Some humble and not so humble opinions on various snippets of recent and not so recent political news.

Platinum strike finally over

Amcu and the platinum producers announced a settlement on Tuesday. The industry reports the strike cost producers R24-billion in lost revenue and the workers R10.6-billion in forsaken wages (see the pro-industry website here for other data.)

So what?

It is generally agreed in the financial press that the mineworkers lost more than they gained (see here and here – that second link to Carol Paton in the Business Day … well worth reading as always and way more subtle than a bald statement that workers lost more than they gained).

My own impression is the settlement will be hailed by the vast majority of the returning mineworkers as a victory for Amcu – and, explicitly, as a defeat for Num, the ANC and government.

I expect Amcu to continue strong growth in the gold sector, eventually threatening Num’s dominance there (Amcu is sitting at about 30% representivity at the major gold producers already). The gold sector has a centralised bargaining system (through the Chamber of Mines) and Amcu has been formally prevented by the Labour Court from holding a protected strike at AngloGold Ashanti, Harmony and Sibanye because the agreement struck last year is binding. However  an unprotected strike remains a possibility and I expect Amcu to apply constant pressure to the agreement – perhaps embarking on an unprotected strike before year end.

My ‘most likely’ scenario (published in January 2014, see here): cascading labour unrest during 2014 and 2015 stemming from Amcu’s rapid growth in the mining sector, Numsa breakaway from Cosatu and the public sector wage round in 2015 – remains my base case.

Numsa is threatening to bring over 200 000 out on strike in the metal industry (largely the auto industry) from July 1. (Summarised by my friend and colleague at BNP Paribas Cadiz Securities economist Jeff Schultz: “The NUMSA and a number of other unions, meanwhile, are threatening to bring over 200,000 out on strike in the metal industry (largely the auto industry) from 1 July. Employers and unions  in the metal and engineering sector have been at loggerheads for three months now. The current three-year wage agreement comes up for renewal at the end of this month. The unions reportedly opened negotiations with a demand for a 15-20% pay rise, while employers are  currently offering 6.5-7.0%. This is another key risk to the production side of the economy in H2  and we will be watching developments here extremely closely in the days and weeks to come.”)

Zuma sick and tired

This week’s Sunday Times led with the ‘revelation’ that a heart condition, diabetes, high blood pressure and exhaustion have combined to raise concerns about the President’s health.

So what?

The story contains no news whatsoever. It is conceivable that Jacob Zuma could retire early for health reasons and it is conceivable that Cyril Ramaphosa, Nkosazana Dlamini-Zuma or some other ANC leader could become president or acting president. There is no strong evidence that such a transition would be accompanied by a damaging power struggle or be otherwise destabilising. Given how the ANC formulates and implements policy, there is also no strong evidence that a new leader would radically depart from the broad policy thrusts of the current government. The ANC is, in any case, under increasing pressure to deliver on a ‘more radical’ transformation policy and this pressure would apply to any new leader of the ANC and government.

State of the Nation: “like watching someone try to make their granny look bad ass”

This is a bit dated, but every political analyst and his (or her) dog seemed to make huffy and opinionated comments about SONA2014#2 so before I get my FOMO on:

If you expected some meat on the bones of Jacob Zuma’s statement we have to embark on radical socio-economic transformation you would have been disappointed. The speech consisted, as it always does, of a series of signals packed in mind-numbing detail.

I have pulled out the relevant quotes and underlined the relevant part of each quote below, but in short the speech raised some concerns for businesses and/or financial markets:

  • He  (Jacob Zuma) made the call for a national minimum wage
  • We can expect increased costs on mining companies as Charter targets are more vigorously pursued: in effect increasing the wage bill and other costs
  • There will be more onerous requirements for BBBEE and EE – in effect increasing costs on the wage bill and lowering rate of return in the short to medium term
  • The nuclear programme is definitely on – and there are increased fears of corruption associated with what will be the biggest public tender in South African history.

However, given the powerful pressures acting on the African National Congress, the populist concessions in the speech were relatively mild – and, if you believe an expanding public infrastructure spending programme could drive economic growth, then there was some good news in there for you too.

My first response on Twitter was along the lines of: ‘If you don’t have a plan for transformation, then force the private sector to come up with one #SONA2014.”

But there is not a lot of threatened force in the President’s outline. In truth,  Chester Missing, a comedian’s ventriloquist dummy was probably more accurate when he posted: “Talking the ANC’s radical transformation programme. It’s like watching someone try to make their granny look bad ass #SONA2014”. (Which hints at what we think is the greater risk: if the ANC fails to meet the various expectations of the emerging middle classes its political hegemony – and electoral majority –  might become marginal, leading to real policy instability.)

QUOTES (with explanatory links):

“Change will not come about without some far-reaching interventions.”

The social partners will also need to deliberate on wage inequality. On our side as Government we will during this term investigate the possibility of a national minimum wage as one of the key mechanisms to reduce the income inequality.”

“To further promote improved living conditions for mine workers, Government is monitoring the compliance of mining companies with Mining Charter targets, relating to improving the living conditions of workers.”

“This situation calls for a radical transformation of the energy sector, to develop a sustainable energy mix that comprises coal, solar, wind, hydro, gas and nuclear energy … Nuclear has the possibility of generating well over 9000 megawatts, while shale gas is recognised as a game changer for our economy.”

“We will promote local procurement and increase domestic production by having the state buy 75% of goods and services from South African producers.”

“We will sharpen the implementation of the amended Broad-based Black Economic Empowerment Act and the Employment Equity Act, in order to transform the ownership, management and control of the economy.”

“The total assets of our Development Finance Institutions amount to some R230 billion …  will be repositioned in the next five years to become real engines of socio-economic development.”

“We have identified agriculture as a key job driver  … target is for the agricultural sector to create a million jobs by 2030  .. Government will provide comprehensive support to smallholder farmers by speeding up land reform and providing technical, infrastructural and financial support.”

“We will also re-open the period for the lodgement of claims for the restitution of land for a period of five years’”

 

SONA debate, Malema response, expulsion and EFF walkout

The fractious debate that followed …

During his maiden speech to parliament, in reaction to Jacob Zuma’s address, EFF leader Julius Malema said: “The ANC government massacred those people in Marikana”. This led to an objection, a refusal by Malema to withdraw the statement, his expulsion from the House and a raucous walkout by the EFF. During the walkout, EFF members “howled and barked several derogatory utterances and made disturbing gestures,” according to Stone Sezani, ANC chief whip, which may lead to further disciplinary action against some EFF parliamentarians.

So what?

The State of the Nation address was marginally relevant and pretty tedious, but the colourful and combative follow-up presages a new atmosphere in the hallowed halls of the National Assembly. The EFF runs the risk of being characterised as a gaggle of truculent children, but the important issue here is that the party is articulating views that are probably mainstream in the black middle class.

In the words of widely respected ex-editor of the Sunday Times Mondli Makhanya, the EFF is challenging the “too good to be true” seamless transition from “the apartheid past to the democratic present”.

The main reasons Mr Makhanya welcomes the EFF’s parliamentary challenge, according to City Press, are that “unencumbered by the guilt of being beneficiaries of an evil system, white South Africans carried on with life as normal and did not feel the need to assist in redress. They took advantage of the opportunities democracy created and made full use of the head-start they had on the newly levelled playing fields. The tough conversation about correcting the wrongs of the past was given cosmetic treatment. If truth be told, one of the really good stories of the past 20 years is the fantastic story of guiltless white comfort.”

The point for Mr Makhanya is that the “questions the EFF is asking about the post-1994 dispensation are tough but necessary. The language is rough but it might just be the ice water the nation needs to wake itself. Its conduct is often uncouth, but that might be what we need to keep us alert.”

 

Land expropriation, South African style

Rural Development and Land Reform Minister Gugile Nkwinti has published a draft proposal that he describes as an “opening gambit” to speed up the redress of black landowners’ apartheid-era dispossession, according to the Sunday Times. (I covered these proposals in some detail ages ago, but the ST treated it as if it was brand new so I thought I better deal with it as if it was.)

The proposal is for commercial farmers to give half their farms to farm workers, “proportional to their contribution to the development of the land based on the number of years they have worked on the land”. The initial proposal (published on 9 April 2014) is that government would pay for the 50%, but that the money would not go to the owner, but to an “investment and development fund to be jointly owned by the parties constituting the new ownership regime,” according to the Sunday Times.

So what?

This proposal is similar to the charter process in the mining industry, whereby various transformation targets are linked to the process of renewal of mining rights – although the Mining Charter does not envisage that workers on mines would or should own significant parts of those companies.

I think this should be seen as a ‘bargaining position’ by government, albeit one that is likely to cause significant anxiety in the farming sector.

The ANC is under increasing pressure to deliver on promises to change the patterns of racial ownership and control of all aspects of the economy.  Transformation of the agricultural sector is attractive to the ANC, because it satisfies a number of imperatives: redress, creation of small businesses and black economic empowerment. However the ANC has also shown itself to be concerned about food security and property rights. Up until now. the ANC has upheld the idea that while land might be expropriated, this would not be done without a fair price being paid.

Mr Nkwinti’s proposals are virgin territory and probably primarily a warning shot across the bows of commercial agriculture, encouraging them to come up with workable and radical solutions to the racially skewed ownership patterns on the land. April next year has been set as the deadline for responses to the proposal.

 

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