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Two very recent articles:

The first by David Brooks from the New York Times entitled The Return of History (a dig at Francis Fukuyama’s deeply mistaken The End of History and the Last Man – 1992). He constructs the history of Economics as a play in 5 acts. Act I is about a  discipline that studied mythical Man, the “perfectly rational, utility-maximizing autonomous individual”.  In Act II economics starts to realise humans are less rational than expected. Act III is the global debt crisis and the fact that traditional economics seemed to have zero predictive power in as far as this crisis was concerned. Act IV and V are the most interesting bits and point the way for a humble new economics more closely allied to the (appropriately humble) intellectual traditions of psychology and history.

Related  – and the most interesting piece of writing I have read in some time – is What Does Greece Mean to You? by John Mauldin. It is written as a letter to his children (and I assume it really is what it claims to be because he puts their pictures – they’re a good-looking bunch – right in there and pre-empts a dispute with a supposedly more liberal daughter, red-headed Melissa,  by denying his figures are a “Republican research conspiracy”). Mauldin explains to his children that the Greek (and Global) debt crisis must be understood as resulting from inevitably critical states in previously stable complex systems. If that sounds like a mouthful, go to the article, because without oversimplifying or intellectually short-changing in any way, Mauldin is able to explain how our global financial system is shot through with instability – and that until the debt is painfully unwound catastrophe is imminent. Catch it here, I recommend you do – and push through the early bits where he is paying the bills by advertising his “paid for” research products and writing – it’s the right thing to do.

Thanks to collaborator and friend Sandra G. for the heads up.

Take a look-see at the names that are linked in Evelyn Groenink’s excellent story about IT billionaire Robert Gumede’s wedding to Dr Portia Mkhize in Nelspruit last weekend.

Ignore if you can the author’s articulate disgust at the complacent and self-satisfied comrade billionaires and their squeezes grunting at the golden trough while Leandra burns.

Think instead of the names she links, almost as an aside:  Mathews Phosa, Tokyo Sexwale, Julius Malema, Fikile Mbalula and then outwards into realms more obviously dark and filled with foreboding.

It’s an interesting social calendar piece that pushes the boundaries of the genre. Catch it here.

I go to the Big Smoke tonight (actually the name wouldn’t work today – there are not many cities in the world that are cleaner, more exciting and with better restaurants, parks and museums … in my humble opinion).

I will be seeing most of the big emerging market fund mangers and discussing South African political  risk and the Zuma presidency with them. I am betting that, as usual, they will tell me I worry too much … look at Russia, they will say; or Brazil, Turkey, the Middle East … you want political risk?

It’s always a relief to hear foreigners with big money to invest saying that we underestimate ourselves, or that we worry too much.

I will try and post while I am there – possibly reflecting on what I can glean about what the big money thinks about our future – but if that doesn’t work, I will be back on Wednesday next week.

The local state – its politicians, agenda and bureaucracy, is under popular attack

It is starting to be whispered that there is a “hidden hand” in the service delivery protests*.

The problem (of the protests) is serious and threatening and government is starting to worry about high-profile violence during the World Cup.

These protest share a strong crossover constituency and architecture with the xenophobic violence that occurred May 2008. At that time, Thabo Mbeki’s spooks argued that a hidden hand was at work – in one bizarre version Zimbabwe’s Central Intelligence Organisation was fingered as triggering the violence to punish the Mbeki government for some impenetrably Byzantine set of motivations.

This time around the speculation is that the spreading protests have something to do with Alliance tensions i.e. the conflict (endlessly discussed in these columns) is fueling service delivery protests – I suppose that would mean either the ANCYL or Cosatu/SACP using popular discontent against the sitting council dominated by either the leftists of the nationalists respectively.

To argue that Alliance tensions is the (or even a) main driver is a bit of a stretch. The protesters themselves foreground slow delivery of housing and the whole gamut of services (toilets, sewerage, water, refuse , telecommunications, roads) but also have a sharp focus on corruption, maladministration, nepotism – and therefore, indirectly, on cadre deployment.

From M&G – Modderfontein Road in Ivory Park after service delivery protests

The protests appear to be coordinated. They have similar beginnings: “elders” – or the moral equivalent –  meet in a town hall to discuss grievances; they decide to march to the municipal offices in the town centre; they carry placards about Eskom, housing, corrupt council officials; on the way they are joined by youth and the unemployed, and the march swells; somewhere near the edge of the town centre police stop the now more threatening and chaotic march; stones are thrown and rubber bullets fired; the protest breaks into smaller groups and spreads; councilors and council property are targeted and running skirmishes with the police occur over a few days; the ANC sends a SWAT team to the area and this team either moves against the council or stands firm against “anarchic” and “violent” protesters. At any point during this process the attention of the mob can turn to the foreigners – Zimbabweans, Malawians, Somalians , Mozambicans, Angolans, Nigerians and those from the DRC.

It has become something of a legend and commonly accepted “fact” by foreigners living in South African townships that post the World Cup and in the lead-up to the local government elections in 2011 the xenophobic violence will erupt on a scale beyond anything that has happened in the past.

The Davies-J Curve – the real hidden hand behind the violence

One of the reasons the government and the intelligence agencies are suspicious about the violence is that it occurs always in municipalities where there has been a degree of successful service delivery. The violence does not seem to happen in areas that are absolutely poor and unserved and have remained so for some time.

Interestingly this is precisely the situation predicted by US sociologist working in the late 1950’s, James C Davies. His theory is that rising expectations is related to the possibility of armed conflict but only when rising expectations – brought about by, for example, some degree of service delivery – meets a downturn. His theory became known as the Davies J-curve.

What happens is that when material and other conditions are improving, expectations rise faster than the individuals own situation. The system seems to be able to cope with this, except when there is a downturn of some kind – this is the sharply curved “Reality” line in the diagramme above.

This predictive framework (usefully discussed by the Centre for Security Studies here) almost perfectly mirrors what has happened in townships and poor municipalities since 1994. The violence seems to spike in early winter and it seems to be concentrated in areas that have had by-elections. In general it seems to be at its worst after national local government elections.

We must assume that in the lead up to such elections the ruling party and its councils push service delivery and the promise of service delivery. After the elections delivery collapses.

Thus the expectations are on an ascending path as the reality of delivery veers sharply downwards.

Violence results and often the weakest and poorest are both the victims and perpetrators of that violence.

* Orange Farm, Sedibeng, Siyathemba township in Balfour, Leandra, Lesilie, Oogies, Accornhoek near Bushbuckridge, Chochocho near White River in Mpumalanga, Protea-Glen, Dobsonville-Gardens in Soweto, Ennerdale in Fine Town, Reiger Park in the East Rand, Parys, Diepsloot, Attridgeville and Mamelodi – all names of service delivery protest hotspots culled from recent press reports. While I cannot place all these towns on a map (and am not even sure that some are not colloquial names for the same place) it seems clear that there is an unfolding crisis of governance in many of South Africa’s 283 municipalities , especially in the poorest, semi-rural communities.

As promised another occasional slide that illustrates a major theme of the moment. I have put the meat into the caption – note the reversion to some traditional Marxist theory … fractions of capital and the working class fighting to wield the state?  Was that Althusser or Nicos Poulantzas … hmm, no, for them the state was a site of struggle and not an instrument …. gosh, I’ve forgotten more than I ever knew.

This slide illustrates discussion about the “real” conflict shaping our future – I use the Eskom saga and the nationalisation debate to illustrate how an alliance of the most  productive classes (the industrial working class and capital) is involved in a struggle with lumpen elements of the comprador bourgeoisie and ‘fugitives from justice’ over who gets to wield the state and to what ends
Absent from the slide itself are Zwelinzima Vavi and Bobby Godsell. Here they are wearing their respective  hats as, in Vavi’s case, a leader of the industrial working class; and in Godsell’s case Chairman of Eskom (but more revealingly Chairman of the World Gold Council). They are up against the ANCYL and the Black Management Forum.
The costs of defeat and the prize of victory concern the fate of Eskom: will it be looted or will it be used as an engine of economic growth and job creation?

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.

I have been sitting on this for a few days partly because Cosatu’s Central Executive Committee statement on Thursday last week and the ANC response are as harsh as we have seen – and that includes the tone of voice that accompanied Cosatu’s huge strike against ‘Mbeki’s privatisation’ in 2002.

Cosatu has a long and interesting statement; one of the more important paragraphs read:

Regrettably, to our frustration and anger, the government continues with the tendency inherited from the previous administration to ignore policy directives it does not like and only implement those areas that the markets/capital are happy with. In this regard we are angry that the Treasury remain infected by the highly organised but conservative bureaucrats who have been driving neo liberal and conservative policies for the past 16 years.

The ANC replied:

ANC has grown weary of the latest media outbursts by COSATU, seeking to rubbish and undermine anything from the content of the President’s State of the Nation Address to the Budget Speech by the Finance Minister, as well as ANC policies. Taking pot shots at the ANC and its Government show signs by COSATU of veering towards oppositional politics and not sticking to Alliance politics and traditions.

The point for now is that this does not presage an actual splitting of The Alliance. Cosatu is going to mobilise its members to join and influence the ANC in the lead-up to the ANC’s National General Council later this year – much as they did in the lead-up to Polokwane in 2007.

Cosatu’s short term objective is to defend against the attack on Gwede Mantashe (emanating from, but not exclusive to, the ANC Youth Leage). The longer term objectives of Cosatu (and the SACP) are finally starting to emerge and I will deal with this in the next post.

For now Cosatu has attacked on a broad front:

  • ‘tenderprenuers’, corruption and cronyism;
  • relaxation of the labour market;
  • failure of the ANC to stick with agreements that are reached in alliance summits;
  • monetary policy, inflation targeting and the role of the SARB and
  • a general lack of fit between micro and macro-economic policy.

For its part the ANC hadn’t quite finished with its fury at Cosatu’s CEC statement, and in particular Vavi’s niggling and constant accusation of corruption within the ANC and government.

Here’s the full text:

The African National Congress (ANC) has noted repeated allegations of corruption raised by the Congress of South African Trade Unions Secretary General, Cde Zwelinzima Vavi.

Cde Vavi speaks with conviction that “there is a tiny minority in the ANC leadership and membership which is corrupt and who use the ANC to enrich themselves”.

To this end, Cde Vavi has not raised this matter with the ANC in any of the fora of engagements we have and he has not provided any evidence of such allegations.

As a leader of the Alliance, we would have expected of him to have brought such a matter to the ANC leadership or even presented the list of such corrupt individuals. Together, we would have walk and matched to the nearest police station to ensure that such individuals are arrested. Cde Vavi would have assisted the ANC and government to root out the scourge of corruption in the country.

Cde Vavi’s failure to bring this weighty matter to the attention of the ANC and even his failure to report this matter to the law enforcement authorities, amounts to an insult to the standing and image of the ANC, its leadership and membership. These omissions on his part cannot amount to a fight against corruption but is reminiscent of grand standing.

Issued by:
Jackson Mthembu
ANC National Spokesperson

I don’t suppose it means much, but Jackson Mthembu was released from a police cell a few hours ago after been caught for drunken driving in Cape Town early this morning

Will Zuma serve a second term?

Will he serve out his first term?

Who dares give an answer to these questions? Oh, alight I will.

I have burned myself before by being a little too sure and a lot too wrong about what the future holds.

Analysts like myself are constantly encouraged to take a firm view of what is going to be going down down the road. The client – usually a fund manager – is the person who has to take a bet on a number of future trends and it usually helps him or her to hear strongly stated predictions with the various arguments that support them from various analysts. If these analysts disagree, all the better. Hence outlier positions are often useful.

“So what percentage likelihood would you place on Zuma becoming president?” I would be constantly asked in the lead-up to Polokwane.

“Oh, not more than 45% … the Mbeki machine is kicking in …. the Zuma character issues are overwhelming …. the left of the Alliance is betting against history …. the ANC prefers educated leaders …”, blah, blah fish paste; if I could only go back there and shut myself up. But I have to believe (in an existential sense) that it added some value.

I am sure anyone whose job it is to understand the workings of a particular societal process or phenomena is likely to make mistakes when pushed to give specific predictions of outcomes. For political analysts I suspect the dangers are greater than for most. The errors seem to congregate in two broad categories:

Confusing how it feels with how it is:

There seems to be a strong human instinct for story telling and narrative that causes us to think of the ordering and outcome of events as being rooted in the origin of a story. The error is that we tend not to hold randomness as our base case (as I think we should – or rather my experience has taught me I should.)

Confusing the subjective with the objective:

This is about the power of what appears to be the consensus. We tend to believe the views that we collect and hear from others, especially when they are reflected back at us by everyone we speak to and by the media consensus. The future is, objectively, full of surprises. Don’t be confused by certainty and repetition – he said sternly to himself.

With those qualifiers, my ‘professional expectation’ is that Zuma will survive the first term of his presidency.

Both the ANC itself and the interplay of the Alliance partners are a real mess, but it took a Polokwane to throw out Mbeki and anyone involved in that process is probably still counting the costs of that exercise. In other words, doing it again, and this time without the kind of unanimity that surrounded the Mbeki ousting, would have to be overwhelmingly urgent as the costs in division and discontinuity would be overwhelming. And I don’t think there is any consensus in the alliance of forces (clearly no longer an alliance) that backed Zuma against Mbeki that there is the requisite urgency around the person and performance of the President.

I am less confident (although strictly speaking I am not confident – in the sense of being certain – about any ordering or outcome of events in the future) about the second term. Up until a few weeks ago I would have said: it is always easier to allow the sitting president to stay in his job when the big contending forces are still involved in the war of position; that no side’s victory is yet in sight. But even if the big power plays are not yet completed by the ANC centenary conference in 2012 there might be a consensus that a safer pair of hands (Motlanthe?) may be in order.

Zuma’s term as president is, unfortunately, proving itself to be that bad.

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

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