Herewith my latest news update as of 06h30 this morning.

  • NDP – defections to the left and right
  • Collusion scandal in the construction industry gathers momentum
  • Tax Review Committee – some welcome caution
  • Proposed legislative changes in the mining industry shows SA government’s deep ambivalence towards the sector
  • Ramaphosa – rumours that Zuma faction is planning his side-lining
  • Zimbabwe election chaos looms
  • Zanu-PF funding Julius Malema? Good story, but impossible to prove
  • ICT takes its ‘R150-billion’  iron-ore claim to the Constitutional Court

National Development Plan – under attack from left and right

Trade union Solidarity has added its voice to growing (but varied) criticism of the National Development Plan (NDP), calling it “self-contradictory, heavily race-based, deeply interventionist … largely unworkable … downright intrusive and harmful and … likely to require substantial funding”. [1]

Solidarity joins John Kane-Berman (Chief Executive of the South African Institute of Race Relations) who recently said “half-baked solutions suggested by the National Development Plan would do little to address the multiple challenges facing South Africa” and, further, that the plan “is a hotch-potch of contradictory ideas that have not been properly costed and are bound to fail” – Business Day 03/07/13.  Kane-Berman added that the lack of future scenarios for tax revenues, budget deficits or the public debt means that an endorsement of the NDP amounts to giving the government “a blank cheque for more taxation and more borrowing and probably for both” – ibid.

The NDP was adopted by the ANC at its Mangaung conference In December 2012 and has since been repeatedly endorsed as the cornerstone of the government’s medium and long-term planning by Jacob Zuma and members of his cabinet.

Since then the policy has been welcomed by organised business (for being generally market friendly) but strongly criticised by Cosatu for prioritising growth over inequality, employment over ‘quality work’ and for its reliance on markets and the private sector.

So what?

Jacob Zuma’s government has used the NDP to lend an appearance of coherence and co-ordination to policies as diverse as infrastructure development, labour market reform, tax policy, mining regulatory shifts and anti-corruption campaigns. Our own view is (unusually) closer to that articulated in a recent position paper by the South African Communist Party which said that the NDP is “a broad vision open to necessary criticism and engagement. It is NOT really a PLAN, still less a fit-for-implementation plan.”

Government should not be judged on its broad statements of intent – which is essentially what the NDP is. Government should be judged by what it actually does (or fails to do), what legislation it brings to parliament, what structural reforms it affects, the degree to which it improves the public service, how it manages the public purse … and by a host of other performance indicators.


The collusion scandal in the construction sector

Murray and Roberts CEO Henry Lass’s public apology for the company’s involvement in the widespread collusion scandal made the main headline on the front page of the Business Times yesterday. “I know that the Competition Commission’s findings of collusion in the construction sector has angered and disappointed you, just as it has our board, executives, employees, shareholders and other stakeholders,” Lass bemoans. He then goes on to explain that much of the wrongdoing took place in the dim and distant past. “None of the current executives at Murray & Roberts were found to be at fault for any form of collusive conduct through the Fast Track Settlement”.

So what?

It appears that public outrage at the scandal is growing. The lead editorial in the Sunday Times is particularly scathing. Headed: “Jail the price-fixers in the construction sector”, the editorial argues “when the private sector is caught out cheating and inflating costs for everyone who pays tax, we should judge them by the same standards we apply to the likes of Bheki Cele, Dina Pule or Menzi Simelane. Apologists argue that construction companies did this to make the deadline for the World Cup — but it’s a poor argument. It wasn’t just the soccer stadiums that South Africa’s iconic blue-chip companies with suitably self-righteous corporate governance manifests, such as Aveng, Group 5, WBHO and Murray & Roberts, colluded on. There were many others, including the Coega harbour nearly a decade ago, the Nelson Mandela bridge and any number of other construction projects.”

Expect civil claims from various angry customers (including metropolitan governments) … and it is not inconceivable that criminal prosecutions of some executives who didn’t “come clean” in the Competition authority process could still be on the cards.

 

Tax Commission – some welcome caution

Pravin Gordhan has named members of the long promised Tax Review Committee charged with inquiring ‘into the role of the tax system in the promotion of inclusive economic growth, employment creation, development and fiscal sustainability’. Judge Dennis Davis will chair the committee. Other members are Annet Wanyana Oguttu, prof Matthew Lester, prof Ingrid Woolard, Nara Monkam, Tania Ajam, prof Nirupa Padia, and Vuyo Jack – with Cecil Morden, an official from National Treasury and Kosie Louw, an official from the South African Revenue Service as ex-officio members who will provide technical support and advice.)

So what?

It’s an adequate committee staffed and led by people respected across society and (mostly) with the necessary technical expertise. After the ANC adopted policies at its Mangaung national conference in December last year that specifically called for increased taxes in mining (the State Involvement in the Mining Sector document) it is a minor relief that the Treasury has qualified the terms of reference by specifying (amongst other limitations) that the any changes to the mining tax regime must take account of “the challenges facing the mining sector, including low commodity prices, rising costs, falling outputs and declining margins, as well as to its current contribution to tax revenues.”

 

Mining industry legislative changes show ANC ambivalence about the resources sector

The Mail & Guardian published an interesting piece raising important concerns about proposed changes to legislation contained in the Mineral and Petroleum Resources Development Amendment Bill that was tabled in parliament on June 21. According to the author of the article (Peter Leon a partner and head of the ‘mining sector group’ at Johannesburg law firm Webber Wentzel) the bill “perpetuates and, in some respects, exacerbates” excessive administrative discretion in the issuing of mining licences.

In the article, Leon says that the proposed legislation “inexplicably deletes all the Act’s statutorily prescribed timelines and leaves this to ministerial regulation … second, it introduces an export licensing system for ‘designated minerals’, which are vaguely defined as: ‘Such minerals as the minister may designate for beneficiation purposes as and when the need arises in the [Government] Gazette.’ All ‘designated’ minerals will require the written consent of the minerals minister prior to their export.”

Leon points out that under the proposed legislative changes “the minister becomes the pricing tsar for ‘designated’ minerals” and “the department will effectively control all exports of such minerals”.

So what?

Many of the proposed legislative changes Peter Leon discusses in this article are precisely those that were originally contained in the State Involvement in the Mineral Sector document adopted as policy by the African National Congress at it December 2012 National Conference. So, despite various attempts to mollify investors after a torrid 2012 (through, for example, Kgalema Motlanthe’s framework agreement for a sustainable mining and the ‘sensitive’ tax commission terms of reference discussed above) the ANC and its government is still following its contradictory impulses with regards to the resources sector. Expect confusion and contradictory signals to continue to undermine sentiment in the sector.

 

“Fierce ANC Ramaphosa succession battle brews” – Sunday Independent

The Sunday Independent quotes several unnamed sources claiming that there is a campaign in the ANC to prevent the party’s deputy president, Cyril Ramaphosa, from becoming the country’s deputy president after the national election next year. The weekly newspaper claims the fight is “pitting President Jacob Zuma and Ramaphosa’s supporters against each other.” The story suggests that either ANC chairwoman Baleka Mbete or Public Services Minister Lindiwe Sisulu are likely to replace Kgalema Motlanthe in 2014.

So what?

This story is based on the idea that the long term imperative of Jacob Zuma and his lieutenants  is to control the succession in 2017 (in the ANC National Conference which will elect the next ANC president ) and in 2019 (in the national election which will elect the next country president). Why? Because an independently minded candidate (which, in this narrative, Cyril Ramaphosa is imagined to be) might fail to protect Zuma from the consequences of the corruption allegations that still hang over his head. A careful reading of this and similar stories indicates that the “unnamed sources” in favour of ensuring that Ramaphosa becomes deputy president next year are from Gauteng and the “unnamed sourced” plotting against him are from Kwazulu-Natal. Such stories in the popular press are inevitably based on factional leaks out of sections of the party pursuing some or other agenda of their own. This doesn’t mean there isn’t a plot against Cyril Ramaphosa, it just means we need a healthy sense of scepticism about these kind of leaks into the media.

 

Zimbabwe election chaos looms

Zimbabwe is due to host national elections on July 31 – having endured a chaotic ‘special vote’ on July 14 and 15 for approximately 80 000 uniformed personal.

SO what?

The Mail & Guardian put it well:  “every indication is of a poll that will be not only shambolic but also intrinsically unfair. The outcome of the past two elections in Zimbabwe were fiercely disputed and it would be tragic if the result once again left the country in limbo. Equally unacceptable would be a façade of legitimacy over another stolen election.”

(Tony Hawkins, “professor at the University of Zimbabwe’s Clinical Research Centre” gives a useful analysis of the “dismal economic past and the failed policies of President Robert Mugabe and his Zanu-PF party” on the leader page of the Sunday Times. After his analysis – which I recommend here  – Hawkins says “given these statistics and Zimbabwe’s ranking near the top of the list of failed states, it is difficult to understand why South Africa’s chattering classes are so convinced Mugabe will win again next week. His track record of economic failure is unparalleled in any developing country that has not experienced civil war or military adventurism.” While this ‘member of the South African chattering classes’ has no real idea whether Mugabe will win –by hook or by crook – next week’s election, I have to agree with both the Mail and Guardian and Professor Hawkins that it is a foregone conclusion that it will be ‘shambolic’ and ‘intrinsically unfair’.)

 

Bits and pieces

  • Facebook profile, Baba Jukwa, purporting to be a kind of ‘deep throat’ in Zanu-PF has claimed (according to  City Press) that Julius Malema’s Economic Freedom Fighters are funded by key members of Robert Mugabe’s cabinet. “This is ostensibly in revenge against President Jacob Zuma and his international relations adviser, Lindiwe Zulu, who have been heading the Southern African Development Community mediation process in Zimbabwe following the violent 2008 polls” – City Press 21/07/13.
  • Business Times said “rumours are swirling that Cell C has been trying to put together a landmark, cross-sector deal to partner with First National bank (FNB)”.  The story repeats speculation that “(e)ssentially, this would see FNB start its own cellphone business using Cell C’s network as its backbone” with the intention of rolling out integrated cellphone banking to the customer base of both companies  – Business Times.
  •   Imperial Crown Trading and Mineral Resources Minister Susan Shabangu have filed papers at the Constitutional Court, asking it to set aside Pretoria High Court and Supreme Court of Appeal judgments giving Kumba Iron Ore subsidiary Sishen Iron Ore Company (SIOC) full rights to one of the largest iron ore mines in the world. ICT is co-owned by Deputy President Kgalema Motlanthe’s long-time partner, Gugu Mtshali. “At stake for ICT is a 21.4 percent share of the mining right, which is conservatively expected to produce a net profit of R150bn over the next 30 years for its owner” – Sunday Independent.
  • Pali Lehohla, Statistician General and head of StatsSA used some unusual language to describe his feeling about his now retired deputy director general Jairo Arrow as well as now fired chief of Methodology, Evaluation and Standards, Marlize Pistorius – who together identified an 18.1% undercount in Census 2011. Aside from expressing his temptation to “physically manhandle” Arrow, Lehohla also said “we will rid this organisation of those kinds of plotters … you have to act with integrity and flesh, flesh, no blood, no drop of blood must come from the neck … It must be a sword that cuts clean. That’s how we deal with people like these … when you attack you must attack as aggressively to eliminate it completely” (Sunday Independent). Is this what happens when statisticians become generals

[1] Solidarity is a (largely white) South African trade union that mostly organises skilled and semi-professional workers. The criticism of the NDP appear in Solidarity’s latest Labour Market Journal (that can be accessed here.)

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