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The ArcelorMittal /Imperial Crown Trading deal (in all its complexity) is deeply threatening to the future of investment in South Africa.

If I ran a display indicating threat levels to the South African democracy the readings would be higher now than at any time since the successful establishment of majority rule in 1994.

Such a statement is obviously subjective. So here goes:

South Africa’s future depends on sustainable economic growth. This is the minimum condition that must be met if we are to roll back the current levels of unemployment, poverty and inequality.

The minimum condition for economic growth to occur is for domestic and international investors to continue to put their money and creativity to work in the country – preferably on an ever expanding scale.

Investors, domestic or international, are always primarily concerned with the safety of their asset and the predictability of returns.

“Political risk”, for investors is the risk that the actions or inactions of government could affect their ownership of their asset and what they can expect to earn from that asset.

Political risk in South Africa has always been about the macro insecurity caused by the levels of unemployment, poverty and inequality – and, crucially, the racial overlay of the same. Political risk has always been encapsulated in a simple question: can/will this government secure my asset – in a situation where ownership of such assets is so unequally spread?

This isn’t only a question for adrenaline stoned young  bond, equity and currency traders sitting in the global financial capitals with their cold little eyes glued to the screens.

If the answer is: ‘the government cannot secure the asset’, or even worse: ‘the government itself might be the thief in the night’, the people who are in the deepest kind of trouble are not sitting in London and New York.

When governments preside over the kind of slippery asset switching that has characterised the ArcelorMittal/Imperial Crown Trading deal, the people that suffer are the poorest and most vulnerable. The reason for this is not because this particular deal is  important, by itself,  to the future of employment and economic growth in South Africa. What’s important is that all the other money and creativity wandering around global markets looks in on this deal and acts in accordance with what it learns.

And what did this “capital and ingenuity looking for a home” learn from the ArcelorMittal/ Imperial Crown Trading deal about making a home here?

In the short term:

  • The issuing of mineral and prospecting rights by the South African government is a process so fraught with danger that it is impossible to trust the authority not to steal,  or be in league with those who wish to steal, your assets;
  • The only way to secure your asset – and effectively compete in this market –  is to hire individuals from the powerful political families and factions – at a huge expense – to act as your partner.

The money and ingenuity looking for a long term home – i.e. capital that is prepared to set up bricks and mortar and businesses with global reputations to uphold – is going to be particularly cautious about deals like this one because:

  • It exposes Black Economic Empowerment to be nothing more than a mechanism to bribe the political class – rather than what it was promised to be: a mechanism to spread the benefits of capitalism to the previously denied and disadvantaged;
  • It acts as a massive drain on the productive employment of capital i.e. it adds so much extra costs to the normal costs of conducting whatever business you are in that the benefits of being in South Africa, as opposed to anywhere else, disappear;
  • The kind of “money and ingenuity” that you get when your market presents such long term risks are short term specialists – the ones who make a living out of basket cases and are used to dealing with them – with their bribes and coups and political meddling.

So the ArcelorMittal / Imperial Crown Trading deal – with all of its ins-and-outs – pushes up political risk to levels last seen in the  mid-80’s at the time of PW’s Rubicon Speech.

And that is what I am telling anyone who asks my advice about political risk and investment in South Africa.


How to explain the decision to start a review of the parastatals by a presidential committee just as Public Enterprises minister Barbara Hogan was busy with that job?

When anything in our country seems confusing it is always useful to abide by the famous injunction from Watergate’s ‘Deep Throat‘: follow the money.

The raison d’être of the new political/economic elite – the thing that brought it into being and the thing that sustains and grows it – is the opportunity to take rents out of the economy. The overwhelming bulk of the low-hanging fruit in this endeavour is in the public sector – specifically in senior management positions and the multi billion dollar expenditure of the Parastatals.

Now if what you are/what you do is sheep stealing you don’t want an independent and famously incorruptible shepherd tending the flock. Far easier to give the job to a few of your wolf mates.

Understanding history

There are times and places when history feels like it is just meandering along minding its own business.

South Africa today is not one of those places or times. Here history is being driven and whipped along by an evil monkey on its back.

This particular evil monkey is none other than the squabble to harness the state to the task of personal accumulation.

Karl Marx and Frederick Engels, writing in The Communist Manifesto in 1848 said:

The history of all hitherto existing society is the history of class struggle.

The “class struggle” shaping our course would have seemed a little eccentric to Karl Marx. There is no simple division into proletariat, bourgeoisie, petit-bourgeoisie – with the aristocracy fading into oblivion and the lumpen-proletariat skulking along the edges.

Here you have an elite that has emerged through leveraging political power – in exactly the same way as the local representatives of the previous political oppressors (the Afrikaner Nationalists) did from 1948.

The Afrikaner nationalists began to lose young Afrikaners (at a greater rate than before) from the early 80’s. The reasons are complex but using the state to advance the economic interests of a political/ethnic group deadens creativity, grows authoritarianism and the stultifying effects of patronage drowns cultural growth.

I suspect exactly the same thing is happening in the ruling party.

For an excellent review of the shenanigans in Public Enterprises read Christelle Terreblanche’s article from the Sunday Independent here. For a brilliant – and quite moving – overview of the growth of what I elsewhere call Vampire Capitalism, read Moeletsi Mbeki’s Architects of Poverty – which I review here.

Jimmy Manyi BMF president doing what he does best

The Black Management Forum (BMF) is competing with the ANC Youth League to represent those who wish to gouge economic advantage from transformation and  bulldoze every law, institution, practice and idea that stands between them and the smorgasbord.

Listen to the BMF president Jimmy Manyi at a recent conference hosted by his organisation as he urges us into the Animal Farm:

  • Firstly he attacks the protection of property in the constitution, saying the clauses insisting on fair or market value for appropriated land are the “sting in the tail”;
  • He goes further and argues “It appears the Constitution does not support the transformation agenda in this country”;
  • He bemoans court cases where previously disadvantaged individuals lost their court bids when trying to obtain tenders;
  • He attacks media freedom, asking “Why is it that the media can have a field day railroading the office of the president without impunity?” … although he probably means “with impunity”.
  • The times live report on his input concludes that: “Two further issues he feels need reviewing were Section 27 of the Constitution which pronounces on procurement and culture”

Manyi and those he represents are delightfully undisguised. There is something strangely compelling about a politics where the class that wishes to loot the state and pillage what it can from the transformation agenda sticks out a belligerent jaw and sulkily asserts: “F$@% YOU, it’s my right!”

(catch The Times article here)

Why setting back Julius Malema is important

Julius Malema has received a body blow and is reeling about the ring.

I mostly want to discuss why this is important – beyond the obvious reasons that drive the obsessive media focus on the grandiose little ANC Youth League President.

But first a bit of context:

As I write Julius Malema is in the process of being disciplined in the ANC.  He has sailed closer and closer to the wind in the last few weeks and, it seems, a dunking is now inevitable.

There are three main charges:

  • On a Zanu PF platform in Zimbabwe last week he attacked the MDC and praised the Zimbabwe “land reform” programme and used the opportunity to promise economy wide nationalisation in South Africa – this a few days after President Jacob Zuma had returned from trying to broker an agreement between the MDC and Zanu PF;
  • He sung – in defiance of a court ruling and of specific orders from Jacob Zuma – the old “struggle” song that includes the words “kill the boer, kill the farmer” – this transgression  became more serious when Eugene TerreBlanche was brutally murdered by young black workers on his farm;
  • Each of these incidents received specific sanction from the ANC, but the straw that broke the proverbial camel’s back came when Malema was (quite bombastically) giving an interview at ANC headquarters on his triumphal return from Zimbabwe. For a variety of reasons Malema seemed to lose his temper and, in a bullying and autocratic fashion, threw out a BBC journalist. Catch that unsettling episode here. For the ANC, where form remains important, this rudeness was a step too far.

Julius Malema and the policy he represents is on the back foot. His behaviour has finally caused those who have backed and protected him within the ANC (particularly Tokyo Sexwale) to start to put distance between themselves and the Youth League leader.

His relative isolation is reinforced by a growing rebellion against him within the ANC Youth League – which he appears to be only just managing to control through bullying and barnstorming tactics.

So why do we so minutely follow the two steps forward, one step backward advance and retreat of Julius Malema and his cronies?

For me – as a ‘professional political analyst’ (someone whose non-evidential claim is that his political views are subjected to more rigorous intellectual testing than those of your average Joe or Sipho in the comments pages of before their airing … hmmm) – there is a real and legitimate reason. The Malema grouping is fighting to control the African National Congress and, in my opinion, the African National Congress remains, for better or for worse,  the institution most able to affect South Africa’s future.

South African politics is overwhelmingly dominated by the ANC and nothing indicates that we are in a process of moving away from this domination. Our politics is racialised and people tend to vote their ethnic identity. The ANC has a de facto monopoly on the banners and flags and songs and dead heroes of the liberation struggle; and it has unprecedented capacity to spread goodies around its supporters and potential supporters. This combination – being the party of liberation and being able dispense the national largesse – kept the Mexican Partido Revolucionario Institucional or PRI (the Institutional Revolutionary Party) in power for over 70 years (sometimes with a different name) and it is not inconceivable that the ANC could rule for as long or longer – especially given the additional dimension of racial solidarity.

So, the setback suffered by Julius Malema and his cronies is important because this is the most dangerous wing of the most voracious faction within the ANC. It is not for nothing that Malema has been singled out by the hysterical and monomaniacal mass media in South Africa. His skill at taking rents out of an economy trying to transform itself is by no means unique within this or previous versions of the ANC, but it is his  astute use of racial appeals to the poorest black South Africans to cover, disguise and justify his tenderpreneurial flare that makes him formidable.

I do not think it is all over for Julius Malema. A person of this political skill and focus is not going to be wiped off the face of the political realm because of a setback like this one. I expect him to be disciplined by the ANC and I expect that this will set him back a few years.

It is, of course, important to point out that Julius Malema is just an extreme version of something that has taken hold of the ANC at a very deep level. I am under the impression that the first thing the Zuma faction did when it came to power after Polokwane was change tender boards throughout the country. Do you think that was to clean them up after Mbeki’s depredations? I think not.

So closing down Malema is a necessary, but by no means sufficient, condition for cleaning up the ruling party and government. That would entail handing over to the ten or so people in the SACP and Cosatu leadership who are not themselves armpits deep on the take – and, unfortunately, they would begin paving the road to hell almost immediately.

So is Juju, as he is not very affectionately known by the aforementioned media, gone?

He is 29 years old which will make him 36 at the ANC’s elective conference in 2017 and 41 at the elective conference in 2022. He has got a lot of time.

I can almost hear, echoing the words of Arnold Schwarzenegger’s 1994 The Terminator,  the battered Julius Malema growling: “I’ll be back”.

I, for one, am not holding thumbs that the next manifestation is going to be any better. In fact a Julius Malema, older and wiser, tempered in the fires of adversity – goodness, now there is a scary thought.

Herewith a note I wrote a week ago for a South African client concerning a recent whip around the London fund management industry

Foreign fund managers perceptions of South African political risk

I recently had an opportunity to interact with a few London-based global emerging market fund managers. These were generally from long-only equity funds, but included a smattering of everything else.

The main lessons I learned were

  • not to be overwhelmed by the negative news flow;
  • always think in relative terms – a negative and obsessive focus on South Africa is meaningless without realistic peer comparisons.

This was brought home to me again as the weekend news of the brutal killing of Eugene Terre’Blanche hit the local and international press. The media focus alone seemed to suggest that this was a potentially destabilising event. However the story has quickly descended into the squalid domestic tale it really is, and the over-the-top alarmism should be faintly embarrassing to those who trumpeted it over the holiday weekend.

Here are the main questions I raised in London and the main responses I received*:

The news explosion around Jacob Zuma’s latest romantic and similar engagements does not drive capital flows

This point did not need emphasising with the fund managers I saw. If anything they were faintly puzzled as to why I would bother to raise it. For them the emerging market universe has much colourful (and sometimes ugly) personal behaviour by the political leadership and other powerful members of society. Zuma’s polygamy and latest love child are way down the list of “transgressions” in that universe.

Conflict over economic policy making the investment and operating environment difficult

The point I was making was that Pravin Gordhan’s budget speech differed in important ways from both the DTI’s Rob Davies’ Industrial Policy Action Plan II and Ebrahim Patel’s Two Year Strategic Plan. My issue with this was that Jacob Zuma had not settled important policy conflicts within his cabinet.

The different emphases could be summarised as follows:

  • Pravin Gordhan supported fiscal restraint, inflation targeting, a segmented labour market and a competitive and unprotected manufacturing sector – and for this he was heavily criticised by Cosatu.
  • The policies espoused in IPAP 2 and the Two Year Strategic Plan from the Department of Economic Development implicitly called for monetary easing, a weaker currency and a vigorous programme of interventions into the domestic economy through the use of tariffs and taxes – policies strongly supported by Cosatu.

Several of the fund managers that I interacted with had recently (within the last few months) met with all the ministers concerned either as part of a marketing tour led by Jacob Zuma or while in South Africa themselves. The detailed interactions with all these departments had convinced them that the policies of government were the policies as espoused by Pravin Gordhan and further that the more activist policies from Patel and Davies were not uncommon in emerging markets and at least did not include new capital controls.

I am not convinced the policy confusion is ‘investment neutral’ – although I do not think is catastrophic. Cosatu and the SACP clearly believe they have a chance to set policy – including monetary and industrial policy – through the DTI and the new Department of Economic Development. Thus Jacob Zuma seems to be clearer and more decisive about these issues in front of foreign fund managers than he ever is in front of a domestic audience. He will reap high resistance and anger from Cosatu and “the left” when they realise they have been lied to again. I think it is clear we are seeing the first signs of this realisation – in, for example, the threatened strikes during the World Cup against Eskom increases.

Julius Malema and the Nationalisation of the Mines

Julius Malema provokes a lot of reaction wherever he is discussed. Not many fund managers take him seriously and again it is because they have met and dealt with senior government and party officials who have spoken of Malema with patronising indulgence and a touch of exasperation.

Susan Shabangu, Minister of Mining, has done good work in assuring fund managers throughout the world that there is no possibility that the South African government will consider the nationalisation of mines as a serious policy option; and I came across several people who had met her and been convinced by her assurances.

Cronyism and tenderpreneurial flair – the threat to service delivery, stability, the functioning of the parastatals

Continuing on the theme of Jacob Zuma’s inability to solve the big conflicts in his government I argued that cronyism, nepotism and tender abuse are:

  • important contributing reasons for the poor functioning of the State Owned Enterprises – the Eskom example reveals that enrichment agendas in tendering and the appointment of senior personnel damages the utility’s ability to do the job;
  • key to understanding the failures of local government and hence the ongoing violence of the service delivery protests.

There were few fund managers I met who disagreed with this assessment, although some, yet again, argued that in the universe that includes Russia, the Middle East and Brazil, South Africa stands out less than we would imagine.

The World Cup and the waiting Hangover

It is perverse to argue that the downside of the World Cup includes:

  • it could become the focus terrorist attacks;
  • it could be targeted by organised labour and taxi operators to strengthen their hand against government or employers;
  • it will inevitably entail a let-down or ‘hangover” period.

This would be a little like arguing that the downside of life is death and that it should therefore be avoided.

I never met a fund manager in London, or elsewhere for that matter, who disagreed.

*Please note that this is a subjective process, over determined by my own interpretation and by a selection processes out of my control. Any real collation of “the views” of fund managers must theoretically translate into their holdings and the prices at which they buy and sell.

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.

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?

Here is a radio interview that was not conducted with me this morning:

Why would the ANCYL want the state to grab 60 percent of an ailing mining industry?

Because Julius wants everyone to be able to afford a R250 000.00 Breitling like the one on  his wrist …

oops sorry, wrong piece of paper … here’s the right one:

Because some corporate finance wide boy has worked out a way to salvage a slew of BEE deals that are under water; deals that were premised on the continuation of the commodities super-cycle into the far and distant future.

How will nationalisation help?

The ANCYL are proposing suspending the issuing of licences; they want the state to set up a mining company and they want the state to nationalise 60% of each existing and all new mining operations …

Yes, but how would that help BEE mining deals?

You think this government would not pay compensation, proper market related compensation, if it came to take 60 percent of  mines belonging to Tokyo, Patrice, Cyril, and Mzi … and Saki and a few others? They will pay, trust me on this.

So you think it is just a scam?

… no, not only a scam. Nationalisation is a traditional badge of radicalism. In an environment  where the majority of South Africans have not benefited much from liberation it is politic for an organisation like the Youth League to assume the posture of heroically trying to take the wealth back from the greedy mine owners and give it to the people.

But isn’t it a fact that the mining houses make huge amounts of money and pay workers poorly and feed nothing back into the communities they work in?

Hmm, yes that is mostly true, but the big multinationals have learned to be on their best behaviour: environmentally friendly, money to local communities, good safety records …. the way to get the most out of being endowed with minerals is make those requirements as stringent as the productivity margins on any one operation allow. So charge royalties and tax them and require a whole range of social goals be fulfilled ….

But isn’t that what the 2002 Mineral and Petroleum Resources Development Act does?

Exactly. That act set up the Mining Charter and was based on a brutal and honest exchange between government and all the big investors in our mining sector … remember the leaked draft of the Mining Charter, the huge sell-off, the (then) Minister of the (then) Department of  Minerals and Energy rushing around the world’s financial centres explaining government’s intentions with regard to the  proposed Act and the BEE process … then the long struggle to set the level of royalties …. this is a process that we have been through …

But surely government can change its mind, and say: no we want more from the sector?

Of course it can – and investors have always treated that as a risk; they would have preferred a clause somewhere promising set levels of BEE ownership and unchangeable targets for the various aspects of the codes. Investors hate governments shifting the goal-posts. But this proposal is a lot more than shifting the goalposts. Nationalisation along the lines the Youth League is proposing is …. ‘a whole new ball game’, so to speak.

But surely we need to get the most out of our mineral resources – for the benefit of the poorest South Africans?

Why do you think state ownership of mines is likely to make them more productive … better generators of state funds, fairer to the workers … better for the environment …. more likely to feed back resources into local communities? All governments’ records as owner/managers of companies is appalling. And let me say that THIS government’s record as a  manager of the assets and resources it inherited stands out for reasons that probably no-one wants to brag about. The way to get the most out of the mines is to leave them to the professionals and tax them and oblige them to deliver certain social goods to just this side of the profitability margin.

Well, we have to leave it there … thanks Nic, and thank you all for listening …

I am trying to work out if Jacob Zuma is condemned to be a one term president; shuffled off the stage by a shamefaced ANC leadership as soon as humanly possible.

I think he will be, unless he is saved by a titanic power-struggle that is not settled in time for the 2012 ANC national conference and centenary. That way he might blunder on, apparently happily, until 2017. Heaven forbid.

There was something endearing about our president’s deep chuckle at Davos last week after he defended his polygamy:

That’s my culture. It does not take anything from me, from my political beliefs, including the belief in the equality of women. (Chuckle, chuckle, chuckle)

But ‘endearing’ became ‘tragic’ when three short days later the Sunday papers brought us the slightly belated news of another happy event in Jacob Zuma’s life: the birth of a baby daughter to proud mum Sonono Khoza, daughter of Iron Duke Irvin Khoza.

I am forced to assume the story is true; that Jacob Zuma is the father of  Thandekile Matina Zuma. He has neither denied nor confirmed the rumour but his record in this department would make it unsurprising that the number of his (known) offspring rises from 19 to 20.

There is little that needs be said about this matter, except maybe: Sonono is 39, her sister died of AIDS; Jacob Zuma is 67, the president of South Africa and  the guy who infamously took a shower after having unprotected sex with another young woman, someone who was HIV positive, someone who immediately went on to accuse him of raping her.  He married his fifth wife in January – bringing the number of current wives to 3. Enough.

Those who conspired to oust Thabo Mbeki by backing the then beleaguered Zuma must be feeling queasy about how this first term is going.

Mbeki spent much of 2006 and 2007 arguing (never directly but always strongly) that this man appeared to have his pants around his ankles and his hands in the till; he was just not the right sort of chap to inherit the mantle that had been passed down from Mbeki himself, from Madiba, from OR Tambo and a host of other legendary leaders.

Zuma’s Polokwane backers, that peculiar alliance of traditional ANC democrats, trade unionists, criminals who Mbeki had cleaned out of the state and BEE aspirants who wanted their bite at the cherry, decided to ignore the evidence of Zuma’s  moral turpitude and take the gap he presented.

I wonder if those who genuinely wanted to improve governance or fix the ANC’s internal democracy and those who believed Mbeki had failed the poor consider this path we are on, on balance and after all is said and done, to be worth it?

None of the things that apparently so concerned them has been fixed. Most problems have deepened and the most serious problems, especially the rise to dominance of vampire capitalism and corruption, are significantly worse today than they were under Mbeki.

The trends might have been heading this direction anyway, but we feel adrift: leaderless and defenceless against the predations of the hordes of pirates who came along for the Polokwane ride.

So do not look to the president for the strength – of politics, ideology or character – to lead us through this swamp.

Take a trip through the blogs and discussions about this matter in the popular media. It seems that aside from satisfying his own needs and whims, Zuma has achieved one thing: he has become grist to the mill of racists and Afro-pessimists everywhere.

They love him, in a complicated and twisted way, because for them he confirms their deepest fears and hatreds.

And for this, we are all significantly poorer.

The spat over Tokoyo Sexwale’s report criticising Gwede Mantashe for not stopping the booing and humiliation of Julius Malema at the SACP conference in December is more important than it seems.

The direction a country takes (economically, socially and culturally) emerges from the interplay of too many factors to make the future even vaguely predictable. But it is always useful to look at the big bets being made by the most focussed and voracious players in politics and business. So, one way of understanding what is happening in the ruling alliance (and I accept there may be other ways) starts by assuming Tokyo Sexwale’s actions are always and at all times directed towards becoming president of the ANC in 2012 or failing that, in 2017 – not a weak assumption in my opinion. Becoming president of the ANC is the same as becoming president of the country (in 2014 or 2019 respectively).

Tokyo is placing himself – carefully and precisely – within the contest and conflict between “nationalists” and “communists” in the ruling alliance and he is doing so because he believes he can ride one side to victory over the other – and then ride that horse on to almost any destination he wants to hop off at. I am not sure that he can get what he wants this time around, but I would bet a considerable amount of money that these are his intention.

The conflict (which Tokyo hopes to exploit) between “nationalists” and “communists” is, in turn – and again in my opinion – also a proxy conflict, although one closer to, but still not perfectly reflective of, the real world.

(Please note that I am doing my own lumping of people below and – to some degree – I am using very loose definitions of “nationalist” or “communist”. The individuals hereby lumped would be unlikely to support my categorization or any of the implications I draw. I justify using the categories because right now there appears to be a significant overlap of both the language, actions and how individuals line up around the issues dividing the alliance within each group – giving the terms and/or concepts ‘communist’ or ‘nationalist’  particular force and effect for analytical purposes here.)

The nationalists

The nationalists include in their ranks those who believe the ANC must seek to represent all classes of South Africans and that the recent relative strength of the communists is damaging this endeavour. Here too are the anti-communists (for practical and/or ideological reasons) as well as the right-wing hang-em-high populists. The main component – and or the main hangers-on, depending on your perspective – of this group are the “TenderCapitalists” and those who otherwise hope to leverage their political access to take as much economic advantage of the state or quasi-state bureaucracy as possible.  Those in this broad category include Fikile Mbalula, Julius Malema, Billy Masethla, Tony Yengeni, Winnie Madikezela Mandela, Siphiwe Nyanda, Dina Pule, Ngoako Ramatlhodi, Nomvula Mokonyane.

This group and anyone trying to lead them, can draw on a rich intellectual tradition in the ANC that has always emphasised the dangers of the organisation adopting too narrow an ideology and thereby losing its ability to provide leadership to other classes (in the terms generally used in this and the communist traditions in South Africa these ‘other classes’ include peasants, the lumpen proletariat {i.e. the unemployed and the youth}, professionals and aspirant bourgeoisie and, more controversially, the actual bourgeoisie.)

At this stage the two organisations clearly dominated by this group are the ANC Youth League and the Umkhonto we Sizwe Military Veterans Association.

The communists

The communists are less diverse, but probably range from those driven purely by ideology and an instinct for collectivism (or being rooted in collectivist organisations like Cosatu) to those genuinely motivated to get the best deal possible for the poorest South Africans – even if their economic theory is never going to deliver this result. Those within this group include Gwede Mantashe, Blade Nzimande, Jeremy Cronin, Zwelenzima Vavi  and a host of less well known individuals. Both Cosatu and the SACP are dominated by individuals from this group.

If the main show (politically) in town is actually, as I assert, the conflict between the nationalists (as described) and the communists (as described) then the outcome of the conflict can be in no doubt. The nationalists come closer to being an economic class or at least an extremely powerful group of people who have one overwhelming set of interests in common: their desire, preparedness and ability to use the state to get rich. The communists have a set of idealistic ideas and a trade union movement. They don’t have a hope of blocking the relentless march of those who have caught the heady scent of easy riches.

What is depressing is that the communists had an inkling of the dangers they would face after they had successfully allied with the nationalists to oust Mbeki at Polokwane. This from The SACP and State Power – The Alliance Post Polokwane – Ready to Govern:

A negative scenario in which the left fails to hegemonise the post-Polokwane reality, and instead (and particularly after national elections in 2009) a new alliance of “1996 class project floor-crossers”, “compradorists” and “fugitives from justice” coalesces around a programme of awarding influential posts, tenders and contracts to themselves, while the factional destabilisation (and not democratic transformation) of the state, including the criminal justice system, persists.


So back to the original premise. I think it is becoming clear that Sexwale, having made his money through Mvelphanda after being stopped in his tracks by Mbeki in the late 90’s, is back in the running and he has chosen the steed he hopes to ride to the presidency.

Can he pull this off? I think he is tainted by how rich he is and will be more so as accusations emerge that he is using his wealth and Mvelephanda contracts to reward certain factions and king-makers he hopes to woo.  I don’t know if the accusations are true, but they are certainly being bruted about. I think a run for the presidency by Tokyo would be formidable – especially now that Mbeki is no longer there to stop him like he was stopped in the 90’s.

So the long and the short is: he could make it, he’s got the wiles and the stamina and the financial muscle. But a post-Polokwane ANC president with a silver spoon in his mouth is a real stretch and Tokyo Sexwale’s bid will be up against it, no matter how skilfully he rides his powerful but ugly horse.

Having  just returned from an idyllic holiday, I am forced to take stock of what I missed …

The Communists versus the TenderCapitalists

A “TenderCapitalist” is not an over-sensitive entrepreneur. It is a South African person, much loathed by the communists,  who uses his or her  race and/or political connection to win tenders from the state or from private companies hoping to fulfil their BBBEE requirements or just hoping to suck up to the ANC. The South African Communist Party has made it clear it thinks the ANC Youth League president Julius Malema is the ring-leader of this faction in the South African political economy.

The SACP conference and the booing of Julius Malema brought things to a head and throughout December and early January there has been something of a toing and froing between Julius Malema and Blade Nzimande.

The spat continued at the Slovo memorial in Soweto on Wednesday 6th of January when Nzimande said that “narrow African chauvinism” threatened Slovo’s non-racial vision and that the slogan: “liberation of blacks in general and Africans in particular” should not be “corrupted into a narrow anti-white African chauvinism” – quoted in Independent Online.

A few days later at the ANC 98th birthday rally in Kimberley Julius Malema suggested that there were “super-revolutionaries” that wanted to “co-govern” with the ANC. On Sunday, in a statement apparently coordinated with Malema, Jacob Zuma said in an SABC interview that the ANC does not “co-govern” with any other party. In response Blade Nzimande, quoted in The Times, said:

I don’t know who coined the term. It’s people’s figment of their imagination. This issue is manufactured by people who are anti-communists.”

The stage is set; let the theatre commence.

The death of Tshabalala Msimang

Manto Tshabalala Msimang died on December 16 of complications from a liver transplant. Msimang was minister of health from 1999-2008 and presided over a period of health policy uncertainty that began with Thabo Mbeki’s insistence that there was no evidence that HIV causes AIDS. A committed revolutionary who went into exile in 1962 under orders from the then banned ANC, Manto Tshabalala Msimang died as government policy and practice around the HIV/AIDS epidemic finally started to achieve traction.

Matric pass rate drops – again

On Thursday last week education minister Angie Motshekga announced the matric results which showed a two percentage point decline in the already dismal pass rate to 60.6. This is the sixth successive year of drops. The figures are, on closer examination, even worse than they first appear. The science pass rate (those who got above 30%)  dropped about 15 percentage points to 36.8 and the maths pass rate remained unchanged at 46 percent. Nothing is better predictive of future prosperity than improving education outcomes. Nothing (obvious) is more predictive of future troubles, on a number of fronts, than the converse.

Attack on Togo soccer team at CAF in Angola

On Friday January 8th the bus carrying the Togo soccer squad to CAF fixtures into the Kabina enclave in the extreme north of Angola. Several officials and players were injured. Rebels in the Kabinda enclave have been at war since the early 60’s (firstly against the Portuguese and later against independent Angola which has insisted that the oil rich territory stay incorporated as part of the country).

The South Africans have insisted that any suggestion that the security situation in northern Angola is in any way similar to that expected to obtain at the World Cup in South Africa later in the year is ludicrous and possibly racist. However all national security officials will have been reminded how easy it is to target an international sporting event to get maximum coverage for your cause, as I argued here. Watch this space …

President Zuma moves (way) up in the popularity stakes

Sapa reports (on South Africa – The Good News – and in many other places) that Jacob Zuma has increased in popularity amongst all groups but most notably amongst Indians, Coloureds and Whites since last April’s election. It’s a surprise, but mostly a good one.

Tomorrow morning at the crack of dawn I will begin travelling with my children for a respite after two years of my (it seems somehow personal) Great Recession.

We will be moving through some places that are less connected than others, so I will be posting irregularly for some time.

For this reason I wanted to say something  about  the South African Communist Party’s special conference in Polokwane before I go and before it finishes on Sunday.

Our red brethren have been meeting since Thursday and it seems they have been having an interesting and boisterous time.

Much of the media coverage has centred around a visit by Julius Malema, Billy Masetlha and Tony Yengeni during which the ANC Youth League president was booed and reportedly walked out in a huff, threatening to ‘tell on’ to the president.

But the underlying conflict that is playing itself out between the SACP and a powerful faction of the ANC is the main show in town.

And the SACP leadership is ‘on message’, constantly attacking what it sees as emerging black capitalists whose primary method of accumulation is tender abuse and looting of the state. It appears that the communists believe this “project” is THE real and immediate danger.

The coordinated attack emerges from even a cursory reading of (most importantly) the political report to the conference, but also from the opening address (some of these links are a little dicky – it seems to be a problem with the SACP’s site) by SACP chairman, Gwede Mantashe, a speech by Cosatu’s Zwelenzima Vavi and an address by the Young Communist’s Buti Manamela.

The political report says it most clearly (it’s a longish quote, but it gives one an excellent idea of the main issues in our politics):

This new tendency has its roots in what we might call “Kebble-ism” – in which some of the more roguish elements of capital, lumpen-white capitalists, handed out largesse and favours and generally sought to corrupt elements within our movement in order to secure their own personal accumulation agendas. Some of this largesse helped elements within our movement to emerge as capitalists in their own right.

In particular, these elements of BEE capital have been exploring a class axis between themselves and the great mass of marginalized, alienated, often unemployed black youth. The material glue of this axis is the politics of patronage, of messiahs, and its tentative ideological form is a demagogic African chauvinism. Because of its rhetorical militancy the media often portrays it as “radical” and “left-wing” – but it is fundamentally right-wing, even proto-fascist. While it is easy to dismiss the buffoonery of some of the leading lieutenants, we should not underestimate the resources made available to them, and the huge challenge we all have when it comes to millions of increasingly alienated, often unemployed youth who are potentially available for all kinds of demagogic mobilization.

We do not use the term proto-fascist lightly, nor for the moment should we exaggerate it. However, there are worrying tell-tale characteristics that need to be nipped in the bud. They include the demagogic appeal to ordinary people’s baser instincts (male chauvinism, paramilitary solutions to social problems, and racialised identity politics).

Now  I disagree with a host of the economic solutions that the communists seem to take as gospel and I am convinced that left to their own devices they would kill creativity and diminish personal liberty without commensurate social gains. However, it is the communists who appear to be most clearly identifying where we are going and what the dangers that confront us are.

They might be full of economic nonsense (i.e. stuff with which one disagrees) but you can always trust the reds to spot the fascists before even the fascists themselves know what they have become!

Here is something I wrote during the April general election – with a few minor edits. It is becoming increasingly relevant, as “the left” is backed into a corner and the Malema style populists seem to hold sway.

Bread and Circuses

Opinion polls indicate that the ruling African National Congress will shrug off five years of bitter leadership struggles and a sea of bad news to emerge from the election with a close to two-thirds majority.

But what it has cost for the ANC to turn the headwinds into tailwinds will be a hard price to pay.

The view divides neatly and sharply between the shorter term and the medium-to-longer term.


For some time South African political risk has been elevated due to a number of factors associated with the rise of a political faction around current ANC president and erstwhile country president, Jacob Zuma. The concerns have included:

  1. Corruption and racketeering charges against Jacob Zuma have raised questions about the probity of the candidate and his supporters as well as elevated a damaging conflict between the rule of law and the ruling party;
  2. The stability and predictability of macro-economic policy has been in question because of the centrality of the support of the Congress of South African Trade Unions and the South African Communist Party.

In the short-term, Zuma’s legal travails have disappeared because his defence team has convinced the National Prosecuting Authority to drop charges. Intelligence monitoring tapes produced by Zuma’s defence team clearly showed that the timing of the investigation and formulation of charges against Zuma were significantly influenced by supporters of Thabo Mbeki to the detriment of Zuma’s candidacy for president of the ANC and the country. While questions about the probity of Zuma will remain, the overhang of an instability provoking trial is now gone, as is the conflict between the ruling party and the justice system.

Additionally, the flow of information from key decision making forums within the African National Congress and ‘The Alliance’ (forums consisting of the ANC, Cosatu and the SACP) have started to indicate that a previously resurgent left wing is now facing headwinds on both policy and representivity fronts. The proposal for a ‘super cabinet’ that would essentially be a central planning commission has been significantly downgraded as have proposals to change monetary policy (away from inflation targeting) and to massively increase the already extensive social grant system. In addition, it appears increasingly unlikely that key communists and worker leaders will occupy the most important cabinet positions in the new government.

Thus, on the face of it and in the short term, South African politics and political risk should not remain a major concern in the aftermath of this week’s election. But delving deeper, and over a longer term – and perhaps with a longer investment horizon – I am not quite as sanguine.


While my general view of South Africa is improved by these positive outcomes, I believe it is prudent to flag one aspect, a potentially central aspect,  of risk in the longer term.

Under Thabo Mbeki and Nelson Mandela politics and leadership within the African National Congress and South Africa were exercised in a deliberately sober and cautious manner. Anti-populism and concerns to downplay any ‘cult of the personality’ were always high on the agenda.

These were hidden virtues that only become apparent now, in the moment of crescendo of the new ANC’s campaign of evangelical political razzmatazz focussed on the rural poor. Faced with opposition from the Congress of the People Party – formed in response to the purge of Mbeki from government and his supporters from the ANC leadership structures –  the ANC has thrust downwards and outwards for new areas of support.  While the ANC has not abandoned its urban, sophisticated working class support it has definitely set a ‘bread and circuses’ caravan amongst the unemployed and rural poor.

The combination of the ANC’s appeals to ethnic Zulus, various illiberal hints about the death penalty and gays, a strong push to be identified with the evangelical churches, a focus on tribal traditionalism epitomised by Zuma’s polygamy and traditional dress and the espousal – at a rhetorical level anyway – of economic populism is an all too familiar post-colonial African recipe. There has been a raft of implicitly and explicitly negative international news coverage about Jacob Zuma and the ANC’s election campaign – epitomised by this week’s “Africa’s next Big Man” cover story in The Economist. While some of the more virulent attacks on Zuma’s ethnic Zulu traditionalism are clearly racist or xenophobic a real and legitimate concern seems to permeate the coverage and market concerns: is this ethnic and economic populism newly espoused by the ANC different from that espoused thirty years ago in Congo and more recently in Zimbabwe?

The traditional logic of the ANC’s alliance with the South African Communist Party and the Congress of South African Trade Unions is the belief that they protect each other from the worst excesses of their individual character and constitution. The undesirability of a total victory of either the communists or organised labour is perhaps more obvious than that of the African National Congress. The multi-class and  multiethnic nature of the African National Congress national liberation movement has always made it vulnerable to populism and hijack by opportunists primarily interested in their own ability to accumulate wealth. The SACP and Cosatu have claimed the Polokwane victory as the moment they took back control of the revolution from the 1996 hijack by “monopoly capital in alliance with the comprador bourgeoisie” (translation: foreign investors and emerging black business). However, it seems to me that what actually happened at Polokwane was a victory of a rickety alliance between those left wing elements and aspects of aspirant and emergent domestic business who had somehow failed under Mandela and Mbeki to accumulate adequately and conservative Africanists within the ANC.

The left has profoundly miscalculated it’s strength in this alliance. They thought they were riding the other interests to victory, but I think they, in their turn, were being ridden by something altogether more unsettling.

This statement from the Young Communist League of South Africa (YCLSA) in the province of Gauteng calls on “parents to intensify efforts in teaching their children the dangers of learning from Julius” Malema.

Its worth a read – if for nothing else but to see how crazy things are getting between the left-wing of the ruling alliance and the crony capitalists.

Here the YCLSA accuses Julius Malema of being a “tender-preneur”, which is “a parasitic petty capitalist who relies on political proximity to different spheres of government and associated tenders” for their leg up in the world.

This is the real political divide in South Africa today. I think the lefties are on a hiding-to-nothing in the long term as I argue in various places but also here. I feel ambivalent about that. I hope they continue to curb some of the excesses of our rapidly evolving system of vampire capitalism from deep within the political wilderness they are returning to.

It’s getting a little like a tennis match. Eventually you can do well to watch the audience, heads swinging from-side-to-side to the sharp “pok” of the shots, to get a sense of how things are going.

As I was reading the article by Cronin, again from Umsebenzi Online, that came out today I groaned. It seemed the deputy secretary general of the SACP who also wears the hat of the deputy minister of Transport was going to kowtow to Malema’s racial bullying and appeals to authority, which in turn was a response to Cronin’s take on the ANC Youth League’s call for the nationalisation of mines that I cover here.

It was difficult to hold out through the comrade’s niceties, etiquette  and jargon – it’s exhausting at the best of times.

But lo! Just in time. If you can plough through the forelock tugging and coded jousting* to the end of paragraph seventeen:

If you disconnect a class analysis from a race analysis you run the danger of wittingly or unwittingly serving the interests of monopoly capital in SA and its comprador and parasitic allies – many of whom have been close to, or actually within our movement.

Well, no guessing which interests Cronin is suggesting Malema is serving – wittingly or unwittingly.

The long and the short of Cronin’s newest contribution is he still thinks that nationalisation of the mines (as he argued in his original critique) is a bad idea; but that more onerous and creative “beneficiation” obligations should be linked to the licences.

His argument is – as always – useful and rational.

My problem remains that the poles of the debate are being defined by the ANC Youth League president and the deputy secretary general of the South African Communist Party.

Hello? – as a 13 year old girl I know might say. Our mining sector has been shrinking for ten years while the equivalent sector internationally has been growing about 5% a year (in response to the so called Commodity Super-Cycle).

The communists and the crony-capitalist aspirants can only extract so much value (for their different, perhaps opposite, purposes) from the sector before investment flows to where the return is better.

Didn’t anyone ever tell them the parable of the goose and the golden egg?

There was this couple. They had a goose. It laid a single golden egg every day. After some years they became disatisfied and wanted more gold. So they cut the goose open to get at the motherload. But it was just a goose on the inside. So they starved to death … and then burned in purgatory forever. (Actually I added that last bit –  it was more a hope on my part.)

* I don’t know what I am doing sneering at Cronin’s writing style! Just read a collection of his poetry (like: Inside) and you will realise that Cronin is unique amongst the comrades in that he has a laconic and comely turn of phrase. My irritation was actually about the fact that I thought – incorrectly – that he had bowed to Malema’s populist and racist assault.

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

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