Mandela’s Economic Legacy

A great South African, and probably the greatest ever South African, has left us for a new walk to immortality. I drove past Mandela Square this morning, and it occurred to me that this is now a memorial – to a man who many believe united our beloved country. But what of his economic legacy? Before he brought the ANC to government, there were fears he would be an anti-business leader, a communist sympathiser much closer in ideology to Fidel Castro than to Margaret Thatcher. We asked some of our experts for their views….

Dennis Dykes from Nedbank:
Nelson Mandela leaves a number of important legacies, but his main economic legacy was to settle business and investor nerves in the post-apartheid period by adopting a pragmatic rather than an ideological economic policy approach. He kept an open mind and it is often said that he was persuaded to follow a more market-based approach after discussions with global business and political leaders at the World Economic Forum in Davos in 1992. However, this did not mean that his compassion and concern for the poor and social justice was in any way diminished, with his government starting the strong drive towards addressing backlogs in areas such as housing, sanitation, education and health. Of course his status as a global icon also helped to market South Africa as a tourist and investment destination. His capacity to build national unity through actions such as those at the 1995 rugby world cup also helped build confidence in the new nation. In 1996, a health scare sent the rand tumbling, again underlining his central role. His economic legacy is significant and we need to reflect on how we can recapture some of that national unity of purpose that he espoused to grow the economy and address continuing inequalities in our society.

Neren Rau from SACCI:
It was definitely yet another demonstration of extraordinary leadership that Madiba succeeded in balancing the difference ideologies and political pressures within the Alliance to deliver a balanced approach to the economy.

Dawie Roodt from the Efficient Group:
The ANC morphed from a socialist-orientated liberation organisation into a neo-liberalist political party during the early 1990’s. This was fortunate for SA, a huge political change AND a significant change in economic policies may have been too much for this new democracy – Nelson Mandela was most likely the driving force behind this change of heart. In recent years, however, the true colours of the ANC with its socialist tendencies are reappearing again. Mandela was a pragmatist that was prepared to suppress his own ideological beliefs for the good of the country.

Frans Cronje from the SAIRR:
It was largely Mandela’s influence that saw the ANC abandon the afro-socialism that the party had advocated through the latter years of the apartheid system. In embracing markets and allowing for relatively conservative macro-economic policy Mandela allowed the rebuilding of the South African economy. This is a poorly understood fact but one that it our opinion was more important even that his investments in reconciliation.

Writer David Bullard:
Madiba had little influence on economic policies other than to put finance into the safe hands of Trevor Manuel. Now the commies rule.

Nedbank CEO Mike Brown
Madiba led South Africa from a closed state back into the democratic world and this allowed our economy to become part of the globalization trends that started in the 1990s.The South African economy of today has been a major beneficiary of our democracy for which we thank the father of our rainbow nation.

Raymond Parsons from BUSA:
It is difficult to find new words to describe the massive contribution which Nelson Mandela made to stability and progress in SA in the early years of democracy in SA after 1994. Whatever his initial ideological points of departure he soon put a strong stamp of pragmatism on economic policy and reached out to stakeholders like the business community to help undo the legacy of apartheid. An early visit to the World Economic Forum in Davos gave him new insights into an global economy from which he had been excluded for so long. His crucial support of the creation of Nedlac in 1995 was, through social dialogue, to provide the socio-economic dimensions of the reconciliation and nation-building to which he was so deeply committed. His pragmatism in economic matters at the time went a long way towards creating the consensual stability needed to underpin investor and business confidence in the formative years of SA’s new democracy. Already in 1996 he said in Parliament that SA needed a longer-term shared vision if it was to fully unlock its real economic potential and create a better life for all, a vision which his one-term Presidency unfortunately did not make possible. SA is still struggling to find this shared vision under the aegis of the latest National Development Plan and to rediscover the values that will make it possible.

Mike Schussler from economists.co.za
Yes I believe that the Mandela administration lead us to a more free economy and we have seen growth improvements over the fifteen years to 2008. Mbeki was essential in this; as was Trevor Manual, Derek Keys, Tito Mboweni and others. But of course the start was Nelson Mandela accepting that a generally mixed economy with a free market leading the way would be best. He also calmed everything down and business stayed and built the economy as did many thousands of entrepreneurs – some of whom had worked for the state before and then found that they had talents beyond paper work. I think if one looks at the adjustment at the time it was clear that labour productivity increased and capital costs declined, making the cost of doing business here much less until about 2007 when it started increasing again. The State Debt was reduced and the civil service became less until 2004 when it started increasing again. Reconciliation was as important to the economy after many years of mistrust and hate. Economies only grow when we have certainty, and his administration brought certainty.

Craig Pheiffer from Absa Investments:
The birth of democracy opened up the world to South Africa and brought with it both the good and the bad of being a member of the international economy. In the honeymoon years we did a lot that was right in maintaining the independence of the central bank, growing the pool of taxpayers, improving the efficiency of the tax system, balancing the national budget books, growing our foreign reserves and reducing our sovereign debt levels. Thanks to our glorious transformation we could also witness World Cup Cricket, Rugby and Soccer on our very own shores. Our markets attracted foreign investors and our domestic asset managers could invest larger and larger sums of money offshore. The downside to being part of the global economy has been the vagaries of foreign capital – easily being withdrawn when our domestic growth has stuttered or when emerging markets have collectively wobbled. But things have gone a little awry in recent years as the countercyclical fiscal policy has widened our Budget Deficit and increased our sovereign debt. Our currency has depreciated sharply and our current account deficit has widened as we struggle to keep growth at 2%, never mind 3% or the much higher levels of growth required to create sustainable employment. These have generally been tricky times for policy makers around the globe but we need to honour Madiba’s legacy by investing in our future through education and eliminating all of those labour market obstacles that are restraining our rate of growth from moving to a higher plane.

Conclusion: Mandela set this country on the right path. But if Malema ever gains real influence, Madiba’s economic legacy, as well as his legacy of tolerance and inclusiveness, would be in terrible danger.

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Will the Last Eskom Executive to Leave the Building Please Keep on the Lights?

I hadn’t been expecting any fireworks from today’s presentation of Eskom’s Interim Results to September, but I was wrong. Good thing I invited myself along (they had failed to). There was one unexpected, but nonetheless electrifying, announcement – that CEO Brian Dames has resigned. Dames, or Danes as my iPhone’s twitter app chose to re-name him, has been a massive improvement on the arrogant thugs who preceded him, and has done an impossible job pretty well. No real explanation why the big boss is being load shedded – just that it was for personal reasons. But Dames’ decision to power down followed uncomfortably soon after Eskom CFO Paul O’Flaherty’s unexpected departure. It leaves a big gap at the top of such an important player. Unless Eskom can bring on more capacity speedily and reliably, we are heading for dark days, indeed. The chat after the presentation was all about why Brian is being dis-charged – he is leaving at the end of March – with no one seeming to think this will be a good thing.
Here are a few of the other issues I noted during the presentation, and before the news of the CEO outage….

– Eskom chairman Zola Tsotsi says the recent emergency, when Eskom ordered big users to cut consumption to keep the system going – was the first since 2008, but the situation has improved over the past 2 weeks.
– Eskom still asks customers to curb demand for electricity. In their weird world enough of a good thing seems to be too much.
– Dames says ZA has a power system that is still constrained, but the system is stable – customers have responded extremely well.
– The 1st power from new Medupi coal-fired power station is due at the end of next year.
– Electricity demand in the next few years is lower than earlier expected. Thanks to a stagnant economy and an army of unemployed (my views, not those of Eskom).
– Eskom made a profit of 12.2 billion rand for the 6 months to September.

Dames signed off by suggesting we should cook on our holiday braai, so we use coal and wood and not his scarce product. If you go on holiday, don’t leave the lights on. Switch them off.

Conclusion: Power cuts are not the only crisis facing Eskom, which now faces a leadership crisis. They need someone exceptional to fill Dames’ shoes, but who would want that awful job?

Tweets of the Day:
Ellen DeGeneres (@TheEllenShow){ What nationality is Santa Claus? North Polish.
Matt Lucas (@RealMattLucas): Great news. I hear Cher is reforming.

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Corruption Eruption

Depressing reading in today’s Business Report, which says the latest Corruption Watch perceptions index shows that ZA has slipped down the ranking to 72nd out of 177 – from 69th last year. On the face of it, this is bad, but we asked a few of our experts for their views….

Mike Schussler from economists.co.za:
At this moment in time almost all the indicators for South Africa are slipping. Corruption, transparency, doing business and global competiveness indices have all slipped in the last few years. I am concerned that all these indices are not getting the country to act as we still fight about silly things such as socialism and capitalism when the world has clearly moved on to capitalism. The corruption index slippage however is not unexpected as many powerful people have their hands in the till. Think presidents and ministers and mayors and even businessmen. Our criminals are getting away with murder and our police chiefs are at best incompetent or part of the underworld. It is actually surprising that we did not slip more places, say to outside the top 100. Sad, really sad, that crime and corruption can become ever-more the norm.

Ian Cruickshanks from the SAIRR:
I think that the Corruption Watch Index shows that the SA level is stabilizing, but at a very unsatisfactory level. This confirms the public view of a low level of accountability, particularly amongst politicians – with abuse of position. And we have business leaders apparently fearful of speaking out because of possible negative impacts on their business. Recent press reports on the possible abuse of public funds at Nkandla, and the Gupta family riding roughshod over domestic regulations, have led to a growing negative view by South Africans and foreign investors. I think this could be having a severe impact on foreign investment.

Azar Jammine from econometrix:
Even in 72nd place South Africa is still in the best half of corruption perceptions in the world. So it is not a total disaster by any stretch of imagination. What is of concern is the trend which has deteriorated significantly over the last few years. What is particularly concerning is that Africa as a whole is considered the most corrupt region of the world. South Africa is one of the least corrupt nations in Africa – but other African nations have become less corrupt while SA has been becoming more corrupt. Most places where you or I do business operate in a non-corrupt way, but clearly the perception is the more you have to do with public sector bodies, the more corruption is becoming endemic. This happened to coincide with the ascendency of Jacob Zuma to the leadership of the ANC. It has also been a period during which SA’s economic performance, related to other emerging nations, has deteriorated.

Neren Rau from SACCI:
It is not as much a surprise as a disappointment. Our members were becoming optimistic that, while we may be losing individual battles, SA was making some progress in the war against crime and corruption. The decline in the ranking unfortunately shows that any positive perceptions were more attributable to business being overwhelmed by other challenges as opposed to any gain in respect of the war against crime and corruption. A partnership between business and government is key to dealing with this challenge with, as a prerequisite, each partner willing to accept its own shortcomings in this regard on entering into the partnership. SACCI has had some success in partnering with the police services on specific challenges faced by our members.

Conclusion: Whether or not the scourge of corruption is growing, the perception is that it is getting worse in South Africa. And, sadly, we are not getting much of an example from our political leaders.

Tweets of the Day:
Gert V8 ™ (@gertmods): Bought a book on the history of flour the other day. Just sifting through it now.
Funny Tweets (@iQuoteComedy): What if soy milk is just regular milk introducing itself in Spanish?

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Nkandla: Don’t Shoot the Messenger

There have been suggestions that the Mail & Guardian was wrong to publish what it claims are extracts from the Public Protector’s report into Nkandla. It was a draft report and may change. However, the counter-argument is that if our President has indeed been siphoning off public cash for this private complex, and has been lying about this, then there is a compelling argument that this was a worthwhile exercise. We asked a few of our experts for their views….

Journalism Professor and former Editor of the M&G Anton Harber:
The saga of the Nkandla report has shown that attempts to suppress such information will only fire up those who are determined to get it out. Censorship was defeated in the process, as was a deceitful attempt to protect the president from public accountability. Would it be more fair under regular circumstances for such reports to be finalised before being released? It probably would be, but in this instance what took precedence was getting the information out in the face of attempts to suppress it. As long as the reports make it clear that the findings are not final, then publishing it serves the fundamental constitutional values of holding the powerful to account and enforcing open government.

Mario Pretorius of Telemasters:
The thoroughness of Ms Tuli Madonsela means that the Final Report on Nkandla may differ around the edges, but the core will remain: current President Jacob Zuma is called a liar and a thief. No efluxion of time will alter the finding, unless she is silenced to Tula Madonsela. Give that girl a Bells. As for the ruling party, nay kleptocratic kakistocracy, I hope with every fibre in my being that these charges will stick and bring down this sordid mess of dream poachers. Give that man a jail cell.

Jeremy Sampson of Interbrand Sampson:
I would suggest the job of the government and of the President, who are all public servants, is to lead by example for the good of all South Africans. If it was not for the media, the South Africans voters would not know of the outrageous pilfering of State funds – that’s yours and mine, not theirs – the lying, the self-enrichment of a totally corrupt government. We are told daily of the criminality and lack of accountability. The forefathers of the ANC must be turning in their graves. Mr Mandela, if he is aware of what is going on, would be very saddened. It’s about time those few good men left in government stood up; otherwise they will be tarred with the same brush.

Journalist and Broadcaster Benedicta Dube:
At what point will the government under President Jacob Zuma respect the role of a free press and at what point will those who advise the president realise that the more you hide information, the more journalists will want to satisfy their own curiosity? Gagging the press on Nkandla will not dilute the stench that it represents. I wish those in charge could realise that South Africa has bigger problems than Nkandlagate, but unfortunately it happens to define exactly what is wrong with this country’s leadership.

Leon Louw from the Free Market Foundation:
The notion that there are security excuses for media muzzling is too manifestly absurd to be dignified by countervailing comment. All there is to see is readily visible in detail by way of three easy options: flying low over Nkandla as I have done, zooming in with Google Earth as I have done, and looking from a nearby hilltop (with binoculars, telephoto lens or telescope if you are visually challenged) which I haven’t bothered to do.

Conclusion: When we see the excellent job done by the M&G, we understand government’s intention to introduce new Secrecy legislation. Very worrying!

Tweet of the Day: Puns (@omgthatspunny): Velcro – what a rip off!

ZA Confidential is e-mailed to subscribers. For details on subscription rates, please contact zaconfidential. Media releases, invitations to presentations, and feedback on ZA Confidential can also be sent to the same address. Upgrade your conference or event by hiring ZA Confidential Editor John Fraser as a speaker or MC.