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… but it’s difficult to know who to back

Thank you Mail and Guardian for publishing the story we all wanted even though you have probably broken the whole cannon of ethics in journalism.

The story to which I refer, titled “Ramaphosa starts fight for top job”, was published in the print edition of the aforesaid newspaper on November 13, it was written by Mmanaledi Mataboge & Matuma Letsoalo and leads with that treasured line: “ANC deputy president Cyril Ramaphosa has declared his intention to stand for the ruling party’s presidency in 2017, sources say.”

Yes, we all know that sources say “Space pumpkins stole my baby”, “Jesus was an astronaut” and “Jacob Zuma has no relationship whatsoever with SAA chairperson Dudu Myeni”, but in the M&G case referred to above I am prepared not only to forgive them because they took one on the chin for the team but I honour, respect and encourage them through the difficult times that lie ahead for them and other similarly esteemed organs.

So …   Cyril Ramaphosa is the presidential candidate for a slate including Gwede Mantashe, is (probably) backed by Gauteng and Eastern Cape provincial ANC’s, is also backed by Limpopo but unreliably and incoherently.  They (this camp) will fight on every terrain where votes are up for grabs in 2017 – which includes KwaZulu-Natal that they narrowly lost to the opposition at the provincial conference last weekend. They will obviously try to win Western Cape, Northern Cape and seem confident that the ‘premier league’ provinces (Free State, Mpumalanga and North West under the the charming patrons, Ace MagashuleDavid Mabuza, Supra Mahumapelo) should yield votes in their favour too.

The other camp, let’s call it the Nkosazana Dlamini-Zuma Camp, is backed by the ‘premier league’, the ANC Women’s League, the ANC Youth League, the winning faction in Kwazulu-Natal (and that is big cheese in ANC internal national votes) and all the premier league provinces. So they are ahead, in case you missed that.

If that’s all plain sailing for you up till now, here comes the confusing bit: the SACP is under vigorous attack by most of the elements supporting the Dlamini-Zuma camp and we must assume the SACP is backing the Ramaphosa/Mantashe ticket.

I would prefer things to be neater. I haven’t argued this point in these pages in enough detail – or with enough vitriol –  but in my private pantheon of villains of South African post liberation politics the SACP has pride of place. In about 2005, facing a probable ousting from the ruling alliance by Mbeki, the SACP pulled off a tactically brilliant but deeply unprincipled counter stroke by riding the debauched, corrupt, amoral, untrustworthy, deceitful, disreputable, tribal, traditionalist, sexist, shameful and scandal-ridden – but still saleable to the populist masses – Jacob Zuma back to power in December 2007 – later ensuring Mbeki’s early removal from the presidency. (Can I say that on my blog? No, you’re fine. That’s all true. I took the illegal stuff out; it halved the length of the story – Ed).

The SACP was lavishly rewarded in the Judas coin of cabinet posts and general status and influence and continued to act as Jacob Zuma’s strength and shield through the myriad scandals that were to follow.

It is my belief that the impact this party’s control of industrial policy has had on our national economy has been little short of ruinous, and its top leadership has shown arrogance, contempt and self-aggrandisement on a scale I would never, ever, have predicted from the party I idealised throughout the 1980’s.

So what happened? Why did groups I assume are close to … or proxies for … Jacob Zuma begin attacking the SACP. (Lets leave the #FeesMustFall for the moment as a stroke of luck for those pushing this line … and get back to it when we are being more conspiratorial.)

Slight rumours of criticism of Jacob Zuma’s various excesses and the SACP’s culpability in its stance in relation to the president filtered into the public domain from discussions internal to the SACP in the lead up to its 3rd Special National Congress in July 2015. Perhaps that self criticism was a lot harsher and the party realised that sticking with Zuma, his policies, his patrimonial and clientelist style, his absence of a plan would lead the country, the ANC and the SACP towards catastrophe?

I do think the SACP has been a restraining hand on the worst excesses of corruption and patronage … so it is not inconceivable that in contrition (and lack of other choices) they have joined the good guys.

I have discussed in detail in the past why Ramaphosa will always be treated with caution by the exiles, Robben Islanders, and the those who worked primarily in the underground military and security apparatuses of the banned ANC. I will get back to this question as I think the conclusion I drew might be changing.

Three last small points

I think  both candidates would be more than adequate to fill the positions they are competing for. A significant portion of Dlamini-Zuma’s support is coming from groups that are characterised by the words I used to describe Jacob Zuma six paragraphs above this one. If there is a large centrist group of progressive Africanists, waiting to show their hand for Dlamini-Zuma, let them do so soon. And they should learn from the SACP that unprincipled alliances can end up doing you much harm.

The ‘woman for president’ argument is basically rubbish. Interestingly it was Thabo Mbeki in his struggle against the rise of Zuma that brought up this facile and distracting little trick. At least Mbeki had made the right noises about the role of women throughout his presidency so that when he suggested Phumzile Mlambo-Ngcuka (then deputy president), alternatively Nkosazana Dlamini Zuma, it could not as easily be dismissed as a dishonest ploy.

The argument being advanced in 2015 that Nkosazana Dlamini-Zuma should be president because it is time for a woman president, is being advanced by the most backward, traditionalist, dare I say misogynistic, elements of the ANC. Dismiss the argument out of hand – even if the appointment of a women president, perhaps of the highly experienced Nkosazana Dlamini-Zuma, might be something of which we could all be justifiably proud. The argument has been advanced purely for factional reasons – which doesn’t necessarily mean it won’t get support from those who believe it would be inherently a good thing.

Finally this is all being played out in the public realm (which basically means it is being cobbled together out of hints and rumours by analysts and journalists) extremely early.

Remember this is a contest that will only be formally resolved in 2017 (probably in December of that year) at the ANC elective National Conference and only lead to a change in the country’s government and president in 2019. I assume it is a sign of desperate desire for change (for the better) and fear of change (for the worse) that has caused these issues to assume such a central public focus so early.

 

 

 

 

 

Greeting … and compliments of the season to you all.

I was too busy to post here during the last few months of 2014.

I had been writing and then road showing (here and abroad) an argument that suggested pressures acting on the ANC might, ultimately, save the organisation from its slow-motion collapse into what can best be described as a kind of criminal conspiracy.

On the whole, as they say, it was a deliberately positive counter to the life draining wails of despair that were starting to keep me from my sleep.

In the ANC there are thousands of pockets of resistance, but the overall character of the organisation and the way it has embedded itself with the state is deeply reminiscent of a huge wasp I watched yesterday stun an even bigger spider, implant it’s eggs in the juicy arachnid abdomen, stuff the bundle in a piece of dry cane, where the baby wasps will soon hatch and begin eating the spider in a precises way that keeps the host alive long enough for the new crop of wasps to fly off to carry on the business for which they were born. I believe some of such wasps are able to mess with the spider’s DNA in such a way that the spider will spend its last dying moments protecting the baby wasps.

This is an almost perfect metaphor for the behaviour of the hijacked centre of the ANC.

But I don’t think that is the whole – or even main – story, and below is the introduction to a longish report I wrote in October last year with my colleagues, Joan Tshivhinda (quantitative analyst) and Jeff Schultz (economist), that argues we have a better than even chance of being in a much improved situation by …. about 2020. That the pressures acting on the ANC could powerfully reshape the organisation for the better.

This is purely the introduction to the document. Joan did lots of quantitative work on the 2014 elections and Jeff did the same for the definition and class structure of SA society – so I think I am going to need more direct permission from BNP Paribas Cadiz Securities to publish the whole thing, but I hope to do so soon.

But for now:

Introduction – Against a Dark Background

(That title was made up purely for the blog post … the original title was “SA Political, Quantitative & Economic Research – emerging middle class lights up the gloom.)

There are significantly more important forces shaping our politics than the bad behaviour of our politicians.

  • Deep within the electorate a rapidly growing black African middle class is beginning to shape political and economic outcomes more profoundly than the size of the group implies.
  • We believe this group will determine many major outcomes for our politics and economics in the next few years.
  • Emerging from our analysis is a first (and best) case scenario in which the ANC goes through a process of renewal and recalibration over the next few years, powerfully reclaiming the defecting black African middle class and rolling out economic policies that will be optimum for financial markets and business.
  • However, we also describe several significantly threatening alternative scenarios, including further splits in the ruling party, the African National Congress (ANC) slipping below 50% of the national vote and losing the major metropolitan areas, the centre of opposition shifting toward some combination of the Economic Freedom Fighters (EFF) and the emergent socialist party… and even more gloomy potential paths we could, with a low probability, travel down.

Many institutions of political representation in South Africa (most obviously political parties and trade unions) are undergoing turmoil – within themselves, in competition with each other and in rapidly changing levels of popularity.

here are various methods we can use to seek to explain the turmoil. Much of the mass media focus has been on the character and integrity of the President (of the ANC and the country) Jacob Zuma, and his allies – and we attribute much of the turmoil to the Zuma camp’s alleged attempts to capture a lion’s share of available rents and patronage – and to keep their principal out of the courts. While we do not deny the role of individuals (as heroes or villains) in shaping history, we think it obligatory to examine changes in the deep structural features of society, especially in processes of class formation, and the changing needs of production, to seek explanations for the changing face of our politics.

Our basic premise is that ‘class formation’ among black Africans was held back by apartheid, and the legislation and state that defined that system. But in the 1960s and 1970s the global economy began to shift in its character, and in its requirements of the function of labour, goods and capital markets. In South Africa the economy shifts toward services and manufacturing and requires a more settled, urban, educated workforce, the members of which are able to purchase the goods and services being produced by the new economy.

For the first time in almost 100 years, black South Africans could realistically aspire to be urbanised, settled, housed, better educated and able to afford the goods and services of the new economy. And this set the emerging class powerfully against the political system of apartheid that understood its survival and the survival of white dominance depended on the defeat or diversion of these aspirations.

It is more useful and has more explanatory power, to understand that underlying the campaigns of resistance and repression and the attempts by the apartheid government to rejig its systems that controlled the movement, work prospects and political aspirations of black people were the reasons for the inexorable rise of the black African middle class.The 1976 uprising, the formation of the UDF in 1983, the formation of Cosatu in 1986 and its clear alignment with the still banned ‘Congress Movement’, the strikes, the school boycotts, the growing campaign for international isolation, the rapid reappearance of ANC symbols, leaders and flags in South Africa in the mid-1980s, the escalation of the ‘armed struggle’ and then the unbanning of the liberation movements, the release of leaders, the tricky negotiations at Codessa (Convention for a Democratic South Africa) 1 and 2 and finally the first democratic election in 1994 – could be seen to have been caused, orchestrated and guided by wise leaders and clever tacticians from both sides. And we don’t believe that statement is wrong, but we do think it misses the main point.

The apartheid state tried everything to head off the rise of the Africa middle class:

  1. the ‘hearts and minds’ campaigns in black communities – which only at its most trite consisted of giving out copious amounts of sweets and propaganda from the top of armoured vehicles;
  2. the attempt to establish a Tricameral Parliament to give political representation to Coloureds and Indians and the vigorous attempts to build the Bantustan[1] administrations and promote the system of local black councils[2] – attempting to ensure that ‘the oppressed’ would not find unity in opposing the regime – and ensuring that black African aspirations were diverted to stony ground and
  3. the campaigns of repression, including raids into neighbouring states, troops deployed into townships and state-funded assassinations squads and other ‘dirty tricks’ campaigns.

The not so subtle point we are trying to make was this was all actually driven by the African middle classes struggling to come into being (led and ridden by various political formations) and held back by the apartheid state and legislative regime. Thus, the emerging black middle class was both the engine and the prize of the contest between the liberation movement and the apartheid regime.

We draw theoretically on both the Weberian and Marxist definitions of class. With the defeat of the apartheid state, long suppressed class formation and differentiation has exploded in black communities. We attempt to describe and characterise the black African middle class (possibly classes) using a mixture of methods:

  1. Our classification has a minimum per capita income threshold which will be significantly above the middle of the income distribution for black South Africans;
  • We will show the group is the fastest growing segment of the Living Standards Measures (LSMs) table since 1994 and we will argue that it is politically influential and powerful beyond its numbers, consumption power and voting preferences;
  • Finally our definition will include the fact that members of the group will be more likely to have tertiary education (or professional or technical qualifications) and be more likely to live in Gauteng.

If we conceive of our political parties, electorate and the interplay of powerful other interests as part of a complex ecology with eco-niches and selective Darwinian pressures, then much of the turmoil in the ecosystem (the formation of the EFF, the torturous debates about affirmative action in the Democratic Alliance (DA), the splitting off from Cosatu of the National Union of Metalworkers of South Africa (Numsa) and the formation of some form of socialist alliance, the details in the drop in support for the ANC in this last election, the extreme anger about Jacob Zuma’s alleged diversion of public assets, his attempts to avoid the law and avoid various forms of constitutional curtailment) can best be explained by the growing assertiveness of the class we describe.

We overlay these categorisations with a close examination of the fact that the African National Congress lost approximately 11% of the national votes it won previously from across the geography of the urban black African areas of South African industrial heartland of Gauteng in the May 2014 general elections. We point out that in areas that were more representative of the middle class we defined above, these losses were greater.

We conclude that the pressures being brought to bear

  • could split the ANC further;
  • could drive the party further toward its flirtation with a sort of rural populism driven by patronage and traditional patriarchal authority;
  • could drive the party further into the hands of the South African Communist Party which has been the main beneficiary of the rise of Jacob Zuma; and
  • could provide space for the EFF, the DA and Numsa’s in potentia socialist party to grow to the point that the ANC drops below 50% vote.

We hope/predict that the middle classes and the Gauteng ANC, as the part of the party most exposed to the middle classes to which we refer, is already in the process of preparing to draw the party back from the brink it is approaching. The Zuma faction is entrenched, but it is our belief that the brand value being lost under his leadership will inevitably lead to a correction.

In general, our conclusion will be that the negative political consensus about South Africa is overdone, because attention is not being given to the deep, underlying structural drivers of change in the country, namely the coming into its own of the black African middle classes.

How history works – the origins of the black African middle class and what really caused apartheid to fall

Change in the structure, priorities and labour processes of the global economy began to accelerate in the 1960s and 1970s with a relative shrinking of primary resource extraction and heavy industry. South Africa, like much of the rest of the world, experienced relative growth in the manufacturing and services sector.

Nicslondonslides2

Thus the economy began to require a settled, better educated and skilled labour force, and one that could procure the goods and services produced by the new economy.

Black South Africans could, for the first time, realistically aspire, as a group, to be more settled, housed, better educated and be the consumers of certain goods and services to which their parents had had no possible access. Thus their interests melded with the similar interests of the already existing black African middle class that had managed to take root in the stony apartheid ground.

This nascent middle class had long been deliberately stunted by the apartheid state – and certainly segregated – to keep it from competing with its white counterparts, but in the views of Nzimande[3] (yes the very same one[4]) quoted in Southall[5], the group could be broken down into the following categories:

  1. The bureaucratic petty bourgeoisie – basically officials tied closely to the central apartheid state, but also town and city administrators and in the Bantustans (reliable allies of the apartheid state in Nzimande’s view);
  2. The civil petty bourgeoisie – civil servants and state employees like teachers, nurses and clerks – and from whose ranks Nzimande argues was drawn much of the leadership of the national liberation movement (clearly entirely unlike the bureaucratic types mentioned above);
  • The trading petty African bourgeoisie – which Nzimande eccentrically orders into several groups based on their ability to align with the liberation movement, but concluding that those belonging to the National African Federated Chamber of Commerce (NAFCOC), while clearly pro-capitalist, were useful allies to the liberation movement.
  1. The corporate petty bourgeoisie – basically black employees in major companies which, since the early 1970s, had “sought to legitimise capitalism through the discourse of the ‘free enterprise system”. In Nzimande’s views (as summarised by Southall) this group was “simultaneously hugely frustrated by limited opportunity and white managerial racism, uneasily situated as it was between capital’s attempts to create a black middle class and white management’s defence of its own class interests”.

The point of all of this is that almost all academic research agrees that there had been an “enormous increase in the African middle class between 1960 and 1970” Harold Wolpe in Southall 1977) “indicating the growing upward mobility of blacks into clerical, technical and non-manual jobs and of Africans into skilled employment”. (Southall) [6]

There are two observations that are worth making:

  1. The group definitions in the literature do not distinguish between skilled and upwardly mobile workers and the classes of traders and small business owners and civil servants.
  2. Because the definition is loose the group appeared almost impossible to count, with Samuel Nolutshungu (1983) estimating 121,948 members of the black middle class by 1970 and Wolpe (1974) putting the number at 1,315,800 for roughly the same time.

However, for our purposes here these are not problems because our argument is that, under the heel of apartheid, was growing a class of people whose expectations were realistically rising and this led to rapidly heightening political resistance.

At the height of apartheid, the oppression faced by all black South Africans, and especially Africans, was the political basis for downplaying growing class differences and it appears to us that the sense that change was possible, that the aspirations were realisable, was a multiclass phenomenon among all black South Africans.

It would be equally difficult to describe the sophistication, brutality; or give a proper timeline of the apartheid state’s attempt to survive the onslaught – and the consequences of its failure to do so.It would be impossible here to adequately describe the growth and momentum of resistance in the 1970s and 1980s. From the massive strikes in Durban in 1973 through the 1976 uprising, the campaign to defeat the Tricameral Parliament from 1983, the strikes, the bombs, the stay-aways, the States of Emergency from July 1985 and the growing criminalisation of any form of opposition – the profound growth of international solidarity for South Africans who were living under apartheid – and rising costs of resisting and defending the system.

However, for our purposes, it is interesting to examine one aspect of the state’s reaction when it realised how rapidly and powerfully black expectations were rising in the 1970s with the changing requirements of the domestic and global economy.

The Wiehahn Commission submitted an interim report to Parliament in May 1979 which recommended:Under pressure from South African and global businesses, especially after the Durban strikes in 1973 and the uprising in 1976, the National Party government made a serious attempt to reform the industrial relations system and the linked system that governed the rights of black Africans to move from place to place (influx control).

  1. Legal recognition of Black trade unions and migrant workers
  2. Abolition of statutory job reservation
  3. Retention of the closed shop bargaining system
  4. The creation of a National Manpower Commission, and
  5. The introduction of an Industrial Court to resolve industrial litigation[7]

The Riekert Commission reported at about the same time and recommended:

  1. Black workers already in urban areas with the ‘requisite permission’ to be there should receive ‘preferential treatment’ in finding employment – and thus create a stable labour force and encourage a “Black urban middle class”[8]
  2. Other Black workers could be removed after 72 hours of looking for work in an urban area and influx control would be tightened.

It is not our purpose and beyond our ability to explain the complex mechanism by which the apartheid legislative regime and its state pursued its ends but what is noteworthy for our purposes here is that National Party strategist and securocrats understood what was happening and they attempted to accommodate and divert the force that was coming at them, namely a rapidly growing group of politically marginalised, controlled and subjugated people who had seen the possibility of a better life and were prepared to struggle for it.

What happened in the 1970s and 1980s and in South Africa would have been strongly predicted in a piece of academic work presented by US sociologist James C. Davies in 1962: Toward a Theory of Revolution” in the American Sociological Review, (27)1 5-9.

We have deliberately left out the role played by individuals, organisations and leaders in building political and military resistance, in mobilising the majority into defiance and then in skilfully negotiating a peace, a new constitution and democratic country.Simply put Davies argues that in societies where expectations of improvement in the conditions of life begin to rise, they inevitably outstrip the real improvement. Finally daring to hope for the removal of influx control and the right to live and work where they chose, black South Africans instead got the mean-spirited liberalisations of the Wiehann and Ricket commissions – and the revolts driven by an unacceptable gap between expectations and reality followed as night follows day.

Nicslondonslides

It is our contention that what broke apartheid, with its laws, its state, its political parties, its cultural institutions, its security apparatus and its ideology was precisely its attempt to dam the flow of people’s rising aspirations – and we are still in the catastrophic flood of that dam having burst.We have done this because we want to emphasise that the deep and powerful historical forces of class formation and economic change tend to drive politics, not the other way around. The best politicians are those who realise these limits, who really understand that their profession is the art of the possible. One may slightly divert and shape the torrent but one’s power is strictly limited.

The Black African middle classes today – an introduction

In this sense the pressures that built up against the apartheid edifice are the same, and the same energy is driving South Africa into the future. It is the long suppressed black African middle class, having steamrolled apartheid out-of-the-way and now moving through our politics and economy with the same irresistible power… and its expectations continue to rise.But again, while we think these programmes have obviously had a major impact – and are likely to be tightened up – the real ‘explosion’ and driving force have been the aspirations of ordinary people who have long been denied the opportunity to seek to the good life, to educate their children to higher levels than was open to them and to accumulate assets. The ANC government has opened the doors, but it is impossible for those doors to be opened wide enough and it is essentially a market force that causes people to push, shove, clump and burst through the crumbling entrance as fast and as far as possible.The formal removal of apartheid legislation in the 1990s, the deliberate and vigorous and largely successful attempts to change the demographics of the state and civil service, including that of the major parastatals, a host of legislation designed to pressure private companies to put equity in black hands and to appoint black senior managers, the use of licensing in the minerals sector and, importantly, the use of state expenditure to promote black entrepreneurial activity have been important pillars of government policy and have undoubtedly been major forces in promoting a black African middle class.

Apartheid, among its myriad impacts on the shape of South African society, suppressed ‘normal’ class formation and segmentation among the black population. It was, in fact, and for a long time, a systematic attempt to do just that – so as to protect whites from the competition.

We have described in the previous section how various black African middle-classes as well as upwardly mobile sections of the working class emerged despite the best efforts of the apartheid system.

[1] A Bantustan was the cornerstone of the system: black people were allocated (often arbitrarily) to one of 10 territories where they would live and be politically represented. The idea was to concentrate members of particular language or ‘ethnic’ groups in these places and black people would eventually only be in ‘South Africa’ as migrant workers from these homelands. Four of the homelands, Transkei, Bophuthatswana, Venda and Ciskei were declared independent, but this was never recognised outside South Africa.We concluded, however, that the apartheid system was destined to fail as soon as the economy required something different from black South Africans and black South Africans could therefore realistically aspire to something different.

[2] A major social project defined in the Black Administration Act 38 of 1927 – endlessly amended to promote the co-optation of influential individuals in the black community – that in turn led to the burnings and killing of such councillors, most notably through the infamous ‘necklacing’ (placing a burning tyre around the victim’s neck).

[3] Nzimande, B. (1990). ‘Class, National Oppression and the African Petty Bourgeoisie: The Case of African Traders’, in Robin Cohen, Yvonne Muthien and Abebe Zegeye (Eds), Repression and Resistance: Insider Accounts of Apartheid. London; Melbourne; Munich; New York. Hans Zell Publishers: 165-210.

[4] Blade Nzimande is General Secretary of the South African Communist Party and has been since 1998.

[5] The ANC and Black Capitalism in South  Africa, Prof. Roger Southall, Democracy and Governance, Human Sciences Research Council Seminar 2003/23

[6] The ANC and Black Capitalism in South  Africa, Prof. Roger Southall, Democracy and Governance, Human Sciences Research Council Seminar 2003/23

[7] From the excellent South African History Online, a non-profit resource: http://www.sahistory.org.za/dated-event/wiehahn-commission-report-tabled-parliament (accessed 10/24/2014 19h54)

[8] http://www.sahistory.org.za/dated-event/recommendations-riekert-commission-investigate-employment-conditions-black-workers-are-t (accessed 10/24/2014 19h54)

Here are some bits and pieces I highlighted for investors over the last few weeks. Thanks as always to BNP Paribas Cadiz Securities for allowing me to republish these snippets here … it is also a touch more information that most people require, but I post it here for the record, if nothing else.

I write these under considerable time pressure  – deadline 06h30 0n Monday mornings. They can sometimes be a bit scrappy, but mostly (although with exceptions) still relevant a few weeks later. Where I say ‘yesterday’ or ‘today’ (or whatever) I mean: relative to the date in the highlighted headline above each section. The newest is on the top – stretching all the way back to the ancient history of Nkosazana Dlamini-Zuma at the US-Africa summit in Washington.

 

01/09/2014

Lesotho, South Africa … and the Guptas

Lesotho Prime Minister, Thomas Thabane, was assisted by South African special forces soldiers to flee to South Africa in the face of a military backed ‘coup’ on early Saturday morning. The ‘coup’ (or ‘coup attempt’ – both terms are used extensively in the coverage) was allegedly orchestrated by Deputy Prime Minister Mothetjoa Metsing.

The key features of the event were the co-ordinated encircling of police barracks by the military, the disarming of the police and the seizing of the national broadcaster in the country’s capital Maseru on Saturday. (Sunday Times, Voice of America, City Press, Sunday Independent – 31/08/2014).

The Sunday Times story suggests the ‘coup’ was sparked by Friday’s firing of army chief Lieutenant-General Kennedy Kamoli by Lesotho’s King Letsie. The City Press reports that South African troops are on standby for further interventions.

Lesotho army spokesman Major Ntele Ntoi has denied there was a coup and says the army’s actions were purely to disarm police “who had been preparing to provide weapons to political parties” – Sunday Times.

Thabane, in a phone interview with Voice of America, said he was not going back until his safety was secured, that there was a situation of “total indiscipline” in the army and that soldiers were “running around the streets, threatening people” and “quite openly stating that they want my neck” – see here for VOA coverage.

So what?

This is almost too bizarre to type out, but here goes: a significant portion of the coverage of the event refers to the recent controversy surrounding the issuing by Thabane of diplomatic passports to the Gupta brothers (who we know better as key Zuma and ANC backers and funders, see Mail and Guardian coverage “The Grim Tales of the Brothers Gupta” for background).

At the time of the appointment Thobane said “(t)hese people (the Guptas) are good friends of the ANC and we have good relations with the ANC … I was introduced to them by ANC president [Jacob Zuma] and other ANC officials… I then appointed them to help scout for investment in my country. They have influence in a number of countries that can help Lesotho” – see here for that story.

In highly interpenetrated and interdependent systems of patronage and corruption, unsuccessful attempts to defend one part of the system can unravel the whole system and cause destabilisation throughout the linked networks.

 

Jacob Zuma’s Russian rest

Jacob Zuma visited Russia this week for six days. He had a light schedule and was, unusually, only accompanied by State Security Minister David Mahlabo and Deputy Minister of International Relations and Cooperation Nomaindia Mfeketo. There has been widespread but largely fruitless speculation about what the President was doing in Russia. (See City Press’s “Jacob Zuma’s mysterious mission to Russia” and former leader of the opposition DA Tony Leon in the Sunday Times in an opinion piece titled “How much more abuse can the constitution take from Zuma?” … unfortunately can’t find a link to that.)

So what?

The crisis faced by Russian President Putin is, by all accounts serious and urgent – and it might seem unlikely that he would have made time for a casual tête-à-tête with Jacob Zuma. Thus we can assume that Putin was in part motivated by wanting to demonstrate he still has friends in an increasingly chilly world. Also there is the sourcinig of agricultural products to fill the gaps left by European and US sanctions against Russia over Ukraine – a job South Africa could be well placed to do.

However Jacob Zuma appeared less to be representing South Africa and more on a personal visit – with several reports, including from government, that he would use the opportunity to rest.

It is difficult to escape the perception of two embattled leaders involved in a perhaps complicated exchange and attempting to secure their present and future:

  • there is the upcoming ZAR850bn nuclear build programme that probably depends on Jacob Zuma staying at the helm in South Africa – Russia reportedly hopes to be central to that programme.
  • Jacob Zuma’s key spy chiefs all reportedly resigned when he (Zuma) refused to allow them to investigate the Gupta brothers as a serious threat to national security (see back story on that here).
  • Jacob Zuma faces unprecedented blowback at home, including the possibility of a public discussion around the original fraud, corruption and racketeering charges against him (see here) now that the famous Spy Tapes are to be handed to the Democratic Alliance in the official opposition’s attempts to have the National Prosecuting Authority’s decision not to charge Zuma reviewed.
  • Also in yesterday’s Sunday Times was an important ‘leaked’ story that South Africa had sent a large group of intelligence officers to be trained in Russia and that “the Russians have recruited at least four of our people, which means we are sitting with double agents” – according to an unnamed source “with inside knowledge of the programme” – Sunday Times 31/08/2014.
Twinkle Toes (Pic from GCIS)

Jacob’s Ladder (geddit?) and check out the body languege (Pic from GCIS)

It is not inconceivable or unreasonable to consider the possibility that Jacob Zuma is asking for intelligence and security coverage and offering in return nuclear contracts and public expressions of support. It’s not a perfect theory, but some kind of explanation is required.

 

Ruling alliance divides itself neatly on defending or attacking the public protector – is Jacob Zuma becoming a cost the ANC cannot bear much longer?

Zwelinzima Vavi, Cosatu general secretary, broke ranks with the ANC on Saturday arguing that the Public Protector’s recommendations on resolving the Nkandla dispute (in which over ZAR200 million of public money was spent irregularly on Jacob Zuma’s private house) should be implemented immediately … “all of them, without exception.” Vavi went on to say that criticism of Madonsela were “absolutely disgusting, to say the least”– Vavi in the Sunday Times 31/08/2014.

So what?

While the main structures of the ANC and its government attempt to close ranks around Jacob Zuma as the multiple scandals unfold and the threats against him grow, the hegemony is crumbling and the edges.

The ANC still has a comfortable electoral majority although as I have pointed out on many occasions, at least part of the electoral declines the ruling party experienced in May, especially in the sophisticated metropolitan areas of the economic heartland of Gauteng, have to do with perception of corruption and mismanagement at the top. It is difficult not to concur with the implicit meaning of the headline of Barney Mthombothi’s column in the Sunday Times yesterday which reads: “ANC courts its own destruction”.

We must consider that the cost of defending Zuma’s multiple infractions is starting to tell on the ANC (as it is telling on the party’s alliance with Cosatu).

I would reason that the ANC’s brand value is being seriously impacted by Jacob Zuma’s presidency and that, almost as a natural law, such a threat to value will call into being an attempt to defend the value by those who have the most to lose (other leaders and members of the ANC)

It’s the future, so I am guessing, but I think it is an even chance that Jacob Zuma will be moved into retirement within the next two years and that the official reasons will be related to his health.

(This added as I post these comments here: the above several paragraphs might be wishful thinking. If you want to see a well reasoned opinion that takes the opposite view, see the interesting  Daily Maverick column by Ranjeni Munusami arguing that Zuma will see out his second term. I suspect that I just can’t live in a world where the thugs get away with it for ever (this paragraph was edited after posting – Ed)

 

Ebola spreads to Senegal – World Health Organisation warns of ‘rapid hike’ in infections

The Ebola (haemorrhagic fever) epidemic ‘sweeping’ West Africa has killed approximately 1500 people and the first cases have been confirmed in Senegal, having up until now being confined in Sierra Leone, Liberia, Guinea and Nigeria.

So what?

Ebola was first identified in the north of the Democratic Republic of the Congo in 1976 and outbreaks have been common in Central and Western Africa since that time. The disease is isolated and confined to countries with weak public health systems and high levels of poverty. In all the news coverage, the headlines tend to be more alarming than the content of the stories. There are various experimental drugs in trial (including one made jointly by GlaxoSmithKline and the US government which has achieved high levels of success) – Sunday Independent – 31/08/2014.

 

25/08/2014

Pay Back the Money … or we’ll huff and we’ll puff

Julius Malema and his cohorts in the National Assembly didn’t quite blow the House down on Thursday last week during President’s Question Time.

JULIUS

They disrupted parliament by demanding that Jacob Zuma pay back a portion of the costs of upgrades to his Nkandla home, as specified by the Public Protector Thuli Madonsela. Their chanted refusal to accept the stock brushoff from Zuma and the poor management of the showdown by Baleka Mbete, Parliamentary Speaker (and ANC National Chairperson), is the leading edge of yet another storm that concerns Jacob Zuma’s integrity – and the ability of the constitutional mechanisms to hold him to account. (Here for a useful and interesting take on festivities.)

 

But political theatre becomes something more serious as the Public Protector and the ANC and its allies go head-to-head on the issue

Several Sunday papers reported yesterday ( 24/08/2014) that the Public Protector Thuli Madonsela has sent a letter to Jacob Zuma criticising several aspects of his response to her Secure in Comfort report and specifically arguing that he (Zuma)  did not have the constitutional right to set aside or review her findings or to allow Police Minister Thathi Nhleko to do so (in essence Zuma has asked Nhleko to determine what his – Zuma’s – financial obligations are with regard to the Nkandla security upgrades).

According to constitutional law expert Pierre de Vos Madonsela is well within her rights. “This is not legally controversial,” he says, quoted in today’s Business Day (25/08/2014). “The president is either receiving appallingly bad legal advice or he is wilfully abusing his power and thwarting the law to protect himself in order to unlawfully benefit financially from the state.”

Both the ANC and the SACP came out late yesterday afternoon strongly critical of Madonsela, arguing that she had overreached herself, especially as a parliamentary committee was currently dealing with the matter.

So what?

The clash in parliament on Thursday made a significant media impact and it seemed for a moment that the damage being done the ANC by the party endlessly having to defend its wayward leader could conceivably lead to some profound political realignment.

But that feeling was brief.

The EFF has 25 MPs in the National Assembly, to the ANC’s 249 and the DA’s 89.  The chances are, the ANC in parliament will work out a set of rules that essentially disciplines the EFF (already MPs may be suspended for not more than 30 days and have their salary docked for the same period).

Jacob Zuma is a master at diverting crises like this into long (perhaps endless) processes that have a degree (or at least a semblance) of legitimacy and constitutionality. And there is a parliamentary process dealing with Nkandla underway and whether this process is an attempt to ‘set aside or review’ the Public Protector’s findings could be the subject of years’ of constitutional debate, such that many of the players will be long gone by the time it is resolved.

There is considerable stability in a system so tightly bound within itself through links of patronage and shared loyalties – although I suspect that when such a system eventually unwinds, it unwinds quickly and perhaps catastrophically.

Jacob Zuma is off for a week in Russia – to work and to rest – and the game will go on. “The visit will further strengthen the excellent bilateral relations with a view to consolidating and opening new avenues towards job creation, skills development, exchange and transfer of technology and trade and investment,” said the Department of International Relations yesterday.

There may be some future moment when the ANC could face electoral losses because of public perceptions about corruption of its leaders, but that day is still far enough ahead to not impact (in any meaningful way) upon behaviour in the present.

(So … that isn’t a direct contradiction on what Nic thought on September 1, but it is more than a little close. I strongly suspect it might be a biorhythm, or hormonal thing – Ed)

 

Julius Malema … how did he ‘Pay Back the Money’?

Julius Malema appears in court today to face questions about where he got the money to pay his R18 million tax bill. According to Rapport newspaper (24/08/2014) the South African Revenue Service (Sars), would ask for a two-month extension of Malema’s provisional sequestration to determine where he got the money to repay his tax debt each month. The newspaper reports that “impeccable sources” allege that “cigarette smuggler Andriano Mazzotti was helping to pay his tax debt” – as re-reported at the Independent Online 25/08/2014 – see here. (I don’t know the Afrikaans language Rapport newspaper well – it is part of Naspers’s Media24 stable – treat the claim with maximum caution). (Not because of Naspers of Media24 – for so are they all, all honourable men … the caution is purely because the claim is faintly outrageous, which doesn’t mean it’s not true – Ed)

So what?

While Julius Malema’s insistence that Jacob Zuma account to parliament is welcome, we should be careful to not lose our sense of discernment. Julius Malema himself has faced a long list of accusations similar to those he is making against the ANC and Jacob Zuma.

 

Land and wage reform – unintended consequences

Two interesting articles in the Sunday papers hint at some of the negative unintended consequences of attempts to protect the interests of the marginalised and vulnerable workers on South African farms.

Firstly, the Sunday Times (24/08/2014) has a colour piece titled “Good intentions pave the road to rural hell” in which the 1997 Extension of Security of Tenure Act is assessed as having “led to as many as a million farmworkers being evicted countrywide”.

Secondly, the Sunday Independent (24/08/2014) records an interesting discussion about the impact of ‘minimum wage’ determinations on employment. The article shares different views on the matter, but concludes that in SA agriculture “the impact was devastating: Employment fell from 819 048 jobs in 2002, just before the law came into effect, to 623 750 jobs in 2003 and continued to decline to 555 549 jobs in 2007 – a net loss of almost a third in five years.”

So what?

The ANC has signalled an urgent desire to ‘get serious’ about land reform.  As we have mentioned previously ‘the land question’ seems to suggest to the ANC an answer to a host of social needs: employment, housing, food security, and black economic empowerment, to name only the most obvious. Racially unequal land ownership patterns (it is generally quoted that SA had 87% of land in white hands at the 1994 transition and that less than 8% has been redistributed since – see here) are also a driver of political dissatisfaction, perhaps helping feed the growth of the EFF and other ‘radical’ forces emerging in the society.

For now government is preparing a host of new legislation and regulation all the while signalling to commercial agriculture that it wants to be met half-way. There will probably be unintended consequences of government’s land reform and rural development programme (including negative impacts) but the lessons from the banking sector (for example with regard to the formulation of the National Credit Act) is that it is always a better idea for the private sector to go out and engage with government and attempt to shape legislation than it is to wait and deal with the future when it is a fait accompli.

 

21/08/2014

Mining, oil and gas sectors: legislative and regulatory drift and a scary audit

Mineral Resources Minister Ngoako Ramatlhodi didn’t calm nerves last week during his address to the third annual Mining Lekgotla. The minister is overseeing two significant regulatory processes causing anxiety in these sectors, namely a major audit of mining companies’ compliance with the 10 year targets of the Mining Charter and the signing into law of a bill amending the Mineral and Petroleum Development Act of 2002 (which the private sector thought it had essentially cautiously agreed to in exchange for it – the private sector – being consulted in detail about the regulations that would arise from the legislation).

With regard to the audit, Minister Ramathlodi said: “(w)hile the review process on the implementation of the Mining Charter is still under way, initial results suggest that whatever compliance we may have achieved, much more work still needs to be done” – Business Day -14/08/2014

With regard to the legislation the Minister said he had not been informed by the Presidency whether or when the bill would be signed into law. “There are legal teams that look at any legislation coming before the president and they advise him. When they do so we’ll act on that advice” – Business Day ibid.  Download Minister Ramatlhodi’s full address at the DMR website here.

So what?

Firstly, the audit obliges the mining companies to meet various ‘transformation’ obligations and targets by 2014 e.g., 26% of the company must be owned, through “full shareholder rights”,  by HDSA (Historically Disadvantaged South Africans) by the end of this year – as a precondition for the retention of the mining right. Go to www.dmr.gov.za to see the “Mining Charter” and the “Scorecard for the Broad-Based Socio-economic Empowerment Charter for the South African Mining Industry” to get a full view.

2014 is the year in which several definite obligations must be met by the mining companies and there is a degree of nervousness by investors and management as to how strict the audit will be, how much leeway the ministry will give and how severe the consequences of failure will be.

Purely the administrative aspects of the reporting process are enough to be a serious burden for smaller mining companies, according to Nic Dinham, Head of Resources at BNP Paribas Cadiz Securities

The apparent prevarication in signing the Mineral and Petroleum Resources Development Act Amendment Bill, after months of careful negotiations between the department and the mining companies, has caused the industry to worry that deals struck and compromises made might be up for renegotiation. There was a general expectation that the constitutionality of the amendments would need to be tested and examined (especially government’s 20% proposed free-carry interest in all new exploration and production rights in the oil and gas sector).  It appears to me that the delays are adding to a more generalised sense of uncertainty about the growing regulatory burden and costs associated with continuing to mine in South Africa.

 

Amcu set to go on the offensive at Num’s last toeholds in the Platinum sector – non-cyclical risk factors in the SA labour environment escalate

Nic Dinham (BNP Paribas Cadiz Securities Head of Resources referred to in a previous section) said yesterday that in the platinum operations where Amcu is not (yet) the major union (at several mines, but including those operations at Aquarius Platinum and Northam Platinum) there were significant indications that Amcu was close to recognition thresholds (specific to each company) and that it was reasonable to expect increased labour unrest at the particular operations and companies where Num was clinging to a majority.

“During the recent result presentations, several companies reported that operations previously dominated by Num are showing signs of losing ground to Amcu, especially in the Rustenburg areas”, said Dinham.

“This is the case at Aquarius Platinum as well as at Northam where Amcu membership has risen to 30% and 15% respectively, just short of both companies’ recognition levels. Clearly, this could be the harbinger of more labour storms to come. At the same time, only small numbers of workers in the existing Amcu fortresses switched to NUM after the end of the strike. So, despite all the rational arguments about the financial impact of the strike on labour, Amcu appear to have won the propaganda war with the mining industry” – Nic Dinham, 20/08/2014.

So what?

There are a number of important implications, not least of which is the confirmation (and deepening) of the implicit defection of mineworkers in the Platinum sector from a key ANC aligned union (Num) and the continued disintegration of previously powerful trade union federation and ANC ally, Cosatu.

In some ways this frees the ANC (and government) to decide on economic policy without having to kowtow to Cosatu, but it will also raise anxieties in the ruling party about the narrowing of its base – and a diminishment of its hegemony and moral authority.

None of that is necessarily a bad thing. It is my opinion that our legislative and regulatory environment has tended to suffer from a lack of clarity and focus as a result of the ANC attempting to keep a number of different legacy constituencies (and sectional interests) happy and on-board.

However, it is also worth noting that my general expectation of a deteriorating labour environment is strengthened by concerns about labour unrest driven by further contestation between Amcu and Num. This, together with a coming trial of strength in all (or most) Cosatu unions that will accompany the impending Numsa split out of Cosatu will be a strong, non-cyclical, driver of labour unrest for the next 18 months. Jeff Schultz (BNP Paribas Cadiz Economist) and I recently suggested that these strands driving labour unrest, along with what we expect will be a major confrontation that will accompany the lead-up to the expiry of the current 3-year public sector wage agreement in March 2015, will keep labour risks at elevated levels in the South African investment environment for at least another 18 months.

 

Cyril Ramaphosa – a hard week down at the Commission

Deputy President Cyril Ramaphosa last week faced an avalanche of criticism and heckling at the Farlam Commission (which is investigating the killing of 44 people at Marikana on and before August 16 2012 in the context of the protracted strike at Lonmin mines in the Rustenburg area at that time).

Cyril Ramaphosa was called to the commission to explain his actions in the lead-up to the Marikana killings. Ramaphosa was on the Lonmin board at the time and in an email to Lonmin managers he said: “(t)he terrible events that have unfolded cannot be described as a labour dispute. They are plainly dastardly criminal and must be characterised as such. In line with this characterisation there needs to be concomitant action to address this situation.” In another email he urged then police minister Nathi Mthethwa to “take appropriate steps”. In both these cases I have added the emphasis.

At the Farlam Commission hecklers shouted “Blood on your hands” (City Press 11/08/2014) during Ramaphosa’s cross-examination. Hecklers wore T-shirts with several different slogans criticising Ramaphosa’s wealth, for example one showed a buffalo in reference to the fact that Ramaphosa bid – unsuccessfully as it turned out – R19.5 million for a buffalo cow and her calf at a wildlife auction a month after the Marikana killings in 2012.

So what?

There is a high level of speculation as to whether Cyril Ramaphosa will succeed Jacob Zuma as president (when the current presidential term expires in 2019 or at some earlier date due to Jacob Zuma’s purported ill health.) There appears to me to be a widespread assumption in the financial markets that Cyril Ramaphosa, as an experienced businessman and an experienced negotiator and conciliator who was central to easing the transition at Codesa 1 and 2 in the early 90s, would be more sensitive to the needs of the private sector, more compliant with global capital markets and, generally, run a cleaner and more efficient ship.

Implicit in that list of attributes is the person who Ramaphosa would be cleaner than, more conciliatory than, more understanding of private sector needs than, is Jacob Zuma. It is impossible to know either that Ramaphosa really has such attributes relative to Zuma or that it is really or primarily those attributes that make Ramaphosa a more attractive choice than Zuma for the financial markets … or, in fact, whether the ‘financial markets’ really makes these kinds of distinctions.

It is my impression that Jacob Zuma’s rise to power and performance as president has been accompanied (and in several cases directly caused) increased political risks associated with investing in the country. Almost any successor would probably be welcomed by the markets. However we would be cautious about seeing Ramaphosa as the knight in shining armour. He is badly damaged by his link to the Marikana killings (unfair as that may be) and he has not yet established a significant constituency within the ANC. The fact that he is a rich man can play both ways; it gives him resources to build his case but it makes him vulnerable to accusations of conspicuous consumption and being out of touch with common people. It is also inescapably true that his wealth has been accumulated more as a result of ‘empowerment deals’, the accumulation of large slices of equity, rather than the involvement in any of the underlying activities (mining, banking, health care etc).

More than anything we must keep front of mind that much ANC policy and politics is determined in the forums of the party – long in advance of such policies and politics becoming law and regulation. The particular character of leaders makes a difference, but in the South African case, not as big a difference as it might elsewhere.

 

The noise around land reform is (partly) bluster designed to get commercial agriculture to act voluntarily

Urging Commercial farmers to take voluntary steps ‘advancing the transformation project in the agriculture sector’, ANC Secretary General Gwede Mantashe said “change that is imposed is more painful” – Business Day 14/08/2014.  Mantashe told attendees at a conference on land reform and food production that land reform was necessary if South Africa was to deal with the “ugly past of racial land dispossession of black people” and that farmers must never allow themselves “to be victims of change” – Business Day ibid.

So what?

We previously described in some detail some of the legislative initiatives around land reform and one of the points we made about assessing the risks associated with the land reform initiative is reinforced by Gwede Mantashe’s choice of words.

The ANC feels keenly its failure to successfully complete a significant process of land reform and redress – and is, in part, being punished for that failure by the (still slight) electoral traction achieved by the ostensibly more radical Economic Freedom Fighters on their debut in the general election on May 7 2014.

However, the ANC feels, at least as keenly, the threats to investment that would result if property rights were ever threatened by an unruly and uncertain ‘land reform’ process à la Zimbabwe.

Commercial farming does not have the handy (from the ANC’s point of view) equivalent to the mining sector’s mineral rights to attach to a number of ‘transformation’ objectives. The ANC would be extremely cautious about bluntly attaching a ‘licence to farm’ (or in fact a ‘licence to operate any business’) directly to ‘transformation objectives’. There is a line beyond which such rights and obligations could constitute a nationalisation in fact and might be both unconstitutional and, certainly, a serious barrier to future investment.

Thus the ANC, in the form of its secretary general, is snapping at the heels of domestic commercial agriculture, attempting to herd it towards the ‘transformation’ objective, putting the argument that this is the national good, but hinting that a bite on the ankle could be the laggard’s reward. It is an open question as to whether farmers would respond to such incentives with greater compliance or with resistance, both covert and overt. However, for now, we think the ANC’s (and therefore government’s) land reform bark is worse than its bite.

 

Bits and pieces

  • Jacob Zuma put out a report last week which he and his spokespeople claim is a satisfactory response to the Public Protector Thuli Madonsela’s, “Secure in Comfort” report into the upgrades to the President’s private Nkandla residence in which she finds several faults with the President’s actions and inactions. The delay, over many months, of a response from Jacob Zuma to Thuli Madonsela was ostensibly as a result of him (Zuma) awaiting a report from the Special Investigating Unit. However, on Friday a spokesperson for the Public Protector said Zuma’s report was not a response, adequate or otherwise, to Secure in Comfort. ““That means a document that comments on the public protector’s report or indicates action taken or to be taken to implement remedial action in compliance with section 3(5) of the Executive Members Ethics Act must still be submitted to Parliament by the president” – my emphasis added.
  • Jacob Zuma’s team is preparing to hang expense overruns and incorrect categorisation of some items as ‘security related’ on Jacob Zuma’s architect, Minenhle Makhanya. The Mail and Guardian reports that the “Special Investigating Unit has lodged a R155-million claim against Makhanya” – 15/08/2014.
  • And in other news Bruce Koloane, the former chief of state protocol who was shouldered with the blame for the landing of a large private wedding party at a secure military base by the close Zuma allies and business partners the Gupta brothers and family last year, was nominated by Jacob Zuma as Ambassador to The Hague. In August last year, Koloane pleaded guilty to all charges relating to his involvement in authorising the controversial landing of the jet.
  • It’s not (just) idle mischief putting these bullets together. If the President’s own actions around his accumulation of personal assets and special favours to his friends can impact on the formal judicial, disciplinary and constitutional oversight functions, if his party can go to extreme lengths to protect him from the consequences of his actions in accumulating personal wealth and influence, it is unlikely that private companies will be trustful of, or willingly and enthusiastically compliant with, the ‘transformation’ agenda emerging from the state, government and party he leads. Ultimately the private sector needs to believe that the value of its various social obligations ends up benefiting those who need the assistance the most. This is the price the private sector seems prepared to pay for stability and growth. Any sense that the public purse is hijacked or that equity transfers and affirmative action obligations have become a kind of asset that can be hoarded and dispensed as patronage by the politically powerful will cause the ‘transformation’ objective – and much else – to fail.

 

11/08/2014

‘Cabinet leaning to break-up Eskom’ – Business Day 05/08/2014 … I would be extremely surprised

Business Day reported that the idea of breaking up Eskom and privatising some of its power stations “is starting to gain traction in government circles, as a team of cabinet ministers and government officials seeks ways to alleviate the company’s financial crisis and restructure its business” – Business Day 05/08/2014.

The governing ANC’s alliance partner, the Congress of South African Trade Unions (Cosatu) vowed the next day to fight any such privatisation “to the bitter end” arguing that electricity price inflation, driven by the ‘commercialisation’ of the utility in the first place, was “one of the key constraints” on economic growth and an important reason South Africa “is not creating decent jobs the country so desperately needs” (catch the full August 6 Cosatu statement here.)

On the same day Lynne Brown, the Minister of Public Enterprises, said “I want to indicate that there is a portfolio of options for the interministerial task team to consider. To my knowledge Cabinet has not discussed the matter of privatisation and there is no need to unnecessarily raise temperatures around this matter” – City Press Online, 06/08/2014. The ‘task team’ to which she refers was described (in the same story) as “representing energy, public enterprises and the treasury” and further, that the findings of the team had not yet been made public.

So what?

This is, supposedly, a defining issue for the ruling faction of the ANC and its allies in Cosatu and the SACP. Much of the motivation for backing Jacob Zuma (and ousting Thabo Mbeki) was – apparently – that Mbeki’s policies were a species of Thatcherism (especially the plan to privatise the major state utilities). The alliance backing Jacob Zuma defined its historical mission as the combating of this “1996 class project”, a catch-all phrase for neoliberalism, fiscal rectitude and the ‘Washington Consensus’.

It might well be true that the breaking up and privatisation of Eskom is an urgent necessity – or even a precondition for recovery from our dire economic state – but it is a political nonstarter, requiring the complete breakup of the alliance of groups that hold power, and is therefore vanishingly unlikely to happen, even symbolically.

 

National Prosecuting Authority in free fall and intelligence services are extensively deployed on behalf of senior politicians and criminals – and the storm is beginning to batter against the South African Revenue Service – this is as serious and urgent as it is confusing and complicated

There is an on-going meltdown at the heart of the criminal justice system which is increasing risks in doing business with, or in, the areas administered by the South African state.

Here are only a few of the most recent visible features of the (complex and confusing) disintegration:

  • Jacob Zuma has asked the National Director of Public Prosecutions Mxolisi Nxasana to give reasons why he should not be suspended. The apparent motivation is that Nxasana has problems associated with his security clearance (owing to his brushes with the law, including a murder charge, when he was a younger man). However, almost all the coverage and analysis suggests that the ‘real reason’ is Nxasana has pursued investigations of key Zuma allies in the NPA and Crime Intelligence Division of the South African Police Service and his (Nxasana’s) actions threaten to lead, eventually, to fraud and corruption charges being reinstated against Jacob Zuma.
  • Award winning journalist Mzilikazi wa Africa published his memoir last week which includes a detailed account of how Jacob Zuma and his allies vigorously undermined the credibility of the first National Director of Public Persecutions Bulelani Ngcuka by spreading the false information that he (Ngcuka) was an apartheid spy.(See an interesting examination of this thread from Business Day 07/08/2014 here.) In here is the source code of much of the chaos in the prosecuting authority and intelligence service: Bulelani Ngcuka led the original investigation into the allegations of fraud, corruption, money laundering and racketeering against the then Deputy President Zuma, concluding that there was “prima facie” evidence that Zuma was guilty, but not enough to win in court – a statement to which Zuma, not unreasonably, strongly objected.
  •  “Sex, SARS and rogue spies” announced the front page headline in City Press yesterday (10/08/2014). The accompanying stories allege that senior SARS official, Johan van Loggenberg, has been the subject of a ‘honey trap’ operation by the State Security Agency “Special Operations Unit”. The story is Byzantine, but the important bit is the detailed allegation that the secret spy unit operating against van Loggenberg has also been used to discredit and smear a ‘anti-Zuma’ camp in the NPA and in Crime Intelligence. Bizarrely, the Special Operations Unit supposedly includes drug dealer Glen Agliotti.  (Read some of this story here and here … if you have the time or the patience.)

So what?

This level of political and criminal infiltration into key state institutions and functions, especially of the security services, the prosecuting authority and the South African Revenue Service raises real questions about judicial, regulatory and legislative certainty in the operating and investment environment. Uncertainty about the application of law, the integrity of the criminal justice system and the functioning of the revenue service must all be considered by anyone wanting to invest in South Africa or in assets regulated by South African institutions of state and law. Frankly, given the deep connections between the instability in these key sectors of the South Africa state and the rise to power of Jacob Zuma I am pessimistic that we have the capacity to fix this problem while the current administration is still in power.

The National Prosecuting Authority has appointed highly respected retired Constitutional Court judge Zak Yacoob to head an inquiry, or ‘fact finding mission’ into its dysfunctional state. Unfortunately Yacoob almost immediately (on Thursday last week while speaking at a workshop at the University of the Witwatersrand) happened to mention that he would have “set aside” the judgement that found Jacob Zuma not guilty of rape in 2006, because he would have put less emphasis on the alleged victim’s sexual history – see here. An outraged African National Congress said it learned of Yacoob’s comments “with shock and dismay” saying they “opened old wounds” and were “an attack on  principles of our jurisprudence and the judiciary.” Yacoob attempted to clarify his comments here but either way he is no longer likely to be the instrument that cleans up the National Prosecuting Authority.

 

 

Cyril Ramaphosa at the Marikana Commission today as succession debate begins

Deputy President Cyril Ramaphosa will have to explain today at the Marikana Commission what he meant when emailed other senior Lonmin managers just before the August 12 2012 killing of 34 striking mineworkers at Marikana and said: “(t)he terrible events that have unfolded cannot be described as a labour dispute. They are plainly dastardly criminal and must be characterised as such. In line with this characterisation there needs to be concomitant action to address this situation.” In another email he urged then police minister Nathi Mthethwa to “take appropriate steps”.

So what?

It is unlikely that the Commission will find anything untoward in Rampahosa’s messages. He was, after all, doing nothing other than responding to the growing violence of the strikers and Lonmin’s increasing anxiety about the strike. We are of the view that there is some political harm done Ramaphosa by his identification with mine management and government – and the police killing of the 34 mineworkers. There is a considerable degree of unease within the broad structures of the ANC and the electorate about the Marikana killings. The ANC is obliged to stand with its Deputy President on this matter, but it can’t be comfortable. This will play against Ramaphosa (although perhaps not decisively) in the coming succession contest in the ANC.

 

Nkosazana Dlamini-Zuma

Chairwoman of the African Union, fresh from pride of place at the US-Africa summit in Washington announced yesterday that she was undecided as to whether to stand for a second term in the AU (her current term expires in 2014 2016) This is inevitably raising questions about whether she will compete with Ramaphosa to succeed Jacob Zuma as president of the country.

So what?

She is in the running – and is clean and capable. She is perhaps more of an insider in the ANC’s power elite than Cyril Ramaphosa and her winning this race might mean (unwelcome) continuities with the current administration. It’s too early to call it one way or another, but the ANC Women’s League has indicated that it could back Dlamini-Zuma (or Baleka Mbete) while the Gauteng ANC has indicated it could back Ramaphosa.  Officially succession would only take place after elections in 2019, but there are constant rumours that Jacob Zuma might want to retire early (or be forced to do so due to failing health). An early retirement of Jacob Zuma would probably be a significant positive for perceptions about South African political risk, but the specific circumstances of such a move would determine whether it would, in fact, be positive, negative or natural.

Someone asked yesterday what I thought of Julius Malema being appointed to the Judicial Services Commission. Did the ANC not care about the kinds of judges that would be appointed? Does this mean the ANC policy is drifting towards the EFF?

These were my first, instinctive, thoughts:

I reckon the ANC is wisely taking a step back and attempting to formulate a more comprehensive strategy to dealing with Malema and the EFF than it (the ANC) has had up until now. During the election and the State of the Nation debate the ANC gave Malema endless opportunities to grandstand – and kept being forced onto the terrain that Malema chose.

So the question of whether the ANC government murdered workers at Marikana became the focus of the national debate around the SONA, as did the expulsion of Malema from parliament and the subsequent EFF walkout. Malema was – as always – cleverly playing out lessons that could have come from Sun Tzu’s The Art of War: draw the stronger enemy out to the terrain and the timing of your choosing … or something similar. (You made it up; you haven’t even read Art of War – Ed. Well … I bet it says stuff just like that in there – Nic.)

Malema has been on the front foot in almost every confrontation he has had with the ANC; more nimble, media savvy and quick, constantly making the bigger, better resourced, and much more popular party look lumbering, old and out of touch.

I think the ANC has finally hit ‘pause’, stopping itself responding automatically and defensively, suppressing the knee-jerk.

The first thing the ANC did then was go back to its own studies and documents like Strategy and Tactics  that constantly exhort the proper revolutionary to deal with a situation as it is and not how one would want it to be (that’s not a quote, it’s a vague memory – Ed).  Thus the ANC has decided to accept that, abhorrent as that may be, the EFF is here, in parliament, with over a million votes, and cannot be wished away.

The second step is to draw the EFF into terrain where it is weakest: the real business of governance, especially the tedious, behind the scenes, work … like the work done by the JSC.(that originally read ‘JSE’ … thanks Colin, totally a Freudian slip!)  I have no doubt that the ANC feels sure it has enough votes on the JSC (ditto – tks Colin) to influence the real outcomes of the commission, that Malema’s presence there will do little other than absorb Malema’s time and attention (and have him endlessly sparring with better trained minds than his – and mouths almost as skilful.)

So what the ANC is probably attempting to do (also with the appointment of Floyd Shivambu to the Pan African Parliament) is to incorporate the EFF, to drain the energy and time available to its leaders for grandstanding and guerilla theatre.

The ANC can argue to anyone: look these people have been elected to parliament, we are obliged to take them seriously and not side-line them, thus we are appointing them to real committees and giving them real responsibilities.

The EFF cannot refuse, after all it has been demanding to be taken seriously and complaining that the ANC doesn’t take them (or the electorate) seriously etc.

The ANC is probably betting that after 6 months of the EFF exhausting itself in the exhausting business of government it will have little room and energy for the kind of vibrant, youthful anarchy it has exhibited up until now.

Is the ANC risking financial market ire by allowing the EFF near the appointment of judges? Could this imply a new openness to the ideas of the EFF around private property, nationalisation, redistribution etc? I don’t think so – or at least not any more than the ANC is itself raising through, for example, Rural Development and Land Reform Minister Gugile Nkwinti published draft proposal for land reform.

The ANC is appropriately responding to the support the EFF has achieved in the recent election. It (the ANC) must address the concerns of those voters who have, or might still, defect to the EFF – but the ANC must do so on its own terms and not the terms and conditions set by the EFF.

The other bet the ANC is making is that the gradual bureaucratisation of the EFF leadership will make them easier to co-opt, and eventually entice them back, across the floor.

It might not work, but I think this is the right strategy: take Malema, as a member of the National Assembly, seriously and eventually he will be forced to take being part of government seriously (and eventually he’ll just be another porky little guy in a suit in the National Assembly?- Ed. Something like that – Nic).

Who can remember the power of the IFP when it refused to be part of the 1994 election? As soon as it was ‘part of the system’, its power drained away.”

And meanwhile quis custodiet ipsos custodes? Well, Julius Malema of course.

 

… which I entirely doubt will be made glorious summer by this sun of KZN when he gives his 5th nth State of the Nation Address this evening.

I am not, as my children might have said, very amped for this.

The only ray of light so far (I am watching on eNCA) was a brief interview with Floyd Shivambu who suggested it should be a ‘state of the resignation address’ … that if the President couldn’t make it to the Cabinet Lekgotla ‘then it would be best for him to just come here to explain that he is just too old and tired and to say goodbye’ – or words to that effect.

I thought I would use the time to publish some bits and pieces that I have sent to my clients over the last week.

The winter of our discontent – as the labour relations cycle meets a secular trend

Every year at this time South Africa is engulfed in strikes as annual wage agreements are traditionally renegotiated in several sectors of the economy. Every year analysts and journalists pontificate widely about the dire labour relations conditions – and the gloom deepens because this all takes place in winter.

Three factors this year are probably going to make the outlook more negative and threatening.

Firstly, the post national election winter has, since 1994, been characterised by spikes in service delivery protests. The causes of this phenomenon are not fully understood, but it is likely that:

  • voters confronting a hostile winter and declining services levels – so soon after being promised the earth by politicians – are likely to be unsettled;
  • local politicians who failed to make party lists begin mobilising factional support, perhaps to stand as candidates in 2016 local government elections, perhaps to discredit those whose positions they covet.

Secondly, the platinum strike is being driven by a number of ‘political’ factors – as discussed previously.

Thirdly Numsa is showing clear signs that its political aspirations are, as we predicted, going to drive deeper and more robust strikes and labour unrest. One sign is the growing violence as Numsa attempts to widen its action at the Ngqura container terminal in the Coega Industrial Development Zone in Port Elizabeth.  The South African Transport and Allied Workers Union (a Cosatu union) is opposing the Numsa strike and is calling for its members to stay at work at the Transnet facility. However, both Transnet and Satawu were quoted on radio (SAFM 20h00 news broadcast 08/06/2014) as decrying the burning of houses and cars of the workers who were at work. The SATAWU spokesperson warned that the situation had similar dynamics to those that were present in the platinum sector in 2012 – that this ‘is just like what happened with Amcu (same broadcast).

Additionally, Numsa is preparing to lead 220,000 workers out on strike from the metals and engineering sector next month. “The bargaining negotiations have spectacularly failed to produce the desired outcomes as expected by the thousands of our members in the sector,” spokesman Castro Ngobese said in a statement quoted in The Herald (5/06/2014). Numsa’s core demands includes a 15% pay rise and a one-year bargaining agreement, the Steel and Engineering Industries Federation of SA (Seifsa, which represents 23 employer associations) has offered an inflation-linked increase of 6.1 percent.

So what?

This is the cycle meeting the secular trend, with each driving the other deeper than either would have been driven ordinarily. Numsa is in the  process of breaking away from Cosatu and is beginning to vigorously compete with other Cosatu unions in overlapping sectors (container terminals, the big electricity generation projects and down and upstream mining and metallurgy operations).  This is, at least partly, about Numsa preparing to set up a ‘left’ party to compete for votes in the future. Comparable (but not identical) dynamics are driving the platinum strike. A winter with ‘normally’ increased social and industrial unrest will probably become unusually bleak and unwelcoming in the months ahead. The impact on GDP growth and on the possibility of ratings downgrades are both important considerations.

 

X Rated

Both Fitch and Standard & Poor made references on Friday (13/06/2014) to increased political risk when they changed their views on the South African government’s willingness and ability to pay the sovereign debt.

Fitch revised the outlook for South Africa to negative from stable and affirmed the country’s long-term foreign and local currency issuer default ratings at BBB and BBB+ respectively. S&P downgraded both the country’s local and foreign currency ratings by one notch from A- to BBB+ and BBB to BBB-  respectively, but moved its outlook negative to stable. None of this is a catastrophe  but of interest to us here is the central role of ‘politics’ in the given reasons for both Fitch’s and S&P’s changes.

Fitch says it most baldly in the press release announcing the change in outlook (my emphasis added):

“Following its election victory in May with 62% of the vote, the African National Congress government faces a challenging task to raise the country’s growth rate and improve social conditions, which has been made more difficult by the weaker growth performance and deteriorating trends in governance and corruption. This will require an acceleration of structural reforms, such as those set out in the comprehensive National Development Plan (NDP). In Fitch’s view, the track record of some key ministerial appointments and shortcomings in administrative capacity mean this is subject to downside risks.”

Fitch gives amongst the key drivers of its more negative outlook: “Increased strike activity, high wage demands and electricity constraints represent negative supply side shock.”

Standard and Poor’s downgrade was similarly motivated but adds some additional concerns:

“While we think that President Jacob Zuma’s newly elected administration will continue the policies of his first administration, which controlled fiscal expenditure and fostered broadly stable prices, we do not believe it will manage to undertake major labor or other economic reforms that will significantly boost GDP growth”.

My initial take on the new Cabinet is supportive of these motivations.

In addition both agencies made extensive reference to the negative industrial relations environment – and the negative impacts on GDP growth and government revenues. There is a significant political dimension driving industrial unrest – as I have argued above.

So what?

The validity of the actual ratings and ratings outlook of these agencies is much disputed[1] but the issues they use to motivate their views are interesting because they (the agencies) are cautious; clinging to a sort of ‘average view’ of investors. So if political criticism makes its way into the text (as is the case in both these instances) we are obliged to consider that these may represent, or may come to represent, a general view in markets.

South Africa has a small open economy and liquid financial markets and the difference that policy makers can make to economic outcomes is limited. But even within those limitations too many political choices (certain cabinet appointments, corruption controls, delivery performance and the honest brokering of labour contestation) are either not helping or are actively negative.

[1]No-one could have failed to notice the excoriating criticism of the credit rating agencies (CRAs) after their generalised failure to accurately assess the risks associated with the collateralised debt obligations allegedly because they were mostly issued by the CRAs biggest paying clients! However, it is the opposite with sovereigns: “It has also been suggested that the credit agencies are conflicted in assigning sovereign credit ratings since they have a political incentive to show they do not need stricter regulation by being overly critical in their assessment of governments they regulate.” http://en.wikipedia.org/wiki/Credit_rating_agency (accessed 13h56 16/06/2014.

 

The National Directorate of Public Prosecutions

I  dealt with this issue last week, but it is making bigger and more anxiety provoking headlines than ever.

So what

The NDPP was drawn into the fight between Mbeki and Zuma and since that time has limped along to the rhythm of one or other faction aligned to competing interests within the ANC seizing or losing power in the institution. This is not a situation in which one could safely choose one set of ‘good guys’ and back them against another set of ‘bad guys’. The situation is complex but relates primarily to the on-going struggle to either ensure that certain senior political leaders are brought to justice or to ensure that they are not.

The NDPP is one of the most important institutions of the justice system, and without certainty and stability here it is impossible to have certainty about the operating environment for any business in the country. This is a serious problem and it appears to be getting worse under the current administration.

 

Platinum Strike

(This is a bit dated, but you might be interested in my rude remarks about the new minister.)

“Government is ready to wash its hands of the protracted wage strike by platinum mineworkers in Rustenburg” according to the Sunday Independent 08/06/2014. Mines minister Ngoako Ramatlhodi threatened to pull out his inter-ministerial task team if a settlement was not reached at the last scheduled government facilitated meeting, which is due to take place today.

In addition, a formal ANC statement delivered by Gwede Mantashe at a press conference in Luthuli House in Johannesburg last night after the ANC weekend lekgotla[1] characterised the strike in a way that seemed to destroy the remote possibility that Ramatlhodi could have made a difference anyway:

“The articulation of AMCU position by white foreign nationals, signalling interest of the foreign forces in the distabilisation (sic) of our economy.

The direct participation of EFF in the negotiations, and thus collaboration with the foreign forces.

These two factors led the lekgotla into cautioning the Ministry of Mineral Resources in handling the facilitation with care. There were questions about the role of the state in workplace disputes where there are clear rules guiding it.”

This statement is interesting precisely because it borders on the bizarre

So what

The ANC statement indicates shows just why the new ANC minister cannot be an honest or effective broker in the negotiation – and it is therefore unsurprising that he is preparing to withdraw his team. The ANC is compelled to believe that this strike is only not ‘negotiable’ in the normal manner because the real issues driving it are political  and not about wages at all. The ANC might be correct about the strike being ‘political’ but the party itself is culpable of having politicised the strike by attempting to defend its Num ally against the vigorously growing Amcu, by alienating workers by characterising their union as ‘vigilantes’ and by the ‘Marikana massacre itself.’ s – There was never any real possibility of this government mediating between the parties or influencing the outcome.

 

Concerns about property rights

The South African Institute of Race Relations and AfriBusiness (AfriSake) have recently released warnings about property rights in South Africa. A proper assessment of these warning would require specialist legal opinions, but our own assumptions have long been that the South African Constitution provides adequate protections for private property (see here) and the ANC government is unlikely to risk fiddling with these principles.

However it seems to be a basic due diligence requirement to keep an eye on the risk – perhaps more so since Jacob Zuma spelled out at his Cabinet announcement (reiterating many recent ANC and SACP statements) that we are entering a “more radical” phase of economic transformation.

With this is mind, we reproduce the basic summary of legal concerns AfriBusiness and the South African Institute of Race Relations have raised in their research (note that below is a direct quote from the AfriBusiness statement linked above):

  1. The National Development Plan has as its aim the transfer of 20% of the agricultural land in a district to black recipients, at only 50% of the value as determined by the state (in terms of the Property Valuation Bill).
  2. The verdict of the Constitutional Court in April 2013 in the case of AgriSA v the Minister of Minerals and Energy distinguishes between “deprivation” and “expropriation”. After the verdict the state is able to dispossess and redistribute property, as long as the state does not assume ownership of the property and act (sic) only as custodian.
  3. The Green Paper on Land Reform aims a radical redesign of property rights, with inter alia a type of freehold on land which will drastically limit the rights of owners. Within this context a Land Management Commission is proposed, which will have discretionary powers regarding disputes over title deeds.
  4. The policy proposal by the Minister of Land Reform, Gugile Nkwinti, for “Strengthening the rights of workers working the land” aims to transfer 50% of the land to the workers, commensurate with their term of service. No compensation will be paid to the owner.
  5. The Expropriation Bill poses that expropriation may be used for the public interest and public goal. The Bill is not only applicable to land but will cover all types of property. Public interest and public goal are determined in an ad hoc manner and both have restitution as aim.
  6. The Promotion and Protection of Investment Bill allows state intervention in investment processes. The Bill explicitly provides for expropriation at less than market value. All in the name of so-called restitution. Any property used for commercial purposes is targeted by the Bill.
  7. The Infrastructure Development Bill aims to eliminate so-called inequalities in infrastructure. The Presidential Infrastructure Coordinating Commission is granted the authority to expropriate in the public interest and for the public goal.
  8. The Spatial Planning and Management of Land Use Act aims at centralized planning of land ownership. It proposed so-called spatial justice by integrating low and high cost housing in residential developments.
  9. The Extension of the Security of Tenure Amendment Bill expands the rights of occupants and their dependents. Evictions are strictly controlled and the Amendment Bill means a significant loss in control over property.
  10. The Restitution of Land Rights Amendment Bill creates further political and economic uncertainty regarding the future of property rights.
  11. The Rental Housing Amendment Bill proposes stricter regulation of the rental property market. Rental Tribunals will be established to hear disputes and will be able to determine increases in rent.
  12. The National Water Amendment Bill and Policy Review prohibits the trading of water rights and proposes a use-it-or-lose-it principle for water rights. Equality (including racial transformation) becomes the criterium (sic) for the allocation and re-allocation of water rights.

Consume that with the requisite amount of salt but keep an eye on the detail.

 

[1]Sesotho loan word meaning court or community council meeting; used in the South African context a “lekgotla is a meeting called by government, Cabinet or the ANC to discuss strategy planning”. Wikipedia accessed 04h30 09/06/2014.

 

I am up to my neck in it, trying to tease out the main implications and trends of the election – in a way that might be useful to investors in our financial markets.

As part of the process I read everything I can find that has been written about the elections. I have just read the Sunday Independent to see what the journalists and columnists had to say and I came across something that I felt I needed to share; and social media granted me immediate gratification.

Jeremy Cronin, deputy general secretary of the SACP, wrote a column assessing the election under the title “No room for complacency for ANC and alliance partners”.

Cronin is always good value and worth reading and today he was especially feisty.

Opposition emerging to the left of the ANC/SACP/Cosatu alliance is an important matter for anyone who has an interest in how South African politics will progress. And Cronin deals with this question as part of his election assessment.

Cronin’s tone reminds me of the sectarian and slightly Stalinist tendencies that I was very much part of throughout the 80’s … and I felt almost nostalgic when he characterised the threats from the left thusly:

Will a serious left challenge now come from outside the ANC alliance? It’s possible, but only if we in the ANC alliance are clumsy or arrogant. We need to distinguish the proto-fascist demagogy of Malema from the hybrid neo-Stalinist business unionism of Irvin Jim, from the ethnically-tinged vigilantism of the Amcu leadership, from the preachy capitalist philanthropy of Jay Naidoo and Mamphela Ramphele.

I wanted to follow that with a few exclamation marks. It’s funny and it has a certain poetic rolling cadence that left me smiling … for a few seconds.

Until I realised that the trick Cronin has pulled here is he has created a sort of ideological bestiary and placed within it every conceivable left critic of the ANC and the SACP.

If you are a left critic of the ANC, SACP, Cosatu alliance then you are either a  proto-fascist demagogue or a hybrid neo-Stalinist business unionist, or you might be an ethnically-tinged vigilante or even a preachy capitalist philanthropist. You certainly couldn’t be a principled socialist of some kind, because then you would be in the ANC/SACP /Cosatu. Dah!

“Clumsy or arrogant”?

The article is worth reading because it gives a mostly subtle and thoughtful assessment of the election from an insiders view, but is, as you can see from the excerpt, occasionally entertainingly clumsy and arrogant.

After fiddling around a bit, I found it at IOL.com. Read it, it is here.

(Note: please read Jonny Steinberg’s comments on my miscasting of the implications of the recent HSRC’s South African National HIV Prevalence, Incidence and Behaviour Survey, 2012. Jonny argues that I have taken “a story of resounding success and twisted it into a tale of alarm”. Jonny Steinberg is correct on all counts and I hope to redress my error  at some time in the near future. Catch his brief criticism and my initial mea culpa in the comments section here.)

 Before it gets too out of date, herewith my last week’s (Monday 14 April) news update … it’s worth it just for Ronnie Kasrils’s comments about Zuma.

  • Employment equity in South Africa is glacially slow and will continue to help drive regulatory and political uncertainty
  • A spoilt ballot campaign and some unusually forthright statements from ANC leaders about corruption in their party and government
  • Ramapohosa brokers a truce, Vavi’s reinstatement holds and Cosatu totters on

Employment equity – dead slow ahead

Last week the Commission for Employment Equity released its 14th Annual report (available here) indicating glacial progress in making workplaces more representative of the demographic profile of the South African Economically Active Population (EAP).

Below is an indicator of race and gender breakdown of the working population as a whole:

Politics1

Original Source: Statistics South Africa, (QLFS 3 2013)

In the report’s ‘Top Management’ category, the trend between 2003 and 2013 is strikingly poor:

Employment equity reports 2003 - 2013

Employment equity reports 2003 – 2013

(The report uses categories: Top Management, Senior Management, Professionally Qualified and Skilled. The Department of Labour begun collecting data on ‘foreign natlonals’ as a distinct fraction of the EAP from only 2006.)

The performance is best in the government sector, but this only slightly improves the overall picture:

Employment equity reports 2013

Employment equity reports 2013

There have been some improvements at the lower end (Skilled Technical):

Employment equity report 2003 – 2013

Employment equity report 2003 – 2013

However, not unsurprisingly, the Employment Equity Commission believes this is not good enough in itself, nor is it adequate compensation for failures elsewhere.

(The Commission is a statutory body that reports to the Department of Labour and operates within the aegis of Employment Equity Act, 1998 – amended by Employment Equity Amendment Act of 2013.)

So what?

Poor performance by the private sector in reaching employment equity targets is a constant irritant to government and to the ‘designated groups’ (Africans, Coloureds, Indians, women and people with disabilities). Employers might argue that the administrative burden of the act is counter-productive and that the top employment categories require skills that are relatively scarce amongst the ‘designated groups’. However, the political consequence of the failure gradually adds to the risks in the operating environment.

Employment equity legislation in South Africa has, since 1998, tended not to concentrate on sanctions to enforce compliance. However it is apparent that government is gradually increasing the pressure. The Employment Equity Amendment Act of 2013 increases fines for non-compliance – both with regard to reporting requirements and with regard to targets.

The African National Congress is increasingly challenged by radical populists (e.g., the EFF) and a militant left-wing (e.g., the incipient Numsa breakaway from Cosatu) which together argue that black South Africans have failed to adequately benefit from ‘liberation’. Part of the answer to this challenge from the ruling party is likely to be a rapid escalation of pressure around employment equity and Broad-Based Black Economic Empowerment.

There will be an increasing burden on all companies operating in the country and increased government hostility to defaulters. The ANC will not be tempted towards the nationalisation policy platforms of the emerging populist and leftist groups, but must find an answer that satisfies its constituency in the rapidly growing black middle class.

Spoiled ballot campaign

Ronnie Kasrils, a former intelligence minister, and long-time leader of the African National Congress, has embarked on a campaign with some other disaffected ANC members to call for a spoiled ballot in the May 7 election.

So what?

Nothing much, except that this is probably the tip of an iceberg of discontent in the African National Congress. Perhaps what is significant is that despite the emergence of the EFF and Numsa breakaways, and the apparent success of the DA campaign, many dissidents in the ANC still find themselves unable to follow a party other than the ANC.

Kasrils’s main problem with the ANC is what he perceives as a spread of serious corruption and abuse of public funds at a senior level in government and the party.

Obviously the strategic or tactical value of a spoiled ballot will be a matter of deep controversy.

(My own view is that Kasrils and his colleagues are well within their rights to propagate this option – it is, however, not an option I will be pursuing.)

Most interesting

What is most interesting is to read Kasrils’s comments about Jacob Zuma and other ANC leaders in the interview with published in the City Press yesterday. I quote him here in-depth, because of how unusually explicit his mode of expression is and because I believe this view is representative of a significant group of ANC insiders, deeply unhappy with their party, but not yet ready to leave it:

People will tell you and it has been stated from people in exile and I can confirm – (that) he (Zuma) was a pretty simple guy. He wasn’t a person who was looking for fancy clothes and flash cars. He was pretty down to earth … I did see a certain ambition there by acquiring so many feminine relationships and wives and then children … (But Zuma has) changed very dramatically. Here is a man who comes back to South Africa and you can imagine how worried he must have been, how he was going to take care of this kind of menagerie … And then there are the people, capitalists, with money in their back pockets, who were looking at the new political power and pounced like vultures … There were some who were only too happy in the embrace because they did not have to worry about the wolf at the door, how they would have to pay the bills, how they were going to educate their kids, where they find a way to house their women … from then on, what happens to your fine principles of serving the people first and thinking of the key things that are necessary when you are now in league, and in bed, with people who become your sponsors? From that point of view, you change.

My view is that the people who now run the ANC, not every one of them, but there is an elite that has become incredibly corrupt that managed to take over – take power from Mbeki and kick him out and it’s just been downhill ever since with this system just rolling on like a snowball becoming larger and larger.

Ronnie Kasrils, City Press 13/04/2014

(Again, my personal views on whether Mbeki, Zuma or none-of-the-above are the root of all evil might differ somewhat from Kasrils’s but I think his plain speaking here is useful anyway.)

Ramapohosa brokers a truce, Vavi’s reinstatement holds and Cosatu totters briefly on

Cosatu’s Central Executive Committee meeting on Tuesday last week was widely expected to be the close-to-final act in the trade union federation’s unravelling. However an ANC delegation led by Cyril Ramaphosa persuaded the Zuma loyalists as well the Zwelinzima Vavi-led faction to postpone a final showdown till after the elections. (Such a ‘final showdown’ is ostensibly about the suitability and prudence of the Vavi, but is actually about loyalty to Jacob Zuma to the ANC’s policy positions.)

So what

Again, it is interesting to note the interaction between fragmentation and momentum in the ruling alliance. The ideas and history (mythological or otherwise) that bind the members and supporters to the ANC make the split that is happening bizarrely protracted. However, there is no question that several splits in the ruling alliance are, in fact, in process. It is tactically important for Vavi and Numsa to hold on within Cosatu for as long as possible. Cosatu remains terrain which neither contestant feels ready to abandon to the other.

 

Herewith some of my latest news updates.

(Just as an aside before I start: I couldn’t help but smile at Richard Poplak’s seriously over-the-top take on the Nkandla report in Daily Maverick this morning: “But Madonsela has certainly nailed Zuma to history’s grimiest post—he will be forever remembered as a thief, a fool, and a Zulu man who was incapable of managing the affairs of his kraal … Jacob Zuma will not escape his fate as one of this country’s more reprehensible figures. And Nkandla will be the crown he wears as he slithers into historical ignominy” … anyone who reads this column probably realises that I am not overly enamoured of Jacob Zuma as our president, but Richard seems to think he is a sort of Vlad the Impaler in leopard skins, which I think is a metaphor too far.

… and while I am making asides did I just hear Gwede Mantashe throw Riah Phiyega under a bus for the fire pool/swimming pool confusion in the Presidential mansion? So she is going to take the fall for Nkandla and Marikana? Shem, as they say on Twitter.)

… anyway:

  • South Africa’s Public Protector ruled that President Jacob Zuma improperly used state funds to upgrade his Nkandla homestead and “failed to act in protection of state resources”.
  • The Public Protector said Mr Zuma’s behaviour amounted to misconduct, but that she couldn’t conclude that the president had misled parliament. He will have to repay some of the funds.
  • The report is negative for the ANC and will cost it votes in the May general election.
  •  Trevor Manuel’s exit from parliament has not been quite as smooth and painless as it first appeared. He will end up as a public critic of the ANC, but not, as yet, in an opposition party.
  • A thickening seam of discontent and activism opposed to growing government intervention in the economy is beginning to reveal itself in the South African financial press.
Zuma deemed guilty of misconduct, but not of misleading parliament

After a 28-month investigation, South African Public Protector Thuli Madonsela announced that President Jacob Zuma and his family had improperly benefited from upgrades to his private Nkandla home worth around ZAR 246mn. “Expenditure on Nkandla was excessive,” Ms Madonsela said and involved the “misappropriation of funds”.

Ms Madonsela said President Zuma knew of the scale of the Nkandla project and “failed to act in protection of state resources”, allowing extensive upgrades beyond security. She explicitly said Mr Zuma’s failure to protect the state’s interests during this saga amounted to “misconduct”, that his failure to protect state resources was a “violation” (of what we are not exactly sure yet) and that his conduct had been inconsistent with the constitution. However, she said that he did not wilfully mislead parliament on the matter. That would have been a criminal offence.

Mr Zuma will now have to respond to these findings to parliament within 14 days and repay some of the misappropriated funds. It doesn’t look like anyone will go to prison or be forced to resign and the actual practicalities of the crisis are not desperately serious for the ANC and President Zuma (or rather not in a new way … they were already quite serious in terms of general respect for the integrity of the President.)

So what?

Ms Madonsela recently described the function of the Public Protector as being to “curb excesses in the exercise of state power and control over state resources”. However, there is some confusion as to the status of her rulings and consequent recommendations to the president for remedial action.

Getting President Zuma to take remedial action against himself for the misuse of public money would seem like something of a non-starter. Already, ex-police chief Bheki Cele, former minister Dina Pule and Agriculture Minister Tina Joemat-Pettersson – all of whom had adverse findings against them by Ms Madonsela – have found their way onto the ANC’s election list.

Still, this is very much a negative for the African National Congress (ANC) – even more so than the general public expected, though probably not more than the ANC expected. The party knew the report was going to be damaging and has been stiffening its spine for some time, weighing up the costs of attacking Ms Madonsela – an illegal act – or taking it on the chin.

The party will lose votes as a result of this, but we think it was losing votes anyway because of Mr Zuma’s general probity (please see our most recent rough guide overleaf for an idea of how we think support is shaping up). Mr Zuma’s position in the ANC will be weakened (but remember he is strong in the sense that he controls the majority of powerful ANC structures).

Still, the brand value of the ANC is being damaged and this is likely to trigger a self-correcting mechanism. While the changes are still 40-60 against, we think a rescue mission by the party’s ‘old guard’ is now more likely  and that it might successfully mange to shift Mr Zuma aside by around 2016 (a sufficiently strong group just needs to emerge that can cut him a deal with proper guarantees). Obviously the worse the ANC does at the polls, the more the under performance is ascribed to the character and probity of the president … the more likely it is that such a group emerges and coheres to a degree that it is able to offer any enforceable guarantees.

votelates

Trevor Manuel: Concealed weapons

Last week, warm tributes were paid to former Finance Minister Trevor Manuel as he took his leave of parliament and it appeared that his sometimes fractious relationship with his party and cabinet colleagues would, for once, be smoothed over. However, in a high-profile Sunday Times interview, he proceeded to warn that “attacks on public bodies, such as the Public Protector and the courts, would weaken these institutions — and that democracy would then battle to survive”. ANC Secretary General Gwede Mathanshe responded sharply to Mr Manuel, saying: “We do not attack the public Protector, but criticise her where we feel we should … Trevor refuses to participate in the activities of the ANC NEC, and if you refuse such, you want to be a free agent.”

So what?

Trevor Manuel has been something of a ‘market darling’ and (according to himself and in his own words) the rand “fell out of bed” when the news broke that he had resigned after Thabo Mbeki had been recalled on 22 September 2008 (The Zuma Years, Richard Calland, August 2013, Zebra Press … read it, it really is quite good!!). There is no love lost between the country’s longest-serving finance minister and architect of the National Development Plan (NDP) and the incumbent leadership of his party.

In a coded farewell speech in parliament, he quoted a seemingly benign passage from a work by historian Tony Judt: “For thirty years, we have made a virtue out of the pursuit of material self-interest: indeed this very pursuit now constitutes whatever remains of our sense of collective purpose.” There were knowing nods all around, but Mr Manuel usefully forgot to mention the title of the book he was quoting, Ill Fares the Land. We expect Mr Manuel to emerge as a critic of the ANC in its present form, although he is unlikely to join any of the existing opposition parties.

Mr Manuel was also interviewed by the Business Times, in which he criticised the short-sighted way in which some trade unions were approaching negotiations, saying it has sparked a “race to the bottom”. He accused National Union of Metalworkers of South Africa (NUMSA) General Secretary Irvin Jim, who has constantly attacked the NDP, of “speaking a lot of rubbish”.

Mining companies told to “get off their knees” and stop sucking up to government

Tension in the mining sector under the twin pressures of serious labour instability and increasing government regulatory pressure is causing unusual fractures and pressures, according to Business Day and the Sunday Times, provoking something of a growing campaign of activism in some sectors of the ‘private-sector intelligentsia’, for want of a better term. Here are some of the highlights and lowlights of the tension (it gets complicated, but stick with it):

  • Eight weeks ago, a respected Chamber of Mines negotiator in the platinum strike (now in its eighth week), Elize Strydom, said Commission for Conciliation, Mediation and Arbitration (CCMA) mediators in negotiations between employers and the Association of Mineworkers and Construction Union (AMCU) had ”showed an absolute lack of economic acumen” by suggesting companies meet the AMCU’s wage demands “half way”. The mediators had suggested they accept a rise of 25-30% for entry-level miners with basic pay of ZAR 5,700 (the AMCU had demanded ZAR 12,500 a month, a rise of 120%, the companies had offered 8.5%).
  • Ms Strydom (and the Chamber) were immediately attacked by the CCMA and accused of ‘‘white-anting” the mediation process. The CCMA insisted the Chamber either apologise or endorse Ms Strydom’s comments. If the Chamber did endorse Ms Strydom, in the words of the CCMA, it would indicate that the Chamber clearly had “no faith in the institution that is made available by the state and which is accepted by all social partners in other economic sectors”.
  • Business Day editor Peter Bruce says in his Thick End of the Wedge column this week: “But the mines did nothing. Until, that is, they flung themselves into the arms of the state and savaged Strydom for what she had said … A depressing scene.” Mr Bruce’s comments, bitterly critical of the Chamber and the mining firms, underpin Rob Rose’s column in the Sunday Times, in which he says: “So, when some maverick breaks the conspiracy of silence, it’s no surprise that there’s a hullabaloo of outrage. Spin doctors reel blindly … the gutless Chamber of Mines, and the even more enfeebled legion of platinum CEOs [fail to take a stand]. Now, this is why this issue is so important: the platinum industry is on a precipice. Workers have been on strike since January 23 and the mines have lost billions in revenue and even more in terms of international investment goodwill.”
  • Also in the Sunday Times, a report on the Mineral and Petroleum Resources Development Act (MPRDA) amendment bill says “the ANC rushed through controversial changes … that opposition parties feel will create further uncertainty in the mining sector.” The article notes that the new regulations will give government the right to a free stake of up to 20% in any new oil and gas projects, with a right to acquire the rest at an “agreed price”. The story quotes the Democratic Alliance’s James Lorimer as saying that only “cronies, comrades and cousins” would benefit from the bill, which he said would “severely damage” the industry. Mineral Resources Minister Susan Shabangu said critics were resisting change and transformation, “representing white minority interests” and “wanting to sell the country’s natural resources to the highest foreign bidder”.

So what?

The Chamber of Mines said that “while further work is required on developing the regulations that will help give effect to the MPRDA Amendment Act, the chamber is firmly of the view that through this problem solving process, greater regulatory certainty is emerging for the mining sector.” Obviously, for the Chamber and the companies engaged in negotiating the details of legislation and regulation with government, or engaged in the constitutionally created structures of the labour market, there is no upside in attacking the government or the institutional framework. Equally obviously, key sections of the financial press disagree and are essentially sounding a call to arms and arguing that the growing institutional, regulatory and legislative hostility to the private sector is becoming a crisis.

I have been agonising over whether to keep this website going –  or to consign it to the wastelands of the interwebs there to wander mournfully, accumulating lurid advertisements for secret ways of getting rid of belly fat and invitations from young, beautiful and lonely people, in your area, waiting by their phones for a call from you.

After weighing matters too arcane to bore you with here I decided to gird my sagging loins (that’s long and loose clothing, not that other thing you were thinking – Ed) and once more into the breach … and all of that.

So … I have written various 2014 previews. One you may have seen was for the Mail & Guardian and titled ‘What I will be telling investors in 2014’. I would have liked to give it a better edit – and I think I don’t adequately deal with the issue of the corroding effects of the original arms scandal – but you may be interested in reading it anyway. Catch it here.

I also published in early January, as part of BNP Paribas Cadiz Securities’ 2014 Outlook, the overview below. (Thanks, as always, to my main contract holder for generously allowing me to republish a few weeks later here.)

(Remember, no-one has been to the future and returned with any useful information as far as I am aware … so treat the following with a healthy degree of scepticism – Ed)

Political outlook 2014: No safe haven in the storm

Introduction

At least part of our sanguine view of South African politics has rested on the belief that the ANC had several more decades of 60%-plus support at the polls. We were of the view that while this could lead to corruption, complaisance and cronyism, it would also allow the party to keep the country, government and constitution steady while SA undertook a wrenching transformation from its apartheid past to whatever the future held.

However, several important fissures have appeared in the ANC’s support base that suggest this assumption of indefinite ruling party dominance may not be correct and, therefore, that the essentially benign shepherding of that transition is under strain.

Amcu: bridgehead in previously safe African working-class constituency

Firstly, the success of the Amcu (Association of Mineworkers and Construction Union) in the mining (particularly platinum) sector has led to the virtual collapse of a key ANC labour ally, the National Union of Mineworkers (Num). Amcu is important for a number of reasons, but in this section, the issue is that it has created a bridgehead in the ANC’s core constituency that has every possibility of linking up with new left-wing (or in other ways radical) political formations that will challenge the ANC politically in the next few years.

Julius Malema and the formation of the EFF

Secondly, the expulsion of Julius Malema from the ANC and his formation of the Economic Freedom Fighters (EFF) party damages the ANC in two important ways. It draws disaffected young black South Africans, who are experiencing unemployment rates of about 60%, out of the ANC. And it captures ideological terrain that the ANC was previously able to control and finesse, namely, the question of the nationalisation of mines and land.

A strong and confident ANC has, since 1994, essentially been able to tell its electoral constituency that patience is required for transformation and that constituency has, with mutterings, accepted the ANC’s moral authority on the matter. However, that consensus is collapsing. Mr Malema’s ‘red berets’ are attacking the president at every opportunity and arguing that the ANC has sold out the birth-right of Africans and has been bought off by the opportunity to loot the state and by juicy empowerment deals. The message has a natural resonance among poor urban and unemployed youth – but up until Mr Malema’s expulsion, the ANC was able to articulate both sides of this debate within itself.

NUMSA split: The unravelling of the ruling alliance

Thirdly, it appears that the long-standing split within Cosatu (Congress of South African Trade Unions) over its relationship with the ANC has been forced to a head by the suspension of Cosatu Secretary General Zwelinzima Vavi. A ‘left’ faction had, with a degree of discomfort, existed within Cosatu since the formation of the union federation in 1985. This faction has its roots in non-ANC liberation traditions and was concentrated mostly in Cosatu manufacturing unions, especially Numsa. The moves to get rid of Mr Vavi and close down Numsa’s criticism of the president and of ANC economic policy probably emanate from the hegemonic faction within the ANC itself, in other words, Jacob Zuma and his closest allies. Not unsurprisingly, Numsa has now formally called on Cosatu to leave the alliance with the ANC, has said it will not be supporting the ANC in the election in 2014 and has called for the immediate resignation of President Zuma.

Over time, this will impact ANC electoral support, though not necessarily profoundly in 2014. How Numsa members and their dependants vote in next year’s election was probably a ‘done deal’ prior to Numsa’s defection decision at its special congress in late December 2013. Numsa may link up with ‘left’ or ‘workers’ parties (and may actually form a ‘socialist party’ that could challenge the ANC for support in the ANC’s key black working-class constituency), but this will likely impact more profoundly on electoral outcomes in the 2019 election.

ANC swelling in rural conservative areas and shrinking amongst urban sophisticates

Fourthly, the patronage and diversion of state resources as depicted by the Nkandla saga, combined with the vigorous pursuit of the rural vote in Kwazulu-Natal, has meant that the ANC is gradually appealing less to urban Africans (although this is by no means a majority trend) and more to rural and traditional poor black South Africans. This appears to mean that parties like the Democratic Alliance, AgangSA and the EFF are picking up a degree of unexpected traction in such constituencies.

Labour environment

After a catastrophic 2012 as far as the labour environment was concerned – especially the repeated waves of illegal and violent strikes in the platinum sector – 2013 saw stabilisation, albeit at still unacceptably high levels of unrest and strike activity.

In the platinum sector, the Amcu is ‘bedding down’, but likely to continue contesting with the Num in the gold sector. The next public-sector wage round is scheduled for 2015, so we have a breather before that storm hits (and we expected it to be a big storm when it does).

The formalisation of the Numsa split from the alliance probably means that this union will begin to actively contest with the Cosatu unions and in several other sectors of the economy. We are looking for the formation of new and smaller unions in sectors where the incumbent unions have grown too cumbersome or complacent to deal with the demands of specialist groups of workers. Unionism is a growth industry in South Africa, with annuity income for those who set them up. As Cosatu shudders, there are many opportunities emerging.

Labour unrest, poor labour productivity and inflexible labour markets (price, size, skills) are among the biggest negative domestic drivers of economic growth and we expect the figures to show a slight improvement in 2013 over 2012 and a significant deterioration in 2014 and 2015 – which may have significant negative implications along the lines of the BMW ‘disinvestment’ decision.

National Development Plan: The political rise of the Treasury and fall of Cosatu

The ruling party and the ruling alliance’s approach to the National Development Plan (NDP) has appeared highly conflicted since the adoption of the plan at the 2012 Mangaung national conference of the ANC.

While our view is that the NDP is little more than a shopping list (and not the miracle cure some ratings and multilateral agencies hope it is) in the areas of large infrastructure roll-out and a disciplining/training/focusing of the public service, we may be in for upside surprises. The important political leaders to watch here are ministers Lindiwe Sisulu (public service and administration) and Malusi Gigaba (state-owned enterprises).

In several different ways, the Zuma leadership of the ANC has, over the last few months, appeared to back with a degree of fortitude previously orphaned policy thrusts from the NDP that are generally ‘financial-market positive’.

The first of these is the foregrounding of the NDP itself – both at Mangaung, but also in the medium-term budget statement in October 2013. Minister of Finance Pravin Gordhan stated that that this budget statement and all future budget statements would be ‘the accounts’ of the National Development Plan, putting the plan at the centre of government policy.

The trade-union movement – especially the now defecting faction rooted in Numsa, but actually common to the whole federation – was outraged by this, as it sees the NDP as a capitulation by the ANC to (variously) ‘white monopoly capital’, ‘neoliberalism’ or ‘business interests’.

In conjunction with this foregrounding of the NDP, Jacob Zuma has recently signed into law two major policy thrusts that are bitterly opposed by the ANC’s labour ally.

The first of these is the Transport Laws and Related Matters Amendment Act, which allows for the implementation of ‘e-tolling’ on Gauteng highways and has been bitterly opposed by COSATU and other community groups in that province. Bond-market investors and ratings agencies have repeatedly said it is crucial that the ANC implement ‘e-tolling’ if the government is to maintain credibility on the global capital markets. It is significant that the Zuma administration has grasped this nettle, despite facing (by all accounts) a significant electoral challenge in Gauteng in 2014.

The second surprising nettle-grasping activity has been the promulgation of the employment tax incentive bill in the face of united Coatu fury. This is the ‘youth wage subsidy’ of yore, and the ANC under Jacob Zuma has obviously decided to accept thunderous criticism from its ally in the hope that longer-term employment growth benefits will weigh in its favour at the polls, in both 2014 and 2019.

Together, these initiatives are surprising positives and have probably come about because the Treasury has managed to persuade Mr Zuma and his cabinet that failure to take a stand on these various measures could lead to downgrades by the ratings agencies.

Policy and regulatory risks predominate

Thus, our view is that the Presidency, bereft of any real policy direction itself (because it is busy purely with rent seeking and hanging onto power) has been persuaded by Pravin Gordhan that the country is in trouble, that the deficit is looking genuinely threatening, that downgrades are a real possibility and that if this goes south, President Zuma might go with it. The National Treasury briefly has the reins, and this gives us a moment of respite.

However, hostile mining regulations, a fiddly and interventionist Department of Trade and Industry, an overly ambitious Department of Economic Development, a hostile Department of Labour, liquor legislation, more and tighter empowerment legislation and deepening regulations on all fronts, but especially in the credit markets, mean that, on the whole, government in 2014 will be an unreliable financial-market ally.

State finances: The deeper risks are fiscal

The country’s increasing dependence for stability on social grants and other forms of social spending is a real and deepening political risk. While the social grant system has lifted millions of South Africans out of poverty and the public sector has employed hundreds of thousands of others, it has also created a culture of dependency and paternalism and is an unsustainable expense that the government will at some stage be forced to reduce. This is definitely going to be accompanied by severe social turmoil, although as mentioned previously, the real ‘fiscal cliff’ is still some way ahead of the forecast period dealt with in this report.

Election 2014

The election results will be important, but in ways that are difficult to predict.

If the ANC’s share of the national vote plummets to the low 50% range, will this force the party into a process of renewal, or will it be panicked into populist measures? It probably depends on which parties take up the slack.

If the ANC gets 65% of the vote, will it be ‘Nkandla business’ as usual – an unhealthy rural populism à la the Traditional Courts Bill, combined with activities like the significant public resources (ZAR208m) spent on building the president’s Nkandla compound and accusations of corruption?
If Mr Malema’s Economic Freedom Fighters get 10% of the vote, will that mean ANC policymaking is paralysed until 2019 as the party attempts to appease the angry and disenfranchised youth? Will it mean legislation relating to mining and land ownership swerves into uncertain and dangerous territory?

If the Democratic Alliance wins 27% of the national vote (which we think unlikely) and if it is able to form a provincial government in alliance with other parties in Gauteng (which we also think unlikely), how might that cause the ANC to behave? Better? To continue to allow the Treasury to set the tone of probity and effectiveness, concentrate on fixing education and focus on economic growth as the only guarantor of electoral success in 2019? Will this kind of threat cause the ruling party to attempt to make opposition strongholds ungovernable? We suspect different impulses are already at war within the ANC and investors should watch how that battle plays out.

Below, purely as a way of presenting our latest ‘guesstimates’, are our ‘most likely’ electoral outcomes for 2014 (these may change as campaigning performance changes before the election and as various crises emerge, eg, the booing of Jacob Zuma at the FNB Stadium commemoration for Nelson Mandela in December 2013).

votingresultsinpreview

BRICs and the uncertain rise of the SACP

A relatively new and difficult-to-unpick issue is the growing confidence the South African Communist Party (SACP) has in shaping the national agenda. The inappropriate focus on BRICS speakers at the FNB Mandela memorial (over Africans and European Union speakers, with Obama the inevitable exception) is probably evidence of the Communists having very significant influence.

We think this could have fed through into the announced Zuma/Putin ZAR 100bn nuclear deal.

This is a matter of growing tension within the ANC, with a previously dominant (under Mandela and Mbeki) group of ‘progressive Africanists’ having lost power to the Communists, who are now in an alliance with a patronage-seeking, provincial elite with strong links to state-security apparatuses and rent-seeking business interests (‘the Nkandla crew’.)

This struggle could play into succession issues and might be a driver of attempts to impeach Jacob Zuma (a strategy unlikely to succeed, in our view) over the next few years.

Succession and a ‘rescue mission’ in the ANC?

While this matter probably lies beyond the 2014 scope of this report, within the ANC, the possibility of a rescue mission is taking shape (driven, in part, by growing commentary about how many public resources are ending up on and around Jacob Zuma’s person and his tight control of security agencies). A group now on the outskirts of the party, and in very general terms representing the ‘old guard’, appears set to begin working on securing a succession process that reverses the decline (moral and in popularity) over which Jacob Zuma appears to be presiding.

This move has not yet taken shape, nor is it properly manifest, but in our view the important people to watch are previous President Thabo Mbeki, Lindiwe Sisulu, Nkosazana Dlamini Zuma, Cyril Ramaphosa and Zweli Mkhize.

I will make a decision on the caption competition soon, but meanwhile here is my latest news update and summary – the Madonsela story continues to grow and, frankly, should be encouraged to.

The Public Protector clashes with Zuma’s security chiefs

Thuli

On Friday state security agencies abandoned their urgent interdict in the North Gauteng high court attempting  to prevent the Public Protector Thuli Madonsela from a limited release of her report into the R206 million upgrade of Jacob Zuma’s Nkandla private residence.  However Nathi Mthethwa (Minister of Police), Siyabonga Cwele (Minister of State Security) and Thulas Nxesi (Minister of Public Works) have indicated that they still expect Madonsela to bow to their various ‘security concerns’ – something the feisty Public Protector is unlikely to do. (She was speaking a few minutes ago, bemoaning the fact that she ever handed the report to this cluster of … securorats? … catch a preliminary reports of that here.)

RadebeCwelebetter

Madonsela has used the security cluster intervention to ensure that a new key piece of evidence becomes public, namely that Jacob Zuma privately appointed Minenhle Makhanya Architects (who had no security clearance) to run the Nkandla project, but that the company was paid (upwards of R18 million) by the state. It will be increasingly difficult for Zuma’s security chiefs to sustain the argument that their ‘real’ concern about the report relates to whether it (the report) compromises the president’s security or, in fact, that the upgrade was essentially or mainly about the president’s security.

So what?

Jacob Zuma might be the quintessential survivor, but in the lead-up to a national election the strong indication that he and his family have personally and directly been the recipients of irregularly redirected state resources could be a serious problem for him and his party. The Sunday Times (17/11/2013) lead editorial is headed: “A suspect president and his questionable lieutenants” … the degree to which Jacob Zuma’s excesses make the ANC look bad is the degree to which he is vulnerable.

The EFF – running out of red berets just as Julius Malema goes on trial for fraud and corruption

The EFF cannot keep up with demand for its  signiature red berets, according to City Press

The EFF cannot keep up with demand for its signature red berets, according to City Press

The dilemma faced by Julius Malema’s  new Economic Freedom Fighters (EFF), is that while the new party appears to be performing well there is a real possibility that some of the leadership could be in prison before the 2014 election.  City Press, in its front page lead story  (17/11/2013) reports of the growing EFF support: “(t)hey can be seen wearing their red berets on street corners, in public places, hangout spots and even at funerals where they go to recruit new members”. The Sunday Independent, however, points out that Julius Malema will go on trial for fraud, corruption, money-laundering and racketeering at the Limpopo Magistrates Court today – and that 3000 EFF supporters were expected outside the court.(Julius’s case has since been postponed till September next next year – which means he will be firmly in the running next year.)

So what?

I have had to constantly upgrade my estimates of how the EFF might perform in the 2014 election. I previously indicated my rough forecasts and promised that from time-to-time I would update my view. Well, here is my latest guesstimate:

Elecguestimates

To do as well as I indicate here the EFF would have to pick up previous ANC defectors (from Cope and the UDM) as well as a significant number of first time youth voters. The EFF remains the part of the story about which I am least confident – although strictly none of these figures can pretend to any scientific validity.  A strong performance by the EFF (built as that party is around a rejection of Jacob Zuma and a rejection of the economic status quo) could set off a shockwave in the ruling party.

 

Cyril Ramaphosa on a ‘social compact’

Cyril Ramaphosa gave an interesting address to the Mapungubwe Institute for Strategic Reflection (dated November 17 and available as a pdf on Mistra’s website) where he usefully summarised government’s and the ANC’s position on economic development – namely that ‘a social compact’ is required.

The full address is well worth reading, but the essential point (from a financial market perspective) is the statement that:

“Significantly, perhaps most importantly, business needs to focus on building an economy that delivers sustainable returns to all stakeholders over a longer term, eschewing the chase for high profits in the next quarter.”

Earlier, he says:

“The commitment to greater capital investment demonstrated by government needs to be matched by a similar commitment from the private sector to invest in productive capacity and to contribute to employment creation.”

So what?

Ramaphosa’s ‘social compact’ is another, perhaps more sophisticated, version of mining minister Susan Shabangu’s comments during an exchange with Gold Fields CEO Nick Holland at a recent conference in Australia:

“Investors must realise they have a responsibility to the country and cannot work to a bottom line that has no heart or soul at all … They have to understand there are various socioeconomic needs of the various partners … If investment will not improve the quality of lives — and recognise that workers also need to live decent lives — it will not be able to bring stability in South Africa … We are a country that, in the past, saw investment coming in that never contributed to ensure that the future of workers would be better.”

Shabangu’s and Ramaphosa’s comments indicate an economic strategy that consists primarily of insisting that private business surrender up the investment, employment and social spending that it is, supposedly, withholding. It indicates a poverty of economic understanding in government and the ANC that is deeply unsettling.

 

Bits and Pieces

  • Next weekend the Democratic Alliance meets in a special federal council during which the party is expected to attempt to deal with tensions around support or otherwise for the Employment Equity Amendment Bill. As the DA’s black membership grows the party will come under ever greater pressure to support both employment equity and black economic empowerment more generally. It is my view that this is a baseline assumption in South African politics – and the DA either will not break through its racial ceiling or it will shift on this policy matter.
  • Winnie Mandela, in an interesting interview in the Sunday Independent (17/11/2013), claims that Nelson Mandela has lost his voice – and is only able to ‘communicate with facial gestures’. She also said “the “poorest of the poor are seething with rage and whether our government is aware of the anger of the people, I do not know.” She also said: “I can’t blame Julius for what he has done because we, the ANC, are responsible for that … we would be foolish to think he is not a player or that he is not changing the political landscape … these are very dangerous and worrying times.” Winnie Mandela’s political affiliations are a good weathervane of the degree to which the ANC is – or isn’t – fragmenting. She is likely to stay within the ANC, at least while her ex-husband lives.
  • The Business Day today (18/11/2013) reports that moves are afoot in Cosatu to suspend or expel the National Union of Metalworkers of SA (Jacob Zuma’s key critic in Cosatu and Zwelinzima Vavi’s key ally). If the Jacob Zuma aligned faction achieves the objective of getting rid of Numsa and Vavi it is likely to precipitate the formation of a competing union federation and, possibly, a new political party of the left. The moves against Numsa seem like the actions of a weak and authoritarian core and are unlikely to achieve a unified and strong ‘ruling alliance’. In fact I suspect that the opposite will be the case.

An irresistible opportunity for a caption competition arose when I saw this picture on Die Burger‘s webpage:

RadebeCwelebetter

What is intelligence minister Siyabonga  Cwele whispering in the ear of justice minister Jeff Radebe? What is Radebe thinking? I hesitate to ask.

Post your suggestions in the comments section below. The winner will receive a copy of the excellent ‘SA Politics Unspun’ by Stephen Grootes – which I will review here soon. The judge’s decisions are arbitrary and subjective … and seldom final.

That picture accompanies a story in Die Burger describing the alleged cover-up by the security cluster of public protector Thuli Madonsela’s Nkandla report – thanks to the person who pointed it out … catch the original here.

Below follows a sliver (‘slither’ as a young close relative of mine is wont to say) of my weekly politics summary and analysis from early Monday morning – I have stripped out some technical issues so what is left is little thin (although it was, frankly, a little thin anyway.)

But purely for the record:

Election fever and the registration weekend

  • Election fever takes hold – AgangSA launches with tea and cakes, EFF slaughters 8 bulls
  • Winnie Mandela still in ANC colours, but speculation as to her loyalties continues
  • Vigilante violence in Khutsong – Minister Nathi Mthethwa holds the thin blue line
  • The Democratic Alliance feels the stress of attempting to hold on to its old support base while pursuing a new one

Despite the 2014 election dates not yet having been announced, most parties are entering campaigning mode. (The elections must be held, according the SA Constitution, between April and July 2014). This weekend the Independent Electoral Commission held the second and last national voter registration drive and managed to register just under 500 000 new voters – and change the details of an additional 600 000 others (Independent Electoral Commission).

Election noise from almost every corner of the country is already deafening. Here are some of the highlights (and lowlights) from this past weekend:

Winnie appropriately dressed in Bekkersdal

Various leaders visited Bekkersdal, a community to the west of Johannesburg that has been plagued by violent service delivery protests and where many IEC registration booths were unable to open on Saturday morning. The most notable was Winnie Mandela who was “warmly received” by the community (eNCA). The twitterati and commentariat were obsessively interested to see whether she would arrive wearing red – indicating a possible defection from the ANC to the EFF. She arrived in ANC colours and spoke like a loyal ANC leader – for now, anyway. Registration booths opened in Bekkersdal yesterday.

Police minister stands his ground

Minister Nathi Mthethwa and several of his generals bravely faced down an extremely angry Khutsong audience (also west of Johannesburg) yesterday. Mthethwa visited the troubled area in the wake of last week’s vigilante violence in which 6 alleged criminals were murdered – by stoning and burning. Mthethwa, a close Jacob Zuma ally, stood his ground as audience members screamed at him and his senior officers, accusing the police of incompetence and corruption and threatening to fry criminals ‘like chicken’. Mthethwa urged the crowd to work with the police – and expose the area’s drug lords and corrupt cops.

The best action was on Twitter

Much of the off-beat action was on Twitter. A flyer portraying itself as having been distributed by the ANC Youth League promising a R60 car-wash by scantily clad young women near a registration station in Kenilworth (looks fake, but you never can tell). One tweet pointed out an essential difference between AgangSA and the EFF: “Agang launched with Tea and cakes, EFF slaughtered 8 Bulls” – which, in our opinion, nails down the difference between the two new parties rather well.

DA swerves

The Democratic Alliance continues to shudder from its ‘mistaken’ backing of the Employment Equity Amendment Bill in the National Assembly recently. It appears the flip-flop is based on tension in the official opposition between those who believe backing state interventions to reverse the relative exclusion of black South Africans from senior management positions as well as from other forms of ownership and control of the economy is essential if the DA is to win black votes. The South African Institute of Race Relations quoted in the Business Day on November 6th says: “DA support for this kind of racial engineering will come as a shock to many of its current supporters.” As it happens Helen Zille backed away from supporting the bill and has reshuffled her shadow minister of labour, Sej Motau. Tension around this matter will remain and grow in the party.

Walking back home from the Sea Point promenade I encountered, no more than thirty minutes ago, two tall attractive young women in blue t-shirts standing next to a table full of DA literature.

Nearby is a church hall that serves as a voter registration station.

This weekend is the last nationwide drive to get as many potential voters as possible signed up before next year’s election.

The DA girls had long ponytails and light-brown hair and they held apparently identical and delicate Japanese umbrellas.

I gruffly (to avoid being misconstrued) asked them how it was going.

“Good!” they chimed brightly and in unison, their thick cables of hair bouncing in a way perfectly described by the aforementioned style’s name.

They politely enquired if I had registered and I muttered something about not being sure if I was going to vote and stumbled off in a confused retreat. (I have registered, I will vote … I am just not sure for whom.)

I was thinking as I walked the final kilometre to my modest apartment that it was about time the DA put some zest into its campaigning – good for the staid old liberals. (Patronising thoughts, I know, but I can do no more than apologise for having them.)

I walked into my flat, came straight to my computer and clicked on my Twitter feed.

Imagine my delight when I almost immediately found this:

ANCELEC

 

Here is the full text of the Tweet – although it is the picture that is important:

‏@iroiphotography:

Lack of creativity RT @Mr_Mpangase: Surely this is in breach of ANC conduct?  pic.twitter.com/Sujnop3cdK Retweeted by Siphelele Mpangase

(I think that is a real flyer or poster, but at this time we all have to be extremely careful of fake advertising designed to make one or other of the parties look bad.)

My delight was immeasurably enhanced as I found another Tweet that really gets to the meat of the election matter.

African ‏@ali_naka29m:

@CdeJMN Agang launched with Tea and cakes, EFF slaughtered 8 Bulls. Spot the difference!

I am still grinning.

This voter registration weekend is specifically aimed at younger potential voters and it has not escaped my attention that none of the myriad and complex messages here are intended for me.

I doubt I will be this sanguine and good natured after another five months of this … but before the nausea sets in I thought I would share some of the silly syrup.

Have a good week.

 

 

  • Important defection from the ANC to the EFF, and the DA launches robust campaign in Soweto – but it is probably not yet enough to scare the ANC
  • Appropriate concern grows at the Promotion of Investment and Protection Bill
  • Stunning victory in eastern DRC is becoming a feather in Zuma’s cap … 
  • … while the chaos in the SAPS and crime intelligence is a serious indictment of South Africa’s political leaders – and is threatening the investment environment

Herewith my latest news summary and analysis.

As I have mentioned previously, I write these updates very early on Monday mornings for the paying clients of BNP Paribas Cadiz Securities. So thanks to those good people for allowing me to republish a few days later here (and thanks to them for giving me a fairly loose rein as to the style I am allowed to use).

Dali Mpofu announces defection from ANC to EFF
Dali Mpofu, advocate of the miners who were killed by the police in Marikana and a former CEO of the SABC, announced over the weekend that he was leaving the ANC and joining the Economic Freedom Fighters. While this is not completely unexpected (he represented Julius Malema in the ANC disciplinary hearings against the former ANCYL chairperson) Mpofu is perhaps the most mainstream figure to formally defect from the ANC and declare for the EFF.

So what?

This is my ‘shifting target’ predictions for the 2014 national election as of Friday November 1 (click on the graphic to see the details … and note the cute child sucking her thumb which is a graphic metaphor indicating I am making this up as I go along):

elecjpg

Some of you who saw those estimates in September might notice that I have massaged the EFF upwards and AgangSA downwards.

My Democratic Alliance results are probably too generous, although the pictures published in Afrikaans weekly Rapport on Sunday (11/03/2013) of the DA’s Gauteng premier candidate Mmusi Maimane’s launch of his campaign in the Walter Sisulu Square in Kliptown, Soweto on Saturday indicate a surprisingly robust start.

Mmusi

My caution about the upside for the DA is based on the history of outcomes in the four national elections since the advent of democracy in South Africa in 1994 (again click on the graphic for a version large enough to read … note DA at 16.66% in 2009 and ANC at 65.9% … hmm):

Elec history

One would have to suggest that the DA has set itself too difficult a task in declaring that it hopes to achieve 30% of the national vote and be in a position to form a provincial government in Gauteng in an alliance with other opposition parties after elections in 2014. The EFF and AgangSA are likely to eat into ANC support but the challengers have a mountain to climb and the incumbent has to fall a long way before the climbers even catch sight of their objective.

Concern grows at the Promotion of Investment and Protection Bill

Legislation designed to replace a number of bilateral investment treaties that South Africa has maintained with over a hundred trade and investment partners was published in the government gazette on Friday and is starting to raise concerns among investors. Already Minister of Finance Pravin Gordhan has angrily blamed “lawyers serving the private sector” for increasing uncertainty in South Africa’s investment environment with regard to this legislation (in a deeply unhelpful statement he made on the side-lines of the African Economic Conference at Montecasino in Johannesburg last Monday – Business Day 28/03/2013).

So what?

At the height of the campaign for the nationalisation of mines during 2012 (by Julius Malema and the ANC Youth League) it was South Africa’s myriad bilateral investment protection treaties that were the strongest argument of reassurance for foreign investors. The problem is less the new legislation, and more that fact that existing treaties will not be renewed. Business Day in its front page lead story this morning says the decision not to renew the treaties has been criticised “by a range of groups, from foreign business to credit agencies for causing uncertainty over the security of future foreign investment”.  An informed legal opinion would be a requirement for the proper assessment of the risk here, but it is appropriate to approach this policy and legislative shift with caution.

Jacob Zuma attempts to fill the Great Lakes power vacuum

In the light of a stunning and quick Congolese army (FARDC) victory over the occupying M23 rebels last week, Jacob Zuma has moved quickly to reinforce South Africa’s apparent sovereign advances in the region. Today he will host a joint summit of southern African and Great Lakes leaders in Pretoria to seek ways of consolidating this week’s victory by the FARDC and its Southern African allies … and on Tuesday he will chair another summit designed to kick-start an African Union plan for volunteer governments to form “coalitions of the willing” to tackle continental conflicts – Sunday Independent 03/11/2013.

So what?

The contending interests in and around the Eastern Congo are extraordinarily complex, but from a South African perspective the apparent defeat of the M23 is a success for the SADC Force Intervention Brigade (FIB) to which South Africa has contributed more than 1 300 troops alongside 1700 from Tanzania and Malawi. The M23 is backed by Rwanda which in turn is an ally of the US and the UK in the region. Crucially, those Western powers have warned Rwanda’s President Paul Kagame to back off supporting the M23 – which is probably what left the rebels vulnerable last week (Sunday Independent and other several other sources).

There are significant mineral resources in the region and the Inga hydroelectric projects might become decisive to economic development in several southern African countries. Stability in the eastern DRC impacts on Uganda, Tanzania, Rwanda, Sudan and even Angola, Zimbabwe and South Africa. Jacob Zuma has managed to shift significant obstacles out of the way of reformatting alliances in the region – an objective that eluded Thabo Mbeki. The situation is delicate and tentative but Jacob Zuma’s decisive follow-up indicates he is seizing the historical moment and the initiative in a manner that we would have thought unlikely a year ago.

The DRC is a Zuma plus but Crime Intelligence and the SAPS is deepening minus

The main domestic weekly newspapers (Mail & Guardian, Sunday Times, Sunday Independent and City Press) all attempted (unsuccessfully) to make sense of the damaging disarray and conflict in various aspects of the South African security services, most importantly in Crime Intelligence, the Hawks and the top echelons of the South African Police Services itself.

Last Monday the national police commissioner Riah Phiyega issued a suspension letter to the acting Crime Intelligence head, Chris Ngcobo (on the basis that there is some unspecified problem with Ngcobo’s qualifications).  Almost immediately afterwards a spy tape emerged and was leaked to the press that indicated Riah Phiyega was guilty of a crime by having “tipped off Western Cape police boss Arno Lamoer about a crime intelligence investigation linked to him” – Mail & Guardian.

So what?

You have to go to the source code for what is happening here because the details of each claim and counter-claim are impossible to follow. Essentially the police, and particularly Crime Intelligence, have been profoundly damaged by having been drawn into high-level political contests, particularly those between former president Thabo Mbeki and then challenger Jacob Zuma. Significant parts of these apparatuses have become semi-criminal and out-of-control, pursuing sometimes arcane political (and worse) agendas. The top echelons of our political establishment are directly implicated in and linked to this chaos – having deployed these institutions in their internecine battles. No individual institutional failing in South Africa is more serious and more threatening for those seeking stability and certainty in the regulatory and institutional environment.

As promised some comments on the politics of Pravin Gordhan’s medium-term budget … but first forgive me for expressing some of my irritation at two of his (Gordhan’s)  recent statements.

That will be followed by some of  the bits and pieces I found interesting in the weekly newspapers – if you didn’t see the ‘Zuma gaffes” selection in the Sunday Times and City Press I reproduce some of them here.

Excuse me?

Look I am not yet ready to start calling him a tubby little tyrant with the charisma of a mud prawn but Pravin Gordhan has been saying some things that are not hugely endearing.

First he told a joint parliamentary committee that negative news flow from ‘the media” was partly responsible for sovereign downgrades of South Africa’s debt. So what, he thinks Moody’s, S&P and Fitch get their understanding of government policy from the Sunday Times?  It is just a stupid thing to say and makes him sound just like a National Party ministers circa about 1986. Catch that here.

Secondly, responding to the flurry around South Africa’s cancellation of its bilateral investment treaty with Germany he “blamed lawyers serving the private sector for increasing uncertainty in South Africa’s investment environment” – catch that Business Day story here .

I didn’t personally hear Gordhan in either of these instances but there might be a pattern emerging:

Pravin (PW Botha) Gordhan

Look familiar … think PW Botha? (That’s Business Day’s photo btw, I hope and trust they don’t mind)

Okay, I am glad I got that off my chest – on with the rest.

Political messaging and the medium-term budget – all good

If political messaging was all that we were looking at in the MTBPS then we would have to conclude that Pravin Gordhan’s performance was overwhelmingly financial market positive. Obviously ‘messaging’ doesn’t determined the price of eggs or the price of much else. The believability of Minister Gordhan’s various estimates and projections is ultimately more important for determining sovereign risk, but the overt politics of the message indicates a more confident government prepared to stand on organised labour’s toes to reassure global capital markets (and other investors).

Firstly, Gordhan was on message with regard to the Employment Tax Incentive Bill. This is the latest manifestation of the youth wage subsidy and has been bitterly opposed by Cosatu and, to some degree, by members of the SACP (for reasons that I have explained elsewhere). It is unclear whether the policy will make a significant dent in South Africa’s serious youth unemployment problem (which deputy minister of Finance Nhlanlha Nene recently put at  42% for  those aged between 19 and 29) but what the rating agencies have been looking for is signs that the ANC and government can forge policy independent of, especially, Cosatu – and in this confident assertion by Gordhan they have their signal.

Secondly, the Finance minister cast the MTBPS – and, in fact, all future budget statements – as the accounts of the National Development Plan (NDP). Again, the NDP is bitterly opposed by Cosatu – and is less than warmly regarded by the SACP. It is a confident Jacob Zuma that backs his Minister of Finance to define government budgeting as : “(t)aking the National Development Plan as the point of departure”.

The NDP is little more than a shopping list and a general statement of intent but it generally conceives of the market as the appropriate mechanism for the allocation of capital (at least more so than the New Growth Path and the Industrial Policy Action plans do). It also puts the infrastructure plans and improving capacity and accountability of the public service as key planning objectives. There is no evidence that the ANC and the Zuma administration is going to succeed in moving beyond planning to implementation, but Gordhan made the right noises in his speech.

Thirdly Gordhan pressed every conceivable button in his attempts to tone down excesses in the executive and the public services. He placed a number of ceilings on luxuries, cars, travel, catering, accommodation, use of credit cards – and amongst the Twitterati the cry went out: Gordhan derails the gravy train!

Again this is good form but we have to keep an eye out for the content. After all this is a government led by a president deeply implicated in the ambitious abuse of various privileges. It is going to take a more than fine sounding words to convince the country that the gravy train has, in fact, been delayed let alone derailed.

Fourthly the key political aspect of political risk in relation to the budget is the commitment to restrain growth of the public sector wage bill and social grants – two pillars of both political stability and continued electoral support for the ANC. Obviously the minister (at this stage the apparently tough and skilful Lindiwe Sisulu) in public service and administration will have to hold the line in public sector wage negotiations – we will have to wait to see how that plays out, but Sisulu is the right person for the job of holding that thin red line.

Loud and widespread muttering about power struggles in the Democratic Alliance

It should probably be seen as a sign that the Democratic Alliance is on the verge of breaking out of its previously narrow ethnic base that the fine details of its internal power struggles are becoming a matter of national public debate. All the major weeklies discussed a putative succession struggle between the DA’s national spokesman and candidate for Gauteng premier, Mmusi Maimane and the DA parliamentary leader Lindiwe Mazibuko. The point being that Maimane’s supporters are pushing for him to be on the parliamentary list so that if the DA does not win Gauteng next year (dah!) he will still get into parliament.

So what?

Obviously the Democratic Alliance believes that it needs a black leader if it is to make a serious dent on ANC support in 2019 – but the matter is not so pressingly urgent that they are likely to dump their extremely successful and popular leader Helen Zille any time soon. I still think there is space for an amalgamation of the DA and AgangSA after that new party performs adequately but fails to shoot out the lights in 2014. That will leave the tantalising possibility of Mamphela Ramphele finding her way into the top leadership of the DA some time in about 2016. So of the three potential black leaders of the DA, Maimane probably has most township credibility and would represent the DA going out there head-to-head with the ANC for the African vote. Lindiwe Mazibuko would be the most palatable for the DA’s traditional support base (yes, we all know who I mean). And Ramphele, with her struggle credibility and achievement in academia and business seems like a perfect – and heavy hitting – compromise. She might need a charisma injection, but that is purely a personal observation.

Mozambique – Renamo rears its scarred and ugly old head

The Mozambique army overran a key Renamo base in central Sofala province on Monday last week and Renamo guerrillas hit back on Saturday by ambushing a minibus, killing one person and injuring 10 more.

So what?

This might seem like small cheese, but Monday’s government attack has forced Renamo opposition leader Afonso Dhlakama to flee into the bush and has raised the spectre of the restart of the 16-year civil war which ended in a 1992 peace pact that established multi-party democracy in Mozambique. Renamo has lost every election since 1992 but Dhlakama’s party said on Monday it was abandoning the peace agreement. In and of itself what has happened over the last week is not huge, but in the context of the hopes for Mozambique’s economic growth as that country emerges as a natural gas giant, Renamo becomes a significant risk that needs careful attention.

The Cosatu vortex is sucking in everyone in – this is a clear and present danger

This weekend the national general council of the powerful South African Democratic Teachers Union lined up in precise opposition to Numsa in the on-going and bitter struggle taking place in Cosatu. Sadtu backed the disciplinary process against Zwelinzima Vavi, it vigorously opposed the holding of a special Cosatu conference and it unequivocally backed the ANC in elections next year.

So what?

My own (perhaps counter-intuitive) view is that the only way for Cosatu to remain as a functional federation and part of the ruling alliance is for a special congress to be held during which Zwelinzima Vavi wins the popular vote, escapes disciplinary action for his various infractions (both the real ones and the made up ones) and Numsa decides to stay in the federation. However, it is looking increasingly like the ANC loyalists are going to force Numsa, Vavi and their various allies out of the federation. Note that Sadtu itself is facing something of a minor palace revolt after receiving threats from some of its own members who are angry at the suspension of the union’s president Thobile Ntola for supporting Zwelinzima Vavi. Yes the key Zuma and ANC allies in Cosatu can force the leftist critics out of the federation but that will lead to a split – and, in my opinion, cascading instability throughout the labour sector as Numsa and others compete in every workplace against the incumbent Cosatu union. This outcome is closer than ever and it appears to me can only be averted if a special Cosatu congress is allowed to take place and that a likely democratic victory by Numsa and Vavi is allowed to carry at any such conference. It would stick in some ANC craws, but it would re-establish the status quo of a restive Cosatu that remains a faithful, if critical, ANC ally.

Jacob Zuma provides some light relief

Politicians often say things that outrage some and delight others by providing grist to the social satirist’s mill.

Jacob Zuma provided a gem last week when he said:

“We can’t think like Africans in Africa, generally; we’re in Johannesburg (the N1 is) not some national road in Malawi”.

(Gauteng ANC manifesto forum – October 21 2013)

This provided the opportunity for several journalists (most notably Gareth Von Onsellen in the Sunday Time and Carien Du Plessis in the City Press) to aggregate some of Jacob Zuma’s more illuminating gaffs from the last several years. Here, purely to save you from having to dig into the papers yourself, are some of those:

“I’ve always said that a wise business person will support the ANC … because supporting the ANC means you’re investing very well in your business”

(ANC 101st anniversary gala dinner in Durban – January 12 2013)

“Sorry, we have more rights here because we are a majority. You have fewer rights because you are a minority. Absolutely, that’s how democracy works”

(President’s question time in the National Assembly – September 13 2012)

“Kids are important to a woman because they give extra training to a woman, to be a mother.”

(SABC interview with Dali Tambo August 19 2012)

“Even some Africans, who become too clever, take a position, they become the most eloquent in criticising themselves about their own traditions and everything”

(Speech to the National House of Traditional Leaders November 1 2012)

“When you are carrying an ANC membership card, you are blessed.”

 (Address to ANC supporter in Easter Cape – February 4 2011)

“The ANC will rule South Africa until Jesus comes back.”

 (Gauteng ANC special council – March 15 2004)

We don’t want to review the Constitutional Court; we want to review its powers.

(Interview in The Star Newspaper – Feb 13 2012)

So what?

When compared with other famous presidents Zuma’s gaffes are fairly benign … (hmm I am no longer as sure that those are quite as benign and cute as I thought they were when I wrote that early Monday morning … but I will let it stand for now.) What is interesting is how socially conservative some of his off-the-cuff comments are. It gives some insight into the gradually building pressures in the ANC with regard to appealing to an urban professional class versus traditional rural groups. There is no question that Zuma represents only one of those choices.

Bits and pieces

  • Pravin Gordhan’s medium-term budget statement received both criticism and praise. Cosatu’s spokesman Patrick Craven described it as “a conservative macroeconomic framework predicated on a neo-liberal paradigm”. Piet le Roux, the senior economic researcher at Solidarity (coming, in some ways, from the other side of the spectrum) said Gordhan’s mini budget was based on an “unsustainable model of deficit spending, mounting government debt and onerous taxation”.
  • The Association of Mineworkers and Construction Union (Amcu) announced on Friday (25/10/13) it would consult its members on a possible strike after it received a certificate to strike at Impala Platinum (Implats) when wage negotiations deadlocked. Amcu is demanding a basic salary of R12 500 a month for underground workers and R11 500 for surface workers.

This is a quick and casual aside as I await the more weighty matters of Pravin Gordhan’s medium-term budget policy statement at 14h00 today.

For various reasons* I attempt to keep abreast of the rapidly evolving technological and cultural aspects of what we call ‘social media’

New cultural trends drive developments in language and there are a couple of new words and usage that I found interesting enough to share here.

Recently a person I follow on Twitter (Sarah Britten who goes by the handle @ananitus – I love her stuff and follow her across several media platforms) used a hashtag to characterise the flood of criticism she got when she mentioned that she had gone to a chiropractor for relief from some or other ailment.

Most of the criticism/advice came from men and she called it (the criticism and advice) “#mansplaining’ as in: enough with the #mansplaining, I don’t need you to tell me whether alternative medicine is unscientific or illogical (that’s not a quote, I don’t have a record of the original interchange, but that is roughly how I remember it).

I immediately felt slightly embarrassed. Oops, busted. I have been patiently mansplaining to the women in in my life that their views are illogical and unscientific ever  since I was a too serious boy. Hurumph Hurumph – stroke my beard, push my eyebrows together, suck on my pipe. You see Josie/Mom/darling the scientific method exposes astrology as  … blah blah.  Yeah, right.

A hashtag (#) is a kind of metadata tag that allows all future conversations that deal with the same topic to be grouped and therefore accessible.

Listicle is another new word (well, new to me anyway) that perfectly sums up a phenomenon to which we are all being increasingly exposed. A listicle is an article that presents itself as a list.

It can be any rubbish … just make it up. The 10 ugliest South African politicians. The five top reasons to vote/not to vote for the ANC in 2014. Seven reasons that Blade Nzimande has become a recluse (or the 50 reasons he should become a recluse). Five secrets that are keeping Zuma in power. The 10 hottest DA members of parliament. Five reasons why South Africa sucks as an investment destination. The three top reasons why Zuma’s critics should keep their tax affairs in order. Five reasons we should not listen to the rubbish spouted by political analysts. The ten least known Zuma sexual conquests. Four ANC members most likely to become president in the next 20 years.

The point that I find so interesting is that  listicles  are almost irresistible to your finger hovering on the mouse. Just look at The Huffington Post and you will understand just how compelling (and trashy)  listicles are.

In fact listicles are so compelling that they can usefully to termed ‘click bait‘. Anyone who has ever flicked a gaudy lure in front of a fish in the hope of irresistibly drawing the fleeting piscene attention long enough to embed the hook in the creatures mouth (goodness, when I put it like that fishing sounds a faintly monstrous activity) will immediately understand what ‘click bait’ means.

I have held out against using listicles as click bait on my blog. I hope I am never reduced to heading a post with Top five political risks to investment in South Africa or 3 reasons supporting a sovereign downgrade or even Top 10 best dressed ANC NEC members. But you never know; desperate times lead to desperate measures.

 

 

*For me it’s a professional imperative: I have to get my views out there to persuade those  who might want to pay for those views (supposedly delivered in more depth) that the said views might be worth paying for … so I  trundle out my free-to-air discussion and curating on a range of platforms in the hope that this will generate paid work … which it generally does, btw. The two other reasons are

  • posting forces me to come up with a view on the unfolding situation … I am never certain what I think about something until the moment I am forced to say to someone else what it is I think – so thanks, you are that someone else;
  • keeping the blog is a way of safely storing a history of my views – this is all sitting out here in the interweb, a record of my views, safely stored away from my own lack of competence or the ill-fortune of my laptop.
  • the cloud.
I am an independent political analyst focusing on Southern Africa and I specialise in examining political and policy risks for financial markets.

A significant portion of my income is currently derived from BNP Paribas Securities South Africa (Pty) Ltd.

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