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It’s the 1st of April and I have already seen that Helen Zille has accepted an ‘elecnomination‘  to spend two weeks living in Khayelitsha, surviving on the minimum wage and using a bucket toilet. Good for her, I say.

In other news the DA has announced that the Western Cape government it is going to upgrade Zille’s private residence in Cape Town. They plan to spend R20 million, but have wisely put aside  R246 million in case of overruns. Nothing wrong with that … as we have seen elsewhere.

In entirely unrelated news the Sunday Independent carried a story about some polling apparently undertaken by the legendary Stan Greenberg on behalf of the DA.

Just as an aside: the headline in the Sunday Indepent calls Greenberg the “De Niro of politics”.

This is a picture of Stan Greenberg:

StanGreenberg

This is a picture of Robert De Niro:

de niro

Oh yes, now I get it. They are both white men, over a certain age …. (oh leave it alone! It’s not important, why don’t you just let it go? And anyway maybe there is a joke here you just don’t get – Ed)

Hmm, okay, sorry …

The DA polling was something of an antidote to an Ipsos poll commissioned by the Sunday Times and published a week earlier.

First the antidote from Stan, the DA and their various minions:

pollsPoilin

 

Then the Sunday Times Ipsos poll published March 22:

IpsosSundayTImes

 

I am not, actually, saying treat this sort of thing with the same caution as you would treat an April Fool’s story. Both the pollsters have defensible and explicable methodologies … but clearly they can’t both be right.

In general I treat the polling with a degree of caution. Results are often leaked or announced with the intention of impacting on the final outcomes (by, for example, scaring voters and supporters into getting out to the voting booths or by bolstering the flagging energies of party workers).

I have used, as a sort of deductive shorthand, a ‘below 60 percent’ versus an ‘above 60 percent’ for the ANC as an indicator of a ‘danger zone’ for Jacob Zuma.

Instinctively I think the ANC will lose votes because of the leader’s breathtakingly cavalier attitude to public money and resources. The alternative would be for me to believe things about the average South African voter that I would feel uncomfortable about admitting in public. The average ANC member voted for Jacob Zuma as president of the party at both Polokwane and Mangaung … so there is nothing I need to say about that.

So … as part of my weekly review of SA politics yesterday morning I tried to collate some of the responses to the Nkandla Report with the specific intention of using these as an heuristic tool  to gain some deeper insight into what is going on.

That’s just a fancy way of saying that when I am unsure of what is going on then I look around at the responses of people I suspect do know what is happening and try and extrapolate from that a greater level of insight i.e. I am using the responses as a heuristic tool … although as you will see in the link ‘heuristic’ means more than just an investigative short cut.  It didn’t achieve what I hoped, but here are my truncated efforts anyway:

Responses to the Public Protector’s Nkandla Report reveal much, but not enough

Responses to Public Protector, Thuli Madonsela, ruling that President Jacob Zuma and his family directly benefited from the improper use of state funds in the (approximately R230m) upgrade to his (Jacob Zuma’s) Nkandla homestead and that he “failed to act in protection of state resources” are flooding in from all directions.

Obviously all the major opposition parties are using the report to attack the ANC and Zuma – and are generally deifying the Public Protector. However, the diverging responses from within the broad membership and leadership of the ruling African National Congress are the most relevant and interesting.

The party itself (and the SACP and the formal structures of the divided Cosatu) are essentially defending the President and/or attacking Madonsela (or the manner in which her report was delivered).

Several news media have attempted to list the number of ANC leaders and widely respected ‘liberation heroes’ who have in some way expressed both support for the integrity of the Public Protector and support for her findings. The list has included previous President Thabo Mbeki, Deputy President Kgalema Motlanthe, Defence Minister Nosiviwe Mapisa-Nqakula (although her problems were primarily with the sexist language of some of the criticism … and up till now I have seen her as something of a Zuma loyalist, so I will have to do some homework on this one), ex-minister Pallo Jordan, ex-minister Ronnie Kasrils and a host of other individuals (e.g. Ben Turok and Marion Sparg) and particular branches of the party and parts of individual unions of trade union federation ally Cosatu which have in some way defended the Public Protector and supported her findings.

So what?

‘Nkandla’ is, on the face of it, small change compared to myriad similar scandals surrounding the President.[1] The difference in this case is a ‘Chapter 9 institution’ (an institution established in terms of Chapter 9 of the South African Constitution to “strengthen constitutional democracy in the Republic”) has made findings that essentially allege that Jacob Zuma has improperly benefited from state spending and that while there is no proof that he engineered this outcome, he had a responsibility, according to the Public Protector, to be aware that it was happening. These might be ugly, but not exactly impeachable offences – unless you believe they are purely the tip of a much larger iceberg hidden through luck, trickery and a good legal strategy.

There are so many issues that this raises, but I will mention only 3:

Firstly, does the ANC lose votes because of this? More precisely: does the release of the report just over a month before the election lose the ANC more votes than it would have lost anyway as a result of its president’s … how should I put this … now very widespread reputation for poor judgement with regard to his private financial affairs?  I would guess ‘yes’.

I have no doubt that there are vast groups of voters who see Madonsela’s report as just another attack on their candidate and who will be completely unmoved by the details. I also suspect that there is a large group that despise the ANC leadership choices but will stick with the party in the belief that it will self-correct sometime soon. However, there are obviously those for whom Madonsela’s report is the proverbial straw – but I suspect this is a marginal group. If the margin is between 60% and 59% then Madonsela’s report could make an important difference. If it is between 63% and 64% then, voting wise on May 7, it is not going to make much difference.

Secondly, the ANC has benefited from occupying the high-ground of moral authority. Whatever its failings it was always the party of national liberation, the party of Nelson Mandela, the party that embodied the majority of black South Africans’ struggle for self-determination and against apartheid – unimpeachable and morally irresistibly aspirations and goals. The voices of disquiet from within the party are beginning to suggest that this objective or record has been redeployed in a baser struggle.

Listen carefully to the coded and heavily portentous words of Thabo Mbeki talking at the 20th anniversary of Wiphold at Sun City on March 22 2014:

 “Regrettably, today, a mere 20 years after our liberation, it is obvious that many in our society have forgotten or are oblivious of the human cost our freedom entailed.  Accordingly, these abuse the gift of our liberation to abuse our precious freedom to do things for themselves whose only objective is personal aggrandisement – thus to use their access to state, corporate and social power radically and systemically to subvert the required sustained and speedy advance we need towards the realisation of the objective of a better life for all our people.”

The Public Protector’s report is reverberating through the ANC (see key ANC intellectual and former cabinet minister Pallo Jordan’s column in the Business Day for another example) and forcing many of the ‘old guard’ to take a public stand. In almost all cases the criticism is unspecific and is being made by people who no longer occupy key positions in the party or state. However, there is a cumulative loss by those who hold central power in the ANC of moral authority. Without moral authority, hegemony must be won with patronage, manipulation, blackmail and force. The ANC is still close enough to its ‘liberation roots’ for such a changing of the guard to cause serious, even dramatic, ructions amongst the party faithful.

Finally, Jacob Zuma has been (significantly) responsible for growing ANC electoral support in Kwazulu-Natal from 33.33% in 1994 to 63.97% in 2009. The province has a population of 10 456 900 people (second to Gauteng which has 12 728 400 according to the 2011 census). Kwazulu-Natal is now a key ANC stronghold and the only province where the party’s electoral support grew during the 2011 municipal elections. More than a quarter of the party’s total membership comes from the province. “On Friday, thousands of ANC supporters wearing yellow T-shirts emblazoned with the words “Hands off Zuma’ marched in Port Shepstone on the south coast … after eThekwini did so earlier this month” – (City Press 30/03/2014). If, as we suspect, Jacob Zuma’s lifestyle and probity issues are losing the ANC a degree of support in many, especially urban, areas of the country but that his personal support is continuing to grow amongst isiZulu speakers in rural Kwazulu-Natal, the party will face the further corroding influences of regionalisation and tribalism. My suspicion is Zuma’s vote pulling power in Kwazulu-Natal peaked in 2011, but only May 7 will put that to rest one way or another.

[1]Jacob Zuma’s financial advisor Shabir Shaik was sentenced to two 15 year terms in prison after he was found ‘guilty of corruption for paying Zuma 1.2 million Rand (US$185,000) to further their relationship and for soliciting a bribe from the French arms company Thomson-CSF, as well as guilty of fraud for writing off more than R1 million (US$154,000) of Zuma’s unpaid debts” – http://en.wikipedia.org/wiki/Schabir_Shaik_trial accessed on 30/03/2014 at 21h17 CAT

 

 

I am on my way to London to speak to the funds that buy and sell South Africa’s corporate and government bonds i.e. the market that sets the price at which the world is prepared to lend us money.

Daily I become more convinced that the South African political economy is, like quick clay so unstable that when a mass …  is subjected to sufficient stress, the material behavior may transition from that of a particulate material to that of a fluid.” 

The other metaphor I was fiddling with was: all the cards have been thrown in the air and where they will land, nobody knows. (I’m sure there is an elegant song or poem that says something like that, any help there would be appreciated  … that request  is the WordPress equivalent of a  #twoogle - Ed) 

But before I get onto the more lofty questions about the future of life, the universe and everything, I thought I would send you my latest news update – so you can see the gradually building case for my sense that everything has changed. (Thanks as always to BNP Paribas Cadiz Securities for generously allowing me to republish this – albeit a few days later – here.)

  • A new socialist party appears on the horizon of South African politics … it’s not all good news, but nor is it all bad
  • Murmurs about vote rigging – a leading indicator of political instability 
  • Mining policy meets with surprising levels of push-back from the private sector – in the Business Day at least
  • The future push for the NDP, Hitachi and the ANC, final takes on the budget and why South African telecommunications infrastructure is a very fat golden goose

Numsa confirms it will launch socialist party

The biggest union in the country is effectively in the process of being expelled from the ANC- aligned Cosatu and has announced its intention to establish a party, provisionally to be called the United Front and Movement for Socialism.

“We need a movement for socialism,” general-secretary Irvin Jim told reporters in Johannesburg on Saturday.

He (Jim) continued on to argue that ‘leadership of the national liberation movement as a whole had failed to lead a consistent radical democratic process …’ (Jim paraphrased in numbing detail in SABC Online, Sunday, 2 March 2014, 17h49.)

Numsa has been given seven days (from last Thursday) by the Cosatu NEC to provide reasons why it should not be suspended from the federation. The main issues motivating the suspension are that Numsa has been openly critical of the ANC and the Cosatu leadership and that Numsa has begun competing with, especially, the National Union of Mineworkers, in defiance of Cosatu’ s one-industry-one-union slogan.

So what?

This is unfolding much as predicted. The ANC under Jacob Zuma has decided (or been compelled) to impose discipline on the ruling alliance and force a degree of compliance with the various policies of the ANC and its government. The discipline sought by the ruling group within the ANC is motivated by apparently divergent concerns. On the one hand, Jacob Zuma and his allies are attempting to get the left-wing to stop attacking them (Jacob Zuma and his allies) as corrupt and incompetent. On the other, Jacob Zuma and his allies are attempting to force a degree of support for the National Development Plan (NDP), a policy that the left-wing generally sees as ‘neo-liberal’, anti-poor, anti-working class and conservative in fiscal and monetary terms.

There is a fine tension here between positives and negatives (for the audience NB writes for … mainly fund-managers – Ed). The NDP has been widely welcomed in financial markets. But the corruption associated with the holding of high office in South Africa is becoming something of a crisis for investors of all stripes. It is as inaccurate to think of Jacob Zuma’s Nkandla faction as purely the champion of market friendly policy as it is to think that Irvin Jim, Zwelinzima Vavi and Numsa are purely the anti-corruption champions of South African politics.

For now, we need to watch for the formation of the socialist party, probably at or before the year-end. Such a party will have a multiplicity of impacts including (but not limited to) undercutting areas of ANC support and forcing the ANC towards finding policies that stimulate economic growth.

(By-the-way I feel it is likely that this new party will have more substance and longevity than the EFF and through a variety of possible mechanisms – including some kind of alliance or even amalgamation – could subsume much of the EFF support and intellectual leadership. But that sort of speculative concoction will follow this post some time over the next few days.)

UDM says beware of vote rigging

The Sunday Independent (2 March) reports that Bantu Holomisa of the United Democratic Movement claimed that ‘rogue elements’ in the Independent Electoral Commission will help rig the 7 May election to ‘facilitate the underperforming ANC’:

“The ANC is very concerned (about shedding votes), hence they are pinning their hopes that those rogue elements will run the elections, so rigging will be on the high. There is no doubt about that” – Bantu Holomisa in the Sunday Independent, 2 March 2014.

So what?

The effectiveness, reliability and constitutionality of the Independent Electoral Commission have been important guarantors of aspects of South African democracy. While Holomisa’s allegations are not substantiated (in the aforementioned interview), the fact that such allegations are made can be an important leading indicator of long-term political stability. People and political parties must trust the electoral system if they are to accept the outcome of elections.

(Holomisa’s ‘rogue elements’ probably refers to Pansy Tlakula, chairperson of the IEC, who was found last year by Public Protector Thuli Madonsela to be guilty of improper conduct and maladministration with regard to the R320 million lease contract for a new head office for the IEC. Tlakula is currently challenging Madonsela’s finding in courts. The IEC and the Public Protector are both institutions established in terms of Chapter 9 of the South African Constitution with specifies that they are designed to “strengthen constitutional democracy in the Republic” – Chapter 9 of the Constitution of the Republic of South Africa, 1996.)

Mining policy pushback – in the Business Day anyway

Today’s Business Day leads with a story claiming that there are ‘growing rumblings’ from the mining industry about the ‘once empowered, always empowered’ equity provisions in the Mining Charter. The issue in this case is that the government will this year audit the mining companies’ requirement to be at least 26% black owned. Neal Froneman, CEO of Sibanye Gold, is threatening to go to court to have Sibanye’s empowerment transactions counted in the audit, even if the black beneficiaries have since sold out of their equity.

Mining companies are issued licences pursuant to them meeting certain criteria with regard to Black Economic Empowerment, employment, social, community and labour obligations.

So what?

The series of stories in the Business Day about this matter smacks a little of a campaign by the newspaper – nothing wrong with that but then consume them tentatively. The story is worth reading just to catch the tone and tenor of Neal Froneman – who sounds fed-up to the point of rebellion. Catch it here.

The article quotes Mike Schroder, a portfolio manager of Old Mutual’s gold fund, at a mining conference last year: “One cost that I can’t chart is BEE (black economic empowerment). It doesn’t affect the bottom line or the EPS (earnings per share) or PE (price:earnings) ratios, but every time a BEE deal is done, our pension funds, our provident funds, our unit trusts have to chip in.”

I expect these legislative interventions by the government to strengthen not weaken over time. It is my initial impression that part of the ANC’s answer to the populist incursions onto its territory by the EFF will be to significantly strengthen ‘transformation obligations’ on the private sector – and in return the government will back the private sector against the labour unions. I think these trends will become visible before the end of the year and will be accompanied by greater emphasis on the NDP and by the axing of the ANC’s left-wing elements. Thus, the ANC will attempt to reconfigure South African politics, basing itself more tightly on the emerging property-owning and middle classes than previously, and in a loose alliance with the private sector.  This feeds into my ‘hoping for the best’ view of last week – although we should be cautious, because these complicated trade-offs will as likely end in tears as smiles.

Bits and Pieces

  • Last week, Helen Zille, leader of the opposition Democratic Alliance, became involved in an unseemly Twitter spat with City Press journalist Carien du Plessis. Actually, it was only Zille doing the spatting and (probably to Zille’s mortification) du Plessis wrote a calm and thoughtful defence of herself in the City Press on Sunday (2 March 2014). In the Twitter exchange, Zille essentially accuses du Plessis of apologising for being white (as far as I can make out). Zille is feisty and combative and there have been several ‘scandals’ around her phraseology and views. She definitely skirts the boundary of what is acceptable in the highly circumscribed and sensitive language of political debate in ‘post-apartheid South Africa’. Will this lose the DA any votes on 7 May? Will it gain the party any? I have no idea.
  • Business Day editor Peter Bruce’s Monday morning column, ‘The Cutting Edge The Thick Edge of the Wedge: The Political Basis for budgets (if he perchance comes to these lonely shores and find’s that error, I ask his forgiveness in advance) should be required reading for anyone interested in the speculative intersections between South African politics and economics. This morning, he claims that a normally reliable informant, someone “spectacularly close to the Presidency”, told him that Trevor Manuel will stay on in government as a super-minister in the Presidency in Zuma’s next administration, that other ‘left leaning ministers in the economics cluster’ (he probably means Ebrahim Patel in EDD and Rob Davies in DTI) will be shifted aside, that the ANC will hold its vote above 60% on 7 May, that the new administration will make “a big and forceful push after the elections to begin implementing the National Development Plan”, that the EFF and Numsa’s new party will not fly, and that Zuma will secure his safety from prosecution for fraud post his presidency by ensuring that his ex-wife and African Union President Nkosazana Dlamini-Zuma is his successor. (The argument in Peter Bruce’s article being: “She would not put the father of her children in jeopardy – which I don’t necessarily buy, but is interesting anyway). This view concurs quite closely with my view articulated last week that it appears, shorn of its ‘left’ and ‘right’ factions, the ANC will be obliged (and set free) to pursue vigorous economic growth if it is to win the 2019 election.
  • Hitachi has bought back the ANC stake (held by investment company Chancellor House) in Hitachi Power Africa as the shareholding constituted ‘a conflict of interest’. You don’t say. Hitachi Power Africa won R38.5 billion of contracts from Eskom for the Medupi and Kusile power plants. Nuff said.
  • The weekend press had a few ‘final takes’ on the budget. The two I found most interesting were Peter Bruce, in his aforementioned column, writing that it was “a budget of almost unsurpassable banality”, and Numsa’s Irwin Jim saying at his Johannesburg press conference on Saturday that the budget “more than anything else confirms the right-wing shift in the ANC/SACP government”. I won’t say anything.
  • Telkom CEO Sipho Maseko wrote a paid-for ‘open letter’ in the Sunday Times yesterday accusing MTN SA and Vodacom of acting against the public interest (of expanding access to and lowering costs of a ‘modern communications infrastructure’) by opposing lower termination rates. Maseko claims that Telkom had subsidised Vodacom and MTM to the tune of R50bn over two decades. Professor Alison Gillwald of Research ICT Africa was quoted in today’s Business Day (by the excellent Carol Paton) as saying “Telkom is right. MTN and Vodacom had an extraordinary termination rate asymmetry with Telkom over 20 years.” She went on to say that, during the period of asymmetry, the private companies rolled out “enormous infrastructure that has improved access.” Finally, she says: “While one wouldn’t want to kill the golden goose, she was a very fat goose”  … which I thought was a good enough turn of phrase to deserve republication anywhere.

* That is deliberately missing an apostrophe – the ‘*’ makes you think it might be there and you are forced back and forward between the noun and verb meaning. (Get a life! – Ed.)

This is a quick  aside before getting onto the more riveting topics of the May 7 elections, service delivery protests (and their search for a Gene Sharp handbook as well as the predictions of the Davies J-curve), the platinum strike, Julius Malema’s sequestration hearing in the North Gauteng High Court this morning (and the pressing matter of whether this could bar him from becoming a member of parliament in terms of section 47c of the Constitution) and the truly interesting Ipsos comparisons of the demographic characteristics of supporters of the ANC, the DA and the EFF.

Out of the mouths of babes and sucklings**

Over the weekend a young, close relative of mine wondered aloud why South Africans continued to vote for the ANC.

The child explained to me late on Saturday night that the ruling party was an institution so obviously bereft of redeeming features that only a person on drugs could possibly continue to vote for it.

“Why don’t they vote for another party?” asked the child in exasperation.

I have to admit that while I recognised the opportunity was begging for a cautious and loving Socratic exchange, I couldn’t raise the enthusiasm to give more than an exhausted ‘who’s they‘, followed by a quick retreat and request a continuation in the morning.

The next day, having completed the obligatory 52 hours (I think that’s about how long it takes?) of newspaper reading, I found myself sitting beside the same child watching Adventure Time on television.

When the charming, nuanced, off-beat and deeply intelligent (in comparison to other media I had been consuming that morning) cartoon was over, the child switched off the television, turned his angelic face towards me and asked: “so, about the ANC …?”

I cleared my throat and gathered my thoughts.

“White settlers from Holland” I began, gazing into the middle distance with a faintly sad expression on my face, as if watching the mournful parade of our history playing out in my mind, “first came to South Africa in 1652 and many bitter struggles were fought over land and cattle.”

Jumping ahead somewhat I went straight to the nub: “On January 8th 1912, chiefs, representatives of people`s and church organisations, and other prominent individuals gathered in Bloemfontein and formed the African National Congress. The ANC declared its aim to bring all Africans together as one people to defend their rights and freedoms.”

Okay, I’m messing with you … that’s a cut-and-paste from ‘a brief history of the ANC’ on the organisation’s website.

However, I find it significant that I had to open the web page and read some of the highlights from there. Somehow the essential story, the glorious history of the glorious struggle for freedom and democracy, the dead heroes, the banners, the flags and the songs, sounded tired and clichéd and faintly hackneyed as I ran through it without much real enthusiasm.

But I still argued the toss. It was not surprising that most black South Africans who were registered to vote would still be voting for the ANC (and, btw, ‘most black South Africans registered to vote’ was still probably ‘most South Africans of voting age’ given both our demographics and our 77% voter registration). The ANC led the fight against Apartheid. The ANC has presided over massive and ongoing redress in favour of black South Africans since 1994! A few bad eggs in the leadership do not change that.

The child raised a litany of objections: ‘Zuma’, ‘Nkandla’, ‘the arms deal’, ‘police violence’, ‘judicial – and other – appointments’, ‘the diversion of billions of rand into the coffers of fat cats and the party itself’, ‘governance failures’, ‘the Traditional Courts Bill’, ‘borderline homophobia’, ‘the impending Zuma/Putin nuclear caper’, ‘growing intra-ANC violence in contestation for increasingly lucrative political jobs’ and ‘increasing state sanctioned violence’ – duh! 

(I suspect the ‘child’ is imaginary, a clunky rhetorical device … also, ‘duh’ means ‘give me a break’, or ‘don’t waste my time with the stupid and obvious’ – Ed)

 The child’s arguments asserting the extremely putrid state of the ruling party became louder as did my insistence that the majority of voters were not brain-dead zombies acting out a destructive and unconscious impulse.

From the vantage point of this Monday afternoon I worry that I sounded a little like a master of ANC Apologetics ; but the child, delightfully, sounded like a shorter, skinnier, cleverer and more charming Wilmot James

I obviously didn’t answer the question why do the majority of South Africans still vote for the ANC? to the satisfaction of he who asked it – although I am equally satisfied that I can understand why a majority of normal, sane black South Africans, acting in their enlightened self-interest, might vote for the ANC.

However what I didn’t say in the argument with the child is that I am also sure that along the path down which the ANC is currently travelling, with Nkandla (the political/economic/security faction rather than the homestead) leading the way, awaits a place or a moment at which the ANC will lose the support of the majority of free thinking, free voting* South Africans. Of this I am convinced. I think that moment is some distance ahead – only conceivably first appearing in 2019.

But who walks blindly towards catastrophe, when it is visible, predicted by one’s own forecasting, evident in every stumble along the deteriorating path?

Think about the ANC as having a brand value. Think about the forces that operate within the ANC as a kind of political market. I am hopefully expectant that that market will automatically self-correct … that the  brand is so valuable that the threat of its loss will trigger a protective impulse, will mobilise the many who have much to lose if their asset continues to be led and used in the manner it is being led and used by its incumbent central leadership.

Obviously the incumbent leaders of the ANC will not willingly lose control. The consequences for this particular crew would be more negative and profound than, for example, a similar loss of control was for Thabo Mbeki. Also the incumbent leadership has a security/intelligence/street-fighter thing going that could make it a vicious and dangerous opponent of any serious movement for renewal within the party.

Finally, I imagine that the fewer votes the ANC receives in the May 7 election (which I don’t see being fewer than 60% of the total) the more likely and vigorous will be an attempt to change the organisation’s current trajectory and leadership.

(I am not going to run all of that passed the aforementioned child – he will, with some justification, roll his eyes and say whatever.)

* I use the “free thinking, free voting” qualification because it is not an eternal given that we will remain, as we have been (only briefly, since 1994) free, or relatively so, to think and vote as we please.

**’Out of the mouths of babes and sucklings’ comes from Matthew (21:16) recalling the words of Jesus, who was in turn referring to Psalm 8 -  from the King James Version, a widely admired (for its literary value) English translation of the Christian Bible … that’s for any readers in a geographical, cultural and/or technological location so remote that even Google cannot help them as it has helped me fake that I knew the full origin of the phrase before I sat down to write this morning.

I have been agonising over whether to keep this website going –  or to consign it to the wastelands of the interwebs there to wander mournfully, accumulating lurid advertisements for secret ways of getting rid of belly fat and invitations from young, beautiful and lonely people, in your area, waiting by their phones for a call from you.

After weighing matters too arcane to bore you with here I decided to gird my sagging loins (that’s long and loose clothing, not that other thing you were thinking – Ed) and once more into the breach … and all of that.

So … I have written various 2014 previews. One you may have seen was for the Mail & Guardian and titled ‘What I will be telling investors in 2014′. I would have liked to give it a better edit – and I think I don’t adequately deal with the issue of the corroding effects of the original arms scandal - but you may be interested in reading it anyway. Catch it here.

I also published in early January, as part of BNP Paribas Cadiz Securities’ 2014 Outlook, the overview below. (Thanks, as always, to my main contract holder for generously allowing me to republish a few weeks later here.)

(Remember, no-one has been to the future and returned with any useful information as far as I am aware … so treat the following with a healthy degree of scepticism – Ed)

Political outlook 2014: No safe haven in the storm

Introduction

At least part of our sanguine view of South African politics has rested on the belief that the ANC had several more decades of 60%-plus support at the polls. We were of the view that while this could lead to corruption, complaisance and cronyism, it would also allow the party to keep the country, government and constitution steady while SA undertook a wrenching transformation from its apartheid past to whatever the future held.

However, several important fissures have appeared in the ANC’s support base that suggest this assumption of indefinite ruling party dominance may not be correct and, therefore, that the essentially benign shepherding of that transition is under strain.

Amcu: bridgehead in previously safe African working-class constituency

Firstly, the success of the Amcu (Association of Mineworkers and Construction Union) in the mining (particularly platinum) sector has led to the virtual collapse of a key ANC labour ally, the National Union of Mineworkers (Num). Amcu is important for a number of reasons, but in this section, the issue is that it has created a bridgehead in the ANC’s core constituency that has every possibility of linking up with new left-wing (or in other ways radical) political formations that will challenge the ANC politically in the next few years.

Julius Malema and the formation of the EFF

Secondly, the expulsion of Julius Malema from the ANC and his formation of the Economic Freedom Fighters (EFF) party damages the ANC in two important ways. It draws disaffected young black South Africans, who are experiencing unemployment rates of about 60%, out of the ANC. And it captures ideological terrain that the ANC was previously able to control and finesse, namely, the question of the nationalisation of mines and land.

A strong and confident ANC has, since 1994, essentially been able to tell its electoral constituency that patience is required for transformation and that constituency has, with mutterings, accepted the ANC’s moral authority on the matter. However, that consensus is collapsing. Mr Malema’s ‘red berets’ are attacking the president at every opportunity and arguing that the ANC has sold out the birth-right of Africans and has been bought off by the opportunity to loot the state and by juicy empowerment deals. The message has a natural resonance among poor urban and unemployed youth – but up until Mr Malema’s expulsion, the ANC was able to articulate both sides of this debate within itself.

NUMSA split: The unravelling of the ruling alliance

Thirdly, it appears that the long-standing split within Cosatu (Congress of South African Trade Unions) over its relationship with the ANC has been forced to a head by the suspension of Cosatu Secretary General Zwelinzima Vavi. A ‘left’ faction had, with a degree of discomfort, existed within Cosatu since the formation of the union federation in 1985. This faction has its roots in non-ANC liberation traditions and was concentrated mostly in Cosatu manufacturing unions, especially Numsa. The moves to get rid of Mr Vavi and close down Numsa’s criticism of the president and of ANC economic policy probably emanate from the hegemonic faction within the ANC itself, in other words, Jacob Zuma and his closest allies. Not unsurprisingly, Numsa has now formally called on Cosatu to leave the alliance with the ANC, has said it will not be supporting the ANC in the election in 2014 and has called for the immediate resignation of President Zuma.

Over time, this will impact ANC electoral support, though not necessarily profoundly in 2014. How Numsa members and their dependants vote in next year’s election was probably a ‘done deal’ prior to Numsa’s defection decision at its special congress in late December 2013. Numsa may link up with ‘left’ or ‘workers’ parties (and may actually form a ‘socialist party’ that could challenge the ANC for support in the ANC’s key black working-class constituency), but this will likely impact more profoundly on electoral outcomes in the 2019 election.

ANC swelling in rural conservative areas and shrinking amongst urban sophisticates

Fourthly, the patronage and diversion of state resources as depicted by the Nkandla saga, combined with the vigorous pursuit of the rural vote in Kwazulu-Natal, has meant that the ANC is gradually appealing less to urban Africans (although this is by no means a majority trend) and more to rural and traditional poor black South Africans. This appears to mean that parties like the Democratic Alliance, AgangSA and the EFF are picking up a degree of unexpected traction in such constituencies.

Labour environment

After a catastrophic 2012 as far as the labour environment was concerned – especially the repeated waves of illegal and violent strikes in the platinum sector – 2013 saw stabilisation, albeit at still unacceptably high levels of unrest and strike activity.

In the platinum sector, the Amcu is ‘bedding down’, but likely to continue contesting with the Num in the gold sector. The next public-sector wage round is scheduled for 2015, so we have a breather before that storm hits (and we expected it to be a big storm when it does).

The formalisation of the Numsa split from the alliance probably means that this union will begin to actively contest with the Cosatu unions and in several other sectors of the economy. We are looking for the formation of new and smaller unions in sectors where the incumbent unions have grown too cumbersome or complacent to deal with the demands of specialist groups of workers. Unionism is a growth industry in South Africa, with annuity income for those who set them up. As Cosatu shudders, there are many opportunities emerging.

Labour unrest, poor labour productivity and inflexible labour markets (price, size, skills) are among the biggest negative domestic drivers of economic growth and we expect the figures to show a slight improvement in 2013 over 2012 and a significant deterioration in 2014 and 2015 – which may have significant negative implications along the lines of the BMW ‘disinvestment’ decision.

National Development Plan: The political rise of the Treasury and fall of Cosatu

The ruling party and the ruling alliance’s approach to the National Development Plan (NDP) has appeared highly conflicted since the adoption of the plan at the 2012 Mangaung national conference of the ANC.

While our view is that the NDP is little more than a shopping list (and not the miracle cure some ratings and multilateral agencies hope it is) in the areas of large infrastructure roll-out and a disciplining/training/focusing of the public service, we may be in for upside surprises. The important political leaders to watch here are ministers Lindiwe Sisulu (public service and administration) and Malusi Gigaba (state-owned enterprises).

In several different ways, the Zuma leadership of the ANC has, over the last few months, appeared to back with a degree of fortitude previously orphaned policy thrusts from the NDP that are generally ‘financial-market positive’.

The first of these is the foregrounding of the NDP itself – both at Mangaung, but also in the medium-term budget statement in October 2013. Minister of Finance Pravin Gordhan stated that that this budget statement and all future budget statements would be ‘the accounts’ of the National Development Plan, putting the plan at the centre of government policy.

The trade-union movement – especially the now defecting faction rooted in Numsa, but actually common to the whole federation – was outraged by this, as it sees the NDP as a capitulation by the ANC to (variously) ‘white monopoly capital’, ‘neoliberalism’ or ‘business interests’.

In conjunction with this foregrounding of the NDP, Jacob Zuma has recently signed into law two major policy thrusts that are bitterly opposed by the ANC’s labour ally.

The first of these is the Transport Laws and Related Matters Amendment Act, which allows for the implementation of ‘e-tolling’ on Gauteng highways and has been bitterly opposed by COSATU and other community groups in that province. Bond-market investors and ratings agencies have repeatedly said it is crucial that the ANC implement ‘e-tolling’ if the government is to maintain credibility on the global capital markets. It is significant that the Zuma administration has grasped this nettle, despite facing (by all accounts) a significant electoral challenge in Gauteng in 2014.

The second surprising nettle-grasping activity has been the promulgation of the employment tax incentive bill in the face of united Coatu fury. This is the ‘youth wage subsidy’ of yore, and the ANC under Jacob Zuma has obviously decided to accept thunderous criticism from its ally in the hope that longer-term employment growth benefits will weigh in its favour at the polls, in both 2014 and 2019.

Together, these initiatives are surprising positives and have probably come about because the Treasury has managed to persuade Mr Zuma and his cabinet that failure to take a stand on these various measures could lead to downgrades by the ratings agencies.

Policy and regulatory risks predominate

Thus, our view is that the Presidency, bereft of any real policy direction itself (because it is busy purely with rent seeking and hanging onto power) has been persuaded by Pravin Gordhan that the country is in trouble, that the deficit is looking genuinely threatening, that downgrades are a real possibility and that if this goes south, President Zuma might go with it. The National Treasury briefly has the reins, and this gives us a moment of respite.

However, hostile mining regulations, a fiddly and interventionist Department of Trade and Industry, an overly ambitious Department of Economic Development, a hostile Department of Labour, liquor legislation, more and tighter empowerment legislation and deepening regulations on all fronts, but especially in the credit markets, mean that, on the whole, government in 2014 will be an unreliable financial-market ally.

State finances: The deeper risks are fiscal

The country’s increasing dependence for stability on social grants and other forms of social spending is a real and deepening political risk. While the social grant system has lifted millions of South Africans out of poverty and the public sector has employed hundreds of thousands of others, it has also created a culture of dependency and paternalism and is an unsustainable expense that the government will at some stage be forced to reduce. This is definitely going to be accompanied by severe social turmoil, although as mentioned previously, the real ‘fiscal cliff’ is still some way ahead of the forecast period dealt with in this report.

Election 2014

The election results will be important, but in ways that are difficult to predict.

If the ANC’s share of the national vote plummets to the low 50% range, will this force the party into a process of renewal, or will it be panicked into populist measures? It probably depends on which parties take up the slack.

If the ANC gets 65% of the vote, will it be ‘Nkandla business’ as usual – an unhealthy rural populism à la the Traditional Courts Bill, combined with activities like the significant public resources (ZAR208m) spent on building the president’s Nkandla compound and accusations of corruption?
If Mr Malema’s Economic Freedom Fighters get 10% of the vote, will that mean ANC policymaking is paralysed until 2019 as the party attempts to appease the angry and disenfranchised youth? Will it mean legislation relating to mining and land ownership swerves into uncertain and dangerous territory?

If the Democratic Alliance wins 27% of the national vote (which we think unlikely) and if it is able to form a provincial government in alliance with other parties in Gauteng (which we also think unlikely), how might that cause the ANC to behave? Better? To continue to allow the Treasury to set the tone of probity and effectiveness, concentrate on fixing education and focus on economic growth as the only guarantor of electoral success in 2019? Will this kind of threat cause the ruling party to attempt to make opposition strongholds ungovernable? We suspect different impulses are already at war within the ANC and investors should watch how that battle plays out.

Below, purely as a way of presenting our latest ‘guesstimates’, are our ‘most likely’ electoral outcomes for 2014 (these may change as campaigning performance changes before the election and as various crises emerge, eg, the booing of Jacob Zuma at the FNB Stadium commemoration for Nelson Mandela in December 2013).

votingresultsinpreview

BRICs and the uncertain rise of the SACP

A relatively new and difficult-to-unpick issue is the growing confidence the South African Communist Party (SACP) has in shaping the national agenda. The inappropriate focus on BRICS speakers at the FNB Mandela memorial (over Africans and European Union speakers, with Obama the inevitable exception) is probably evidence of the Communists having very significant influence.

We think this could have fed through into the announced Zuma/Putin ZAR 100bn nuclear deal.

This is a matter of growing tension within the ANC, with a previously dominant (under Mandela and Mbeki) group of ‘progressive Africanists’ having lost power to the Communists, who are now in an alliance with a patronage-seeking, provincial elite with strong links to state-security apparatuses and rent-seeking business interests (‘the Nkandla crew’.)

This struggle could play into succession issues and might be a driver of attempts to impeach Jacob Zuma (a strategy unlikely to succeed, in our view) over the next few years.

Succession and a ‘rescue mission’ in the ANC?

While this matter probably lies beyond the 2014 scope of this report, within the ANC, the possibility of a rescue mission is taking shape (driven, in part, by growing commentary about how many public resources are ending up on and around Jacob Zuma’s person and his tight control of security agencies). A group now on the outskirts of the party, and in very general terms representing the ‘old guard’, appears set to begin working on securing a succession process that reverses the decline (moral and in popularity) over which Jacob Zuma appears to be presiding.

This move has not yet taken shape, nor is it properly manifest, but in our view the important people to watch are previous President Thabo Mbeki, Lindiwe Sisulu, Nkosazana Dlamini Zuma, Cyril Ramaphosa and Zweli Mkhize.

Herewith some comments on the latest political news. Apologies that I have posted so seldom here of late. I see a New Year’s resolution coming on. I see a New Year’s resolution exiting stage left.

Numsa, Cosatu and the SACP … and Jacob Zuma

During this past week the National Union of Metalworkers of South Africa (Numsa) shifted closer to exiting the ruling alliance (and possibly Cosatu). The matter will be decided at a special Numsa congress from 13-16 December.

Meanwhile several distinct forces entered the fray.

Gwede Mantashe, the powerful ANC secretary general, argued that if pursuing Zwelinzima Vavi split Cosatu, then that strategy should be reconsidered. His general approach was supported by the President of the National Union of Mineworkers Senzeni Zokwana calling for sober heads and for the two main factions in Cosatu to ‘swallow their pride and solve their ideological and political differences’ (Business Day 3/12/13)

In complete contrast to this attempt to mend fences, Blade Nzimande, wearing his South African Communist Party secretary general’s cap on Sunday attacked the Numsa leadership, using strong and unbending language saying a “clique” within the union is manipulating rank and file members for  personal gain and should account for their personal wealth … that Numsa general secretary Irvin Jim and deputy general secretary Karl Cloete should submit themselves to independent lifestyle audits and that Mr Jim should explain his role in chairing the Eastern Cape tender board and should come clean on the work of the union’s investment arm.” (News24 02/12/13)

The Numsa leadership meanwhile continued with its formulation of a detailed criticism of the ANC performance in government – only parts of which have been announced – but will form part of the discussion about whether to stay in Cosatu and in the alliance at the special congress in mid-December.

The Eastern Cape provincial executive committee of Cosatu (PEC) has strongly criticised the Cosatu president Sdumo Dlamini for failing to arrange the special Cosatu conference designed to address all the issues bedevilling the federation, including the suspension of Vavi and the relationship with the ANC. The Eastern Cape PEC was also strongly critical of the Communist Party’s attack on the Numsa leadership.

So what?

This is not only the untidy squabble it appears.

Jacob Zuma came to power backed by the SACP, by Cosatu, by the ANCYL, by disparate regional power-blocks and business groups who saw an opportunity to get the benefits of being at the high table, and by democrats within the ANC who believed Mbeki had become authoritarian and/or unresponsive to the changing requirements of the situation (with his failure to grapple with the HIV/AIDs question his most obvious failing.)

This alliance of interests and groups has long since fragmented (with the trajectories of Malema and Vavi the most visible signs of this), but the SACP remains up close and personal with Zuma, his family, his business friends and the security agencies he keeps firmly under his wing. That it is the SACP who has said: ‘let’s chase these Numsa fellows out’ is not a surprise, as the SACP is one of the main beneficiaries of the rise of Jacob Zuma … an attack on Zuma is an attack on the SACP.

(My implicit assumption, which might be wrong, is that the SACP probably has some socialist explanation or justification for what it is doing in bed with Zuma. However I must confess I cannot imagine a version of politics in which the struggle for socialism is best served by allying oneself with a corrupt, regional elite – with ethnic overtones – that makes free use of the state security apparatuses to secure its dominance. If you lie down with dogs you should expect to get fleas.)

Thus, the SACP appears to be pushing for radical intrusive surgery on Cosatu and Numsa. They hope to cut out the cancer and, supposedly, slowly repair the healthy body left-behind.

The most obvious dangers are inherent in the metaphor: namely that the cure could kill the patient. But the bigger danger is that what the SACP, and the faction within the ANC that backs the radical surgery option have, perhaps wilfully, mistaken ‘democratic criticism’ (albeit of a damning sort) for cancer. This was precisely the warning that Mantashe and Zokwana were giving when they were brutally cut short by Blade Nzimande wielding a meat-cleaver.

So Nzimande and the communists have an agenda tied much more closely to the narrow version of the Nkandla Crew (that nexus of commercial interests, regional Kwazulu-Natal politics, state-security agencies and crime intelligence that are all pushed up tight against their principal, Jacob Zuma). More closely, that is, than, for example, Gwede Mantashe

Where this is leading is uncertain. It seems likely that Numsa will split from (or be driven out of) the alliance and perhaps from Cosatu. Numsa might more explicitly move towards establishing  a ‘labour’ or ‘workers’ party, perhaps in alliance with existing left-wing parties and trade unions. Numsa itself  may split in this process, so that a vestige of its former self is left behind in Cosatu.

Numsa freed from the constraints of belonging to the alliance and Cosatu has strong growth potential, particularly in the mining sector and can be expected to flourish there. It is not inconceivable that a defected Numsa will continue to lobby Cosatu unions and will grow as structures and regions of Cosatu unions also defect.

It is always possible for the ANC aligned leadership to stop this process, but that would entail having to give free rein to Jim and Numsa’s brutal criticism of ANC corruption and economic policy. The Nkandla Crew have obviously decided this is no longer an option – especially in the lead-up to an election where their principal is already under attack for public resources being lavished on his Nkandla home. Time will tell if they are strong enough to hold the smaller fort they have built against the growing number of enemies they are createing.

Meanwhile we must remember that Numsa is the most radical and best organised union in Cosatu – and many businesses would find them significantly less playable than the unions to which they are accustomed.

The next step will be the Numsa special conference. I expect Numsa to resolve to insist that Cosatu holds a special congress before elections next year. It is not impossible that that Cosatu special conference does take place and that the pro-Vavi faction secures his return – although there are almost endless practical difficulties in making this happen. However, any return of Vavi and and outbreak of peace in Cosatu will be temporary – unless there are radical changes in the ANC as well.

 

Draft of the Public Protectors report on the Nkandla build was leaked by the Mail & Guardian

The leaked report states that Jacob Zuma derived “substantial” personal benefit from the Nkandla upgrade that went way beyond ‘security features’ and that he would be liable to pay back this money to the public purse. The features Madonsela identified as unrelated to security spending was a swimming pool, visitors centre, amphitheatre, cattle kraal, marquee area, extensive paving and new houses for relocated relatives. Public Works allowed Zuma’s architect ‘uncontrolled creep’ to broaden the project until another 4 firms that Zuma had privately engaged were effectively carrying out the Public Works’ security upgrade but without having tendered for the job  – and reporting back into Zuma and his architect (Mail & Guardian 30/11/13)

So what?

Mandonsela has come out strongly against the Mail & Guardian for having published the draft report. She says the confidential circulation of draft reports from her office is designed to allow interested parties to argue points and correct substantial errors. The Mail & Guardian argues that the public interest outweighed the internal processes of the Public Protector – given that the security cluster of government had regularly threatened to stop the report being published.

The more important question is how Jacob Zuma comes out of this. It is now impossible to avoid the fact that significant state resources were used on the President’s private residence and more and more details will surface as we head towards the elections in 2014. Leaks are appearing from the major party’s polling processes that suggest that the ANC is vulnerable around the Nkandla upgrade. If the ANC were to suffer electorally from the appetites of its president, and if it knew that its suffering was linked to those appetites, then we must assume that Jacob Zuma would be vulnerable. But vulnerable to impeachment or vulnerable to having his wings-clipped? It’s a big difference, but both should be items on our long-range screens.

Some of my recent news coverage and commentary:

E-tolling and the DA’s cruel billboards

Last week Jacob Zuma signed into law the Transport Laws and Related Matters Amendment Bill – meaning the unpopular e-tolling can begin on certain Gauteng highways.

I was impressed that the President did the necessary – despite the fact that this will cost the ANC votes in the 2014 poll especially in the closely contested Gauteng and especially amongst the class of people the ANC is, supposedly, at risk of losing to opposition parties.

Of course failure to sign the law might have led to downgrades by rating agencies and an even more hostile report from the IMF … but good for him anyway!

The interesting aside is that last week huge billboards sprung up along those highways saying things like: “E-tolling – Proudly brought to you by the ANC”.

ANC-e-tolls-billboard

Of course that campaign is funded by the Democratic Alliance snapping with its sharp little teeth at the ruling party’s heals .

Or perhaps it is more like being savaged by a duck?

Whatever, it’s all part of the razzmatazz that is going to be seriously tiring in about four months’ time but for the moment is mildly entertaining.

Election 2014 – the Zuma swings and the Zuma roundabouts

The major weeklies continued their faintly mindless coverage of Election2014.

City Press ran with two stories about how the ANC had decided to put Jacob Zuma delivering 50 specific and successful infrastructure projects at the centre of the ruling party’s election campaign. Not quite the shock the screaming headlines claim it to be.

All the Sunday Papers covered the fact that last weekend’s National Executive Committee of the ANC nullified the previous week’s Provincial General Council of the ANC in Gauteng. At issue was that the ANC in Gauteng is clearly not delighted to have to front itself with this particular president and believes its supposedly more urbane, sophisticated urban voters would be better wooed by Thabo Mbeki, Cyril Ramaphosa and/or Kgalema Motlanthe.

Deep behind the chatter is the growing view that the Zuma-face of the ANC is unlikely to charm the middle classes. The basic reasons, according to feisty City Press editor Ferial Haffajee, are made explicit in the Gupta wedding scandal cover-up:

“(it was not) the first time the party has been damaged by our president’s careless ways and friendships, which morph too easily into cronyism and patronage. There is a long line of infractions, stretching from the arms deal and his relationship with Schabir Shaik, to the rape trial he faced (the president was acquitted), the news of a child born out of wedlock with Sonono Khoza, the splurge at Nkandla and the game-playing with the courts around the spy tapes.” (Said the delightful, clever and middle-class Ferial Haffajee in her column in City Press  on 06/10/2013)

The rumour mill is constantly hinting that in certain constituencies the ANC will lose votes because of perceptions about Jacob Zuma’s cronyism and his traditionalist lifestyle choices. The hints usually suggest that the ANC’s own polling information confirm the view.

Frankly it would hardly be a big surprise if certain middle class constituencies are not enamoured with Jacob Zuma. Previous elections strongly indicate that the president is wildly popular in poorer and rural communities, so things are likely to balance out for the ANC.

What would be a surprise is if government got its act together with regard to infrastructure delivery in any meaningful way before Election2014. While a burst of energy can only be a good thing, do not expect a miraculous improvement in infrastructure delivery to result from the ANC’s election campaign.

Microlending falls from favour

Microlending as a business took a number of hits this past week. Nobel Peace Prize winner and founder of the microcredit lender Grameen Bank, Muhammad Yunus, warned that microlending to finance consumption could lock the poor into a life of poverty.

More importantly from a local perspective, Futuregrowth Asset Management’s Andrew Canter was quoted in the Business Times (06/102013) saying the company would “wind down” its exposure to microlenders, including Capitec, African Bank and other unsecured lenders on “moral grounds” (unfortunately the story doesn’t specify if Canter was purely referring to Futuregrowth’s SRI funds – which would be my expectation.) Canter, according to the paper, said: “We have always backed the responsible firms, but the industry structure has provoked industry behaviours that are not good for consumers, or in our view, the nation” … but, he said, Futuregrowth would not make a “panic exit”. “If industry practices improve, or particular players create more sustainable lending products, we will look to back them.”

The microcredit industry has always been controversial and becomes more so when consumers are struggling to make repayments in declining economic conditions. With the link having been drawn between the Marikana tragedy and the extent to which the strikers where in dire straits with regard to loan repayments, it was only a matter of time before sentiment towards the lenders would sour. With sentiment this negative, government is likely to further tighten regulatory control of the sector, especially in an election build-up.

The judiciary – it’s that Jacob Zuma problem again

In a matter almost as impenetrable as it is serious, a judicial tribunal appointed to probe Western Cape Judge President John Hlophe’s alleged attempt to influence two Constitutional Court judges to rule in President Jacob Zuma’s favour when he was fending off serious allegations of corruption got under way last week.

Amongst the complicating factors is that the two judges Hlophe allegedly tried to influence, Chris Jafta and Bess Nkabinde, have indicated they do not wish to proceed with the complaint.

I am not going to pretend to be able to analyse adequately what is going on here. Follow Pierre De Vos at his excellent blog Constitutionally Speaking for all matters relating to politics and the constitution. There is going to be a lot of complex legal argument around this matter but most constitutional experts suggest that the judiciary will be harmed almost no matter the outcome.

The point we unfortunately have to keep uppermost in our minds is that politicians, and especially their machinations in internal struggles within the ruling party, have damaged our systems of law and the institutions that are important to our democracy – from the judiciary, to the prosecutorial authority and including all state sectors directly concerned with national security (including the SAPS, crime intelligence and National Intelligence Service.) And further, such damage continues unabated as powerful groups in the ruling alliance war against each other.

Niccolo MachiavelliJacob Zuma has forced me to reread Niccolò di Bernardo dei Machiavelli’s The Prince, published 500 years ago this year.

He (Jacob Zuma) didn’t threaten me with the red lightsaber or catch me in a honey trap. My natterings, fortunately, are not impactful enough to draw the attentions of the Dark Lord (Darth Vader, dah! – ed) or his stormtroopers.

The compulsion comes from watching, slack-jawed, as Jacob Zuma skips happily across the backs of starving crocodiles - on his way, off towards the welcoming horizon.

Surely the world was an intrinsically hostile place for a black baby boy, born to a single-parent mother (who was also a domestic worker) in the South Africa of 1942? Surely when he received no formal education any chance of success in life would have become vanishingly small – in the estimation of a wandering actuarial statistician, perhaps?

When Jacob Zuma went to prison and then later was repeatedly caught with his hands in all sorts of cookie jars I imagine the hypothetical actuary would have confidently predicted a life of ignominy and poverty.

But instead Jacob Zuma is picking up an honorary Doctorate of Leadership from the Limkokwing University of Creative Technolog(who writes the script of the world? … no ordinary mortal would dare make this shit up – ed) and rubbing shoulders with the great and the good and undoubtedly stashing bits of his loot in safe houses in Malaysia.

My second post on this website in mid-2009 titled The Accidental President (catch that here) argued that Zuma’s rise was pure chance and contingency. But when the same random set of things happens over-and-over (Jacob Zuma escapes danger with a sack full of cash) you have to start questioning whether this is purely the shambolic interactions of events, people, history and the world.

Politics is about power (yes, I know, we have heard that somewhere before). Power is agency, the ability to make stuff happen, to make people do your bidding and to make situations turn out in a particular way. Political analysis is the analysis of how (and why) power is exercised.

Which brings me back to Machiavelli.

I read The Prince when I was about 17 and, clearly, I didn’t understand a bleeding word.

I vaguely remember being outraged and confused by the book.  Bertrand Russell is widely quoted as having said The Prince is a handbook for gangsters (which is a great line but there is much debate as to whether the great logician himself actually said it).

However, I am now kicking myself that I haven’t been reading and rereading The Prince every year – and in the flush of my transient enthusiasm, I promise myself I will do so from now on until I die … or perhaps I will stop a little before.

(As an aside: I was halfway through the book when the Syrian nerve gas story broke. I was glad to have Machiavelli as a companion to think about how those with agency might cause, or allow, such things to happen and why they might do so.)

So, anyway … Jacob Zuma is the Prince and I doubt he ever needed a Machiavelli to tell him how to be what he is and how to do what he does.

Here is the opening dedication. It’s quite compellingly mysterious to those among us who are a little thin on our Florence-during- the-Renaissance, but it is also a good explanation of the work that follows:

Dedication: To the Magnificent Lorenzo Di Piero De’ Medici

It is customary for such as seek a Prince’s favour, to present themselves before him with those things of theirs which they themselves most value, or in which they perceive him chiefly to delight. Accordingly, we often see horses, armour, cloth of gold, precious stones, and the like costly gifts, offered to Princes as worthy of their greatness. Desiring in like manner to approach your Magnificence with some token of my devotion, I have found among my possessions none that I so much prize and esteem as a knowledge of the actions of great men, acquired in the course of a long experience of modern affairs and a continual study of antiquity. Which knowledge most carefully and patiently pondered over and sifted by me, and now reduced into this little book, I send to your Magnificence. And though I deem the work unworthy of your greatness, yet am I bold enough to hope that your courtesy will dispose you to accept it, considering that I can offer you no better gift than the means of mastering in a very brief time, all that in the course of so many years, and at the cost of so many hardships and dangers, I have learned, and know.

This work I have not adorned or amplified with rounded periods, swelling and high-flown language, or any other of those extrinsic attractions and allurements wherewith many authors are wont to set off and grace their writings; since it is my desire that it should either pass wholly unhonoured, or that the truth of its matter and the importance of its subject should alone recommend it.

Nor would I have it thought presumption that a person of very mean and humble station should venture to discourse and lay down rules concerning the government of Princes. For as those who make maps of countries place themselves low down in the plains to study the character of mountains and elevated lands, and place themselves high up on the mountains to get a better view of the plains, so in like manner to understand the People a man should be a Prince, and to have a clear notion of Princes he should belong to the People.

Let your Magnificence, then, accept this little gift in the spirit in which I offer it; wherein, if you diligently read and study it, you will recognize my extreme desire that you should attain to that eminence which Fortune and your own merits promise you. Should you from the height of your greatness some time turn your eyes to these humble regions, you will become aware how undeservedly I have to endure the keen and unremitting malignity of Fortune.
Niccolò Machiavelli

……………………………………………………………..

I know how Niccolò feels. Sometimes these humble regions are just that little too humble. However, I would have been more cautious about calling for the Prince’s attention if I was Machiavelli. If the Prince read the little book, then the Prince would know that Machiavelli had the Prince’s number and that Machiavelli had rewritten the handbook. Which I can’t imagine would have charmed the Prince.

I will attempt a ‘highlights package’ of The Prince and possibly some learned comments (which are unlikely to be as good as you will find in this interesting article and interview). For the keenest among you, there are several places on the internet where The Prince is downloadable for no charge – I am sure the copyright has long expired … or rather I hope so. My copy, which is in electronic form on my laptop, originates at: http://www.feedbooks.com.

Finally, Jacob Zuma still has a few crocodiles to hop on before he reaches safety. I still think that the odds are against him, but I am not an actuarial statistician, wandering or otherwise . I draw comfort purely from the certainty that no-one, ultimately, gets out of this alive.

The appropriate comparison for J Arthur Brown’s visit to Khayelitsha yesterday is Jacob Zuma’s visit to Eldorado Park a few weeks ago – the president’s vist conducted ostensibly to free that neighborhood from the tyranny of crystal meth and tik.

Watching the visuals on eNCA (catch those here) of the white fraudster’s visit to the Cape township yesterday was surreal. Brown, louche, handsome and relaxed in tatty jeans and gelled hair being warmly welcomed by the community meeting; the elderly African audience in their Sunday best, anxious to please, respectful and sitting up straight in their seats. Brown lounging like a  rock star being interviewed by Rolling Stone.

Afterwards outside: the crowd greeting him with Amandla!  – everyone taking a turn to hug their last hope for the return of the money, the man who the state accused of stealing it in the first place.

Zuma’s trip to Eldorado Park is the same species of manipulation. It was supposedly prompted by an eloquent request by resident Dereleen James describing her desperate efforts to get her 17-year-old son off crystal meth. See that moving letter here.

Both these incidents have the classic elements of ‘big man’ politics and the worst features of populism.

What you do is take an issue that absolutely no-one could disagree with and then you march in as the good and heroic saviour. Even those who suspect your motivations are forced into silence. The poverty-stricken victims need all the help they can get, even if it is coming from people who are motivated by the need to repair their public image.

I don’t buy that, in exactly the same way as I don’t buy it when repressive governments argue that the internet needs censoring because of child pornography.

Anyone who argues against the populist measures is immediately cast as the villain: so what, are you in favour of drugs, child pornography and poverty? You are prepared to let these victims suffer just to satisfy some political principle of your own?

Julius Malema, Jacob Zuma and Winnie Mandela had one thing in common. They understood perfectly that you shouldn’t waste your time with actually solving the housing crisis, poverty, drug addiction (choose your perfect and sanctified issue.) All you need to do is go into the impoverished area and give someone a house. Do it with fanfare and praise singers. The community will come out, awed at your power and generosity, clear that you are the source of the goodies that make life possible, full of hope that their turn might come some time soon.

So maybe J Arthur Brown is going to stump up a few million rand, perhaps set up a fund for the people who have been robbed. Surely that is a good thing?

No, it’s not if it means that pressure is relieved on the more pervasive looting of pension and investment funds by people like J Arthur Brown.

How can we be anything but horrified when the fox volunteers to police the hen-house? Not for some vague political principal, but because our desire to save one chicken has endangered them all.

A few years ago it would have been the SACP and the ANC making these arguments and far more eloquently than I have here (catch an excellent interview with Jeremy Cronin several years ago doing precisely that  – push through till he gets to the ‘big man’ and populism bit, it will be worth your while).  Of the many things I regret about the present, the loss of that perspective from our politics is the one I feel most keenly.

Zuma’s visit to Eldorado Park is indistinguishable, in its deeper architectural structure, from J Arthur Brown’s visit to Khayelitsha. In both cases there will be immediate changes to local people’s lives, but changes that purely result in a displacement of the problems and temporary relief.  Like the distribution of food parcels by politicians just before elections the temporary relief provided the hungry does not balance the harm done the society by the successful hoodwinking of the electorate by the ‘big man’.

In high anxiety at my failure to publish here for several weeks (what with 12 days visiting fund managers in the UK and Europe and new commitments to the Daily Maverick – see here and here for the first two of those) I have decided to again post a modified version of my usually bespoke  ‘SA Political news commentary’ … to show willing; to demonstrate that I am not entirely unembarrassed that my last post, which was also a news commentary, was on March 18.

Perhaps I am edging towards closing down this blog … but I am not quite done yet, and for those who have stuck with me this long, I thank you.

So here,  written to a deadline of 06h30 yesterday, slightly modified for my hanging-by-a-thread website:

SA Political News update 23/04/2013

Cosatu and the ruling alliance: corruption claims and counterclaims

According to the Mail & Guardian (April 19-25), the battle for control of Cosatu is becoming ever more vicious. The article states that behind the noise is an apparent attempt by the ANC to close down a powerful left faction in Cosatu that has been critical of both corruption and the alleged adoption of ‘pro-business’ policies by the ANC and government. The main issues over which the battle is playing out are:

  • Allegations made (according to the M&G) by “an informal caucus … of senior leaders from Nehawu, the NUM, Popcru, Sadtu, Cepawu [they mean CEPPWAWU, I think - ed], the SACP and the ANC[1]” that Zwelinzima Vavi, the popular Cosatu Secretary General, has engaged in corrupt activity and is disloyal to the ANC-led alliance, including by failing to adequately support Jacob Zuma for re-election at Mangaung.
  • A flood of accusations made through the Cosatu linked NGO Corruption Watch that many of the leaders of unions involved in attacking Vavi are themselves corrupt – Mail & Guardian in a story that works more by insinuation rather than actual content – see here  for the story that was later denied by Corruption watch here).
  • The proposal made by Fawu (Food and Allied Workers Union) for a special Cosatu congress to resolve this issue, opposed by the group named in the first bullet, but supported by Numsa, Samwu and several smaller unions[2].
  • Support for and against the National Development Plan.

So what?

Business might be tempted to fold its arms and sit back and delight that the old ‘thorn in the side’ Cosatu is being riven by tension. However, it is worth recalling that some industrial relations consultants also delighted in the emergence of Amcu in the platinum sector as a counter to Num for similar reasons – and look how that played out. The serious political conflict in Cosatu could as easily result in higher levels of labour unrest, with higher levels of unpredictability, in a wide variety of industries than in a generally more compliant labour movement. Several multi-year wage agreements are coming up for review before the end of this year (including in the automobile, chemical, gold mining, coal mining, retail motor industry and tyre sectors – which historically have been trendsetters – Business Times). Add to this my uncertainty as to whether the tight three-year public sector wage agreement set last year will hold under strain caused by a combination of:

  • the (welcome) reforming zeal of Public Service and Administration Minister Lindiwe Sisulu,
  • government’s apparent attempt to roll back the power of the South African Democratic Teachers Union, and
  • the generally difficult economic circumstances for union members,
  • the successes of the wildcat strikes, particularly in the platinum sector last year, perhaps having established a new baseline for increase expectation throughout the economy

and it is not inconceivable that we could have another year of potentially devastating labour unrest.

If the government’s (and the ANC’s) intention was to have a showdown with organised labour over economic growth and stability that would be one thing. But I suspect that the evident intervention in Cosatu is based on the sectarian interests at the ruling faction of the alliance rather than in any real desire to pursue the national good. If that faction faction successfully expels Vavi they might precipitate a split in Cosatu and the long awaited formation of a new ‘left’ political formation … and just by the act of pushing, through what appears to be a dirty tricks campaign, for this outcome the ruling faction risks rapidly escalating labour unrest.

The DA and the ANC try on their best dresses (or maybe not)  for Election 2014

The DA has launched a campaign attempting to burnish its anti-apartheid credentials, including publishing a pamphlet with a picture of Nelson Mandela embracing deceased party stalwart Helen Suzman under the caption: “We played our part in opposing apartheid”.

At the same time, the Mail & Guardian has published excerpts of what it calls ‘draft DA election material’ which explicitly compares the ANC to the National Party. The M&G’s quotes from the draft document include the arguments that under Zuma’s ANC there is a “rise of Zulu nationalism and racist rhetoric” and “as was the case with apartheid, the ANC is using the police to suppress criticism of its government”.

In the City Press and Sunday Independent, the ANC secretary general Gwede Mantashe has separate opinion pieces that argue that the DA’s attempt to appropriate Nelson Mandela is “an abuse of the human and humble character of this icon”. He adds that the DA “remains a brazen advocate for white domination and privilege, and for elaborate schemes for its retention in the guise of liberal policies”.

So what?

The general election next year is likely to be messy and disruptive – sustaining the apparently endless flow of unsettling news coming out of South Africa. From this far out it appears possible that the ANC will be arguing that the electoral issues are essentially identical to what they were in 1994 (white domination and the legacy of apartheid) and that the DA will be arguing that that is just an excuse for delivery failure – it would be difficult to conjure up a more divisive and unhelpful framing of the issues 20 years after the first democratic election.

The unravelling of the Mandela legacy

The weeklies have a flood of stories that pick away at the fabric of the Mandela story. A reality TV show “Being Mandela” is reviewed in the Sunday Times under the heading “Opening up the canned Mandelas – comic kugels[3] help deflate the myth”. The show “unveils the vacuous, pampered lives of two of Nelson Mandela’s grand-daughters, Zaziwe Dlamini-Manaway and Swati Dlamini” – Sunday Times.

The Sunday Independent leads with a review of “struggle stalwart” Amina Cachalia’s new book “When Hope and History Rhyme” in which, among many other matters, she reveals aspects of her own alleged romantic relationship with Nelson Mandela post his marriage to Graça Machel.

All of this comes as a bitter fight among Mandela’s children (with, among others, Nelson Mandela nominees George Bizos and Tokyo Sexwale) for control of various trusts that Nelson Mandela set up on his children’s behalf comes to a head in the Johannesburg High Court – The Sunday Tribune.

So what?

There may be some inherent advantages to the exposing of myths and legends as … myths and legends – but there really appears to be no upside to this depressing deflation. None of these stories changes the reality of the 94 year old South African former president’s contribution to the South African democracy and state-craft in general, but the incessant exposure does add to the gathering gloom around the South African story.

Bits and pieces

  • The Youth Employment Accord has finally been signed after three years of squabbling in the National Economic Development and Labour council (Nedlac). Not unexpectedly, it does not include a youth wage subsidy in the form of a tax-break for companies employing first time youth workers. Frankly, at first glance, the accord, as reported in the Sunday Independent, Sunday Times and City Press appears vague enough to leave some confusion as to how it might result in its proposed creation of 5 million jobs for youth by 2020. No real surprises there.
  • The weeklies were full of scholarly – and not so scholarly – debate about the resignation of Judicial Services Council member Izak Smuts. The debate boils down to whether there is a tension between the quality of judicial appointments and the need to make the judiciary more demographically representative. This is an intrinsically South African debate that cuts across every sector of society and will likely be with us for many years to come – for better or for worse.
  • ANC MP, Ben Turok, explains in the Sunday Times the terms of reference and limitation of the nine member “inquisitorial” panel appointed by parliament to investigate the “ethical conduct and conflicts of interest, potential or otherwise” of Communications Minister Dina Pule with regard to the various allegations that she has allowed her romantic partner to make significant capital out of her ministerial post. That parliament is investigating this matter can only be a good – albeit long overdue – thing.

[1] In order in which it appears in the quote, and supposedly constituting an anti-Vavi, pro-NDP, pro Zuma  faction: the National Education Health and Allied Workers’ Union, the National Union of Mineworkers, the Police and Prison Civil Rights Union, the Chemical Energy Paper Printing Wood and Allied Workers Union, the South African Communist Party and the African National Congress

[2] And this group, supposedly constituting the pro-Vavi, anti-NDP faction, anti Zuma faction: National Union of Metal Workers of South Africa and the South African Municipal Workers Union (plus a host of smaller unions including the Food and Allied Workers union).

(Note for both footnotes 1 and 2 – it is undoubtedly more complicated than this, but we need to start somewhere to attempt to make sense of the chaos.)

[3] Wikipedia (accessed 22/04/2013) explains the use of this term in South African slang as follows: “Amongst South African Jews, the word “kugel” was used by the elder generation as a term for a young Jewish woman who forsook traditional Jewish dress values in favour of those of the ostentatiously wealthy, becoming overly materialistic and over groomed, the kugel being a plain pudding garnished as a delicacy. The women thus described made light of the term and it has since become an amusing rather than derogatory slang term in South African English, referring to a materialistic young woman.”

Early on Monday mornings I send my clients a review of the previous week’s political news which might be of relevance to financial markets.

This morning I thought the issues were of more general interest.

Thus …

Summary:

It is difficult not to see the main items in this review as connected:

  • The ANC yesterday disbanded its Youth League’s executive and the executive of its Limpopo provincial structure – both epicentres of the unsuccessful campaign against Zuma in the lead up to Mangaung;
  • An investigation into Cosatu secretary general Zwelinzima Vavi’s affairs and political loyalties deepens and widens – although, just because it is a stitch-up doesn’t mean there is no fire within the smoke;
  • Zuma’s approval rating among city dwellers drops to an all-time low and disapproval ratings rises to an all-time high.

Main body text:

ANC disbands its Youth League executive soon after axing its Limpopo Provincial Executive Committee

Yesterday, it was reported that at its 4 day legotla [1], the ANC National Executive Committee disbanded, as expected, the Provincial Executive Committee of the party in Limpopo. More surprisingly the NEC of the ANC then went on to axe the NEC of the ANC Youth League – which most observers had thought abased itself adequately to Jacob Zuma after failing to unseat him at the Mangaung national conference. (Note I am reliant on news reports for this … the ANC NEC is due to hold a press conference at 12h00 today where it will give a fuller report.)

So what

The Limpopo ANC and the ANC Youth League were the launching pads of the challenge against Jacob Zuma that had been led by Julius Malema. Disguising itself behind the ‘nationalisation of mines’ call and funding itself through tender abuse in Limpopo the challenge peaked in mid-to-late 2011, just before Julius Malema was suspended. While the leaders of the ANC Youth League were clearly surprised by their axing yesterday, they can probably count themselves lucky that they are not being taken down the same path as their erstwhile leader Julius Malema, which might well end in prison for corruption charges.

While the Limpopo ANC, and to a lesser degree the ANC Youth League NEC, were riddled with corruption, it would be a very generous interpretation of what happened yesterday to see it as a “clean-up” of the ruling party. The  more appropriate prism would be to understand this as an attempt to get rid of centres of resistance to the leadership of Jacob Zuma and the faction he represents. In a less jaundiced view, it is also an attempt to establish a basic degree of coherence in the party before the national elections which will be held midyear 2014.

Cosatu – 3 commissions to investigate Vavi

Zwelinzima Vavi is facing 3 simultaneous commissions into aspects of the criticism that members of Cosatu’s national executive committee made against him two weeks ago – including that he has been involved in corrupt activity and that he is disloyal to the ANC. This comes against the backdrop of ANC secretary general, Gwede Mantashe, attacking Cosatu for failing to defend the ANC against “a neoliberal agenda” and he has warned that anarchy is taking root in Cosatu: “my conclusion is that Cosatu is on a dangerous downward slope” – (Mail & Guardian March 15). (This added after publication – Carol Paton, in her excellent article in Business Day about this matter a few hours ago said: “One of the most distasteful dimensions of Cosatu’s internal fight has been the partial role played by several journalists, who have published information from parties to the conflict designed to smear Vavi. For example, allegations have appeared in the press to the effect that Vavi sold Cosatu’s former headquarters for R10m less than the market price. But such a direct allegation has not been made in a Cosatu meeting.

So what?

The answer is best provided by a quote from “a senior Cosatu leader” in the same article: “All this is a smoke screen. The main cause of divisions in Cosatu is ANC and SACP politics. The two organisations are trying hard to capture Cosatu, but Vavi is the obstacle. He is the only one prepared to defend the interest of workers. Dealing with him will ensure that they capture the federation.”

Not unlike the decision by the ANC NEC to close down internal opposition in Limpopo and in the Youth League, at least part of what is happening in Cosatu is an attempt to close down criticism of Zuma (especially after Vavi called for an investigation into the R230 million state spending on Zuma’s home in Nkandla) and criticism of the ANC more generally. This is the Nkandla faction crushing the last vestiges of the attempts to unseat Zuma at Mangaung – as well as an attempt to establish coherency in the ruling alliance in the lead-up to national elections next year.

(The allegations against Vavi – aside from ‘collusion with opposition’ parties – includes that he sold Cosatu’s old head-office for R10 million less than its market value and that he awarded a tender to a company at which his stepdaughter was employed. Just because there are other agendas at play, says nothing of the veracity or otherwise of these charges. Vavi himself has welcomed the commissions, stating that he believes they will clear him of all charges – although, interestingly, he attempted, unsuccessfully, to have ANC stalwart Pallo Jordan and Minister of Economic Development, Ebrahim Patel as commission leaders.)

(This added after publication: Carol Paton writing in Business Day argued a few hours ago as follows: “One of the most distasteful dimensions of Cosatu’s internal fight has been the partial role played by several journalists, who have published information from parties to the conflict designed to smear Vavi. For example, allegations have appeared in the press to the effect that Vavi sold Cosatu’s former headquarters for R10m less than the market price. But such a direct allegation has not been made in a Cosatu meeting.” I wish I had put that  in earlier.)

 

Zuma approval rating among city dwellers drops to all time low

The Sunday Times reports that President Jacob Zuma’s approval rating among urban dwellers is lower than ever and his disapproval ratings are at their highest – and, in general, views are firming up on this matter.

%

Apr

‘09

Jun

‘09

Sep

‘09

Nov

‘09

Feb

‘10

May

‘10

Sep

‘10

Nov

‘10

Feb

‘11

Mar

‘11

Sep

‘11

O/N

‘11

Feb

‘12

Apr

‘12

Aug

‘12

Feb

‘13

Approve

52

57

53

58

43

51

42

49

49

48

45

55

55

46

48

41

Disapprove

29

13

19

23

41

33

44

34

35

38

41

38

35

46

44

51

Don’t know

19

31

28

12

17

16

15

17

16

14

14

14

10

8

8

9

Net positives

+23

+24

+34

+35

+2

+18

+2

+18

+2

+15

+14

+1

+20

0

+4

-10

Zuma’s approval ratings amongst city dwellers over time (TNS Research)

TNS conducted home interviews with “1290 blacks, 385 whites, 240 coloureds and 115 Indians and Asians.”[2]  54% of black people were still happy with Zuma’s performance, but only 13% of whites. The president still has 64% of the vote from “younger Zulu-speaking adults, of whom 64% – down from 71% in August last year – were happy with his work” (Sunday Times).

An important indicator comes near the end of the story: “Zuma’s biggest drop in approval was recorded in Soweto, where the figure of 42% was the lowest since he assumed office. The Port Elizabeth figure of 22% was also an all-time low.”

So what?

National general elections must be held some time between April and July in 2014. For the first time “born frees” (young people born after 1994) will be eligible to vote. This first wave of born frees will consist of approximately 6 million people, “using the 76% turnout of the 2009 elections, these new voters could make up more than 20% of the vote by 2014 … for context, the Democratic Alliance won 17% of the vote in 2009. From 2014 onward, the born-frees will come in waves of just over 5-million each national election until they make up nearly half of the voting population by 2029” -  (Osiame Molefe in the online news source Daily Maverick).

There is growing excitement that, perhaps, this category of voter, and urban African voters more generally, might be open to political choices unthinkable only a few years ago. Much of the growing expectation in the Democratic Alliance and the energy behind Agang comes from this source. Could younger and urban voters (especially Africans) vote for a party other than the ANC in 2014?

Jacob Zuma has established a rigid hold on the ANC, but the TNS and other market research could indicate that it is precisely this victory that makes the ANC a less appetising choice for younger and urban voters. If Jacob Zuma leads the ANC in an election in which the ruling party gets much less than 60 % of the vote, his hard but brittle hold on the party could shatter.

ANC strategists are seriously worried about both the Eastern Cape (especially, but by no means exclusively, the Nelson Mandela Bay metropolitan area) and the Northern Cape. The idea of whole of the Cape (Western Cape is already in Democratic Alliance hands) in opposition hands and a party the equivalent to the Movement for Democratic Change in Zimbabwe giving the ANC a run for its money in urban areas throughout the country is a nightmare scenario.

Analysts have consistently been surprised at how well the ANC has performed in national elections (62.65% in April 1994, 66.35% in June 1999, 69.69% in April 2004 and 65.90% in April 2009) so treat any wild predictions with a degree of scepticism. However, the TNS survey of Jacob Zuma’s ratings is an indicator that shifts are in progress .

Bits and pieces

  • Business Times quotes a succinct put-down by Finance Minister Pravin Gordhan of the ratings agencies: “[You must] understand that we in South Africa did not create this crisis …when … the financial sector began to create … derivatives, based on sub-prime mortgages … [they] had an AAA rating given to them by the same agencies.” Last week S&P affirmed South Africa’s foreign currency sovereign credit rating at BBB and kept the outlook negative, arguing that external imbalances and underlying social problems remain.
  • All the major weeklies expressed deep levels of concern about what they see as out-of-control police violence in the country – most obviously evinced in the killing of Mozambican taxi driver Emidio Macia in Daveyton, but also brought into public focus by police commissioner Riah Phiyega’s spoon-fed testimony to the Markikana commission on Thursday last week. Police minister Nathi Mthethwa is one of Zuma’s closest allies and his department is, truly, in a parlous and dangerous state.

[1] A word in South African English borrowed from Sesotho, usually meaning a consultation or community meeting with government and the community or within a political party

[2] Categories and language routinely used in South Africa where the racial categorisation of the past is correctly understood to have a significant influence in the present and is routinely used in the media and academic analysis.

Sunday’s newspapers were more interesting from a political risk and investment point of views than normal.

This is what I thought mattered, as far as financial markets were concerned, in last week’s Mail & Guardian, the Sunday Times, Sunday Independent and City Press:

Construction industry – possible prosecution and fines for fraud and racketeering

Government and the national prosecuting authority are reported to be facing a dilemma: managers in at least 20 major constructions firms might be guilty of serious criminal practices relating to may years of in-industry collusion, but a successful prosecution of the guilty parties would rip the whole management level out of up to 20 top companies and thereby sink government’s infrastructure plans – Mail and Guardian.

The stories are covered in the Mail & Guardian and the City Press – both drawing their details from a series of leaked 2011 affidavits apparently produced by individual managers at Sefanutti Stocks when they (Stafanutti) realised that despite co-operating with a Competition Commission investigation, individual managers were likely to be liable for criminal prosecution (by the Hawks and the NPA) and that the punishment could include imprisonment.

Paul Ramaloko, Hawks spokesperson said “This case is bigger than people think. We are going to take our time and do a thorough investigation” (Mail & Guardian), but in City Press he says the investigation was in its “early stages” and that he would only comment once it had “matured”.

So What? Sounds like a political dilemma. The NPA and the Hawks are not (entirely) governed by the political priorities of government (despite apparently decisive co-ordination between the Hawks, SARS and the Public Protector in the Julius Malema fraud, money laundering and tax evasion investigation). However, government is likely to do what it can to make sure the companies survive intact – albeit compliantly chastened and grateful for leniency. Of course, the NPA and the Hawks might, alternatively, feel these managers would make good examples of how ‘old-order’ and ‘untransformed’ individuals and companies are as important sources of corruption as the ANC, its leaders, supports and structures.

Either way, the reputation and coherency of the companies concerned could be seriously impacted. However it is not clear from the news reports that there is any differentiation between, “winners and losers” … no-one appears more or less guilty than anyone else – which rather suggests the sector as a whole is risky, with no safe havens.

Gupta TV

Key Jacob Zuma allies Atul and Rajesh Gupta (using family vehicle Oakbay Investments) are reported to be on the verge of adding a 24-hour continent-wide news channel to their media portfolio (which includes New Age newspaper) in partnership with Essel Media and an unnamed black empowerment firm. Multichoice will likely be providing the platform but purely on a commercial basis and is not expected to be partner in the venture (Mail & Guardian).

So What?

Well, one of the Guptas’ current empowerment partners is President Zuma’s son Duduzane and the Guptas themselves have become key ANC funders and power players in South African politics.  The Mail & Guardian has a picture of Atul and Rajesh Gupta (who came to the country from India in the early 90’s) ensconced at the ANC’s elective conference in Mangaung in December. Obviously, the more the merrier on the news diversity front – and who says government and the ANC shouldn’t spend more money in the space? South Africa has a free and open media culture – to the point of government and ANC leadership spending a considerable amount of their time denying allegations and defending government policy against feisty attacks. It is unlikely to be harmful if government and the ANC strengthen their ability to put their point of view. Influence trading is always a feature of politics and is no worse or better in South Africa than it is in many countries across the world.

Telecommunications – new political upheavals on the cards

All the weeklies report that Communications Minister Dina Pule is about to be removed from her post in a cabinet reshuffle. At least part of the reason is because she is accused of “routing large sums of money to her alleged lover” – Sunday Independent.  So many individuals are touted as possible replacements, but the one person who comes up time and against is Lindiwe Zulu. This is what the Mail and Guardian has to say about this close Zuma confidant: “Zulu has just been appointed head of the ANC’s communications and her star has been rising under Zuma. A government source said Zuma trusted her opinions. She is his adviser on international relations. ‘He likes her bravery. The way she’s handling the Zimbabwe issue in a fearless manner has impressed him.’ She is one of Zuma’s three envoys on that country.”

So what? Pule will be the third minister to exit this portfolio in four years and instability in the department has raised fears that SA will continue to wander in the policy wilderness as far as migration to digital TV, Telkom’s business plan chaos, spectrum allocation and unbundling of the local loop (to name but a few pressing policy mattings) are concerned.

Mining Indaba – policy confusion as rife as ever

The Business Times has a depressing few pages about the Mining Indaba that implied that if anything the industry is more concerned than ever about policy uncertainty. On the proposed Mineral and Petroleum Resources Development Amendment Bill: “The move has again flooded the country’s struggling mining sector with uncertainty” – Loni Prinsloo.

“On the exploration side” said Magnus Ericsson, Chairman of Raw Material Group, in the lead story, “I think it’s a general hesitation … if you find something in South Africa, what will be the BEE requirements? What are the other requirements? For some foreign investors they are seen as difficult”.

The same series of articles argues that the pressure to “quarantine” SA assets is becoming fierce. “A valuation by AngloGold Ashanti’s biggest shareholder, Paulson & Co, indicated that South Africa’s biggest gold miner could boost its share price by as much as 68% if it split out it local assets.” Elsewhere on the front page of the Business Times, the paper argues: “The true investor sentiment will be measured tomorrow (now yesterday– ed) when Sibanye (Gold Fields’ local assets – ed) lists separately.”

So what? To my mind regulatory uncertainty, especially in the minerals sector, remains the key politically driven investment risk in South Africa. The risk is being driven by pressures (felt by the ANC and government) to improve delivery and redistribution. These pressures will increase going forward and the increased regulatory burdens government is placing on private mining companies is unlikely to achieve any of government’s objectives … in fact, the reverse is more likely to be true. This is an unhappy environment for those searching for policy certainty.

Bits and pieces

  • The brutal rape, torture and murder of Anene Booysen in Bredasdorp filled many column inches in all four weeklies – hoping to stimulate the kind of outrage against rape that swept India recently. Many of the stories point out that South Africa has the highest incidence of rape in the world.
  • Ramphele – will she or wont she? The press is full of speculation about whether Mamphela Ramphele (former anti-apartheid activists and close friend of Steve Biko, a doctor, academic,  successful businesswoman, a former director at the World Bank and former Vice-Chancellor at the University of Cape Town) will set up a political party and that that party will capture a significant percentage of urban black support. I think she might, but I doubt whether the party will make a dent on South Africa’s politics. The most likely scenario, to my mind, is Ramphele ends up in the Democratic Alliance.
  • There was much speculation about what President Zuma might say in his State of the Nation address this Thursday – with a generally excited consensus emerging that Zuma is less beholden to special interest groups (post his decisive victory at Mangaung) than he was previously. I am not convinced this will lead to bold new steps.  I am watching for tension between this speech and the National Budget on the 27th of February.  I expect the political plans in Zuma’s State of the Nation to be at odds with Pravin Gordhan’s plans to balance the books … but I expect that tension to be hidden.
  • The Mail & Guardian gave a list of who it thought is in Zuma’s inner circle: (Lakela Kaunda, Lindiwe Zulu, Mac Maharaj, Collins Shabane, Gwede Mantashe, Nathi Mthethwa and Batandwa Siswana), but then spoiled any special insight that might have given us by adding :

“Those privy to Zuma’s kitchen Cabinets say the president also has a high regard for Economic Development Minister Ebrahim Patel, National Planning Commission Minister Trevor Manuel and Justice and Constitutional Development Min­ister Jeff Radebe. Other key confidants include Rural Development Minister Gugile Nkwinti, Intelligence Minister Siyabonga Cwele, Cosatu president S’dumo Dlamini, Public Enterprises Minister Malusi Gigaba, KwaZulu-Natal Premier Zweli Mkhize, Finance Minister Pravin Gordhan and, to some extent, Higher Education Minister Blade Nzimande. People outside government who are in the president’s good books include businessperson Sandile Zungu, film producer Duma ka Ndlovu and  businessperson Deebo Mzobe, widely considered the man behind the building of “Zumaville”, the town surrounding the president’s homestead.”

… hmmm, must have a pretty big kitchen.

I was interviewed on eCNA by the excellent Gareth Edwards yesterday about some matters relating to Mangaung, policy and succession. Catch that here.

… and here is a part of my weekly news summary from Monday morning:

  • Nelson Mandela hospitalised on the eve of Mangaung conference;
  • A leaked KPMG audit conducted for Zuma’s corruption trial indicates serious money from some surprising sources has flowed into the bank accounts and bonds of what Mail & Guardian is calling the “kept politician”;
  • Mangaung is going to be all about economic policy – and ANC leaders are very directly signalling this, so that what is ultimately decided won’t come as too much of a shock… it is best to sit up and take notice now;
  • With the presidential leadership contest all but resolved, the only interesting story is the choice between Motlanthe and Ramaphosa;

Nelson Mandela hospitalised

It only just made the Sunday papers, but: “President Jacob Zuma wishes to advise that former President Nelson Mandela has today, 8 December 2012, been admitted in hospital in Pretoria to undergo tests… As said before, former President Mandela will receive medical attention from time to time which is consistent with his age” – presidential spokesman, Mac Maharaj.

So what?

There is no direct financial market implication of Nelson Mandela’s health (he has long since stopped playing any role in relation to South African politics or policy). However, the financial markets do not list the price of every important thing. At the level of sentiment, it will be impossible to separate the growing unease about many aspects of South African politics (see below) from the failing health of the universally loved founding father of the country.

Secret audit reveals how millions flowed to President Zuma

The Mail & Guardian has placed on its website a secret September 2006 KPMG audit of fund flows into Jacob Zuma’s accounts – it is still there this morning. According to the Mail & Guardian: “The report exposes the president as a ‘kept politician’ – a financial freeloader who accepted money and favours on a routine and increasingly extravagant basis not only from his so-called financial adviser, Schabir Shaik, but also from other benefactors, including Nelson Mandela.” The report was prepared for Zuma’s now cancelled corruption trial, and has thus never been contested in court. Mac Maharaj, spokesman for Mr Zuma, said: “Much of the information that is being headlined seems to have been in the public arena already, from the Schabir Shaik trial. I’m finding it strange that it is coming up now, in this fashion.” Here for M&G report and here for the full 490 page report.

So what?

The report should not derail Zuma’s re-election at Mangaung because, as Maharaj so clearly points out, only a few details within the 400-page document are ‘new’. The ANC elected Zuma as its president at Polokwane in December 2007 at the height of public interest in the details of the recently withdrawn corruption charges against him. These details did not stop the ANC then and are unlikely to influence the Mangaung outcome now. The report does add to the gloom around the apparently out of control cronyism at the heart of the ruling party – leaving us with low levels of confidence that Zuma and his government might be able to address the serious challenges facing the country and the economy.

Economic policy is where Mangaung action is – and most of that will be about resources

You had to be watching carefully, but the top ANC leadership signalled over the weekend that economic policy will shift at Mangaung and, further, that too much attention on the leadership struggle will cause observers to miss what’s important. In the Sunday Times, Gwede Mantashe argued the toss in a story headed “Mangaung is all about the economy”; in the Sunday Independent, Jesse Duarte did the same under a headline “Mangaung will clear all confusion over ANC policy”; and in the Mail & Guardian, Jeff Radebe wrote “Mangaung turns on economics”.

In all of these stories (coordinated in line, length, content and ordering, but presenting themselves as independent pieces by these top ANC leaders), it is argued that the National Development Plan co-ordinated with the New Growth Path is central to what “needs to be done”, that state intervention is the key to job rich and equitable growth, that mineral policy is the central area of change that can be expected at Mangaung, that BEE needs review, that land reform needs radical intervention, and that the ANC must be rebuilt to guide these processes.

City Press looked more closely at the State Involvement in the Mining sector document and pointed out that private sector companies were lobbying hard against the ANC’s intention to add a resource rent tax and to control the price of mineral inputs into the domestic economy – but that they (private sector companies) are unlikely to stop or significantly curtail the ANC’s plans.

So what? As we have stated (perhaps repetitively), the ANC is likely to recommend a rise in taxes in mining (or rather a shift to a resource rent tax regime that will have the same impact) and it (the ANC) is likely to decide on taxes on “unbeneficiated” mineral exports to secure supplies for domestic manufacturing combined with price controls as a stimulus to domestic manufacturing. And this is just in relation to the mineral sector. There are plans for state intervention across several sectors and we believe these will have serious impacts on investment in South Africa – many negative, some positive, but generally different across sectors.

 

Cyril Ramaphosa versus Kgalema Motlanthe

All the newspapers reviewed here (and several online sources) discussed in detail the fact that the Zuma camp has essentially nominated Cyril Ramaphosa for deputy president – making him a dead certainty for president in 2017 (if it plays that way).

So what? The Mangaung presidency issue is settled and the only interesting bit (as far as the electoral process is concerned) is the election of the deputy president.

The Zuma camp is entirely in control of the president/deputy choice, so when we analyse what might happen we have to ask: what is the imperative of the Zuma camp?

Well, that’s an easy one: to ensure that the corruption charges do not return and that the candidate and his continued ownership of his (and his camp’s/family’s) acquired assets remains secure even after Zuma has left office.

So which deputy choice could better ensure this outcome?

Would a President Ramaphosa eventually, following the logic of the Constitution and the law, and impelled by some hope for his own legacy, end up allowing Zuma to be charged for the original corruption charges?

Would Motlanthe?

I think Ramaphosa might, although I would not feel entirely confident that the Zuma camp could not construct a deal that keeps him (Ramaphosa) beholden long enough to ensure the achievement of the imperative stated above.

And Motlanthe?

I don’t think Motlanthe would pursue the corruption charges. He is a man who hates having to take decisions that “divide the house”. Taking down Nkandla is going to require something even more invasive and destructive than taking down Polokwane. I cannot see Motlanthe as the author of such a story.

As things stand, the nominations indicate that Ramaphosa will be elected as Zuma’s deputy. However, a last-minute ‘unity’ compromise might easily allow the Zuma camp to appoint the probably more pliable Motlanthe as deputy.

By the way “deep blue” in the headline was not meant to be a riff on IBM’s chess playing supercomputer.

Rereading Part 1  I can see how someone might accuse me of being a little too certain about the shape of the future.  I am not running “deep blue” regressions and algorithms, modelling South Africa and the world, generating predictions x of y % accuracy with z % error margins … South … Africa … will … be … peachy … in …2021 … bidledeebidledee beep.

I have no real idea of what is going to happen in the future – and only the bare bones of an idea of the internal processes I go through to develop the views I advance here.

From time to time I investigate how we predict outcomes, and how we asses risks. I am interested in how our evolved systems (honed against sabre-toothed tigers and uncertain rainfall patterns, for example) apply in the kind of technology driven mega-societies we now inhabit – or, specifically, don’t apply i.e. that our ‘instinctive systems’ need to be suppressed or countermanded if we hope to get it right in certain situations. But that is not what I am doing in these quick pre-Mangaung notes.

The “deep blue” of the headline was actually a reference to being bleak, sad, cold and lonely.

Which leads me to:

Who are the demagogic populist, proto-fascists* now?

DancingANC

The ANC will (initially) combat the threat of losing support by becoming more ‘demagogic populist’, rural conservative and based in the lumpen classes – basically, by drifting to the right

In December 2010 I wrote an article in GQ Magazine under the headline: “Can you hear the drums?” with a concluding paragraph that read:

In the year 2010, anger and resentment … bubbled over  … The winners still have their stuff, but they are clutching it more tightly to their chests, and for the first time in 16 years they are straining for the hint, a sound or a smell, of what might be coming for them out of the night.

Read the whole story here.

Two ‘crises’ (or warnings) that occured this year are the equivalent of the scary sound of drums in the night for the incumbent ANC elite. The first warning is Marikana and the second, linked, warning is the traction Julius Malema’s manipulative populism was able to achieve amongst some sections of the disenfranchised youth.

I made some of these links in my coverage of Marikana here.

I think the ANC will ride out the gradually escalating social and industrial unrest by becoming the “proto-fascist” and “demogogic populist” movement that Zuma’s SACP ally accuses Malema of representing (here for the context of that). This ANC, under this president is being drawn inexorably, by the logic of its own politics, into the territory of rural patriarchy with its natural links to the fear and hatred of education and any form of gender equality. (I am not going to argue this out here … just take a glance at the saga around The Spear, the Traditional Leaders Courts Bill and various comments about women and about “clever blacks” and appeals to African ways of doing things over foreign ways of the same – see TrustLaw’s Katy Migiro’s excellent takes here  and here.)

Thus (forgive the leap) the ANC begins to lose the urban industrial working class (on the road to becoming much more like a classic middle class and deeply opposed to the looting of the state),  the professional classes (already at that destination), the productive and rule based businesses, local and global, and it eventually begins to lose the pirates looking to launder their money and ‘go straight’ (as I argued in Part 1).

This leaves the ANC with the rural poor, the marginalised unemployed, a bureaucratic elite within the state (those last three dependent on state spending through the public sector wage bill and social grants) and global resource privateers who powerfully thrive in countries like this with leaders like these.

Initially the ANC might get even higher turnout at its rallies (especially with free food and t-shirts and sexy young people dancing between the rabble-rousing and the singing of Umshini wami). But eventually the class and demographic changes of the society impact upon the party – reformat it, split it, renew it … change the political ecology in which it moves and feeds.

You will see from my next post that I do not only think the ANC is a useless bubble of foul smelling gas buffeted on the sea of history. The ANC, in my analysis, has become a most significant and material influence for and against my upbeat scenario … a sort of deranged midwife at the happy birth.

* The term “demagogic populists, proto-fascist” is from various SACP documents and was code for Julius Malema (and, I suspect, in slightly early versions, a code for Tokyo Sexwale). This is what the SACP had to say about it:

The “new tendency”

It was the SACP at the 2009 Special National Congress that first identified clearly the ideological and underlying class character of what we called the “new tendency”. We described it as a populist, bourgeois nationalist ideological tendency, with deeply worrying demagogic, proto-fascist features. It was the SACP that pointed out the connections between the public face and pseudo-militant rhetoric of this tendency and its behind-the-scenes class backing. It was a tendency funded and resourced by narrow BEE elements still involved in a rabid primitive accumulation process, based on a parasitic access to state power. It was a bourgeois nationalist tendency that sought to mobilize a populist mass base, particularly amongst a disaffected youth, to act as the shock troops to advance personal accumulation agendas.

The SACP must feel free to pat itself on the back, but the reality is that party took on the straw man of  Kebble/Malema/Sexwale and backed – to the hilt – the real demagogic, proto-fascist tendency – the one with real power … and the one with real patronage to dispense. (That last bit explaining why this SACP has backed the Nkandla Crew)

That SACP quote is from here. For my explanation of how that all fits together with the nationalisation of mines call and host of other issues here (again) .

I am not encouraged, in my professional life, to be too colourful in what I write or say.

This morning I reviewed the weeklies – as I do before 06h30 every Monday morning – and found myself having to strip more metaphor and vitriol than usual from what I had to say.

For example – still right here in my clipboard, recently cut from the document I sent to clients – is this little piece of over-the-top contemptuous bitterness: “it paints a picture of an engorged elite sitting atop piles of treasure they will defend at all and any cost.”

I remember vaguely from 04h00 this morning a picture lurking somewhere in my head: there are about fifty fat dragons uncomfortably sprawled over their separate piles of loot in a disgusting, dank cave somewhere far below the smoking and ravaged surface. These beasts are  dangerously fanged in a mean, cowardly way and entirely without the pretty iridescence of most dragons I have encountered – and they hate and fear each other and anyone else who might take their stuff …

… but obviously I never went down that route.

Last Friday’s Mail & Guardian had particularly excellent – and depressing – stories about the the Nkandla looting. See here for the memorable editorial that sums up the ugly story; here for the alleged Maharaj arms deal link, here for the Gupta’s further bankrolling of the Zumas’ excessive domestic costs … and here, from the Sunday Times, a clear view of how significant public funds were diverted to the Zuma coffers and asset base, but also that much of that money did not actually arrive because it was creamed off by cronies before it even got spent on the Zuma friends and family.

The point, I think, is that the African National Congress is fast resembling sets of competing patronage networks – and little else. This is revealed in the violence and vigour in its internal contests for position. There is zero evidence of ideological division; all claims to the contrary, to my mind, are, sadly, often revealed to be false fronts: sheep’s clothing for wolves trying to sneak up on their prey.

Anyway, if it is all too exhausting and depressing to read in the original here is an extract from my morning summary:

  • The ANC nomination process draws to a chaotic and sometimes violent close – with Jacob Zuma achieving something of a Pyrrhic victory
  • Out of this might come one result welcomed by financial markets: the election of Cyril Ramaphosa as Zuma’s deputy and, hence, his (almost) automatic rise to the presidency in 2017
  • The body of the news commentary was a painful forensic tracking of the corrosive flood of money pouring over the ruling family from some worrying sources
  • The Gold Fields’ unbundling was portrayed as a straightforward vote of no-confidence in the country and its leadership – despite the clear and coherent denials by the company itself
  • The death of two much loved and respected South Africans seemed to increase the anxiety about the present and the future

ANC nominations close

City Press counts 2,256 implied votes for Zuma (slightly more than 2,251 he needs to win at Mangaung) emerging out of the nomination process. Table 1 below is what we get as a running total,  including the Leagues. (Note: the votes are ‘implicit’ from the nominations;  where branches-nominated candidates at the provincial conferences we have made the fairly safe assumption that most of these branches would vote for that candidate at the National Conference in December.)

Table 1: Zuma has it – and the 986 outstanding from Limpopo, Western Cape and Northwest is not enough to make a difference

Province/League Zuma Motlanthe
Eastern Cape 392 211
Northern Cape 160 23
Limpopo Conference delayed – violence etc.
Western Cape Conference delayed – disputes etc.
Mpumalanga 427 17
Free State 249 0
Northwest Conference delayed – shots fired etc.
Gauteng 173 238
KwazuluNatal 856 0
Women’s League 45 0
Youth League 45
Veterans league 45 0
  2307 538

So what?

Nothing much. It is going as expected – ever since the Julius Malema campaign was defanged with him (Malema) facing gradually escalating criminal charges related to his alleged ‘tenderpreneurial’ activities it was all over for the Anything But Zumas (ABZs). The interesting dynamics are in the side-lines, with the Zuma camp having backed Cyril Ramaphosa for deputy – partly because their first choice, Kgalema Motlanthe, refused to say he wouldn’t stand against Zuma for president and refused to campaign as part of any slate. Motlanthe’s meticulously principled position may get its just rewards in the fullness of time, but for now he seems to have abandoned the field to those with no qualms  about the tactics they use to secure the ever richer prizes that come with controlling the ANC patronage network.

 

Nkandla, Gupta, Duduzane, arms deal, Maharaj, Mrs Bongi  Ngema-Zuma and Baroda Bank

If anyone was wondering why the ANC battle for power is so intense and bloody, at least one major set of explanations can be found in the incredibly complex (and rich) web of transactions between those at the centre of power and various groups and companies that flood money towards them – presumably because they are such a good investment.

Headlines like: “Zuma’s Home Economics 2 – Guptas ‘bankroll’ wife’s mansion”, “Did arms firm pay Mac’s bill?” ,  “Living in the lap of luxury”, “Bankrolling their way to the top” and “Private deals that demand scrutiny” (Mail and Guardian); “Nkandla: who will take the fall?”, “Joemat-Pettersson flew back for Zuma’s wedding (at R400 000 cost to taxpayer)” (City Press); “Millions stolen from ANC Elders’ (Sunday Independent)  … and just too many more to list here.

So What? The fact that weekly, the tone and intensity of the popular press is becoming more explicitly accusatory of those within the financial web around the Zuma family, and that there has been no significant attempt by those accused of very considerable impropriety to defend themselves has, to my mind, two possible explanations. The first is that the accusations are so overblown, inaccurate and sensationalist that the Zuma family, the presidency, the Gupta family and Mac Maharaj (among a host of implicated others) expect the accusers to choke on their own excess and overstatement. The other possibility is the Zuma camp learned during its effective defence against a myriad corruption, bribery and money laundering allegations that if they can hold out long enough the prosecuting authority will eventually be forced to back off – or be replaced by new prosecutors.

“Gold Fields: who is next?” (Business Times) versus “We will not follow split” (Business Report)

The weeklies were full of anxiety about Gold Fields’ unbundling of some of its local assets – and concern that this might be the start of a wave of similar unbundling and ring-fencing. More importantly, the press was unanimous in rejecting Gold Fields’ denial that this was a vote of no-confidence in South Africa: “…it is one of the strongest votes of no-confidence in domestic investment to date. Its share price jumped 7% after Thursday’s announcement …” (Business Times).

Peter Major (Cadiz Corporate Solutions) is quoted in Business Report as saying “Soon shareholders will tell companies like AngloGold, Ashanti and Harmony Gold that if they don’t unbundle they’ll sell their interests.”

So What? The Sunday Times ran its main editorial on this issue. Saying it is clear why Gold Fields has done what it has done. “The company’s output dropped by 11% in the third quarter as the strikes took their toll. Its managers have been buffeted by unrest, uncertainty and the ever-shifting sands of policy pronouncements. On the horizon is some form of nationalisation of ‘strategic’ resources and more labour unrest as the government fails to lead the country back to the sanity of proper collective bargaining.” We can’t really fault that, although Gold Fields may have had a host of others issues to consider when it made the decision it did.

Changing the guard

The deaths of two respected South Africans who played important roles in the transition away from apartheid and towards democracy continue to raise anxiety about other impending deaths of great South African leaders and about the quality of the incumbent crew. Professor Jakes Gerwel (18 Jan 1946- 28 Nov 2012), Nelson Mandela’s first Director General (among a myriad other achievements) and Arthur Chaskelson (24 Nov 1931-1 Dec 2012) former Chief Justice and architect of much of the South Africa’s judicial system were mourned in all of the weeklies.

So what? Nelson Mandela appointed both of these men to play the crucial roles they did in the young South African democracy in the mid-1990s. It is inevitable that the popular press will hold leaders like these up against the individuals and processes overwhelming the ANC and government as we write this. As Nelson Mandela’s death moves ever closer, the anxiety about the Nkandla improprieties and the violence in the ANC’s internal contests in the lead-up to Mangaung are held up to a (perhaps) mythical standard of the past. The comparisons, fair or not, sentimental or realistic, makes the tone of much of the news and commentary in the weeklies angry, fearful and condemnatory.

I am sometimes tempted to think of myself as a company analyst, with South Africa as my company,  government as management and the currency and bonds as the share price

Company analysts make sell, hold or buy recommendations. Obviously a buy means the analyst believes the shares are cheap – in some difficult to determine absolute terms, but more likely in relation to appropriate peer or category comparisons.

If I was a company analyst, then what I might have been doing over the last while would have been writing a report changing my recommendation on South Africa from a hold to a sell.

Here is a bare-bones summary and ordering of that argument:

  • There are two major cycles driving negative sentiment which are coinciding now (which they do every five years):  the “strike season” and the lead up to the  ANC’s National Conference ;
  • Both these cycles are deeper and more traumatic that usual;
  • The reasons the strikes are worse than usual is excellently addressed by Gavin Hartford of Esop Shop -  here for a link to his paper at polity.org;
  • Mangaung is “deeper” and more traumatic than Polokwane because there is more at stake (some ANC members realise that another seven years of Zuma could hurt the ANC and the country; and Zuma and his backers cannot afford to lose office, because their dealing is not yet wrapped up and because their man remains legally vulnerable to the original corruption allegations against him);

But the main reason these cycles are deeper than previously is they are meeting a structural or secular trend, which consists of (and this is very stripped down):

  • Uncertain political stewardship from the top;
  • Institutional weaknesses in political (and labour) organisation characterised by systemic cronyism, corruption and nepotism (which leads to violent competition for control), managerial incoherence, narrowing support base and falsely inflated membership figures;
  • A significantly negative economic policy environment which might lower investment levels – e.g. fiscal uncertainty (because there is no way the ANC cannot keep increasing social grants and the public sector wage bill, which together are already more than half annual non-interest government spending) and a highly interventionist industrial policy (best exemplified in the SIMS document) which is one step away from ‘nationalisation by stealth” i.e. the effective deployment of private assets for public – or more narrowly governmental or even party – ends.
  • Incompetent infrastructure build, disruptive labour relations and failed educations systems are constant, apparently irresolvable and narrowing bottlenecks in the economy;
  • Institutional and administrative failures of government (in specific geographies and at specific levels of government) – with similar features to the second bullet referring to parties and labour unions;
  • Failures of the collective bargaining system – and other institutions designed to manage and mediate conflicting interests in society;
  • Growing social stresses around levels of inequality, unemployment, indebtedness and poverty – and unresolved racial overlays of the same.

Just listing that is faintly distressing … and you can imagine writing about it for weeks is not very uplifting.

But, I have, mid-stream, decided that I am not at all certain it is appropriate to take this relentlessly negative view.

Let’s go back to the political analyst/company analyst metaphor. Company analysts often suggest investors sell a share in a top quality, well  managed and highly profitable company if it is too expensive.

They might also recommend a buy on a company in all kinds of trouble – but one that is cheap and has upside that the herd of sellers hasn’t spotted.

I cannot remember an SA political shock or flood of negative sentiment that did not represent a buying opportunity in our financial markets. Remember the sell-off of  R54bn of SA resources companies after the leaking of a draft mining charter in 2002? It proposed forcing mining companies to immediately sell half their equity to black South Africans and spooked the market. The next few months was the chance of a life-time to buy excellent value company shares on the cheap.

Whether financial analysis adds real value to the investment process (or is just another bleed-off) is a matter of endless dispute. But here is why I would hesitate to call a sell on SA:

  • I cannot honestly say we have more political risk than Russia and Turkey, for example;
  • Where are the safe havens for investors, given the complex risks and problems in the global economy?
  • I cannot be sure that the negative news flow is not already in the price – it would be a very financial-market-analyst-type error to rush around shouting sell, sell, sell just after the last savvy investor had finished selling and begun buying;
  • My ‘negative secular trend’ is described as if it is inevitable – whereas there is much that can be decided and turned around by citizens, government and the ANC (despite my bleak outlook as to the likelihood of that happening, it must be in the mix as a possibility);
  • The country has a number of inherent advantages: its natural resources, its growing domestic market, its proximity to the last great frontier market (Africa), its sophisticated financial system and complex infrastructure, its constitutional framework, judicial independence and stable democracy – to name just a few.

Now obviously that does not counter the negative “secular” or structural trend I describe above. But there is something of a “baking a cake” strategy about how I have motivated for the big underlying negative trend. What I mean by that is I have marshaled all (or as many as I can come up with) of  the negative arguments in one place to bolster a particular conclusion: sell!

To make a cake one follows certain steps – mix ingredients, add energy and voilà: a nasty, stodgy, too sweet lump.

And that is a relatively simple object, with only a few requisite variables for its construction.

When we think about the future – especially when we write about it and propose to people how they should position themselves – the very first thing we should be is extremely tentative.

So I can’t, in good conscience, say sell South Africa.

I am unmistakably bleak about our politics and governance, but don’t take that as a signal to sell. I am quite likely being tossed on the waves of sentiment  – following financial market indicators, rather than leading them.

My very negativity could as easily be the indicator to start buying; that all the bad news is already in the price.

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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