness for Covid-19, it is perhaps time to consider a strategy to deal with emerging and future health crises and pandemics. In this regard, a system of barefoot doctors would greatly enhance the country’s preparedness, while being beneficial on an ongoing basis.

Chief Justice Mogoeng and his Israel thesis – A Bible-based Response

One of the most revolutionary (and, to the Jews/Israelites then, controversial) concepts or teachings that Jesus brought was that the “God of Israel” was actually a God of all, a God for Jews and gentiles alike, including the mortal enemies of the Jews/Israelites. This is extremely important because according to the Old Testament, God had made a special covenant with “His people”, the nation of Israel, to the exclusion of other nations and peoples (Genesis 15:1-21:34; also, Genesis 28:11-22). To them, for instance, the rabbinic summary of the law exhorting them to “…love…your neighbour as yourself” (Luke 10:27) was interpreted hypocritically very narrowly. It definitely did not apply to non-Jews. Which is why Jesus, in His Wisdom, decides to narrate the Parable of the Good Samaritan (Luke 10:30-36), at the conclusion of which He instructs or advises him to “Go and do likewise” (Luke 10:37).

Jesus further ‘complicates’ life for the Jews/Israelites by overturning the law of retaliation, “An eye for an eye, a tooth for a tooth”, instead preaching turning the other cheek, going the extra mile, loving not just your neighbour, but your enemies too and those who curse you, “…that you may be sons of your Father in heaven; for He makes His sun rise on the evil and on the good, and sends rain on the just and on the unjust…” (Matthew 5:38-48).

Indeed, therefore, the notion that God is a God for all implies that the old covenant is broken and replaced by a new covenant, and this new covenant is confirmed by Jesus in two ways. First, He says the only way to heaven is through Him (John 14:6). Whoever believes in Him shall have eternal life but “…he who does not believe is condemned already, because he has not believed in the name of only begotten Son of God” (John 3:14-18). It is important to note that, although this teaching has universal application, here Jesus was preaching to the Jews/Israelites, and so no exception or special dispensation was made for them. You believe in Jesus, you go to heaven and you have everlasting life; you don’t believe in Jesus, you are condemned eternally.

Second, Jesus died on the cross as a sacrifice for all our sins. Not just the sins of Jews/Israelites (or Judeans), but all of humanity. Not just people living then, but all future generations and peoples too. This act again invalidates the old covenant because according to the old covenant or laws, sins could only be absolved through the slaughter of an animal: Jesus became the lamb (Genesis 4:4; Genesis 22:13; John 1:29).

The notion, therefore, that the Israelites are/were the chosen dies/died with the birth of Christ and is buried when He is nailed to the cross for all of humanity. Indeed, Chris invalidating the old covenant is one of the reasons the Sadducees and Pharisees and some Israelites were against Him. (In purely political, geopolitical, military, strategic and psycho-cultural terms, it was dangerous talk! It invalidated the belief and feeling by the Israelites that they were “special”, and that they were “chosen” and that they had a “special relationship” with the one true God. The chosen or God’s people were now only on the basis of their acceptance of Christ as Lord and Saviour!)

In his epistles, Apostle Paul further expounds and cements this new covenant and disavows the old. He affirms that God is a God for all, including the Greeks and gentiles. Part of Paul’s doctrine or Christology essentially revolves around or is grounded on this issue. For instance, in 2 Corinthians 5:14-17, Paul makes the assertion that since Christ’s death was on behalf of all, this means that the whole human race has been brought under the sentence of death; and Christ’s resurrection means that in the new order only what He brings to life is actually living (this affirms what Jesus Himself said – see above). Thus, those who do live (in God’s new order) may now live only for the One who died for them and was raised again. Moreover, this new order brought about by Christ’s death and resurrection nullifies one’s viewing anything any longer from the present (or old) perspective, whose values reflect an old age point of view. To view either Christ or anyone/anything else from that perspective is no longer valid. Why? Because being in Christ means that one belongs to the new creation: the old has gone, the new has come!

Paul’s radical, new-order point of view – resurrection life marked by the cross! – lies at the heart of everything he thinks and does. Paul further makes the following assertions, which derail the argument of a chosen nation with special status and special laws given only to them by God:

1.     Christ is the Seed of Abraham, to whom God made the promises. Therefore, who are Abraham’s true children? Those who are of Christ! (Galatians 3:16-29; see also Romans 8:12-17).

2.     The true and enduring covenant with God is spiritual. So, true descent from Abraham is a spiritual one: “There is neither Jew nor Greek, there is neither slave nor free, there is neither male nor female, for you are all one in Christ Jesus” (Galatians 3:28; see also Romans).

3.     Observance of the “Law” of Christ (Galatians 6:2). The law or commandment of Christ is to love one another as He loves us or love your neighbour as you love yourself (Galatians 5:14; John 13:34; 15:12; see also above).

4.     On the other hand, Jews/Israelites, who were supposedly the chosen people, and into whom Christ was born and unto whom the gospel was first preached and revealed, by their continued rejection of Christ may actually forfeit any status of being God’s children and may not see God’s Kingdom. The only way that this can/could change is/was through them accepting Christ as their Lord and Saviour, and not any prior relationship or “special” status! (This was again an affirmation of what Jesus had said – see above).

5.     The ultimate goal of salvation is not simply the saving of individuals and fitting them for heaven, as it were, but the creation of a people for God’s name, reconstituted by a new covenant. That is, although people in the new covenant are saved one by one, the goal of that salvation is to form a people who, as the Israel of old, in their life together reflect the character of the God who saved them, whose character is borne by the Christ incarnate and re-created in God’s people by the Spirit (See, among others, Hebrews 8:7-10:29).

In conclusion, to insist, therefore, on a narrow interpretation of the bible in furtherance of unholy agendas is actually a misunderstanding of why Christ came to live among us and to sacrifice Himself on the cross. Indeed, as Paul puts it, “…if we sin wilfully after we have received the knowledge of the truth, …[we have] trampled the Son of God under foot, counted the blood of the covenant by which he was sanctified a common thing, and insulted the Spirit of grace[.]” (Hebrews 10:26-29; see also 6:1-8). To paraphrase Paul, these Christians, who clearly do not understand what it means to be a new creation and who do not understand the new covenant, are still infants (Hebrews 5:12-14).