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I wanted to discuss something called heuristics, which refers to the way we make decisions or reach an understanding about something, especially when the matter under consideration is complicated.

The word (heuristics) can mean the short cuts we take but the general field also deals with the many errors of thinking to which such short cuts can and do lead.

There was a particular line from a client note I wrote earlier this weak as I was considering the matter of Dianne Kohler Barnard’s booting from the Democratic Alliance that I thought about afterwards and wondered on what basis I had reached the conclusion.

The line was : “If I had to take a wild, but still informed, guess, I would say the DA is likely to pick up stragglers from this defection but the EFF will get the lioness’s share, and apathy the lion’s” (this being in relation to ANC losing support in urban black middle-class and DA attempts to keep its current support and also win some of the new.)

But then I thought I might as well show you the note before I went onto a discussion about heuristics to give myself something to use as a basis for the discussion. The version of my note below had some of the ruder but funnier bits pulled by those who have better judgement than me. But seeing as this is my website I thought I would leave in the the silly jokes as I wrote them.

SA Politics – 3 November 2015

  • Kgalema Motlanthe says the alliance is dead… and the ANC respectfully nods its head. The SACP and Cosatu look increasingly as if they will be on their own soon.
  • The Gauteng ANC and the Gauteng government fighting to bring the ANC as a whole back to the black middle class (and the middle classes generally).
  • The DA uses the meat cleaver against supposed racist sentiments in its ranks – but a rose is a rose is a rose.
  • Drought and failing infrastructure raises risk that water shortages will be the new load-shedding.
  • … and in other news, ideal candidate Tokyo Sexwale stands for FIFA presidency and the ANC Women’s League marches on the Union Buildings in heroic defence of Jacob Zuma’s dignity.
Ex-President Kgalema Motlanthe says the unsayable truth that everybody knows and a calm and respectful ANC welcomes his intervention … the pigs have indeed taken flight

In an exclusive interview with Business Day yesterday (catch it on YouTube here but the whole – extremely interesting – text here), the widely admired and respected ex-ANC deputy president and ANC secretary general and ex-country president (from 25 September 2008 to 9 May 2009) said things about the ruling alliance that everyone knows but few have dared say.

The alliance is dead, Motlanthe declared. The three organisations have become one organisation. In so becoming, Cosatu expelled 350,000 workers by expelling its largest affiliate, the National Union of Metalworkers of South Africa (Numsa) as well as the leadership that had criticised the failure of Cosatu to take a stand independent of the ANC. The ANC would now meet as opponents those workers and shop stewards in Nelson Mandela Bay Metro and other areas of the Eastern Cape in local government elections next year.

He said a number of other things that were stern – if coded – attacks on the current leadership of the ANC:

  • Rising debt is fast approaching 50% of GDP. “We have a crisis and people who understand that are the people in Treasury because every week they have to go and borrow money in order to manage the current account… and they are raising this money in markets where political sentiment counts for naught”.
  • “Nuclear, for instance, it’s going to cost trillions,” he said. “If you have no regard for public debt… and it’s public debt… not government … it would affect each of us, each individual South African” – Business Day 02/11/2015.
  • He stood against Zuma at Mangaung party elections knowing he would lose because he refused to be part of a leadership where “it would be a constant battle just to get them to operate on the basis of the (ANC) constitution” – Business Day 02/11/2015.
  • He thought the decision to expel Julius Malema was part of the rise of unethical and factional decision-making. Now “(what) the EFF is saying resonates with their (young people’s) own feelings.”
  • The bullying tactics of the ANC in the National Assembly alienated people from minority groups – for example Afrikaners were “drawing back into their laager”.

The ANC put out a media statement, to the astonishment of many, on 2 November saying: “The African National Congress wants to affirm Comrades Kgalema Motlanthe as a leader and a voice reason” – and went on in the same vein – see here.

Cosatu diplomatically trashed him: “we find it regrettable that, he has ignored all the facts,” said the official statement. “Cde Kgalema was part of the leadership collective in government and in the ANC that defended labour brokers and e-tolls …” etc., etc. See here for the whole whine.

The SACP is, for the moment, maintaining a stunned silence.

So what?

Motlanthe is seen, in my opinion correctly, as an impeccably honourable man and representative of the ANC’s best instincts – which is largely why the Zuma machine had to squeeze him out after Mangaung in 2012. But there are new winds blowing through the ANC. Zuma is either on the retreat or happily edging towards retirement. The SACP and Cosatu are closer than ever to exiting (probably by being pushed) the ruling alliance.

While opposition is growing everywhere, it does not yet threaten the ANC’s overall and powerful majority. However, anyone with an eye on 2019, 2024 or 2029 – for example Motlanthe – the implacable consequences of the current trends are obvious. Defections from the ANC are closely linked to perceptions of corruption and the nepotistic behaviour associated with the Nkandla gang, perceptions that are most strongly held by the urban middle classes.

The ANC can either start or make visible a process of renewal at its National Congress in 2017 or a gradual decline, shift into rural areas and the defection of the urban middle classes is inevitable. This is precisely the road Zanu-PF took when it started losing ground in its most educated urban constituencies. That Zimbabwean journey is on-going and unhappy.

Gauteng – trying to seize the ANC by the scruff of its neck and pull it towards modernity and the urban middle classes

Look at this full page advertisement in Sunday Independent 1/11/2015:

Capture

… and this:

Front page advertisement in same newspaper

Front page advertisement in same newspaper

So what?

We have written extensively (here for the most detailed example) about the ANC losses in the Gauteng metropolitan areas in the May 2014 election and how this is applying pressure on the ANC to move back towards its urban middle class base.

The above advertisements are an almost perfect example of the marketing – and governance – campaigns the ANC Gauteng provincial government is conducting, undoubtedly with its eye on the 2016 local government and 2019 national elections.

As the link to our research above indicates, the ANC is vulnerable in its most sophisticated urban constituencies (Tshwane, Ekurhuleni and the Greater Johannesburg Metro in this case) and is least vulnerable in the poorly educated and poverty stricken rural areas.

(Some analysts interestingly believe that this is a ‘perverse incentive’, linked to this defecting black middle-class, for the ANC to underfund tertiary education. See the inimitable Johnny Steinberg argue this case, with all the requisite subtlety and disclaimers, in Business Day 10/30/2015 here.)

The Desperate Alliance

Ms Dianne Kohler Barnard, (now ex) shadow minister of police, was axed from the Democratic Alliance over the weekend after she was found guilty of misconduct, bringing the party into disrepute and contravening its social media policy.

What she had done was share a Facebook post that argued some aspects of government were better managed under apartheid strongman PW Botha than they are today. She claims not to have read the post properly, and immediately deleted it and apologised when she realised what it said. She was initially suspended but a disciplinary committee decided to expel her from the party.

So what?

On the face of it this appears to be a harsh and hurried sentence – unless the disciplinary hearing discovered that, in fact, Barnard did have apartheid sympathies and is an admirer of PW Botha. I find this unlikely – but that her re-posting of the article was careless and insensitive is beyond doubt. However, the punishment probably has more to do with DA desperation to woo suspicious black voters than any previously hidden demonic impulses in Barnard.

The DA has to make whatever strategic choices it feels are necessary, but we doubt that expelling Barnard or, in fact, electing Mmusi Maimane, will be enough window dressing to tempt the mass of voters into the shop. Risk is always highest as one steps from a safe ledge to another. The DA is stuck in a peculiar conundrum of needing to take care of its “racial base” in its ‘safe’ white and coloured constituencies (apologies for the casual South African terminology – we use these terms because they had precise historical/legal meanings under apartheid and they have on-going consequences and meanings in the present) while reaching out to the ANC’s fragmenting urban middle-class base.

If we had to take a wild, but still informed, guess, we would say the DA is likely to pick up stragglers from this defection but the EFF will get the lioness’s share, and apathy the lion’s.

Kidnap and MTN – risky business

City Press 11/01/2015 argues that the size of the proposed MTN fine for tardiness in deactivating millions of improperly registered SIM cards despite numerous warnings and fines, is because the matter “stopped being a purely regulatory issue and became a matter of national security” when unregistered MTN SIMs were used by kidnappers to negotiate a ransom for a former Nigerian finance minister in September.

The Nigerian Communications Commission has imposed a fine of N1.04 trillion, the equivalent of ZAR70b (a number of different estimates are given, but this is the general region). Read the full article here and another take here.

So what?

Regulatory and political risks are rising throughout the world, as sovereigns assert their power over markets, globalised or otherwise, partly in response to the Great Recession and partly in response to terrorist threats (and often to protect their own ‘national’ enterprises against foreign competition). It has now become common for massive fines to be imposed by governments on companies that are not necessarily domiciled in the jurisdictional area under that government’s control.

Drought and failing infrastructure raise risk that water shortages will be the new load-shedding

KwaZulu-Natal and Free State provinces have been declared disaster areas due to drought conditions that are worse than they have been for 24 years. Minister of Water and Sanitation Nomvula Mokonyane said 170 water schemes (that usually means dams) in the country are currently affected by the drought – Eye Witness News 02/11/2015.

Water utilities are also under pressure after years of under-investment while having had to expand connections to millions previously denied access by discriminatory legislation under apartheid.

“Water shedding will take the form of pressure reduction to manage leaks in the system and an overall loss of assurance of supply,” said Anthony Turton, a professor at the Centre for Environmental Management at the University of Free State.

So what?

Food security, food price inflation and a multitude of industrial processes are water dependent. Water clean enough for human and animal consumption is also, obviously, important. The predicted length of the drought and the state of our increasingly rickety water and sewerage reticulation systems represent increasing risks in South Africa.

And in other news …
  • Tokyo Sexwale, ex-Robben Islander, businessman, ex-Premier of Gauteng and ex-Minister of Human Settlements (and ex-too-many-other-things-to-name) has announced he will be making himself available to replace Sepp Blatter as FIFA president. Sexwale has very little football administrative experience and I cannot think of anyone better qualified to run FIFA … it’s a perfect fit.
  • The ANC Women’s League marched on the Union Buildings last Friday in the high priority cause of ‘defending Jacob Zuma’s dignity’. Some commentators have argued that it was a last ditch attempt. “That horse has bolted,” said one analyst who preferred not to be named Elspeth. Almost 300 members of the League were engaged in the mass march which was peaceful and well ordered.

So … my intention is to use bits of that to discuss heuristics, for those of you who are clamouring to hear more about that.

I have been completely taken up with a project (now completed) that argued that the black African middle-class was our single biggest asset and the workings of the interests of that class in the world would save our politics and help our economics. Yaay!

The basic argument looked at the defection suffered by the ANC in the May elections from its most sophisticated constituency and went on to argue that things were going to turn out rosy in the end. (There are hundreds of tables and graphs and other clever financial market type number crunching that was mostly done by my brilliant colleagues …. but I will only publish a version of that when I have had a chance to chat to them and get their permission).

Not everyone bought our story, but soon you will be able to make up your own mind if our grounds for optimism (that the ANC self-corrects) have an adequate basis.

The ‘black African middle-class saves South Africa’ project (which is what we started calling as a sort of shorthand … the report is LONG so trust me that really is shorthand) has held me back from completing my promised comments about the SACP. The further we went with the ‘middle-class’ project, the more disturbed I have become about the the role the SACP played in engineering the end of Mbeki’s presidency and it’s iron protection of Zuma through the chaos he has brought upon us over the last 4 years.

So as promised I will write that out here and publish it before year end … that’s the SACP story … so 2 promises so far.

Meanwhile here is an extract of my bespoke comments (now too dated to remain bespoke) on the Numsa split (written on the trot) a week ago. My brilliant editor friend in London suggested it be titled:

South African politics: Love’s labours lost

Numsa expulsion … if you love it let it go, if you hate it pray for its demise

The central Executive Committee of Cosatu expelled the largest member of the trade union federation at an extended weekend meeting of the special Central Executive Committee (CEC). Irwin Jim, Numsa general secretary gave a 3 hour long spirited defence of Numsa and attack on those trying expelling the union – but to no avail. It has always been a foregone conclusion, but what Numsa was doing was contesting the terrain, trying to stay as long as possible to take as many members and individual with them. The strategy has probably worked and they have come out, if not smelling of roses, then not badly damaged.

So what?

Numsa’s ideological position reaches back in an unbroken line to a strong and independent left faction (referred to as Workerists) which at the formation of Cosatu in 1985 were still strongly critical of the over-close relationship with the ANC. They  believed that the ‘national liberation agenda’ of the ANC would swamp the more limited agenda of the pursuit of workers’ rights – and the more expansive pursuit of socialism – and that therefore the unions need to be wary of this ally and always fight for their independence.

As it turns out Cosatu did pretty well out of its relationship with the ANC – getting much of the labour market structured in their favour – to the point that it has done some real damage to our economy. However, the tension between the ANC and Cosatu has continued to rise. Cosatu didn’t like the National Development Plan (too pro-markets), Cosatu didn’t like e-tolling (who in Gauteng and outside The Treasury does?), Cosatu didn’t like the Treasury setting the limits of public sector wage increases, Cosatu didn’t like the youth wage subsidy, believing it to be the short end of segmentation of the labour market into more and less protected (cheaper and more expensive) workers.

And of late the ANC, at the end of its tether about the losses of revenue from the platinum and Numsa strikes, at the violence that accompanied the platinum strikes, at the damage done our investment image by strikes, at the damage done the limping infrastructure programme plagued by strikes, has finally started talking about amendments to the Labour Relations Act that would make it a lot more difficult for Cosatu to strike (make secret balloting compulsory) and make it difficult for nationally damaging strikes (like Amcu’s strike in the platinum sector) to go on indefinitely (make some form of forced independent mediation obligatory after a certain time of being on strike.)

Numsa, and Irvin Jim – and Cosatu general secretary Zwlinzima Vavi – have gradually come into more and more serious conflict with the ANC and the SACP over these policies – and the relationship has finally broken. It must be said that Vavi and Jim have also been on the side of the angels on a number of different issues as well; Corruption Watch, abuse of ministerial car allowances, various human rights issues, including the Dalai Lama visit, the Right to Know Campaign, the Treatment Action Campaign, the protection of the Public Protector, the getting of Zuma to pay back the money, the Gupta wedding, horror at the proposed done Russian nuclear deal … the list is too long, but, in general (and with one or two notable exceptions), Cosatu under Vavi and Jim have defended the defensible – unlike their erstwhile comrades in the ANC and SACP

The expulsion of Numsa, which might quickly be followed by the exit of its closest allies the South African Commercial Clothing and Allied Workers Union (Saccawu), Communication Workers Union of South Africa (Pawusa), Democratic Nurses Organisation of South Africa (Denosa), and South African Football Players Union (Safpu) will leave Cosatu much weakened and with an over preponderance of public sector unions.

Numsa – the world is its oyster

For Numsa, the world is its oyster. It has announced intention to set up forums of some form of ‘socialist alliance’ – which we must assume will evolve into a political party, perhaps testing the waters of some constituencies in Nelson Mandela Bay and Johannesburg (where it has pre-existing strong union organisation that could easily be redeployed as party structures in the 2016 municipal election.

Numsa can also now freely pursue its strategy for vertical integration into mining, processing, construction, energy, and manufacturing, including light manufacturing and food processing. Numsa sees these whole value chains of particular metals (and possible other minerals) as natural pillars through which they can exert more power over employers and employer organisations. Up until now Cosatu’s slogan of “One Industry, One Union, One Federation” has prevented Numsa realising its full ambitions (although several unions, especially Num have complained for years that Numsa has poached its members.)

Cosatu?

This leaves Cosatu with the heavyweight public sector unions as its dominant component (and, officially, remember it is still bigger, if not more vigorous, than the bits that have been expelled or might leave in sympathy with Numsa). However the public sector unions are about to embark on a do-or-die wage negotiation in the Public Service Co-ordinating Bargaining Council. Keep in mind that Numsa fought to stay in Cosatu primarily because it believed it could pull the heart of the federation with it, that in each of the unions, large and small, there were branches and sections and individuals who supported Numsa and supported Numsa’s decision to not back the ANC in the last election. Including significant parts of the public sector unions.

Strikes are a testing time – in fact, wage negotiation are a testing time – and even more so when you have on the other side of the table representatives of a state, so absolutely constrained by the fiscal ledge to which it is clinging that is unlikely to shift towards your bargaining position. The MTBF issued by Finance Minister Nhlanhla Nene last month was as close as we have come to the austerity of Trevor Manuel’s first few budgets in the mid 90’s. This was the heart of the Cosatu (and South African Communist Party) attack on Mbeki’s government, with ‘the left’ arguing it was a form of Kowtowing to the Washington Consensus. ‘The left’ then and now believe the way to economic growth is by state spending as a stimulus that creates the virtuous circle. Nene’s budget was the heart of the “1996 Class Project” that Zuma and his allies supposedly defeated at Polokwane in December 2007, which takes the decidedly opposite view of growth: that the state needs to make room for investment and that government needs to create an environment maximally attractive to the same. And part of doing that is keeping borrowing and therefore spending strictly within the bounds acceptable to global capital markets.

Cosatu is now dominated by unions that are not involved in the productive economy. It’s basically the South African Democratic Teachers Union (Sadtu) and the National Education, Health and Allied Workers Union (Nehawu) and the burned out cinders of the likes of the National Union of Mineworkers and other bits and pieces. More than anything these unions are dependent on state spending … but from a state that seems to be all out of resources. We do not think that while Sadtu and Nehawu are ostensibly close to the Zuma faction of the ANC that this is going to take any of the sting out of the coming public sector wage round. Which trade union loves the boss enough to tell its members to back off because he is in political trouble? None that we have ever heard of. And anyway these unions all face a myriad splits, including towards Numsa … they have to show their members they can win them a decent deal.

SACP?

The SACP backed, to the hilt, with everything it had, Jacob Zuma’s rise to power at Polokwane. It did so because its main task was to stop Mbeki and the political programme he represented. Mbeki was increasingly basing ANC policy on promoting the rising black middle-classes and he was doing so at the expense of the trade unions and the SACP for whom he seemed to express ever greater public contempt – and in my opinion would eventually have moved out of the ruling alliance … essentially by collapsing it. The is no question in our minds that Mbeki was making sure that both the SACP and Cosatu had less and less power over ANC policy making. Obviously Mbeki overplayed his hand, not believing his enemies would stoop to backing Jacob Zuma for president. Well he certainly called that one wrong and the rest is history.

The SACP still sits as Zuma’s main backer. Cosatu has essentially collapsed under the pressure of trying to keep its unity and back this president at the same time. The ANC Youth League was expelled along with Julius Malema because Zuma became so tarnishing that it was impossible to stand by him … and it now (the ex-ANCYL) exists as a vigorous and challenging opposition party, the EFF.

So the SACP is sitting there in the Kraal with Jacob Zuma, defending him to the hilt on his myriad transgressions, trying to explain to the world how it (the SACP) is the true representative of the working class as the millions follow Numsa out of the alliance – and it is impossible to avoid the fact that Numsa’s most virulent criticisms are for the SACP.

The ANC

The ANC is looking particularly forlorn. They fought this split, understanding that the loss of Numsa would lead to other losses and would make the 2016 municipal election a myriad-sided fight in which the ANC was likely to get a bloody nose. The ANC still has way to fall. It got just over 62% of the vote in the national election in May this year and just under 62% in the municipal election in 2011. The trajectory is downwards (the party does worse in municipal polls) and there is much fear (if you support the ANC) and much anticipation (if you don’t) of catastrophic results for the ANC in 2016.

As it happens part of our ‘upside surprise’ scenario, is one in which the ANC, freed from the constraints of its alliance with organised labour, recognises the errors of its ways, elects a clean, reforming and effective leadership in 2017 (the National Conference), shuffles the current crew off to the safe retirement and comfortably wins the 2019 elections with a decent development plan at the helm. But this precisely requires the ANC getting a serious shock in the 2016 election. It sounds like a fantasy and probably is. But it is unavoidably apparent that the conditions are looking increasingly hostile for the ANC.

It does appear that if the ANC doesn’t do something radical and soon, it could be in serious electoral trouble. Of course it might chase the EFF and Numsa’s socialist policy in the belief that this would win the party votes. We think there are other and better options the ANC is considering but they are not on the table yet and all we can hear is the repeat of “welcome to the second, more radical phase, of the transition” – which doesn’t actually mean anything, but sounds vaguely (distinctly?) threatening to investors.

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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