I will get on to the weighty question of whether Jacob Zuma might retire before his term of office is completed momentarily, but first let me mention that I have been busy with what started as an idle rumination about the South African Communist Party.

But has turned, inevitably perhaps, to “become persistent and recurrent worrying or brooding” (from the third meaning for ‘rumination’ given in the link above.)

I am at a serious disadvantage when assessing the SACP. Unlike many of my readers I was always an admirer of the party – well, certainly in the bad old days of the struggle against apartheid.

Slightly more difficult to explain is that I am still moved by Billy Bragg singing The Red Flag, and the pleasure I once took at the same artist (or perhaps another, even Google can’t nail it for me) singing a song that went something like “Stalin wasn’t stalling, when he told the Beast of Berlin, that we’d never rest contented, till we’d driven him from the land.”

So I am hard wired, deep in my political DNA, to not think ill of the SACP – which is why the party riding Jacob Zuma to power, its dogged defence of the President’s most unsettling activity and much of the threatening sloganeering and bullying that gets published as Red Alerts on Umsebenzi Online have had me at a real analytical loss.

I have provisionally titled the post: “O SACP, SACP! wherefore art thou SACP?” It wanders around a bit, speculating wherefore, actually when you get right down to it, art the SACP? There are various asides of a semi-personal, even light hearted, nature – but the path of my meander has definitely darkened and right now I feel I am, metaphorically speaking, in a gloomy forest and the growing stench suggests there is a poisoned well somewhere up ahead.

So I have decided to take a bit more time and care on that.

Meanwhile here are some of my recent comments (sent to clients on the 3rd of this month) about the increasingly widely discussed matter of the future of Jacob Zuma.

Jacob Zuma – will he stay, will he go and does it matter? 

My basic view of the question in the title is:

  • Jacob Zuma is more likely to retire early that I have considered previously.
  • There is wide variation in the quality of South African politics, administration and government, with awful, mediocre and excellent aspects. This variation will not be overwhelmed or overdetermined by whether Zuma stays or goes – although it would also be incorrect to suggest it doesn’t make a blind bit of difference.
  • In general I would assert that Jacob Zuma is as much a symptom of the problems as he is a cause of them – although I would, if someone held a gun to my head, go with 60% symptom, 40% cause (I had it the other way around when I sent this out initially, but that was just my dyslexia playing havoc: Zuma is less the architect of history than history is the architect of Zuma – no Nkandla pun intended).
  • Additionally, Jacob Zuma’s term of office would end in 2019 anyway and his replacement would be elected ANC President at the 2017 national conference. We are, at most, not much more than a year off knowing (or having a pretty strong idea) who the likely replacement of Jacob Zuma will be even if he (Zuma) serves out his full second term.
  • However, unexpected transitions can be destabilising, especially if the incumbent has much to lose if he loses (like going to prison, losing some of his and his family’s accumulated assets and having his powerful political network’s continued asset accumulation threatened – just to take a few arbitrary and hypothetical example of why such a persons going might be a messy business).

However, I am of the opinion that the question is worth considering, but we need to get some of our methodology right first:

This is a future event and as such it is uncertain and unpredictable. There is no acceptable methodology (that I understand or can use)  that can reliably (academically, empirically, scientifically) give a probability estimate as to the potential outcomes.

It is crucial to avoid the trap of predicting a particular outcome and then assembling the evidence to support it – and, further, attempting to defend the prediction over time as ‘the facts’ move against it.

We need an adequate reason to believe the outcome is important, not important or somewhere in between – or all of these things at once , with this last choice being the one I would probably go for.)

The past (Zuma’s survival against the odds up until now) is not a predictor that he will survive the confluence of events. If that argument held weight, then we should argue that nobody alive today will die because they haven’t died up until now – I attempt to fill-out this assertion under “Jacob Zuma, the survivor” below.

Normative reasoning is acceptable, but we need to be conscious of doing it when we do it. In this case my ‘normative’ assumption is that a successful and calm succession completed before Zuma’s term of office expires in 2019 would be a ‘good thing’, perhaps even a precondition for the reestablishment of political stability and financial market trust in the bona fides of government (and lower risk levels in the geography and assets administered by the South African state). However, as I mentioned previously, I think this is a necessary not sufficient condition for such improvements.

Jacob Zuma, the survivor

It is being argued repeatedly   that Zuma is the quintessential survivor, that he has the ANC and its National Executive Committee wrapped up, that he demonstrated this again at Mangaung in December 2012 (see here for a persuasive  example). I do not disagree with these assertions. But to accept that argument as complete we must establish that there are no new facts or new elements that might impact upon that assumed outcome.

Much has changed (both in fact and in my interpretation of the facts) over the last 18 months:

  • The alliance of forces that backed and defended Zuma’s rise to power at Polokwane has disintegrated. Crucially Julius Malema is now heading a hostile opposition party energetically represented in parliament and Cosatu is undergoing an on-going collapse – and it’s biggest union Numsa is in the process of setting up a socialist political movement that has as one of its founding principles that Jacob Zuma is the epitome of the corrupt and disastrous leadership cadre that have hijacked the ANC and the country (this is Numsa’s – and Malema’s/EFF’s – oft expressed view, not mine.) These are the very people and institutions that where the centre of the campaign that brought Zuma to power. (The SACP is pretty much ‘the last man standing’, which is what has led me to look more  closely at the whys and wherefores of that phenomenon.)
  • I am under the impression, but am unable to ‘prove’, that key elements and individuals of Jacob Zuma’s support base in Kwazulu-Natal are starting to  hedge their bets and keeping open the possibility of shifting their support to either Zweli Mkhize (ANC national treasurer and previous KZN premier) or Nkosazana Dlamini-Zuma (Current AU chair with too many other credentials in SA politics and government to begin to list). Both these candidates would be acceptable to the powerful (dominant?) KZN ANC. I cannot be certain if this is “true”, but this is my impression.
  • There are signs (rapid apparent weight loss, increased ‘time off’) and widespread speculation that Jacob Zuma’s health is an issue in play. Again I cannot ‘prove’ this – that would require his confidential medical records, amongst other things – but there are many circumstantial supporting elements that I have discussed several times elsewhere.
  • The linked controversies around Jacob Zuma, the allegation that he has improperly allowed the Gupta brothers to capture important aspects of the state and government, that he has abused public finances to build his Nkandla home, the various allegations around the Arms Deal scandal, with reference to convicted fraudster Shabir Shaik, (and the attendant ‘spy tapes’ scandal), the infiltration and destruction of the National Prosecuting Authority, the similar damage and modality of damage done the various structures of national intelligence as well as crime intelligence – all apparently in an attempt to protect Zuma from the legal consequences of his actions are starting to cause serious strain for the ANC.
  • The losses of 11% of voting support in the ANC’s most sophisticated middle class electoral constituency in the economic heartland of Gauteng in May this year and the serious worry by the Gauteng ANC that this damage might deepen in the 2016 local government election. The assumption (that I share) is that at least part of this is because of the myriad scandals surrounding Zuma.
  • The noisy disruption of Parliament by the EFF in an attempt to get Zuma to account to the public and to Parliament for Nkandla expenditure … and the degree of national embarrassment that surrounds this.
  • There has been a coup (which has now degenerated into a volatile stalemate) against the Lesotho government which had just issued the Gupta brothers with diplomatic passports. This both exposes the degree to which the Guptas have captured key political institutions in South and southern Africa, but also that that capturing is being exposed and challenged all over the place and the most significant person most publicly connected to the Gupta brothers is Jacob Zuma.
  • Jacob Zuma has just visited Russia, alone and forlorn, and in a manner and context that appears to me that he is the supplicant – when logic dictates that Putin should have been the supplicant.

The future, scenarios and consequences

  • Zuma may well survive to see out his term but the facts suggest that the possibility of outcomes different from that are rising, and must be seriously considered.
  • Zuma’s health could deteriorate and he could be forced out of office (this is a risk with any leader at any time but is raised with regard to Jacob Zuma for the reasons discussed previously)
  •  The ANC, suffering the myriad consequences of Jacob Zuma’s myriad failings, might be finally moved to attempt to move him out. The ruling party could do this by promising him security in Nkandla and immunity from prosecution. It is by no means clear that the ANC could summon the leadership capacity to undertake such a manoeuvre and it is unlikely that the National Executive Committee of the ANC, for now completely beholden to Jacob Zuma for jobs, position and access, would be the instrument that could initiate such a manoeuvre. But just because I can’t come up with a mechanism which might bring about such a change does not mean that that change will not happen (although I do accept that the arguments here would be more interesting if I was able to give a plausible and new mechanism for such a change.)
  • If there were a sudden ‘run’ on Zuma, if his apparent weakness suddenly became more visible, his supporters would vanish like the morning mist. There is no cadre of leaders and supporters waiting in the wings to set up a version of the Cope political party that Mbeki’s supporters established after Mbeki was fired.
  • There are a number of potential successors to Jacob Zuma, the prospects of whom I have assessed on a number of different occasions. To the two I have mentioned earlier in this note, add Cyril Ramaphosa, Lindiwe Sisulu, Baleka Mbete – and, as a safe pair of hands, stalwart stand-in Kgalema Motlanthe. Any of these candidates would be acceptable to the electorate, to the ANC and to financial markets, although each group, and probably each individual within each group, might have his or her specific preference.
  • Power vacuums and unexpected transitions can be destabilising and risky and can be accompanied by wild swings in financial markets. It is important to keep the possibility of this in mind. This is not the same as saying: ‘this is happening’ … or even: ‘this is more likely to happen than not’. It is purely saying this is more likely to happen than I previously thought and it is worth keeping in mind.

A useful critique of thinking around this issue was published by a senior ex-intelligence officer Andre Zaaiman a few days ago. Catch that here … you might be able to see that we spoke about the issue over a cup of coffee before either of us wrote about it.

 

Here are some bits and pieces I highlighted for investors over the last few weeks. Thanks as always to BNP Paribas Cadiz Securities for allowing me to republish these snippets here … it is also a touch more information that most people require, but I post it here for the record, if nothing else.

I write these under considerable time pressure  – deadline 06h30 0n Monday mornings. They can sometimes be a bit scrappy, but mostly (although with exceptions) still relevant a few weeks later. Where I say ‘yesterday’ or ‘today’ (or whatever) I mean: relative to the date in the highlighted headline above each section. The newest is on the top – stretching all the way back to the ancient history of Nkosazana Dlamini-Zuma at the US-Africa summit in Washington.

 

01/09/2014

Lesotho, South Africa … and the Guptas

Lesotho Prime Minister, Thomas Thabane, was assisted by South African special forces soldiers to flee to South Africa in the face of a military backed ‘coup’ on early Saturday morning. The ‘coup’ (or ‘coup attempt’ – both terms are used extensively in the coverage) was allegedly orchestrated by Deputy Prime Minister Mothetjoa Metsing.

The key features of the event were the co-ordinated encircling of police barracks by the military, the disarming of the police and the seizing of the national broadcaster in the country’s capital Maseru on Saturday. (Sunday Times, Voice of America, City Press, Sunday Independent – 31/08/2014).

The Sunday Times story suggests the ‘coup’ was sparked by Friday’s firing of army chief Lieutenant-General Kennedy Kamoli by Lesotho’s King Letsie. The City Press reports that South African troops are on standby for further interventions.

Lesotho army spokesman Major Ntele Ntoi has denied there was a coup and says the army’s actions were purely to disarm police “who had been preparing to provide weapons to political parties” – Sunday Times.

Thabane, in a phone interview with Voice of America, said he was not going back until his safety was secured, that there was a situation of “total indiscipline” in the army and that soldiers were “running around the streets, threatening people” and “quite openly stating that they want my neck” – see here for VOA coverage.

So what?

This is almost too bizarre to type out, but here goes: a significant portion of the coverage of the event refers to the recent controversy surrounding the issuing by Thabane of diplomatic passports to the Gupta brothers (who we know better as key Zuma and ANC backers and funders, see Mail and Guardian coverage “The Grim Tales of the Brothers Gupta” for background).

At the time of the appointment Thobane said “(t)hese people (the Guptas) are good friends of the ANC and we have good relations with the ANC … I was introduced to them by ANC president [Jacob Zuma] and other ANC officials… I then appointed them to help scout for investment in my country. They have influence in a number of countries that can help Lesotho” – see here for that story.

In highly interpenetrated and interdependent systems of patronage and corruption, unsuccessful attempts to defend one part of the system can unravel the whole system and cause destabilisation throughout the linked networks.

 

Jacob Zuma’s Russian rest

Jacob Zuma visited Russia this week for six days. He had a light schedule and was, unusually, only accompanied by State Security Minister David Mahlabo and Deputy Minister of International Relations and Cooperation Nomaindia Mfeketo. There has been widespread but largely fruitless speculation about what the President was doing in Russia. (See City Press’s “Jacob Zuma’s mysterious mission to Russia” and former leader of the opposition DA Tony Leon in the Sunday Times in an opinion piece titled “How much more abuse can the constitution take from Zuma?” … unfortunately can’t find a link to that.)

So what?

The crisis faced by Russian President Putin is, by all accounts serious and urgent – and it might seem unlikely that he would have made time for a casual tête-à-tête with Jacob Zuma. Thus we can assume that Putin was in part motivated by wanting to demonstrate he still has friends in an increasingly chilly world. Also there is the sourcinig of agricultural products to fill the gaps left by European and US sanctions against Russia over Ukraine – a job South Africa could be well placed to do.

However Jacob Zuma appeared less to be representing South Africa and more on a personal visit – with several reports, including from government, that he would use the opportunity to rest.

It is difficult to escape the perception of two embattled leaders involved in a perhaps complicated exchange and attempting to secure their present and future:

  • there is the upcoming ZAR850bn nuclear build programme that probably depends on Jacob Zuma staying at the helm in South Africa – Russia reportedly hopes to be central to that programme.
  • Jacob Zuma’s key spy chiefs all reportedly resigned when he (Zuma) refused to allow them to investigate the Gupta brothers as a serious threat to national security (see back story on that here).
  • Jacob Zuma faces unprecedented blowback at home, including the possibility of a public discussion around the original fraud, corruption and racketeering charges against him (see here) now that the famous Spy Tapes are to be handed to the Democratic Alliance in the official opposition’s attempts to have the National Prosecuting Authority’s decision not to charge Zuma reviewed.
  • Also in yesterday’s Sunday Times was an important ‘leaked’ story that South Africa had sent a large group of intelligence officers to be trained in Russia and that “the Russians have recruited at least four of our people, which means we are sitting with double agents” – according to an unnamed source “with inside knowledge of the programme” – Sunday Times 31/08/2014.
Twinkle Toes (Pic from GCIS)

Jacob’s Ladder (geddit?) and check out the body languege (Pic from GCIS)

It is not inconceivable or unreasonable to consider the possibility that Jacob Zuma is asking for intelligence and security coverage and offering in return nuclear contracts and public expressions of support. It’s not a perfect theory, but some kind of explanation is required.

 

Ruling alliance divides itself neatly on defending or attacking the public protector – is Jacob Zuma becoming a cost the ANC cannot bear much longer?

Zwelinzima Vavi, Cosatu general secretary, broke ranks with the ANC on Saturday arguing that the Public Protector’s recommendations on resolving the Nkandla dispute (in which over ZAR200 million of public money was spent irregularly on Jacob Zuma’s private house) should be implemented immediately … “all of them, without exception.” Vavi went on to say that criticism of Madonsela were “absolutely disgusting, to say the least”– Vavi in the Sunday Times 31/08/2014.

So what?

While the main structures of the ANC and its government attempt to close ranks around Jacob Zuma as the multiple scandals unfold and the threats against him grow, the hegemony is crumbling and the edges.

The ANC still has a comfortable electoral majority although as I have pointed out on many occasions, at least part of the electoral declines the ruling party experienced in May, especially in the sophisticated metropolitan areas of the economic heartland of Gauteng, have to do with perception of corruption and mismanagement at the top. It is difficult not to concur with the implicit meaning of the headline of Barney Mthombothi’s column in the Sunday Times yesterday which reads: “ANC courts its own destruction”.

We must consider that the cost of defending Zuma’s multiple infractions is starting to tell on the ANC (as it is telling on the party’s alliance with Cosatu).

I would reason that the ANC’s brand value is being seriously impacted by Jacob Zuma’s presidency and that, almost as a natural law, such a threat to value will call into being an attempt to defend the value by those who have the most to lose (other leaders and members of the ANC)

It’s the future, so I am guessing, but I think it is an even chance that Jacob Zuma will be moved into retirement within the next two years and that the official reasons will be related to his health.

(This added as I post these comments here: the above several paragraphs might be wishful thinking. If you want to see a well reasoned opinion that takes the opposite view, see the interesting  Daily Maverick column by Ranjeni Munusami arguing that Zuma will see out his second term. I suspect that I just can’t live in a world where the thugs get away with it for ever (this paragraph was edited after posting – Ed)

 

Ebola spreads to Senegal – World Health Organisation warns of ‘rapid hike’ in infections

The Ebola (haemorrhagic fever) epidemic ‘sweeping’ West Africa has killed approximately 1500 people and the first cases have been confirmed in Senegal, having up until now being confined in Sierra Leone, Liberia, Guinea and Nigeria.

So what?

Ebola was first identified in the north of the Democratic Republic of the Congo in 1976 and outbreaks have been common in Central and Western Africa since that time. The disease is isolated and confined to countries with weak public health systems and high levels of poverty. In all the news coverage, the headlines tend to be more alarming than the content of the stories. There are various experimental drugs in trial (including one made jointly by GlaxoSmithKline and the US government which has achieved high levels of success) – Sunday Independent – 31/08/2014.

 

25/08/2014

Pay Back the Money … or we’ll huff and we’ll puff

Julius Malema and his cohorts in the National Assembly didn’t quite blow the House down on Thursday last week during President’s Question Time.

JULIUS

They disrupted parliament by demanding that Jacob Zuma pay back a portion of the costs of upgrades to his Nkandla home, as specified by the Public Protector Thuli Madonsela. Their chanted refusal to accept the stock brushoff from Zuma and the poor management of the showdown by Baleka Mbete, Parliamentary Speaker (and ANC National Chairperson), is the leading edge of yet another storm that concerns Jacob Zuma’s integrity – and the ability of the constitutional mechanisms to hold him to account. (Here for a useful and interesting take on festivities.)

 

But political theatre becomes something more serious as the Public Protector and the ANC and its allies go head-to-head on the issue

Several Sunday papers reported yesterday ( 24/08/2014) that the Public Protector Thuli Madonsela has sent a letter to Jacob Zuma criticising several aspects of his response to her Secure in Comfort report and specifically arguing that he (Zuma)  did not have the constitutional right to set aside or review her findings or to allow Police Minister Thathi Nhleko to do so (in essence Zuma has asked Nhleko to determine what his – Zuma’s – financial obligations are with regard to the Nkandla security upgrades).

According to constitutional law expert Pierre de Vos Madonsela is well within her rights. “This is not legally controversial,” he says, quoted in today’s Business Day (25/08/2014). “The president is either receiving appallingly bad legal advice or he is wilfully abusing his power and thwarting the law to protect himself in order to unlawfully benefit financially from the state.”

Both the ANC and the SACP came out late yesterday afternoon strongly critical of Madonsela, arguing that she had overreached herself, especially as a parliamentary committee was currently dealing with the matter.

So what?

The clash in parliament on Thursday made a significant media impact and it seemed for a moment that the damage being done the ANC by the party endlessly having to defend its wayward leader could conceivably lead to some profound political realignment.

But that feeling was brief.

The EFF has 25 MPs in the National Assembly, to the ANC’s 249 and the DA’s 89.  The chances are, the ANC in parliament will work out a set of rules that essentially disciplines the EFF (already MPs may be suspended for not more than 30 days and have their salary docked for the same period).

Jacob Zuma is a master at diverting crises like this into long (perhaps endless) processes that have a degree (or at least a semblance) of legitimacy and constitutionality. And there is a parliamentary process dealing with Nkandla underway and whether this process is an attempt to ‘set aside or review’ the Public Protector’s findings could be the subject of years’ of constitutional debate, such that many of the players will be long gone by the time it is resolved.

There is considerable stability in a system so tightly bound within itself through links of patronage and shared loyalties – although I suspect that when such a system eventually unwinds, it unwinds quickly and perhaps catastrophically.

Jacob Zuma is off for a week in Russia – to work and to rest – and the game will go on. “The visit will further strengthen the excellent bilateral relations with a view to consolidating and opening new avenues towards job creation, skills development, exchange and transfer of technology and trade and investment,” said the Department of International Relations yesterday.

There may be some future moment when the ANC could face electoral losses because of public perceptions about corruption of its leaders, but that day is still far enough ahead to not impact (in any meaningful way) upon behaviour in the present.

(So … that isn’t a direct contradiction on what Nic thought on September 1, but it is more than a little close. I strongly suspect it might be a biorhythm, or hormonal thing – Ed)

 

Julius Malema … how did he ‘Pay Back the Money’?

Julius Malema appears in court today to face questions about where he got the money to pay his R18 million tax bill. According to Rapport newspaper (24/08/2014) the South African Revenue Service (Sars), would ask for a two-month extension of Malema’s provisional sequestration to determine where he got the money to repay his tax debt each month. The newspaper reports that “impeccable sources” allege that “cigarette smuggler Andriano Mazzotti was helping to pay his tax debt” – as re-reported at the Independent Online 25/08/2014 – see here. (I don’t know the Afrikaans language Rapport newspaper well – it is part of Naspers’s Media24 stable – treat the claim with maximum caution). (Not because of Naspers of Media24 – for so are they all, all honourable men … the caution is purely because the claim is faintly outrageous, which doesn’t mean it’s not true – Ed)

So what?

While Julius Malema’s insistence that Jacob Zuma account to parliament is welcome, we should be careful to not lose our sense of discernment. Julius Malema himself has faced a long list of accusations similar to those he is making against the ANC and Jacob Zuma.

 

Land and wage reform – unintended consequences

Two interesting articles in the Sunday papers hint at some of the negative unintended consequences of attempts to protect the interests of the marginalised and vulnerable workers on South African farms.

Firstly, the Sunday Times (24/08/2014) has a colour piece titled “Good intentions pave the road to rural hell” in which the 1997 Extension of Security of Tenure Act is assessed as having “led to as many as a million farmworkers being evicted countrywide”.

Secondly, the Sunday Independent (24/08/2014) records an interesting discussion about the impact of ‘minimum wage’ determinations on employment. The article shares different views on the matter, but concludes that in SA agriculture “the impact was devastating: Employment fell from 819 048 jobs in 2002, just before the law came into effect, to 623 750 jobs in 2003 and continued to decline to 555 549 jobs in 2007 – a net loss of almost a third in five years.”

So what?

The ANC has signalled an urgent desire to ‘get serious’ about land reform.  As we have mentioned previously ‘the land question’ seems to suggest to the ANC an answer to a host of social needs: employment, housing, food security, and black economic empowerment, to name only the most obvious. Racially unequal land ownership patterns (it is generally quoted that SA had 87% of land in white hands at the 1994 transition and that less than 8% has been redistributed since – see here) are also a driver of political dissatisfaction, perhaps helping feed the growth of the EFF and other ‘radical’ forces emerging in the society.

For now government is preparing a host of new legislation and regulation all the while signalling to commercial agriculture that it wants to be met half-way. There will probably be unintended consequences of government’s land reform and rural development programme (including negative impacts) but the lessons from the banking sector (for example with regard to the formulation of the National Credit Act) is that it is always a better idea for the private sector to go out and engage with government and attempt to shape legislation than it is to wait and deal with the future when it is a fait accompli.

 

21/08/2014

Mining, oil and gas sectors: legislative and regulatory drift and a scary audit

Mineral Resources Minister Ngoako Ramatlhodi didn’t calm nerves last week during his address to the third annual Mining Lekgotla. The minister is overseeing two significant regulatory processes causing anxiety in these sectors, namely a major audit of mining companies’ compliance with the 10 year targets of the Mining Charter and the signing into law of a bill amending the Mineral and Petroleum Development Act of 2002 (which the private sector thought it had essentially cautiously agreed to in exchange for it – the private sector – being consulted in detail about the regulations that would arise from the legislation).

With regard to the audit, Minister Ramathlodi said: “(w)hile the review process on the implementation of the Mining Charter is still under way, initial results suggest that whatever compliance we may have achieved, much more work still needs to be done” – Business Day -14/08/2014

With regard to the legislation the Minister said he had not been informed by the Presidency whether or when the bill would be signed into law. “There are legal teams that look at any legislation coming before the president and they advise him. When they do so we’ll act on that advice” – Business Day ibid.  Download Minister Ramatlhodi’s full address at the DMR website here.

So what?

Firstly, the audit obliges the mining companies to meet various ‘transformation’ obligations and targets by 2014 e.g., 26% of the company must be owned, through “full shareholder rights”,  by HDSA (Historically Disadvantaged South Africans) by the end of this year – as a precondition for the retention of the mining right. Go to www.dmr.gov.za to see the “Mining Charter” and the “Scorecard for the Broad-Based Socio-economic Empowerment Charter for the South African Mining Industry” to get a full view.

2014 is the year in which several definite obligations must be met by the mining companies and there is a degree of nervousness by investors and management as to how strict the audit will be, how much leeway the ministry will give and how severe the consequences of failure will be.

Purely the administrative aspects of the reporting process are enough to be a serious burden for smaller mining companies, according to Nic Dinham, Head of Resources at BNP Paribas Cadiz Securities

The apparent prevarication in signing the Mineral and Petroleum Resources Development Act Amendment Bill, after months of careful negotiations between the department and the mining companies, has caused the industry to worry that deals struck and compromises made might be up for renegotiation. There was a general expectation that the constitutionality of the amendments would need to be tested and examined (especially government’s 20% proposed free-carry interest in all new exploration and production rights in the oil and gas sector).  It appears to me that the delays are adding to a more generalised sense of uncertainty about the growing regulatory burden and costs associated with continuing to mine in South Africa.

 

Amcu set to go on the offensive at Num’s last toeholds in the Platinum sector – non-cyclical risk factors in the SA labour environment escalate

Nic Dinham (BNP Paribas Cadiz Securities Head of Resources referred to in a previous section) said yesterday that in the platinum operations where Amcu is not (yet) the major union (at several mines, but including those operations at Aquarius Platinum and Northam Platinum) there were significant indications that Amcu was close to recognition thresholds (specific to each company) and that it was reasonable to expect increased labour unrest at the particular operations and companies where Num was clinging to a majority.

“During the recent result presentations, several companies reported that operations previously dominated by Num are showing signs of losing ground to Amcu, especially in the Rustenburg areas”, said Dinham.

“This is the case at Aquarius Platinum as well as at Northam where Amcu membership has risen to 30% and 15% respectively, just short of both companies’ recognition levels. Clearly, this could be the harbinger of more labour storms to come. At the same time, only small numbers of workers in the existing Amcu fortresses switched to NUM after the end of the strike. So, despite all the rational arguments about the financial impact of the strike on labour, Amcu appear to have won the propaganda war with the mining industry” – Nic Dinham, 20/08/2014.

So what?

There are a number of important implications, not least of which is the confirmation (and deepening) of the implicit defection of mineworkers in the Platinum sector from a key ANC aligned union (Num) and the continued disintegration of previously powerful trade union federation and ANC ally, Cosatu.

In some ways this frees the ANC (and government) to decide on economic policy without having to kowtow to Cosatu, but it will also raise anxieties in the ruling party about the narrowing of its base – and a diminishment of its hegemony and moral authority.

None of that is necessarily a bad thing. It is my opinion that our legislative and regulatory environment has tended to suffer from a lack of clarity and focus as a result of the ANC attempting to keep a number of different legacy constituencies (and sectional interests) happy and on-board.

However, it is also worth noting that my general expectation of a deteriorating labour environment is strengthened by concerns about labour unrest driven by further contestation between Amcu and Num. This, together with a coming trial of strength in all (or most) Cosatu unions that will accompany the impending Numsa split out of Cosatu will be a strong, non-cyclical, driver of labour unrest for the next 18 months. Jeff Schultz (BNP Paribas Cadiz Economist) and I recently suggested that these strands driving labour unrest, along with what we expect will be a major confrontation that will accompany the lead-up to the expiry of the current 3-year public sector wage agreement in March 2015, will keep labour risks at elevated levels in the South African investment environment for at least another 18 months.

 

Cyril Ramaphosa – a hard week down at the Commission

Deputy President Cyril Ramaphosa last week faced an avalanche of criticism and heckling at the Farlam Commission (which is investigating the killing of 44 people at Marikana on and before August 16 2012 in the context of the protracted strike at Lonmin mines in the Rustenburg area at that time).

Cyril Ramaphosa was called to the commission to explain his actions in the lead-up to the Marikana killings. Ramaphosa was on the Lonmin board at the time and in an email to Lonmin managers he said: “(t)he terrible events that have unfolded cannot be described as a labour dispute. They are plainly dastardly criminal and must be characterised as such. In line with this characterisation there needs to be concomitant action to address this situation.” In another email he urged then police minister Nathi Mthethwa to “take appropriate steps”. In both these cases I have added the emphasis.

At the Farlam Commission hecklers shouted “Blood on your hands” (City Press 11/08/2014) during Ramaphosa’s cross-examination. Hecklers wore T-shirts with several different slogans criticising Ramaphosa’s wealth, for example one showed a buffalo in reference to the fact that Ramaphosa bid – unsuccessfully as it turned out – R19.5 million for a buffalo cow and her calf at a wildlife auction a month after the Marikana killings in 2012.

So what?

There is a high level of speculation as to whether Cyril Ramaphosa will succeed Jacob Zuma as president (when the current presidential term expires in 2019 or at some earlier date due to Jacob Zuma’s purported ill health.) There appears to me to be a widespread assumption in the financial markets that Cyril Ramaphosa, as an experienced businessman and an experienced negotiator and conciliator who was central to easing the transition at Codesa 1 and 2 in the early 90s, would be more sensitive to the needs of the private sector, more compliant with global capital markets and, generally, run a cleaner and more efficient ship.

Implicit in that list of attributes is the person who Ramaphosa would be cleaner than, more conciliatory than, more understanding of private sector needs than, is Jacob Zuma. It is impossible to know either that Ramaphosa really has such attributes relative to Zuma or that it is really or primarily those attributes that make Ramaphosa a more attractive choice than Zuma for the financial markets … or, in fact, whether the ‘financial markets’ really makes these kinds of distinctions.

It is my impression that Jacob Zuma’s rise to power and performance as president has been accompanied (and in several cases directly caused) increased political risks associated with investing in the country. Almost any successor would probably be welcomed by the markets. However we would be cautious about seeing Ramaphosa as the knight in shining armour. He is badly damaged by his link to the Marikana killings (unfair as that may be) and he has not yet established a significant constituency within the ANC. The fact that he is a rich man can play both ways; it gives him resources to build his case but it makes him vulnerable to accusations of conspicuous consumption and being out of touch with common people. It is also inescapably true that his wealth has been accumulated more as a result of ‘empowerment deals’, the accumulation of large slices of equity, rather than the involvement in any of the underlying activities (mining, banking, health care etc).

More than anything we must keep front of mind that much ANC policy and politics is determined in the forums of the party – long in advance of such policies and politics becoming law and regulation. The particular character of leaders makes a difference, but in the South African case, not as big a difference as it might elsewhere.

 

The noise around land reform is (partly) bluster designed to get commercial agriculture to act voluntarily

Urging Commercial farmers to take voluntary steps ‘advancing the transformation project in the agriculture sector’, ANC Secretary General Gwede Mantashe said “change that is imposed is more painful” – Business Day 14/08/2014.  Mantashe told attendees at a conference on land reform and food production that land reform was necessary if South Africa was to deal with the “ugly past of racial land dispossession of black people” and that farmers must never allow themselves “to be victims of change” – Business Day ibid.

So what?

We previously described in some detail some of the legislative initiatives around land reform and one of the points we made about assessing the risks associated with the land reform initiative is reinforced by Gwede Mantashe’s choice of words.

The ANC feels keenly its failure to successfully complete a significant process of land reform and redress – and is, in part, being punished for that failure by the (still slight) electoral traction achieved by the ostensibly more radical Economic Freedom Fighters on their debut in the general election on May 7 2014.

However, the ANC feels, at least as keenly, the threats to investment that would result if property rights were ever threatened by an unruly and uncertain ‘land reform’ process à la Zimbabwe.

Commercial farming does not have the handy (from the ANC’s point of view) equivalent to the mining sector’s mineral rights to attach to a number of ‘transformation’ objectives. The ANC would be extremely cautious about bluntly attaching a ‘licence to farm’ (or in fact a ‘licence to operate any business’) directly to ‘transformation objectives’. There is a line beyond which such rights and obligations could constitute a nationalisation in fact and might be both unconstitutional and, certainly, a serious barrier to future investment.

Thus the ANC, in the form of its secretary general, is snapping at the heels of domestic commercial agriculture, attempting to herd it towards the ‘transformation’ objective, putting the argument that this is the national good, but hinting that a bite on the ankle could be the laggard’s reward. It is an open question as to whether farmers would respond to such incentives with greater compliance or with resistance, both covert and overt. However, for now, we think the ANC’s (and therefore government’s) land reform bark is worse than its bite.

 

Bits and pieces

  • Jacob Zuma put out a report last week which he and his spokespeople claim is a satisfactory response to the Public Protector Thuli Madonsela’s, “Secure in Comfort” report into the upgrades to the President’s private Nkandla residence in which she finds several faults with the President’s actions and inactions. The delay, over many months, of a response from Jacob Zuma to Thuli Madonsela was ostensibly as a result of him (Zuma) awaiting a report from the Special Investigating Unit. However, on Friday a spokesperson for the Public Protector said Zuma’s report was not a response, adequate or otherwise, to Secure in Comfort. ““That means a document that comments on the public protector’s report or indicates action taken or to be taken to implement remedial action in compliance with section 3(5) of the Executive Members Ethics Act must still be submitted to Parliament by the president” – my emphasis added.
  • Jacob Zuma’s team is preparing to hang expense overruns and incorrect categorisation of some items as ‘security related’ on Jacob Zuma’s architect, Minenhle Makhanya. The Mail and Guardian reports that the “Special Investigating Unit has lodged a R155-million claim against Makhanya” – 15/08/2014.
  • And in other news Bruce Koloane, the former chief of state protocol who was shouldered with the blame for the landing of a large private wedding party at a secure military base by the close Zuma allies and business partners the Gupta brothers and family last year, was nominated by Jacob Zuma as Ambassador to The Hague. In August last year, Koloane pleaded guilty to all charges relating to his involvement in authorising the controversial landing of the jet.
  • It’s not (just) idle mischief putting these bullets together. If the President’s own actions around his accumulation of personal assets and special favours to his friends can impact on the formal judicial, disciplinary and constitutional oversight functions, if his party can go to extreme lengths to protect him from the consequences of his actions in accumulating personal wealth and influence, it is unlikely that private companies will be trustful of, or willingly and enthusiastically compliant with, the ‘transformation’ agenda emerging from the state, government and party he leads. Ultimately the private sector needs to believe that the value of its various social obligations ends up benefiting those who need the assistance the most. This is the price the private sector seems prepared to pay for stability and growth. Any sense that the public purse is hijacked or that equity transfers and affirmative action obligations have become a kind of asset that can be hoarded and dispensed as patronage by the politically powerful will cause the ‘transformation’ objective – and much else – to fail.

 

11/08/2014

‘Cabinet leaning to break-up Eskom’ – Business Day 05/08/2014 … I would be extremely surprised

Business Day reported that the idea of breaking up Eskom and privatising some of its power stations “is starting to gain traction in government circles, as a team of cabinet ministers and government officials seeks ways to alleviate the company’s financial crisis and restructure its business” – Business Day 05/08/2014.

The governing ANC’s alliance partner, the Congress of South African Trade Unions (Cosatu) vowed the next day to fight any such privatisation “to the bitter end” arguing that electricity price inflation, driven by the ‘commercialisation’ of the utility in the first place, was “one of the key constraints” on economic growth and an important reason South Africa “is not creating decent jobs the country so desperately needs” (catch the full August 6 Cosatu statement here.)

On the same day Lynne Brown, the Minister of Public Enterprises, said “I want to indicate that there is a portfolio of options for the interministerial task team to consider. To my knowledge Cabinet has not discussed the matter of privatisation and there is no need to unnecessarily raise temperatures around this matter” – City Press Online, 06/08/2014. The ‘task team’ to which she refers was described (in the same story) as “representing energy, public enterprises and the treasury” and further, that the findings of the team had not yet been made public.

So what?

This is, supposedly, a defining issue for the ruling faction of the ANC and its allies in Cosatu and the SACP. Much of the motivation for backing Jacob Zuma (and ousting Thabo Mbeki) was – apparently – that Mbeki’s policies were a species of Thatcherism (especially the plan to privatise the major state utilities). The alliance backing Jacob Zuma defined its historical mission as the combating of this “1996 class project”, a catch-all phrase for neoliberalism, fiscal rectitude and the ‘Washington Consensus’.

It might well be true that the breaking up and privatisation of Eskom is an urgent necessity – or even a precondition for recovery from our dire economic state – but it is a political nonstarter, requiring the complete breakup of the alliance of groups that hold power, and is therefore vanishingly unlikely to happen, even symbolically.

 

National Prosecuting Authority in free fall and intelligence services are extensively deployed on behalf of senior politicians and criminals – and the storm is beginning to batter against the South African Revenue Service – this is as serious and urgent as it is confusing and complicated

There is an on-going meltdown at the heart of the criminal justice system which is increasing risks in doing business with, or in, the areas administered by the South African state.

Here are only a few of the most recent visible features of the (complex and confusing) disintegration:

  • Jacob Zuma has asked the National Director of Public Prosecutions Mxolisi Nxasana to give reasons why he should not be suspended. The apparent motivation is that Nxasana has problems associated with his security clearance (owing to his brushes with the law, including a murder charge, when he was a younger man). However, almost all the coverage and analysis suggests that the ‘real reason’ is Nxasana has pursued investigations of key Zuma allies in the NPA and Crime Intelligence Division of the South African Police Service and his (Nxasana’s) actions threaten to lead, eventually, to fraud and corruption charges being reinstated against Jacob Zuma.
  • Award winning journalist Mzilikazi wa Africa published his memoir last week which includes a detailed account of how Jacob Zuma and his allies vigorously undermined the credibility of the first National Director of Public Persecutions Bulelani Ngcuka by spreading the false information that he (Ngcuka) was an apartheid spy.(See an interesting examination of this thread from Business Day 07/08/2014 here.) In here is the source code of much of the chaos in the prosecuting authority and intelligence service: Bulelani Ngcuka led the original investigation into the allegations of fraud, corruption, money laundering and racketeering against the then Deputy President Zuma, concluding that there was “prima facie” evidence that Zuma was guilty, but not enough to win in court – a statement to which Zuma, not unreasonably, strongly objected.
  •  “Sex, SARS and rogue spies” announced the front page headline in City Press yesterday (10/08/2014). The accompanying stories allege that senior SARS official, Johan van Loggenberg, has been the subject of a ‘honey trap’ operation by the State Security Agency “Special Operations Unit”. The story is Byzantine, but the important bit is the detailed allegation that the secret spy unit operating against van Loggenberg has also been used to discredit and smear a ‘anti-Zuma’ camp in the NPA and in Crime Intelligence. Bizarrely, the Special Operations Unit supposedly includes drug dealer Glen Agliotti.  (Read some of this story here and here … if you have the time or the patience.)

So what?

This level of political and criminal infiltration into key state institutions and functions, especially of the security services, the prosecuting authority and the South African Revenue Service raises real questions about judicial, regulatory and legislative certainty in the operating and investment environment. Uncertainty about the application of law, the integrity of the criminal justice system and the functioning of the revenue service must all be considered by anyone wanting to invest in South Africa or in assets regulated by South African institutions of state and law. Frankly, given the deep connections between the instability in these key sectors of the South Africa state and the rise to power of Jacob Zuma I am pessimistic that we have the capacity to fix this problem while the current administration is still in power.

The National Prosecuting Authority has appointed highly respected retired Constitutional Court judge Zak Yacoob to head an inquiry, or ‘fact finding mission’ into its dysfunctional state. Unfortunately Yacoob almost immediately (on Thursday last week while speaking at a workshop at the University of the Witwatersrand) happened to mention that he would have “set aside” the judgement that found Jacob Zuma not guilty of rape in 2006, because he would have put less emphasis on the alleged victim’s sexual history – see here. An outraged African National Congress said it learned of Yacoob’s comments “with shock and dismay” saying they “opened old wounds” and were “an attack on  principles of our jurisprudence and the judiciary.” Yacoob attempted to clarify his comments here but either way he is no longer likely to be the instrument that cleans up the National Prosecuting Authority.

 

 

Cyril Ramaphosa at the Marikana Commission today as succession debate begins

Deputy President Cyril Ramaphosa will have to explain today at the Marikana Commission what he meant when emailed other senior Lonmin managers just before the August 12 2012 killing of 34 striking mineworkers at Marikana and said: “(t)he terrible events that have unfolded cannot be described as a labour dispute. They are plainly dastardly criminal and must be characterised as such. In line with this characterisation there needs to be concomitant action to address this situation.” In another email he urged then police minister Nathi Mthethwa to “take appropriate steps”.

So what?

It is unlikely that the Commission will find anything untoward in Rampahosa’s messages. He was, after all, doing nothing other than responding to the growing violence of the strikers and Lonmin’s increasing anxiety about the strike. We are of the view that there is some political harm done Ramaphosa by his identification with mine management and government – and the police killing of the 34 mineworkers. There is a considerable degree of unease within the broad structures of the ANC and the electorate about the Marikana killings. The ANC is obliged to stand with its Deputy President on this matter, but it can’t be comfortable. This will play against Ramaphosa (although perhaps not decisively) in the coming succession contest in the ANC.

 

Nkosazana Dlamini-Zuma

Chairwoman of the African Union, fresh from pride of place at the US-Africa summit in Washington announced yesterday that she was undecided as to whether to stand for a second term in the AU (her current term expires in 2014 2016) This is inevitably raising questions about whether she will compete with Ramaphosa to succeed Jacob Zuma as president of the country.

So what?

She is in the running – and is clean and capable. She is perhaps more of an insider in the ANC’s power elite than Cyril Ramaphosa and her winning this race might mean (unwelcome) continuities with the current administration. It’s too early to call it one way or another, but the ANC Women’s League has indicated that it could back Dlamini-Zuma (or Baleka Mbete) while the Gauteng ANC has indicated it could back Ramaphosa.  Officially succession would only take place after elections in 2019, but there are constant rumours that Jacob Zuma might want to retire early (or be forced to do so due to failing health). An early retirement of Jacob Zuma would probably be a significant positive for perceptions about South African political risk, but the specific circumstances of such a move would determine whether it would, in fact, be positive, negative or natural.

JULIUS

This is obviously a season of reflection for me.

Here is (another) post from the past, this one from November 4 2009.

For a long time Julius Malema is the Coming Man was the most viewed and most commented upon article here.  (Later this post about Chris Hani became ‘most viewed’ if not most commented upon.)

Remember, when I wrote this, Julius Malema was firmly ensconced as ANC Youth League president. It was a full 11 months before the defining showdown at the National General Council (11-13 October 2010) where Julius Malema was the sharp end of an attempt to force the ANC to adopt a position on the nationalisation of South African mines – read the exhausting, if not exhaustive, details  about that here.

From then on Malema’s relationship with the top leadership of the ANC deteriorated until he was suspended from the party in November 2011 and on the 4th of February 2012 the appeal committee of the ANC “announced that it found no reason to “vary” a decision of the disciplinary committee taken in 2011, but did find evidence in aggravation of circumstances, leading them to impose the harsher sentence of expulsion from the ANC” – Wikipedia

I think it is interesting to read 5 years later. Not that it was ‘true’ then or now. It’s just interesting. Given the last few days … also I think it (the article) implicitly relies too much on a ‘big man view of history’, gives too much prominence to the idea that ‘leaders’ make the crucial difference in how things turn out … something I will deal with some time in the future.

I am not endlessly going to repost old blogs. I am busy with a news update that should be out here during the next 24 hours.

Julius Malema is the Coming Man

PREPARE YOURSELF

Take a deep breath, put your shoulders back and look  through the frenzy.

Reading the Democratic Alliance’s Diane Kohler Barnard pour scorn on the “rotund” and “Idi Amin-like” Julius Malema I couldn’t help but think that she is leaving herself as few choices as J.M. Coetzee leaves his fictional characters.julius-malema

Julius Malema is a powerful contender for future ANC leadership – and is already a powerful politician. I think his rise to lead the ANC and possibly the country may be unstoppable. I fear that Barnard’s feisty and admirable rhetoric leaves her, and those she represents, no paths upon which she might ride her high horse back, when this is all over.

Barnard, recounting how Malema allegedly attempted to bully his way through a traffic violation with : “Don’t you know who I am?” arrogance, says:

[Julius Malema is] the man who believes there is one law for South African citizens, yet another law for him. He is the man who will slap a neighbour who has the temerity to ask that the music at his housewarming be turned down at 3 in the morning. He is the man who Julius Malemahas turned hate-speech into an art form [...]

Barnard’s anger is palpable as she sneeringly reminds us that Malema has said he would fire Thabo Mbeki and any ANC parliamentarian “should he get the urge”

Malema’s ego and contempt for the law the rest of us must respect, is unparalleled [...] Is this, to quote the President, someone you honestly believe is a ‘leader in the making – worthy of inheriting the ANC”?

Well, is he “a leader in the making”? Is he “worthy of inheriting the ANC?”

The answer to the first question is: “yes” – more about that below.

The answer to the second question is irrelevant. Could we agree what this historical artefact: “the ANC”  is; could we agree on what its characteristics and values are? Could anyone make this judgement call?

Frankly,  history can give a fig whether you or I think Julius Malema is worthy of inheriting the ANC – or, quite frankly, whether the ANC is worthy of  inheriting Julius Malema.

This is not about what you or I think or believe or hope for; it is also not about what Diane Kohler Barnard and the Democratic Alliance and those they represent hope for and hope to accomplish.

This is not, unfortunately,  about how things aught to be, or about what is fair and just in the moral universe.

This is about how things are; this is history as a raging torrent.

A de facto leader

Assuming “leader” is neither complimentary nor derogatory  – the word can be either or neither – it is clear that Malema more than fits the common sense meaning of the term.

  • Malema has been hot-housed as a boy in ANC training institutions and groomed for leadership after  joining the organisation at the point of its unbanning in about 1990;
  • He has led the two key feeder organisations, the Congress of South African Students and the ANC Youth League;
  • He has become the crucial port of call for politicians and individuals hoping to build support for any initiative that requires ANC support;
  • He personally played an important role in the rise to dominance of the faction that backed Zuma for president;
  • He is the only ANC politician – aside from Jacob Zuma – who has a significant and deliverable mass base; both numerous and militant;
  • His rhetoric (in my opinion) is closer to the views of the core constituency of the ANC than the publicly expressed views of any other South African politician;
  • His name/face recognition is almost unparalleled.

Julius Malema was born in the Northern Transvaal (Limpopo Province) and raised, like Jacob Zuma, by a single mother who worked as a domestic worker. This is the hard school of South African life and these kinds of  credentials are still highly valued in the ANC.

In the last few weeks Julius Malema has come over all statesmanlike:

  • He acknowledged Thabo Mbeki’s key leadership role – of the ANC and the country;
  • He declared the rector of the University of the Free State “one of our own” – thereby helping to defuse growing racial conflict on that campus.

This is deliberate marketing, evolving the brand [firebrand to Dollar Brand ...] while the news media, opposition politics and certain dinner table discussions remain obsessed with each new Malema gaff or his latest confrontational tirade.

It is striking how similar the Julius Malema story is to the Jacob Zuma story.

The human need is to normalise the inevitable or the inescapable present. Three years ago media and dinner table sentiment about Jacob Zuma was almost identical to the sentiment held by the same groups of people about Julius Malema today.

The central dilemma in J.M. Coetzee’s Disgrace.

Is accepting – and trying to get your head around – the present and future leadership role of Julius Malema the moral equivalent of  the choices made by J.M Coetzee’s Lucy, the daughter of main character David Lurie in the 1999 novel Disgrace? Lucy (who is white) is raped and ends up seeking and receiving protection (and more) from Petrus (who is black) who is closely associated with those who raped her in the first place. Even if you have not read Disgrace I think you can understand the dilemma.

Is Julius Malema the Great Defiler – of our constitution, of the bill of rights and of our hopes for non-racialism?

No more than that previous rape accused, Jacob Zuma.

It sometimes feels that Julius Malema is deliberately teasing; upping the ante to cause his opponents to shriek ever louder and sound ever more shrill.

I have no idea whether he has the sense of humour or sense of the absurd to be deliberately inviting the kind of scorn he receives from those Dianne Kholer Barnard represents – and a smattering of those she hopes to represent.

But I have no doubt that it will be Julius Malema who laughs the longest.

Listening to the EFF be the rock against which Zuma’s blithe refusal to account finally dashed itself yesterday I felt briefly elated.

Gangsters! Bashi-bazouks! Yes, PAY BACK THE MONEY! PAY BACK THE MONEY! Billions of Blue Blistering Barnacles!

But after a moment’s reflection I pulled myself, by the ear, back into the vehicle.

“You irresponsible old twit!” I said, my mind drifting back to this blog post from August 24 2010:

Waiting for a saviour to rise from these streets*

Just when all hope flees, as the last good politician still within government leaves his/her post to join the feeding frenzy and as the last decent officials trying to do a public service throw up their hands in disgust; and as the striking workers blockade the last functional HIV/AIDS clinic and trash the streets again; and as the broken bits of the Ruling Alliance go  for the kill in their eye gouging, groin stamping gutter fight – just as all hope flees, whose silhouette is it that appears, backlit and heroic, flying in low over the horizon?

“Franco”: General Francisco Paulino Hermenegildo Teódulo Franco y Bahamonde Salgado Pardo de Andrade – and yes, he did keep his armies up his sleevies

Is it a plane?

Is it a bird?

No, it’s … hmm, I’m not really sure.

When things are going as badly wrong as they are going for us, the person to look out for is the one who seems to have been sent by history itself as the solution to all of our problems.

I am not suggesting, as my old Granny used to say: don’t worry, cometh the moment, cometh the man or all’s well that ends well. I am suggesting the very opposite.

This is more of a warning to be careful about decisions we make when we are desperate than it is anything else.

Societies, political parties and whole nations are uniquely vulnerable at times like these. Our desperate need is for someone who can raise an anti-corruption army, is prepared to control the unions, able to fix service delivery and able to make the difficult decisions that will allow job rich economic growth.

The darker and more dire things become – and goodness knows they are as dark and dire as anyone can remember – the stronger our wish fulfilment drive becomes.

Where is the good-looking one, with the strong jaw and the easy, comforting manner, and the very firm but gentle eye and the plan and the promise and the words – and the record, or at least one you can, in your desperation, convince yourself of?

This is the moment in which nice Germans welcomed Adolf Hitler and Spaniards General Franco. King Constantine II of Greece inducted the awful “Regime of the Colonels” in 1967 saying he was “certain they had acted in order to save the country” and there was  a (brief) Argentinian sigh of relief when Brigadier-General Jorge Videla overthrew the execrable, incompetent and authoritarian regime of “Evita” – as popular culture has dubbed Isabel Martínez de Perón.

I am not suggesting that a fascist opportunist and criminal is about to present him or herself as the saviour from our woes – or that things are so bad that we risk losing our judgement and welcoming him/her into the stockade. Well, not yet.

But explicitly and implicitly various political factions and individuals have presented themselves as alternatives, and the solution to our current problems.

There’s Zwelinzima Vavi – and whatever kind of workerist paradise he represents – who heroically criticised the media appeals tribunal and has laid about himself with a stout cudgel at all the worst of the cabinet ministers and officials trying to stuff the last tasty bits of the family roast into their distended bellies. And he’s available next year.

Deputy Minister of Police Fikile Mbalula suggested (of criminals) we should “shoot the bastards!” and in so doing presents a kind of law-and-order (and anti-communist) alternative, clearly being supported by the ANC Youth League and tenderpreneurs everywhere.

Lindiwe Sisulu dresses nicely and would be excellent if we ever panicked enough to need a kind of Cleopatra/Boadicea empress to save us.

Tokyo Sexwale is getting the kind of press that suggests he is an effective anti-corruption campaigner and an excellent Minister of Human Settlements i.e. he’s clean and gives good service delivery – and he’s  bright, presentable, charming, good-looking and available – very available.

(This added as an afterthought: don’t discount Kgalema Motlanthe as a sort of leftish compromise that we have grown used to and, obviously, Mathews Phosa with his charming Afrikaans poetry and his friendly demeanour and his market friendly comments and his bitter struggle with ANC leader and communist Gwede Mantashe. Also consider a scenario, one I discuss elsewhere, where none of the contending factions achieves dominance and everyone agrees to stick with the burdensome incumbent … all is still possible.)

The National General Council of the African National Congress (to be held in Durban from 20 – 24 September) will reveal the main factions and their key representatives for leadership. The last NGC resulted in a rebellion against Mbeki and foretold his rout at Polokwane. This one is likely to be as instructive.

The point I wish to make here is a simple one. Those who appear to offer solutions must be judged in terms of who they are, what they have done and what they really represent. Just because we are in trouble does not mean we can afford to lose our critical faculties. My long gone Granny would have had two more things to say on the subject: don’t throw the baby out with the bath water, and don’t jump from the frying pan into the fire.

* The title of this post comes from the glorious “Thunder Road” by the inimitable  Bruce Springsteen (it doesn’t really fit the story … but I really love the song:

You can hide `neath your covers
And study your pain
Make crosses from your lovers
Throw roses in the rain
Waste your summer praying in vain
For a saviour to rise from these streets
Well now Im no hero
That’s understood
All the redemption I can offer, girl
Is beneath this dirty hood
With a chance to make it good somehow
Hey what else can we do now?

I intend, in the near future, to dust off my Marxist theory.*

I am going to need a framework through which to express my growing conviction that much of our politics can be understood as a function of the collapse of the alliance of classes that underlay the national democratic revolution – and the African National Congress.

The big driver is the strongly emergent black middle class – or perhaps competing versions of that class. In the background is a sort of bad kung fu movie fight scene involving the industrial working class, various parasitic elites within the state and party, a comprador bourgeoisie and a whole mess of tribalists, proto-fascists, landless peasants and  lumpen proletarians of various stripe.

(The camera occasionally flicks across the deeper shadow behind, where we almost catch a glimpse of Moeletsi Mbeki’s lurking oligarchs, watching us.)

It’s my job to have some kind of understanding of what is going on … and I will need all the help I can get theory-wise.

In the last week the ANC has given strong hints that the Labour Relations Act amendments are being held up because government wants balloting prior to strikes and a ‘forced mediation’ strike-breaking mechanism. (See here.)

Also we have the astonishing re-emergence of the (excellent) idea that we should break up Eskom and sell off some of  the bits and get the private sector to build other bits. (See here  … and btw I can’t help but notice how much interesting news is written by Carol Paton of Business Day.)

What’s going on?

Well, one things is government is facing further downgrades because it can’t pay its bills.

The biggest bill of all is public sector wages, which will be renegotiated before  the current wage agreement expires in March 2015.

That bill will represent above 35% of non-interest government spending and the wage level the employer and the employee eventually agree upon and the degree of disruption that accompanies the bargaining is extraordinarily important for South Africa and therefore for the stability of the governing party.

Also government is burning due to its apparent inability to get the endlessly promised infrastructure built. At least part of the reason is the constant labour stoppages, for example at Kusile and Medupi.

Having lost much revenue (and political support) during the recent strikes led by Amcu and Numsa, the ANC government is forced to find a way to rewrite the terms of engagement between employer and employee.

Also Eskom is bleeding … or potentially bleeding … government dry.

The case for privatisation is threefold: you get money from the asset sale to pay your debts, you don’t have to keep bailing out the loss-making enterprise and you get the ‘efficiencies’ (the removal of structural impediments to growth) that supposedly come from the private sector running the enterprise.

(As an aside: privatisation seldom works quite like that. This government, and the people of South Africa, have barely recovered from the the drubbing we received from the ‘private sector’ following the partial privatisation of Telkom in the 90’s.  But desperate times, desperate measures … and all of that.)

The groups that traditionally oppose these policies are in disarray. Cosatu has essentially collapsed in a heap – and the most energetic sections of organised labour are actively hostile to government/ANC anyway and no longer require wooing … or rather, following Marikana and various statements of outright hostility by the ANC and government leaders, are no longer susceptible to those old sweet lies.

The forces that shaped our labour market are profoundly changed.

A growing mystery to me is where the SACP is in all of this?

So its all: hello 1996-class project, we who threw you out with the bathwater at Polokwane in December 2007 would like to apologise and welcome you back. Don’t worry, the communist are in China learning how to deal with corruption and with the labour force … you can chat to them if they ever come home.

So meanwhile here is a sort of ancestor to my questioning the ‘class character’ of the moment; a column I wrote for the Compliance Institute of South Africa in November last year:

Is this Jacob Zuma’s Maggie Thatcher moment?

I admit that on the face of it the comparison seems something of a stretch.

For example I can’t think of an ‘Nkandla’ equivalent in Baroness Thatcher’s world – although her son seemed to benefit from parental political power in much the same way as Jacob Zuma’s myriad offspring seem to be enjoying.

Maggie1

The point, though, is Thatcher came to power with the reforming mission to roll-back back the influence of organised labour and to make labour markets more flexible– all as part of her attempt to stop an on-going recession, bring summer to the ‘Winter of discontent’ (paralysing wage strikes by public sector unions in Britain in 1978-1979) and increase employment and economic growth.

(‘Thatcherism’ as a political-economic ideology is also considered to include attempts to keep inflation low, shrink the state – by privatising state owned enterprises – and keep a tight rein on money supply … (and is not famously concerned about employment – Ed) … but let’s leave those details aside and stick with the matter of organised labour.)

Much to my surprise there is growing evidence Jacob Zuma is forcing a showdown within the Congress of South African Trade Unions (Cosatu) – and between the members of the ruling alliance (the ANC, the SACP and Cosatu).

Since 1994 it has been a good bet that tensions in the ruling alliance would flare up and then subside – but that the constituent ideological factions and organisations would always back off from a real split.

The ruling alliance has always seemed to me like a vaguely unhappy marriage that none of the parties have the resources or discipline to leave.

I have been covering South African politics and financial markets since 1997 and in 1999 I commissioned this cartoon :

Maggie2

 

The original caption read: ‘She means nothing to me’, he pleaded unconvincingly. ‘You’re the one I will always love’.

The report that accompanied the cartoon – which I originally published for the then stockbroker Simpson Mckie James Capel – made it clear that the man in the middle represented the ANC and his entreaties were addressed to Cosatu and the SACP … while his real passion (and the furtive fumbling behind his back) was for business, global and domestic. (Cathy Quickfall drew the cartoon and did a better job than I could have hoped for: the Cosatu/SACP figure’s naive and hurt innocence, still wanting to trust Mr ANC; business in a sharp suit, her disdainful look into the distance with just the busy hand behind her back revealing her urgent and furtive intent.)

It has looked for many years as if the dysfunctional relationship would continue for ever – that the parties involved (both the institutions of the ANC, the SACP and Cosatu but also the myriad ideological factions that exist across those organisations) have more to gain from being inside and more to lose from being outside.

But, surprisingly, it appears that the ruling faction within the ANC (the incumbent leadership, represented by Jacob Zuma) appears to have finally drawn some kind of line in the sand with the ‘left’ unions within Cosatu, most obviously the National Union of Metalworkers of South Africa.

The first signs that this was happening appeared when evidence surfaced that Jacob Zuma’s allies within Cosatu were moving against Zwelinzima Vavi, the now suspended secretary general and strident ‘left’ critic of corruption in the ANC and critic of the slightly more business-friendly economic policy (particularly the National Development Plan) of the Zuma government … (remembering that this was written late last year and Vavi has now been reinistated … sort of – Ed).

At first it appeared that Vavi would be got rid of by being accused of corruption or some form of financial mismanagement related to the sale of Cosatu House for a price less than it was worth. While that investigation was still on-going, Vavi handed his enemies a perfect excuse to suspend him by having sex with a junior employee in the Cosatu head-office earlier this year (last year – Ed).

Since the suspension of Vavi his allies in Cosatu, especially the biggest affiliate (the 350 000 member Numsa) has been on a collision course with both Cosatu itself and with the ANC.

The conflict is likely to come to a head at the Numsa special congress to be held on December 13 – 16.

Why do I see this as, partly, Zuma’s Maggie Thatcher moment?

Well, Vavi’s suspension is only the proximate cause of the impending collision. The ‘real’ or ‘underlying’ causes are what are important.

Vavi, Numsa secretary general Irwin Jim, his deputy Karl Cloete – and probably a majority of Numsa leaders and shop stewards … and several other groups and leaders within Cosatu) appear increasingly of the opinion:

  • that Cosatu has been bullied by the Zuma leadership into accepting policy positions with which it (generally) disagrees
  • that the ANC under Zuma has attempted to turn Cosatu into a ‘labour desk’ of the ANC and the alliance summits have become nothing but a ‘toy telephone’ rather than a real joint decision making forum for the ANC/Cosatu/SACP alliance
  • the policy positions with which this group disagrees are, particularly, the National Development Plan, but also e-tolling, the Youth Wage Subsidy and the ANC government’s failure to ban labour brokers. (The reasons why this ‘left’ group opposes these policy measure are crucial: they oppose the NDP because it is seen as ‘neo-liberal’ and anti-socialist; e-tolling because it is seen as covert privatisation of public infrastructure; the youth wage subsidy because it segments the labour market, threatening Cosatu’s monopoly and potentially exposing ‘protected’ Cosatu members to competition from ‘unprotected’ youth workers; and the failure to ban labour brokers because those institutions are also anathema to Cosatu’s monopoly.)
  • that the ANC under Zuma has been captured by a crony-capitalist regionally based (possibly ethnic) elite bent on looting the state
  • that the gamble to back Zuma against Mbeki has badly misfired

 

There is widespread press and analyst speculation that the tensions within Cosatu could lead to the federation splitting – and in some way or another the more specifically ‘socialist’ pro-Vavi, Numsa-based group leading Cosatu – or a piece of Cosatu – out of the ruling alliance.

In what way is this ‘Zuma doing a Maggie’?

Well, because the disgruntlements of the Vavi/Numsa group (described above) are real and represent significant shifts against organised labour by the Zuma government.

If we add to the youth wage subsidy, the NDP, the failure to ban labour brokers, e-tolling in Gauteng to the very tight budgeting for public sector wage increases mentioned in my October column I think we have a strong circumstantial case that Zuma’s ANC has moved decisively to roll-back the power of organised labour.

Maggie3

 

Why Jacob Zuma and his allies might have done this is revealed clearly in the anaemic Q3 GDP growth figures of 0.7 per cent compared to the previous quarter, or 1.8 per cent on a year-on-year basis . Almost across the board analysts and economists have ascribed most of the weakness to labour unrest, particularly in the motor vehicle sector – where the recent strikes were organised by Numsa! (Again, remember that this was written in November last year … just imagine how many exclamation marks he would have used if he had written that sentence today? -Ed)

Numsa has also helped plague Eskom’s flagship Medupi project – and has undoubtedly contributed to government’s infrastructure plans looking shaky.

The ANC’s motivation is not purely an attempt to fix economic growth – and bring to an end our own ‘Winter of Discontent’. Vavi and his allies in Numsa have harried and harassed the ANC leadership over corruption – and particularly the upgrade to Nkandla – and this has clearly helped force the hand of the Zuma ANC to drawn a line in the sand with the left-wing of Cosatu – especially as the ANC enters an election and struggles to cope with this level of internal dissent and criticism.

The resignation earlier this week of Numsa president Cedric Gina (who, unlike the majority of his Numsa colleagues, is close to the current ANC leadership: his wife is an ANC MP and he probably has similar ambitions himself) is probably an indication that the Zuma/ANC allies intend contesting Numsa’s direction in the lead-up to the Numsa special congress in December. The ANC leadership has probably decided to fight it out in Numsa – and Cosatu more generally – making sure that if/when a split occurs the faction that sticks with the ANC/Zuma/SACP is as large as possible and the faction that defects is as small as possible.

The big risk for investors and financial markets associated with a possible split in Cosatu is that Vavi/Jim group is likely to contest with unions within Cosatu that currently support the ANC and Zuma’s leadership – most obviously and most unsettlingly –  with the National Union of Mineworkers which has complained repeatedly that Numsa is poaching its membership. This potential for a widespread contestation of each workplace and each economic sector between a new ‘Cosatu’ and an old ‘Cosatu’ is probably the most important threat represented by the unfolding crisis.

Politically the Vavi/Jim group will likely be campaigning against the NDP, the youth wage subsidy, e-tolling and Nkandla-style corruption just as the ANC’s election campaign peaks early next year. I do not think a split in Cosatu will translate automatically into specific electoral declines for the ANC – it is possible and even likely that Numsa members who support a split could still vote for the ANC.

However, one of the big unanswered questions is whether the defecting faction has any possibility of linking up politically with the EFF. Up until now the defecting faction linked to Vavi and Jim have unequivocally rejected the EFF on the grounds that its (the EFF’s) leadership are ‘tenderpreneurs’ (much like the Nkandla faction of the ANC) who just happen to be out in the cold.

However, the EFF’s support for nationalisation of mines and expropriation of white owned farms with or without compensation does dovetail with aspects of the Vavi/Jim faction’s essentially socialist ideology.

My own view is that in the event of a split it is possible that the Vavi/Jim faction forms a ‘labour party’ which could only feasibly contest elections in 2019.

The motivation for Thatcher moving against the unions was as much about weakening the Labour Party as it was about repairing the economy – so we shouldn’t dismiss the Zuma/Thatcher comparison purely because his motivations are mixed.

If Zuma and the ANC succeed in reducing the militancy and power of organised labour it is possible that they will have contributed in a small way to laying the grounds for an improvement in public education, for a period of recovery and even extended economic growth.

It’s a risky – and complicated – business, but it was for Baroness Thatcher as well.

 

* It was, in our eyes,  a fine hat and we cocked it jauntily. And thus attired, and to our very great satisfaction, we successfully answered all the important epistemological questions of the day. We let the  cowards flinch and traitors sneer as they boastfully proclaimed the end of history. We were history … or at least, through the complex functioning of the intelligentsia in Marxist Leninist theory … we were history’s engine made flesh. And the race wasn’t over … we were merely getting our breath back.

I often send out commentary before I am satisfied with it.

That usually means typos and misspellings that I have failed to find in a rushed edit, but sometimes it means the analysis is … less in-depth (trite? … shallow? … Ed) than I would have liked.

It’s the price of procrastination when chasing deadlines – and one of those deadlines was two weeks ago when I rushed to get a weekly update out just as the news from the  Brics summit was coming in. This is what I wrote (tagged on to a longer report about a number of different matters):

Brics bank (16/07/2014)

Leaders of China, India, Russia, Brazil and South Africa met at the 6th Brics summit in Fortaleza, Brazil yesterday.  On the agenda is the establishment of a development bank and monetary reserve – eventually together consisting of as much as $200bn in capital reserves and guarantees.

So what?

There are a number of important issues associated with this initiative, but one is that this is a deliberate attempt to institutionalise a shift away from the Western (specifically US) dominated financial system (particularly the IMF, the World Bank and the use the USD$ as the global reserve currency).  Such moves are probably historically inevitable and as China, India and Russia – and to a lesser extent Brazil – stutteringly grow in influence (economically, militarily and otherwise) they were always going to gently tug at the leash of US global dominance.

For South Africa – a small regional player, with anaemic economic growth and very moderate political/military influence – to have attached itself to the coattails of a kind of teenage rebellion by the powerful young global bucks is faintly ridiculous. South Africa winds up being drawn into a subservient relationship with China and Russia (over which it has almost no influence) and thereby flirts with the enmity of the real global adult whose judgements, when push-comes-to-shove, can be quite severe. That’s a lose-lose, as far as I can see.

Nothing wrong with the comment, although I wish I had made it clearer that I welcome Brics and I welcome the gradual receding of US power as much as I hope its retreat is orderly.

But I especially wish my good friend and old comrade-in-arms Andre Zaaiman had launched his Mindsight – Intelligent Enterprise Systems website before I wrote that report.

It would have been a great benefit to my analysis if I had read the first article Andre published on the website: “National Security: China-US-Africa“.

It’s not specifically about the Brics Bank (but it does mention it in context) but it is an excellent high level analysis of the growing contest between the US and China … and it argues that this is a matter of national security and national interest for South Africa.

Read the article … meanwhile, here are a few extracts:

ships

 

“The emerging geo-political great game between the USA and China is of great importance to Africa and South Africa. How this great power relationship unfolds will have a commanding influence on the 21st century.

“The future cannot be known; but probability and prediction can be improved as well as surprise avoided, if we are assisted by facts – by a proper understanding of what is going on – as well as by quality information, good theory and off course, secrets.”

“In statecraft, the purpose of intelligence is to provide a competent decision-maker with an informational advantage in the context of national security and the pursuit of national goals.”

“The launch of the New Development Bank (NDB) and of the Contingency Reserve Fund (CRF) by the BRICS-countries in July 2014 is a powerful signal that developing countries are no longer willing to play second fiddle on the global stage.”

“The desired post-Bretton Woods era does not only contain different global financial institutions – not controlled by the USA – but some analysts believe, also rests on different values … the need to prioritize physical infrastructure over other priorities (such as education, healthcare, women’s rights, etc.) towards which the World Bank has been drawn in recent decades. From a holistic point of view, all such investments are crucial for equitable national prosperity and well-being, but nothing creates jobs and literally drives ‘state-building’ like infrastructure.”

There is much in the article that is worthwhile and I recommend it to anyone who is interested in the unfolding contest between the USA and China especially from a South African perspective.

Andre’s vantage point is especially interesting. He “is a former senior official in the State Security Agency of the democratic South Africa” and has previously “worked in the underground and intelligence service of the African National Congress during the struggle against apartheid and subsequently, served in the Presidential Support Unit under former President Thabo Mbeki” – those quotes from here.

 

 

For the record – and on the off chance that  someone may one-day want some background on the (at time of writing) unresolved metalworkers strike – here are the bits and pieces I have published over the last two weeks; ordered from most recent at the top.

The piece from the eve of the strike was written jointly with my colleague (economist at BNP Paribas Cadiz Securities) and friend Jeff Schultz … and just while I am on that, well done Jeff on your accurate 25 basis point hike call  from the SARB’s MPC.

(btw, I am publishing in something of a rush … I will attempt to clean up the formatting and editing over the next day or so.)

 

Numsa and SIEFSA – so near yet so far – 13th July 2014

The engineering strike has reached an impasse that is less insignificant than it first appears. Numsa, representing the majority of the 220 000 workers on strike, has gradually reduced its demand from 15% to 10%. SIEFSA is prepared to meet the 10% for the coming 1 year period but only if this is part of a 3 year agreement with 9.5% in 2015 and 9% in 2016. Numsa has rejected this offer (which SIEFSA subsequently withdrew) saying it will only agree to a 3 year agreement at 10% for each of the years

So what

The strike is entering its 16th day and the knock-on effects into the rest of the economy are severe; threatening our already anaemic GDP growth estimates.

Numsa has adequately jumped the hurdles to ‘prove’ that it is not opportunistically pursuing the industrial action purely as a way of building momentum towards launching a political party. By moving towards the employer organisation at each bargaining round (from 15% to 12% for 3 year agreements and then to 10% for a single year) but staying just out of reach of SIEFSA’s mandate, Numsa can now dig in its heals without losing the backing of those of its members who feel unwilling to be used in the Numsa leadership’s broader political game.

Numsa now promises to produce “a detailed Programme of Action (PoA) to intensify the (indefinite) strike action” – Numsa press release 14/07/2014. Numsa is hinting that this means getting other sectors in which it organises (especially the automobile manufacturing industry which is already negatively affected due to parts shortages) to strike in sympathy.

At issue here is that if our assumption that Numsa has ‘hidden’ motivations is correct, then predicting how and when the strike will end is that much more difficult.

Numsa’s trade union movement to the left of Cosatu and political party to the left of the ANC are an historical inevitability – and likely to garner significant support

A useful background article by Eddie Webster and Mark Orkin concerning the historical origins of, and potential support for, a ‘workers party’ appeared in Monday’s Business Day (15/07/2014). The article is based on “a large nationally representative sample of adults of all races” conducted in February and March this year and concludes that the party (which Numsa is pushing to form) could win as much as 33% of the national vote in an election. While we think these estimates are a bit rich, the article is a ‘must read’ for anyone wanting to understand the ideological origins and potential size of the initiative emerging from Numsa and other dissident Cosatu sectors and leaders.

To restate our oft restated view on this matter:

  • the initiative will cause heightened industrial unrest in the medium term (over 2 years) as the breakaway unions compete with established Cosatu unions;
  • the resulting ‘political initiative’ could push the ANC to a marginal hold on its absolute majority in future elections (potentially leading to more schizophrenic policies … but potentially having more positive impacts).

 

The National Union of Metalworkers is ready to fight – 30th June 2014

A strike in the engineering sector is on – and Numsa will attempt to extend the action to Eskom.

“The national executive committee has agreed to the decision from our members to embark on an indefinite strike action, beginning on July 1,” said Irvin Jim, general secretary of Numsa yesterday at a media briefing (SABC News).

Numsa claims membership of 341,150 (making it easily the largest union in the country) and it organises 10,000 companies across the motor, auto, engineering, tyre and rubber sectors – although it is officially only the engineering sector that is targeted by the strike (see here for the strike certificate and the full lists of all unions and employers involved in the dispute).

(Note that the strike is not directly in the automakers’ sector. Numsa took 30,000 workers out on strike here in 2013 – in an action that ostensibly led to BMW shelving plans for a big South African investment. However the strike will affect the auto parts sector and hence could impact directly on the automakers’ sector.)

Irvin Jim, Numsa Secretary said members would also picket the headquarters of state power utility Eskom on July 2 as part of a push for a wage increase of 12% – in a linked, but separate action. Eskom is defined as an “essential service”, making strikes illegal.

(Note that while the Eskom action is separate but parallel to the strike against SIEFSA, Numsa says that Eskom will feel the impacts of the main action because of the mechanical and engineering contractors on the Medupi and Kusile building sites.)

SIEFSA (the Steel and Engineering Industries Federation of South Africa) is the counterparty in the negotiation with Numsa (and five other unions). SIEFSA represents 27 independent employer bodies and 2,200 companies which employ over 220,000 hourly-paid workers – although 62% of those companies employ fewer than 50 workers (see the SIEFSA website here).

So what?

We (Jeff Schultz BNP Paribas Cadiz Securities economist and I) covered on Friday evening – quite extensively – the political and economic issues around the strike(see below).

The key points worth reiterating here are:

  • the potential impacts on the broader economy are profound – a characteristic that Numsa hopes to leverage off, helping to bring pressure on the employers represented in SIEFSA;
  • Numsa’s motivations include its political ambitions to set up a mass-based workers party – which makes the length of the strike and the tractability or otherwise of the union negotiators difficult to predict.

How government deals with Numsa’s apparent attempt to break the ‘essential services’ clause in the industrial relations regulatory framework is going to be interesting. Numsa is threatening to call 9,000 workers at the power utility out on strike after mobilising them through a protest action on Tuesday. “The intention is to move toward a full strike,” said Steve Nhlapo, Numsa’s sector coordinator for energy and non-precious metals. SIEFSA has offered a 5.6% wage increase and Numsa, coordinating its action across sectors, is demanding 12% (City Press 29/06/2014).

 

Numsa’s Industrial (political) action – June 27, 2014

Industrial relations

The possibility that 2014 would be another tumultuous year for South African labour relations looked good in January, and is coming true with a vengeance.

The cycle meets a secular trend

The five-month platinum sector strike – perhaps the most costly mining strike in the country’s history – and the metals and engineering workers’ strike from 1 July (based on confirmed reports in the media) might have happened as part of the normal cycle or normal part of the negotiation cycle – but we think the main drivers are secular.

NUMSA’s political ambitions coming to the fore

NUMSA has been moving towards a political divorce from the ANC and from the Ruling Alliance for several  years – and in the last nine months has begun to talk explicitly about forming a ‘left’ or socialist party that will compete against the ANC. We do think NUMSA wants (and plans) to strike next week and we think its leadership hopes to turn this momentum towards building a political party (although we lay out several qualifiers in the main text.)

The risks to the real economy remain large

It is too soon to even estimate the numbers but a metals and engineering sector strike on the scale NUMSA plans could spell disaster for SA’s growth and investment outlook – at least in 2H 2014. We reiterate the large downside risks to our current 1.9% GDP growth estimate for 2014.

(The above  is the summary, below is the body – Ed)

SA industrial relations: The cycle meets the secular trend

Our long-held view that the National Union of Metal Workers of South Africa (NUMSA) are looking to vigorously compete for membership with other COSATU affiliated unions in different sectors of the economy is at the forefront of our concerns here. We believe this week’s press release by NUMSA sums this up quite succinctly:In our 2014 Outlook document released in early January we highlighted our expectation for another tumultuous year for South African labour relations and our concerns therein. With the more than five-month-long strike in the platinum sector likely to be one of the most costly in the country’s history and confirmed reports this week that the metals and engineering industries are now about to embark on a strike from 1 July, our concerns seem to have been warranted.

“Our NEC wishes to send a congratulatory message to the courageous mineworkers for securing a decisive and historic settlement in the platinum belt. This settlement is not only a victory for mineworkers, but for workers in South Africa as a whole. The settlement secured after bitter battles between workers and the mining ruling oligarchy has called on workers to not simply unite beyond the logos or t-shirt colours of their unions. It has renewed workers battle assertion of “an injury to one; is an injury to all”.

“Furthermore, it has called on the progressive trade union movement to go back to basics, and not to be used by politicians to garner electoral support and parliamentary seats, while worker grievances and challenges remain unresolved. Doing so will continue to lead to the implosion of those trade unions that possess a rich heritage in our struggle.”
NUMSA and the numerous elements/questions to considerIt seems to us that the ‘normal’ cyclical nature of industrial action in South Africa’s winter months is now also meeting a trend specific to this political-economic moment. We believe NUMSA (and AMCU’s motivations) are playing a role here, as is the orientation of government and the ANC towards these unions.

The questions on our minds concerning Numsa since at least January this year have included: ‘will NUMSA engage in industrial action primarily to build momentum for its soon to be launched political party or movement?’; and: ‘will NUMSA ride the anti-ANC momentum implicit in the platinum strike – and implicitly and explicitly build a relationship with AMCU?’ and finally: ‘how will this mobilisation relate to the Economic Freedom Fighters?’NUMSA has been moving towards a political divorce from the ANC and from the Ruling Alliance for several  years – and in the last nine months has begun to talk explicitly about forming a ‘left’ or socialist party that will compete with the ANC.

The EFF question is more difficult. NUMSA has been extremely cautious not to be seen to be sidling up to the EFF. NUMSA has widespread credibility and respect – and was a leading critic of Julius Malema’s ‘tenderpreneurial’ habits and the ‘proto-fascist’ nature of Malema’s mobilisation around mine nationalisation and expropriation of White-owned farm seizures. However, the actual policies of NUMSA and the EFF are extremely close, and, in our opinion, the EFF has successfully occupied a political niche very similar to the one the leadership of NUMSA would like to occupy. It would be in the interests of both the EFF and NUMSA to cooperate rather than compete directly – especially when they are both up against the ANC. This might end up resembling the careful courtship of porcupines – but we think it will be courtship nonetheless.We do think NUMSA wants (and plans) to strike and we think its leadership hopes to turn this momentum towards building a political party. And we do think that NUMSA is flirting, politely, with AMCU. On both these issues, however, we have many provisos, disclaimers and cautionary notes – which we deal with in the bullet points below.

Cautionary notes

  • A union, especially one as well organised and sophisticated as Numsa, understands that is does not have a free hand to pursue obviously political objectives around a wage strike. Strikes are costly to workers who are often indebted and whose lives and families can be seriously disrupted by a strike.
  • NUMSA’s grand ambitionsIn the NUMSA central executive committee statement this week, NUMSA presented its demands by stating “We have now made a significant compromise to decrease our wage demand to 12%”. This is NUMSA making sure it can say it has done what it can to avoid a strike while refusing to budge even one cent from 12%.
  • Remember too that in the communities where NUMSA’s membership lives, the African National Congress is electorally overwhelmingly dominant. Numsa must be cautious and limited in how it attempts to turn strike mobilisation into political mobilisation.

From the early 1990s, NUMSA has been the ‘left’ edge of COSATU and has long criticised the ANC – especially the fiscally conservative Growth, Employment and Redistribution macro-economic policy adopted in 1996. However, throughout the presidencies of Nelson Mandela and Thabo Mbeki, NUMSA made the assessment that there was more to be had by being within the Ruling Alliance than without it – an assessment that is probably true, given the pro-union regulatory and legislative labour regime that was developed during that time.

NUMSA conceives itself as occupying or potentially occupying the centre of the economy. The trade union aspect to its political ambitions is that it hopes to ‘vertically integrate’ along the supply chains of energy (including construction of generation capacity – Medupi, Kusile), mining (including smelting and associated industries) and metalwork/engineering/manufacturing.However, NUMSA has always harboured an ideology way to the left of the ANC, i.e., explicitly socialist. It preached caution in dealing with the ‘African nationalist political formation’ (i.e., the ANC) which would try to co-opt socialist unions into the struggles of an aspirant black bourgeoisie. NUMSA preached a kind of ‘partyism’ (the belief that unions should only support a worker’s party) and ‘workerism’ (a belief that unions should stay away from politics to avoid co-option by political parties). In many ways, where things are heading is rooted in NUMSA’s long held ideology.

The real economy 

So what does all of this mean for the SA real economy and where do the risks lie?For almost 10 years, the National Union of Mineworkers (NUM) has been complaining that NUMSA constantly trespasses on its turf – poaching its members. NUM has also warned for many years that NUMSA has political ambitions driving its contestation for members with NUM and other COSATU unions. The seldom explicitly stated strategy (or fantasy) of the NUMSA leadership is that they can build a union or alliance of unions that can occupy the whole centre of the South African economy and spin or leverage that into powerful political influence – leading naturally to the formation of a mass socialist workers political party that contests with the ANC. We think this week’s actions by NUMSA are the next phase of these ambitions.

While we concede that it is a little premature to ascertain or quantify the 2H 2014 economic implications of the impending strike in the metals and engineering sector, we nevertheless find it necessary to highlight the risks and our concerns here.

The SARB calculate in its most recent quarterly bulletin that the impact of the loss of production in the PGM sector in 1Q thanks to strikes equates with a decrease of 0.3% in real GDP (or 1.3% at an annualized rate). The indirect effects of the strike (i.e., onto household consumption and the manufacturing sector, etc.) reveals that annualized GDP growth would have been around 2.2ppt higher at +1.6% q-q saar versus the headline 0.6% contraction (i.e., 1.3% due to direct effects and 0.9% due to indirect effects – (i.e., a ratio of 60/40). The current account deficit, the SARB estimates, would have been around 0.3ppt smaller than the 4.5% of GDP it registered in 1Q.

The Steel and Engineering Industries Federation of South Africa (SEIFSA) represents 23 affiliated employer associations, representing 2,072 companies and employing around 200,000 workers. Comparing the damage done to the local mining sector from the recent PGM strike which had only around 70,000 members down tools over three companies’ operations, the negative impact of this strike could prove to be much more damaging.

A breakdown of SA’s gross value add by sector indicates a risk to around 40% of the production-side of the economy (mainly direct). Add to this the massive risks to the country’s export base (being conservative, we roughly estimate such a strike has the ability to hinder at least a quarter of SA’s total export receipts), and the strong linkages between the manufacturing and mining sectors (from an intermediate inputs standpoint), and the outlook for the real economy in the second half of the year has the potential to be very damaging. We continue to highlight the large downside risks to our current 1.9% 2014 GDP projection as a result.Furthermore, next week’s purported strike action in the metals and engineering sector in gross value add terms accounts for a much more sizable chunk of the local economy’s GDP composition than just the platinum industry.

Numsa 1 Numsa 2 Numsa 3 Numsa 4

 

On my return on Sunday from 10 days relaxing in and around the unparalleled Lake Malawi a friend took me aside and said he had visited my blog and found only cobwebs, spiders and dust.

Forgive me.

So putting my shoulders back and girding my loins I logged on to deal with the decay and say something about the Numsa strike and the Brics bank when I noticed that I had had several ‘hits’ on a post from August 2010.

One of the (few) delights in running a WordPress blog is it generates several detailed statistics: the countries from which  people  have have visited the site, the search terms they followed and which posts they read … amongst other data.

I was intrigued to see what the the August 2010 post was about, so I read it. (It was only read by about 20 people over the last week, all from South Africa … but in my little world that is statistically significant, although of what I cannot say.)

It is interesting to go back to one’s opinions to check if they have shifted – or more interestingly, if they are unchanged or unmodified.

I suspect I am today slightly more bleak about the ANC than I was when I wrote the piece below; that I would say the same thing today, but with more of a grimace and the feeling more than ever that my hope really was a triumph over experience.

So, while I am tinkering around and deciding on whether I dare to borrow a picture from FT Online of Jacob Zuma looking like a lost child at the 6th Brics summit in Fortaleza, Brazil,  here, unexpurgated, unedited and unreconstructed is:

It is difficult not to imagine the tearing of some deep and important ligament in our body politic in the tone and content of this debate that starts in The Times, ostensibly between Pallo Jordan and Justice Malala and ostensibly about media freedom. The battle is joined – and complicated – by the ANC in its formal capacity in this unattributed article, by a reader’s reply to Justice Malala (K B Malapela’s article here) and a contribution by the redoubtable Paul Trewhela here.

My mother was taught at a Catholic convent in Johannesburg in the 40′s and part of the curriculum was a subject called “Apologetics”, which essentially means defending the faith and recommending it to outsiders. All of the contributions to this debate, to greater or lesser degrees, have the brittle quality of Apologetics. This is clearly not a debate designed to win over an opponent;  it is much more a debate designed to slag off the opponent – to influence perhaps separate audiences.

This does not mean that the opponents are all just political propagandists rolling out set pieces in an archaic ideological struggle. The anger, hurt and perhaps even fear are real and personal. After studying each spit and snipe, each appeal to history and every egregious character assassination (of which there are many) I find myself uncomfortably ambiguous about where my sympathies lie.

When we strip out all of the detail, at issue is the clash of these two broad assertions (this is definitely my formulation – the actual words or even ordering of arguments – will not necessarily be found in this form in any single contribution to the ‘debate)’:

  • The one view attacks Malala and defends the ANC – in the general context of supporting legislation to make the print media legally accountable. It goes something like this: ‘The ANC, admittedly imperfect and flawed, is thenational liberation movement that led the struggle against Apartheid; the organisation whose members and supporters paid the overwhelmingly highest price in the struggle against Apartheid and it is currently the political party in which resides the main hope of building a South Africa free of Apartheid and its vestiges (which are still strongly present and primarily injurious to black South Africans). Given this truth, the depth and ferocity of Justice Malala’s attack on the organisation can only be explained by him having made a profession out of attacking the organisation for the benefit of a self-satisfied and confirmedly racist audience – or that he serves some darker and deeper purpose of enemies of South Africa.
  • The other view defends Malala and attacks the ANC – in the general context of opposing legislation that seeks to control the media. This argument goes something like this: “The ANC has no claim to an exclusive role in the struggle against Apartheid and in any case the ANC’s contribution to that struggle was always flawed and undermined by deeply anti-democratic (or Stalinist) traditions and brutal repression of internal dissent. Justice Malala is part of a tradition of journalism in South Africa that has fought government censorship and general government abuse of power. Abuse of power, in various forms, characterises the ANC government today and it is right, fitting and brave for Malala to continue to ‘speak truth to power’.

I was going to paraphrase each article and attempt to draw out each essence but it’s probably better that you do that for yourself.

But here, for those who are interested, are my considered opinions on the issues that I think lie at the heart of this debate.

Firstly, regimes can reach a point where the only strategic option is complete non-engagement; where the only way forward is the destruction of that regime and its replacement by an alternative. But it is ludicrous to argue that this is where we are in South Africa with regard to the ANC government. Much of our political commentary and journalism seems to be phrased in these terms – as if we are all revolutionaries now, beyond any hope or care of reforming the system. This view is both implicit and, to a lesser degree, explicit, in the words of Malala and Trewhela. I am all for gung ho evisceration (by written word) of corrupt and pompous politicians, but there is a not-so-subtle line between vigorous – even exuberantly irreverent – criticism and the argument that government per se is the problem and therefore cannot be part of the solution. Many aspects of this government’s performance are deeply disturbing – as is the seeming avalanche of cronyism in our political culture. But I am absolutely clear that a government that continues to command around 70% of national electoral support (primarily because that electorate perceives the government as the main heir to the mantel of national liberation movement) has got to be engaged with, has got to be encouraged to be “the solution” more than it is “the problem”. And anyway the ANC, government, Cabinet and ‘the state’ in all of its manifestations is not some undifferentiated monster that requires slaying. The most important debates that shape our future take placewithin the ANC and the government as much as they do in the national media or in Parliament. Who wins and who loses within the ANC remains a decisive question that we cannot abandon as “irrelevant”.

Secondly, the ANC’s claim to legitimacy based on its historical role as the leading organisation representing black South African’s aspirations for national determination and in opposing Apartheid is a false claim. That the ANC was the main formation thrown up by Apartheid oppression of black South Africans is indisputable and that legions of its supporters, leaders and members fought bravely and suffered deeply is equally indisputable. But how often in the world have we seen claims of historical suffering and historical struggle against oppression justifying present corruption and brutal repression? The ANC needs to hear the claims of some journalists and commentators that the ANC of todayrepresents a radical discontinuity with that ANC of the past.  This is a legitimate assertion that can only be answered with specific claims to value based on present activities and achievements.

Too often the ANC’s claim to legend, previous heroism and fortitude, to banners and flags and songs, is the only answer it seems able to give to those who say it has become an unsalvageable cesspool of greed and self-interest.

The ANC needs to be reminded of the words of the great African revolutionary leader, strategist and philosopher, Amilcar Cabral (here I quote the first and last few sentences of this famous statement):

Always bear in mind that the people are not fighting for ideas, for the things in anyone’s head. They are fighting to win material benefits, to live better and in peace, to see their lives go forward, to guarantee the future of their children. . .

Tell no lies. Expose lies whenever they are told. Mask no difficulties, mistakes, failures.

Claim no easy victories…

 

Three asides from the present:

  1. I have absolutely no idea how I justified to myself putting that Amilcar Cabral quote in the original … the link to the rest of the story is faintly tenuous. But I suppose I loved it when I first read it in about 1981 and I love it still … and any excuse to get others to read it will do.
  2. Do I still write such long, unbroken paragraphs?
  3. I will only be able to check whether all the links in the original article work at some future, unspecified, time  … apologies if they (the links) took you to a place even more dusty, cobweb infested and spider-ridden than where you are right now.

Some humble and not so humble opinions on various snippets of recent and not so recent political news.

Platinum strike finally over

Amcu and the platinum producers announced a settlement on Tuesday. The industry reports the strike cost producers R24-billion in lost revenue and the workers R10.6-billion in forsaken wages (see the pro-industry website here for other data.)

So what?

It is generally agreed in the financial press that the mineworkers lost more than they gained (see here and here – that second link to Carol Paton in the Business Day … well worth reading as always and way more subtle than a bald statement that workers lost more than they gained).

My own impression is the settlement will be hailed by the vast majority of the returning mineworkers as a victory for Amcu – and, explicitly, as a defeat for Num, the ANC and government.

I expect Amcu to continue strong growth in the gold sector, eventually threatening Num’s dominance there (Amcu is sitting at about 30% representivity at the major gold producers already). The gold sector has a centralised bargaining system (through the Chamber of Mines) and Amcu has been formally prevented by the Labour Court from holding a protected strike at AngloGold Ashanti, Harmony and Sibanye because the agreement struck last year is binding. However  an unprotected strike remains a possibility and I expect Amcu to apply constant pressure to the agreement – perhaps embarking on an unprotected strike before year end.

My ‘most likely’ scenario (published in January 2014, see here): cascading labour unrest during 2014 and 2015 stemming from Amcu’s rapid growth in the mining sector, Numsa breakaway from Cosatu and the public sector wage round in 2015 – remains my base case.

Numsa is threatening to bring over 200 000 out on strike in the metal industry (largely the auto industry) from July 1. (Summarised by my friend and colleague at BNP Paribas Cadiz Securities economist Jeff Schultz: “The NUMSA and a number of other unions, meanwhile, are threatening to bring over 200,000 out on strike in the metal industry (largely the auto industry) from 1 July. Employers and unions  in the metal and engineering sector have been at loggerheads for three months now. The current three-year wage agreement comes up for renewal at the end of this month. The unions reportedly opened negotiations with a demand for a 15-20% pay rise, while employers are  currently offering 6.5-7.0%. This is another key risk to the production side of the economy in H2  and we will be watching developments here extremely closely in the days and weeks to come.”)

Zuma sick and tired

This week’s Sunday Times led with the ‘revelation’ that a heart condition, diabetes, high blood pressure and exhaustion have combined to raise concerns about the President’s health.

So what?

The story contains no news whatsoever. It is conceivable that Jacob Zuma could retire early for health reasons and it is conceivable that Cyril Ramaphosa, Nkosazana Dlamini-Zuma or some other ANC leader could become president or acting president. There is no strong evidence that such a transition would be accompanied by a damaging power struggle or be otherwise destabilising. Given how the ANC formulates and implements policy, there is also no strong evidence that a new leader would radically depart from the broad policy thrusts of the current government. The ANC is, in any case, under increasing pressure to deliver on a ‘more radical’ transformation policy and this pressure would apply to any new leader of the ANC and government.

State of the Nation: “like watching someone try to make their granny look bad ass”

This is a bit dated, but every political analyst and his (or her) dog seemed to make huffy and opinionated comments about SONA2014#2 so before I get my FOMO on:

If you expected some meat on the bones of Jacob Zuma’s statement we have to embark on radical socio-economic transformation you would have been disappointed. The speech consisted, as it always does, of a series of signals packed in mind-numbing detail.

I have pulled out the relevant quotes and underlined the relevant part of each quote below, but in short the speech raised some concerns for businesses and/or financial markets:

  • He  (Jacob Zuma) made the call for a national minimum wage
  • We can expect increased costs on mining companies as Charter targets are more vigorously pursued: in effect increasing the wage bill and other costs
  • There will be more onerous requirements for BBBEE and EE – in effect increasing costs on the wage bill and lowering rate of return in the short to medium term
  • The nuclear programme is definitely on – and there are increased fears of corruption associated with what will be the biggest public tender in South African history.

However, given the powerful pressures acting on the African National Congress, the populist concessions in the speech were relatively mild – and, if you believe an expanding public infrastructure spending programme could drive economic growth, then there was some good news in there for you too.

My first response on Twitter was along the lines of: ‘If you don’t have a plan for transformation, then force the private sector to come up with one #SONA2014.”

But there is not a lot of threatened force in the President’s outline. In truth,  Chester Missing, a comedian’s ventriloquist dummy was probably more accurate when he posted: “Talking the ANC’s radical transformation programme. It’s like watching someone try to make their granny look bad ass #SONA2014”. (Which hints at what we think is the greater risk: if the ANC fails to meet the various expectations of the emerging middle classes its political hegemony – and electoral majority –  might become marginal, leading to real policy instability.)

QUOTES (with explanatory links):

“Change will not come about without some far-reaching interventions.”

The social partners will also need to deliberate on wage inequality. On our side as Government we will during this term investigate the possibility of a national minimum wage as one of the key mechanisms to reduce the income inequality.”

“To further promote improved living conditions for mine workers, Government is monitoring the compliance of mining companies with Mining Charter targets, relating to improving the living conditions of workers.”

“This situation calls for a radical transformation of the energy sector, to develop a sustainable energy mix that comprises coal, solar, wind, hydro, gas and nuclear energy … Nuclear has the possibility of generating well over 9000 megawatts, while shale gas is recognised as a game changer for our economy.”

“We will promote local procurement and increase domestic production by having the state buy 75% of goods and services from South African producers.”

“We will sharpen the implementation of the amended Broad-based Black Economic Empowerment Act and the Employment Equity Act, in order to transform the ownership, management and control of the economy.”

“The total assets of our Development Finance Institutions amount to some R230 billion …  will be repositioned in the next five years to become real engines of socio-economic development.”

“We have identified agriculture as a key job driver  … target is for the agricultural sector to create a million jobs by 2030  .. Government will provide comprehensive support to smallholder farmers by speeding up land reform and providing technical, infrastructural and financial support.”

“We will also re-open the period for the lodgement of claims for the restitution of land for a period of five years’”

 

SONA debate, Malema response, expulsion and EFF walkout

The fractious debate that followed …

During his maiden speech to parliament, in reaction to Jacob Zuma’s address, EFF leader Julius Malema said: “The ANC government massacred those people in Marikana”. This led to an objection, a refusal by Malema to withdraw the statement, his expulsion from the House and a raucous walkout by the EFF. During the walkout, EFF members “howled and barked several derogatory utterances and made disturbing gestures,” according to Stone Sezani, ANC chief whip, which may lead to further disciplinary action against some EFF parliamentarians.

So what?

The State of the Nation address was marginally relevant and pretty tedious, but the colourful and combative follow-up presages a new atmosphere in the hallowed halls of the National Assembly. The EFF runs the risk of being characterised as a gaggle of truculent children, but the important issue here is that the party is articulating views that are probably mainstream in the black middle class.

In the words of widely respected ex-editor of the Sunday Times Mondli Makhanya, the EFF is challenging the “too good to be true” seamless transition from “the apartheid past to the democratic present”.

The main reasons Mr Makhanya welcomes the EFF’s parliamentary challenge, according to City Press, are that “unencumbered by the guilt of being beneficiaries of an evil system, white South Africans carried on with life as normal and did not feel the need to assist in redress. They took advantage of the opportunities democracy created and made full use of the head-start they had on the newly levelled playing fields. The tough conversation about correcting the wrongs of the past was given cosmetic treatment. If truth be told, one of the really good stories of the past 20 years is the fantastic story of guiltless white comfort.”

The point for Mr Makhanya is that the “questions the EFF is asking about the post-1994 dispensation are tough but necessary. The language is rough but it might just be the ice water the nation needs to wake itself. Its conduct is often uncouth, but that might be what we need to keep us alert.”

 

Land expropriation, South African style

Rural Development and Land Reform Minister Gugile Nkwinti has published a draft proposal that he describes as an “opening gambit” to speed up the redress of black landowners’ apartheid-era dispossession, according to the Sunday Times. (I covered these proposals in some detail ages ago, but the ST treated it as if it was brand new so I thought I better deal with it as if it was.)

The proposal is for commercial farmers to give half their farms to farm workers, “proportional to their contribution to the development of the land based on the number of years they have worked on the land”. The initial proposal (published on 9 April 2014) is that government would pay for the 50%, but that the money would not go to the owner, but to an “investment and development fund to be jointly owned by the parties constituting the new ownership regime,” according to the Sunday Times.

So what?

This proposal is similar to the charter process in the mining industry, whereby various transformation targets are linked to the process of renewal of mining rights – although the Mining Charter does not envisage that workers on mines would or should own significant parts of those companies.

I think this should be seen as a ‘bargaining position’ by government, albeit one that is likely to cause significant anxiety in the farming sector.

The ANC is under increasing pressure to deliver on promises to change the patterns of racial ownership and control of all aspects of the economy.  Transformation of the agricultural sector is attractive to the ANC, because it satisfies a number of imperatives: redress, creation of small businesses and black economic empowerment. However the ANC has also shown itself to be concerned about food security and property rights. Up until now. the ANC has upheld the idea that while land might be expropriated, this would not be done without a fair price being paid.

Mr Nkwinti’s proposals are virgin territory and probably primarily a warning shot across the bows of commercial agriculture, encouraging them to come up with workable and radical solutions to the racially skewed ownership patterns on the land. April next year has been set as the deadline for responses to the proposal.

 

Someone asked yesterday what I thought of Julius Malema being appointed to the Judicial Services Commission. Did the ANC not care about the kinds of judges that would be appointed? Does this mean the ANC policy is drifting towards the EFF?

These were my first, instinctive, thoughts:

I reckon the ANC is wisely taking a step back and attempting to formulate a more comprehensive strategy to dealing with Malema and the EFF than it (the ANC) has had up until now. During the election and the State of the Nation debate the ANC gave Malema endless opportunities to grandstand – and kept being forced onto the terrain that Malema chose.

So the question of whether the ANC government murdered workers at Marikana became the focus of the national debate around the SONA, as did the expulsion of Malema from parliament and the subsequent EFF walkout. Malema was – as always – cleverly playing out lessons that could have come from Sun Tzu’s The Art of War: draw the stronger enemy out to the terrain and the timing of your choosing … or something similar. (You made it up; you haven’t even read Art of War – Ed. Well … I bet it says stuff just like that in there – Nic.)

Malema has been on the front foot in almost every confrontation he has had with the ANC; more nimble, media savvy and quick, constantly making the bigger, better resourced, and much more popular party look lumbering, old and out of touch.

I think the ANC has finally hit ‘pause’, stopping itself responding automatically and defensively, suppressing the knee-jerk.

The first thing the ANC did then was go back to its own studies and documents like Strategy and Tactics  that constantly exhort the proper revolutionary to deal with a situation as it is and not how one would want it to be (that’s not a quote, it’s a vague memory – Ed).  Thus the ANC has decided to accept that, abhorrent as that may be, the EFF is here, in parliament, with over a million votes, and cannot be wished away.

The second step is to draw the EFF into terrain where it is weakest: the real business of governance, especially the tedious, behind the scenes, work … like the work done by the JSC.(that originally read ‘JSE’ … thanks Colin, totally a Freudian slip!)  I have no doubt that the ANC feels sure it has enough votes on the JSC (ditto – tks Colin) to influence the real outcomes of the commission, that Malema’s presence there will do little other than absorb Malema’s time and attention (and have him endlessly sparring with better trained minds than his – and mouths almost as skilful.)

So what the ANC is probably attempting to do (also with the appointment of Floyd Shivambu to the Pan African Parliament) is to incorporate the EFF, to drain the energy and time available to its leaders for grandstanding and guerilla theatre.

The ANC can argue to anyone: look these people have been elected to parliament, we are obliged to take them seriously and not side-line them, thus we are appointing them to real committees and giving them real responsibilities.

The EFF cannot refuse, after all it has been demanding to be taken seriously and complaining that the ANC doesn’t take them (or the electorate) seriously etc.

The ANC is probably betting that after 6 months of the EFF exhausting itself in the exhausting business of government it will have little room and energy for the kind of vibrant, youthful anarchy it has exhibited up until now.

Is the ANC risking financial market ire by allowing the EFF near the appointment of judges? Could this imply a new openness to the ideas of the EFF around private property, nationalisation, redistribution etc? I don’t think so – or at least not any more than the ANC is itself raising through, for example, Rural Development and Land Reform Minister Gugile Nkwinti published draft proposal for land reform.

The ANC is appropriately responding to the support the EFF has achieved in the recent election. It (the ANC) must address the concerns of those voters who have, or might still, defect to the EFF – but the ANC must do so on its own terms and not the terms and conditions set by the EFF.

The other bet the ANC is making is that the gradual bureaucratisation of the EFF leadership will make them easier to co-opt, and eventually entice them back, across the floor.

It might not work, but I think this is the right strategy: take Malema, as a member of the National Assembly, seriously and eventually he will be forced to take being part of government seriously (and eventually he’ll just be another porky little guy in a suit in the National Assembly?- Ed. Something like that – Nic).

Who can remember the power of the IFP when it refused to be part of the 1994 election? As soon as it was ‘part of the system’, its power drained away.”

And meanwhile quis custodiet ipsos custodes? Well, Julius Malema of course.

 

… which I entirely doubt will be made glorious summer by this sun of KZN when he gives his 5th nth State of the Nation Address this evening.

I am not, as my children might have said, very amped for this.

The only ray of light so far (I am watching on eNCA) was a brief interview with Floyd Shivambu who suggested it should be a ‘state of the resignation address’ … that if the President couldn’t make it to the Cabinet Lekgotla ‘then it would be best for him to just come here to explain that he is just too old and tired and to say goodbye’ – or words to that effect.

I thought I would use the time to publish some bits and pieces that I have sent to my clients over the last week.

The winter of our discontent – as the labour relations cycle meets a secular trend

Every year at this time South Africa is engulfed in strikes as annual wage agreements are traditionally renegotiated in several sectors of the economy. Every year analysts and journalists pontificate widely about the dire labour relations conditions – and the gloom deepens because this all takes place in winter.

Three factors this year are probably going to make the outlook more negative and threatening.

Firstly, the post national election winter has, since 1994, been characterised by spikes in service delivery protests. The causes of this phenomenon are not fully understood, but it is likely that:

  • voters confronting a hostile winter and declining services levels – so soon after being promised the earth by politicians – are likely to be unsettled;
  • local politicians who failed to make party lists begin mobilising factional support, perhaps to stand as candidates in 2016 local government elections, perhaps to discredit those whose positions they covet.

Secondly, the platinum strike is being driven by a number of ‘political’ factors – as discussed previously.

Thirdly Numsa is showing clear signs that its political aspirations are, as we predicted, going to drive deeper and more robust strikes and labour unrest. One sign is the growing violence as Numsa attempts to widen its action at the Ngqura container terminal in the Coega Industrial Development Zone in Port Elizabeth.  The South African Transport and Allied Workers Union (a Cosatu union) is opposing the Numsa strike and is calling for its members to stay at work at the Transnet facility. However, both Transnet and Satawu were quoted on radio (SAFM 20h00 news broadcast 08/06/2014) as decrying the burning of houses and cars of the workers who were at work. The SATAWU spokesperson warned that the situation had similar dynamics to those that were present in the platinum sector in 2012 – that this ‘is just like what happened with Amcu (same broadcast).

Additionally, Numsa is preparing to lead 220,000 workers out on strike from the metals and engineering sector next month. “The bargaining negotiations have spectacularly failed to produce the desired outcomes as expected by the thousands of our members in the sector,” spokesman Castro Ngobese said in a statement quoted in The Herald (5/06/2014). Numsa’s core demands includes a 15% pay rise and a one-year bargaining agreement, the Steel and Engineering Industries Federation of SA (Seifsa, which represents 23 employer associations) has offered an inflation-linked increase of 6.1 percent.

So what?

This is the cycle meeting the secular trend, with each driving the other deeper than either would have been driven ordinarily. Numsa is in the  process of breaking away from Cosatu and is beginning to vigorously compete with other Cosatu unions in overlapping sectors (container terminals, the big electricity generation projects and down and upstream mining and metallurgy operations).  This is, at least partly, about Numsa preparing to set up a ‘left’ party to compete for votes in the future. Comparable (but not identical) dynamics are driving the platinum strike. A winter with ‘normally’ increased social and industrial unrest will probably become unusually bleak and unwelcoming in the months ahead. The impact on GDP growth and on the possibility of ratings downgrades are both important considerations.

 

X Rated

Both Fitch and Standard & Poor made references on Friday (13/06/2014) to increased political risk when they changed their views on the South African government’s willingness and ability to pay the sovereign debt.

Fitch revised the outlook for South Africa to negative from stable and affirmed the country’s long-term foreign and local currency issuer default ratings at BBB and BBB+ respectively. S&P downgraded both the country’s local and foreign currency ratings by one notch from A- to BBB+ and BBB to BBB-  respectively, but moved its outlook negative to stable. None of this is a catastrophe  but of interest to us here is the central role of ‘politics’ in the given reasons for both Fitch’s and S&P’s changes.

Fitch says it most baldly in the press release announcing the change in outlook (my emphasis added):

“Following its election victory in May with 62% of the vote, the African National Congress government faces a challenging task to raise the country’s growth rate and improve social conditions, which has been made more difficult by the weaker growth performance and deteriorating trends in governance and corruption. This will require an acceleration of structural reforms, such as those set out in the comprehensive National Development Plan (NDP). In Fitch’s view, the track record of some key ministerial appointments and shortcomings in administrative capacity mean this is subject to downside risks.”

Fitch gives amongst the key drivers of its more negative outlook: “Increased strike activity, high wage demands and electricity constraints represent negative supply side shock.”

Standard and Poor’s downgrade was similarly motivated but adds some additional concerns:

“While we think that President Jacob Zuma’s newly elected administration will continue the policies of his first administration, which controlled fiscal expenditure and fostered broadly stable prices, we do not believe it will manage to undertake major labor or other economic reforms that will significantly boost GDP growth”.

My initial take on the new Cabinet is supportive of these motivations.

In addition both agencies made extensive reference to the negative industrial relations environment – and the negative impacts on GDP growth and government revenues. There is a significant political dimension driving industrial unrest – as I have argued above.

So what?

The validity of the actual ratings and ratings outlook of these agencies is much disputed[1] but the issues they use to motivate their views are interesting because they (the agencies) are cautious; clinging to a sort of ‘average view’ of investors. So if political criticism makes its way into the text (as is the case in both these instances) we are obliged to consider that these may represent, or may come to represent, a general view in markets.

South Africa has a small open economy and liquid financial markets and the difference that policy makers can make to economic outcomes is limited. But even within those limitations too many political choices (certain cabinet appointments, corruption controls, delivery performance and the honest brokering of labour contestation) are either not helping or are actively negative.

[1]No-one could have failed to notice the excoriating criticism of the credit rating agencies (CRAs) after their generalised failure to accurately assess the risks associated with the collateralised debt obligations allegedly because they were mostly issued by the CRAs biggest paying clients! However, it is the opposite with sovereigns: “It has also been suggested that the credit agencies are conflicted in assigning sovereign credit ratings since they have a political incentive to show they do not need stricter regulation by being overly critical in their assessment of governments they regulate.” http://en.wikipedia.org/wiki/Credit_rating_agency (accessed 13h56 16/06/2014.

 

The National Directorate of Public Prosecutions

I  dealt with this issue last week, but it is making bigger and more anxiety provoking headlines than ever.

So what

The NDPP was drawn into the fight between Mbeki and Zuma and since that time has limped along to the rhythm of one or other faction aligned to competing interests within the ANC seizing or losing power in the institution. This is not a situation in which one could safely choose one set of ‘good guys’ and back them against another set of ‘bad guys’. The situation is complex but relates primarily to the on-going struggle to either ensure that certain senior political leaders are brought to justice or to ensure that they are not.

The NDPP is one of the most important institutions of the justice system, and without certainty and stability here it is impossible to have certainty about the operating environment for any business in the country. This is a serious problem and it appears to be getting worse under the current administration.

 

Platinum Strike

(This is a bit dated, but you might be interested in my rude remarks about the new minister.)

“Government is ready to wash its hands of the protracted wage strike by platinum mineworkers in Rustenburg” according to the Sunday Independent 08/06/2014. Mines minister Ngoako Ramatlhodi threatened to pull out his inter-ministerial task team if a settlement was not reached at the last scheduled government facilitated meeting, which is due to take place today.

In addition, a formal ANC statement delivered by Gwede Mantashe at a press conference in Luthuli House in Johannesburg last night after the ANC weekend lekgotla[1] characterised the strike in a way that seemed to destroy the remote possibility that Ramatlhodi could have made a difference anyway:

“The articulation of AMCU position by white foreign nationals, signalling interest of the foreign forces in the distabilisation (sic) of our economy.

The direct participation of EFF in the negotiations, and thus collaboration with the foreign forces.

These two factors led the lekgotla into cautioning the Ministry of Mineral Resources in handling the facilitation with care. There were questions about the role of the state in workplace disputes where there are clear rules guiding it.”

This statement is interesting precisely because it borders on the bizarre

So what

The ANC statement indicates shows just why the new ANC minister cannot be an honest or effective broker in the negotiation – and it is therefore unsurprising that he is preparing to withdraw his team. The ANC is compelled to believe that this strike is only not ‘negotiable’ in the normal manner because the real issues driving it are political  and not about wages at all. The ANC might be correct about the strike being ‘political’ but the party itself is culpable of having politicised the strike by attempting to defend its Num ally against the vigorously growing Amcu, by alienating workers by characterising their union as ‘vigilantes’ and by the ‘Marikana massacre itself.’ s – There was never any real possibility of this government mediating between the parties or influencing the outcome.

 

Concerns about property rights

The South African Institute of Race Relations and AfriBusiness (AfriSake) have recently released warnings about property rights in South Africa. A proper assessment of these warning would require specialist legal opinions, but our own assumptions have long been that the South African Constitution provides adequate protections for private property (see here) and the ANC government is unlikely to risk fiddling with these principles.

However it seems to be a basic due diligence requirement to keep an eye on the risk – perhaps more so since Jacob Zuma spelled out at his Cabinet announcement (reiterating many recent ANC and SACP statements) that we are entering a “more radical” phase of economic transformation.

With this is mind, we reproduce the basic summary of legal concerns AfriBusiness and the South African Institute of Race Relations have raised in their research (note that below is a direct quote from the AfriBusiness statement linked above):

  1. The National Development Plan has as its aim the transfer of 20% of the agricultural land in a district to black recipients, at only 50% of the value as determined by the state (in terms of the Property Valuation Bill).
  2. The verdict of the Constitutional Court in April 2013 in the case of AgriSA v the Minister of Minerals and Energy distinguishes between “deprivation” and “expropriation”. After the verdict the state is able to dispossess and redistribute property, as long as the state does not assume ownership of the property and act (sic) only as custodian.
  3. The Green Paper on Land Reform aims a radical redesign of property rights, with inter alia a type of freehold on land which will drastically limit the rights of owners. Within this context a Land Management Commission is proposed, which will have discretionary powers regarding disputes over title deeds.
  4. The policy proposal by the Minister of Land Reform, Gugile Nkwinti, for “Strengthening the rights of workers working the land” aims to transfer 50% of the land to the workers, commensurate with their term of service. No compensation will be paid to the owner.
  5. The Expropriation Bill poses that expropriation may be used for the public interest and public goal. The Bill is not only applicable to land but will cover all types of property. Public interest and public goal are determined in an ad hoc manner and both have restitution as aim.
  6. The Promotion and Protection of Investment Bill allows state intervention in investment processes. The Bill explicitly provides for expropriation at less than market value. All in the name of so-called restitution. Any property used for commercial purposes is targeted by the Bill.
  7. The Infrastructure Development Bill aims to eliminate so-called inequalities in infrastructure. The Presidential Infrastructure Coordinating Commission is granted the authority to expropriate in the public interest and for the public goal.
  8. The Spatial Planning and Management of Land Use Act aims at centralized planning of land ownership. It proposed so-called spatial justice by integrating low and high cost housing in residential developments.
  9. The Extension of the Security of Tenure Amendment Bill expands the rights of occupants and their dependents. Evictions are strictly controlled and the Amendment Bill means a significant loss in control over property.
  10. The Restitution of Land Rights Amendment Bill creates further political and economic uncertainty regarding the future of property rights.
  11. The Rental Housing Amendment Bill proposes stricter regulation of the rental property market. Rental Tribunals will be established to hear disputes and will be able to determine increases in rent.
  12. The National Water Amendment Bill and Policy Review prohibits the trading of water rights and proposes a use-it-or-lose-it principle for water rights. Equality (including racial transformation) becomes the criterium (sic) for the allocation and re-allocation of water rights.

Consume that with the requisite amount of salt but keep an eye on the detail.

 

[1]Sesotho loan word meaning court or community council meeting; used in the South African context a “lekgotla is a meeting called by government, Cabinet or the ANC to discuss strategy planning”. Wikipedia accessed 04h30 09/06/2014.

 

The Financial Mail recently conducted its annual survey of the fund management industry’s ranking of the broker analysts  in South Africa.

As I have mentioned previously I find it faintly awkward crowing about it here. However, in the spirit of our age of frenzied self-promotion, I feel compelled to share with you the fact that I topped the ranking in the Political Trends and Industrial Relations category again this year.

(Click on the table and a larger version will load.)

FMrankingsedit2

 

This does not mean I am a better political analysts than anyone else on that list. It means that more fund managers who pay for the service voted me as useful to their investment process. At least part of the reason for that is this is my main source of income and I probably spend a greater portion of my time and effort on servicing the fund manager clients than do other analysts on that list.  In addition, for at least one of the people on that list, this category is a minor priority for them (Elna Moolman of Macquarie First South is primarily an economist and she has been top ranked as such for several years.)

I value the ranking; the people who actually pay for the research are the ones who get to vote.

I am grateful to have had a consultancy arrangement with BNP Paribas Cadiz Securities which makes me part of that firm’s excellent and supportive research and sales team.

 

Below are my comments about Sunday’s cabinet announcement followed by my comments about the elections from a week or so earlier – a sort of trip back in time.

In both cases the originals were written under tight deadlines and in both cases my initial impressions have been moderated by time, drifting towards the insipid end of the spectrum.

But for those who might be interested these were my first, slightly more vivid, impressions …

(Sent out 06h00 Monday 26th May):

Jacob Zuma’s Cabinet 2014 – through a glass darkly

From a narrow ‘financial market’ perspective the Cabinet announcement by Jacob Zuma last night was disappointing and confusing.

(Note: it would be possible to find much good in this Cabinet and the strategy it implies, but because the announcement was so late – about 1900 hours last night – I have decided to focus almost exclusively on the risks and problems, mostly because they dominate. Apologies if this makes me sound whiny.)

Cyril Ramaphosa

The appointment is finally made. It’s largely a good thing from a financial market perspective – given his understanding of how business works. However, the damage done him by his comments before the Marikana massacre should not be underestimated (he called for greater police action against strikers – see here) and his power within the ANC should not be over-estimated (he has, essentially, played hand-maiden to Jacob Zuma from assuming office of the ANC deputy president at Mangaung in December 2013). However, Ramaphosa was a clever and powerful negotiator for the ANC at Codesa I and II. It is likely that Ramaphosa’s authority and influence will gradually increase in the next few years, possibly leading to his ascension to the ANC’s and the country’s presidency.

Nhlanhla Nene – Minister of Finance

Nene became Deputy Minister of Finance in November 2008 and served in that role till May 2014. He is technically competent and liked by the few in the markets and in business who have dealt with him. As chairman of parliament’s finance committee Nene urged in October 2008 that “utmost care should be taken that parliament does not undermine macroeconomic stability” – see here for that reference.

Issues, problems and basis for assessment

Nene is the ‘continuity candidate’ in the absence of Pravin Gordhan – but it is this absence that increases uncertainty. Nene is not well known in the markets and he is particularly ‘lightweight’ politically in terms of his seniority and influence in the ANC (as opposed to his predecessors Trevor Manuel and Pravin Gordhan).

This becomes more of a problem when GDP growth is as sluggish as it is in South Africa and when the President himself summarises his intentions (as he did prefacing his cabinet announcement): “I announced on Saturday that we have entered the second phase of our transition to a national democratic society. I also said this would be a radical phase of socio-economic transformation.”

One must assume such “a radical phase of socio-economic transformation” would put even greater spending pressures on the Finance Minister. Gordhan (and before that Trevor Manuel) had proven levels of toughness and authority in holding the fiscal line – although at least in Manuel’s case the ‘markets’ were nervous for some time after his appointment in 1996 (and Gordhan was not, initially on the ANC NEC when he was appointed).

The problem is made worse by the fact that DTI and EDD are unchanged

One of my early concerns with Zuma’s first Cabinet in 2009 was that it distributed economic policy-making power around government apparently (to me) as a gift to the SACP and Cosatu for having backed Jacob Zuma in his struggle against Mbeki. Thus Rob Davies in DTI and Ebrahim Patel in EDD have been left in place in yesterday’s cabinet announcement. As it turned out after 2009 Pravin Gordhan was eventually able to establish the Department of Finance as the centre of government’s economic policy-making function. Appointing Nhlanhla Nene to head the Treasury while leaving the other (now more experienced) economic Tsars in place rather reawakens the original concern.

If public sector wages and public service productivity are key variables for balancing government books …

The removal of independent and powerful Lindiwe Sisulu to the backwaters of Human Settlements (formally housing) and her replacement with the quiet and self-effacing Collins Chabane, previously of monitoring and evaluation in the Presidency, is another cause for concern. Again, he is admired and liked and should be given the chance to rise to the challenge of this key portfolio, but my first take is this is another weak appointment. The major negotiations for 3-year wage agreements in the public sector come up for renewal this year. I would have preferred someone in this post who had the political weight to stand up to the public sector unions (and various other political interests).

The key idea seems to be to house the NDP in a politically beefed up Presidency

The new ‘centre’ of economic policy making will actually be within the Presidency where Zuma has appointed Jeff Radebe as a sort of Prime Minister of the National Development Plan into which he (Zuma) has collapsed performance and monitoring as well as ‘youth development’.

Radebe swings a lot of weight – and a more general comment is that Jacob Zuma has made weak appointments throughout his cabinet but has very significantly strengthened his own office. There are several problems with this, but I will mention only that Jeff Radebe has never played a role where he has been required to establish or defend (or even understand) macro-economic policy stability, but he has played the role of party fixer, strongman and bully in the ANC. If these talents can be deployed in giving flesh to the NDP bones that will be a good thing.

Supply-side misery

The Governor of the South African Reserve Bank consistently has expressed concern about various ‘supply side’ constraints (see here for the Monetary Policy Committee statement of May 22nd).

These constraints include energy prices, labour unrest, transport bottlenecks, broadband penetration and regulation and failures in the education system among a host of issues.

So here are just a few of the appointments in this area:

Energy: After a disastrous term in Agriculture, Forestry and Fisheries, Minister Tina Joemat-Peterssen has been appointed Minister of Energy. She has been the subject of several Public Protector Investigations and she has courted a highly confrontational relationship with the fishing industry. However, she is strongly supported by Jacob Zuma. Her new department will be central to the decisions about the biggest public tender in South African history: R1-trillion worth of  nuclear power stations.

Telecommunications and Communications: The functions have been split, with the  Minister of State Security Siyabonga Cwele moving to Telecommunications and Postal Services. The bigger problem is how many changes have been made here, with the telecommunications industry  having expressing the hope that Minister Yunus Carrim would stay in the post and finally move towards stabilising the policy framework under which the local loop would be unbundled and the sector regulated – after a long succession of disastrous appointments. There are no grounds to be confident that Cwele is up to this task. The only grounds that we can see for the appointment is if the sector is conceived of as an extension of the country’s state intelligence function.

Communications: Ms Faith Muthambi has been appointed to head this department which will include the functions of the independent regulator Icasa, the state broadcaster SABC and government information services, the GCIS. It still needs to be assessed whether the structural change and appointments here and in telecommunications will be positive for the industry, but on the face of it is peculiar, to say the least, to group the regulator of the private sector (Icasa) with the ‘marketing’ and ‘promotion’ capacity of the government and state.

(See here for the eviscerating comments on the ‘communications’ decisions in the cabinet from the SOS Coalition (‘trade unions, community media and content producers hoping to support quality public broadcasting’).

Education, transport and labour: It can have escaped no-one concerned with South Africa’s economic development that these functions of government are failing or significantly underperforming. But Jacob Zuma has left education and training with Blade Nzimande, basic education with Angie Motshekga (which, btw, some NGO’s and the DA reckon is a good thing), transport with Dipuo Peters and labour with Mildred Oliphant.

(Because I don’t know him that well, I didn’t discuss Adv Ngoako Ramathlodi as mining minister in that note. But here  is the new minister in 2011 essentially arguing that the South African constitution was a compromise from weakness on the ANC’s part and the the courts need to passop stepping on toes of government, the ANC and the Executive’s …. and here is constitutional expert Pierre De Vos apoplectic response to Ramatlhodi’s disturbing views.)

Full Cabinet

(The Deputy President is Cyril Ramaphosa)

1. The Minister in the Presidency is Mr Jeff Radebe.

2. The Minister of Women in the Presidency is Ms Susan Shabangu.

3. The Minister of Justice and Correctional Services is Mr Michael Masutha.

4. The Minister of Public Service and Administration is Mr Collins Chabane.

5. The Minister of Defence and Military Veterans is Ms Nosiviwe Mapisa-Nqakula.

6. The Minister of Home Affairs is Mr Malusi Gigaba.

7. The Minister of Environmental Affairs is Ms Edna Molewa.

8. The Minister of State Security is Mr David Mahlobo.

9. The Minister of Telecommunications and Postal Services is Dr Siyabonga Cwele.

10. The Minister of Police is Mr Nkosinathi Nhleko.

11. The Minister of Trade and Industry is Dr Rob Davies.

12. The Minister of Finance is Mr Nhlanhla Nene.

13. The Minister of Agriculture, Forestry and Fisheries is Mr Senzeni Zokwana.

14. The Minister of Water and Sanitation is Ms Nomvula Mokonyane.

15. The Minister of Basic Education is Ms Angie Motshekga.

16. The Minister of Health is Dr Aaron Motsoaledi.

17. The Minister of International Relations and Cooperation is Ms Maite Nkoana-Mashabane.

18. The Minister of Rural Development and Land Reform is Mr Gugile Nkwinti.

19. The Minister of Higher Education and Training is Dr Bonginkosi “Blade” Nzimande.

20. The Minister of Economic Development is Mr Ebrahim Patel.

21. The Minister of Transport is Ms Dipuo Peters.

22. The Minister of Mineral Resources is Adv Ngoako Ramathlodi.

23. The Minister of Social Development is Ms Bathabile Dlamini.

24. The Minister of Public Enterprises is Ms Lyn Brown.

25. The Minister of Sport and Recreation is Mr Fikile Mbalula.

26. The Minister of Labour is Ms Mildred Oliphant.

27. The Minister of Arts and Culture is Mr Nathi Mthethwa.

28. The Minister of Public Works is Mr Thulas Nxesi.

29. The Minister of Small Business Development is Ms Lindiwe Zulu.

30. The Minister of Energy is Ms Tina Joemat-Peterssen.

31. The Minister of Science and Technology is Ms Naledi Pandor.

32. The Minister of Cooperative Governance and Traditional Affairs is Mr Pravin Gordhan.

33. The Minister of Communications is Ms Faith Muthambi.

34. The Minister of Human Settlements is Ms Lindiwe Sisulu.

35. The Minister of Tourism is Mr Derek Hanekom.

ends ….

 

(And then this, sent out Monday 12 May 06h30)

Election 2014 results

South Africa’s Independent Electoral Commission (IEC) announced the following election results for the country’s National Assembly on Saturday 10 May 2014:

Elections1

The ANC has 15 fewer National Assembly seats and the DA 22 more than they achieved in the 2009 election.

The provincial results followed a similar pattern, with the ANC winning 8 out of 9 provinces (with the Western Cape remaining in DA control). In three of those provinces the ANC increased its majority (Kwazulu-Natal, Eastern Cape and Northern Cape – and increasing its percentage of the vote in the Western Cape) and in five provinces the ANC majority was reduced.

ANC drop more significant in Gauteng and some other major cities

The most significant reduction in ANC support occurred in Gauteng, the country’s economic and industrial heartland and the province with the highest population and highest population density. In the provincial poll in Gauteng the ANC fell 10.45% to 53.59% from 64.04% in the 2009 election.

In the table below the trend is clearly revealed in the three major Gauteng metropolitan areas and is reproduced to some degree in Nelson Mandela Bay in the Eastern Cape:

 

Elections2

 

(As an aside, News24’s coverage of the election as well as it’s app from which the above is a cut-and-paste was truly excellent –  it’s set the new gold standard for election coverage in South Africa. To get a taste of that, visit here.)

‘Racial voting’ patterns persist

A feature of South African voting trends is that, in general, the parties have quite distinct racial or ethnic support bases.

This trend clearly persists (from City Press 11/05/2014)

Elections3

 

So what?

A close examination of ward data changes between 2009 and today reveals that there is a blurring of the racial voting patterns in Gauteng’s metropolitan areas – but only to a limited degree and only in the most developed urban centres. The persistence of ‘racialised’ voting patterns is unsurprising given the country’s history and the persistence of apartheid’s spacial planning and economic, demographic and cultural disparities in the present. The implication is that party support patterns are as suborn and persistent as other social patterns. From a financial market perspective this can mean both that the political environment is stable and predictable but also that such secure incumbency is likely to gradually increase patronage and complacency.

(You might want to temper these conclusion with the views of Pallo Jordan who wrote in a Business Day column: “Racial interpretations of voter behaviour might be very comforting for analysts who confuse public manifestations of discontent with the rejection of the governing party. Unless the coloured voters of the Northern Cape are being included in the “racial solidarity” African voters are accused of, their political choices can only be explained in terms of attractive policies”. I think Jordan’s argument is taking on something different to the points I make above, but I include them – Jordan’s comments – here in case I am missing something.)

The main implications: government, the ANC, the NDP, the middle ground and the EFF

These are, in my opinion, the main financial market implications of the election:

  • The result is generally financial market positive: it leaves the ANC with a secure enough majority to be able continue ‘grasping the nettle’ of macro-economic policy stability, including fiscal consolidation.
  • However, there may be just enough voter admonishment implicit in the ANC’s loss of 15 National Assembly seats and the more dizzying drops in the major metropolitan areas to cause the party to attempt a clean-up of the behaviour of some of its top leaders.
  • My reading of the relative ANC losses in the main urban centres of Gauteng is that these were only partly driven by the introduction of unpopular e-tolling gantries in that province. A more fundamental divide is the kind of leadership Jacob Zuma has brought to the ANC: with his ‘rural big man’ characteristics, the casual diversion of public funds for the development of his Nkandla home, his backing of patriarchal legislation like the Traditional Courts Bill and his too cosy, mutually beneficial, relationships with business people like the Shaik and the Gupta families (see here and here). The most educated urban voters are the least likely to tolerate this kind of behaviour by the country’s top politician – and this is reflected in voting patterns.
  • There is very little disagreement between the ANC and the DA (and most of the smaller opposition parties, except the EFF) as to the broad outlines of economic policy. Thus the National Development Plan and a broadly stable macro-economic policy platform is the consensus of over 90% of the political establishment.
  • It has long been a feature of South African politics that ‘the real opposition’ and political contest is not in parliament, but actually within the ANC/SACP/Cosatu alliance itself. This alliance has not, since 1994, been less divided over economic policy. The SACP is firmly backing the Zuma government and Cosatu is in disarray, leaving the ANC/SACP to pursue the NDP and related policies.
  • While I do not think the NDP is a panacea for South Africa’s myriad economic problems, the programme’s holistic approach to economic development, it’s emphasis on improving infrastructure and its greater reliance on market mechanisms for the allocation of capital (more so than previous such policies like Asgisa, IPAP 1 & II and the New Growth Path) make it broadly financial market positive.
  • The ANC is signalling its intention to ratchet up Black Economic Empowerment and affirmative action in the workplace (through legislative, regulatory, political and state spending mechanisms.) This will get loud – and will become a more central feature of the valuation of companies and economic sectors in South Africa.
  • The rise and vibrancy of Julius Malema’s Economic Freedom Fighters has been, perhaps, the most notable feature of this election. Malema faces a final sequestration hearing on May 26 – and if his provisional sequestration is upheld he will be barred from being a member of parliament.
  • With or without its leader in parliament the EFF is already vigorously attempting to link up with striking platinum workers and with service delivery protesters.  This will become an increasingly noisy feature of South African politics. The upside is the ANC will probably become less ambiguous in its attitude to such strikes and protests. The downside is there will now be a parliamentary pressure group backing the radical populist policies of land seizures and mine nationalisation. My view is this is, on the whole, a healthy development. The radical populist views have been present in the ruling alliance and the society more generally since 1994 anyway. Having those views directly represented by a minority party in parliament formalises the debate and contest within the democratic and constitutional structures of the country. Of course that doesn’t mean the EFF won’t constantly attempt to take its struggle to the streets, but it does mean that the ANC will be clear on where it stands in relation to those issues.
  • All attention will now move to Jacob Zuma’s new cabinet (which will be announced soon after his inauguration – which I expect on the 24th of May) and to succession issues within the ANC.

A couple of asides as I tinker away at a framework for assessing Sunday’s Cabinet announcement.

EFF

The media noise surrounding Helen Zille’s putative attitude towards Lindiwe Mazibuko is interesting, but largely because it is so loud.

In the last hour I have been asked twice (by journalists) for an opinion on Mmusi Maimane‘s acceptance of nomination to the position of DA Parliamentary Leader.

Not long ago I would have (privately) filed news of DA power-struggles and leadership changes under ‘white mischief’ and forgotten about it – confident that no client or journalist would ask for an opinion.

Real politics, the stuff that actually made a difference to legislative or regulatory outcomes, happened within the Tripartite Alliance or in the interactions between the ANC and business.

I think that was a useful shorthand that saved me time in the past, but clearly I will have to break the habit.

The Alliance no longer contains its own opposition – and is therefore no longer the primary site of politics.

The EFF, Amcu, whatever Numsa finally initiates and the DA all (healthily in my view) strip out a sort of multi-polar disorder from the ANC.

Politics will now (tend to) happen where it is meant to: on the streets and in parliament … and not where it previously tended to happen: in back room deals and as a result of other shenanigans in the ANC-led alliance.

There is an obvious trade-off between clarity of government policy/structure and the broadness of the ANC’s alliances. As those alliances break or simplify or are otherwise transformed I expect some kind of dividend for governance and economic policy.

If I might add …

Another habit of thought I might soon have to break is my instinctive intellectual pessimism about politics.

By ‘pessimism’ I do not mean an automatic assumption that politician are corrupt or incompetent.

What I mean is that I tend to think that politics changes little in the world, but that the world changes the politics.

I think this might make me some kind of market fundamentalist. I am certain that to grow, the DA will have to become more like the ANC – in its policy and in the class and racial character of its leadership.

The assumption (and maybe error) I make is believing that  the electorate purely aggregates the interests of broad groups of people and the political parties are compelled to reflect the character and interests of those groups.

So my ‘habit of thought” is that I assume that for a party to grow it will necessarily become more generic and bland.

Why this is ‘pessimistic’ (and I hope incorrect) is I tend to assume that our politics increasingly changes nothing (except to the negative) and parties endlessly drift towards a sort bland and generic centre in response to the ‘market’ of the bland and generic voters.

No wonder I was a secret reader of P J O’Rourke. He once observed in his normal right-wing, smug but hilarious way:

Now majority rule is a precious, sacred thing worth dying for. But like other precious, sacred things …. it’s not only worth dying for; it can make you wish you were dead. Imagine if all life were determined by majority rule. Every meal would be a pizza.

P. J. O’Rourke, Parliament of Whores, 1991

Why this is a bad habit

I worry that my instinctive attitude is a potentially serious error. I can see how this ‘political pessimism’ might be a useful short cut in relatively homogeneous and stable first-world countries.

The main parties in those countries blur into each other.

But recession and unemployment, even in those countries,  is inevitably accompanied by a growing divergence in the political arena – a shrinking of the centre and growth of radical nationalists and/or populists.

Surely this is a better permanent model for understanding South Africa?

I suspect our calm transition and the stable predictability of the ANC and it’s comfortable electoral majority might have lulled me into a false sense of security.

Who could not smile at the jaunty red boiler-suits, gumboots and maid’s outfits adorning the mostly young EFF members being sworn in to parliament yesterday?

I am delighted the EFF are there and I think it is healthy for our politics that the ANC will have to contest with the EFF in the minds of voters and in the national and provincial assemblies.

Rather that than the nodding and winking and/or furious factional splits that have gone on up until now in the closed shop of the ANC.

But it should be front of mind that the ANC has to answer the challenge of the DA and of the EFF.

The ANC still has a safety margin and room for manoeuvre, but party leaders will have heard the howls in the night and are unlikely to just sit back staring into the fire hoping  for the best.

There is something strangely compelling about Chris Griffith’s now infamous comments about his salary and perks – published in Business Day last week.

Remember these are the words of the CEO of Amplats, the biggest platinum company in the world. It cannot have escaped your notice that a bitter and grinding strike throughout the South African platinum sector is entering its 17th week. The Business Day story about the comments also refers to the 2013 Amplats annual report that mentions Mr Griffiths was paid R17.6m, of which R6.7m was a basic salary, for that year.

I have put the following quotes from Chris Griffith in the order in which they appear in the story but they did not necessarily flow together like this in the original interview:

If this debate is around the comparison of CEO pay and somebody else, then we’re completely missing the point. There is a greater supply of lower-skilled people … What the unions are doing is putting more people out on the street … Am I getting paid on a fair basis for what I’m having to deal with in this company? Must I run this company and deal with all this nonsense for nothing? I’m at work. I’m not on strike. I’m not demanding to be paid what I’m not worth.

Since then Griffith has apologised, saying:

I wish to apologise to the employees of Anglo American Platinum and the readership for comments I made in a Business Day article on Wednesday … My choice of words was inappropriate and a poor way to describe the extremely challenging situation we find ourselves in.

But the truth of the matter is that Griffith’s original comments are clearly what the company believes because this is what it does. Everything else is public relations and spin.

At the AGM of a listed company shareholders vote approval or otherwise of executive remuneration. So in one way or another the actual owners of this company are happy to pay Griffith’s fee. The company either believes he is worth that (and they pay him for it) or they do not believe he is worth it (and they pay him less … and perhaps he doesn’t accept the job.)

This might feel monstrous and unfair to you and me – especially when we read of the hardship experienced by the workers on those mines and the sacrifices they seem prepared to make to improve their lot. But in the world in which these hugely powerful companies operate, supply and demand is the basic mechanism that determines the price of everything.

I don’t like euphemisms – it is (almost) always better to see the snarling teeth of the beast rather than to be beguiled by its fake smile.

The whole exchange reminds me of a P. J. O’Rourke essay I read several years ago.

He’s talking about bigotry in apartheid South Africa (and be warned he uses language often considered to be rude or impolite*):

Everywhere you go in the world somebody’s raping women, expelling the ethnic Chinese, enslaving stone-age tribesmen, shooting communists, rounding up Jews, kidnapping Americans, settling fire to Sikhs, keeping Catholics out of the country clubs and hunting peasants from helicopters with automatic weapons. The world is built on discrimination of the most horrible kind. The problem with South Africans is they admit it. They don’t say, like the French, “Algerians have a legal right to live in the sixteenth arrondissement, but they can’t afford to.” They don’t say, like the Israelis, “Arabs have a legal right to live in West Jerusalem, but they’re afraid to.” They don’t say, like the Americans, “Indians have a legal right to live in Ohio, but oops, we killed them all.” The South Africans just say, “Fuck you.” I believe it’s right there in their constitution: “Article IV: Fuck you. We’re bigots.” We hate them for this. And we’re going to hold indignant demonstrations…until the South Africans learn to stand up and lie like white men.

That’s P. J. O’Rourke, Holidays In Hell,  Atlantic Monthly Press, 1988. It’s very, very funny – albeit irritatingly smug and right-wing. I have long since lost the book, but I found that quote here.

 

(Below anxiously added a few hours after initial publication.)

* And be further warned that he (O’Rourke) is sneakily winking at apartheid … weellll, at least they** don’t lie about it! 

** And be even further warned that he talked about “South Africans” in 1988 as if the term referred elusively exclusively to white South Africans who supported apartheid.

(Lawdy, enough already! Just leave it alone, the damage is done – Ed.)

(… and finally, despite Ed’s protestations, and after having glanced over this several weeks after publishing it: PJO also failed to understand the systemic and systematic nature of apartheid …. ‘hunting peasants from helicopters’ is an outrage, but comparing that to ‘apartheid’, the specific historical system of government and social control for a whole country,  is a category error.)

 

 

I am an independent political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

A significant portion of my income is currently derived from BNP Paribas Cadiz Securities (Pty) Ltd.

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