Rating agencies are meant to give comfort about an issuer’s ability to repay debt. Ratings are essential in determining the level of interest rate that a borrower must pay. Inaccurate ratings, therefore, distort both the prices of debt instruments and the interest rates payable on them. As history has shown, this creates asset bubbles that eventually burst, disrupting the functioning of financial markets.
The three dominant international credit rating agencies – Standard & Poor’s, Moody’s and Fitch – have been accused of many faults including:
These shortcomings originate from their ‘issuer-pays’ business model. The institution being rated pays for the rating which is used by investors. This means that the model has an inherent conflict of interest.
Although this has been evident through various crises – most notably the financial meltdown in 2008 – regulatory mechanisms are yet to address this problem. And, despite these known weaknesses, rating agencies are still being referenced in key financial market decisions.
Why current regulations aren’t working
A number of studies have identified the issuer-pay revenue model as a key driver of conflict of interest. Here are four reasons why I think the current attempts to regulate rating agencies will not address conflict of interest.
The first big problem is the relationship between the rating agencies and the issuers. This relationship naturally creates pressure for both the lead rating analyst – around which the whole rating process is centred – and the rating committee to give favourable ratings over time.
This is how the process works: after an issuer contracts a rating agency, the rating agency assigns an analytical team (lead and support analysts) to gather information about the entity from different sources they deem credible. The analytical team makes recommendations to a rating committee, convened by the lead analyst. The lead analyst also determines the size and composition of the rating committee based on the size and the complexity of the credit analysis.
The second problem is that rating agencies are bound to be concerned about the sustainability of their revenue sources because they’re profit-driven businesses. They will fight to protect their income at the expense of aggressive or objective ratings that could compromise revenues, although in the long run will damage their businesses.
The third problem is that the individual employees of a rating agency face no criminal liability. Conflict of interest usually manifests itself through members of the analytical team.
Lastly, the credit rating industry is highly concentrated. Moody’s Investors Service and Standard & Poor’s together control 80% of the global rating market. Fitch Ratings accounts for a further 15%. The ‘big three’ credit rating firms seek to maintain dominance in the industry through discouraging any activities that may lead to a loss in their market share. They are unwilling to allow competition, suggesting that it could lead to poor ratings.
Following the 2008 Global Financial crisis the US, European Union, China and South Africa introduced legislation to address the flaws in rating agencies’ operations.
Although strict civil laws are necessary to deter misconduct and encourage compliance, enforcing civil regulations only is both an ineffective and expensive way of curbing conflict of interest. Tighter scrutiny of credit rating agencies by investors, regulators and the media is also not effective.
Despite these regulatory responses, rating agencies are still being caught on the wrong side of the law. Recent cases are proof of this. But there’s still the possibility that a lot of wrongdoings go undetected.
Earlier this year the European Securities and Markets Authority fined the Fitch group of companies in France, Spain and the United Kingdom a total of €5 132 000 for failing to maintain independence and avoiding conflict of interest. Fitch UK, Fitch France and Fitch Spain issued ratings on Casino Guichard-Perrachon, Fondation Nationale des Sciences Politiques, and Renault. This was despite the fact that they knew one of their shareholders – which indirectly owned 20% shares in each of the Fitch group companies – was also a board member of the rated companies.
In 2018, China suspended licences held by Dagong Global Credit Rating, one of China’s biggest agencies. Dagong was found guilty of submitting false information to regulators and charging borrowers very high fees, actions that regulators said compromised the rating agency’s independence.
In South Africa, the Financial Sector Conduct Authority recently found the Global Credit Rating Agency guilty of failure to avoid a conflict of interest. The agency was fined an administrative penalty of R487 000. The CEO of the GCR undertook to an issuer, whose credit rating had expired, that the GCR would issue a credit rating. This was contrary to the rules that required the CEO to act separately from the agency’s rating analysis team.
At the time of undertaking, the issuer was the process of procuring the services of a rating agency, a process in which global agency was one of the bidders.
A shortfall in the regulatory mechanism
The continuing infringement by credit rating firms on rules and analysts’ actions that compromise the independence of their opinions shows there is a major shortfall in the current regulatory mechanism.
Although problematic, abandoning the ‘issuer-pays’ business model is not the solution and will push some rating agencies out of business.
The only solution is to criminalise rating misconduct such as breaching conflict of interest. The strict monitoring, scrutiny and penalising of credit rating firms alone will not be enough to deter bad behaviour. Individuals responsible for breach of conflict of interest rules should face criminal prosecution. If this does not happen, analysts will not hesitate to take chances.
South Africa’s economy is in dire straits. Unemployment has reached a 15-year high of 27.6%. And in the first quarter of this year GDP growth dropped by 3.2%. That’s the biggest quarterly drop in a decade.
Considered in conjunction with the country’s dismal education outcomes, which the IMF found are perpetuating inequality and contributing to the country’s low economic growth, and the possibility of a rating downgrade, the outlook isn’t auspicious.
Academics and political leaders have long warned that a combination of high youth unemployment, poor educational outcomes, and high inequality levels will eventually explode into large-scale social disorder. There has indeed been a steady rise in the number of protests. The country is now classified as a fragile state by Corruption Watch.
However, the recent elections provide two interesting pointers. The first was the extremely low voter turnout of just 49%. The second was a near doubling of the Economic Freedom Fighters’ (EFF) share of the vote, from 6.4% in the 2014 poll to 10.8% in 2019. Taken together, these factors suggest that South Africa’s vulnerable citizens are frustrated with the established political parties. However, they are not as yet widely attracted to the potential re-distributive policies of populists.
This raises a question. If South Africa’s political and socioeconomic stability is so fractured, how has the country managed to defuse the ‘ticking time-bomb’ for so long?
According to economists Daron Acemoglu and James Robinson, the democratic system attempts to balance two forces. The revolutionary redistributive pressure of the citizens on the one side, against the repressive power of the elites on the other. But high levels of inequality interfere with democratic consolidation and make revolutionary change more attractive. For self-preservation reasons, elites must stomach high tax rates, or land and capital redistribution.
In the first decade of democracy in South Africa, the country followed a path of financial and trade liberalisation as it re-engaged with the global economy. The relatively strong economic performance then enabled the government to placate the formerly disenfranchised through redistributive policies. The key ones were black economic empowerment and social grants. This was underpinned by an effective tax system.
Unfortunately, the ability to balance the insider-outsider economy with social support was then significantly rocked by two major disruptions. The first was the global financial crisis. The second was the misrule of President Jacob Zuma.
Over the next decade, state capture and crony capitalism, coupled with economic decline, weakened the middle class and entrenched meritocracy. In turn, this raised pressure for greater re-distributive policies, both among factions of the ANC and eventually with the emergence of the EFF. The dire state of private sector investment and growth meant that the increased redistributive pressure was initially alleviated by public sector employment creation. This grew from 2.2 million in 2008 to 2.7 million by the end of 2014.
But in recent years, as the corrosive effects of corruption took hold, economic decay has become entrenched. This has resulted in declining tax revenues and spiralling state-owned enterprise debt. Political factionalism and policy paralysis have also increased.
Consequently, the government no longer has the financial wherewithal to fund the dysfunctional and indebted state-owned enterprises. These enterprises have been associated with the failed developmental state ideology. Weakened government finances have also made it difficult to provide social support via public sector employment.
As a result, the African National Congress (ANC) has increasingly turned to desperate policy debates such as expropriation of land without compensation, prescribed assets, off-shore income taxes, and changing the mandate of the South African Reserve Bank to print more money.
To make matters worse, the global economy is experiencing instability associated with trade wars and populism. South Africa’s economy will therefore likely continue to perform worse than the slowing global economy.
Tough choice ahead
If the country is to survive its current crisis, the government will need to undertake two difficult tasks simultaneously. It will need to:
refocus on resuscitating inclusive growth by supporting the informal economy and removing red tape for small, medium and micro-sized enterprises,
allow the private sector to invest in state-owned enterprises, and
facilitate the move away from a fossil-fuel based mining economy.
At the same time, the government will also have to free up budgetary resources by reducing the size of the bloated public sector and withstanding trade union wage demands.
If the inclusion of left-leaning ministers in the new cabinet and the recent contradictory policy statements from ANC leaders are a precursor to continued fractional government paralysis, then the country can expect even more economic instability and policy stagnation ahead.
Eventually, this will lead to significant socio-political stress as the private sector disengages and disinvests. The public sector will collapse under its own weight, and disenfranchised citizens will clutch at populist straw men.
Given the dysfunctional state of the ANC alliance and the over-arching quest for ‘unity’, it is apparent that President Cyril Ramaphosa must make a choice between saving the ANC alliance or saving the country. He can’t save both. Let’s hope he chooses wisely.
South African President Cyril Ramaphosa has selected a Cabinet which shows that he and his allies believe they are now firmly in control of the governing party and can shape the government’s agenda. What is not yet clear is whether they are right.
Ramaphosa’s choice of his cabinet was particularly important because the government in South Africa is at a crossroads.
The governing African National Congress (ANC) has been the site of a factional battle between the president’s allies and supporters of former president Jacob Zuma. Ramaphosa’s group has vowed to stop the misuse of public money and trust, of which the Zuma faction is accused. But their credibility is dented by, among other factors, the claim that they are too weak to counter the Zuma faction’s influence over the ANC. Their detractors point to the continued presence in the national government of ministers from the Zuma faction who are accused of abuses.
A key indicator of whether the government can win back public trust is, therefore, who Ramaphosa appoints to his Cabinet.
Before the announcement, he and his allies seemed to face an impossible task. They had to make good on his promise to trim down the Cabinet. But they must know that, in any governing party, fewer jobs means more resentment: one reason why Zuma became ANC president at the expense of his predecessor Thabo Mbeki is that Mbeki rarely replaced ministers and so ANC politicians believed that their job prospects were slim until he went.
Second, they had to meet public demands to remove Zuma faction ministers. But governing party leaders who deny posts to their opponents within the party are likely to be accused of purging them and might be resisted by anyone outside their faction.
A clear message
Given these obstacles, the Cabinet appointments send a clear message that Ramaphosa and his allies believe that, having improved the ANC’s vote compared to the 2016 local government elections – the first time in 15 years that it did better in any election compared to the previous one – they are firmly in control.
Only five of the 28 ministers are linked to the Zuma faction: one of them, Nkosazana Dlamini-Zuma, is probably no longer aligned to it. She was the faction’s choice for president but was not overly enthusiastic about its style of politics then and seems even less so now.
So only one in seven ministers are aligned to Zuma’s group and none are in posts regarded within government as senior positions. The Cabinet has been reduced although, as Ramaphosa acknowledged when he announced the appointments, not as much as he would like. So unconcerned was Ramaphosa about resistance within the ANC that he appointed an opposition politician, former Cape Town mayor Patricia de Lille, as his public works minister.
Ramaphosa and his faction did not ignore resistance within the ANC. The Cabinet was announced five days after he was inaugurated, an unusually long delay: the announcement was twice postponed on the day. This signalled that there had been intense bargaining within the ANC.
The Ramaphosa group lost one important battle. They had hoped to drastically cut the number of deputy ministers but reports suggest that they bowed to resistance from various lobby groups, among them the Zuma faction: there are 34 deputies, three fewer than under Zuma.
But their strategy seems to have been to give ground only if they believed this would not prevent them from appointing the Cabinet they needed to pursue their agenda. So, as they did when Ramaphosa chose his first Cabinet, they appointed Zuma faction members in posts which are not central to their plans or as deputy ministers, who are not members of the Cabinet and have no say over what it decides.
The Cabinet signals to the Zuma faction that the Ramaphosa group believes their star is waning and that they are not strong enough to turn the tide. They are probably right.
First, the election was a huge defeat for the Zuma faction. Three parties formed by or including politicians linked to the faction made no headway in the May election. While parties formed by supporters of factions which lost ANC battles won over 8% in 2009 and 6% in 2014, the three parties – African Transformation Movement, African Content Movement and Black First, Land First – polled 0,6% between them.
In the North West province, the removal of a Zuma faction premier and his replacement by a Ramaphosa faction appointment boosted an ANC vote which had fallen below 50% in by-elections to over 60%. If they were to lead the ANC again, it would probably lose its majority and most active ANC members must know this.
Second, Ramaphosa’s government has boosted the capacity of the National Prosecuting Authority to prosecute crimes committed by politicians accused of misusing public office. There are signs that key Zuma faction politicians are in the firing line. This will hamper their political role and further damage their credibility.
But there is a potential threat to Ramaphosa from within the ANC.
Mabuza is now politically isolated: the Zuma faction feels he betrayed him while the Ramaphosa faction never trusted him. But he seems bent on reinventing himself. In the weeks before the Cabinet appointment, it was rumoured that he would not be reappointed. He reacted by delaying his swearing in as a member of Parliament and appearing before the ANC integrity commission to answer allegations of corruption published in the New York Times. His aim was presumably to discredit the claims and so to present himself as a champion of clean government and a plausible next president.
His plan worked in the short-term – he is back as deputy president. Ironically that may make it harder for him to build support. ANC history shows that candidates who are removed from government office have plenty of time to campaign for support; some have used this to win election to national or provincial office. Mabuza will now have less time on his hands to campaign behind the scenes as he tackles his governmental duties.
The odds seem stacked against Mabuza if he is eyeing the presidency, for himself or his ally Paul Mashatile, the ANC’s treasurer. But he still seems a likelier contender for power than the Zuma faction. If he does aspire to lead the ANC, the threat to the Ramaphosa group may shift from the Zuma faction to Mabuza.
President Cyril Ramaphosa takes the oath of office at his inauguration by Chief Justice Mogoeng Mogoeng. EPA-EFE/Stringer
The ANC’s integrity commission’s job is to root out unethical conduct in the party. The Public Protector’s responsibility provides oversight over the government. It’s empowered to “investigate, report on and remedy improper conduct” byall state organs.
Ramaphosa needs both if he is to succeed in cleaning South Africa’s body politic of corruption. He, therefore, can’t afford to run roughshod over either.
All the incoming presidents since democracy in 1994 have announced their deputy presidents, cabinets and deputy ministers on the day after their inaugurations. Ramaphosa is the first who has not done so.
Since the inauguration, and until the members of a new cabinet are sworn in, South Africa is without a cabinet. For this period, Ramaphosa is the only member of the Executive. Not even the Deputy President is available.
TheConstitutionis clear about the fact that the President must assume office within five days after his election by Parliament. And that the first sitting of the National Assembly after an election must take place not later than 14 days after the election results are announced.
But it’s silent on the Cabinet. Theoretically, at least, this means that the President can continue without a cabinet for an unspecified period.
The main reason Ramaphosa hasn’t been able to act with haste is that theintegrity commissionhas made unfavourable pronouncements against some prospective Cabinet members. One of them is his deputy David Mabuza. And, thePublic Protectorhas recommended he take disciplinary action against Pravin Gordhan, his trusted former Public Enterprises Minister.
The integrity committee is made up of nine ANC veterans chaired by former Robben Island prisoner George Mashamba.
The ANC’s NEC flagged22 peopleon the party’s 2019 parliamentary candidates’ list as potentially being improper. This included Mabuza and the Minerals and Energy Minister Gwede Mantashe. Both are also part of theANC’s top six leaders. They are respectively the party’s deputy president and national chairman.
The integrity commission could potentially develop into a powerful organisational instrument in Ramaphosa’s drive against corruption, and torenew the ANC.
The Public Protector, Busisiwe Mkhwebane, has recommended that Ramaphosa takedisciplinary actionagainst Gordhan, a trusted ANC colleague who has served as public enterprises minister, the country’s finance minister on two occasions, as well as head of the South African Revenue Service.
Mkhwebane has accused Gordhan of behaving illegally by approving an early retirement agreement with the deputy head of the South African Revenue Service, Ivan Pillay. Gordhan disputes the accusation and ischallenging the public protector’s reportin court.
It would be indefensible for Ramaphosa to ignore Mkhwebane’s report and to appoint Gordhan. Only a court judgmentcould set asidethe public protector’s report.
The office of the Public Protector has the potential to be another indispensable instrument in Ramaphosa’s anti-corruption arsenal. He cannot, therefore, undermine it by ignoring a decision it has taken.
On the other hand, he will be loath to sacrifice Gordhan.
The seriousness of these considerations – and their dire impact on the executive – shows how respectful Ramaphosa is of these anti-corruption institutions.
The fact that he stood aside and allowed Mabuza, who was key to his election as president of the ANC inDecember 2017, to be put through the integrity commission’s processes even though this meant not pulling off a speedy appointment of the cabinet, is a testimony to his determination to respect due process. Ramaphosa has alsoleft Gordhanto deal with the Public Protector’s report.
After being cleared by the integrity commission, Mabuza was due, belatedly, to besworn in as an MP.
This has removed uncertainty about his future as Deputy President. But it’s given him ammunition for the future – because he can point to the fact that he’s been exonerated of any wrongdoing by his own party.
Ramaphosa is inching closer to being able to make his vital cabinet appointments. He will want to do so as soon as possible. Constitutionally, the country’s executive power is vested in the President – but he exercises most of his power in concert with Cabinet members.
That’s not to say that this lacuna has left government departments entirely in limbo. They are still managed by directors-general, and the laws they have to implement are not affected bythis situation.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
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More than a decade after being launched with a great fanfare of publicity, Jamie Oliver’s restaurant group has been taken into administration with the potential loss of up to 1,300 jobs. One person unlikely to be redundant, though, is Oliver himself, as the 43-year-old chef and television presenter will almost certainly continue with his television work and the sponsorship deals and advocacy work that his celebrity has brought him.
It is easy to be cynical about celebrity enterprises, whether they are built on real skill – as in the case of Oliver – real talent or pure celebrity status, as in the case of the Kardashians.
Admittedly he was lucky in getting his break while working at the River Cafe in West London where a film crew was making a documentary and identified his chirpy TV presence as the next big thing in TV chefs. As one commentator remarked at the time:
While some have been par-boiling for decades, young Jamie had put in a mere soupcon of an apprenticeship before his star quality was spotted at London’s famed River Cafe. Take one lad, sprinkle with some clever sexy marketing, add wacky camera angles, and hey presto, a fully-formed superchef is born.
But Oliver was – and is – a natural on television. And he has used his undoubted star power as an advocate to try to get people to understand about healthy eating – especially for children and young people – and the importance of home cooked food.
Various popular food brands have leveraged off his popularity and credibility. But his latest association with oil and gas company Shell certainly caused a lot of comment – and in the current climate change debate, we doubtless have not heard the last of it.
The contradiction that he’ll be revamping the oil giant’s food offering is unmistakable to those concerned about climate change – he has been praised as an “environment champion” by the UN’s environment programme after years of campaigning, while Shell’s business plans don’t come close to doing what is required to address the climate crisis.
A lot on his plate
So enough of the man, what about his business skills? This is where it might be that the problem lies. While celebrities can and do move into other business for which they have not been trained – Victoria Beckham as fashion designer comes to mind – it is not an easy transition to go from being a TV personality to running what is effectively a large and complex hospitality business. While building a Michelin-starred restaurant such as Le Manoir aux Quatre Saisons requires high-end culinary skills, it is after all only one business. On the other hand, as Gordon Ramsay found, even having a few premium establishments is a tough business model.
Of course Oliver himself was not running the business on a day-to-day basis, but he was the driving force behind it and it may be that he did not have the experience or knowledge to recognise that a fashion for dining out is just that – probably temporary when the economy is on the up and people aren’t fearful for the future. At the same time people have been tightening their belts – literally and metaphorically – and while people are still buying food from restaurants, the number of people actually going on “dinner visits” is falling while the number of people taking advantage of the growth of food delivery companies is on the rise. For a branded restaurant chain like Jamie’s which is about the experience as much as the food, this is not good news.
When the business environment changes you have to be fleet of foot and either innovate your product – change it to meet the change in the environment – or at least drawback enough to reassess where to go next. The US restaurant market seems to be particularly good at this, for example, regularly remodelling one’s restaurant space and menu format. Fast expansion for a chain of restaurants is always risky, but – more specifically – here are some of the factors I consider to be key business problems for Oliver’s restaurant empire.
Hard to swallow
The restaurant business is tough. Every day small independents are closing. That has been the case for as long as I can remember – and many new restaurants close in their first year of trading.
The chain restaurant trade is newly highly competitive – over the last few years masses of new mid-market restaurants and cafes opened – Byron Burgers, Five Guys, Leon, Joe and the Juice and many more. The market is saturated and this is not like internet shopping where the world is your oyster – restaurants are service businesses that are geographically constrained. People have to get to them and every table not filled on a night is a loss.
Mass marketing a premium product is difficult. This is what Oliver said about the vision he had for his restaurants: “We launched Jamie’s Italian in 2008 with the intention of positively disrupting mid-market dining in the UK high street, with great value and much higher quality ingredients, best-in-class animal welfare standards and an amazing team who shared my passion for great food and service. And we did exactly that.”
But these values come with a price and it isn’t a price everyone can pay and those that can pay, cannot pay every day. Mass-market restaurant chains are far cheaper to run and have a much bigger target market – think McDonald’s, Burger King, Greggs.
There is no doubt that a long stretch of economic uncertainty and low wage growth has been a factor in this story – but it cannot just be put down to that. Successfully running restaurants is hard and running a large number of them is a good deal harder. Being a brilliant young chef is one thing – running a business with thousands of employees and a multi-million-pound turnover is quite another.
South Africans recently went to the polls in a national election which the African National Congress (ANC) won by a wide margin. The incumbent president Cyril Ramaphosa will shortly appoint a cabinet after parliament officially declares him president. Thabo Leshilo asked Mzukisi Qobo, Cheryl Hendricks and Seán Muller what he should focus on.
Given that Ramaphosa probably has less than five years in the job, what cabinet posts should be his top priority?
Cheryl Hendricks: He needs to leave a legacy and live up to his promise of a new dawn. He, therefore, needs to concentrate on a few things that will make maximum impact. These include changing the conditions that generate high levels of inequality, as well as those that have made South Africa’s state institutions dysfunctional and have reduced its international standing.
So his top priority cabinet posts should be basic education and higher education, economic development, finance, trade and industry, rural development and land reform, public enterprises, international relations and science and technology.
Finally, he needs to attend to the representation of women. South Africa has lost a lot of ground in the struggle to translate gender representation into gender equality and women’s peace and security.
Seán Muller: There are four main dimensions that could be considered: strategic institutions, policy direction, the effectiveness of the state and institutions for delivery. Ideally, Ramaphosa needs to pursue major improvements on each of the four dimensions in parallel.
What will be crucial in the context of rolling back the influence of state capture on strategic institutions will be who he appoints to justice and correctional services, police, state security, as well as the economics cluster (notably finance and public enterprises).
Then there are the posts that will be important in determining policy and delivery of social services. These include social development, health, education, water and sanitation, transport, and human settlements. Many of these are also important for economic services, along with departments like energy, mineral resources, communications, telecommunications and postal services, tourism and agriculture, forestry and fisheries.
Finally, there are departments that should play a key role in the effectiveness of the state itself. These include the departments of public service and administration, and cooperative governance and traditional affairs. Within the presidency, there’s performance monitoring and evaluation.
To the extent that prioritisation is necessary, Ramaphosa has to ensure that reform of critical institutions is placed first – for the simple reason that everything else will be compromised if this fails.
Mzukisi Qobo There are limits to Ramaphosa’s reform agenda in the next five years. For him to succeed, he will need to rely on highly competent technocrats to drive change within government, take bold and decisive action in reforming institutions early on, and take measures that may make him unpopular but have good results. For this to happen he will have to stare his party down and be his own man. The last time he put his cabinet together, his party constrained his options. The result was a watered-down compromise. He can’t afford that this time.
But it will be hard for him to find capable ministers. This is true even in the economic cluster, apart from Tito Mboweni in the finance ministry and Pravin Gordhan in the department of public enterprises. Yet the economy is an area that will likely define the next five years of his term (if he completes it). With unemployment at 27.6%, economic performance and job creation, in particular, will be yardsticks against which his success will be measured.
What attributes should he be looking for in these key positions?
Cheryl Hendricks: People with integrity, people who have leadership skills and people who have a vision for the positions they will be stepping into. People with fresh ideas to deal with old challenges and who are willing to do the hard work it will take to rebuild the country. He needs a cabinet with a healthy mix of experience and youthfulness and gender balance.
Seán Muller: A common error is to think that ministerial positions should be filled on the basis of area-specific expertise. This reflects a fundamental misunderstanding of the role of ministers relative to senior officials (like the director general of a department). Ministers serve a political function and need not have any particular expertise in an area.
What matters is a general level of competence, commitment to their mandate and the public interest, and respect for the separation between political and bureaucratic competence. A minister’s core functions are, arguably, to ensure that the officials leading the department are the best – technically and ethically – and that they are allowed and enabled to do their job.
Public confidence in the integrity of members of Cabinet is an intangible factor that is also important. But there’s tension between this and the challenges Ramaphosa faces within his own party. It is these that are likely to lead to the greatest compromises in cabinet appointments. Ultimately, it will do the country little good if he appoints the best Cabinet possible without factoring in party political considerations, only to then be so weakened within his party that he and his appointees cannot pursue the public interest.
Mzukisi Qobo: The cabinet is a reflection of the quality and depth of the governing party’s leadership bench, whose heft has been in decline over the years. Even the best of its parliamentarians will struggle to bring renewed energy to the job. Many of them are recycled, as they were part of the political arrangements in the last nine years of corruption and institutional decay under former President Jacob Zuma.
And, there is no evidence that they did much to ameliorate its damage. Some, such as Jeff Radebe, have been in government for two decades. There is no evidence of innovative thinking in their approach to governance.
Under such circumstances, Ramaphosa may find himself relying a lot on informal networks, especially business links, outside of government. But this could undercut his credibility among constituencies within the governing tripartite alliance.
Success requires a combination of experience, competence, integrity, and fresh ideas. This is particularly true in ministries such as the National Treasury, and those that interface with critical sectors of the economy such as agriculture, telecommunications, mineral resources, energy, and transport.
Since early 2018 there have been strong indications that Ramaphosa will overhaul the current structure of cabinet as part of an institutional reconfiguration of government. The low-hanging fruit will be to reduce the size of the cabinet. Even a country like China, 20 times larger than South Africa, has a cabinet with 24 ministers compared to South Africa’s 35. There is more emphasis on quality and meritocracy and less on viewing cabinet positions purely from the view of dispensing patronage.
Ramaphosa has a very difficult task ahead. Constitutionally, he can only appoint two individuals who are not members of parliament to his cabinet. That means he has to choose his cabinet from the list of MPs who are political fossils and were, by and large, part of the problem during Zuma’s administration.
The reality is that most MPs have a poor grasp of their oversight roles, are often out of depth on how government works, are under-prepared, and many see themselves as no more than deployees of the ruling party.
In our latest podcast, we taste a rewarding Stellenbosch Cabernet Sauvignon, the Kontras.
Michael Olivier orchestrates the tasting, while John Fraser does his best to disrupt proceedings. The other tasters are Clientele’s Malcolm MacDonald, Gumtree Auto’s Jeff Osborne and economic superstar Mike Schussler.
Click below for the podcast:
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