You are currently browsing the monthly archive for June 2009.

We  are not there yet. There is still a way to go. But the dark territory is along here somewhere. The signposts loom more frequently out of the night and you can feel the icy chill.

If I was the director of this movie I would have the little children huddle closer and the music would be so low and scary you could hardly hear its threatening groan. The camera, mounted on the rickety cart, would creep and shudder through the dark forest. Suddenly: there! In the gloom …

That we are in danger should not be a surprise. To be where we are requires us to have taken the path here – with all the twists and turns and accidents and choices along the way. And it is not like we have been lost in the woods – we are more Frodo Baggins than Hansel and Gretel.

Architects of Poverty

What brought the dark metaphor to mind is I am reading Moeletsi Mbeki’s Architects of Poverty (Picador, 2009) . The next post will be a full review of his interesting contribution, but meanwhile let it be said that it is a huge relief to read a leading South African intellectual fingering all those who have conspired to make Black Economic Empowerment and transformation something of a venal orgy (is there any other kind?) that has encouraged bureaucratic corruption and obscene consumption in almost equal measures.

Moeletsi Mbeki (brother of Thabo) is at pains to pin the blame on white capital. Black Economic Empowerment, he argues was precisely an attempt (hitherto successful) to co-opt and corrupt key black leaders. This would pull the sting of pent up black demand for more thoroughgoing redistribution.

While it is useful to identify the full range of those who are complicit in the unfolding disaster that is BEE in South Africa, it is important to remind ourselves that BEE (later BBBEE – Broad Based Black Economic Empowerment) was not the only option for redressing the wrongs and distortions of Apartheid. This policy is government policy and it should have known better: a quick glance at the harm the Bumiputra process did to the supposed beneficiaries, indigenous Malaysians, would have given them pause.

The Cycle of Abuse

Moeletsi Mbeki needn’t fear being thought to be criticising black people per se – although you can bet your last, increasingly cheap dollar, that his book will be seized on with the same joy by the same people who seized on Dr Chika Onyeani’s Capitalist Nigger. He describes the emerging elite as being characterised by ostentatious (let alone conspicuous) consumption and being largely unproductive – taking a rent on politically leveraged shares in private companies. The fact is the Nouveau riche, in all times, places and ethnic guise, is the same, especially when it owes its advantage to access to state power.

Our parasitism sprung from the poisonous union of capitalism and Apartheid – midwifed, as it were, by the officers and princes of the National Party.  That system created distortions of all kinds by distributing wealth and power in ways that were in deep conflict with the needs and potentials of members of society.

In this sense Apartheid was ultimately a massive and complex intervention into the markets and it profoundly distorted the distribution of wealth and power in this country. It left us like a tightly wound spring. The overwhelming victory of the ANC in the 1994 (and subsequent) elections was the first, welcome, unwinding of the spring. The second, less welcome, unwinding, has been the the rapid growth of crony capitalism.

The ANC, with all its idealism and hope, became the focus of irresistible pressures of built-up demand from within the ranks of its members and supporters.

Despite being cognisant of the dangers, and with the best will in the world, the ANC bowed to the pressure.  ANC decisions (perhaps made by Moeletsi’s brother, but codified by the Department of Trade and Industry and vocally supported by the new Zuma administration) determined how government handled the demand for redress. There were other ways to do this thing (more about that in a later post), but they chose the way that has led to: 

  •  state tendering becoming a feeding frenzy for the politically connected – resulting in massive misallocation of scarce resources;
  • local and provincial government, in fact any geographically or legally bounded area with a budget and some form of expenditure, becoming the fiefdoms of the political incumbents;
  • corruption and bribery becoming endemic throughout the state.

As far as I can see Moeletsi Mbeki’s book (I will finish it during the course of the night)  compares the new business and political elite with the tribal chiefs who sold other Africans to the Europeans as slaves in exchange for the guns and brick-a-brac that could be used to capture more slaves and to laud it over their countrymen. That is harsh, and I am sure his final version will be nuanced, albeit angry.

The South African journey is entering the dark and creepy territory where we know the Count rules and has free reign. In the Dracula mythology the bad guy is vulnerable to light … well sunlight, anyway.  Moeletsi Mbeki’s book – whatever details I quibble about later – and blunt public assertion of the issues in articles and interviews over the last week,  is a real and welcome attempt to bring some light into the darkness.

It would be cute to end with saying: “and if sunlight fails – and garlic and Christian crosses – then we can always hammer a wooden stake through the monster’s heart.” But it is clear from everything we have learned that the monster of venality and corruption threatening this democracy is older, more powerful and a lot trickier than the dumb old aristocrat from Transylvania. More importantly it doesn’t live in the creepy castle up ahead. This monster lives inside of us and in South Africa today he fears precious little.

Hmmm – I know, it seems a bit of a stretch. Soccer and investment risk? Unlikely. Must be a soccer obsessed blogger looking for an excuse to write about last night’s game.

Well, this “political risk and financial market” blogger is not soccer obsessed, but after last night’s game his soccer appreciation senses are …. aroused? He feels ready to make sweeping generalisations about soccer as a metaphor for life.

Bafana Bafana lost to Brazil. Ellis Park was stunned into silence after the 88th minute goal smashed into the back of the South Africans’ net. The silence was all the more deafening at having cut short the cacophony of vuvuzelas and the cheering of the almost hysterically excited crowd.

The cameras dwelt on hundreds of faces of grown men with tears streaming, unchecked, from their eyes.

The overwhelming (over-the-top?) grief did not detract from the deeper sense of victory. The South Africans had held the line against the exceptional Brazilian team for most of the game. And for most of that game it was the South Africans who looked more likely to score – in my famously humble soccering opinion.

After years of performances that were something of a national embarrassment Bafana Bafana is back. All the commentary that has followed the game has heaped praise on the South Africans. The underlying achievement is important for reasons way beyond the soccer field.

From the moment South Africa was awarded the 2010 Fifa World Cup in Zurich on May 15 in 2004, South African’s- and many of the country’s external critics – have seemed to invest the cup with the power of prophecy and prediction – for the country and the continent.

In a note to the financial markets in 2006, entitled “The Sum of all Fears”, I wrote:

The 2010 soccer World Cup seems to have taken on the peculiar status as a proxy for South Africa’s future survival. Is the country such a basket case that the opening ceremony is going to be held in Sydney?

The fact that 2010 is having to carry South Africans’ existential anxiety about themselves and the world’s anxiety about Africa is hardly surprising.

Germany just showed itself and the world that it could combine superb organisation with a degree of creative flair. The world sat back and marvelled, often, and bizarrely, at the fact that German’s could have a good time – in an orderly sort of way. 

For South Africa the World Cup is proving nail biting and grounds for defensiveness, in equal measure. The worries about hosting the World Cup are eerily close to some real worries about South Africa, per se.


 The concerns have not changed much:

  • Can the country protect players and spectators from crime?
  • Can the country build and renovate the required ‘stadia’ (the silly plural of stadium) to adequate standards and on time?
  • Can the country solve its urban infrastructure problems, particularly as these relate to accommodation and, more importantly, to transport – the getting of players and spectators safely and efficiently into the country and from hotels to games and from city to city?
  • Does the country have the capacity to bring communications facilities up to the exacting standards required by Fifa?
  • Are we going to run out of skills – project managers, engineers, planners, every kind of artisan imaginable?
  • Does South Africa have the capacity to enforce the intellectual and advertising exclusivities required by Fifa?

But what has changed is the final – and deepest –  concern I expressed then:

  • Can South Africa field a soccer team that will not be humiliated on home turf?

That last concern was profoundly addressed and put to bed last night. We held the best team in the world until the nail-biting last few minutes. We did that when everyone in the world thought we were no-hopers. If we can do that, we can do anything!

I know that is not an argument. Your country can have a great football team and still be a rubbish investment destination. (Look at … Mexico? No, Columbia …. hmm, maybe I have discovered a new investment strategy. Brazil and Spain here my spare R17.85 comes ….. Look out! – Nic) 


On any given day, global sports-news (and news news) organisations comb through information about the ballooning cost of the stadium upgrade and building programme; about Sepp Blatter’s aside comments on vuvuzelas; Danny Jordaan’s shifting fortunes; hotel security and the Bus Rapid Transit standoff with the scary taxi operators.

But let’s be clear:  the challenges facing South Africa are infinitely more complex than organising even a global event of the scale of the 2010 Soccer World Cup. South Africa is well on track with all the major technological and infrastructural issues relating to the World Cup in 2010 and I suspect that national pride and prejudice will cause South Africans from every walk of life to be on their very best behaviour during these finals.

We have seen that it is impossible to protect players and spectators from every predator within South Africa’s borders – especially if such predators have been invited into the hotel room for a bit of slap and tickle by the soon-to-be-victimised visitor.

The 2010 world cup has given focus to urban planning and infrastructure rollout. It has been a useful motivator and self-measure of progress.

And as I said in 2006:

 But when the tents, banners and flags have all packed up and the Sepp Blatter circus has moved on, coffers bulging with cash, South Africa will still face its fundamental challenges, which can mostly be tracked back to GDP growth, productivity, unemployment, poverty and inequality (with a racial overlay). 

The difference between then and now is the secret shame we felt about Bafana Bafana. How could we host this competition; how could we lift our ‘national game’ if we couldn’t lift our soccer game? Well today Bafana Bafana are heroes. The South African media – and to some extent global news coverage – is investing this sports team with ideas like “excellence”, “hard work”, “non-racialism”, “fighting against adversity” and ‘turning difficult situations around”. Now I am not a management guru, but I am quite certain that that has a monetary value, that it improves the South African investment case.

So, like I said in 2006, but with more verve and gusto: “Go long the Soccer World Cup, South Africa 2010”! But to add for now: Go long Bafana Bafana!

You might not be aware of it, but there is “a lovely discourse” about inflation targeting going on.

These were the gentle, if slightly quaint, words of Pravin Gordhan as part of an expression of  support for SARB governor Tito Mboweni yesterday (June 23).

This comes after months of Cosatu’s blustering against inflation targeting: threatening to call a strike against high interest rates, marching against the SARB and criticising Mboweni, including calling for his contract not to be renewed for a 3rd term in August.

The debate is important, and it is difficult not to wish that Cosatu was less  threatening and bombastic and that the SARB and the Department of Finance spent a little more time explaining themselves in lay person’s terms. In the spirit of supporting the “lovely discourse” I hereby summarise (probably simplistically) what could have been, in a better world, opening statements from the two sides of the debate:

Cosatu’s view – if it bothered to explain itself

The SARB’s targeting of inflation means interest rates are too high. This means “borrowing” and debt is expensive. This hurts us and our members because they have household and personal debt. But more importantly, companies throughout the economy struggle to grow when interest rates are too high – they can’t borrow money for capital expenditure and their customers have less money to buy the goods produced; this means downward pressure on wages and employment. Lowering interest rates sets off a virtuous cycle: companies grow, employment increases, more money is available for consumption which in turn drives economic growth. Tax income improves which drives government expenditure which in turn continues to fund consumption and GDP growth and employment. And there’s an additional bonus: reduced rates reduces the attractiveness (to foreigners) of holding our currency, and this devaluing affects means the cost of production is  reduced – when stated in foreign currency terms – making international trade more profitable. So for Cosatu this is a virtuous circle that constantly and ever more deeply stimulates the traded goods sector. If the SARB was given “employment” or “GDP growth” as its target instead  “inflation” it wouldn’t feel compelled to hike interest rates and thereby kill growth.

The official view – if it were easier to understand

This view is almost exactly opposite to Cosatu’s. The first point of departure is that “the official view” is not, primarily, the view of the SARB. It is the view of the government that mandates the SARB i.e. that mandates the SARB to target inflation – as opposed to any other objective – with the only weapon in it’s arsenal: the ability to determine the rate at which money is lent and borrowed.

 (Note: does this mean government doesn’t care about growth? Of course not. But just because an objective is desirable doesn’t mean it is sensible to decree that a certain instrument will henceforth achieve that objective: People are hungry? Henceforth the department of Science and Technology will provide one chicken for every family, once a week! Yaaay! … government has solved the hunger problem -not.)

The official view is about understanding the  limits of what is possible  i.e. monetary policy can only use one instrument (interest rates) to target one objective (inflation). Aside from being the only achievable objective, a low, stable inflation rate is a necessary – although not sufficient – condition for sustainable growth.  To understand the benefits of this conservative approach examine the implicit critique of the alternative: artificially lowering interest rates creates an economy-wide equivalent of a sugar buzz in small children: stimulation, yes; but a short-term rush with unhappy long term consequences. With Cosatu’s proposed growth stimulated by “cheap money” (i.e. radically reduced interest rates) there are no efficiency gains – in management, productivity, pricing and the effective use of technology. Growth that comes about by “artificially lowered interest rates” – i.e. growth in a high inflationary environment –  creates the kinds of businesses that have no inherent strengths and no inherent need to be competitive. So yes, wages and employment go up, but those gains are only held while the artificial conditions (conditions created purely by government or central bank – or Cosatu – decree) continue. The official view emphasises the desirability of inflation targeting for an additional reason: high inflation directly and immediately worsens the conditions of life of the poorest and most vulnerable South Africans. The rich can, at least partially, protect themselves from the effect of inflation by investing in financial instruments such as inflation linked bonds.


This is Pravin’s “beautiful dialogue”, and I’m hoping that wiser heads than mine can help draw out the issues more clearly. My instincts (honed by Cosatu’s refusal to explain itself and instead to constantly threaten to strike)  is to suspect Cosatu of being sectarian and short-term; and to think of government as nobly attempting to meet its manifold obligations and responsibilities, including to the poorest South Africans. I am prepared to accept that I am giving government too much credit and Cosatu too little – and generally missing the point in the “lovely discourse” going on around inflation targeting.

This week’s set of findings from a controlled study conducted by the Gender and Health Research Unit of the Medical Research Council are so shocking as to be almost impossible to take from the the page into your brain. Instead of  me droning on about it, let the text speak for itself. Remember it’s a controlled study with a cross-class and cross-racial sample that attempts to be representative of the whole South African population:

Rape of a woman or girl had been perpetrated by 27.6% of the men interviewed and 4.6% of men had raped in the past year. Rape of a current or ex-girlfriend was disclosed by 14.3% of men. Since many men had raped more than once, rape of a woman or girl who was not a partner was actually more often reported than rape of partners. In all only 4.6% of men had raped a partner and not raped a woman who was not a partner (i.e. an acquaintance or stranger). 11.7% of men had raped an acquaintance or stranger (but not a partner) and 9.7% had raped both. In total, 8.9% said they had raped with one or more other perpetrators when a woman didn’t consent to sex, was forced or when she was too drunk to stop them.

And further:

 Nearly one in two of the men who raped (46.3%) said they had raped more than one woman or girl. In all, 23.2% of men said they had raped 2-3 women, 8.4% had raped 4-5 women, 7.1% said they had raped 6-10 and 7.7% said they had raped more than10 women or girls.

The report is startling. It is short and easy to read. It discusses various associations between socio-economic status and rape and educational levels and rape (prepare to be surprised). Read it, for all its scruffy banality. The executive summary is here


Remember dogs running after cars, their nails screeching across the asphalt and all that desperate barking? And remember the old chestnut: what would the dog do if it ever actually caught the car?

Well, then think of Cosatu. There is something about the way Zwelinzima Vavi and his colleagues are behaving in relation to the ANC and government that brings to mind how the dog might have behaved in the first second of having caught the car – before coming to a sticky end, that is.

In the last two weeks alone we have heard and seen Vavi and Cosatu:

  • announce that Jacob Zuma will serve two full terms as president;
  • support strikes in favour of radically lowered interest rates and lambaste SARB Governor Tito Mboweni;
  • denounce public enterprises minister Barbara Hogan for saying under-performing enterprises in her portfolio could be sold;
  • slam Trevor Manuel for his criticisms at the WEF;
  • eviscerate Helen Zille for the all-male nature of her Western Cape cabinet;
  • rage against the Vodacom deal – probably because Mbeki cronies were important beneficiaries;
  • thank fans who have attended Confed Cup games and urged the nation to: “fill those stadiums!”.

Well thank you for governing, Zwelinzima!

How does a trade union federation, especially in a high unemployment environment, get to talk and act like this and, more importantly, be taken seriously? By a combination of skill and luck, that’s how; but it is vanishingly unlikely that the luck will hold. Which is somewhat like the case with the dog who does, eventually, catch the car – its initial confused delight must soon be crushed beneath the wheels.

Read the rest of this entry »

Understanding Jacob Zuma is not the same as understanding history.

If we believe that Polokwane was essentially the manifestation of Jacob Zuma’s destiny we are going to struggle to understand the present and be shocked – even more than we would otherwise have been – by the future.

It is not only the volume of Zwelinzima Vavi’s bombast that should have alerted us to the fact of Zuma’s relative lack of presidential consequence – and nor is it Gwede Mantashe’s haughty absolutism or even the impunity with which Manuel declaimed against left and right at WEF last week.

The ridiculous frenzy of biography, hagiography and vitriol that has accompanied Zuma’s rise to power is fed by a general misconception of how history works – and a particular misconception of how it works in this case. Post hoc fallacies abound in political analysis, journalism and Western historiography, but this invention of Jacob Zuma as the beloved leader finally achieving his long-denied destiny is, to put it plainly, rubbish.

Read the rest of this entry »

First published May 14 2009

Jacob Zuma’s cabinet was announced in mid-May. This report looks at each minister and deputy minister and gives a brief  introduction to each one.

Summary conclusions 

  • This cabinet is shaped by the competing objectives of improving performance/delivery and the political requirement to satisfy both the SACP/Cosatu constituency who backed Zuma’s rise and investors, foreign and local;
  • Prior to the announcement, the main financial market concern was that Jacob Zuma would, out of indebtedness to his left-wing backers, appoint individuals to cabinet who would influence macro-economic policy in a ‘populist’ direction;
  • These concerns gave rise to particular focus on the future of outgoing Minster of Finance Trevor Manuel.
  • This specific issue has been resolved as a secondary consequence of a major cabinet restructuring exercise designed to improve the high-level strategic direction and co-ordination of government work by the creation of 2 potentially powerful planning and monitoring/evaluation cabinet posts within the President’s Office – with Manuel heading the planning commission;
  • As has been long expected, South African Revenue Services head Pravin Gordhan becomes Minister of Finance, with the expectation that he will provide continuity and probity post-Manuel;
  • A new department, Economic Development, as well as Trade and Industry are headed by “leftists” – who are also both technically strong in their fields. The appointments of Ebrahim Patel and Rob Davies must presage significantly increased job protection, tariff protection and an increased preparedness to use the state to shape particular sectors of the economy.
  • The most powerful individuals (politically) are clustered in the security sector;
  • Areas of concern include education and labour, partly because these are crucial as well as poorly functioning areas of government. SACP secretary general, Blade Nzimande is appointed head higher education and training (now separated from ‘basic’ education). Membathisi Madladlana is a disappointing reappointment as Minster of Labour after having shown himself unconcerned about labour market rigidities and unwilling to step on the toes of organised labour.
  • There are clearly identifiable ‘payback appointments’, rewarding loyalty to Zuma in the struggle against Mbeki. While these are often necessary political compromises (and there are a number of people who backed Zuma who have adequate skills for the job – therefore the assessment needs to be cautious) there are occasions when it is not apparent what skills these loyalists bring to the position which they have won.
  • Interestingly, where appointments have been made to reward ‘the left’ the appointees are universally technically skilled and hard working.
  • On the whole, an upside surprise, with an abundance of technical skills and proven energy and track record as well as a degree of presidential political skill shown in negotiating/bullying a sophisticated compromises on structure and personnel.

click here for the full pdf document

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

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 6,318 other followers

My twitter tweets