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

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

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

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

This is a picture of Stan Greenberg:

StanGreenberg

This is a picture of Robert De Niro:

de niro

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

Hmm, okay, sorry …

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

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

pollsPoilin

 

Then the Sunday Times Ipsos poll published March 22:

IpsosSundayTImes

 

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

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

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

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

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

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

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

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

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

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

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

So what?

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

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

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

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

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

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

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

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

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

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

 

 

Herewith some of my latest news updates.

(Just as an aside before I start: I couldn’t help but smile at Richard Poplak’s seriously over-the-top take on the Nkandla report in Daily Maverick this morning: “But Madonsela has certainly nailed Zuma to history’s grimiest post—he will be forever remembered as a thief, a fool, and a Zulu man who was incapable of managing the affairs of his kraal … Jacob Zuma will not escape his fate as one of this country’s more reprehensible figures. And Nkandla will be the crown he wears as he slithers into historical ignominy” … anyone who reads this column probably realises that I am not overly enamoured of Jacob Zuma as our president, but Richard seems to think he is a sort of Vlad the Impaler in leopard skins, which I think is a metaphor too far.

… and while I am making asides did I just hear Gwede Mantashe throw Riah Phiyega under a bus for the fire pool/swimming pool confusion in the Presidential mansion? So she is going to take the fall for Nkandla and Marikana? Shem, as they say on Twitter.)

… anyway:

  • South Africa’s Public Protector ruled that President Jacob Zuma improperly used state funds to upgrade his Nkandla homestead and “failed to act in protection of state resources”.
  • The Public Protector said Mr Zuma’s behaviour amounted to misconduct, but that she couldn’t conclude that the president had misled parliament. He will have to repay some of the funds.
  • The report is negative for the ANC and will cost it votes in the May general election.
  •  Trevor Manuel’s exit from parliament has not been quite as smooth and painless as it first appeared. He will end up as a public critic of the ANC, but not, as yet, in an opposition party.
  • A thickening seam of discontent and activism opposed to growing government intervention in the economy is beginning to reveal itself in the South African financial press.
Zuma deemed guilty of misconduct, but not of misleading parliament

After a 28-month investigation, South African Public Protector Thuli Madonsela announced that President Jacob Zuma and his family had improperly benefited from upgrades to his private Nkandla home worth around ZAR 246mn. “Expenditure on Nkandla was excessive,” Ms Madonsela said and involved the “misappropriation of funds”.

Ms Madonsela said President Zuma knew of the scale of the Nkandla project and “failed to act in protection of state resources”, allowing extensive upgrades beyond security. She explicitly said Mr Zuma’s failure to protect the state’s interests during this saga amounted to “misconduct”, that his failure to protect state resources was a “violation” (of what we are not exactly sure yet) and that his conduct had been inconsistent with the constitution. However, she said that he did not wilfully mislead parliament on the matter. That would have been a criminal offence.

Mr Zuma will now have to respond to these findings to parliament within 14 days and repay some of the misappropriated funds. It doesn’t look like anyone will go to prison or be forced to resign and the actual practicalities of the crisis are not desperately serious for the ANC and President Zuma (or rather not in a new way … they were already quite serious in terms of general respect for the integrity of the President.)

So what?

Ms Madonsela recently described the function of the Public Protector as being to “curb excesses in the exercise of state power and control over state resources”. However, there is some confusion as to the status of her rulings and consequent recommendations to the president for remedial action.

Getting President Zuma to take remedial action against himself for the misuse of public money would seem like something of a non-starter. Already, ex-police chief Bheki Cele, former minister Dina Pule and Agriculture Minister Tina Joemat-Pettersson – all of whom had adverse findings against them by Ms Madonsela – have found their way onto the ANC’s election list.

Still, this is very much a negative for the African National Congress (ANC) – even more so than the general public expected, though probably not more than the ANC expected. The party knew the report was going to be damaging and has been stiffening its spine for some time, weighing up the costs of attacking Ms Madonsela – an illegal act – or taking it on the chin.

The party will lose votes as a result of this, but we think it was losing votes anyway because of Mr Zuma’s general probity (please see our most recent rough guide overleaf for an idea of how we think support is shaping up). Mr Zuma’s position in the ANC will be weakened (but remember he is strong in the sense that he controls the majority of powerful ANC structures).

Still, the brand value of the ANC is being damaged and this is likely to trigger a self-correcting mechanism. While the changes are still 40-60 against, we think a rescue mission by the party’s ‘old guard’ is now more likely  and that it might successfully mange to shift Mr Zuma aside by around 2016 (a sufficiently strong group just needs to emerge that can cut him a deal with proper guarantees). Obviously the worse the ANC does at the polls, the more the under performance is ascribed to the character and probity of the president … the more likely it is that such a group emerges and coheres to a degree that it is able to offer any enforceable guarantees.

votelates

Trevor Manuel: Concealed weapons

Last week, warm tributes were paid to former Finance Minister Trevor Manuel as he took his leave of parliament and it appeared that his sometimes fractious relationship with his party and cabinet colleagues would, for once, be smoothed over. However, in a high-profile Sunday Times interview, he proceeded to warn that “attacks on public bodies, such as the Public Protector and the courts, would weaken these institutions — and that democracy would then battle to survive”. ANC Secretary General Gwede Mathanshe responded sharply to Mr Manuel, saying: “We do not attack the public Protector, but criticise her where we feel we should … Trevor refuses to participate in the activities of the ANC NEC, and if you refuse such, you want to be a free agent.”

So what?

Trevor Manuel has been something of a ‘market darling’ and (according to himself and in his own words) the rand “fell out of bed” when the news broke that he had resigned after Thabo Mbeki had been recalled on 22 September 2008 (The Zuma Years, Richard Calland, August 2013, Zebra Press … read it, it really is quite good!!). There is no love lost between the country’s longest-serving finance minister and architect of the National Development Plan (NDP) and the incumbent leadership of his party.

In a coded farewell speech in parliament, he quoted a seemingly benign passage from a work by historian Tony Judt: “For thirty years, we have made a virtue out of the pursuit of material self-interest: indeed this very pursuit now constitutes whatever remains of our sense of collective purpose.” There were knowing nods all around, but Mr Manuel usefully forgot to mention the title of the book he was quoting, Ill Fares the Land. We expect Mr Manuel to emerge as a critic of the ANC in its present form, although he is unlikely to join any of the existing opposition parties.

Mr Manuel was also interviewed by the Business Times, in which he criticised the short-sighted way in which some trade unions were approaching negotiations, saying it has sparked a “race to the bottom”. He accused National Union of Metalworkers of South Africa (NUMSA) General Secretary Irvin Jim, who has constantly attacked the NDP, of “speaking a lot of rubbish”.

Mining companies told to “get off their knees” and stop sucking up to government

Tension in the mining sector under the twin pressures of serious labour instability and increasing government regulatory pressure is causing unusual fractures and pressures, according to Business Day and the Sunday Times, provoking something of a growing campaign of activism in some sectors of the ‘private-sector intelligentsia’, for want of a better term. Here are some of the highlights and lowlights of the tension (it gets complicated, but stick with it):

  • Eight weeks ago, a respected Chamber of Mines negotiator in the platinum strike (now in its eighth week), Elize Strydom, said Commission for Conciliation, Mediation and Arbitration (CCMA) mediators in negotiations between employers and the Association of Mineworkers and Construction Union (AMCU) had ”showed an absolute lack of economic acumen” by suggesting companies meet the AMCU’s wage demands “half way”. The mediators had suggested they accept a rise of 25-30% for entry-level miners with basic pay of ZAR 5,700 (the AMCU had demanded ZAR 12,500 a month, a rise of 120%, the companies had offered 8.5%).
  • Ms Strydom (and the Chamber) were immediately attacked by the CCMA and accused of ‘‘white-anting” the mediation process. The CCMA insisted the Chamber either apologise or endorse Ms Strydom’s comments. If the Chamber did endorse Ms Strydom, in the words of the CCMA, it would indicate that the Chamber clearly had “no faith in the institution that is made available by the state and which is accepted by all social partners in other economic sectors”.
  • Business Day editor Peter Bruce says in his Thick End of the Wedge column this week: “But the mines did nothing. Until, that is, they flung themselves into the arms of the state and savaged Strydom for what she had said … A depressing scene.” Mr Bruce’s comments, bitterly critical of the Chamber and the mining firms, underpin Rob Rose’s column in the Sunday Times, in which he says: “So, when some maverick breaks the conspiracy of silence, it’s no surprise that there’s a hullabaloo of outrage. Spin doctors reel blindly … the gutless Chamber of Mines, and the even more enfeebled legion of platinum CEOs [fail to take a stand]. Now, this is why this issue is so important: the platinum industry is on a precipice. Workers have been on strike since January 23 and the mines have lost billions in revenue and even more in terms of international investment goodwill.”
  • Also in the Sunday Times, a report on the Mineral and Petroleum Resources Development Act (MPRDA) amendment bill says “the ANC rushed through controversial changes … that opposition parties feel will create further uncertainty in the mining sector.” The article notes that the new regulations will give government the right to a free stake of up to 20% in any new oil and gas projects, with a right to acquire the rest at an “agreed price”. The story quotes the Democratic Alliance’s James Lorimer as saying that only “cronies, comrades and cousins” would benefit from the bill, which he said would “severely damage” the industry. Mineral Resources Minister Susan Shabangu said critics were resisting change and transformation, “representing white minority interests” and “wanting to sell the country’s natural resources to the highest foreign bidder”.

So what?

The Chamber of Mines said that “while further work is required on developing the regulations that will help give effect to the MPRDA Amendment Act, the chamber is firmly of the view that through this problem solving process, greater regulatory certainty is emerging for the mining sector.” Obviously, for the Chamber and the companies engaged in negotiating the details of legislation and regulation with government, or engaged in the constitutionally created structures of the labour market, there is no upside in attacking the government or the institutional framework. Equally obviously, key sections of the financial press disagree and are essentially sounding a call to arms and arguing that the growing institutional, regulatory and legislative hostility to the private sector is becoming a crisis.

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

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

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

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

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

Numsa confirms it will launch socialist party

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

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

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

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

So what?

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

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

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

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

UDM says beware of vote rigging

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

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

So what?

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

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

Mining policy pushback – in the Business Day anyway

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

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

So what?

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

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

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

Bits and Pieces

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

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

Herewith my news commentary as of yesterday morning. I thought I would republish it here because it includes my brief assessments of how to think about the Zimbabwe election, Vavi and the EFF. I also, politely, imply that the Seriti commission might be a cover-up and that Amcu’s underlying objectives in the gold sector are potentially quite scary.

Zimbabwe – grin and bear it

Robert Mugabe has won 61% of the votes (2.11 million votes) in the presidential poll, against Prime Minister Morgan Tsvangirai’s 34% (1.17 million votes). Zanu-PF won 158 parliamentary seats against the MDC’s 49.

The head of the SADC facilitation process, South African President Jacob Zuma’s office yesterday released a statement that began:

H.E President Jacob Zuma extends his profound congratulations to HE President Robert G Mugabe on his re-election as President of the Republic of Zimbabwe following the successful harmonised elections held on 31 July 2013. President Zuma urges all political parties in Zimbabwe to accept the outcome of the elections as election observers reported it to be an expression of the will of the people.

The opposition MDC has called the result “fraudulent” and has threatened not to take up its 49 seats and to boycott government institutions and “pursue peaceful, legal, political, constitutional and diplomatic remedies” (several online news sources, including BBC Africa).

The Mail & Guardian points out that monitors from the African Union and the Southern African Development Community (SADC) have stressed that the elections were peaceful and have endorsed them as ‘broadly free’. In contrast, the United States and European governments, which have sanctions in place against Mugabe over past election-rigging, “listed a litany of alleged flaws in the vote, from lack of availability of the voters’ roll to pro-Mugabe bias in the media and security services that skewed the election run-up” – M&G.

So what?
Even allowing for the myriad ways in which the MDC was (deliberately – and probably illegally) disadvantaged in this election it appears there has been a real shift away from the opposition. Perhaps this is because just by entering the unity government in 2008 the MDC both saved the economy from collapsing (and thereby saved Zanu-PF) and suffered some of the sins of incumbency. Perhaps it was how mediocre Morgan Tsvangirai has turned out and how endless have been his romantic and sexual travails. Whichever. I am not certain that the MDC will follow through and actually not take up it seats – this will only be revealed in the next few weeks.

To repeat comments I made on Friday:

  • It is deeply unfair. The election was brutally stolen in 2008 and every state resource that could be deployed against the MDC has been so deployed in the last 5 years. Slight economic upticks post 2008, the deepening indigenisation programme (or at least the promise of the goodies from the programme) combined with a host of tactical and strategic errors by the MDC appear to have allowed Zanu-PF to ‘pull off’ a victory at the edge of acceptability … and the edge of the law, but just within it. Even if that is not the opinion of the MDC or Western observers, it is going to be the formal assessment.
  • Thus, I am not suggesting that this result reflects the “will of the Zimbabwean people” … but it reflects it adequately to avoid the crisis that would result from an outright declaration that voters’ roll irregularities … and inadequate other preparations … and the historical legacy of repression and cheating … and misuse of security agencies and state media … constitute enough impact to declare the result not reflective of the will of the people.
  • Does this mean Zanu-PF’s deeply investor unfriendly, GDP growth unfriendly, economic policies will continue? Not entirely. I think Zanu-PF has, miraculously, won back a chance to control the post-Mugabe succession period. They very nearly lost it as a result of their catastrophic policies. I expect Zanu-PF to be more cautious and embracing of investors in future … including with regard to the indigenisation programme. 
  • I am less sure  of that final bullet than I was when I wrote it on Friday, but it appears to me that, at very least, Zanu-PF, will have learned a lesson from nearly losing its hold on the country and is likely to give more emphasis to ensuring that the benefits of its economic policies flow to ordinary Zimbabweans (and less to buying off Zanu-PF cronies, which has been the emphasis up until now.)

Arms probe in tatters

Last week Judge Francis Legodi resigned from the The Seriti Commission into the arms deal scandal and evidence leader, advocate Tayob Aboobaker, announced his resignation citing ‘nepotism, unprofessionalism and infighting’ (he may since have withdrawn his resignation). These ructions follow the earlier resignations of senior researcher Mokgale Norman Moabi and the law researcher, Kate Painting.
So what?
The elephant in this room is the Jacob Zuma himself is one of the individual ANC leaders whose reputation has been most tarnished by the scandal (corruption charges against him in this regard were only – controversially – withdrawn in 2009). At the same time, it is Jacob Zuma himself, in his capacity as President, that has instituted this commission, possibly in the hope that he can put the threat of the return of those charges permanently behind him. At this stage the commission is meant to begin hearings today, and among those who will be called are former President Thabo Mbeki, head of Cope and former Minister of Defence Mosiuoa Lekota, former Minister of Intelligence, Ronnie Kasrils, former Trade and Industry Minister Alec Erwin and former Minister of Finance Trevor Manuel. I think it extremely unlikely that this commission will ever pronounce on why the bizarre decisions were taken to purchase the singularly inappropriate (for the country’s defence needs) set of expensive weapons systems (including 48 Saab Gripen fighters and trainers, 4 Daphne class submarines and 4 frigates). I also think it vanishingly unlikely that the commission will find out where the kickbacks went.

I will not be surprised if it emerges that the resignations from the commission are motivated by the belief that the process will achieve the exact opposite to its apparent purpose.

Zwelinzima Vavi

Several of the weeklies speculate as to whether Zwelinzima Vavi will survive the scandal in which he had unprotected sex in Cosatu’s headquarters with a junior employee whose employment in Cosatu he had irregularly organised – and who accused him of rape and later withdrew the charge in an internal Cosatu procedure.

So what
I covered this in some detail last week, but there is an implication to what is happening here that needs emphasising.

The ANC is facing an election next year and much of the pressure Vavi has been under up until now (from ANC/Zuma loyalists in Cosatu) has been directed at pulling him (Vavi) into line, to stop him constantly accusing government leaders of corruption, to stop him criticising macro-economic policy. The ANC needs to establish a united front so that it can take on the various challenges it faces in the national election next year. 

But there is a difference between placing pressure on Vavi and forcing him out of Cosatu. If Vavi is forced to resign because of his actions in relation to the junior employee it is not inconceivable that Cosatu’s biggest union Numsa might go with him.

It is as if the ANC has been pushing a board – that it thought was solid – to get it into a better position. But the board was rotten all along and it suddenly collapses as it is being pressed. An actual split in Cosatu that drove the most left-wing elements together and out of the ruling alliance would be negative for the ANC in a number of ways. It would further weaken the credibility of the trade union ally, it could raise the spectre of a viable ‘left’ party, it could force the ANC into having to contest on too many fronts in the 2014 election, it could increasingly lead to policy paralysis in government and it could cause serious labour unrest as Cosatu member unions reconstitute and split in a number of different industries. None of this is certain (or even likely) but it is a threat or a series of threats we need to bear in mind.

Economic Freedom Fighters – taxing times … but behind the theatre there are credible risks

Along the same lines as the above, the latest round in the colourful pageant of Julius Malema’s attempts to re-establish himself at the centre of South African politics came yesterday when he mounted a fierce attack on the South African Revenue Service (the full text published at politcsweb.co.za) after SARS made public the details of his tax record. (Here for the SARS statement and here for Malema’s response.)
So what?
SARS is defending itself from Julius Malema’s accusation that it is being used as a tool by what Malema calls the ZANC (the Zuma ANC). The truth or otherwise of this particular matter cannot be established, but I wanted to use the opportunity to raise what I see as the main risk associated with the Economic Freedom Fighters. The risks are not dissimilar to those associated with a potential ‘left’ split in Cosatu. It is increasingly likely that the ANC will be contesting the 2014 elections with significant threats both to its ‘left’ and its ‘right’.

The Democratic Alliance, perhaps in a formal alliance with other opposition parties and independent candidates is starting to seriously consider the possibility that it could win the Western Northern and Northern Cape and come achingly close in the, Eastern Cape and Gauteng. While I am unable to assess whether these are realistic objectives, I think it is important to consider how the ANC might behave if it faces this threat at exactly the point as its own members, allies and the Economic Freedom Fighters, place it (the ANC) under pressure.

I have no grounds to argue that the EFF and any ‘workers’ party’ that could conceivably emerge from a split in Cosatu could win enough votes to become a viable parliamentary opposition, but I do think that the operation of these forces place the ANC in an awkward, even untenable, ‘policy’ and ‘message’ position.

In adopting the investor friendly National Development Plan at Mangaung and in the presidency’s concerted attempts to stabilise the platinum mining sector, the Zuma administration has made it clear that it is extremely worried that investor sentiment towards South African policy and policy risk has turned negative. An ANC fighting a populist wildfire from the EFF (perhaps more heat than light … but anyway), an incipient ‘ left’ split from Cosatu and an ascendant DA is hemmed-in, constrained, unable to formulate viable national policies and increasingly tempted to engage in dirty tricks against its enemies.

 

Amcu and the gold negotiations – some tentative speculation

Following Amcu’s apparent walkout from the Commission for Conciliation and Mediation of the gold sector wage negotiation that had become stuck at the Chamber of Mines last week, I made the following comments (note that Amcu has since said it intends participating in the process, although as you will see from the below, I would be cautious of accepting that at face value):

I think that it is directly in Amcu’s rational best interest to:

  •  ensure that collective bargaining through the Chamber of Mines breaks down (i.e. that the central bargaining chamber is destroyed) and that companies are forced to seek agreements on a mine by mine basis; and
  • to provoke crises similar to those that took place at Impala in January last year and Lonmin in August on gold mines where it is not yet recognised as the majority union.

Firstly, why is this “rational”?
Because any of the anger, hot-headedness and youthful passions rooted in the history of Amcu leadership’s conflict with Num would have been burnt out of them last year.

Now it is probably more accurate to conceive of Amcu as rational competitors in a game where the objectives can be stacked in a very similar way to how one would stack objectives of a company with three or four major competitors in a set market.

Amcu can certainly get things wrong – and engage in activities that are counterproductive to the likelihood of it achieving its objectives – but this is less likely to be because Amcu is led by anarchist lunatics, and more likely to be because its leaders have made tactical and strategic errors.

Thus, while it is possible to argue that Amcu’s members and potential members are “tired of strikes” or “unable to bear the burden of further strikes” this should be conceived of as a constraint to Amcu pursuing its objective rather than an absolute barrier.
So what are Amcu’s objectives in the gold sector?
Firstly, to destroy the National Union of Mineworkers.

The Num, the loyalty of its (declining) membership, and its abuse of its prior dominance, is the most important obstacle to Amcu achieving its main objective which, unsurprisingly, is to be the only significant union in the resources sector. That is, Amcu’s primary objective is to occupy the eco-niche that Num has occupied up until now.

Trade unionism is a business … it’s about money and power. So yes, Amcu grows by more effectively representing (or portraying itself as more effectively representing) the collective interests of its members or potential members … and thereby actually getting greater numbers of signed up, due-paying members.

However, it cannot be effective in this task, even where it has already got more members than Num … because Num occupies an institutional and regulatory “space” that it is using to maintain its dominance.

Thus, in a central bargaining chamber system where the representivity of the participating members is outdated (as it clearly is in this case) the union that is actually dominant (or in the process of becoming dominant) must destroy the process and force employers to deal directly with it … and not with the old dinosaur that is taking up all the space by trading purely on the institutional lag effect.

So forcing employers to deal with Amcu, on a mine-by-mine basis, seems to be a no-brainer for the upstart union and explains perfectly Amcu’s actions up until now in the gold negotiation process that started 2 weeks ago.

The next step is that Amcu has to establish dominance at each mine … it has to “force” the employer to deal with Amcu rather than Num … even if the outdated books still show Num as the dominant union at each mine.

Thus Amcu will attempt to destroy Num’s negotiating position … it will work to ensure that workers do not feel that whatever Num and management settle for is an adequate settlement. Amcu only wins if that settlement fails; therefore it has an absolute imperative to cause those settlements between Num and management to fail (by proposing levels that are more difficult for management to meet and by mobilising workers against whatever settlement Num reaches).This is a competition that Amcu can lose. Num and management might strike a workable deal that the majority of mineworkers back … but it (Amcu) has got to fight it.

If this is correctly reasoned, there is a strong pressure on the central bargaining system in the gold sector and for possible mine level negotiations to be traumatic – in a very similar way to the trauma associated with strikes in the platinum sector last year and with an almost identical ‘architecture’.

Once (and if) Amcu has crushed Num and established its dominance across the industry its motivational hierarchy changes; it will then want to lock itself into the monopolistic position that Num now occupies. But that is a long way ahead, so long that it is not yet worthy of serious consideration. For now, it (Amcu) is trying to free up space so that it can go head-to-head with Num, which in turn is hiding behind bureaucracy. Thus Amcu is trying to increase competition because it believes in a straight fight it will win.

Finally, Amcu does not have a free hand in pursuing these objectives. Management and Num are going to fight back in all the ways (positive and negative) open to them. Also, workers are tired, indebted, the industry is shrinking and management is looking for excuses to downsize workforces – but within these constraints, I would argue that Amcu is forced by its own nature, to pursue the objectives here set out, as effectively as it can within those constraints.

Occasionally I publish slides from a current presentation series and here are a few from something I am busy with called: “The Second Transition – SA politics and policy somewhere twixt hither and yon”.

The general idea is the ANC government is determined to move beyond the ‘transitional’ arrangements that it agreed to in 1994 and strike out boldly towards some undefined, but more profoundly transformed future.

I start with a quote from Jeff Radebe at the launch of the ANC discussion documents in early March … which sets the atmosphere of the ANC proposals.

Then, taking some liberties, I summarise what the ANC is “really” (in my humble opinion) saying in motivating the documents:

I then set out on the difficult task of attempting to assess whether the ANC documents actually propose anything as thoroughgoing as the initial motivation implies.

Frankly, the answer is “no”; although the proposals are both worrying in tone and in how contradictory and “bitty” they are.

The best formulated document is the “Maximizing the Developmental Impact of the People’s Mineral Asset: State Intervention in the Minerals Sector (SIMS) – document (get a link to that here). It contains a thoroughgoing set of proposals that change the tax system for mining and propose a complicated set of upstream, downstream and sideways linkages for the industry that will create a new set of burdens and obligations (not all bad) for the mine owners. (My own feeling about mineral resources is that these are “non-renewables” and government is obliged to get the maximum developmental benefit out of them before they are lost forever – but that is just by the way.)

Almost every other document – and there are 12 in  all – meanders between

  • being meaningless wish-lists,
  • statist and authoritarian  blueprints to bully and control and
  • well researched and argued guides to fixing key aspects of what is wrong with our society

Almost all the good stuff is lifted body and soul from the meticulously researched National Development Plan with its focus on the 9 challenges of

  • widespread unemployment
  • ailing infrastructure
  • low standards of education
  • exclusion of the poor from mainstream development
  • a resource dependent economy
  • a failing public health system with a large disease burden
  • inept public service provision
  • widespread corruption and
  • societal divisions.

My presentation itself does not make strong predictions on how far the ANC will get with its deliberations … although what is clear is that policy discussion this whole year will be drowned out by the Mangaung election noise. It is is going to be difficult to ascertain any real direction through the clamour of the struggle to re-elect Jacob Zuma.

Leaving aside all the slides that deal with the actual documents, I do, however conclude by asking some questions of our key players … and I include those slides here for your interest:

As the months go by, I will hopefully have time to flesh out some of those question.

But for now I am in the final days of the road show trying to make sense of  the mess of proposals and hints in the documents, which span issues as diverse as fracking the Karoo, IDZ’s to SEZ’s, the Treasury versus EDD versus DTI, local procurement fantasies, some excellent fixes of BEE from Rob Davies,  the lonely excellence of the Gordhan and Marcus and infrastructure looking more and more like the ANC’s one-trick-pony.

I occasionally publish slides that I have used for clients as part of my attempt to examine political and investment risks to them.

Below are 3 from a presentation I delivered soon after the ANC NGC.

See if you can identify all the people concerned – a sort of politics general knowledge test ( you know the ones: if you score 10 you are probably a CIA/MI5 agent; if you score 9, then get a life and stop obsessing about politics …. if you score 2 you are living in a special care facility etc.)

As an aid here is a link to Stalking horses at the NGC – the blog I posted at the time. To help refresh your memory ‘the NOM’ was meant to describe the group that had coalesced around the ANC Youth League’s call for the nationalisation of mines.

I have been sickly and trying to pay the bills.

All my ‘paid for’ commentary on the NGC is done and I can finally get back to home ground where I feel more comfortable to make some wild accusations – and I will, finally, be more explicit in this post about who I think the bad guys are and who I think the less bad guys are.

At the outset, forgive me; this is long and requires a degree of effort to plough through. I believe your efforts will be rewarded in the end – but I would think that, wouldn’t I?

The NGC, just like the world itself,  becomes a cacophony, impossible to follow and impossible to interpret, without a guiding theory or a framing shape to look through.

The “theory” I am going to use here is that the NGC was the terrain on which two broad factions in the ruling alliance clashed. How you slice-and-dice a thing, conceptually, is always important for what you conclude, so much of what appears below is an attempt to unpick what and who those ‘factions’ consist of.

To think that what was happening at the NGC was “about” the nationalisation of mines call will lead to ‘error’ (you can see Lenin in my heritage when I use terms like that). Instead the NGC was “about” a more fundamental and complex power struggle.

The picture is additionally complicated when we consider that there were over 2000 delegates at the NGC (1500 from branches, 500 from the leagues/Cosatu/SACP/SANCO/PECs and 800 deployees/non-NEC ministers/DGs/premiers/CEO’s of SOE’s) and the interplay was vast and varied.

So instead of trying to cover everything I am going to look through the prism of an alleged power struggle between two broad factions or groups of interest.  This will ultimately be another attempt to “follow the money”.

Here then is the prism through which I believe it is most useful to look:

  1. The ‘nationalisation of mines’ (NOM) call was always a “stalking horse”. The term “stalking horse”  refers originally to  “a horse behind which a hunter hides while stalking game” (WordNet) and is defined in Wikipedia as “a person who tests a concept with someone or mounts a challenge against them on behalf of an anonymous third-party … if the idea proves viable and/or popular, the anonymous figure can then declare their interest and advance the concept with little risk of failure … if the concept fails, the anonymous party will not be tainted by association and can either drop the idea completely or bide their time and wait until a better moment for launching an attack.”  Oh yes, I love the language.
  2. The ‘nationalisation of mines’ call (hereafter called NOM because in fact, it has less do with policy and more to do with power) is best understood as the political platform of a particular alliance of groups and individuals and interests that has as its objective the winning  to power in the commanding heights of the ANC and the South African State. The NOM is therefore something more (and less) than a policy proposal. It is a contingent strategy for winning power – and getting the ANC to nationalise the mines would be a desirable side-affect for some of the participants.
  3. The first part of the NOM is the Youth League’s own specific ambitions, which have most obviously been expressed as a campaign to elevate Fikile Mbalula to the position of Secretary General of the ANC – the position currently occupied by Gwede Mantashe. Mantashe is despised by the League for a number of reasons, but mainly because he is part of those who believe the ANC Youth League is part of an ambitious rent seeking agenda. The League considers itself to be a “king maker” in ANC electoral processes and the organisation has energy and mobility and time to move quickly around the country to influence decisions at a branch and provincial level – a feature it demonstrated successfully at and in the lead-up to Polokwane.
  4. The second part of the NOM are those mining tycoons who want their BEE deals bailed out by the taxpayer. Who could have failed to notice the unified voices of those gleaming billionaire siblings Patrice Motsepe and Bridget Radebe as well as Minister of Housing Tokyo Sexwale backing the NOM in the lead-up to the NGC or at the conference itself?
  5. The third part of the NOM is the election campaign of Tokyo Sexwale to succeed Jacob Zuma. Has he specifically funded and backed the ANC Youth League so that it can be deployed in its traditional role of “king-maker” on his behalf – or because he wants his BEE deals bailed out … or both? It is impossible to prove – either that he has passed money/business/tenders the way of the League or why he might have done so – but that he has done so – with the intention of becoming president – is clearly the view of most of “the left” in the tripartite alliance.
  6. The clearest unifying principle behind the NOM and the most distinct characteristics of its participants is that they are first in the queue to gouge a rent out of the ANC’s economic transformation agenda. The nationalisation of mines call is tailor-made for the broader agenda of the NOM:  there are real material benefits for the backers, it allows the policy bereft Youth League to appear radical and pro-poor – and anti-white capitalist – to its potential supporters; it forces the current top leadership under Zuma (for the sake of investment and economic stability) to deploy itself to defend against something that would naturally appeal to the rank-and- file’s populist instincts.
  7. So who is the NOM challenging? Essentially “the incumbents”, which at one level just means Jacob Zuma, but at another level means everyone who has assumed a leadership role in government, party and the Tripartite Alliance as a consequence of Jacob Zuma’s elevation as well as the ideas and policies that have come to be crafted by that incumbent group.
  8. The “incumbents” should also be conceived of as including all those tenderprenuers, Nkandla hangers-on and Zuma family members whose fortunes are linked to the fortunes of the incumbent leadership.
  9. Do the members of the NOM even know who they are or what they are part of? Mostly they do – because there is an increasingly bitter conflict, for example, between the ANC Youth League and the SACP. When powerful factions clash, they strengthen themselves, make themselves more defined; they force anyone and any issue into the framework of their clash. We saw this in the Cold War, but more recently and specific to the groups here, we saw this in the struggle to stop Mbeki and elevate Zuma. eventually everyone knew whether they were “for” or “against” the motion. Attempts to stay sane, principled and above the fray are inevitably MIA in this kind of overblown factional dispute.

Given that framework, what actually happened?

NOM preparation

Firstly, the NOM did extensive (but insufficient) spade work around the policy that fronts their agenda. Julius Malema and Floyd Shivambu have been on an extended road trip, selling the idea for over a year. They have written for newspapers and addressed conferences. Malema threatened to withdraw Youth League support from any leader who did not support the call. The Youth League attended all provincial preparation conferences for the NGC and was successful in getting its view represented in every delegation from every part of the country. There are extensive reports that members were instructed to infiltrate ANC branches and emerge later as NGC delegates. The style associated with “winning” this view at various conferences was a combination of exclusive focus on the issue and heckling, booing and threatening any opposition – in the now time-honoured traditions of the League and its members.

What the financial backers of the NOM and members of the broader NOM agenda were doing in the lead-up to the NGC should not be underestimated. Individual backers of the NOM have extremely extensive resources. Such wealth and power gives individuals the ability to reach people and process far from themselves – and snap them like a twig.

Incumbent preparation

It is difficult to say how much work the incumbents did. I have made the assumption that securing the Tripartite Alliance was key to the incumbents preparing for the onslaught they knew was coming at the NGC. In this context the brokering of the ending of the public sector strike and the carefully worded apology from Cosatu to the Zuma/government for the language workers and their leaders had used during the strike was, in part, an attempt to establish the ground for a united front against the NOM agenda at the NGC. Comprises and certain concession were probably made to “the left” – but I will discuss this in the conclusion.

The NGC opening – political and organisational reports

Jacob Zuma’s Political Report and Gwede Mantashe’s organisational report were interesting for a number of important reasons but what is relevant for this post is both reports were correctly interpreted as a significant shot across the bows of the NOM. We can all delight in the fact that Winnie Mandela had to physically comfort the distraught Julius Malema after the dressing down he received during Jacob Zuma’s opening Political Report and take to heart her now immortal words ” … every parent is allowed to talk to their children … Every organisation is like a parent.”

Commission 5 victory and then plenary defeat

The sighs of relief ‘the incumbents’ might have breathed after the NOM’s early humiliation were soon replaced by anxiety when the NOM decided to put all of its eggs in one basket (this is one time that cliché is justified) by sending 45 of the Youth League’s 66 delegates to the Wednesday economic transformation commission. It appears that all supporters of the NOM including Tokyo Sexwale and several other BEE mining tycoons flooded the commission to ensure a particular outcome. The best article in the public domain I have seen about the commission is by Moipone Malefane and Caiphus Kgosana in The Sunday Times of September 26 – catch it here.

Joel Netshitezhe , Lesetja Kganyago  (DG in the Treasury),Trevor Manuel, Enoch Godongwana (Deputy Minister Public Enterprises) and old stalwart on this issue, Jeremy Cronin, were amongst the key ANC intellectual and economic thinkers who tried to hold the line at the meeting. Their appeal for thoughtfulness and care around an issue likely to costs government hundreds of billions of Rand were reportedly overwhelmed with bullying, heckling and unthinking repetition of the demand: adopt the call, as we have defined it, as policy!

Without having seen the exact statement that emerged from this commission it is clear that the Youth League (and everyone else present) was under the impression that they had scored a clear victory and the inner cabal reportedly headed off to the Hilton Hotel to celebrate victory in the style to which they had become accustomed.

The ANC Youth League’s (and the NOM’s) celebration was premature. The next day at the plenary session of the NGC Minister Geoff Radebe (husband of Patrice Motsepe’s sister, Bridget, and someone who had expressed support for the basic premise of NOM earlier) delivered a watered down version of the results of Commission 5 – and the ANC Youth League leaders exploded, ultimately sealing their fate by appearing to storm the stage in an aggressive manner.

Conclusion

Ultimately, through the support of delegates from across the alliance at the plenary, a watered down version of Commission 5 carried – essentially calling for thorough cross-country comparison and analysis of nationalisation as part of government’s ability to influence economic growth patterns in favour of the poor and unemployed. This study was mandated to report back to the 2012 Bloemfontein/Mangaung 100th centenary elective National Conference.

In the end it was not ‘the incumbents’ that were overwhelmed by the “shock and awe” campaign of the NOM. In the end it was the NOM that lost the skirmish – they overestimated the efficacy of their own preparation and they underestimated the coherency of the opposition – as well as degree of anger that is now widespread towards the ANC YL and its leaders.

The paucity of facts in the public domain does not relieve us of the obligation to think about what may be going on and develop a view as to the potential risks involved in any situation. Wile E Coyote might have said ‘what we don’t know can’t hurt us’, as he wandered over another cliff, but in the real world what we don’t know can sometimes be deeply threatening. So the explanations I have given here are my best attempts to muster an explanation for as much of the story as possible. I am sure that at some point in the future some of the guesswork and necessary assumptions might prove misguided – but that is life in the threat analysis business.

Three final points;

Firstly, it is okay to delight in the set-back of a particularly voracious self-enrichment agenda at the ANC NGC. But it is important not forget that the conference left unscathed similar agendas in many other places in ANC and affiliated ranks, including in the Zuma family itself.

Secondly, the defeat of the NOM is a tactical, tangential issue. Like the Governator, they’ll be back.

Finally, the victory was bought at the expense of some kind of compromise with “the left”. I expect the upcoming Cabinet review of a New Growth Path to be more sympathetic to a host of issues traditionally seen as part of an SACP or Cosatu platform (including Rand policy, inflation targeting, downward pressure on interest rates, nationalisation of the SARB, tax on short-term capital flows, industrial policy, National Health Insurance and the establishment of a state-owned bank.) The consensus within “the incumbents” is inexorably moving towards a rejection of some of the basic tenants of the Growth, Employment and Redistribution Macro-Economic Policy as defined by Mbeki and Manuel.

Our future is full of as yet undefined state intervention. I wouldn’t feel so bad about this if I didn’t agree with Cosatu that this state, in this place and time, is rapidly becoming a predator.

A quick run through documents and press statement emanating from the Congress of South Africa Trade Unions and the South African Communist Party reveals the existence of a new ‘song sheet’ our crimson brethren have devised to help them sing in tune with each other.

This is something more than a coordinated set of slogans and something less than a recipe for creating socialism, socialised production and a workers’ republic out of the ingredients of the conjuncture.

If I had to try to construct a Ten Point Programme out of the bits and pieces in the press statements and discussion documents of the last few months, but particularly the last few weeks, it would look something like this:

A ten point (interim) programme for The Left

  1. Argue that macro-economic policy is increasingly in conflict with micro-economic policy.
  2. Argue that IPAP II (industrial policy) from Minister Rob Davies of the DTI in combination with Minister Ebrahim Patel’s Medium Term Strategic Plan (2010/11 – 2012/13) form the first pro-poor, employment creation oriented plan to put South Africa on a “new growth path” in which state intervention will lead to job-rich and equitable growth.
  3. Argue that the Rand is overvalued and wherever possible criticise inflation targeting and call for the nationalisation of the SARB as well as devaluation of the currency to effect a growth of valuable jobs in the export manufacturing sector.
  4. Link the Treasury under Pravin Gordhan to the economic tradition fostered by Thabo Mbeki and Trevor Manuel and keep pointing out that many of the senior bureaucrats in that department were trained and placed by the former president and former Minister of Finance; as part of this thrust attack labour brokers and the subsidy for first time youth workers as part of ongoing attempts to segregate the labour market.
  5. Co-ordinate calls for a national health insurance and free and universal education.
  6. Defend Gwede Mantashe (your man at the heart of the ANC leadership) and isolate the most hostile elements among the conservative nationalists, populists, tenderprenuers and anti-communists – Julius Malema and Fikile Mbalula (the proposed challenger to Mantashe) are perhaps seen as core elements of this “most dangerous friend” group, although Billy Masetlha and Tony Yengeni are in there somewhere.
  7. Start preparing a strategy linking this group with those attempting to buy their way into leadership of the alliance i.e. those who have inherited the Brett Kebble mantel. The general direction of the red finger of accusation appears to point at Tokyo Sexwale.
  8. Fight to stay in the alliance and fight for your views within alliance forums; make sure the ANC and government takes the results of those forums seriously.
  9. Prepare your cadres to influence the outcome of the National General Council later this year and the ANC’s elective National Conference in 2010 – and start preparing a set of policies and candidates to support. In the process continually cement relationships between SACP and Cosatu
  10. Always maintain a mass profile (through work amongst the masses) that is distinct, pro-poor, anti-corruption and principled; this strengthens your hand in Alliance forums but, more importantly, is your insurance policy if or when you are eventually forced out of the alliance.

It seems logical that despite the vicious atmosphere in the ruling alliance Cosatu, the SACP and the ANC’s own left-wing are not about to abandon the field to the “proto-facists“, populists, tenderprenuers and powerful hangers-on from the “1996 class project“. Not so soon after their triumph at Polokwane. Not after “capturing” two key cabinet posts and finding themselves in a position to, perhaps, profoundly influence government policy for the first time since 1994.

Those hoping that the tension in the ruling alliance would lead to a blossoming of opposition politics in parliament will have to wait a little longer. For now the real prize is still within the ANC and the ruling alliance.

The Alliance Summit on the weekend has significantly reduced confusion about policy and risk – although monetary policy is still under review.

Background

  1. “The Alliance”  met at Esselen Park, Ekurhuleni  this weekend.
  2. This meeting consisted of the the African National Congress (ANC), the South African Communist Party (SACP), the Congress of South African Trade Unions (COSATU), and the South African National Civic Association (SANCO).
  3. According to a joint communique press release the summit was to be “attended by the ANC National Executive Committee, led by its President, cde Jacob Zuma, the Central Committee of the SACP, led by its General Secretary, cde Blade Nzimande, the Central Executive Committee of COSATU, led by its General Secretary, cde Zwelinzima Vavi, and lastly, SANCO National Executive Committee, led by its President cde Ruth Bhengu.”

Rumours

The big rumour was that Gwede Mantashe  attempted to achieve acceptance that “The Alliance” and not “The ANC” should be the centre of policy making – I doubt this, but it is what the Sunday papers were saying.  The same rumour claims that Julius Malema led the charge of ANC traditionalists against this sacrilege ….. difficult to tell if it is true (Mantashe said the story was cooked up) but it gives an interesting twist to the ongoing rehabilitation of the ANC Youth League president.

Reports

  1. Cosatu and the SACP lost the battle around Trevor Manuel and the NPC. The National Planning Commission, located in the presidency and headed by Trevor Manuel but also consisting of a panel of independent experts and charged with the responsibility for integrated strategic planning across government is now a fait accompli. This is how Trevor Manuel conceived of his mandate in the Green Paper and it seems Trevor Manuel and the ANC have won the day against Cosatu and SACP criticism.
  2. There was a strong indication that the ANC had agreed to re-examine the South African Reserve Bank mandate. Mantashe  announced after the summit that they had discussed “how best the Reserve Bank should talk to the development priorities of the state …. The summit agreed that the alliance task team on macroeconomic policy must remain seized with reviewing and broadening the mandate of the Reserve Bank.” This is carefully phrased and is unlikely to panic the markets – but risks remain and financial markets and sovereign risk agencies will be watching this space.
  3. The summit clearly opposed the electricity hikes proposed by Eskom: “We are totally uncomfortable with the 45 percent increase. The summit also noted with concern that the successive tariff increase requests through the multi-year price determination by Eskom will negatively impact on society, the economy and jobs. The summit therefore supported efforts to have the tariff increases minimised,” said Gwede Mantashe in the post Summit interview.  This is likely to be popular with almost every constituency – except for those who believe that Eskom is best left to manage its own affairs …. not a significant demographic at this stage of proceedings.

The bottom line

The ANC has usefully asserted its authority.

The idea that “The Alliance” could or should determine details of government policy was becoming deeply disturbing and untenable. This is not only because of the policies espoused by Cosatu and the SACP are generally seen by investors and businesses as hostile, but also because there appeared to be no centre to policy making, and therefore no predictability – and therefore a serious risk overhang.

In an environment where policy making has no centre we started to hear the worst and most self-interested voices raised bombastically and claiming authority. The Alliance Summit went some way towards increasing investors ability to dismiss the noise.

I was dreading yesterday’s mini-budget.

Firstly the objective conditions were against us. It was clear that the Great Recession was going to squeeze revenue – and therefore the space available for the new Minister of Finance to operate in. As it turns out, lower revenue and higher than expected expenditure has pushed the estimated deficit on the consolidated budget to R184bn or 7.6% of GDP.

Now that is a significant shortfall, but not bigger – and in some cases a lot smaller – than governments around the world are operating on in these difficult times.

Secondly the long triumphalist Polokwane after-party  had led me to miscalculate. It had begun to feel as if every milestone we reached was another opportunity to celebrate the crushing of “the 1996 class project”  (read “fiscal rectitude”) and the rise to dominance of woolly thinking and left populism in an uneasy alliance with a new more voracious layer of vampire capitalist aspirants.

And here comes stout Pravin Gordhan and the new parliamentary autocue to wipe away my cynical fears. He said it loud and clear for all to hear:

Special appreciation is therefore due to Minister Manuel for his sound stewardship of our public finances.

The new Minister of Finance stood before our parliament and clearly phrased the budget in the terms of this ANC’s election manifesto (emphasising education, health, rural development/agrarian reform/land, crime/corruption and the creation of decent jobs). However he did so while clearly placing himself within the macro-economic framework of the past – including by continuing to relax exchange controls and defending inflation targeting.

I have no reason to think that Gordhan will gradually bow to pressures from any quarter before the the real budget early next year. This does not mean that we won’t have higher taxation and more poverty relief in future. In a country like South Africa these thrusts are inevitable and appropriate.

So the chickens that actually came home to roost yesterday were not born in Polokwane in December 2007. They are in fact the fruits of pro-investment policies and fiscal austerity in the mid-90’s. Those chicken were hatched as part of  the macro-economic framework developed under Nelson Mandela and Thabo Mbeki and guided by the stewardship of Trevor Manuel.

Pravin Gordhan yesterday spent some of the heritage of a sound macro-economic framework that has prevailed for the last 14 years. It is this very framework that the ANC’s left-wing and Cosatu and the SACP excoriate at every opportunity. It feels better to know that the politician dealing with these issues at the centre of the Zuma government understands perfectly well what is owed to those men and women who held the line against self-serving economic populism in the 90’s – at great cost to themselves and their future careers.

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

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

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