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Some humble and not so humble opinions on various snippets of recent and not so recent political news.
Platinum strike finally over
Amcu and the platinum producers announced a settlement on Tuesday. The industry reports the strike cost producers R24-billion in lost revenue and the workers R10.6-billion in forsaken wages (see the pro-industry website here for other data.)
It is generally agreed in the financial press that the mineworkers lost more than they gained (see here and here - that second link to Carol Paton in the Business Day … well worth reading as always and way more subtle than a bald statement that workers lost more than they gained).
My own impression is the settlement will be hailed by the vast majority of the returning mineworkers as a victory for Amcu – and, explicitly, as a defeat for Num, the ANC and government.
I expect Amcu to continue strong growth in the gold sector, eventually threatening Num’s dominance there (Amcu is sitting at about 30% representivity at the major gold producers already). The gold sector has a centralised bargaining system (through the Chamber of Mines) and Amcu has been formally prevented by the Labour Court from holding a protected strike at AngloGold Ashanti, Harmony and Sibanye because the agreement struck last year is binding. However an unprotected strike remains a possibility and I expect Amcu to apply constant pressure to the agreement – perhaps embarking on an unprotected strike before year end.
My ‘most likely’ scenario (published in January 2014, see here): cascading labour unrest during 2014 and 2015 stemming from Amcu’s rapid growth in the mining sector, Numsa breakaway from Cosatu and the public sector wage round in 2015 – remains my base case.
Numsa is threatening to bring over 200 000 out on strike in the metal industry (largely the auto industry) from July 1. (Summarised by my friend and colleague at BNP Paribas Cadiz Securities economist Jeff Schultz: “The NUMSA and a number of other unions, meanwhile, are threatening to bring over 200,000 out on strike in the metal industry (largely the auto industry) from 1 July. Employers and unions in the metal and engineering sector have been at loggerheads for three months now. The current three-year wage agreement comes up for renewal at the end of this month. The unions reportedly opened negotiations with a demand for a 15-20% pay rise, while employers are currently offering 6.5-7.0%. This is another key risk to the production side of the economy in H2 and we will be watching developments here extremely closely in the days and weeks to come.”)
Zuma sick and tired
This week’s Sunday Times led with the ‘revelation’ that a heart condition, diabetes, high blood pressure and exhaustion have combined to raise concerns about the President’s health.
The story contains no news whatsoever. It is conceivable that Jacob Zuma could retire early for health reasons and it is conceivable that Cyril Ramaphosa, Nkosazana Dlamini-Zuma or some other ANC leader could become president or acting president. There is no strong evidence that such a transition would be accompanied by a damaging power struggle or be otherwise destabilising. Given how the ANC formulates and implements policy, there is also no strong evidence that a new leader would radically depart from the broad policy thrusts of the current government. The ANC is, in any case, under increasing pressure to deliver on a ‘more radical’ transformation policy and this pressure would apply to any new leader of the ANC and government.
State of the Nation: “like watching someone try to make their granny look bad ass”
This is a bit dated, but every political analyst and his (or her) dog seemed to make huffy and opinionated comments about SONA2014#2 so before I get my FOMO on:
If you expected some meat on the bones of Jacob Zuma’s statement we have to embark on radical socio-economic transformation you would have been disappointed. The speech consisted, as it always does, of a series of signals packed in mind-numbing detail.
I have pulled out the relevant quotes and underlined the relevant part of each quote below, but in short the speech raised some concerns for businesses and/or financial markets:
- He (Jacob Zuma) made the call for a national minimum wage
- We can expect increased costs on mining companies as Charter targets are more vigorously pursued: in effect increasing the wage bill and other costs
- There will be more onerous requirements for BBBEE and EE – in effect increasing costs on the wage bill and lowering rate of return in the short to medium term
- The nuclear programme is definitely on – and there are increased fears of corruption associated with what will be the biggest public tender in South African history.
However, given the powerful pressures acting on the African National Congress, the populist concessions in the speech were relatively mild – and, if you believe an expanding public infrastructure spending programme could drive economic growth, then there was some good news in there for you too.
My first response on Twitter was along the lines of: ‘If you don’t have a plan for transformation, then force the private sector to come up with one #SONA2014.”
But there is not a lot of threatened force in the President’s outline. In truth, Chester Missing, a comedian’s ventriloquist dummy was probably more accurate when he posted: “Talking the ANC’s radical transformation programme. It’s like watching someone try to make their granny look bad ass #SONA2014”. (Which hints at what we think is the greater risk: if the ANC fails to meet the various expectations of the emerging middle classes its political hegemony – and electoral majority – might become marginal, leading to real policy instability.)
QUOTES (with explanatory links):
“Change will not come about without some far-reaching interventions.”
“The social partners will also need to deliberate on wage inequality. On our side as Government we will during this term investigate the possibility of a national minimum wage as one of the key mechanisms to reduce the income inequality.”
“To further promote improved living conditions for mine workers, Government is monitoring the compliance of mining companies with Mining Charter targets, relating to improving the living conditions of workers.”
“This situation calls for a radical transformation of the energy sector, to develop a sustainable energy mix that comprises coal, solar, wind, hydro, gas and nuclear energy … Nuclear has the possibility of generating well over 9000 megawatts, while shale gas is recognised as a game changer for our economy.”
“We will promote local procurement and increase domestic production by having the state buy 75% of goods and services from South African producers.”
“We will sharpen the implementation of the amended Broad-based Black Economic Empowerment Act and the Employment Equity Act, in order to transform the ownership, management and control of the economy.”
“The total assets of our Development Finance Institutions amount to some R230 billion … will be repositioned in the next five years to become real engines of socio-economic development.”
“We have identified agriculture as a key job driver … target is for the agricultural sector to create a million jobs by 2030 .. Government will provide comprehensive support to smallholder farmers by speeding up land reform and providing technical, infrastructural and financial support.”
“We will also re-open the period for the lodgement of claims for the restitution of land for a period of five years’”
SONA debate, Malema response, expulsion and EFF walkout
The fractious debate that followed …
During his maiden speech to parliament, in reaction to Jacob Zuma’s address, EFF leader Julius Malema said: “The ANC government massacred those people in Marikana”. This led to an objection, a refusal by Malema to withdraw the statement, his expulsion from the House and a raucous walkout by the EFF. During the walkout, EFF members “howled and barked several derogatory utterances and made disturbing gestures,” according to Stone Sezani, ANC chief whip, which may lead to further disciplinary action against some EFF parliamentarians.
The State of the Nation address was marginally relevant and pretty tedious, but the colourful and combative follow-up presages a new atmosphere in the hallowed halls of the National Assembly. The EFF runs the risk of being characterised as a gaggle of truculent children, but the important issue here is that the party is articulating views that are probably mainstream in the black middle class.
In the words of widely respected ex-editor of the Sunday Times Mondli Makhanya, the EFF is challenging the “too good to be true” seamless transition from “the apartheid past to the democratic present”.
The main reasons Mr Makhanya welcomes the EFF’s parliamentary challenge, according to City Press, are that “unencumbered by the guilt of being beneficiaries of an evil system, white South Africans carried on with life as normal and did not feel the need to assist in redress. They took advantage of the opportunities democracy created and made full use of the head-start they had on the newly levelled playing fields. The tough conversation about correcting the wrongs of the past was given cosmetic treatment. If truth be told, one of the really good stories of the past 20 years is the fantastic story of guiltless white comfort.”
The point for Mr Makhanya is that the “questions the EFF is asking about the post-1994 dispensation are tough but necessary. The language is rough but it might just be the ice water the nation needs to wake itself. Its conduct is often uncouth, but that might be what we need to keep us alert.”
Land expropriation, South African style
Rural Development and Land Reform Minister Gugile Nkwinti has published a draft proposal that he describes as an “opening gambit” to speed up the redress of black landowners’ apartheid-era dispossession, according to the Sunday Times. (I covered these proposals in some detail ages ago, but the ST treated it as if it was brand new so I thought I better deal with it as if it was.)
The proposal is for commercial farmers to give half their farms to farm workers, “proportional to their contribution to the development of the land based on the number of years they have worked on the land”. The initial proposal (published on 9 April 2014) is that government would pay for the 50%, but that the money would not go to the owner, but to an “investment and development fund to be jointly owned by the parties constituting the new ownership regime,” according to the Sunday Times.
This proposal is similar to the charter process in the mining industry, whereby various transformation targets are linked to the process of renewal of mining rights – although the Mining Charter does not envisage that workers on mines would or should own significant parts of those companies.
I think this should be seen as a ‘bargaining position’ by government, albeit one that is likely to cause significant anxiety in the farming sector.
The ANC is under increasing pressure to deliver on promises to change the patterns of racial ownership and control of all aspects of the economy. Transformation of the agricultural sector is attractive to the ANC, because it satisfies a number of imperatives: redress, creation of small businesses and black economic empowerment. However the ANC has also shown itself to be concerned about food security and property rights. Up until now. the ANC has upheld the idea that while land might be expropriated, this would not be done without a fair price being paid.
Mr Nkwinti’s proposals are virgin territory and probably primarily a warning shot across the bows of commercial agriculture, encouraging them to come up with workable and radical solutions to the racially skewed ownership patterns on the land. April next year has been set as the deadline for responses to the proposal.
… which I entirely doubt will be made glorious summer by this sun of KZN when he gives his
5th nth State of the Nation Address this evening.
I am not, as my children might have said, very amped for this.
The only ray of light so far (I am watching on eNCA) was a brief interview with Floyd Shivambu who suggested it should be a ‘state of the resignation address’ … that if the President couldn’t make it to the Cabinet Lekgotla ‘then it would be best for him to just come here to explain that he is just too old and tired and to say goodbye’ – or words to that effect.
I thought I would use the time to publish some bits and pieces that I have sent to my clients over the last week.
The winter of our discontent – as the labour relations cycle meets a secular trend
Every year at this time South Africa is engulfed in strikes as annual wage agreements are traditionally renegotiated in several sectors of the economy. Every year analysts and journalists pontificate widely about the dire labour relations conditions – and the gloom deepens because this all takes place in winter.
Three factors this year are probably going to make the outlook more negative and threatening.
Firstly, the post national election winter has, since 1994, been characterised by spikes in service delivery protests. The causes of this phenomenon are not fully understood, but it is likely that:
- voters confronting a hostile winter and declining services levels – so soon after being promised the earth by politicians – are likely to be unsettled;
- local politicians who failed to make party lists begin mobilising factional support, perhaps to stand as candidates in 2016 local government elections, perhaps to discredit those whose positions they covet.
Secondly, the platinum strike is being driven by a number of ‘political’ factors – as discussed previously.
Thirdly Numsa is showing clear signs that its political aspirations are, as we predicted, going to drive deeper and more robust strikes and labour unrest. One sign is the growing violence as Numsa attempts to widen its action at the Ngqura container terminal in the Coega Industrial Development Zone in Port Elizabeth. The South African Transport and Allied Workers Union (a Cosatu union) is opposing the Numsa strike and is calling for its members to stay at work at the Transnet facility. However, both Transnet and Satawu were quoted on radio (SAFM 20h00 news broadcast 08/06/2014) as decrying the burning of houses and cars of the workers who were at work. The SATAWU spokesperson warned that the situation had similar dynamics to those that were present in the platinum sector in 2012 – that this ‘is just like what happened with Amcu (same broadcast).
Additionally, Numsa is preparing to lead 220,000 workers out on strike from the metals and engineering sector next month. “The bargaining negotiations have spectacularly failed to produce the desired outcomes as expected by the thousands of our members in the sector,” spokesman Castro Ngobese said in a statement quoted in The Herald (5/06/2014). Numsa’s core demands includes a 15% pay rise and a one-year bargaining agreement, the Steel and Engineering Industries Federation of SA (Seifsa, which represents 23 employer associations) has offered an inflation-linked increase of 6.1 percent.
This is the cycle meeting the secular trend, with each driving the other deeper than either would have been driven ordinarily. Numsa is in the process of breaking away from Cosatu and is beginning to vigorously compete with other Cosatu unions in overlapping sectors (container terminals, the big electricity generation projects and down and upstream mining and metallurgy operations). This is, at least partly, about Numsa preparing to set up a ‘left’ party to compete for votes in the future. Comparable (but not identical) dynamics are driving the platinum strike. A winter with ‘normally’ increased social and industrial unrest will probably become unusually bleak and unwelcoming in the months ahead. The impact on GDP growth and on the possibility of ratings downgrades are both important considerations.
Both Fitch and Standard & Poor made references on Friday (13/06/2014) to increased political risk when they changed their views on the South African government’s willingness and ability to pay the sovereign debt.
Fitch revised the outlook for South Africa to negative from stable and affirmed the country’s long-term foreign and local currency issuer default ratings at BBB and BBB+ respectively. S&P downgraded both the country’s local and foreign currency ratings by one notch from A- to BBB+ and BBB to BBB- respectively, but moved its outlook negative to stable. None of this is a catastrophe but of interest to us here is the central role of ‘politics’ in the given reasons for both Fitch’s and S&P’s changes.
Fitch says it most baldly in the press release announcing the change in outlook (my emphasis added):
“Following its election victory in May with 62% of the vote, the African National Congress government faces a challenging task to raise the country’s growth rate and improve social conditions, which has been made more difficult by the weaker growth performance and deteriorating trends in governance and corruption. This will require an acceleration of structural reforms, such as those set out in the comprehensive National Development Plan (NDP). In Fitch’s view, the track record of some key ministerial appointments and shortcomings in administrative capacity mean this is subject to downside risks.”
Fitch gives amongst the key drivers of its more negative outlook: “Increased strike activity, high wage demands and electricity constraints represent negative supply side shock.”
Standard and Poor’s downgrade was similarly motivated but adds some additional concerns:
“While we think that President Jacob Zuma’s newly elected administration will continue the policies of his first administration, which controlled fiscal expenditure and fostered broadly stable prices, we do not believe it will manage to undertake major labor or other economic reforms that will significantly boost GDP growth”.
My initial take on the new Cabinet is supportive of these motivations.
In addition both agencies made extensive reference to the negative industrial relations environment – and the negative impacts on GDP growth and government revenues. There is a significant political dimension driving industrial unrest – as I have argued above.
The validity of the actual ratings and ratings outlook of these agencies is much disputed but the issues they use to motivate their views are interesting because they (the agencies) are cautious; clinging to a sort of ‘average view’ of investors. So if political criticism makes its way into the text (as is the case in both these instances) we are obliged to consider that these may represent, or may come to represent, a general view in markets.
South Africa has a small open economy and liquid financial markets and the difference that policy makers can make to economic outcomes is limited. But even within those limitations too many political choices (certain cabinet appointments, corruption controls, delivery performance and the honest brokering of labour contestation) are either not helping or are actively negative.
No-one could have failed to notice the excoriating criticism of the credit rating agencies (CRAs) after their generalised failure to accurately assess the risks associated with the collateralised debt obligations allegedly because they were mostly issued by the CRAs biggest paying clients! However, it is the opposite with sovereigns: “It has also been suggested that the credit agencies are conflicted in assigning sovereign credit ratings since they have a political incentive to show they do not need stricter regulation by being overly critical in their assessment of governments they regulate.” http://en.wikipedia.org/wiki/Credit_rating_agency (accessed 13h56 16/06/2014.
The National Directorate of Public Prosecutions
I dealt with this issue last week, but it is making bigger and more anxiety provoking headlines than ever.
The NDPP was drawn into the fight between Mbeki and Zuma and since that time has limped along to the rhythm of one or other faction aligned to competing interests within the ANC seizing or losing power in the institution. This is not a situation in which one could safely choose one set of ‘good guys’ and back them against another set of ‘bad guys’. The situation is complex but relates primarily to the on-going struggle to either ensure that certain senior political leaders are brought to justice or to ensure that they are not.
The NDPP is one of the most important institutions of the justice system, and without certainty and stability here it is impossible to have certainty about the operating environment for any business in the country. This is a serious problem and it appears to be getting worse under the current administration.
(This is a bit dated, but you might be interested in my rude remarks about the new minister.)
“Government is ready to wash its hands of the protracted wage strike by platinum mineworkers in Rustenburg” according to the Sunday Independent 08/06/2014. Mines minister Ngoako Ramatlhodi threatened to pull out his inter-ministerial task team if a settlement was not reached at the last scheduled government facilitated meeting, which is due to take place today.
In addition, a formal ANC statement delivered by Gwede Mantashe at a press conference in Luthuli House in Johannesburg last night after the ANC weekend lekgotla characterised the strike in a way that seemed to destroy the remote possibility that Ramatlhodi could have made a difference anyway:
“The articulation of AMCU position by white foreign nationals, signalling interest of the foreign forces in the distabilisation (sic) of our economy.
The direct participation of EFF in the negotiations, and thus collaboration with the foreign forces.
These two factors led the lekgotla into cautioning the Ministry of Mineral Resources in handling the facilitation with care. There were questions about the role of the state in workplace disputes where there are clear rules guiding it.”
This statement is interesting precisely because it borders on the bizarre
The ANC statement indicates shows just why the new ANC minister cannot be an honest or effective broker in the negotiation – and it is therefore unsurprising that he is preparing to withdraw his team. The ANC is compelled to believe that this strike is only not ‘negotiable’ in the normal manner because the real issues driving it are political and not about wages at all. The ANC might be correct about the strike being ‘political’ but the party itself is culpable of having politicised the strike by attempting to defend its Num ally against the vigorously growing Amcu, by alienating workers by characterising their union as ‘vigilantes’ and by the ‘Marikana massacre itself.’ s – There was never any real possibility of this government mediating between the parties or influencing the outcome.
Concerns about property rights
The South African Institute of Race Relations and AfriBusiness (AfriSake) have recently released warnings about property rights in South Africa. A proper assessment of these warning would require specialist legal opinions, but our own assumptions have long been that the South African Constitution provides adequate protections for private property (see here) and the ANC government is unlikely to risk fiddling with these principles.
However it seems to be a basic due diligence requirement to keep an eye on the risk – perhaps more so since Jacob Zuma spelled out at his Cabinet announcement (reiterating many recent ANC and SACP statements) that we are entering a “more radical” phase of economic transformation.
With this is mind, we reproduce the basic summary of legal concerns AfriBusiness and the South African Institute of Race Relations have raised in their research (note that below is a direct quote from the AfriBusiness statement linked above):
- The National Development Plan has as its aim the transfer of 20% of the agricultural land in a district to black recipients, at only 50% of the value as determined by the state (in terms of the Property Valuation Bill).
- The verdict of the Constitutional Court in April 2013 in the case of AgriSA v the Minister of Minerals and Energy distinguishes between “deprivation” and “expropriation”. After the verdict the state is able to dispossess and redistribute property, as long as the state does not assume ownership of the property and act (sic) only as custodian.
- The Green Paper on Land Reform aims a radical redesign of property rights, with inter alia a type of freehold on land which will drastically limit the rights of owners. Within this context a Land Management Commission is proposed, which will have discretionary powers regarding disputes over title deeds.
- The policy proposal by the Minister of Land Reform, Gugile Nkwinti, for “Strengthening the rights of workers working the land” aims to transfer 50% of the land to the workers, commensurate with their term of service. No compensation will be paid to the owner.
- The Expropriation Bill poses that expropriation may be used for the public interest and public goal. The Bill is not only applicable to land but will cover all types of property. Public interest and public goal are determined in an ad hoc manner and both have restitution as aim.
- The Promotion and Protection of Investment Bill allows state intervention in investment processes. The Bill explicitly provides for expropriation at less than market value. All in the name of so-called restitution. Any property used for commercial purposes is targeted by the Bill.
- The Infrastructure Development Bill aims to eliminate so-called inequalities in infrastructure. The Presidential Infrastructure Coordinating Commission is granted the authority to expropriate in the public interest and for the public goal.
- The Spatial Planning and Management of Land Use Act aims at centralized planning of land ownership. It proposed so-called spatial justice by integrating low and high cost housing in residential developments.
- The Extension of the Security of Tenure Amendment Bill expands the rights of occupants and their dependents. Evictions are strictly controlled and the Amendment Bill means a significant loss in control over property.
- The Restitution of Land Rights Amendment Bill creates further political and economic uncertainty regarding the future of property rights.
- The Rental Housing Amendment Bill proposes stricter regulation of the rental property market. Rental Tribunals will be established to hear disputes and will be able to determine increases in rent.
- The National Water Amendment Bill and Policy Review prohibits the trading of water rights and proposes a use-it-or-lose-it principle for water rights. Equality (including racial transformation) becomes the criterium (sic) for the allocation and re-allocation of water rights.
Consume that with the requisite amount of salt but keep an eye on the detail.
Sesotho loan word meaning court or community council meeting; used in the South African context a “lekgotla is a meeting called by government, Cabinet or the ANC to discuss strategy planning”. Wikipedia accessed 04h30 09/06/2014.
(Note: please read Jonny Steinberg’s comments on my miscasting of the implications of the recent HSRC’s South African National HIV Prevalence, Incidence and Behaviour Survey, 2012. Jonny argues that I have taken “a story of resounding success and twisted it into a tale of alarm”. Jonny Steinberg is correct on all counts and I hope to redress my error at some time in the near future. Catch his brief criticism and my initial mea culpa in the comments section here.)
Before it gets too out of date, herewith my last week’s (Monday 14 April) news update … it’s worth it just for Ronnie Kasrils’s comments about Zuma.
- Employment equity in South Africa is glacially slow and will continue to help drive regulatory and political uncertainty
- A spoilt ballot campaign and some unusually forthright statements from ANC leaders about corruption in their party and government
- Ramapohosa brokers a truce, Vavi’s reinstatement holds and Cosatu totters on
Employment equity – dead slow ahead
Last week the Commission for Employment Equity released its 14th Annual report (available here) indicating glacial progress in making workplaces more representative of the demographic profile of the South African Economically Active Population (EAP).
Below is an indicator of race and gender breakdown of the working population as a whole:
In the report’s ‘Top Management’ category, the trend between 2003 and 2013 is strikingly poor:
(The report uses categories: Top Management, Senior Management, Professionally Qualified and Skilled. The Department of Labour begun collecting data on ‘foreign natlonals’ as a distinct fraction of the EAP from only 2006.)
The performance is best in the government sector, but this only slightly improves the overall picture:
There have been some improvements at the lower end (Skilled Technical):
However, not unsurprisingly, the Employment Equity Commission believes this is not good enough in itself, nor is it adequate compensation for failures elsewhere.
(The Commission is a statutory body that reports to the Department of Labour and operates within the aegis of Employment Equity Act, 1998 – amended by Employment Equity Amendment Act of 2013.)
Poor performance by the private sector in reaching employment equity targets is a constant irritant to government and to the ‘designated groups’ (Africans, Coloureds, Indians, women and people with disabilities). Employers might argue that the administrative burden of the act is counter-productive and that the top employment categories require skills that are relatively scarce amongst the ‘designated groups’. However, the political consequence of the failure gradually adds to the risks in the operating environment.
Employment equity legislation in South Africa has, since 1998, tended not to concentrate on sanctions to enforce compliance. However it is apparent that government is gradually increasing the pressure. The Employment Equity Amendment Act of 2013 increases fines for non-compliance – both with regard to reporting requirements and with regard to targets.
The African National Congress is increasingly challenged by radical populists (e.g., the EFF) and a militant left-wing (e.g., the incipient Numsa breakaway from Cosatu) which together argue that black South Africans have failed to adequately benefit from ‘liberation’. Part of the answer to this challenge from the ruling party is likely to be a rapid escalation of pressure around employment equity and Broad-Based Black Economic Empowerment.
There will be an increasing burden on all companies operating in the country and increased government hostility to defaulters. The ANC will not be tempted towards the nationalisation policy platforms of the emerging populist and leftist groups, but must find an answer that satisfies its constituency in the rapidly growing black middle class.
Spoiled ballot campaign
Ronnie Kasrils, a former intelligence minister, and long-time leader of the African National Congress, has embarked on a campaign with some other disaffected ANC members to call for a spoiled ballot in the May 7 election.
Nothing much, except that this is probably the tip of an iceberg of discontent in the African National Congress. Perhaps what is significant is that despite the emergence of the EFF and Numsa breakaways, and the apparent success of the DA campaign, many dissidents in the ANC still find themselves unable to follow a party other than the ANC.
Kasrils’s main problem with the ANC is what he perceives as a spread of serious corruption and abuse of public funds at a senior level in government and the party.
Obviously the strategic or tactical value of a spoiled ballot will be a matter of deep controversy.
(My own view is that Kasrils and his colleagues are well within their rights to propagate this option – it is, however, not an option I will be pursuing.)
What is most interesting is to read Kasrils’s comments about Jacob Zuma and other ANC leaders in the interview with published in the City Press yesterday. I quote him here in-depth, because of how unusually explicit his mode of expression is and because I believe this view is representative of a significant group of ANC insiders, deeply unhappy with their party, but not yet ready to leave it:
People will tell you and it has been stated from people in exile and I can confirm – (that) he (Zuma) was a pretty simple guy. He wasn’t a person who was looking for fancy clothes and flash cars. He was pretty down to earth … I did see a certain ambition there by acquiring so many feminine relationships and wives and then children … (But Zuma has) changed very dramatically. Here is a man who comes back to South Africa and you can imagine how worried he must have been, how he was going to take care of this kind of menagerie … And then there are the people, capitalists, with money in their back pockets, who were looking at the new political power and pounced like vultures … There were some who were only too happy in the embrace because they did not have to worry about the wolf at the door, how they would have to pay the bills, how they were going to educate their kids, where they find a way to house their women … from then on, what happens to your fine principles of serving the people first and thinking of the key things that are necessary when you are now in league, and in bed, with people who become your sponsors? From that point of view, you change.
My view is that the people who now run the ANC, not every one of them, but there is an elite that has become incredibly corrupt that managed to take over – take power from Mbeki and kick him out and it’s just been downhill ever since with this system just rolling on like a snowball becoming larger and larger.
Ronnie Kasrils, City Press 13/04/2014
(Again, my personal views on whether Mbeki, Zuma or none-of-the-above are the root of all evil might differ somewhat from Kasrils’s but I think his plain speaking here is useful anyway.)
Ramapohosa brokers a truce, Vavi’s reinstatement holds and Cosatu totters briefly on
Cosatu’s Central Executive Committee meeting on Tuesday last week was widely expected to be the close-to-final act in the trade union federation’s unravelling. However an ANC delegation led by Cyril Ramaphosa persuaded the Zuma loyalists as well the Zwelinzima Vavi-led faction to postpone a final showdown till after the elections. (Such a ‘final showdown’ is ostensibly about the suitability and prudence of the Vavi, but is actually about loyalty to Jacob Zuma to the ANC’s policy positions.)
Again, it is interesting to note the interaction between fragmentation and momentum in the ruling alliance. The ideas and history (mythological or otherwise) that bind the members and supporters to the ANC make the split that is happening bizarrely protracted. However, there is no question that several splits in the ruling alliance are, in fact, in process. It is tactically important for Vavi and Numsa to hold on within Cosatu for as long as possible. Cosatu remains terrain which neither contestant feels ready to abandon to the other.
Perhaps you are a journalist covering the May 7 elections or the Oscar Pistorius trial – and will soon be immersed in Shrien Dewani’s adventures in our specialist niche of the honeymoon-tourism market.
You might be a TV continuity announcer-cum-journalist, circling endlessly between serious discussion about bone fragments, Nkandla’s fire retarding swimming pool, Numsa’s endless exit from Cosatu – and then back to Oscar standing up, Oscar sitting down, Oscar making gagging noises, Oscar weeping about how horrible and sad this whole business is for him.
If you’re very lucky you might get to do a colour piece on Zuma’s ‘shorty and the machine gun’ routine:
But after the 10th showing of that, between the traffic, Oscar Pistorius, the sport, Oscar Pistorius and the economy … and Oscar Pistorius, even you must be having to fight to keep your food in your stomach.
I understand the private honour in doing something deeply distasteful and humiliating when this is the price of earning a living. So, in an attempt to provide us all with some light relief, I hereby republish and rework some ‘cynical quotations’ I have posted on a few occasions previously. Apologies to those long time readers who have seen these more than once … but this is a public service I feel compelled to render.
These are from the excellent Cassell Dictionary of Cynical Quotations (John Green – Cassel, 1994) with a few comments from the peanut gallery.
As we listen to politicians as we head towards May 7
People never lie so much as after a hunt, during a war or before an election.
Otto von Bismarck
There are hardly two Creatures of a more differing Species than the same Man, when he is pretending to a Place, and when he is in possession of it.
George Savile, Marquis of Halifax, Political, Moral and Miscellaneous Thoughts and Reflexions, c.1694
An Honest politician will not be tolerated by a democracy unless he is very stupid … because only a very stupid man can honestly share the prejudices of more than half the nation.
Bertrand Russel, Presidential Address to LSE students, 1923
An honest politician is one who when he is bought will stay bought.
Simon Cameron, 1860
In general, we elect men of the type that subscribes to only one principle – to get re-elected.
Terry M. Townsend, speech 1940
That a peasant may become king does not render the kingdom democratic.
Woodrow Wilson, 1917
Anybody that wants the presidency so much that he’ll spend two years organising and campaigning for it is not to be trusted with the office.
David Broder, in the Washington Post, 1973
When buying and selling are controlled by legislation, the first things to be bought and sold are legislators.
- P. J. O’Rourke
Should you bother voting at all?
Bad officials are elected by good citizens who do not vote.
George Jean Nathan
… yes, but (and forgive the emphasis here on the over-cynical … and slightly fascist):
Democracy is the name we give to the people each time we need them.
Robert, Marquis de Flers and Arman de Cavaillet, L’habit vert, 1912
A democracy is a state which recognises the subjection of the minority to the majority, that is, an organisation for the systematic use of violence by one class against another, by one part of the population against another.
V. I. Lenin, The State and Revolution, 1917
Parliaments are the great lie of our times.
Konstantine Pobedonostsev, 1896
Democracy is a device which ensures that we shall be governed no better than we deserve.
George Bernard Shaw
Democracy is a form of religion. It is the worship of jackals by jackasses.
H. L. Mencken, Sententiae, 1916
Now majority rule is a precious, sacred thing worth dying for. But like other precious, sacred things …. it’s not only worth dying for; it can make you wish you were dead. Imagine if all life were determined by majority rule. Every meal would be a pizza.
P. J. O’Rourke, Parliament of Whores, 1991
The democratic disease which expresses its tyranny by reducing everything to the level of the herd.
Henry Miller, The Wisdom of the Heart, 1941
Democracy is the art of running the circus from the monkey cage.
H.L. Mencken, 1916
On the ANC and the (infamous) liberal media
Democracy becomes a government of bullies, tempered by editors.
Ralph Waldo Emerson, Journals, 1909 – 14
It is a general error to suppose the loudest complainer for the public to be the most anxious for its welfare.
Edmund Burke – 1769
What seems to be generosity is often only disguised ambition – which despises small interests to gain great ones.
Francois, Duc de La Rochefoucauld, Maxims 1665
Revolution, n. In politics, an abrupt change in the form of misgovernment.
Ambrose Bierce, The Devil’s Dictionary, 1911
Every revolutionary ends up either by becoming an oppressor or a heretic.
Albert Camus, The Rebel, 1955
Fame is but the breath of the people, that is often unwholesome.
Thomas Fuller 1732
The urge to save humanity is almost always a false front for the urge to rule it.
H.L. Mencken 1956
A judge is a lawyer who once knew a politician.
What a liberal really wants is to bring about change that will not in any way endanger his position.
An arbitrary comment about families
Sacred family! …. The supposed home of all the virtues, where innocent children are tortured into their first falsehoods, where wills are broken by parental tyranny, and self-respect smothered by crowded, jostling egos.
August Strindberg 1886
On love – and the current state of the ruling alliance:
The voyage of love is all the sweeter for an outside stateroom and a seat at the Captain’s table.
Henry Haskins 1940
On the global debt crisis and the Great Recession?
What is robbing a bank compared with founding a bank?
Bertolt Brecht 1928
A bank is a place where they lend you an umbrella in fair weather and ask for it back when it begins to rain.
Bloggers (as a sort of author-lite) – in an attempt to be even-handed in my sneering
An author, like any other so-called artist, is a man in whom the normal vanity of all men is so vastly exaggerated that he finds it a sheer impossibility to hold it in. His over-powering impulse is to gyrate before his fellow men, flapping his wings and emitting defiant yells. This being forbidden by the police of all civilized nations, he takes it out by putting his yells on paper. Such is the thing called self-expression.
H.L. Mencken, Prejudices 1919-27
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:
This is a picture of Robert 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:
Then the Sunday Times Ipsos poll published March 22:
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.
‘Nkandla’ is, on the face of it, small change compared to myriad similar scandals surrounding the President. 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.
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.
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.
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.
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 EdgeThe 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.)
The Numsa exit from the alliance is a natural consequence of what appears to me to be a ‘Maggie Thatcher moment’ in South African politics.
(This is a loose characterisation and it purely means that I believe there is evidence that government is taking a much harder line with the union movement and is backing the private sector to do the same. As you will see in the final slide I do not think it is strictly accurate to define this moment as Thatcherite, but I do believe the metaphor has some value i.e. that Cosatu is collapsing because the ANC under Zuma is forcing it to come into line.)
Below is an extract from a piece of my weekly news commentary published just after SONA 2014 … and below that are three slides from a presentation I delivered in November last year – thanks to BNP Paribas Cadiz Securities, as always, for allowing me to republish here.
Amplats to sue Amcu for strike related damages – various news reports (17/02/2014)
Several news outlets reported on Sunday that Anglo American Platinum (Amplats) will sue the Association of Mining and Construction Union for R591m. “The company seeks payment of damages caused by Amcu’s failures to adhere to the law, damage to property, increased costs to pay protection services staff overtime, and loss of production because non-striking workers were prevented from working” – Amplats statement quoted in the Sunday Times 16/02/2014.
I think a combination of factors are making it probable that the major platinum companies will use this strike to attempt to reset the balance of power between the companies and labour in the sector. The legal action by Amplats is probably part of such a generally agreed strategy by companies in the sector.
My reasoning includes the following supporting conjectures:
- Management will not want to again make the mistakes in made in 2012. The damage suffered by the platinum companies during that year – when unions appeared to push their advantage with little resistance or any coherent counterstrategy from management – led, in part, to the state clumsily stepping in, with Marikana the centrepiece of the gruesome consequences.
- (According to various media, for example the Business Day) the platinum market is in oversupply, the companies are cash flush and the rand is weak – an ideal combination of conditions that would assist the companies ‘digging in’ and waiting for Amcu to break.
- It is increasingly clear that the union resources are stretched to the limit and strikers are carrying high levels of unsecured debt which makes both strikers and their union unable to last more than one payday
I am suggesting that the companies have tacit government support in taking a hard line with the strike. Amcu is, after all, the union that displaced key ANC ally Num and any strategy to break Amcu would probably be tacitly supported by the ruling party (although this is not something the ANC could admit to.)
Solidarity general secretary Gideon du Plessis put it best when he said Amplats’s action would restore the balance of power and send out a message that unreasonable pay demands and irresponsible union action would not be tolerated. He summarised Amplats’ intention as to “bankrupt Amcu and get rid of this militant and irresponsible union once and for all; or to send out a strong message to Amcu and all other trade unions that Amplats has had enough of union bullying; or to merely place Amcu under huge pressure to call off the strike and accept the final offer made by the companies.”
What is clear to me, is Amplats would only be behaving in the vigorous and hard-line manner if it has been given the tacit support of government. Zuma’s SONA2014 statement that “We cannot have industrial conflict that destroys the economy” is the visible spine of a deep seam of just such support.
… and then as part of the background that leads me to those conclusions, 3 slides from a presentation entitled “The Curate’s Egg” from November last year:
“How seriously to take the EFF is becoming the question of the year for a view on South African political risk”
As I listened to Pravin Gordhan’s budget speech I thought I would share with you an extract of my news commentary from Monday morning.
But I forgot to hit ‘publish’ as I was being torn between being slightly underwhelmed and moderately admiring that Gordhan could make so few populist concessions this close to May 7.
Thus, the EFF and DA manifesto launches:
- The Economic Freedom Fighters and The Democratic Alliance both launched their manifestos this weekend
- The EFF will likely out-perform and its policies are the ‘sum of all fears’ for investors in emerging markets
- In the longer term, however, the ANC is set free to pursue more growth orientated, investor friendly policies – and success or failure in this regard is the key question about South Africa’s future
- The Democratic Alliance also launched its manifesto and is rapidly shifting its demographic appeal
- By 2019 we could have a Goldilocks scenario where the ANC and the DA comfortably occupy the middle ground of South African politics, keeping at bay both the left and right-wing, and pursuing economic growth. Other scenarios are both possible and plausible, but I thought I would, just this once, hope for the best
EFF – radical
left-wing populism of old (and marketing genius)
The EFF packed out the Mehlareng Stadium in Tembisa in Gauteng and launched a radical populist manifesto with great aplomb. Ambitious plans announced included free education up to tertiary level for all and double social grants paid for with the proceeds from nationalising 60% of the mines and banks. The party will build a state pharmaceutical company to produce medicines, scrap the tender system, ban the use of consultants while increasing civil servant salaries by 50% and it will subsidise the taxi industry and provide housing finance for middle-income earners. Mineworkers will take home a minimum wage of R12500.00 a month (undoubtedly designed to chime with current Amcu platinum sector strike) and other minimum wages would vary from R4500.00 for waiters and waitresses to R7500.00 for private security guards.
To get a sense of the scripting and impact of the launch here is Ranjeni Munusamy of The Daily Maverick describing the Marikana widows on the platform: “To make the point about the treachery of the ANC government, Malema had invited as his special guests the widows of the Marikana massacre, all clad in EFF t-shirts. They sang and spoke of the hardship, their heartbreak and the betrayal they feel at the ANC government killing their husbands on behalf of capital.”
The EFF is becoming the big story of this election. Previously in SA politics the ANC managed to encompass within itself the full spectrum of liberation ideologies including this radical populism. The expulsion of Julius Malema (paralleled by the pushing of Numsa out of the ruling alliance) has left the radical populists on the outside and unconstrained by previous alliances and loyalties.
The ANC ran a counter rally/concert aimed at a youthful audience not far from the EFF manifesto launch. While that concert/rally was well attended and festive, it didn’t appear to detract from the EFF launch. All it really indicated was that the ANC is taking the EFF threat seriously.
How seriously to take the EFF is becoming the question of the year for a view on South African political risk. The EFF is articulating the set of demands and occupying the political space that has always been of concern to investors in South Africa – characterised as it is by chronic unemployment, poverty and inequality with the racial underpinnings of apartheid. Previously markets had become convinced that the ANC by its size and reach and general authority, was able to mediate between the different and competing demands of the transition.
However, it is now clear that the ANC has either been forced to abandon the terrain of the radical populists and ultra-left and expel those factions – or it has chosen to do so for its own strategic objectives.
On the one hand this sets the ANC and government free to develop policy without the straitjacket that came from clinging to the populists and leftists. On the other, those groups are now free to compete for votes and the ANC is vulnerable to electoral shrinkage.
The EFF will undoubtedly grow, but the question for me is: ‘can the ANC, in the longer-term, now find policies to grow the economy that will allow it to regain ground in the 2019 election that it is likely to lose in the 2014 election?’
Meanwhile I think the EFF will do better in this election than expected …. and I am moving my expectation for its electoral performance up from 8% to 10% (a thumb suck, rough guide, purely for me to keep track) of the total vote on May 7th. I do, however, think that once the EFF gets to parliament the unworkability of its policies and the manipulations inherent in its campaigning will inevitably be exposed. Over the longer term it could be under pressure to hold onto its parliamentarians and its voters, especially if the ANC is pushed by the pressures from left and right into a process of internal renewal … and especially if the Cosatu unravelling results in a real labour/left party.
The Democratic Alliance
The Democratic Alliance also launched its manifesto this weekend – on Sunday in Polokwane in Limpopo Province. The launch was well attended – with an almost exclusively black audience, a feature which puzzled many commentators (but not you?- ed)
The party was at pains not to attack the pre-Zuma led ANC with Helen Zille saying of the ANC’s 2007 Polokwane conference ‘(t)hat was the moment when a great political movement lost its sense of direction. It was hijacked by leaders who care more about themselves than the people they are meant to serve … (the) good story ended in 2007.’
The economic aspects of the election platform emphasised job creation: ‘The manifesto we release today is a ‘manifesto for jobs’… Job creation is only possible if we cut corruption’.
The manifesto is worth reading and pushes all the right buttons balancing state encouraged redress with laying the conditions for private sector led growth. Catch Helen Zille’s speech, which is a useful summary of the manifesto, here.
The DA appears to be on top of its game and performing optimally, given the limitations imposed by its origins as a largely white party. The ‘ethnic’ or ‘racial’ character of the DA is clearly in transition, with Helen Zille the only white person who took the stage and the cameras covering the launch having to search long and hard for the few white faces in the audience. These contortions are going to be difficult.
The DA has clearly decided to appeal directly to defecting ANC voters and much of the tone and approach was structured with this in mind – including being respectful of the pre-Zuma ANC history. However it is my impression that defecting ANC voters are (mostly) going to abstain from voting or will vote EFF (and maybe UDM/COPE leftovers). I think that while the DA might get a portion of these votes the ‘racialisation’ of our politics means it is too early for the DA to capture enough black votes to shake the ANC.
However, I think the political realignment’s now taking place could mean that it will be the ANC and the DA that occupy the middle ground of South African politics by 2019, a scenario that has many more positive than negative features. (I wrote that line on Monday morning. I am not sure I agree with it still. Nothing has changed except my mind.)
In passing I should note the strong convergence of two features of both the DA and the EFF. They have both identified Jacob Zuma as the key individual responsible for the ANC’s and the country’s failures. True or not, fair or unfair, the ANC must be under pressure to find ways of shifting this president into the side-lines – which is, in my opinion, one of the features necessary for the emergence of a process of renewal in the ANC.
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
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.
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.
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).
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.
(This is part of a brief note I sent out to clients this morning)
Nelson Rolihlahla Dalibunga Mandela, 95, died last night on Thursday December 5 2013.
- There may be short-swings in some South African financial instruments but it is unlikely that this will be a longer term driver of the markets. Nelson Mandela has been ill for some time and has not played a role in South African politics since the late 90’s.
- There will be intense world focus on the country – and much of that focus is likely to negatively compare the current crop of leaders with Nelson Mandela (but the martyred and canonised version of the man). It should be noted that investors in South African equities and bonds appear increasingly bleak about the environment (labour unrest, labour productivity, uncertain mining legislation – as well as uncertainty about a host of other regulatory and legislative interventions by the government – corruption and cover-up around the President’s Nkandla residence, the use of state security apparatuses to advance certain interests of politicians, uncertainty about the infrastructure build programme, the difficulties in achieving fiscal consolidation and the possibility of further ratings downgrades). Those uncertainties will increase with Mandela’s death, although his passing is unlikely to impact significantly on the real situation.
- The country will be crawling with celebrities and senior politicians from other countries (including as many as 5 current and former US presidents) – which will be highly disruptive in a number of different ways. There is also likely to be a period of formal national mourning, which could feed through into already anaemic GDP growth numbers for the 4th quarter.
- For the African National Congress the opportunity emerges for the ruling party to run an election campaign centred around the great and popular ex-president – and we should expect Nelson Mandela to be alongside Jacob Zuma in many posters and promotional material. Of course the risk is that this makes the comparison more obviously unfavourable for the incumbent. But on the whole we think the ANC election campaign will benefit from foregrounding the key role played by Nelson Mandela at all times casting himself as a loyal member and leader of the ANC.
- As I say in the final paragraph below: the financial market is unlikely to react wildly or in a sustained manner to this single event … but then the financial markets do not list the price of everything that is important.
Here is an updated version of some comments I have made on previous occasions (including here) when his death seemed imminent:
The country will initially be bathed in a blinding light and then buried in mountains of obscuring verbiage taller and wider than the verbiage that covers the September 11 attacks on the World Trade Centre, the US invasions of Iraq and Global Warming combined.
It is only the usually skittish financial markets that I expect to take the old man’s passing with equanimity.
For those who comment on South African financial markets, Nelson Mandela’s death should be considered “investment neutral” – but in an investment environment that looks anything but neutral from a political risk perspective.
But there are more important meanings than prices in financial markets.
Nelson Mandela is the last symbolic link to the full ambit of the struggle of all Africans, but black South Africans in particular, to free themselves from colonialism, Apartheid and slavery.
Crucially, he is also the symbolic representative of the compromises and tolerance that characterised the negotiations from 1990 and the election in 1994.
If that was not enough for the symbol to carry, Nelson Mandela’s 27 years in prison and his calm forbearance have come to represent for many throughout the world the manifestation of the human spirit in its best possible form.
His passing will give focus to the anxieties many feel about South Africa’s future – but also to anxieties about the world, about the predation of humans on each other and on the planet. He was, after all, as much a global symbol and leader as a South African one.
Our feelings about the lives and deaths of “great” men and women allow us an emotional link to the grand scope of the history we live in and through. The death of Pope John Paul II and of Diana Spencer gave a sense of how, in the age of celebrity, the so-called ‘general public’ becomes emotionally connected to the grand human drama that can usually only be understood a long time afterwards and at many degrees of abstraction.
Nelson Mandela’s death will be such a moment for humanity, because it will represent the drawing together of important threads of the last several hundred years of human history.
The point, however, for South African financial markets is that little will change in South Africa with the passing of the man. The real running of the country and the dealing in the compromises between the old South Africa and the new, has long moved on from Nelson Mandela.
It has now become a truism that even in his last years as president Nelson Mandela was already more important as a symbol than as a politician and statesman.
There is real and visceral grief from comrades, friends and citizens who have participated with him in the struggles for African liberation. I imagine too, that throughout the world there will be an unprecedented outpouring of emotion that will elevate the symbol even higher than the man.
South Africa, for one last time, will be bathed in light and the centre of puzzled global attention – as it often has been since the formal beginnings of Grand Apartheid in the late 40′s and early 50′s.
But South African financial markets – the currency, the equities, the bonds and products that derive from these – are unlikely to falter.
But that only tells us one thing: that the ticker tape does not list the price of every important thing.
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.
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)
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.
I will make a decision on the caption competition soon, but meanwhile here is my latest news update and summary – the Madonsela story continues to grow and, frankly, should be encouraged to.
The Public Protector clashes with Zuma’s security chiefs
On Friday state security agencies abandoned their urgent interdict in the North Gauteng high court attempting to prevent the Public Protector Thuli Madonsela from a limited release of her report into the R206 million upgrade of Jacob Zuma’s Nkandla private residence. However Nathi Mthethwa (Minister of Police), Siyabonga Cwele (Minister of State Security) and Thulas Nxesi (Minister of Public Works) have indicated that they still expect Madonsela to bow to their various ‘security concerns’ – something the feisty Public Protector is unlikely to do. (She was speaking a few minutes ago, bemoaning the fact that she ever handed the report to this cluster of … securorats? … catch a preliminary reports of that here.)
Madonsela has used the security cluster intervention to ensure that a new key piece of evidence becomes public, namely that Jacob Zuma privately appointed Minenhle Makhanya Architects (who had no security clearance) to run the Nkandla project, but that the company was paid (upwards of R18 million) by the state. It will be increasingly difficult for Zuma’s security chiefs to sustain the argument that their ‘real’ concern about the report relates to whether it (the report) compromises the president’s security or, in fact, that the upgrade was essentially or mainly about the president’s security.
Jacob Zuma might be the quintessential survivor, but in the lead-up to a national election the strong indication that he and his family have personally and directly been the recipients of irregularly redirected state resources could be a serious problem for him and his party. The Sunday Times (17/11/2013) lead editorial is headed: “A suspect president and his questionable lieutenants” … the degree to which Jacob Zuma’s excesses make the ANC look bad is the degree to which he is vulnerable.
The EFF – running out of red berets just as Julius Malema goes on trial for fraud and corruption
The dilemma faced by Julius Malema’s new Economic Freedom Fighters (EFF), is that while the new party appears to be performing well there is a real possibility that some of the leadership could be in prison before the 2014 election. City Press, in its front page lead story (17/11/2013) reports of the growing EFF support: “(t)hey can be seen wearing their red berets on street corners, in public places, hangout spots and even at funerals where they go to recruit new members”. The Sunday Independent, however, points out that Julius Malema will go on trial for fraud, corruption, money-laundering and racketeering at the Limpopo Magistrates Court today – and that 3000 EFF supporters were expected outside the court.(Julius’s case has since been postponed till September next next year – which means he will be firmly in the running next year.)
I have had to constantly upgrade my estimates of how the EFF might perform in the 2014 election. I previously indicated my rough forecasts and promised that from time-to-time I would update my view. Well, here is my latest guesstimate:
To do as well as I indicate here the EFF would have to pick up previous ANC defectors (from Cope and the UDM) as well as a significant number of first time youth voters. The EFF remains the part of the story about which I am least confident – although strictly none of these figures can pretend to any scientific validity. A strong performance by the EFF (built as that party is around a rejection of Jacob Zuma and a rejection of the economic status quo) could set off a shockwave in the ruling party.
Cyril Ramaphosa on a ‘social compact’
Cyril Ramaphosa gave an interesting address to the Mapungubwe Institute for Strategic Reflection (dated November 17 and available as a pdf on Mistra’s website) where he usefully summarised government’s and the ANC’s position on economic development – namely that ‘a social compact’ is required.
The full address is well worth reading, but the essential point (from a financial market perspective) is the statement that:
“Significantly, perhaps most importantly, business needs to focus on building an economy that delivers sustainable returns to all stakeholders over a longer term, eschewing the chase for high profits in the next quarter.”
Earlier, he says:
“The commitment to greater capital investment demonstrated by government needs to be matched by a similar commitment from the private sector to invest in productive capacity and to contribute to employment creation.”
Ramaphosa’s ‘social compact’ is another, perhaps more sophisticated, version of mining minister Susan Shabangu’s comments during an exchange with Gold Fields CEO Nick Holland at a recent conference in Australia:
“Investors must realise they have a responsibility to the country and cannot work to a bottom line that has no heart or soul at all … They have to understand there are various socioeconomic needs of the various partners … If investment will not improve the quality of lives — and recognise that workers also need to live decent lives — it will not be able to bring stability in South Africa … We are a country that, in the past, saw investment coming in that never contributed to ensure that the future of workers would be better.”
Shabangu’s and Ramaphosa’s comments indicate an economic strategy that consists primarily of insisting that private business surrender up the investment, employment and social spending that it is, supposedly, withholding. It indicates a poverty of economic understanding in government and the ANC that is deeply unsettling.
Bits and Pieces
- Next weekend the Democratic Alliance meets in a special federal council during which the party is expected to attempt to deal with tensions around support or otherwise for the Employment Equity Amendment Bill. As the DA’s black membership grows the party will come under ever greater pressure to support both employment equity and black economic empowerment more generally. It is my view that this is a baseline assumption in South African politics – and the DA either will not break through its racial ceiling or it will shift on this policy matter.
- Winnie Mandela, in an interesting interview in the Sunday Independent (17/11/2013), claims that Nelson Mandela has lost his voice – and is only able to ‘communicate with facial gestures’. She also said “the “poorest of the poor are seething with rage and whether our government is aware of the anger of the people, I do not know.” She also said: “I can’t blame Julius for what he has done because we, the ANC, are responsible for that … we would be foolish to think he is not a player or that he is not changing the political landscape … these are very dangerous and worrying times.” Winnie Mandela’s political affiliations are a good weathervane of the degree to which the ANC is – or isn’t – fragmenting. She is likely to stay within the ANC, at least while her ex-husband lives.
- The Business Day today (18/11/2013) reports that moves are afoot in Cosatu to suspend or expel the National Union of Metalworkers of SA (Jacob Zuma’s key critic in Cosatu and Zwelinzima Vavi’s key ally). If the Jacob Zuma aligned faction achieves the objective of getting rid of Numsa and Vavi it is likely to precipitate the formation of a competing union federation and, possibly, a new political party of the left. The moves against Numsa seem like the actions of a weak and authoritarian core and are unlikely to achieve a unified and strong ‘ruling alliance’. In fact I suspect that the opposite will be the case.
- Important defection from the ANC to the EFF, and the DA launches robust campaign in Soweto – but it is probably not yet enough to scare the ANC
- Appropriate concern grows at the Promotion of Investment and Protection Bill
- Stunning victory in eastern DRC is becoming a feather in Zuma’s cap …
- … while the chaos in the SAPS and crime intelligence is a serious indictment of South Africa’s political leaders – and is threatening the investment environment
Herewith my latest news summary and analysis.
As I have mentioned previously, I write these updates very early on Monday mornings for the paying clients of BNP Paribas Cadiz Securities. So thanks to those good people for allowing me to republish a few days later here (and thanks to them for giving me a fairly loose rein as to the style I am allowed to use).
Dali Mpofu announces defection from ANC to EFF
Dali Mpofu, advocate of the miners who were killed by the police in Marikana and a former CEO of the SABC, announced over the weekend that he was leaving the ANC and joining the Economic Freedom Fighters. While this is not completely unexpected (he represented Julius Malema in the ANC disciplinary hearings against the former ANCYL chairperson) Mpofu is perhaps the most mainstream figure to formally defect from the ANC and declare for the EFF.
This is my ‘shifting target’ predictions for the 2014 national election as of Friday November 1 (click on the graphic to see the details … and note the cute child sucking her thumb which is a graphic metaphor indicating I am making this up as I go along):
Some of you who saw those estimates in September might notice that I have massaged the EFF upwards and AgangSA downwards.
My Democratic Alliance results are probably too generous, although the pictures published in Afrikaans weekly Rapport on Sunday (11/03/2013) of the DA’s Gauteng premier candidate Mmusi Maimane’s launch of his campaign in the Walter Sisulu Square in Kliptown, Soweto on Saturday indicate a surprisingly robust start.
My caution about the upside for the DA is based on the history of outcomes in the four national elections since the advent of democracy in South Africa in 1994 (again click on the graphic for a version large enough to read … note DA at 16.66% in 2009 and ANC at 65.9% … hmm):
One would have to suggest that the DA has set itself too difficult a task in declaring that it hopes to achieve 30% of the national vote and be in a position to form a provincial government in Gauteng in an alliance with other opposition parties after elections in 2014. The EFF and AgangSA are likely to eat into ANC support but the challengers have a mountain to climb and the incumbent has to fall a long way before the climbers even catch sight of their objective.
Concern grows at the Promotion of Investment and Protection Bill
Legislation designed to replace a number of bilateral investment treaties that South Africa has maintained with over a hundred trade and investment partners was published in the government gazette on Friday and is starting to raise concerns among investors. Already Minister of Finance Pravin Gordhan has angrily blamed “lawyers serving the private sector” for increasing uncertainty in South Africa’s investment environment with regard to this legislation (in a deeply unhelpful statement he made on the side-lines of the African Economic Conference at Montecasino in Johannesburg last Monday – Business Day 28/03/2013).
At the height of the campaign for the nationalisation of mines during 2012 (by Julius Malema and the ANC Youth League) it was South Africa’s myriad bilateral investment protection treaties that were the strongest argument of reassurance for foreign investors. The problem is less the new legislation, and more that fact that existing treaties will not be renewed. Business Day in its front page lead story this morning says the decision not to renew the treaties has been criticised “by a range of groups, from foreign business to credit agencies for causing uncertainty over the security of future foreign investment”. An informed legal opinion would be a requirement for the proper assessment of the risk here, but it is appropriate to approach this policy and legislative shift with caution.
Jacob Zuma attempts to fill the Great Lakes power vacuum
In the light of a stunning and quick Congolese army (FARDC) victory over the occupying M23 rebels last week, Jacob Zuma has moved quickly to reinforce South Africa’s apparent sovereign advances in the region. Today he will host a joint summit of southern African and Great Lakes leaders in Pretoria to seek ways of consolidating this week’s victory by the FARDC and its Southern African allies … and on Tuesday he will chair another summit designed to kick-start an African Union plan for volunteer governments to form “coalitions of the willing” to tackle continental conflicts – Sunday Independent 03/11/2013.
The contending interests in and around the Eastern Congo are extraordinarily complex, but from a South African perspective the apparent defeat of the M23 is a success for the SADC Force Intervention Brigade (FIB) to which South Africa has contributed more than 1 300 troops alongside 1700 from Tanzania and Malawi. The M23 is backed by Rwanda which in turn is an ally of the US and the UK in the region. Crucially, those Western powers have warned Rwanda’s President Paul Kagame to back off supporting the M23 – which is probably what left the rebels vulnerable last week (Sunday Independent and other several other sources).
There are significant mineral resources in the region and the Inga hydroelectric projects might become decisive to economic development in several southern African countries. Stability in the eastern DRC impacts on Uganda, Tanzania, Rwanda, Sudan and even Angola, Zimbabwe and South Africa. Jacob Zuma has managed to shift significant obstacles out of the way of reformatting alliances in the region – an objective that eluded Thabo Mbeki. The situation is delicate and tentative but Jacob Zuma’s decisive follow-up indicates he is seizing the historical moment and the initiative in a manner that we would have thought unlikely a year ago.
The DRC is a Zuma plus but Crime Intelligence and the SAPS is deepening minus
The main domestic weekly newspapers (Mail & Guardian, Sunday Times, Sunday Independent and City Press) all attempted (unsuccessfully) to make sense of the damaging disarray and conflict in various aspects of the South African security services, most importantly in Crime Intelligence, the Hawks and the top echelons of the South African Police Services itself.
Last Monday the national police commissioner Riah Phiyega issued a suspension letter to the acting Crime Intelligence head, Chris Ngcobo (on the basis that there is some unspecified problem with Ngcobo’s qualifications). Almost immediately afterwards a spy tape emerged and was leaked to the press that indicated Riah Phiyega was guilty of a crime by having “tipped off Western Cape police boss Arno Lamoer about a crime intelligence investigation linked to him” – Mail & Guardian.
You have to go to the source code for what is happening here because the details of each claim and counter-claim are impossible to follow. Essentially the police, and particularly Crime Intelligence, have been profoundly damaged by having been drawn into high-level political contests, particularly those between former president Thabo Mbeki and then challenger Jacob Zuma. Significant parts of these apparatuses have become semi-criminal and out-of-control, pursuing sometimes arcane political (and worse) agendas. The top echelons of our political establishment are directly implicated in and linked to this chaos – having deployed these institutions in their internecine battles. No individual institutional failing in South Africa is more serious and more threatening for those seeking stability and certainty in the regulatory and institutional environment.