Alan Hirsch, University of Cape Town

To some observers, South Africa’s recent investment summit led by the president Cyril Ramaphosa, seemed like much ado about nothing. Several of the projects announced had been incorporated into companies’ plans for some time. And, combined with the fact that the summit had a showbiz style about it, it’s tempting to see the event as little more than smoke and mirrors.

But the summit could be more than the sum of its parts. It could be an important step forward to reviving economic growth in South Africa.

One notable outcome was that, in one crucial respect, Ramaphosa nailed his colours firmly to the mast. After the confused and confusing sophistry of the era under Jacob Zuma’s presidency, Ramaphosa committed his government to a market economy, where obstacles to private investment would be removed, where possible.

This moment is reminiscent of 1980 in India. That year, Indira Gandhi committed the Indian Congress Party to business-friendly policies. Reforms were slow, picking up a little under Rajiv Gandhi a few years later. And the major structural economic reforms only took place in 1991 under India’s new Prime Minister P. V. Narasimha Rao and the new Finance Minister Manmohan Singh.

Yet, India’s growth spurt clearly began after Indira Gandhi’s signalling and Rajiv’s initial tinkering. It didn’t wait for Rao and Singh’s dramatic reforms a decade later.

This is consistent with contemporary analysis of economic growth. Recent thinking by renowned Harvard-based economist Ricardo Hausmann and colleagues suggests that what stimulates significant growth acceleration is often not major structural changes – it can be significant incremental shifts.

The economists found that major structural reforms seldom preceded significant growth accelerations. As his colleague Dani Rodrik put it recently:

in economies that suffer from multiple distortions, small changes can make big differences.

The small change made in India was a clear shift by the dominant political party towards business-friendly policies.

Could the same be true for South Africa? Has South Africa reached it’s own Indira Gandhi moment?

Signals at the summit

Amid a great deal of fanfare, an audience of 1300 business and government leaders, and one of the globe’s most successful entrepreneurs Chinese internet commerce magnate Jack Ma, Ramaphosa announced R209 billion worth of investment at the summit.

It was important for the president to meet expectations by announcing concrete outcomes. But what was possibly more important was that he used the opportunity to send out a number of signals.

To please his own constituencies in the African National Congress (ANC) and the unions, he referred to the end of the “investment strike”; some critics of business had said they were holding back their investments as a deliberate policy.

More significantly, most of his messaging was aimed at reassuring the business community. He talked about how their investments and property were safe and how their factories were protected from expropriation by an independent judiciary and the rule of law.

Land reform would continue, he said. But it would be “fair and equitable”. Transformation would continue:

while providing certainty to those who own land, those who need land, and to those who are considering investing in the economy.

Perhaps the most telling signal was the apparently off-the-cuff remark he made dismissing the concept of “white monopoly capital”. At the dinner which followed the conference he said:

We have become accustomed to … treating our entrepreneurs and business-people (badly) and called them all sorts of names. We’ve treated them like enemies and… (called them) white monopoly capital – that must end today.

The term “white monopoly capital” is an accurate approximation of the distribution of economic power under apartheid, and much of the imbalance in economic power remains. In the Zuma era, the term was popularised by the now defunct public relations firm Bell Pottinger under contract to the Gupta family and was used by some as a cover for looting government and its agencies.

Ramaphosa, who became a successful capitalist after he left Parliament in the mid-1990s, has now signalled that he wants to build trust between government and white owned businesses. This won’t be easy. There are still elements in the ANC that reject capitalism while others want to continue using the term “white monopoly capitalism” as a battering ram.

Credibility gap

South Africa’s disadvantage is that the country’s credibility has been damaged. After 15 years of transparent social democratic policies – from 1994 to 2009 – the country lurched into confusion under Zuma’s presidency. The ANC government became opaque, volatile and unpredictable.

The consequence was a loss of credibility in the Zuma era. Ramaphosa’s biggest challenge therefore is to recover credibility.

Ramaphosa and his advisors will be asking what can we do to rebuild credibility fast?

The answer seems simple: those involved in state capture must go, looters must be punished, and constructive policies must be carefully prepared and implemented with authority and urgency. These include fixing the state owned enterprises as Finance Minister Tito Mboweni repeatedly pointed out in his recent budget speech , better regulation for the network industries (energy, telecommunications, water) and sorting out public transport systems. In addition, honest leaders need to be appointed to the criminal justice institutions.

These all have been promised since Ramaphosa’s first State of the Nation Address in February.

The trickier, and implicit question that investment decision-makers will be asking is, is Ramaphosa’s sway over government as strong as that of Indira Gandhi’s in India in 1980? Or is the president yet to demonstrate complete control over the ANC?

The answer, unfortunately, is probably that an election has to be reasonably convincingly won before he can win the credibility he so badly needs.

Alan Hirsch, Professor and Director of The Nelson Mandela School of Public Governance, University of Cape Town

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Show us your shuffle, Cyril

By John Fraser

Our hardworking and hard-walking President is now in Germany, and I do hope they give him a few hours off for some much-deserved beer and sausages.

The Investment Conference on Friday gave him a platform to sell SA, and he did so very commendably.

However, sitting in a breakaway session of the conference, it was noteworthy to see two of our most reviled ministers on the platform. Both are believed to have been active state capturers, yet both we were referred to by the MC as “honourable”. Pass the sick bag, Mabel.

There has been much talk of the need for a Cabinet reshuffle, which will hopefully reduce the number of ministries, and send some of our more crooked politicians scuttling under the nearest rock.

One suggestion is that we get rid of the deputy ministers. How about we keep all those deputies who we can readily name? That should clear the decks quite comprehensively.

If ministries do get the chop, my prime candidates would be anything in the Presidency, apart from Cyril himself, the feeble Small Business bunch, and the Communications portfolio, mainly so we can see the back of the current incumbent.

Getting rid of the Deputy President position would also be a useful way of removing another member of the awful old guard.

Will it happen? The President holds a precarious position in the ANC, where the corrupt forces of evil still hold a lot of power. So maybe he will have to hold on to some of the shits, as he did when first he named his current Cabinet.

But whether or not it will happen, it damn well should.

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Roger Southall, University of the Witwatersrand

It is common cause that the performance of South Africa’s government, led by the African National Congress (ANC), has been worse than abysmal. Under former President Jacob Zuma, ANC functionaries pillaged numerous institutions of state. They enabled state owned institutions to be looted, mismanaged the provision of basic services and presided over an alarming downward spiral of the economy.

Evidence keeps mounting of dishonesty and profligacy. The unfolding scandal around VBS Bank has shone a spotlight on the ANC as a nest of thieves. In addition, a commission of inquiry is relentlessly exposing how Zuma’s henchmen amassed huge riches from state capture. And another inquiry into the South African Revenue Services is revealing how the state’s capacity to raise revenue from the politically powerful and influential was systematically undermined.

All in all, the ANC has completely forfeited its right to be reelected in 2019. It knows it, and is running very scared. But the odds are that it will still win, even though with its smallest majority yet.

What the party does have going for it is its president Cyril Ramaphosa. He is the ANC’s one big pull. And much to the chagrin of the Zuma faction, the party is going to have to build its election campaign around him – precisely because he is far more popular than the party. Indeed, South Africa can expect the 2019 election to bring the most presidential-style campaign yet.

The irony is that Ramaphosa will privately welcome a smaller rather than a larger ANC majority. A thumping reduction in the ANC’s vote will serve as a popular rebuff of the Zuma faction, and erode its base in the party. An ANC which knows that it may have lost its majority had it not been for Ramaphosa’s personal popularity will be an ANC in which he will at last be able to assert his authority.

A troubled party

Ramaphosa sits atop a party which has long been in a state of internal factional turmoil. He defeated his rival for the presidency, Nkosazana Dlamini-Zuma, at the ANC’s five yearly congress with an excruciatingly narrow vote. He lacks control over the party’s national executive (its highest decision-making body between conferences) where Zuma’s supporters remain strong. And, he is facing a robust fight-back campaign by Zuma’s acolytes in provinces around the country.

Zuma himself, like Banquo’s ghost, remains an ambiguous and dangerous presence. He professes innocence of all crimes as well as continuing loyalty to the party. But, behind the scenes he’s seemingly still pulling the strings of his puppets.

With the party in a state of continuing internal war, the scramble for positions on both its national and provincial electoral lists will be overt, in some places violent, and overall, very probably, embarrassing.

Nonetheless, come the election campaign, it is more than a little likely that its competing factions will forge something of a truce, and preach a new-found unity. The ANC may be divided over policies, positions and spoils, but one thing it is united about is the necessity of retaining power. It will prove ruthless in doing so. One of the few things it knows how to do well is to run an election campaign, and how to induce or scare its popular constituency into voting for it.

Even so, it is uncomfortably aware that its base is eroding. The loyalty of its traditional supporters is declining; it is failing to attract support among “born-frees” (those born after Mandela’s release in 1990); its narrative of having liberated the country from apartheid is wearing tired and thin; and the different commissions of inquiry are going to uncover more and more dirt as the campaign goes on.

So, what is the party going to be doing to win back the vote of the disillusioned?

The campaign

ANC elections head Fikile Mbalula recently acknowledged that the party has allowed itself to become mired in “the sins of incumbency”, to have become distanced from its base, arrogant and unaccountable. Under Ramaphosa, therefore, it will be making fulsome promises of renewal. The ANC will claim that the establishment of the various commissions of inquiry signal a determined assault on corruption, and indicate that the party’s bad apples will be thrown out.

Meanwhile, in all humility, the ANC is promising to renew its bonds with the people. This will involve a country wide process of consultation with what Mbalula has referred to as “strategic sectors of society” in a bid to “broaden and deepen participation” the drawing up of a “People’s Manifesto”.

Amid all this, the party will be promising to build on Ramaphosa’s various reform initiatives to return the economy to growth.

The ANC’s major problem is that none of this is going to be particularly convincing. The gospel of the party’s commitment to virtue and renewal is going to be a hard sell to a corruption-weary electorate.

Its base divided and increasingly cynical, the ANC knows that it is going to have to look for support beyond its normal boundaries. It knows all too well that it is likely to lose important ground to the radical Economic Freedom Fighters. It knows that it may have a hard time in getting the voters out in KwaZulu-Natal, where support for Zuma remains strong. It knows that many of its traditional supporters may be tempted to record their disgust with the party by staying at home.

Given all this, the ANC knows that it will have to play to Ramaphosa as its one major asset. A Ramaphosa-centred strategy is likely to work because there is no credible alternative as a party of government to the ANC.

The main opposition Democratic Alliance will again go unchallenged in the Western Cape, and may do surprisingly well in provincial elections in provinces such as Gauteng and Eastern Cape, based upon its “better-than-the-ANC” record in local government. But at the same time it may well suffer at national level because its conservative constituency fear the prospect of the ANC losing its majority and being forced into a coalition with Julius Malema and the EFF. In short, some will hold their noses, and vote for Ramaphosa and the ANC.

Roger Southall, Professor of Sociology, University of the Witwatersrand

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

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Summiteer Cyril

by John Fraser

Any of us who expects the biscuits to fill the cardboard carton will know the sadness, the grief, of realising you are getting less than you had expected.

The same goes for SA Summits.

Take the BRICS Summit….a three-day event that was crushed to just two days, with a poorly-attended investment conference on the first day.

One hears of the actual Summit that the Indians nearly didn’t come; Putin was late, but surely the fault lay with the hard-working but inept organisers, who are thankfully banned from any event involving breweries and piss-ups.

Then came the Job Summit – did you blink? You might have missed it.

An afternoon of pretty tedious speeches from very tedious people. Even Cyril was less animated than normal. A list of things was agreed to, but not posted online until the following day. Shows how serious they all were about jobs.

And then there is the Investment Summit (rebranded Investment Conference, which cannot be a positive move.)

Today, Thursday, is Day 1 and not a lot is happening. Cyril has gone awol to open a train factory in the West Rand, which may be able to turn trains out almost as fast as our beloved countrymen torch them

A gala dinner in the evening? Media not invited. A great opportunity to get coverage is being squandered by organisers, who appear deeply dysfunctional and unable to issue timely information. There is a website for the Conference, which must have cost a fortune. Looks pretty. Hard to navigate, and lacking in fine detail. Symbolic, really, of the whole thing.

The Friday may have some meat, with announcements due on some new investment. How much of this is really new, how much of it will actually happen….? It may be difficult to pick it apart. As they no doubt intended.

And then there are break-away sessions, with a choice of three different themes, running all at the same time.

They could have stretched this into another day, to give more people a chance to listen to more stuff. But no. Conference or con?

And then on Saturday, soon after dawn, the President will be leading a stroll through Soweto. One suspects it is more about the images than about anything of substance.

Bilaterals are then promised, which may lead to some real wheeling and dealing, substance, investment.

But it may be difficult to judge this squashed Summit, and there are fears it may miss as many opportunities as the BRICS one and the Jobs get-together.

Maybe it is time that when we organise high-level events, with valued guests, we should get the professionals to put it together.

Or maybe it remains the case that when you are trying to get the right people into the right place at the right time, over a few days, you are biting off a lot more than you can chew.

Except at the gala dinner, where I won’t be allowed to bite off anything.

Welcoming the media, it seems, is an investment too far.

By John Fraser

Finance Minister Tito Mboweni has dangled the prospect of debt-strangled SAA being allowed to collapse.

He was speaking to journalists, Wednesday, just before delivering his mini-budget address.

When asked about parastatals, which continue to receive billions of rand in bailouts, he said there should be no sacred cows in seeking solutions.

He said state companies such as Sanral should approach the markets for their funding.

And on SAA, he suggested that closure should be an option.

He gave the example of Swissair – which was in trouble, was “closed down”, and this paved the way for the launch of another Swiss airline.

“We need to be open minded,” he said.  “You need to progress in your thinking to the wi-fi generation.  Otherwise you are stuck in the 60s.”

Mboweni also supported belt tightening in government, and when asked about a cut in the number of departments, he suggested 20-25 ministries would be better than the current line-up – with around 70 ministers and deputies.

“There is no economic, financial or political reason to have an executive of up to 70,” he said.   “But this is the President’s problem.”

He also appeared lukewarm on the NHI – suggesting that the existing infrastructure is excellent, but state health provision may need private sector expertise to reach its potential.

He said he prefers the concept of development to that of service delivery – where people wait for help.

He emphasised that red tape must not delay action.  He gave the example of Vaal pollution and said that the Military has been called in to help.   In his budget speech he spoke of the military supplying “engineering and other expertise”

Meanwhile he described the Giyani water project as a “cesspit of corruption”, with spending exploding.

He appeared to have been unmoved by calls to introduce zero VAT on chicken, but he did approve Zero VAT rating on sanitary pads, bread flour and cake flour.

The mini-budget was a maiden appearance for the new Finance Minister, and he appeared cheerful, relaxed and gave an impressive performance.

He said he is using his honeymoon period to say some things which equate with his most recent experience in the private sector, but which may not be in line with current government thinking.

A gathering to make Cyril smile

By John Fraser

The President’s Investment conference, which will be held at the end of next week in Sandton, is expected to eclipse the recent, rather underwhelming, Jobs Summit.

Unlike that event, which saw most of the cabinet stiffly sitting in a row while others waffled on (and on), the government team looks poised to do some actual work next week.

Economic Affairs minister Ebrahim Patel told a rather poorly-attended media briefing, Thursday, that he expects a number of announcements of new investment plans next Friday, which seems to be staged as a showcase for SA, an exercise to show that – despite all the negatives – people are still prepared to start new operations in SA.

And there are negatives aplenty – the land seizure issue, inadequate labour skills and worker unrest, crime, corruption, the challenges of meeting ever-tighter BEE rules, little worth watching on SABC……

However, Patel was playing the good cop – admitting that tough questions will need to be answered.

Moving away from the endless waffle of the Jobs Summit, the Investment Conference will have a series of focused discussions on specific sectors where investment is being most sought – agroprocessing, advanced manufacturing, ICT, mining, infrastructure. And a few others.

Lots of visitors from big corporations, both local and global. Lots of face-to-face discussions.

Patel said a key focus will be to tackle obstacles to investment, so that these can be dealt with, where practicable.

He suggested a “single market-place” will be the theme, comparing it to Davos, where a lot of movers and shakers, politicians and businesspeople, are in the same place at the same time.

He also promised that this is not a one-off, but part of a continuing process.

So expect some headlines on progress towards Ramaphosa’s goal of securing $100bn in new investment.

And if it does get boring, delegates will have the comfort of knowing that in the same Sandton Convention Centre, the big wine tasting party Winex will be underway.

A great retreat to which they can escape, where we really do show the world that when we put our minds to it, SA can shine. With wine.

Make mine a magnum, please Gladys.

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By Richard J Grant

In 2000, SA ranked 46; now we rank 110 

It is a common temptation, in the months before an election, for politicians to promise the moon to those voters they fear might be attracted to the similarly lofty promises of a rival party. But it would be easier to send someone to the moon than to deliver on many of the more shameless promises made by desperate politicians. The latest attention-grabbing promise, through which South African politicians have made world headlines, is that the expropriation of land without compensation will assure greater prosperity through enhanced economic efficiency and improved food security through the diversity of farm ownership. 

Although there are conditions under which a reasonable argument for “land reform” could be made, governments that make such promises of expropriation under electoral duress rarely understand, or are willing to implement, the policies needed to assure the fair and efficient allocation of property in the future. That is why most such politically expedient reforms have resulted in Zimbabwe-style poverty and widespread hunger. 

Recent political pressure in South Africa for uncompensated land confiscation seems intended more to satisfy a factional lust for retribution – and the enrichment of cronies – than a desire to improve the general welfare or even to assure food security. Such demands invariably come unaccompanied by any recognition of what is necessary for such a policy to have a hope of succeeding. 

In South Africa, the legal processes for the transfer of property ownership are inefficient, expensively slow, and often seen to be corrupt. The inefficiency of the normal property transfer process makes it less likely that efficient patterns of land ownership will emerge in the future. Current land ownership patterns are almost certainly less well allocated than they would have been were the government capable of instituting a more competently operated property transfer system. Experience gives us no reason to believe that an arbitrary expropriation of land and its redistribution to politically favoured individuals would benefit the broader population or even maintain current levels of food production. In the absence of genuine respect for private property rights and equal legal treatment of its owners, the opposite is more likely. 

Property ownership is important not because of the specific physical or intellectual assets that are susceptible to seizure. Those items can be seized only once. The creative source or steward of those expropriated assets cannot be compelled to replicate past creativity or productivity – or even to apply the attentiveness of a good manager. Governments with a reputation for theft, even under the guise of a popular redistribution of wealth, always elicit a counterproductive response from those creative individuals who are perceptive enough to see themselves as the latest political goats to be milked. They take the creativity and skills with which they once served the people of their communities and either move to less politically visible endeavours or emigrate to new jurisdictions where their personhood is better respected. 

In that sense, the Economic Freedom of the World: 2018 Annual Report is a global measure of respect. It is a measure of how well governments respect the humanity of their residents and how well they maintain policies compatible with that humanity and the need to be free and to flourish. It is a broad-based index that should be taken seriously as a guide to all those interested in good governance. Countries with high, or rising, Economic Freedom of the World (EFW) ratings are invariably those with the highest, or most rapidly improving, standards of living. 

Since the economic successes of the Reagan and Thatcher years, and the subsequent collapse of the Soviet Union and other socialistic regimes, economic freedom has been increasing worldwide, reducing poverty and increasing the potential prosperity of those people blessed by their increased freedom. But since the turn-of-the-century, South Africa has failed to keep up with that trend and has, thereby, failed to reap the promised rewards of the 1994 transition. 

In this year’s EFW report, South Africa ranks 110th out of 162 countries. This leaves South Africa in the third quartile of the rankings based on data from 2016, which are the latest data available. The EFW Panel Dataset, which is adjusted to improve year-to-year comparisons, shows South Africa losing economic freedom in absolute terms. Each of the five categories of economic freedom that comprise the EFW index declined since the last report. Although there were some improvements in minor components within the area of Regulation, the most significant changes were downward within the area of Legal System and Property Rights. 

Despite a record of low and slowly declining scores for the legal system overall, the judiciary had long been seen with respect, and its relatively high EFW component scores reflected that. The ratings fluctuated over time, but in the last measured year the ratings for “judicial independence” and “impartial courts” declined by 18% and 26% respectively. And as if to set the stage for, and perhaps to predict, the headlines of 2018, the rating for “protection of property rights” also dropped by just over 20%. A parliament unconstrained by respect for either constitutional limits or an independent judiciary is an institutional force that bodes badly for economic freedom. The political attacks on private property rights, not only for land but also for the right fully to exercise ownership of a business, are a symptom of the institutional and moral decline that presages economic and cultural stagnation. 

Even the (largely symbolic) calls for the “nationalisation” of the South African Reserve Bank should give pause, not because the private shareholders exercise any control (they do not), but because those shareholders ostensibly oversee and bring a modicum of transparency to the operations of a government agency. In the EFW category of “Sound Money,” South Africa ranks 102nd in the world. The inflation rate remains within its official target range of 3% to 6%, with consumer price inflation showing an annual rate of 5.1% through July 2018. The Producer Price Index showed a higher rate of 6.1% through the same period. By world standards, these inflation rates are high, though they are reasonably stable and predictable. 

Within South Africa, the Reserve Bank is one of the better-run institutions. The calls to nationalise an agency that has always been de facto nationalised suggest that the thin façade of central bank independence could suddenly be torn away as the ruling ANC responds to shifting political pressures. Fiat money has always served the ruling class as a pre-election anodyne and as a convenient, and at times blatant, means of redistributing wealth to government and supporting politically favoured businesses. The depressing effect of inflation on standards of living goes beyond the mere loss of purchasing power, disrupting the structure of production and affecting lives in a way that few can detect. 

Of more pressing concern in daily life are matters of livelihood and personal safety. The rate of economic growth has trended downward in recent years, just as economic freedom has slowly declined. Crime has long been a problem in South Africa and has been reflected in low EFW scores for “reliability of police” and “business costs of crime.” Crime rises in any society that fails to protect and show respect for life – and for the property that is part of each life. A government that fails to protect economic freedom and private property will eventually lose its ability to maintain civil order. Ultimately it will lose the respect of the people and any claim to its own legitimacy. 

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Jannie Rossouw, University of the Witwatersrand

The latest reshuffling of South Africa’s finance minister, following the resignation of Nhlanhla Nene and appointment of Tito Mboweni, may have negative origins but it brings with it some positive energy.

Nene resigned as finance minister after it emerged that he lied about the nature of his contact with the controversial Gupta family, the friends of former President Jacob Zuma who stand accused of championing massive misappropriation of public funds in a process branded as state capture.

In an initial response to a journalist’s question, Nene claimed that he had only met the Guptas in passing. But in his recent testimony to a commission investigating state capture he admitted that he’d met Gupta family members on numerous occasions, including a number of visits to their house and their offices.

The inconsistency tarnished his integrity and sparked massive public criticism. Within a week of making his admissions he resigned. South Africa’s President Cyril Ramaphosa immediately appointed former South African Reserve Bank governor Tito Mboweni as the new finance minister.

On the one hand Nene’s departure must be hailed as setting a new tone for South African politicians, particularly for the cabinet. By falling on his sword, he has taken responsibility for his actions – a rarity in South African politics. It’s tempting to cast his action in stone as the “Nene Rule” that sets a standard for politicians to resign when in the wrong.

On the other hand the appointment of Mboweni brings back someone with considerable skills and the political finesse needed to steer South Africa out of its current economic quagmire.

Mboweni needs to hit the ground running. In late October he must present the country’s medium-term budget policy framework. All eyes will be on how he steers the challenge of rebalancing the national budget. His political skills and ranking might come in handy.

Equal to the task

Mboweni takes over the finance portfolio at a difficult time. Tough decisions will be required in a hostile environment as a strong populist wave sweeps through the ruling party, the African National Congress (ANC).

It’s therefore a positive that he commands a more senior political ranking than Nene had within the ANC. Mboweni claimed the 11th position in the tallying of the votes for the ANC’s National Executive Committee (NEC) during the ruling party’s 2017 elective conference that made Ramaphosa the President. The NEC is made up of 80 members and is the ANC’s highest decision making body between conferences.

In addition to this, Mboweni has a strong financial background. He served as governor of the South African Reserve Bank from 1999 to 2009. Prior to that he served in Nelson Mandela’s first cabinet as minister of labour.

Both experiences should help equip him to meet the economic challenges facing the country. There’s no doubt that he’s knowledgeable about financial matters and is respected among investors.

His tenure at the Reserve Bank should ensure a smooth working relationship between the minister of finance, the national treasury and the central bank. As a previous governor, Mboweni understands this important relationship while valuing the autonomy and the independence of the various institutions and their responsibilities.

High expectations of Mboweni

Mboweni will need to be a quick study. He has only two weeks in which to familiarise himself with the details of the medium-term budget.

He can’t afford to disappoint. This year’s budget will be watched more intensely than usual by key stakeholders, including investors and credit rating agencies because it follows closely on an economic stimulus and recovery plan announced by Ramaphosa. Details are expected to be unveiled in the medium-term budget.

The medium-term budget is also expected to signal how South Africa is dealing with its fiscal challenges. This is where government faces its very hard choices.

The ultimate aim must be to increase economic growth and eradicate unemployment. But to achieve these objectives the government must revise its expenditure priorities.

Expenditure on civil service remuneration, social grants and interest on government debt currently equates to 70% of the government’s tax revenue. This is clearly untenable. If not addressed, South Africa will face a fiscal cliff – the point at which these three expenditure items account for all government revenue and make spending on anything virtually impossible.

At the same time, Mboweni will have to work closely with Pravin Gordhan, the Minister of Public Enterprises, on the restructuring of state-owned enterprises. The precarious financial position of a number of state-owned enterprises is placing a heavy burden on taxpayers. Removing this burden will release resources that can be used to stimulate the domestic economy. Mboweni must therefore help with tough decisions about unaffordable vanity projects.

And, finally, Mboweni must sort out the challenges facing the Public Investment Corporation which is responsible for managing civil servants’ pension funds, and is worth over R1,5 trillion.

Restoring trust

South Africa is in serious economic difficulty. It also faces a trust deficit owing to the state capture project of the Zuma administration. The golden triangle of trust between the government, the public and the business community has been broken. No country can succeed without this. Mboweni can play an important role in restoring it.

Jannie Rossouw, Head of School of Economic & Business Sciences, University of the Witwatersrand

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Stephanie Dieckvoss, Kingston University

Serious collectors of contemporary art had already started to leave the room at the Sotheby’s New Bond Street auction house in London last Friday night as a successful evening sale drew to a close. Most people seemed more interested in getting to their post-auction dinners than in the final two lots: paintings by KAWS and Banksy, who are generally perceived to be interesting for new or young buyers but not serious collectors. KAWS, the American graffiti artist also known as Brian Donnelly, is seen as too comic; Banksy as too “street”.

That doesn’t mean they are not in high demand. KAWS’ large yellow comic face, Again and Again, sold for just over £1m, making him – in the words of auctioneer Oliver Barker – the Damien Hirst of the 21st century. And the last lot of the sale was Banksy’s 2006 Girl with Balloon, which was last year named in one survey as the UK’s favourite artwork.

Unsurprisingly, bidding was intense and the hammer came down at £860,000, making a final sales price (including buyer’s fees) of £1,042,000 – quadrupling the previous estimate of the work. But the moment after the hammer came down a faint alarm went off in the room and, shortly after, in front of a roomful of gawping faces, the canvas slipped out of the frame, being shredded in the process by some concealed machine, before being hurriedly carried away by attendants.

Under near chaotic circumstances, the sale ended. At the delayed press conference, all Sotheby’s experts would say was: “We got Banksy-ed”. And all they did was to reiterate that they had no prior knowledge of the prank, failing to shift attention away from it.

Performance art

In our media-crazy society, everyone likes a prank – especially when it hits the top end of the art market which excludes all but the very rich. So to nobody’s surprise this story has gone viral, cheered on by Banksy’s “official” Instagram feed, where he not only claimed ownership of the prank, but also “documented” its genesis.

Since then, speculation around the value of the shredded piece and Banksy’s role in the art world has led to a lot of hype. But what needs to be considered here is not only value generation in the art market but ultimately the role and agency of the artist within the market’s resale structure, where artists usually benefit only marginally from the resale of any of their works. That the stunt happened during the Frieze Art Fairs, one of the most important art fairs for contemporary art worldwide, has also given it added currency.

As a case study, the prank has been so successful that it will occupy the art world – as well as academics and students of the art market – for a long time to come. It might even become art history’s most famous stunt. Who are the involved parties, for example? Despite a great deal of speculative comment, I don’t think Sotheby’s was in on the game. The story really doesn’t benefit them; it detracted from all the other good news the evening was supposed to spread.

At this point, Sotheby’s is still claiming – and it does sound plausible – not to have touched the work or its frame, following the instructions of Banksy’s studio that the frame is an integral part of the work. Again, not unusual. Neither does the inclusion of the piece in the auction come as a surprise. As a quick search on Artnet’s price database shows, no less than 26 works by Banksy have been offered this year alone at auction – most of them with very good results above estimates. Banksy is hot.

So the fact that the work sold for more than £1m is not surprising, considering both the previous auction prices of the artists and the buoyant atmosphere of the sale that evening.

More interesting, of course, is what the work is worth now. Despite excitement by the press, claiming that it would now be worth far more (and what appears to be a copycat attempt by a collector to shred his own print copy of the painting), the case has not been decided contractually yet. In a comment to the author, the auction house states it is unclear whether the sale will go through and that negotiations are still ongoing. There is a debate to be had that the buyer obviously bid on a work in pristine condition – and we won’t know if the work is worth double its sale price until it has been sold again in this state.

It’s a tempting thought – and a terrific story – but an artist’s stunt and a weekend buzz are not a guarantor for ongoing investment value. It will, however, surely alert any auction house to ensure proper due diligence and conservation examinations when taking on more of his works.

Banksy’s brand

But where does Banksy stand, as someone who so happily seems to claim to stand outside the market? Given he is so against the resale of his work, has he attempted to sabotage more of his works? As mentioned above, his paintings as well as prints often come up at auction and have been an integral part of his output for years. For street artists who have become famous for often radical actions, the question of how to interact with a collector market has always been a challenge.

But one thing is for sure: if this was instigated by Banksy as a marketing stunt it was a big success. Even if the future of this particular Girl with Balloon is as yet unclear, Banksy’s name will be in everybody’s mind and his brand value has definitely risen.

So let’s wait and see what he will produce and sell next. In the meantime, the people cashing in on this story are also the so-called art experts who keep media outlets busy with comments – most of them, let’s not forget, unproven and highly speculative. And as such this story is a perfect image of the contemporary art market today – about money, but at least as much about the buzz.

Stephanie Dieckvoss, Senior Lecturer, Kingston University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Mark New, University of Cape Town

The release this week of the Intergovernmental Panel on Climate Change’s (IPCC) special report on global warming of 1.5℃ above pre-industrial levels marks a critical point in climate negotiations. Billed in the media as “life changing,” the report illustrates how crossing the ever-nearer threshold of 1.5℃ warming will affect the planet, and how difficult it will be to avoid overshooting this target.

The special report takes a worldwide look at the growing impacts of climate change. For climate change “hotspots” – hot, dry and water-stressed countries like Botswana and Namibia in southern Africa – local warming and drying will be greater than the global average.

The report underscores the urgent need for countries like Botswana and Namibia to prepare and adapt – and do so quickly. The Paris Agreement’s goal of limiting global warming to well below 2°C, ideally 1.5°C, by the turn of the century will be extremely challenging. To date, mitigation pledges by nations fall far short of what is needed, with global temperatures on track for a warming of 3.2°C by 2100. Under an increasing emissions trajectory, the 1.5°C threshold could be breached as early as the next decade, and the 2°C mark the decade after.

Our analysis of the effect in Botswana and Namibia of 1.5°C, 2.0°C and higher levels of global warming shows that they’re likely to get hotter, drier and more water-stressed. The sooner southern African countries prepare and implement adaptation strategies the better.

Impact

Botswana and Namibia already know the challenges of droughts and floods. A few years ago, Botswana’s capital city Gaborone was on the brink of running out of water as the country battled its worst drought in 30 years. Neighbouring Namibia has battled with recurrent and devastating droughts and floods in recent years, especially in its northern regions, where most of the population live.

Global warming of 1.5°C would lead to an average temperature rise above the pre-industrial baseline in Botswana of 2.2°C and Namibia 2.0°C. At 2.0°C global warming, Botswana would experience warming of 2.8°C. Namibia would warm by 2.7°C.

Changes in rainfall are also projected to shift. At 1.5°C of global warming, Botswana would receive 5% less annual rainfall, and Namibia 4% less. At 2.0°C global warming, annual rainfall in Botswana would drop by 9%, with annual rainfall in Namibia dropping by 7%.

Both countries would also see an increase in dry days. At global warming of 1.5°C, projections show Botswana having 10 more dry days per year. That number rises to 17 extra dry days at 2.0°C global warming. For Namibia, dry days increase by 12 at global warming of 1.5°C, and by 17 at 2.0°C.

The impact of global warming on extreme events is also evident. Both countries can expect roughly 50 more days of heatwaves at 1.5°C global warming, and about 75 more heatwave days at 2.0°C global warming.

Tables show the projected impact of hotter temperatures.

What global warming of 1.5°C.
and higher means for Botswana.

What global warming of 1.5°C.
and higher means for Namibia.

Vulnerable sectors

The effects of higher global and local temperatures will be felt in various sectors key to the prosperity of people and economies in both countries.

Understanding what this will mean for sectors like agriculture, health and water, is crucial for adaptation planning and thinking about what must be done, and by when.

In a hotter, drier future there will be less domestic water available. Runoff in Botswana’s Limpopo catchment is projected to decline by 26% at 1.5℃ global warming, and by 36% at 2.0℃. In Namibia, evapotranspiration rates increase by 10% at 1.5℃ global warming and by 13% at 2.0℃, leading to reduced river flows and drier soils.

Agriculture is particularly vulnerable, with potential drops in crop yields and increased livestock losses. In Botswana, at 1.5℃ global warming maize yields could drop by over 20%. At 2.0℃ warming, yields could slump by 35%. Rain-fed agriculture is already marginal across much of the country, and anticipated climate change may well make current agricultural practices unviable at 1.5℃ and above. In Namibia, productivity of cereal crops is expected to drop by 5% at 1.5℃ and by 10% at 2.0℃

The impacts of global warming on human health are also essential to consider. Heat stress is projected to become an increasingly greater threat. At 1.5℃ of global warming, Namibia and Botswana can expect roughly 20 more days of heat stress exposure in a year. At 2.0℃, in Namibia this doubles to around 40 more days of heat stress exposure.

All of these factors become even more severe should the 2.0℃ threshold be overshot.

Urgent action is needed

The progressively serious climate impacts at 1.5 and 2.0℃ in these countries demands concerted action, both locally and internationally. Leaders from countries such as Botswana and Namibia cannot let-up on the global stage in pushing for nation states to make good on, and further improve, their pledges to cut greenhouse gas emissions in line with the Paris Agreement. As the IPCC report shows, early and decisive action will not only reduce the risks of overshooting the Paris temperature targets, but also slow down the rates of change, making local adaptation easier to roll out.

At the same time, highly exposed countries such as Namibia and Botswana need to anticipate and plan for quite rapid changes in local weather and climate. They need an acceleration in developing adaptation strategies in a way that works for all people and across the economies of these countries. The time for pilot adaptation projects and experiments is over, and the moment to start mainstreaming climate resilience into public, private and community sectors has arrived.

In parallel, governments, scientists and development practitioners need to think longer term, to consider what overshooting the 1.5°C and 2°C targets really means for adaptation. At some stage, adaptation of these systems may not be enough, and complete transformations to new livelihoods that are suitable in a 2°C+ world may be needed.

Brendon Bosworth, a communications officer with ASSAR, based at the ACDI, University of Cape Town contributed to writing this article. Tiro Nkemelang, a PhD student at ACDI and Roy Bouwer, a research assistant at ACDI, contributed to the underlying analysis.

Mark New, Director, African Climate and Development Initiative, University of Cape Town

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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