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"The Necklace" is back...

Here's the next contribution in my series called "South Africans are from Venus, Germans are from..." - a series highlighting the differences between South Africa and Germany.

Imagine living in a suburb where a man suspected of stealing a few Euros and a cell phone is burnt to death in front of your house by your neighbours, with dozens of children watching.

Imagine living in a society where the newspaper report on the atrocity is a mere 3 paragraphs long.

Imagine living in Cape Town....over the past weekend. While Germany was celebrating Advent, the season of peace, love and goodwill.

Here is the 3-paragraph report:

Suspect necklaced
December 03, 2007 Edition 1

CAPE TOWN: A mob of Nyanga residents assaulted a man accused of robbery and put several tyres around his body and set them alight, Western Cape police said yesterday.

"He died on the scene," said Inspector Bernadine Steyn.

Steyn said members of the community caught one of the three robbers as he fled and assaulted him with sticks and stones after a man and a woman had been robbed of a wallet and cellphones. They then necklaced him. - Sapa

End of story (or...should I say: end of reality check?)
3.12.07 10:36


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Why I'm so negative on the rand - Part II

Sub-title: Is South Africa about to throw the baby (good economic policies) out with the bathwater (Thabo Mbeki)?

Would it be possible for Trevor Manuel to stay on as minister of finance if Jacob Zuma became president? That's the big question....the one no-one in South Africa has asked to date. It's a vital question, nonetheless. Especially for the rand.

Let's begin at the beginning...

In the years before 27 April 1994 South Africa's economists, business people, lobby groups and political leaders worked tirelessly to convince the political leaders of the still-to-be-born "new, democratic SA" that the economic policies as spelt out in a row of ANC and Cosatu policy documents would not "work for the people" in the long run, and that the government of a democratic SA should rather opt for the market-oriented, mainstream policies which were in vogue in the corridors of the IMF and all over the world at the time.

In essence, the ANC/Cosatu/SACP policies wanted to "redistribute wealth for economic growth", while the policies preferred by business were aimed at "creating wealth for redistribution". It might not sound like it, but there are worlds between these two approaches. The latter basically said you have to grow first, before you can think of redistributing. Or, you can only redistribute, when you've got something to redistribute.

Looked at from a different angle, it was a choice between policies which gave the state a major role and policies which gave private initiative the major role (and the state the secondary role).

Cosatu and its affiliates wanted nothing to do with the "growth first, redistribution second" option. They wanted to hand out the wealth that there was and believed this would put SA on a sustained higher growth path. This, in turn, was the horror scenario for SA's business people, who feared nationalisation, political interference in interest rate management (monetary policy) and disregard for private property rights.

Sometime before or after 1994, the ANC leadership decided to go with the "growth first, redistribution second" option and started making noises in that direction in public. (How this happened and exactly when, is unclear...several books have since been written on the topic, all with different theories about how and when it happened - if at all.)

From my vantage point in parliament I saw it differently: The ANC leadership didn't break with the Cosatu-option. Instead, the ANC government thought it could go for the business-friendly option, without completely breaking with the Cosatu-option. In other words, the ANC leadership thought it was not necessary to go for the one or the other, but that they could sail in-between, keeping all options open and so keeping all sides happy. In short, they thought they could concoct an eclectic policy mix on the fly, so to speak, and no-one would notice.

But, of course, that was not enough for the "amorphous" markets (as he once said). The markets wanted a clear, unambiguous signal. In parliament (where I was reporting from at the time) it was all but clear that the new government had, in fact, broken from the Cosatu-option. In fact, in parliament Cosatu was very much part of the decision-making process and its officials very confident (read: cocky, boardering on arrogant).

Two years into the new democracy (early in 1996) the financial markets couldn't stand this "let's-please-all" approach of the new government any longer and the rand started to "suffer under the uncertainty", as market players put it at the time. After a few months of "uncertainty", the government listened to the distress calls from the market and released a long policy document which broke clearly and finally with the Cosatu-option and opted for the "market-friendly approach".

Cosatu was furious. The next day I got a phone call from a very angry senior Cosatu official (parliamentary representative at the time) blaming me for writing such utter nonsense - government had not turned its back on the Cosatu policies.

But, that it had, was there for all to see. From what the Cosatu official told me on the phone I could gather that they've been taken by surprise - that they were not in on this document at all.

In the following weeks the markets relaxed and the rand stabilised. The policy document did what it was supposed to do.

But, behind closed doors Trevor Manuel and Co. had to weather the Cosatu storm. What exactly happened in the next days and weeks between the Trevor Manuel/Maria Ramos/Gill Marcus team on the one side and the Cosatu/SACP team on the other side, I never could find out. But, one thing I was sure of: It wasn't pretty. And those cocky Cosatu officials certainly didn't succumb after just a single 10 minute meeting. But, they lost their battle and pretty much left the economic policy-making stage - also in parliament Cosatu became less vocal and visible.

Now we are in 2007....about one decade later. A decade in which the SA economy did very well under the policies selected by the new government. The huge apartheid debt have been (sufficiently) repaid, the national budget is in balance (can you believe that!) and new jobs are created at a steady pace. The economy is on a roll.

Now, suddenly the ugly face of Cosatu (and its policies) re-appeared. Suddenly the whole "fight" about the policies best suited to the SA situation is back with us. And, suddenly the rand is under threat again.

Because, Jacob Zuma is likely to be the next president. And Zuma and Cosatu are "gat-gabbas". At least, that is what Cosatu thinks. (So, even if Zuma only used Cosatu to get in, the very least that should be expected, is a repeat of the 1996-showdown over policy directions.)

Very likely, Cosatu will demand that Trevor Manuel step down as minister of finance.

This morning it was reported on News24 that the Mbeki cabinet will launch a national campaign to prevent Zuma from being voted ANC president later in December. This was a bad sign for me. It told me, enough serving cabinet ministers fear the Zuma axe, to get a vote for a national campaign against Zuma through. I'll bet my bottom dollar Trevor was one of those who voted for this national campaign.

So, 16 years into the new democracy we are back where we were in 1990 - 1993. Sixteen years in, we're back at the basic choice between a state-driven economy and a private initiative-driven economy.

Only difference, this time around no-one seems to realize the seriousness of the moment. And no-one knows what Zuma thinks when it comes to matters economic. Only thing one could say: How can one be in bed with Cosatu, without knowing and liking what the trade union wants for the economy?

PS. Who is to blame for the re-appearance of the policy direction battle is a topic for another day. A hint: His name starts with M and ends with i. And the essence of my next story: How M....i's inability to redistribute the wealth created by Trevor's policies, resulted in this real threat that "the baby might be thrown out with the bathwater".

Afterthought: Poor Trevor. Under Mbeki he is not loved...under Zuma he probably won't survive. That's a classic "caught between the devil and the deep blue sea". Who is the devil, I'm not sure.
3.12.07 13:22


Why I'm negative on the rand - Part III

ITINews published the following Standard Bank newsletter written by the esteemed political commentator and journalist Allister Sparks on its website today. ITINews published it without permission. In turn, I publish the re-published article without permission - because it backs up my recent articles on Zuma and the rand 100%. In other words, it's a confirmation of what I suggested. But, it's worth a bit more when Allister says it...

Start quote:

Global Foreign Exchange Newsletter re-published without the permission of Standard Bank in the public interest.

Implications of a Zuma presidency

Now that Jacob Zuma is the clear front-runner to become president of the ANC next month, the only questions that remain are how peacefully or disruptively the succession process will unfold, whether he will be charged with corruption and fraud before or after the Polokwane conference, or maybe not at all, and what the implications would be of Zuma becoming President of South Africa in 2009.

Ironically, the answers to these questions will depend largely on how President Thabo Mbeki plays his hand over the next three weeks.

There are still those in the Mbeki camp who argue that intense lobbying could turn the vote around before the ANC's national conference, which is scheduled to run from December 16 to 20. They are deluding themselves.

It is true that last weekend's nomination process showed that Mbeki had won four of the nine provinces and Zuma the other five. But the actual voting in the provinces shows that Mbeki's provinces were all marginal while Zuma's were landslides, with the result that Zuma came away with 61% of the provincial votes to Mbeki's 38%.

Voting at the national conference is likely to reflect the same percentages, for the same branch delegates from around the country will be there. Votes from the Youth League, the Women's League and the National Executive Committee may make a small difference, but nowhere near enough to close that gap.

And, yes, there may be some individual shifts resulting from the intense lobbying being predicted, but both sides will be doing the lobbying, and it is a fair bet that more rats will jump from the sinking ship than from the winning one.

In other words, defeat is staring Mbeki in the face. What will he do about it? Everything depends on the answer to that question.

Meanwhile, looming over the whole scene is the question of whether or not the National Prosecuting Authority (NPA) is going to recharge Zuma with corruption charges, each carrying a statutory minimum sentence of 15 years imprisonment — and, if so, whether it will do so before or after the Polokwane conference.

It is three weeks since the Supreme Court of Appeals handed down four judgments in favour of the NPA, giving it access at last to the large amount of documentary evidence it needed to recharge Zuma. The prudent thing would have been for it to do so immediately. But in yet another instance of bungling in this drawn-out affair, it delayed.

In part this was Mbeki's fault, yet another instance of how his machiavellian manoeuvres have caught up with him. In his zeal to protect his ally, Police Commissioner Jackie Selebe, from impending prosecution, he suspended NPA chief Vusi Pikolo, who was known to be strongly committed to recharging Zuma.

That meant the tough decision fell, at the critical moment, on the untried and understandably nervous acting director, Mokotedi Mpshe. Perhaps not realising the importance of timing in this matter, he hesitated — and now it is too late.

To bring charges against Zuma now, after he has established himself as the clear front-runner, would outrage his supporters who would denounce it as another blatant intervention by Mbeki to use state institutions to derail their champion at the last moment. Not only would this increase popular support for Zuma, it could set the country ablaze.

On the other hand, to bring these charges only after Zuma has gained the presidency of the ruling party and is on track to become President of South Africa would require a degree of courage that Mpshe and the whole NPA/Scorpions structure may not have. In which case, Zuma would head for the presidency of the country with the serious allegations against him untested — and once there, he would have presidential immunity from prosecution.

Taking account of all this, what are the prospects that lie ahead? I offer three scenarios:

SCENARIO ONE Driven by his own ego and a camp of supporters who fear being swept into oblivion if he is ousted, Mbeki decides to fight to the finish. This would lead to a bitter clash on the conference floor, with Mbeki losing amid triumphant calls from the Zuma camp for a clean-out of Mbeki's closest and most senior lieutenants from the administration.

There could even be a call, backed by a motion of no-confidence in Mbeki as President, for him to resign immediately and hold a snap election so that Zuma could take over immediately.

This could result in the departure of some of the most able people in the Cabinet, resulting in a sharp change of direction in social and economic policies and a general rupturing of both the party and the country. It is the worst-case scenario.

SCENARIO TWO Mbeki realises he is on a losing track and decides to avoid the public humiliation of defeat on the conference floor by announcing beforehand that he is withdrawing from the contest in the interests of party and national unity — and inviting Zuma to do likewise. The deal would then be to allow a compromise candidate to take over the leadership of the party, someone acceptable to the Left, such as secretary-general Kgalema Motlanthe, whose role would be to reunite the party and its alliance partners.

Mbeki's own withdrawal would remove 60% of the sting from this bitter contest, which has always been more of an anti-Mbeki than a pro-Zuma movement. It would not be easy to persuade Zuma to withdraw when the road ahead looks clear for him to take over leadership of the country. But though weakened, Mbeki is not without some negotiating powers. Without his cooperation, Zuma would find it difficult to gain control of a bitterly divided party stripped of some of its most effective ministers and to run the country successfully.

There is also the matter of the impending criminal charges. With Mbeki having made an honourable withdrawal in the national interest, Zuma might find it difficult to counter the argument that it would be in the best interests of both party and country for him to allow the legal process to run its course and clear his name — after which he would be the undisputed candidate for the national presidency.

Of course, he might be convicted. In that case, he might have the assurance of a pardon from Mbeki, but the country would have been spared the ignominy of having a suspected criminal as president.

This is the best-case scenario. Difficult, but not impossible.

SCENARIO THREE Mbeki realises he is going to lose and announces his withdrawal from the race in the interests of party and national unity — at the same time approaching Zuma in a spirit of magnanimity and offering to join with him in healing the rift and bringing the two warring sides together.

Zuma could hardly reject such a gesture. Indeed, he would desperately need Mbeki’s help in reuniting the ANC and would obviously welcome the offer and respond in kind.

Such a gesture would dramatically change the political atmosphere and also go some way to restoring Mbeki’s legacy.

This would open the way for Zuma to retain the most effective members of the Mbeki Cabinet, while disposing of those who have been primarily responsible for the incumbent's deepening unpopularity, such as the Ministers of Health, Safety and Security, Justice, Intelligence, perhaps Education, and most certainly the Pahad brothers, Essop and Azziz.

Zuma would have to accommodate some of his key supporters in Cosatu and the South African Communist Party (SACP), but I doubt he would give them any of the key economic portfolios. SACP leader Blade Nzimande, for example, is an education specialist and would likely be given that portfolio, while the SACP's Jeremy Cronin is a highly intelligent and rational individual who would do well in any ministerial position.

The question on every investor's mind is probably: What of Trevor Manuel? He has been an extremely competent Minister of Finance, but his association with GEAR has made him unpopular with the Left.

A really smart Jacob Zuma would make him Deputy President, as a striking gesture to reassure the international and domestic business communities — but that may be a bridge too far after Manuel's intimate relationship with Mbeki.

This is the most likely scenario.

What, then, of Zuma himself? What kind of President would he be?

Very different from Mbeki in almost every respect. Whereas Mbeki is highly intelligent and well educated, Zuma had to leave formal school after standard two when his father died and he had to start working to help support the large family. But to his great credit, he continued his education by correspondence while a political prisoner on Robben Island, which, combined with his political activities, has made him into a smart and literate man.

With this background, he is essentially a man of the people, with a charm and warmth that endears him to the crowds. He would not be the philosopher president. You would not hear him quoting Yeats or Shakespeare or delivering speeches of literary grandeur, but he has his ear to the ground and he knows what's going on. As the Afrikaners used to say of their political equivalents, Hy weet waar die volk se hart klop.

He is clever, but not too clever. Perhaps his greatest asset is that, unlike Mbeki, he knows his own intellectual limitations. He would not try to run everything himself. A Zuma administration, like Nelson Mandela's, would be more open and collegiate, with the President keeping a light hand on the tiller. He would let his ministers get on with the job of running their departments, while he concentrated on what he does best, which is mixing with the people, pressing flesh, listening to their complaints and trying to make them feel good. It would all be done in the name of returning to the ANC's tradition of "the collective."

As for policies, there could be some welcome changes. A much clearer and more vigorous set of policies to combat HIV-AIDS; a tougher line on crime; a tougher line on Zimbabwe, where Cosatu, Zuma’s closest ally, has been actively involved and grievously insulted by Robert Mugabe.

The worries are on the economic front, for although Zuma is not himself a socialist, he would come to power indebted to the Left. He would have to deliver some payback. He is not the sort of man to do anything silly, like "nationalising the commanding heights of the economy" which used to be an ANC mantra before the party came to power and faced global economic reality, but he might feel obliged to yield to Cosatu demands for an end to inflation targeting and, more seriously, to introduce protectionism in industries such as clothing, textiles and footwear where there have been massive job losses through cheap Asian imports.

Which brings me to my main concern about a Zuma presidency. His campaign has been a populist one, pitched to the aggrieved underclass who feel they have missed out on the new wealth flowing to the burgeoning black middle class and are accusing Mbeki of betraying the revolution.

It is an easy pitch to make, but a difficult one on which to deliver. And failure to deliver to that expectant constituency could provoke an angry backlash, with new accusations of "betraying the revolution" leveled against the new President. It is a familiar pattern which has led to the axiom that “revolutions end up devouring their own children”.

How Zuma might handle such a backlash is hard to judge, but it should be noted that history is littered with examples of embattled populists turning to demagoguery and repression.

More immediately, though, there is the problem of those corruption charges. The prospect of having a President living under a cloud of unresolved allegations of impropriety is not a comfortable one for a new democracy that came into being with such high hopes of being a moral beacon to the world. But that may well be where we are headed.

End quote.

(Suggestion: Google "Allister Sparks" to see what the guy has been up to until now.)
7.12.07 13:51


The long road to (taking press) freedom (away)

Earlier this year I wrote the ANC might want to get its hands on a national newspaper. Here is an article from The Economist on the topic.

Guess who's buying the press
Nov 8th 2007 | JOHANNESBURG
From The Economist print edition

The independence of South Africa's media is threatened by a takeover bid.

On paper there was nothing odd about Koni Media Holdings, a company with interests in advertising, wanting to buy Johnnic Communications, known as Johncom, one of South Africa's four leading media groups—except that the prospective buyers include several close allies of the president, Thabo Mbeki. One is his former chief of protocol, another is a special adviser. No less to the point, the newspapers they would like to buy, for a tidy 7 billion rand ($1 billion), are among the most critical of Mr Mbeki's government. In a country that has enshrined press freedom in its constitution, many feel there is a conflict of interest.

In August, in the latest round of press coverage to annoy the government, the Sunday Times, Johncom's flagship newspaper, ran a series of articles accusing the controversial health minister, Manto Tshabalala-Msimang, of being a kleptomaniac and a drunk. The articles were based in part on her confidential medical records, which were allegedly stolen from the hospital where she has been treated for various medical ailments. The ruling African National Congress (ANC) accused the paper of a gross breach of privacy and of pursuing a personal vendetta against the minister—who, however, has not sued for libel. (In the past, she had cast doubt on the link between HIV and AIDS, recommending beetroot juice as a cure.)

Similarly embarrassing articles for the government have flowed from other papers in the Johncom group (see chart). The opposition Democratic Alliance accuses the government of trying to silence dissent by buying critical newspapers. According to Reporters Without Borders, an international lobby group measuring press freedom, South Africa ranks 43 out of 169 countries—ahead of the United States. But some worry that this proposed takeover is part of a trend against press freedom, more than a decade after the end of the overt censorship of the apartheid era.

One bill being debated, for instance, is meant to shield children from pornography but could result in serious restrictions on publication of other articles. If adopted, it is likely to be challenged in the constitutional court. On several occasions, orders by other courts were granted to stop the publication of articles in the weekly Mail & Guardian, which regularly sniffs out corruption and other dodgy practices, though a recent appeal-court ruling should make this practice more difficult.

Jane Duncan of the Freedom of Expression Institute (FXI), a local watchdog, claims that the independence of the broadcasting regulator has been gradually eroded since the late 1990s. The government has been accused of turning the South African Broadcasting Corporation (SABC), the public broadcaster that remains the main source of information for most South Africans, into a lapdog. There has been an exodus of senior staff, and much criticism of Snuki Zikalala, an ANC stalwart who heads the news department at the SABC. A commission of inquiry concluded last year that some commentators notably critical of the government had been blacklisted from appearing or speaking on the SABC.

An alliance of groups, including FXI, trade unions and the Media Institute of Southern Africa, recently asked Mr Mbeki to revisit the composition of the SABC's proposed new board, which they say is neither representative (too many businessmen) nor independent enough. Raymond Louw, who heads the Media Freedom Committee at the National Editors' Forum, says that, though the press is quite free, official tolerance of media freedom and freedom of expression is diminishing.

The government retorts that although media freedom is sacrosanct the private media have at times abused this freedom and violated professional codes of conduct. Officials also argue that the main threat to media freedom is not the state but the fact that private newspapers are increasingly driven by commercial interests and do not represent a diversity of views. The ANC is mulling over the creation of a media tribunal to address these concerns, though it remains unclear what it would do.

As for the takeover, the government dismisses as “ludicrous and laughable” claims that it or Mr Mbeki himself had anything to do with the Koni bid for Johncom. But doubts persist. For one thing, it has been reported that Koni is seeking funds from the Public Investment Corporation, which manages government employee's pensions and is entirely owned by the government. For another, the Koni bid came little more than a week after the purchase was announced of about 30% of Johncom's stock by a business tycoon, Tokyo Sexwale, who happens to be another ANC stalwart, with a fair chance of succeeding Mr Mbeki as president.

end of quote.
8.12.07 23:02


Why I'm negative on the rand - Part IV

I've alluded to the "frail-Mandela factor", the "populist-Zuma factor" and the "let's-get-rid-of-Trevor-Manuel factor" as grounds for being bearish on the rand in the next 12 months. There are more reasons for being negative, of which the most important is the "let's-get-rid-of-Mboweni factor". This factor has the potential to destabilise the rand in the coming months like no other.

(And strangely, to date the SA media have hardly mentioned it....)

Tito Mboweni has been president of the SA Reservebank (central bank) since 1999 and has done an excellent job protecting the value of the rand, which is the primary goal of the central bank according to section 224 of the new Constitution of South Africa.

The president of the SA Reservebank is appointed by the president of the national government for a 5 year period. Mboweni's second 5-year term will come to an end in 2009, but the decision about the renewal of his contract for another 5-year period will most certainly have to be made already in 2008 - while Mbeki is still in the chair.

How this decision is made and who is appointed as president of the SA Reservebank for the period 2009 - 2014 could be a major destabilising factor for the rand throughout 2008 - if it's not handled carefully.

For instance, if Zuma is selected as ANC president in the next few weeks and the appointment of the president of the SA Reservebank is NOT made by Mbeki next year, but postponed until Zuma is in the chair, this will make the forex markets nervous no end.

And then, of course, there is the scenario where he is not appointed again, but a "more populist" candidate is appointed instead. Now, that would really cause instability. The worse case scenario: Trevor Manuel and Tito Mboweni go within months of one another.

No, no, there is still another (even) worse case scenario: Mboweni, Manuel and Mandela all leave the stage within a few months of each other. But, let's not sound alarmist.

I couldn't find anything in the Constitution, the Reserve Bank Act, or the regulations thereto, prohibiting Mboweni from accepting a third term. As far as I could make out, Mboweni could go on as long as he wanted to. And really, there is no reason to throw out a man who obviously knows what he's doing. And is still very young. South Africa simply hasn't got so many "potential central bank governors" hanging around, to just throw Mboweni out - and with him the government's hard-won market credibility.

Nevertheless, at this point it seems very, very likely to happen. In fact, in the next 18 months South Africa could be without it's 2 best functionaries in the Mbeki era, namely Manuel and Mboweni.

If the prospect of this happening doesn't make the forex markets nervous in coming months, I'll eat my hat.
10.12.07 11:14


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