SA political risks for investors

I was looking for a shorthand way of summarising what I thought were the main political risks that are in the minds of investors in South African financial markets.

Note that the emphasis here (in what appears below) is what I think is an appropriate prism for investors in financial markets, and specifically those with an horizon of a maximum of 5-7 years.

If I was looking at broader security issues, particularly with regard to the stability of the state and ruling party, I would have had a significantly different emphasis – and have aspects that are both more negative and more positive than that which appears below. Hopefully, at some time in the future, I will post here a more general threat or risk analysis that would be of more specific relevance to South Africans who hope to live and work here.

Finally, before I get on with it, I do not explore the potential for an upside suprise here … but there does appear to me to be a slight accumulation of good news, albeit against a dark background.

SA Politics and financial markets – 3 risks

• Unpredictable and/or negative government economic policy interventions: Medium seriousness. Medium likelihood. Short- and medium-term duration (next few months to five years);
• Escalating social unrest – perhaps leading to “Arab Spring” type event: Very serious. Very unlikely. Medium- to-long duration (five to seven years);
• Ratings downgrades and tension between ambitious government plans and narrowing fiscal space: Serious risk. Medium likelihood. Short- and medium-term duration (one to three years).

Unpredictable and/or negative government economic policy interventions

Medium seriousness. Medium likelihood. Short- and medium-term duration (next few months to five years)

What it’s about: Most obvious are new interventions in the mineral and exploration sectors (including new taxes, price setting, beneficiation requirements, export restrictions, uncertainty about licence conditions and significantly increased ministerial discretion via the Mineral and Petroleum Resources Amendment Bill), but there are comparable interventions across the economy, as indicated in the ANC’s Mangaung Resolution and in a range of proposed regulatory and legislative changes, including those relating to telecommunications, liquid fuels,  the labour market, employment equity and Black Economic Empowerment (to name just a few).

My view: Since 1994, it has generally been the case that markets consistently overestimate the risk that the ANC and its government will take significantly populist policy measures. The best example of this was in July 2002, when exaggerated targets for black equity participation in the mining sector where leaked and R52b left the JSE resources sector in 72 hours – a buying opportunity of note. However, the traction Julius Malema was able to achieve with disaffected youth post-2009 and the implicit defection from the ANC and its allies in the platinum strikes last year have catapulted the ANC into something of a policy scrabble. While nationalisation is off the agenda, it has been replaced by a policy push that hopes to deploy private companies, through regulation and other forms of pressure, to achieve government (and party) targets of employment, revenue generation, service delivery to local communities and infrastructure build. Increases in the tax take look likely – it’s purely a question of ‘how much the market can bear’.

Government intervention, per se, is less the issue here but rather the confused, generalised and uncertain nature and intent of the interventions. If the interventions do not have the desired results (growth, employment and equality), the risk is that government does not reassess the wisdom of the intervention, but instead uses a heavier hand.

Financial markets: Policy uncertainty puts downward pressure on investment, employment and output in all sectors. In South Africa, these negative impacts will be felt most keenly by companies most exposed to government licencing and regulatory power, or most exposed to government’s political prioritisation. Resources, telecommunications and agriculture all fall into one, or both, of these categories.

Escalating social unrest – perhaps leading to “Arab Spring” type event

Very serious. Very unlikely. Medium-to-long duration (five to seven years).

What it’s about: Significant and consistent (apparently linear) growth in service delivery protests, combined with growing levels of industrial unrest (in 2012, anyway) seem to imply that such unrest could continue to escalate until it reaches a point of ‘phase state change’ (as in thermodynamics, referring to changing states of matter – to/from solid, liquid and gas). Thus, the risk is of a sudden systemic shift from unstable to revolutionary/insurrectionary.

My view: Increasing protest and industrial unrest are normal – and fairly consistent – features of South African political life and have been since at least the mid-1970s. Even before 1994 there was no real expectation that unrest would lead naturally to insurrection. A rapid phase state change, like an Arab-spring type event, requires (perhaps indirectly) contesting political formations and ideologies as well as the widespread failure – or absence – of social institutions (parliaments, courts) that direct, mediate and give expression to grievances and/or conflicting group interests. South Africa is rich in such institutions and there is no evidence that large groups of dissenting voices have permanently failed to find expression in society’s normal processes and institutions – even when some of those processes include robust forms of public dispute. However, South Africa does have some comparable features to countries that have had ‘Tunisia-moments’ – including high and growing youth unemployment, high  levels of visible inequality and serious government corruption – so we would keep an eye on the escalating ‘service delivery protest’ trends, as evidenced in graphs from Municipal IQ below.

Municipal IQ

Industrial relations unrest is slightly different from – and more negative than – the question of social unrest as a whole. Trade unions are strong and growing in South Africa, and contestation between them is vigorous, even violent – as we saw in the platinum sector in 2012. Trade unions are businesses with an enticing annuity income flow – and this will drive their contestation. The collective bargaining system in South Africa is functioning sub-optimally for a number of reasons – including inappropriately high levels at which automatic recognition kicks in – and the disarray in the system also drives unrest. This conjunction of subjective and objective conditions means I am less sanguine about industrial relations stability (than about stability per se) and expect this to remain a negative investment feature for the next several years. I am specifically negative on public sector industrial relations stability for 2013.

Thus, I do not think unrest and social discord will lead to any radical policy or political discontinuities, but will remain a constant drain on confidence. I also think this phenomenon will tempt government into keeping spending (on the public sector wage bill and on social grants) at above-inflation levels – helping to feed uncertainty and unpredictability in state finances, inflation, the currency and the bond markets.

Additionally, I think labour unrest will remain a seriously destabilising factor of production – including via disruption of services in public sector strikes.

Financial markets:

Resources, agriculture and construction are most exposed through their reliance on large, aggregated and often low-skilled/low-pay labour forces. The financial services and retail are less exposed to (but not immune to) the negative effects of industrial action.

Ratings downgrades and tension between ambitious government plans and narrowing fiscal space

Serious risk. Medium-likelihood. Short- and medium-term duration (one to three years).

What it’s about: The ruling party is facing something of its own ‘fiscal cliff’. The ANC feels itself in danger of losing some support because of failure to deliver employment growth or adequate reductions in poverty and inequality. Foreign investors agree this is a risk, but will not necessarily agree to fund the gap. This tension is among the reasons that all three major rating agencies (Moody’s, Fitch and S&P) downgraded SA’s sovereign rating in 2012 (Fitch in January this year) and both Moody’s and S&P put SA on watch list for future downgrades. The ANC secures political support, at least in part, through spending on the public sector wage bill and on social grants – which together now make up more than half of annual non-interest government spending. Additionally, the ANC has occasionally shown itself hostage to the views of its alliance partners or popular opinion in its spending and revenue plans (Gauteng toll-roads, youth wage subsidy). The ratings agencies don’t like the tension and I expect the bond markets won’t either.

My view: South Africa maintains respectable debt-to-GDP ratios, although these grew to 39% of GDP by end-2012, substantially higher than the 34% for emerging and developing economies as a whole. When Fitch downgraded SA earlier this year, it specifically mentioned concerns about SA’s rising debt-to-GDP ratio, given that the ratio is higher (and rising at a faster pace) than the country’s peers.

South Africa is uniquely (eg in relation to its BRICS peers) exposed to foreign investor sentiment through the deficit on the current account combined with liquid and deep fixed interest markets. SA’s widening deficit on the current account is a specific factor that concerns the rating agencies and is one of the metrics the agencies will use to assess SA’s sovereign risk in the near future. Further downgrades are the risk – potentially driven by foreign investor sentiment about political risks. Non-investment grade (junk bond status) is not an inconceivable future rating.

Financial markets: A significant sell-off in the rand, coupled with persistent currency volatility and reduced foreign capital inflows. Traditionally this scenario would mean investors look for rand hedges and attempt to get exposure to export-orientated sectors, including manufacturing – and to stay out of the bond market. Offshore borrowing costs will be raised for domestic companies – as well as for the country as a whole.  This risk has an internal feedback loop (downgrades make debt more difficult to pay, leading to further downgrades) and naturally feeds other political risks, including in relation to taxation, clumsy government intervention, social stability and property rights.

Mangaung – takes, outtakes and takeouts

Various commentators, politicians and analysts have attempted to characterise Mangaung, to define the moment’s essential nature. Below are two takes I found interesting with some words from me on why I found them thus. After that I include a more general summary of what happened with the voting results for the Top Six and the National Executive Committee.

M&G:  will the scandal prone authoritarian traditionalist and the constitutionalist businessman lick the platter clean together?

Nic Dawes – editor of the doughty Mail & Guardian suggested (on December 21 2012) that Zuma has moved the ANC “dangerously away” from the urban and middle classes and is starting to overtly exhibit rural, patriarchal and authoritarian values inimical to the middle classes. He suggests that Cyril Ramaphosa’s election at Mangaung is (ultimately) an attempt to woo urban and middle class voters back to the ANC – with Zuma having secured traditional and rural support. But, asks Dawes, “can the constitutionalist businessperson avoid contamination by association with a scandal prone, authoritarian traditionalist?”

Good question … except that I am starting to realise that Zuma would never have appointed Ramaphosa if he posed a potential threat in any way at any stage no matter how far they (the Zuma camp) are looking into the future. Ramaphosa is in the house … the Nkandla house … it’s too late for decontamination.

Dawes also makes the useful formulation that Motlanthe’s challenge was a principled attempt to “confront the ANC with the enormity of its Jacob Zuma problem”. I think Dawes is right – or at least that the Motlanthe strategists he spoke to had this conception of what they were up to. However the whole Motlanthe endeavour feels much more like the foolish (but strangely attractive) arrogance of Don Quixote tilting at windmills, or, more tragically, this stupid and noble rush onto heavily defended enemy positions:

Half a league, half a league,
Half a league onward,
All in the valley of Death
Rode the six hundred.

Read the brilliant, awful, manipulative (in my admittedly limited estimation) Tennyson poem and its glorification of cruel and stupid military and administrative incompetence here – ok, glorification of those acting as a result of such incompetence . (You will see from voting patterns at the end of this post that it was closer to 1000 than 600, but aside from that I thought the Tennyson metaphor held up rather well?)

The nationalists, anti-nonracial, populist versus the … who?

If I was on one of those TV or radio programmes that specialise in asking stupid questions right at the end, and I was asked: which South African political analyst do you rate highest? Then “Steven Friedman” is the answer that would most likely trip off my tongue.

With that disclaimer, I am forced to take issue with an aspect of his characterisation of what happened at Mangaung (published in the Business Day – 27/12/12 – here for that link).

Friedman characterises the Anyone But Zuma or Forces For Change (that is the defeated faction at Mangaung) as “the nationalist group, which wants a bigger black share of business … and whose members use radical-sounding language to pursue that goal.” No quibble from me there.

But then Friedman goes on to characterise the group that opposed ‘the nationalists’, that is the group that was victorious at Mangaung, as “a loose alliance stretching from the left to centrist business people who believe the nationalists threaten the ANC’s commitment to nonracialism and are corrupting the movement because they are too close to the wealthy.”

The implicit injunction, one I believe we should resist, is: choose a better devil.

Break it down (and I paraphrase what I imagine the argument would have to entail – and I am taking this much further than is implicit in Friedman’s article, but his argument leads inevitably to this point):

We support both Jacob Zuma (the patriarchal and authoritarian traditionalist with rigid and ruthless control of the security establishment and the ANC – and we support him despite his family and friends having become fabulously wealthy since his winning to high office) and Cyril Ramaphosa (the billionaire ex-unionist who has effectively used the black economic empowerment imperative to accumulate his wealth and will occupy his office with zero power and purely at the beck and call of the Nkandla Crew).

… because …

… they are a whole lot better than the nationalist, anti-nonracial Julius Malema, Tokyo Sexwale, Mathews Phosa, Fikile Mbalula and ANC Youth League?

I think not.

Extract from my summary as of last week

The expected

1. The leadership and policy results of the African National Congress National Conference was a strongly status quo outcome and a victory for the incumbents (the Zuma camp) and their political and economic policies
2. The leadership challenge to Zuma (with Kgalema Motlanthe the unwilling champion of that challenge) was routed, as was the policy platform most closely associated with the challengers (the nationalisation of mines). The extent of the victory is clearly and accurately revealed in the leadership election results detailed in Addendum 1.
3. Cyril Ramaphosa’s election as deputy president has been heralded in much of the financial and popular press as a market-friendly outcome and, in some versions, a salvation of the ANC. It should be pointed out, however, that whatever qualities Ramaphosa possesses (and in my experience he possesses many excellent qualities) these will be exercised as the deputy to an extremely confident and powerful (in party and state terms) president, a president at whose behest Ramaphosa will serve and as a result of whose political influence Ramaphosa was elected. To further dampen any untoward enthusiasm it should be pointed out that Ramaphosa has no base in any constituency within the ANC or within the ruling alliance.
4. Because the National Conference of the ANC is not the kind of forum in which decisive interventions or radical new directions can be formulated (it takes place over 5 days, has a long and complex agenda, entails many rounds of voting by 4000-plus branch delegates who are often unskilled in policy matters and who are generally organised into large voting blocks by contending factions for leadership) there were no such interventions and (no unexpectedly) new policy directions.
5. However, the full policy platform of the incumbents, which does entail significant new state intervention in the economy (described and assessed by me in interminable detail elsewhere) was accepted in full (but in a very broad, vague, poorly attended and poorly discussed commission process at the conference.) The ANC is yet to publish the full policy resolution of the conference and I expect it to be a carefully phrased call for more state intervention, but in a language unlikely to alarm financial markets. The details here are important  but I will have to postpone further analysis until the ANC decides it has crafted the resolution carefully enough.

The less expected

1. Mangaung did only confirm policy and political trends that were already extant – and widely known. However the extent of the dominance of the Zuma camp and the weakness of the challengers took some commentators by surprise – see Addendum 1 for the details of the election results.
2. The total failure of the political factions aligned to the ANC Youth League to make any impact on the conference policy-making process did come as a surprise to me – I would have thought there would be a rear-guard action around the ‘nationalisation of mines’ call, but none appeared (to me, anyway).
3. It would have been politic for the Zuma camp to allow some of those who challenged for the top six positions (and their allies) to be represented on the 80 person National Executive Committee. It seems that either the desire to demonstrate total dominance won the day, or the Zuma strategists lost control of the popular mobilisation against the challengers. Either way it leaves a huge internal constituency of the ANC (roughly 25%) without representation at any leadership level within the party – an obviously destabilising outcome. However the Zuma camp is likely to invite some of the excluded individuals back into leadership positions, on terms satisfactory to the victors.

(Post Scrip reminder:  outstanding is the ANC National Conference resolution on policy. The resolution that emerged out of the June Policy Conference took several months to formulate and be published. I do not expect the Mangaung Resolution to take things much further than the resolution from the policy conference. Much of the detail will be dealt with in the New Year and largely in Cabinet and government departments, rather than in party structures.)

Addendum 1

… the results below are culled from various news sources and people who attended the conference (I found the full NEC results at Politicsweb).

A – Voting and results for the top six

(Interesting things to note: Zuma got the least votes of all contested positions and Gwede Mantashe the most – an observation I borrowed from Steven Friedman’s previously discussed Business Day article.)

• President – Jacob re-elected with 2983 votes to Kgalema Motlanthe’s 991 votes.
• Deputy President – Cyril Ramaphosa elected with 3018 votes to Mathews Phosa’s 470 and Tokyo Sexwale’s 463.
• Secretary General – Gwede Mantashe re-elected with 3058 votes to Fikile Mbalula’s 901.
• Deputy Secretary General – Jessie Duarte elected unopposed.
• Chairperson – Baleka Mbete re-elected with 3010 votes to Thandi Modise’s 939.
• Treasurer General – Zweli Mkhize elected with 2988 votes to Paul M Mashatile’s 961.

B – Voting and results for the National Executive Committee

(Note that no challenger to the Zuma camp in the top six election was elected to the National Executive Committee. Note, as well, that the only prominent member of the anti-Zuma camp, Winnie Mandela, just scraped onto the list, having topped the poll for the NEC election at Polokwane in 2007.)

Rank	Name	Sex	Votes
1	Dlamini-Zuma, Nkosazana Clarice	F	2921
2	Gigaba, Malusi	M	2669
3	Sisulu, Lindiwe	F	2658
4	Chabane, Collins	M	2585
5	Radebe, Jeff	M	2570
6	Pandor, Naledi	F	2517
7	Hanekom, Derek	M	2497
8	Gordhan, Pravin	M	2465
9	Mboweni, Tito	M	2463
10	Mthethwa, Nathi	M	2450
11	Sisulu, Max Vuyisile	M	2442
12	Dlamini, Bathabile Olive	F	2423
13	Jordan, Zweledinga Pallo	M	2407
14	Nzimande, Blade	M	2406
15	Mthembu, Jackson	M	2387
16	Ndebele, Joel Sibusiso	M	2379
17	Mapisa-Nqakula, Nosiviwe	F	2353
18	Motsoaledi, Aaron	M	2339
19	Godongwana, Enoch	M	2334
20	Kodwa, Zizi	M	2306
21	Ebrahim Ebrahim	M	2303
22	Dlodlo, Ayanda	F	2300
23	Brown, Lynne	F	2293
24	Cwele, Siyabonga C	M	2245
25	Mokonyane, Nomvula Paula	F	2240
26	Mfeketo, Nomaindia	F	2228
27	Dlamini, Sidumo Mbongeni	M	2213
28	Nxesi, Thulas	M	2202
29	Bhengu, Nozabelo Ruth	F	2195
30	Nkoana-Mashabane, Maite	M	2169
31	Bapela, Obed	M	2167
32	Masetlha, Billy Lesedi	M	2161
33	Ramatlhodi, Ngoako Abel	M	2156
34	Davies, Rob	M	2151
35	Motshekga, Angie	F	2146
36	Zulu, Lindiwe	F	2142
37	Netshitenze, Joel	M	2138
38	Nkwinti, Gugile	M	2100
39	Joemat-Petterson, Tina	F	2076
40	Mabhudafhasi, Rejoice	F	2042
41	Shabangu, Susan	F	2036
42	Oliphant, Mildred N	F	2019
43	van der Merwe, Sue	F	1992
44	Capa-Langa, Zoleka Rosemary	F	1984
45	Mthembi-Mahanyele, Sankie Dolly	F	1930
46	Phaahla, Joe	M	1916
47	Skwatsha, Mcebisi	M	1888
48	Xasa, Fikile D	M	1881
49	Majola, Fikile (Slovo)	M	1872
50	Mashamba, Joyce	F	1868
51	Tshwete, Pam	F	1849
52	Mabe, Sisi	F	1823
53	Sizani, Stone	M	1803
54	Cele, Bhekokwakhe Hamilton (Bheki)	M	1736
55	Magadzi, Dikeledi	F	1732
56	Tolashe, Sisisi	F	1715
57	Gcabashe, Lungi	F	1695
58	Mmemezi, Humphrey M Z	M	1679
59	Dlulane, Beauty N	F	1674
60	Moloi, Pinky	F	1664
61	Mokoto, Pinky	F	1644
62	Mashinini, Sam	M	1643
63	Zokwana, Senzeni	M	1600
64	Mabe, Pule	M	1586
65	Yengeni. Tony Sithembiso	M	1570
66	Mafu, Nocawe	F	1549
67	Mahlobo, David	M	1495
68	Mapulane, Philly	M	1462
69	Maphatsoe, Kebby	M	1456
70	Ntwanambi Nosipho, Dorothy	F	1450
71	Semenya, Machwene Rosinah	F	1449
72	Segabutla, Miriam	F	1403
73	Moloi- Moropa, Joyce C	F	1396
74	Molewa, Ednah	F	1361
75	Ntombela, Sefora Hixsonia (Sisi)	F	1348
76	Manganye, Jane	F	1276
77	Letsatsi-Duba, Dipuo	F	1057
78	Mtintso, Thenjiwe	F	875
79	Mandela, Nomzamo Winfred (Winnie)	F	841
80	Didiza, Thoko	F	817

A few (more) deep blue thoughts as we rush towards Mangaung – Part 2

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

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

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

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

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

Which leads me to:

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

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

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

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

Read the whole story here.

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

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

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

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

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

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

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

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

The “new tendency”

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

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

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

A few deep blue thoughts as we rush towards Mangaung – Part 1

Annus horribilis

This has undoubtedly been the worst year for South Africa – at too many levels to name – since 1994. There is much I have wanted to say here but couldn’t find the time.  So I am going to rapidly fire off a series of posts, as my professional duties tail off towards the end of the year.

That probably means potential readers will soon be on holiday and lounging on a beach somewhere.

So let me be cheery to start:

I am positive about South Africa in the medium to long-term … but it’s complicated

My first-case long-term view on South Africa is somewhere between hopeful and good. I don’t think societal outcomes are primarily about the choices made by politicians and their parties – if they (societal outcomes) were (dependent on the choices made by politicians), my view would be significantly more negative.

Instead I think societies change in response to shifts of deep structural features – in themselves and in the ‘global world’ within which the society and country exists. South  Africa – its institutions, politics and economy – is being buffeted by the flood emanating from the unwinding of the distortions of the past, interacting with the ‘flooding-in’ of elements of the global society and economy previously locked out … or previously just less ‘globalised’  as was the case in the world of the 80′s and before.

The most obvious domestic feature of this is the rapid growth of a class of South Africans who have ‘emerged’, settled and accumulated assets. They have done this because they can i.e. as a result of the removal of political and legislative obstacles created by Apartheid. Alternatively they have emerged because such settled and skilled groups are a requirement of newly globally integrated labour and consumer goods’ markets. It works both ways – one as a push the other as a pull. Either way the black middle class is growing and on the move to become the prime determinant of much of what lies ahead for South Africa.

The overwhelming numeric majority of this class is a normal middle-class (public and private sector workers, teachers, artisans, skilled workers and other professionals) previously denied by law and repression the chance of improving their lot (to accumulate assets and get ahead). But along with this classic middle-class has come a slurry of individuals and groups who have more specifically seized the opportunities to extract a rent, opportunities created by the legal and political imperative to transform patterns of ownership and control.  Again, most of these are rational individuals who have seized the legal opportunities that the imperatives for transition have presented them with. However, and this is the important bit, a very large (in terms of accumulated assets and power) part of this group includes those who have successfully harnessed political power with the specific intentions of diverting public resources and/or other resources available for redistribution (the assets of private companies, for example) into their own hands.

The point of all of this is that once through the door, once securely established, that elite, its children, its family networks will attempt to re-establish the basic economic rules that allow for the formal and ordered regulation of property, the appropriate separation between the public and the private and the establishment of the rule of law – an imperative that already characterises the ‘classic middle-class’ that has emerged alongside this elite. In short, once inside the enclosure, the new elite will attempt to lock the door and secure the perimeters. It’s part of normal capitalist development and we will get through it in about 10 – 20 years. Meanwhile we are going through what Karl Marx would have called a form of “primitive accumulation” – with all the attendant threat and chaos.

Once this class has formed, emerged and assumed its central place in South African society – and Census 2012 suggests this is in process – our politics, parties, structures of governance will be forced to adapt to the imperatives of the new underlying configuration. This is the kind of tectonic force that effortlessly shuffles and cuts and pastes our politics and our parties to suit itself.

In 12 years’ time we are going to look around and remark at how surprising it is that South Africa has settled down and become such a productive and cooking hub, that corruption and nepotism has retreated so far and so quickly, that the political certainties of the past have so quickly and radically changed for the better.

Or that’s the outcome I have bet my meager resources on …. and before you follow my lead, remember; there is a reason those resources are as meager as they are.

I am positive about South Africa (or at least about reduced volatility) in the immediate post-Mangaung period

Once the political contest for the presidency is resolved and once the platinum sector strikes settle, the deep uncertainties driven by these interacting cycles will recede.

But that is enough sunshine for now  … because what has driven the intensity of those cycles is still very much present and will feature prominently in the South African investment and operating environment in the next 5 – 10 years, revealing itself in crises at least as serious and awful as the Marikana Massacre and the Mangaung contest. (Much of this will be the subject of the next few “deep blue thoughts” posts.)

Motlanthe or Ramaphosa?

At Mangaung the presidency issue is settled and the only interesting bit (as far as the electoral process is concerned) is the election of the deputy presidency and in the general balance that is achieved within the NEC.

I will leave the NEC for a later discussion.

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

Well, that’s an easy one: stay out of prison after you have left office and keep your loot forever. That’s the thing and the whole of the thing.

So which deputy choice could better ensure this outcome?

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

Would Motlanthe?

I think Ramaphosa might. I would have trusted the younger version to do the right thing a lot more than I do this older one. This man has done a lot of complex dealing with “the cold realities”, he has supped with with a Dark Lord or two along the way  … and I would not feel entirely confident that the Zuma camp could not construct a deal that keeps him (Ramaphosa) beholden until long after Nkandla Incorporated has broken free of the threat of justice and been laundered till it shines like a blue chip.

And Motlanthe?  I am grinding my way through “Kgalema Motlanthe: A Political Biography” by Ebrahim Harvey (there’s more than one medicine measure of hagiography in there, but despite that I am starting to believe that KM might just be a seriously good person). However, I don’t think that means he would send Zuma to jail. He seems like a man who hates having to take decisions that “divide the house”. Taking down Nkandla is going to require something even more invasive and destructive than Polokwane. I cannot see Motlanthe as the author of such a story.

It would be a relatively easy matter for the Zuma camp to claim the imperative of unity, and decide to accept Motlanthe back into the fold – instead of Ramaphosa – and therefore as the successor president in 2017.

Enough for now.

Beware the thing that might pick up power lying in the street*

There is something that seems to have been missed in the public discourse about Marikina.

Without wanting to be over dramatic, I think Marikana is a clear warning that we are under immediate and serious threat; in ways that I will discuss below.

What happened – both before and after the police shooting – has been exhaustively examined and there have been excellent discussions about the untransformed migrant labour system, the collective bargaining system, the gradual implosion of Num, the awfulness of the conditions in Nkaneng, the micro-lenders explosion, the sadness and despair of families of victims in the labour sending areas  … one might have thought that every conceivable angle has been exhaustively pursued.

But we can be swamped by the details and the anger and grief.

I think something has been missed, perhaps in emphasis, rather than facts – and  because, rather than despite, the sheer attention to detail in the media coverage.

So take one step back and look carefully.

Ask: what is most essential about what happened here?

• The police shot and killed 35 striking mine workers.
• At least 10 other people had been killed beforehand – including 2 police officers – mostly by the strikers.

Now take another step back and let a slightly, only very slightly, broader picture come into focus:

• It happened now, not in the apartheid era – and there is nothing with which to compare it in our 18 years of democracy.
• The closest proximate cause was the implosion of the National Union of Mineworkers.

One more step:

• The failure of Num created space for the rise of the Association of Mineworkers and Construction Union.

… and one last step:

• Num is Cosatu’s biggest affiliate, is the mainstay of ANC support in Cosatu and is one of 3 key pillars of support within the ruling alliance backing the re-election of Zuma (with the SACP and Kzn);
• Amcu, Julius Malema and the wildcat strikers and their committees found each other from the beginning of the cascade (of which Marikana was a part) after the Implats strike in January.

As I focussed backwards and forwards through those perspectives I suddenly, with a surge of adrenalin, realised the danger we are in.

This is the essence of that realisation:

We have had 18 years of a comfortable ANC majority. Whatever the problems with the ANC’s performance I have mostly believed the party would continue to enjoy the overwhelming support of the majority – of so-called African black South Africans – well into the future, beyond any point worth worrying about.

Despite growing evidence to the contrary I have come to rely on the inherent stability that comes from the ANC sitting like a collapsed star at the centre of our political solar system; with that dense cinder, in turn, held together by the ANC’s own leadership sitting at the core of the party, heavy and stultifying, but essentially stable.

Marikana (in the violence, in the institutional collapse, in the momentum given political  evangelists of the Malema stripe) is about Jacob Zuma’s ANC spinning off pieces of itself, of its members and supporters, of its voters and potential voters.

The most obvious metaphors are from physics.

The centripetal force decreases as the set of interest at the centre narrow (please check my science here). The Nkandla patronage networks are in an ever tighter and more mutually dependent relationship with the SACP and a faction of Cosatu (a faction most closely identified with the Num). The narrower the centre, the less able it is to hold in place the system orbiting around itself. Ultimately, the bits are flung out of the orbit.

Forgive the scattering of a few lines from Yeats‘ The Second Coming, but they are so apposite here as to be inevitable:

Things fall apart; the centre cannot hold;

And the narrowing centre’s response? Well, that would be the massacre of the 34 mineworkers.

The blood-dimmed tide

The other metaphor is the vacuum, and as we know nature abhors a vacuum so it sends the first things that come to hand to fill it.

There seems to be a universe of hopeful voices out there that the first thing that will ‘come to hand’ is either a more democratic version of the ANC or a DA somehow more rooted in the nation (especially that three-quarters of the nation that is poor and black).

But what were the first things to rush into the vacuum, the vacuum left by the rapidly narrowing set of interests at the centre and by its precipitous loss of moral and political authority?

The communists had it right in 2009 already.

If the communists are good for nothing else, they are excellent at spotting fascists (I always think it is because, like alcoholics and drug addicts in recovery, communists feel the call of the beast within … but that is an argument I will need to explore elsewhere).

Already in late 2009 the SACP warned about the emerging tendency within the ANC (the tendency that coalesced around Malema, but has its roots deeper in elements of the emerging elite and their allies in the private sector):

Because of its rhetorical militancy the media often portrays it as “radical” and “left-wing” – but it is fundamentally right-wing, even proto-fascist. While it is easy to dismiss the buffoonery of some of the leading lieutenants, we should not underestimate the resources made available to them, and the huge challenge we all have when it comes to millions of increasingly alienated, often unemployed youth who are potentially available for all kinds of demagogic mobilization.

See what I mean? The communists are almost prescient as far as fascism is concerned. I covered those issues in more detail here.

Amcu and Julius Malema are part of the same phenomenon in the sense that they are both drawn into existence by the collapse of the centre and in addition share a number of features in ideology and style.

The extreme levels of violence, especially the violence of the state (deployed to defend the weakening centre) is also an essential and predictable element of what must flood in to fill the emptiness at the centre.

This is not some threatening future. Marikana threw aside a veil and revealed that this is where we are already, this is what is filling the vacated centre.

When a vast image out of Spiritus Mundi
    Troubles my sight: a waste of desert sand;
    A shape with lion body and the head of a man,
    A gaze blank and pitiless as the sun

…

  And what rough beast, its hour come round at last,
    Slouches towards Bethlehem to be born?

(Note: I know it is such a cliché to use The Second Coming, but it is almost irresistible given the points I want to make here. Read the whole poem at the link I provide earlier … it is not really meant to be dipped into in the way that I have here. Consider its post-First World War context. )

*It was Vladimir Ilyich Lenin who famously said the Party “found power lying in the streets and simply picked it up” – and he would have known a thing or two about that. For the most sturdy readers you can find a discussion of that here.

Lenin knew how easy it was to pick up power when it was lying around

Marikana – ways of seeing

Background

This is a summary of my analysis of the news from of the weekend press (August  19) – and radio and TV commentary – concerning the events in which 34 striking miners were killed by police last Thursday (August 16) at Lonmin’s Marikana mine in Northwest Province. (Written Sunday night, so some new facts might have come to light that I haven’t included – especially not Julius Malema’s “breathtaking political coup yesterday” – see Carol Paton’s lead story on front page of Business Day today … here is a link.)

The police shootings came after a week (starting August 12) in which workers launched a violent wildcat strike reportedly demanding a wage increase to R12500.00 p/m – from the current average of about R4500.00 p/m for Rock Drill Operators, who were the main constituents of the approximately 3000 workers who had gone on strike (the wage demand issue was dissected here – a story that points out that the real wage differential between what the workers were demanding and what they were getting was actually much narrower.)

During the course of the strike, prior to the police decision to remove the workers from a nearby hill they had occupied, approximately 10 people had been killed, including members of the police force, security guards, and ordinary workers – perhaps strikebreakers, although this is still unclear.

Julius Malema visited the area on Saturday and addressed the strikers – and is the only political leader who has been welcomed to do so. (Since I wrote this Zuma also managed to address the strikers).

President Jacob Zuma’s office has announced that a (judicial) inquiry into what happened will be established (see terms of reference and other details here.)

Minister of Mineral Resources Susan Shabangu together with Minister of Labour Mildred Olifant announced on Saturday they will be establishing a “task force” to address the problems at Marikana and deal with wider problems in the platinum sector.

Commentary

It would be difficult to overstate the depth and variety of impacts of this event. Every news source reviewed here took the position that what had happened at Marikana was impossible to explain through any one category of cause and thus a multiplicity of causes was the approach taken across the board – although usually ending with the statement that the society and its top political leaders must, ultimately, carry the responsibility. Thus the commentary will be broken into the categories most commonly used in the Mail & Guardian, City Press, Sunday Times and Sunday Independent:

Marikana as union rivalry

All the weeklies placed the rivalry between the mainstay Cosatu union, the National Union of Mineworkers (Num) and the Association of Mining and Construction Union (Amcu) as the central explanation of what happened at Marikana. The consensus was that Num is slipping throughout the mining sector, having become too close to management (I doubt this is something with which either the union or management would agree) and increasingly representative of white-collar workers – and not RDOs and their assistants, and others who do much of the difficult physical work deep underground. “Amcu leaders and members launched ferocious attacks on Num members who were not prepared to go on strike”, said the Sunday Times lead editorial, summarising the most popular explanation for the central cause of what happened at Marikana. This ‘inter-union rivalry prism’ has much deeper implications when we consider the fact that Num is the key element of support for Jacob Zuma’s re-election at Mangaung in December this year, and Cosatu itself is three weeks away from its National Congress where its own leadership struggles – which are likely to be deeply influenced by what happened at Marikana – are being driven by those within the ANC – a matter explored under a headline below.

Marikana as Lonmin management failure

All the news sources reviewed here expresses the view that wages were unacceptably low in the platinum sector and that management was in some way culpable of feeding the conflict in the workforce by having attempted to make a separate deal with Rock Drill Operators at Marikana. These stories also tended to quote a 5 year study by the independent, “faith based”, Bench Mark Foundation – by chance (according to the foundation) released during the strike – that is sharply critical of the platinum mining companies for having failed to fulfill social obligations to workers and surrounding communities. (Sunday Times, Mail & Guardian, City Press)

Marikana as policing failure

There was unanimity throughout all the news sources reviewed here that the police had handled the situation badly – and that deaths were, in part, a result of improperly armed (with automatic rifles) and poorly led police forces on the scene. Most accounts went to some effort to explain that the police had been fired on by strikers, that (at least one) member had been hacked to death by strikers during the course of the action (City Press, Sunday Independent) and that at least one shot came from the strikers during the confrontation – although the only weapons collected by police after the action were pangas, sticks and iron bars … no guns (Philip de Wet corrects this in the comments sections below, saying police found 6 guns including the one taken from the murdered policeman … I am looking for a link to the Phiyega statement and will put it here when I find it.)

Most of the sources agree that “They were armed to the teeth and advancing on the police. This is not to justify the killing, but we must be aware that today we could just as easily have been talking about the massacre of policemen” – Mondli Makhanya, Sunday Times. However, the Independent Police Investigative Directorate (IPID) has announced that it will investigate the killings and ”will seek to establish if the police action  was proportional to the threat posed by the miners” – Pierre De Vos in Constitutionally Speaking.

Marikana as societal break-down – as a result of economic inequality

As mentioned, it is difficult to overstate the degree of anxiety and hand-wringing about the state of the South African democracy that came through in all the news sources reviewed here – and in television commentary throughout the weekend. The general point of concern was that the levels of inequality (raised in this case by low wages and poor working conditions of miners) will, here-on-out, be a constant destabilising element to this society. Commentary also focused on asserting that the mechanisms by which society negotiates clashes of interest – including the labour market collective bargaining regime – are broken (evidenced by this incident and the more-widespread-than-ever, and often violent, service delivery protests). Thus political stability was raised as a matter of concern in all 4 of the weeklies.

Marikana as driving exit of foreign investment

The business sections of the three Sunday newspapers all pointed out that the price of platinum rose sharply on the back of what had happened, but that Lonmin share prices fell precipitously. “Fear clashes will spread” was the lead Business Times headline and several stories suggested that “foreign investors” would exit because of endemic labour conflict and unrest. “The police killings … ‘have taken things to a new level, spreading the fear to currency and bond market investors’”, Business Times quoted Nomura’s Peter Montalt

Marikana through the prism of Mangaung.

Two issues lay the ground for Marikana to be perceived through the prism of the pervasive leadership contest in the ANC. The first is that Num itself is the key pillar of ANC support in the trade union movement (it’s the biggest union in Cosatu) and the force that swung Cosatu support for the ANC at the formation of the trade union federation in 1985. More specifically, Num, under the leadership of Frans Baleni, is backing Jacob Zuma’s bid for re-election at Mangaung in December. The powerful – and very left-wing – National Union of Metal Workers of South Africa (Numsa) under Irvin Jim – and backed by Cosatu Secretary General Zwelinzima Vavi – is opposed to giving carte blanche backing to Zuma (mostly because of corruption concerns) and it is speculated that this faction might back Kgalema Motlanthe against Zuma at, and in the lead-up to, Mangaung. Several newspapers – but particularly the better informed Mail & Guardian, suggested this dynamic will lead to an attempt (by pro-Zuma forces) to unseat Zwelinzima Vavi at Cosatu’s national congress in three weeks’ time.

Secondly, Julius Malema immediately stepped into the breach at Marikana – as he did at the comparable (because it was also driven by the Amcu/Num contest) Impala strike earlier this year. Speaking to the workers on Saturday 18 – and note he was the ONLY political leader who has been allowed, by the strikers, to address them and he received a warm reception – Malema called for the resignation of Nathi Mthethwa (Minister of Police and key Zuma ally) and Jacob Zuma himself.

The faction of which Malema is a part and the factions that have a tactical alliance with him are likely to make as much as possible of the Marikana killings, and attempt to lay the blame directly at Zuma’s door (as almost all news sources reported Malema doing on Saturday.)

Initial conclusions

• There is a risk that it spreads – to other platinum operations, to the mining sector more generally and even to the society at large. The transmission mechanisms would be Num trying to win back ground it is losing from Amcu as well as via the already restive squatter camps and township neighborhoods. Municipal IQ, an organisation that monitors various aspects of municipalities, but particularly service delivery protests, points out that we had already passed, in July, the highest yearly totals of such protests since 1994. This outcome would not be my first case scenario. What drove the violence and the series of errors (of commission and omission) of the unions, management, the police and government that led to the killings are unique to that incident. If it does spread, the most likely first stop would be other platinum mines, and therefore the first impacts would be on supply of the metal.
• The feed through into conflict between unions – obviously between Num and Amcu, but also within Cosatu, between Num and Numsa -  could presage a generalised increase in levels of industrial unrest.
• Government is likely to turn its full attention to the “social” performance of the mining companies – under the Mining Charter. Expect a thicket of new regulations – and a generalised attempt to focus the blame on the companies.
• Jacob Zuma’s comfortable lead in the Mangaung contest (and this is purely my opinion) is gradually narrowing as we get closer to the December ANC National Conference. The Marikana incident is likely to weaken his position further – and this in the context of a series of defeats in the second biggest ANC province, the Eastern Cape – which until a year ago was considered safe ground for Zuma.

My growing worries about the ANC’s plans for economic intervention

Remember kaleidoscopes?

Basically a tube that you held up towards a light and peered through as if it was a telescope?

But unlike kid’s telescopes –  which, like kid’s microscopes, were blurry and disappointing and stupid – the kaleidoscope was a device of astonishing power and beauty.

The point for my six-year-old self who received his first kaleidoscope for a birthday, probably, was the power that little tube put in my hands.

The simple expedient of  twisting one end caused visions of astonishing, luminous, grandeur to pour out the other.

I can still feel that tingling as if I was balanced on a precipice, reaching out to shape a whole universe; causing tectonic shifts in the intrinsic structure of reality … okay, maybe not that last bit … but you get the point.

Such power … and I had absolutely no idea how it worked.

My “device of power and beauty” was a semi-rigid cardboard tube with loose coloured beads or pebbles in the end and two mirrors running lengthways up the inside, duplicating images of the transparent junk that tumbled as it was twisted.

My first kaleidoscope wilted in my sweaty, meglomeniacal hands a few hours after I had torn it from its pretty wrapping – and I cut myself on a broken piece of mirror as I desperately pounded it to make it continue producing those wonderous images.

Which brings me to my worries about ANC policy making.

I am slightly more worried today that I was when I wrote the piece below (from July 2) just after the conference.

That is partly because I have thought further about some of the issues and partly because the consensus points within the ANC seems to be slippery – and therefore uncertainty is rising.

In short my worry is that the ANC is approaching more vigorous economic intervention with the enthusiasm and growing expectations of my six-year-old self after he first looked through his pretty new cardboard tube.

I think the likelihood of this all ending in tears in increasing exponentially – and the reasons are not very different from those that caused the ruin of my first kaleidoscope and my cut finger.

I will pursue this theme (the threats involved with increasingly desperate state interventions – especially those that worsen the problems they promise to fix) in future posts, but first my initial take on the conference; written just after having read the particularly awful English language Sunday newspapers of July 1:

Much ado – and confusion – about the ANC policy conference

The teams of journalists from the political desks at the Mail & Guardian, the City Press, the Sunday Times and the Sunday Independent could have been covering different conferences given the divergence of their understanding of what went down at Gallagher Estates in the Midrand from Tuesday to Friday last week.

This is my first attempt at a distillation of the main points – partly of the coverage, partly of what was supposedly being covered:

• Debates about policy and the struggle over who will be elected to the top positions in the ANC at the National Conference in December became blurred, to the detriment of both.
• The “Second Transition” concept became associated with Jacob Zuma (even though it was penned by his factional enemy, Tony Yengeni) and its rejection by most commissions at the conference was interpreted as a set-back to Zuma’s re-election campaign.
• The power struggle obscured the fact that there was general consensus that transformation is “stuck” and radical and urgent action to hurry the process along needs to be taken if the ANC is to keep the trust and support of its majority poor and black constituency.
• The report-back to plenary of the key breakaway commission on mining became the most blurred moment, when Enoch Godongwana presented a summary of the views on the state’s proposed involvement in the mining sector – with pro-Zuma provinces KwaZulu-Natal, Mpumalanga and Free State tending to go with the SIMS compromise and the other six provinces tending to support the ANC Youth League in a strengthened nationalisation position.
• When consensus is finally reached, it is likely to include an even stronger role for the state-owned mining company – perhaps giving it the right to take significant stakes in all future mining licenses issued. Absolute taxation levels might be an area of compromise between the state and the mining sector in negotiations about this matter in the final lead-up to Mangaung where policy will be formally decided.
• There was broad consensus that the state could and should force the sale of farmland for redistribution purposes and that an ombudsman be appointed to determine ‘a fair price’ – to prevent the process being frozen by white farmers holding out for better terms. It is not clear whether this would require a constitutional amendment.
• There was general consensus that the Media Appeals Tribunal is no longer necessary, that the number of provinces needs to be reduced, that the proposed Traditional Courts Bill is reactionary and against the constitutionally guaranteed rights of women and children in rural areas, and that the youth wage subsidy (as a tax break to employers) had to be sweetened, or replaced, with a grant directly to young job seekers.
• The push for “organisational renewal” will require a number of changes: a probation period of 6 months for new members, a 10 year membership requirement before such members can be elected to the NEC, a reduction of the size of the NEC from 80 to 60 members and a downgrading of the status of the Leagues (women, veterans and youth) so they more directly serve the interests of the mother body.

So if this was a soccer tournament, what is the score?

The City Press led with “Tide Turns Against Zuma”, but frankly I think this is more about that newspaper’s preferences than anything else. The ideological disputes in the ANC are complicated but broadly follow an Africanist/nationalist group versus a SACP/Cosatu/anti-nationalist group. Neither Jacob Zuma nor Kgalema Motlanthe are clearly in either camp (but Zuma tends towards the former and Motlanthe towards the latter). Only one potential challenger, Tokyo Sexwale, is firmly in one group (the nationalists, which is the ideological home of the ANC Youth League) and he has more chance of passing through the eye of a needle than winning this competition.

Only Motlanthe could seriously challenge Zuma in a succession race and despite all the rumours and leaks it is by no means clear whether he has any intention of running – or, if he did, whether he would have a significantly different policy agenda than that being pursued by Zuma and his backers.

Zuma was to Polokwane what Malema hopes to be to Mangaung

Doesn’t the Julius Malema saga feel so familiar?

Remember how the Jacob Zuma campaign seemed to transform each new obstacle placed in his path into fuel for his political train that eventually steamed triumphant into Polokwane in December 2007?

The fact that he was known far and wide as hopelessly incapable of moderating his sexual behaviour and as being on the take from, at least, Shabir Shaik, seemed to make almost no difference to the eventual outcome … unless the legal and other processes to charge him actually strengthened his claim to the presidency.

He was the victim of Mbeki’s shenanigans and he was heading a column of pro-poor ANC alliance cadres that were coming to take the ANC back from the pro-monopoly capital “1996 class project” – and every deed or word against that was coming from the privileged few defending their privilege. The marching column was irresistible and Polokwane was its destiny. Or at least that was the narrative that seemed to win out.

With the benefit of hindsight it is clear that Zuma’s success was all about momentum – and its inevitability is a post hoc construction.

I remember a movie from my childhood where the hero escapes almost certain death (it was either Indiana Jones or one of the Bonds ) by running across about fifty metres of crocodile infested waters by … yes, you guessed it: stepping on the back of each starving crocodile but with such speed that he was on his way to the next one before they snapped at him or sunk.*

That is probably a better metaphor for Zuma’s perilous progress towards Polokwane than the one that has him steaming towards that conference as if it was his manifest destiny. The second post of this blog was called The Accidental President and in it I argued that Zuma’s presidency was a result of an unlikely set of circumstances and he was not a character that many could have previously imagined in the role.

On closer examination it becomes clear that Zuma, on several occasions, almost crashed and burned – and came close to going to prison. Ultimately it was only the forward momentum of his campaign that allowed him to escape the snapping crocodiles at his heals.

In fact, I would put it even more strongly: for Jacob Zuma the only way to avoid ignominy and prison was to win the presidency.

And that is where the comparison with Julius Malema becomes so compelling – especially in his weekend attempt to boost the Economic Freedom in Our Lifetime campaign into the mouths and minds of the genuinely marginalised and poverty-stricken in places like Diepsloot and Bantu Bonke.

Just as his disciplinary hearing comes to a head.

Just as his questionable personal finances start to be ‘put to the question’ by various authorities.

Just as he prepares to lead the marches on the Chamber of Mines and the Johannesburg Stock Exchange.

He told those audiences: “They [the whites] found us here. They did not bring any land nor did they bring any minerals.”

And: “”We are here for every one of you. We will not rest until you stop worrying about where your next meal will come from.”

Woven into every word and phrase is the argument that the incumbent leadership of the ANC has failed the poor. That Julius Malema’s fight against Jacob Zuma is actually a fight to have the needs of the poor and dispossessed met.

Can Julius Malema, engorged as he and his comrades apparently are from sucking the marrow from the bones of Limpopo’s  (amongst others) public purse skeletal public finances (some bad metaphors are impossible to fix – ed)  hope to pull off this audacious argument?

Clearly he can.

Clearly he is betting on himself to be sitting up in the cab of a triumphant train steaming into Mangaung; to have turned all obstacles aside and spun the narrative of the little guy standing up against the incumbents, standing up for the poor and dispossessed.

The parallels are not perfect. Julius Malema is not the apex of a push for the presidency of the ANC – he is too young, untested and controversial to aspire to those lofty heights this time around. He is rather part of the campaign of other powerful contenders – although he hopes to be nested near the centre of a new ruling configuration of the ANC.

Finally, Zuma had the backing of the SACP, Cosatu and a host of ANC democrats exhausted by Mbeki’s stale centralism – as well as a swathe of aspirant BEE wannabes who felt excluded from the previous gravy train.

Julius Malema (and those who hope to benefit from his campaigning) have nothing like the mighty alliance of those disaffected by Mbeki’s presidency.

After yesterday’s radical cabinet reshuffle and Zuma’s apparent ability to reinvent himself as an anti-corruption and responsive president I would have to bet on the incumbents and against the invaders at the castle gate.

This is the week, however, when Malema’s gamble will either pay off or fail.  On Wednesday his disciplinary hearing resumes. On Thursday and Friday the marches on the JSE and the Chamber of Mines will take place.

This is not an accident of timing.

This is about planning, planning by individuals and groups with large appetites for risk – especially when the prize is so rich and the price of failure so high.

*I have a terrible feeling that someone has used that metaphor for Zuma’s march to Polokwane before … so let me apologise in advance if I stole it … and while on the textual commentary – I found this in Wikipedia while trying to check if the image had, in fact, been used for Polokwane before:

“Ross Kanaga as James Bond used four crocodiles as stepping stones to reach safety on the other side. Kananga, who owned the crocodile farm seen in the film, and after whom the main villain is named, did the stunt five times wearing the same crocodile skin shoes as his character had chosen to wear. During the fourth attempt, the last crocodile bit through the shoe and into his foot.The fifth attempt is one seen on film, with the tied-down crocodiles snapping at his feet as he passed over them.”

Beat the dog till the owner comes out

Tokyo comes out to defend Julius Malema in the disciplinary hearing?

To be followed by Winnie Madikizela-Mandela and Tony Yengeni?

It is an almost too perfect reversal of Julius Malema’s own metaphor after his victory at the Eastern Cape provincial conference of the ANC Youth League in August 2010:

“We will never surrender to Blade. He has never been a member and has no understanding of …  the youth league … Their people have been receiving serious lashings in the youth league conferences. As we said before, we will beat the dog (SACP) until the owner (Nzimande) comes out” … (a copy of The Herald editorial I took that from here.)

The boot, at the moment, seems to be on the other foot (or ” the stick is in the other hand” might have been better – ed.)

The “dog” that is now being beaten at the disciplinary hearing is Julius Malema himself and the owners that are revealing themselves are Tokyo Sexwale, Winnie Madikizela-Mandela, Tony Yengeni and friends.

And who is doing the beating? Why, the South African Communist Party and Blade Nzimande (as well as Jacob Zuma, Gwede Mantashe and many – but by no means all – in the incumbent leadership of the ANC).

Last weekend, almost while the disciplinary hearing was sitting, SACP Secretary General Blade Nzimande said to  the SACP provincial congress in Esikhawini, near Richard’s Bay, in northern KwaZulu-Natal, that young people should be discouraged from participating in the ANC Youth League’s Economic Freedom in Our Lifetime marches and protests on the 27th and 28th of this month:

“Do not allow yourselves to be used by people with agendas that are not in your interest … We are not going to be supporting any march whose intention is malicious and to undermine the authority of the ANC and the government.”

Breaking ideological stereotypes and confusing the foreigners

Spare a thought for those of us whose job it is to explain to foreign investors why the communists are leading the fight against a youth movement calling for the nationalisation of mines, the expropriation of land without compensation and “Economic Freedom in Our Lifetime!”

I could, of course, have just sent them a few extracts from Fiona Forde’s An Inconvenient Youth – Julius Malema and the ‘New’ ANC (Picador Africa 2011).

Here she is, sitting outside a hotel in Caracas Venezuela chatting with a sulking Julius Malema on his way back to South Africa (from a conference of the World Federation of Democratic Youth taking place in downtown Caracas in April 2010)  to face his previous disciplinary hearing. She has been getting a lesson from Julius on the importance of matching the leather of his watch strap with his belt and his shoes.

Venezuela has never seen so many designer labels as it has these past 48 hours since the arrival of the South African young ones. They descended on the city with their expensive suitcases and travel bags, top-of-the-range baseball caps, flashy T-shirts, snazzy shoes and sneakers, sleek manbags and a string of other expensive accessories hanging out of them – and a bodyguard in tow – all dressed up for a socialist youth conference.

I have been wondering how they must appear in the eyes of the other youth who have flown in from all over the world, and who are also staying at the Avila. The three-star hotel is swarming with casually-dressed, young delegates and among them, to my mind at least, the South Africans seem to stand out a mile.

When we understand that these delegates are the very same people who have formulated the “Economic Freedom In Our Lifetime” slogan, the implacable opposition of the South African Communist Party to the campaign becomes  obvious.

The campaign is a classic attempt by a parasitic elite to manipulate those who are really poor and dispossessed so that these disenfranchised citizens become the battering ram and the lever through which that elite can capture even more resources and assets than it has already – through tender abuse and diversion of state resources into their own pockets.

So the dog is being beaten.

But we would be unwise not to think deeply and carefully about the nature and intentions of the owners that rush out to defend their animal.

Game of Thrones in the ANC

A good friend of mine in New York* recently put me on to “A Song of Ice and Fire” – a seemingly endless series of swords and sorcery novels by George R R Martin.

This is the crack cocaine of fantasy fiction but it is also a surprisingly brilliant study of politics and power vacuums.

The fictional edifice of the “Song of Ice and Fire” is built around the consequences of the death of a powerful king. In the aftermath the kingdom collapses into factional chaos, pretenders to the throne contest for power and war rages across the land.

Scheming power-brokers manipulate and assassinate their way through the dysfunctional court as provincial lords and petty “hedge nights” ransack, pillage and rape “the small folk” all across the Seven Kingdoms.

What an excellent metaphor.

The demise of Thabo Mbeki at Polokwane in December 2007 and the political cycle towards Mangaung in December 2012 is our own Song of Ice and Fire and the intrigue and viciousness in the ANC’s internal struggle feels like it is being run by the Lady of Casterly Rock, Cersei Lannister – but you will have to read the books to fully understand how apt and awful that comparison is.

Two weeks ago the increasingly excellent City Press published the following schematic of what it sees as the individuals in the main factions contesting for power at Mangaung (using Malema as the proxy for the broader conflict):

(see at the end of the story for my optional key to that graphic)

One of the problems with factional battles like this one is that it is not always possible for the participants to choose which side they are on – or, in fact, whether to be on any side at all.

As the powerful interests clash in the Ruling Alliance there can be no ‘innocent bystanders’ or anyone above the fray. A factional dispute like this one is a bit like the Cold War used to be. It imposes itself upon the whole structure; every forum, every election and every policy debate gets forced into the dominant paradigm  of the overall contest for power.

One of the dangers – with this analysis and with the more general struggle – is that it is increasingly difficult to work out what each side stands for and how they might differ from each other.

When we use Julius Malema’s friends and foes as the proxy for the broader struggle it is easy to portray the challengers as the most voracious faction, fighting for the right to loot the state and dominate patronage networks. The problem is that the incumbents, certainly Jacob Zuma himself, can hardly be portrayed as the good and brave king to Malema’s dastardly evil knight.

There are shades of grey here that we are going to need to have a more subtle sense of as we get closer to whatever compromises might emerge at Mangaung.

It’s best not to act as a cheerleader for any one faction or part of a faction in a struggle as complex as the one unfolding within the Ruling Alliance. And while today’s heroes can be tomorrows villains and vice versa I would still use Julius Malema’s friends and foes as a rough guide to who the most dangerous enemies of our democracy are. Malema himself is a bit player, just the most visible aspect of a fight that is much deeper and more involved than his personal future. But he’s a useful proxy, nonetheless.

One of the pay-off line from A Song of Ice and Fire is a phrase that is the perfect warning to give the players in the ANC’s internal conflict:

‘In this Game of Thrones you win or you die.”

But George RR Martin has another device that he keeps repeating, threateningly, as the lords and knights struggle and murder each other for the throne.

“Winter is coming”, he keeps warning, constantly reminding the reader and his characters that there are much greater threats than the outcome of their brutal squabbles.

Winter is coming.

* That’s Tony Karon, editor at Time Online and expert on all things Middle East. He tells me he has also, several times, used metaphors from A Song of Ice and Fire, including: “Goldman-Sachs are like the Lannisters — no matter who’s on the throne, they’re always on the Small Council.”)

(My schematic key to the graphic – not required reading, and a little bit cobbled together: the friends are Mathews Phosa,  ANC treasurer general and  previous premier of Mpumalanga, one of the ANC’s top six, National Working Committee (NWC) member and a member of the 81 person National Executive Committee (NEC); Fikile Mbalula, previous ANC Youth League president, currently a head of campaigns in the ANC as well as minister of sport in government – highly effective in both positions he is being pushed by this faction to replace Gwede Mantashe as ANC secretary general – on the NWC and NEC;  Tony Yengeni, fraud convict and ex-ANC speaker of parliament (during which time he was caught defrauding parliament by accepting a discount on a luxury car during the tendering process for the arms deal while he was the member of a parliamentary committee reporting on the same deal), ex-member of the ANC underground, tortured by Apartheid police agents in the late 80’s. He is on the ANC National Executive Committee and on the National Working Committee; Winnie Madikizela-Mandela convicted fraudster, wicked step-mother of the nation, she who famously said “with our boxes of matches and necklaces we will free our country”, prime ANC populist who was married to Nelson Mandela and struggled bravely while he was imprisoned, but later accused of several human rights abuses …. and has taken every opportunity to identify herself with Julius Malema and his various calls for nationalisation and expropriation of “white owned” property. On the NEC and generally still influential and symbolically powerful as any member of the ruling party; Siphiwe Nyanda chief of staff of ANC’s armed wing Umkhonto we Sizwe and later head of South African National Defence Force (in which capacity he was regularly accused of being a significant recipient of some of the billions paid in arms deal bribes) and lately minister of telecommunications from which he was fired by Jacob Zuma during an avalanche of accusations that he had illegally enriched himself by getting R55m tenders from Transnet for his security company (GNS or General Nyanda Security) – also eviscerated by the media for his extremely expensive habits and choice of vehicles as a minister – on ANC NEC and NWC; Tokyo Sexwale, has long been thought to be the power behind the Malema challenge, although little evidence had been presented to prove this – and he was recently reported as referring to Malema as “that loud mouthed young man” – he was a popular premier of Gauteng when the fell foul of Thabo Mbeki machinations in the late 90’s, he withdrew from politics and became a successful business man – now reported to be extremely wealthy (through the company he founded, Mvelaphanda Holdings) – he has returned to politics and threw his hat into the ring in the lead-up to Polokwane in 2007 indicating that he would be prepared to take the ANC presidency if he was so nominated and elected. Instead Jacob Zuma became president and ended up appointing Tokyo as Minister of Human Settlements – a difficult position in which he has appeared to perform adequately – his wealth makes his election to the ANC top spot a difficult road …. but his determination and deep pockets make him a serious challenger; Cassel Mathale, premier of Limpopo and the closest of close allies (business and politics) to Julius Malema – the Limpopo province is beset by very high levels of cronyism and tender abuse by senior ANC politicians …..; Nomvula Mokonyane – surprised to see her on the list, premier of Gauteng and former housing minister – she has conflicted with another very powerful player Paul Mashetile (ANC Chair in Gauteng) who I would have thought was closer to Malema that she – she is on the NEC (ex-officio, which means she wasn’t elected there);  Baleka Mbete, ANC Chairperson, NEC and NWC – powerful … conflicted with Zuma and Motlanthe over whether she could keep the Deputy President post she help under Kgalema Mothlathe’s caretaker presidency – which put her in conflict with the Zuma camp at the start of his government in 2008; Sindiso Magaqa Secretary General of ANC YL and powerful Malema henchman.

And foes: Jeremy Cronin; key ANC intellectual and deputy secretary general of South African Communist Party (SACP) – as well as effective deputy minister of Transport – he has been the main intellectual opposition to Malema taking him on around mine nationalisation (accusing him of dishonestly fronting BEE interests and being interested in plunder) and on his general populist politics which Cronin and the SACP characterise as racially chauvinistic and even “proto-Fascist” comparing Malema arc explicitly to Germany in the 1930’s on the ANC NEC; Gwede Mantashe powerful ANC secretary general who also holds the position of SACP Chairman – he is one of the main targets of the Malema fronted faction as a leading voice against cronyism in the ANC – the push from the right is to replace him with Fikile Mbalula who is probably the best organiser of the opposition – Mantashe is gruff and famously speaks his mind, a characteristic that has put him in conflict with the most voracious cronies – in the ANC and the trade union movement – NEC and NWC …; Malusi Gigaba – ex-President of the ANC Youth League, but now adequate minister of Public Enterprises (but not about to shoot the lights out) in Zuma’s cabinet – gradually assumed to role of being a key defender of Zuma and the incumbents against the Malema battering-ram on the NEC; Blade Nzimande – top Secretary General of SACP and (adequate minister of higher education) – came in for a lot of flack from Cosatu for not focussing on building the SACP as well as for his expensive choice of cars as  Minister,  NEC and NWC; Collins Chabane – key intellectual and minister in the presidency (monitoring and evaluation) – respected ally of Zuma, opposed mine nationalisation – ANC NEC and NWC; Angie Motshekga - minister of basic education (shaping up well) and ANC Women’s League president … denies she recently suggested that one of the solutions to current crisis was dissolution of the ANC Youth League – NEC and NWC; Mathole Motshekga – ANC Chief Whip in parliament (always a powerful position) and law lecturer at Unisa in his spare time. ANC NEC … maybe opposition to Malema thrust is a family affair?; David Mabuza; Mpumalanga premier and ANC chairperson recently accused by ANC Youth League of “interfering” in the Youth League politics i.e. backing Lebogang Maile to replace Malema and the recent ANCYL national conference … a challenge that fizzled – he is on the ANC NEC;  Lindiwe Zulu, senior foreign affairs official previous Ambassador to Brazil, close Zuma confidant and powerful behind the scenes player building his image abroad …. she ran into flak from the ANC YL for appearing to back the MDC in Zimbabwe against ZanuPF. She is also close link with Angola for Zuma. ANC NEC.)

Nationalisation revisited revisited … if you know what I mean

In case anyone was wondering if I had disappeared into the ether: I have been seriously busy and have had no time to post on the blog.

If you were paying extra attention, you may have noticed that a post reviewing the nationalisation of mines debate appeared and disappeared a few weeks ago.

My mistake – it was bespoke for a month, and I jumped the gun. I am now able to publish it and you will find it below.

Meanwhile I am into my second reading of An Inconvenient Youth – Julius Malema and the ‘New” ANC by Fiona Forde. It is exceptionally good and I strongly recommend you go out and buy yourself a copy. I have begun a review which I will publish here during the course of the week.

But meanwhile, here is the month-old nationalisation update/review. My views haven’t changed much since I wrote it … and it is good to get it on the record … even if it is a little turgid and written in an overly formal tone.

Nationalisation update/review

The nationalisation of mines debate in South Africa is, as predicted, reaching new heights of sound and fury. Yesterday it appeared that Cosatu was officially supporting the Youth League call. This is a situation fraught with danger although I do not change my assessment that the ANC is unlikely to decide on mine nationalisation along anything like the lines proposed by its youth wing.

Summary bullets

• Yesterday Cosatu economist Christopher Malikane argued that the ANC has accepted as fact that the mines would be nationalised and that it was only a question of “how” not “if”.
• This does not imply significant new risk although the markets are likely to interpret it as such.
• In reality Cosatu is significantly divided on the call and current shifts in Cosatu policy have more to do with (important) internal conflicts.
• Cosatu does not have the final or even main say over ANC economic policy and its current flirtation with the Youth League is actually about frustration with not achieving its policy aims with the ANC.
• The ANC and its left wing allies have been consistent and steadfast in their criticism of the call and I outline the history both of the Youth League call and of the critique of the call in this report.
• The nationalisation call has consistently been deployed in political battles for power within the ANC and in government which both gives the call unrealistic political energy and makes the threat difficult to interpret or assess.
• The ANC has set its Economic Transformation Committee the task of assessing the call and making proposals. I expect clarity to emerge in November this year but a final decision will only be made at the centenary national conference in December next year.
• Cost, international agreement, the Bill of Rights and the constitution make it inconceivable that the ANC attempt to nationalise the mines.
• However I think the party and government will use the threat as a stick to get a better deal out of the mining houses.
• Between now and the final decision the “sound and fury” will keep the issue alive and the threat present.

Cosatu shifts towards the ANC Youth League

Yesterday  Congress of South African trade Unions economist Professor Christopher Malikane was reported to have said at a South African Chamber of Commerce and Industry forum that the group charged with discussing the nationalisation of mines in the ANC had moved beyond the issue of whether the mines should be nationalised and is now purely considering modalities to achieve this aim. “Investors are looking for certainty around the issue of nationalisation, well this is the certainty they need,” he said.

The ANC Youth League managed to place formally on the agenda of the ruling African National Congress (at the party’s National General Council in September 2010) the proposal that government consider nationalising a majority share of the mining industry – for report back and a decision at the party’s Mangaung elective centenary conference in December 2012.

The general noise gets louder

With the ANC and government leadership mired in controversy relating to poor service delivery, poor government performance and accusation of corruption – and the Zuma presidency as weak as it has ever been – the ANC Youth League and its supporters in government appear to have seized the initiative and are making all the running at a public level. Investors and other observers would be forgiven for thinking that the slogan “Economic Freedom in our lifetime!” and the calls to nationalise the mines, banks and the land (that last explicitly without compensation) were not government policy. I am of the view that owners of mining equity and other property in South Africa are starting to feel the heat.

My view

My view has been that the ANC is highly unlikely to decide to nationalise the mines – although uncertainty in this regard will persist right up until December 2012 (although some clarity is expected to emerge after the ANC committee examining this issue reports back some time in November this year).

I think that the party and government will attempt to use the populist surge to discipline the mining companies to fulfil their social and Black Economic Empowerment obligations under the Mining Charter (which arises out of the 2002 Mineral and Petroleum Resources Development Act).

Additionally government and the party are likely to use the opportunity to change the tax and royalty regime to extract more revenue from the sector – particularly with the imposition of a tax on windfall profits.

Finally I think it likely that new obligations will be placed on the mining companies – especially with regard to some form of obligatory contribution to the building and maintenance of transport and power infrastructure near where the mining operations are located.

Brief History of the nationalisation call

The ANC Youth League on nationalisation of mines

Soon after the current leadership of the ANC came to power at the landmark Polokwane conference in December 2007 the ANC Youth League elected Julius Malema as its president (in April 2008).

By the end of that year Julius Malema and the Youth League began proposing that the mining industry be nationalised. This was the essential elements of that proposal:

* an immediate suspension of the issuing of mineral rights and permits;

* the establishment of a state owned mining company;

* the nationalisation – with or without compensation – of fifty percent of all mining operations;

* that licenses only be issued in future on the basis of a 60 percent equity stake being held by the state owned company.

The Youth League drew authority from the historic Freedom Charter document. The document, drawn up in a national consultative process led by the African National Congress in 1955 and adopted at the Congress of the People in Kliptown says of the economy:

“The national wealth of our country, the heritage of South Africans, shall be restored to the people; the mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole”.

Criticism from the Left of the ANC Youth League call

The major critique of the ANC Youth League call was formulated by Jeremy Cronin, Deputy Minister of Transport and Deputy Secretary General of the South African Communist Party (and major ANC intellectual and ideologue).

It is my guess that Jeremy Cronin was deployed by the incumbent leadership of the ANC in the belief that a criticism of the nationalisation call articulated by leading communists would defuse the Youth Leagues claim of militancy and radicalism – and I therefore cover these arguments in detail here.

Cronin argued that the Freedom Charter passage supports the idea that “the people” get the full benefit of the economic resources “not that there be a narrow bureaucratic take-over by the state apparatus and the ruling party’s deployees” (all Cronin quotes in italics in this section from SACP’s Umsebenzi Online Volume 8, No. 20, 18 November 2009).

The state owning important aspects of the economy says nothing, for Cronin, about whose interests are being served:

“Hitler’s Nazi Germany, Mussolini’s fascist Italy, and Verwoerd’s apartheid South Africa all had extensive state ownership of key sectors of the economy.”

So for Cronin the 2002 Mineral and Petroleum Resources Development Act had already gone some way to fulfilling the Freedom Charter’s objectives by explicitly stating:

“… that South Africa’s mineral and petroleum resources belong to the nation and that the State is the custodian thereof ….  In other words, it is the “nation” (with the state as custodian) and not the mining companies that have legal ownership of the mineral resources beneath our soil”.

Cronin argues that the Youth Leagues proposal of nationalising

“mining houses in the current global and national recession might have the unintended consequence of simply bailing out indebted private capital, especially BEE mining interests”.

And further that:

“Many of our gold mines in particular are increasingly depleted and unviable. Some reach costly depths of four kilometres below the surface. Recently the global gold price has bounced back, but it is telling that, unlike in the past, our gold output actually dropped by some 9% in the same period. Our gold mines are simply no longer able to respond dynamically to gold price rises.”

Cronin (while making it clear he thinks “the people owe the mining houses absolutely nothing”) points out that South Africa’s Bill of Rights sanctions expropriation but requires compensation at a price agreed by both parties or determined by the courts.

The bottom-line for Cronin is that nationalisation would do nothing to further the “national democratic struggle”. Rather it;

“would land the state with the burden of managing down many mining sectors in decline … burden the state with the responsibility for dealing with the massive (and historically ignored) cost of “externalities” – the grievous destruction that a century of robber-baron mining has inflicted on our environment. In the current conjuncture, nationalising the mining sector at this point would also probably unintentionally bail-out private capital, in a sector that is facing many challenges of sustainability. The problems of liquidity and indebtedness for BEE mining share-holders are particularly acute.”

Opposition to and support of Youth League call

President Jacob Zuma, ANC Secretary General Gwede Mantashe (who is also SACP Chairman), and Minister of Mineral Resources Susan Shabangu have all explicitly rejected the ANC Youth League’s call – with Shabangu having famously said that the mines would only be nationalised “over my dead body”.

However despite this being the overwhelming position of the ANC and government, the Youth League scored a significant victory by having its proposal placed formally on the ANC’s policy agenda – achieved at the National General Council meeting in September last year.

At that conference Tokyo Sexwale (Mvelapanda Resources and Human Settlements minister) and Bridget Radebe (Mmakau Mining, wife of minister of Justice and Constitutional Development Jeff Radebe and sister of Patrice Motsepe) both came out in support of the ANC Youth League’s call – giving some weight to the now widespread allegation that the Youth League is operating with a hidden and funded agenda to have failing Black Economic Empowerment deals bailed out by government.

Arguing against the call were leading ANC intellectuals Joel Netshitenzhe, Jeremy Cronin and Trevor Manuel. However the ANC incumbent leadership failed to block the Youth League proposal and it is now formal policy of the ANC to investigate the matter and report back for a decision to be made at the centenary National Conference of the ANC which will be held at Mangaung (Bloem) in December 2012.

The ANC’s Economic Transformation Committee

The committee tasked with formulating the ANC’s position on the nationalisation of mines is the Economic Transformation Committee – which has the general brief of investigating the role of the state in economic development and is the natural forum in the ANC to develop a position on nationalisation.

There is not much in the public domain about the proceedings of the committee, but it is my information that Gwede Mantashe is overseeing the work of the committee which is formally headed by Enoch Godongwana (deputy minister of Economic Development and ANC NEC member).

The contributors thus far include those from the ANC Youth League, Joel Netshitenzhe, MZ Ngungunyane, Cosatu, Floyd Shivambu, Paul Jordaan and the National Union of Mineworkers. The full text of the initial contributions can be found in the last five issues of ANC’s internal discussion publication “Umrabulo” (find those on the ANC website at http://www.anc.org.za/list.php?t=Umrabulo).

It is my understanding that those opposed to the nationalisation call – for the reasons that have already been summarised in this report – are attempting to craft a compromise that will allow everyone to save face while allowing government to wrestle a better deal out of the mining companies – as stated in the “My view” section at the start of this report.

It is my understanding that the committee will report back in November this year and I expect the markets to get an indication of how the debate will pan out then. However, it should be borne in mind that the formal conclusion of this debate will only be reached at Mangaung in December 2012 and the noise is likely to continue right up until the last minute.

Cosatu’s shifting sands

The major change of external inputs into my assessment has been a struggle within the Congress of South African Trade Unions that has resulted in a shift away from the federation’s original position which was closely aligned with the view of the SACP and the incumbent leadership of the ANC – as articulated by Jeremy Cronin above.

The last unambiguous statement from Cosatu on this general issue came in the form of a joint communiqué with the SACP on the 24^th of June 2011- I quote it here in full:

“… periods of capitalist crisis are also typically characterized by various forms of right-wing demagogic populist mobilization acting on behalf of various capitalist strata in crisis, but often masked behind a pseudo-left rhetoric. We believe that the same phenomenon is apparent in SA, finding a potential mass base amongst tens of thousands of unemployed and alienated youth in particular. However, behind this populism are often well-resourced business-people and politicians seeking to plunder public resources. We resolved as the SACP and COSATU to close ranks and to expose the true agenda of these tendencies and their connections to corruption and predatory behaviour in the state.”

However, at the Cosatu National Executive Committee meeting a week later a split appeared in Cosatu that has impacted on this debate.

The conflict is complicated but in a nutshell, it is between a faction led by powerful Cosatu Secretary General Zwelenzima Vavi and Irvin Jim of the National Union of Metal Workers (Numsa) of South Africa and a faction headed by leaders grouped around the National Union of Mineworkers (NUM) under Frans Baleni. Broadly the NUM/Baleni faction is supportive of the SACP and the Zuma leadership of the ANC while the Vavi/Jim/Numsa axis has become frustrated with broken promises (concerning both corruption and economic policy) of the Zuma/ANC leadership and would generally seek a more radical socialist or workerist political solution than is being offered by the ANC.

The Vavi/Jim/Numsa faction has over the last month begun courting the ANC Youth League, and attempting to harness the energy coming from this sector for its own ends. This is highly opportunistic as Vavi and Numsa have consistently characterized the Youth League leadership as “right-wing demagogic populist” and the League’s nationalisation call as fronting a corrupt BEE agenda looking to take a double bite out of resources available for transformation.

Rank opportunism or not, the crack in the Cosatu position is adding a new element to nationalisation debate. It is my understanding that the National Union of Mineworkers remains opposed to the ANC Youth League call, but the new element will undoubtedly add some confusion.

The point to remember about Cosatu – a point reiterated by the ANC and government leadership time and again – is that the federation represents a sectional interest. There are obvious reasons why some elements in Cosatu would want the mines nationalised – who wouldn’t want a guaranteed job for life as a Greek style (up until recently) government employee?

It is to NUM’s credit that its president Senzani Zokwana said in November last year that the Youth League was being reckless with the industry and that the League’s call was inspired by rich Black Economic Empowerment recipients looking to get failing deals bailed out by the state and Frans Baleni a month ago reiterated: “It is not only the private sector that has invested (in mines), but the workers with their pension and provident funds have also invested. We should have maturity and the debate should not have political undertones.”

It’s the law!

A key motivator of my view has been that South Africa is bound both formally and informally to agreements – including in the Constitution – that make it impossible to nationalise the mines without full compensation. Nationalising 50 percent of the mines would cost in the region of $130bn. There is no conceivable advantage – and an almost endless downside – for the government to nationalise the mines. Therefore it is not going to happen – although the end result might look like a compromise and might entail the establishment of a state owned mining company, although one with a much smaller asset base and agenda than conceived in the Youth League’s call.

Nothing material has changed that would allow me to change the view – although my confident smile has assumed a slightly brittle quality. Cosatu was never going to be the determining factor in this debate but the weakness of the ANC leadership – in particular the weakness of Jacob Zuma’s presidency – means that I am no longer certain that the centre of the Ruling Alliance can hold.

From the start the nationalisation of mines call has, in part, been a stalking horse for leadership challenges within the ANC and government. I have argued elsewhere that the call has been central to Tokyo Sexwale’s political ambitions and that he has covertly supported the Youth League in this regard for some time.

Now we have an element of Cosatu attempting to forge some form of alliance with the Youth League around the call clearly as part of a strategy to shift the leadership balance within the ANC.

The Youth League itself is using the call for its popular mobilization potential to help push its own candidates (particularly Fikile Mbalula – currently minister of sport) for higher office.

In this environment it would be foolhardy to be overconfident about the call. However it is my opinion that predicting the success of the Youth League call would be the same as predicting the imminent failure of the South African democratic project and state – a view I believe is too extreme and alarmist.

In many ways what is happening now is very much as predicted: the situation will be full of sound and fury right up until a decision is made at the end of 2012.

Julius Malema and predicting the future you want

The déjà vu is washing over me like the phantom symptoms of a late winter bout of hypochondria.

I remember the lead-up to Polokwane.

The thuggish crowds outside Jacob Zuma’s court appearances.

The man we had known was in Shaik’s pockets since 1993, he who famously couldn’t keep it in his pants, the rape accused shower-after-baby-oil-sex to fend off HIV/AIDs who had only been doing his Zulu man duty by her, Umshini wami mshini wam …  it was entirely impossible that my ANC would ever allow this man to rise to the venerable chambers previously occupied by heroes of the stature of Oliver Tambo and Nelson Mandela … and kept lukewarm by Mbeki’s occasional visits.

And my paying clients insisting I make a call: will he become president?

Well, say I, Mbeki only appointed him deputy because he needed to fend off the challenge from Winnie a-fate-too-awful-to-be-contemplated-by-the-financial-markets Madikizela-Mandela. He had a certain ethnic appeal, so to speak, in the Inkatha heartlands of Kwazulu-Natal but Mbeki knew no-one would ever seriously propose him as president!

And as I knew, you don’t bet against Thabo Mbeki, the master of palace politics …

… and now here we are again.

The weekend the charges against Malema were announced, SARS, the Public Protector and the Hawks were reportedly deep into investigations of their own.

How could Malema hope to sell himself as a victim just as his lifestyle and his predation on the public purse became the subject of such intense scrutiny?

Can the man whose clothes and accoutrement cost the annual income of any twenty of the youths he hopes to represent … represent them or gain their sympathy?

Yes! I need to shout in my own ear. Yes they can … they have … they will again.

Maybe not this time.

This situation has its own dynamics and there is no point in second guessing what the ANC Disciplinary Committee might decide after it finishes meetings this week – but we mustn’t pretend to ourselves or anyone else that we can tell the future.

Will Malema’s minions brute about the streets wearing 100% Juju t-shirts and threatening to fight to the death for their … leader?

Will this sway the process?

Where is the unswayed process going anyway?

There are only two things I know for sure.

The first is that I do not know what the future holds for Julius Malema. He could be banished from the ANC. His disciplining might  provoke a backlash that conceivably could lead to Zuma’s downfall and to Mangaung being an even more corroding rerun of Polokwane. He might disappear into obscurity in the wasteland that (until very recently) has been politics outside of the ANC. He might spend a few years in the wilderness and return chastened and wiser and work his way back to becoming the coming man.

The second thing I know for sure is that my desire for particular outcomes is a serious barrier to me thinking sensibly about which outcomes are most likely.

I know this is not a great and profound insight – nor am I here on the road to Damascus or any particular destination; intellectual, metaphorical or spiritual.

I do hear the breathless clamour of the prediction and analysis industry prophesying the best and the worst of all possible worlds – depending on the emotional predisposition of their target market.

Predicting the worst is often a mistaken attempt to warn against a particular course of action … it’s a political act and an act of propaganda.

Predicting the best is often a semi-religious act, a sort of shamanistic incantation, willing a particular future into the present.

For me, I admonish myself daily:

It is okay to hope the ANC will rediscover its soul and its leaders their long-lost spines. But hoping for a thing does not make it more probable. No-one knows what is going to happen with Malema. So sit on your hands and wait like the rest of us.

‘Economic Freedom’ debate rescued from hijackers

Two brief thoughts – on a rainy Cape Town Sunday:

Firstly – a by-product of Malema’s (possible) retreat

I have a feeling that debates ranging from mine nationalisation, land distribution and continued white economic dominance in the South African economy have just been saved from the gangsters in the ANC Youth League who have been using these as a cover for looting.

It has been difficult not to lump every statement about ongoing race based inequality with the smokescreen slogans used by the ANC Youth League leadership – and many equally corrupt politicians.

The latest Commission of Employment Equity Annual Report says whites still occupy 73.1 percent of top management positions – and blacks 12.7, Indians 6.8 and coloureds 4.6?  Yeah, well they would say that wouldn’t they – after all, that is (one of) Jimmy Manyi’s old outfits and he is the grandmaster of running racial interference for pillaging resources destined for development!

Willing-seller, willing buyer policy of land distribution responsible for only 5 percent of redistribution targets met? Yeah, well, guess who are trying to get themselves a portfolio of farms a la Zanu-PF?

Nationalise the mines? Yeah, so you can rescue your BEE backers and get a piece of the action yourself?

But that was last week.

Those issues are back on the agenda, but this time the discussion might be led by people genuinely looking to harness the country’s resources for development and transformation – not looters, corrupt tenderpreneurs and “demagogic populists” disguising their true intentions.

If anyone thought we could go on with the levels of unemployment, inequality, poverty and racially skewed distribution of ownership and control of this economy I suspect they will find they have been very much mistaken.

One of the consequences of the retreat of the Malema agenda is that we will all have to deal with the issues we have, up until now, been able to dismiss or deflect because they were ‘owned” and propagated by thugs.

Itumeleng Mahabane says it like it is

In a similar vein – and my favourite read of the week – was Itumeleng Mahabane’s column in Friday’s Business Day.

He deals with a variety of aspects of the country’s debates about development and transformation.

In tones that have been tightly stripped – of anger, I suspect – Mahabane appeals for the debate to lose the “prejudicial invectives” and that participants should “desist from creating cardboard villains”.

He makes 4 main points (actually he makes a whole lot more, and it is not impossible that I misinterpret him here – and he is certainly more subtle and nuanced than my summary below – so read the original column – the link again.)

Firstly he suggests (although in the form of a question, not the statement as I have it here) that we have to acknowledge the damage our Apartheid past has done our country, leaving “the inequity of our income distribution and the historic systematic destruction of black capability”.

Secondly he hints that the state cannot assume more economic responsibility before we have fixed accountability – and thereby arrested corruption.

Thirdly he appeals for a sophistication of our views on the labour market – I think by suggesting that a degree of duality is crucial.

But, he warns:

I do not subscribe to the simplistic and questionable idea that the inability to hire and fire people is the core cause of structural unemployment. The balanced high growth would create demand for labour, regardless of labour rigidity.

Fourthly he asked us analysts why:

we casually, without considering the social implications, vilify workers and the working class, making them useful villains for complex economic challenges? We almost never give view to the body of evidence that shows that market rigidity and anticompetitive behaviour is a significant factor in deterring investment and output and that, in fact, it contributes to SA’s excessive business and skilled-labour rents.

Those are important views – and an important corrective to aspects of our debate about development.

Of course Cosatu wants to nationalise the mines!

Wouldn’t you want to have a job for life as a public servant, with guaranteed medical and benefits in a parastatal company that government would push up borrowing and taxation to keep afloat no matter what?

Of course you would – any of us would … just like the Greeks did up until very recently.

When Cosatu economist Chris Malekane argued as he did yesterday, stating with imperious certainty that the discussion about mine nationalisation was over – that the ANC NEC was unanimous and that it was not a question of if, it was a question of how – we should not be too surprised.

Malekane was talking the book of a particular faction of Cosatu – and his views are in stark contrast to views that had been expressed by leading member of the National Union of Mines.

While Malekane said Cosatu had encouraged the Youth League to place the debate on the agenda, National Union of Mineworkers president Senzani Zokwana said in November last year that the Youth League was being reckless with the industry and that their call was inspired by rich Black Economic Empowerment recipients looking to get failing deals bailed out by the state. ”I believe that there’s no threat to any investor …. I don’t think that view (nationalising the mines) will fly given the facts at our disposal”, he said.

Frans Baleni NUM Secretary General said just a month ago: “It is not only the private sector that has invested (in mines), but the workers with their pension and provident funds have also invested. We should have maturity and the debate should not have political undertones.”

NUM has to care about the the state of the mining sector – it has members who would undoubtedly lose jobs if the mines were nationalised.

Additionally NUM is lead by the ANC/SACP supporting faction of Cosatu – with Vavi and NUMSA increasingly seeking ways forward around and beyond the ANC.

The ANC incumbents have done everything they can to stop or limit this debate – and they have been supported in this by the South African Communist Party. The president, cabinet ministers and senior party officials have argued that it was never ANC policy to interpret the Freedom Charter clause on the nationalisation of mines and “the commanding heights of the economy” in the crude and mechanistic was the Youth League has done.

I am convinced that it is entirely impossible that the ANC will nationalise the mines along the lines proposed by the Youth League. It would cost in the region of $130bn (see excellent Reuters article here) and it would break a long list of formal and informal obligations South Africa has with trading partners – as well as explicit reassurances the ANC gave at the time of the leaked mining charter in 2003. Finally, owning the mines would oblige government to take on the accumulated risks associated with environmental damage those mines have built up over the years as well as the risk associated with volatile resource demand.

Government’s task is to get the best possible value out of the non-renewable resources with which the country is endowed. I don’t see any scenario in which that could be achieved through the nationalisation of mines in the form described by the Youth League or that supported by a faction of Cosatu yesterday.

Neither the best nor worst of all possible worlds

Arrived late last night in New York from London (and Edinburgh and Frankfurt)  and the lag means I am only going to want to fall asleep at exactly the time it will be most unsuitable to do so.

I have been travelling (for Indian owned Religare Capital Markets, where I have a new berth) with the excellent Michael Kavanagh who is a mining and metals specialists. We have a story which interestingly balances the South African political risk (especially associated with nationalisation) and the long-term bullish outlook for  platinum. We are half way through a global tour talking to fund managers who specialise in investing either in mining stocks or emerging markets … or both.

South Africans at the point of weeping and pulling their hair out because of the latest ANC Youth League posture, or the newest tender scandal or Jacob Zuma’s increasingly hopeless grasp on the complexities need to spend a little time with people whose job it is to compare South Africa as an investment destination with its peers.

Oh yes, they worry faintly about Julius Malema’s antics but their universe of comparison is huge and diverse … and if the worst comes to the worst the money they manage can shift very easily and early.

(Our parochialism causes us to believe) we have no-one with whom to compare our populists, gangsters, thugs and incompetents.

Trust me (or rather trust the fund managers with whom I have been speaking), ours are no worse than the equivalents in Russia, Brazil, India, China … and a host of similar investment destinations between which the money flicks and flitters.

One of my slides that might not charm a domestic audience causes nothing more than a wry smile here. This is par for the course for investors who concentrate on global emerging markets; some light relief before going back to worrying about whether Israel is going to bomb the Iranian nuclear fuels development programme or not.

We might as well smile – both because we are not as bad as we could be, but also because when you look further than the grotesque, our earnestness is almost sweet and crazy … to my mind, anyway.