Dirk Kotze, University of South Africa

Thirty years ago, on 2 February 1990, a speech was delivered by then President FW de Klerk that marked the beginning of a radically new political landscape for South Africa.

In his opening address to parliament, De Klerk unbanned the exiled liberation movements, notably the African National Congress (ANC), Pan-Africanist Congress (PAC) and South African Communist Party (SACP). All had been embroiled in a fight against white minority rule. He also announced a moratorium on the death penalty, the end of the state of emergency – which had been in place for five years – and the release of political prisoners.

The speech set off a series of dramatic, and, until that point, unforeseen events. Nine days later Nelson Mandela was released from prison after 27 years. Within three months the first bilateral talks between the ANC and the De Klerk government happened.

De Klerk’s speech that day has often been portrayed as having happened because of a Damascene moment on his part: that is that he suddenly had a blinding insight that apartheid was bad.

My view is different: I believe that the speech was preceded by an array of developments that created an environment which either forced or encouraged him to make the epochal announcements.

Thirty years later, it is an opportune time to take stock of the historical significance of the 1990 speech. What insights can we gain from that single event, and what does it tell us about how history is made?

Apartheid was regarded as one of the most intractable international issues of the time. Hence its demise, to which De Klerk’s speech helped provide the impetus, shows that even the most seemingly intractable political problems can be resolved peacefully.

Impetus for change

The demise of De Klerk’s predecessor PW Botha, after suffering a stroke, on 18 January 1989, was a critical change in the dynamics. On 2 February 1989, De Klerk succeeded him as leader of the National Party (NP), which governed apartheid South Africa.

De Klerk immediately made changes to Botha’s military security paradigm by down-grading the State Security Council and its local structure staffed mainly by the military and police and restored civilian rule by the cabinet.

As the new party leader, he undertook an international tour after realising the extent of the international community’s abandonment of National Party rule. He met then UK Prime Minister Margaret Thatcher in 1989. She made the urgency of Nelson Mandela’s release clear to him.

In the ANC, too, changes were underway. The liberation movement took the initiative in the form of the Harare Declaration, its framework for a democratic transition in South Africa. It publicly showed the ANC’s willingness to negotiate and not to rely mainly on strategies like the “people’s war” and armed struggle to bring an end to apartheid.

The ANC wanted to take the initiative in moulding a transition framework. The declaration was adopted by the Organisation of African Unity in August 1989 and later by the Commonwealth in October 1991.

Prelude to change

Other developments in the background provided an impetus to De Klerk’s announcements. These included talks-about-talks in three separate processes between the NP and the ANC. South Africans knew nothing about these encounters.

The first was a series of meetings between Mandela and Justice Minister Kobie Coetsee and his team. It included talks about his release as well as Mandela’s views on a range of policy matters.

The second process was in the form of a number of meetings in Switzerland in the late 1980s between ANC leaders such as Thabo Mbeki, Jacob Zuma and Joe Nhlanhla, with senior officials of South Africa’s National Intelligence Service.

The talks explored the ANC’s thinking on important matters like the economy and the armed struggle. With these talks both sides could determine whether there would be sufficient common ground for a dialogue.

The third process was a set of meetings in the UK between the ANC under Thabo Mbeki, and groups of Afrikaner intellectuals coordinated by the academic, Willie Esterhuyse. As a civil society grouping with direct access to the National Party government, they explored the same topics as the Swiss talks.

In hindsight, this process served to legitimise future dialogue, both for the National Party government once official dialogue was publicly announced, and for the Afrikaans community, which respected its intellectuals.

All these talks helped the leaders on both sides view one another as fellow human beings capable of working together. They also clarified their views and strengthened the credibility of dialogue as a way to break South Africa’s political stalemate.

Internal turmoil, external pressure

Domestic factors also played a big role in De Klerk’s decision to deliver his momentous speech.

One was that the country was under a state of emergency. First announced in 1985, the government used it to quell the growing revolt in the black townships.

But the heavy-handed approach failed to pacify the townships, leading to a stalemate that hurt both the apartheid regime and its opponents.

The other domestic development was the impact of the United Democratic Front formed in 1983, which united several anti-apartheid organisations, effectively under the banned ANC’s banner.

Public disillusionment with the state of emergency – and a general realisation that the National Party government had exhausted all its options – deepened the stalemate.

De Klerk responded by meeting leaders of the then Mass Democratic Movement, which brought together the United Democratic Front and the trade union movement, led by Bishop Desmond Tutu among others, in October 1989. He also announced the release of ANC leader Walter Sisulu and all the other Rivonia trialists, except Mandela whose turn would come four months later.

A huge welcome rally was held for the Sisulu group outside Soweto. The event amounted to a de facto unbanning of the ANC. All its banned symbols were on public display. Sisulu and others’ speeches were unmitigated renditions of the ANC’s message.

Final push

Two international moments served as the final push for De Klerk. On 9 November 1989, the Berlin Wall fell. De Klerk later explained that this signified the end of Soviet socialism and its influence on the ANC. That meant the ANC would be less ideological and more open for negotiated compromises, making it the opportune time to negotiate.

Four months later, Namibia became independent under the leadership of the ANC’s ally, Swapo. At the time of De Klerk’s speech, most of the negotiations for Namibia’s independence had been concluded – with South Africa’s support. To some degree, a free Namibia was, therefore, a precursor to a free South Africa.

Dirk Kotze, Professor in Political Science, University of South Africa

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

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By Mike Schussler

Pensions in South Africa have been on the rise for six and a half years. In December 2019, banked private pensions increased by 3.9% year-on-year to reach R7 071 in real terms.

While this value may seem insignificant, it does show that pensions have performed well in a country with low overall market returns in the last 5-6 years.

We are not talking about the number of people on a pension or even the number of private pensioners.

We are discussing the trend of private pensions that have helped senior citizens survive the weak economy relatively well.

Since June 2012, the BankservAfrica Private Penson Index (BPPI) has been recording South African pensions that are paid to those people who are retired but who saved a large proportion of their salary in the decade before retirement.

We often hear that people have not saved enough for their pension and our data tends to agree with that – as private pensioners receive roughly half the money from their pension than they had received as take-home pay.

Nobody will argue with any of the above statements. But here is the strange thing: pensions have beaten inflation 94% of the time. This is far more than salaries.

When our measurement of private pensions started, it showed that pensioners only banked about 40% of the level that their take-home pay had been. Now, more than six years later, private pensions are very close to 50% of take-home pay.

While the equity market has been in the doldrums for most of the BPPI, one would have expected pensions to struggle to keep up with salaries. But perhaps pensioners and their fund managers knew something. and kept more of the investments in interest-bearing instruments.

So, despite the poor economy, pensions have done remarkably well.

Many funds are not performing much above inflation. Yet pensioners are receiving higher than inflation payouts year after year!  In the context of a weak economy, this is astounding!

While a large segment of our pensioners are retired civil servants and they receive a pension based on their final salary rather than investment returns (and their increases are linked to civil servant salary adjustments unlike the rest, who depend on investment returns), the fact is that an estimated two-thirds of our pensioners are subjected to returns in their pension funds or retirement pots.

Yet the average increase over nearly 80 months and on an annual basis has been 2.9% higher than inflation. This again is incredible, as the private pensions we monitor are after reductions by fund managers and other expenses.

So the strange case of ever-increasing pensions rests partly on favourable real rates while it relies far less on the stock market. Did pensioners know that the Johannesburg Stock Exchange (JSE) would not be a good investment, or were they drawing down their money too fast?

The latter could be the case, but since June 2012 there has been no evidence of a crash in private pension payments, which is what one would have expected after five years or so of fast drawdowns.

Moreover, our previous and unpublished data suggest increases were lower than interest rates and did not experience the same level of growth as the JSE’s recovery after the great recession of 2009.

While we cannot answer the question thoroughly, it does appear that interest rates and yields play a far more critical role in helping pensioners receive faster-growing payments than the inflation rate.

The last six and a half years have seen real private pensions increase by 21% and the average private pensioner is 18% better off! This is a truly remarkable story if one considers that take-home pay has increased by less than 5% over the same period!

BankservAfrica has the only monthly pension time series in the world. This provides ample evidence that even in a relatively young country, pensioners have become a more substantial group to target.

This is due to two factors: private pensions are growing faster than salaries (or at least take-home pay, as tax rates have effectively increased in the last six years). The other is that the number of pensioners is increasing while the number of formally employed is stagnating (at least from what is evident in our data).

The number of people receiving social pensions from the government is also growing and therefore private pensions make an ever more critical part of the SA consumer market.

With retrenchments very likely in the years ahead, pensioners will play an ever more significant role in the South African economy.

Mike Schussler is the founder of economists.co.za

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Mandisi Majavu, Rhodes University

One of the shameful achievements of the African National Congress (ANC) in its 25 years of governing post-apartheid South Africa is that it’s living up to the political stereotype of what is wrong with post-colonial Africa – unethical and corrupt African leaders who exercise power through patronage.

The widespread corruption in post-apartheid South Africa is epitomised by what is now referred to as “state capture”. The effects of entrenched corruption are exemplified by frequent power cuts devastating the economy. Another example is the government’s failure to keep the trains running.

Democratic South Africa appears to have morphed into a fully-fledged predatory state. The lobby group Corruption Watch reported last year that more than half of all South Africans think corruption is getting worse. They also think the government is doing a bad job of tackling corruption.

Characteristics include using public office and resources to promote the private interests of ANC politicians and those connected to them. It also includes an entrenched culture of being untouchable.

Events in South Africa have echoes in countries across the continent. These range from the Dos Santos family in Angola to Mobutu Sese Seko’s decades of thieving in Zaire. Mobutu is credited with the invention of modern African kleptocracy.

Of course, African leaders are not the only corrupt political leaders in the world. For example, Noah Bookbinder, a former trial attorney for the US Justice Department’s Public Integrity Section, recently argued that US President Donald Trump’s

increasingly egregious abuses made 2019 one of the most corrupt years in US history.

But the fact of the matter is that sub-Saharan Africa is in a league of its own. In the 2018 Corruption Perception Index, published by Transparency International, it appears at the bottom. The report released with the index stated that the region had “failed to translate its anti-corruption commitments into any real progress”. In 2019, the region again appears at the bottom. Transparency International remarked:

Sub-Saharan Africa’s performance paints a bleak picture of inaction against corruption.

Moral decay

The ANC once represented a political tradition of opposition to apartheid rooted in altruism. But the events that have unfolded since it took over running the government in 1994 suggest that it has become a corrupt machine.

It seems the party appears intent on following in the footsteps of the likes of the late Mobutu.

State corruption has taken hold with utter disregard for ethics and democratic norms in cynical exploitation of the post-apartheid transformation agenda. For example, large-scale corruption is often framed around the liberation struggle rhetoric of empowering black people.

The reality is that the black elite enriches themselves and their families through government tenders and other questionable and unethical means.

Former president Jacob Zuma is the “poster boy” for this black kleptocracy. He and his associates, the Gupta family, captured the post-apartheid state with the sole purpose of exercising power to shape policymaking, and to control political institutions to their own advantage.

Dishonest politics has become a defining feature of post-apartheid politics while the legitimate fight against corruption is being made analogous to racism. It is a politics that is characterised by a lack of ethics, morals, and logic and has no legitimate place in a democratic society.

Yet it continues to trickle down to other societal institutions. Transport minister Fikile Mbalula recently described the Passenger Rail Agency of the country as a

broken organisation, struggling to provide an efficient and committed passenger rail service.

Meanwhile, South African Airways has been forced into voluntary business rescue after its working capital dried up and the national treasury refused another bailout.

Of course, the private sector is not corruption-free. Corporate businesses that have been associated with state capture include Deloitte, McKinsey, KPMG, Bain & Company.

The breakdown in social order reveals a dysfunctional political system that rewards sycophants, con artists, thugs, greed, and antisocial attributes.

The development of this patronage network is the product of the ANC’s cadre deployment policy. This values party membership over ability and probity.

Lessons from history not learnt

The history of democratic South Africa shows that the ANC has failed to learn from the experiences of post-colonial Africa, and thus avoid its unsavoury parts.

Instead, it has chosen to walk in the footsteps of other corrupt post-colonial African leaders. Small wonder that its frustrated citizens have turned to the courts to force the government to govern in their interests.

The latest example of this the Makhanda High Court ruling that the Makana Municipality be dissolved and placed under administration for failing to carry out its constitutional obligations to its citizens. The court found that the ANC-run municipality had failed to “promote a healthy and sustainable environment for the community”, as required by the country’s constitution.

More such political collisions between the country’s cherished democratic norms and the corrupt post-colonial political elites are needed to change the current political trajectory of corruption and incompetence. That is the only antidote.

Mandisi Majavu, Senior Lecturer, Department of Political and International Studies, Rhodes University

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

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Mcebisi Ndletyana, University of Johannesburg

What are South Africans to make of the murmurs that its governing party, the African National Congress (ANC), plans to recall Cyril Ramaphosa as president of the republic at its next National General Council in June? That’s where the party will meet to review if the government has implemented its policies.

Apparently, the motivation for the removal will be that Ramaphosa has not implemented the party’s 2017 national conference resolutions.

The mere suggestion of a recall is not surprising. The ANC has recalled two of its four previous presidents, Thabo Mbeki in 2008 and Jacob Zuma early last year. And, like his predecessors, Ramaphosa has formidable detractors within the party who see him as a menace to their livelihood and freedom.

There’s no doubting their determination to throttle the success of this presidency. But Ramaphosa’s detractors are unlikely to succeed in their rumoured bid. And, their failure will not be because they’ve suddenly become weak within the administration.

On the contrary, ANC secretary-general Ace Magashule, Ramaphosa’s main nemesis, is much stronger now than he’s ever been. He has appointed multiple individuals to bolster his grip. These are all individuals who’ve been marginalised by Ramaphosa’s presidency on account of malfeasance and, as a result, are similarly opposed to his presidency. They include former cabinet ministers Nomvula Mokonyane, Malusi Gigaba and Des van Rooyen.

Conversely, Ramaphosa’s influence in the ANC’s administration has been weakened by the departure of Zizi Kodwa, Senzo Mchunu and Fikile Mbalula from the ANC’s headquarters to cabinet.

The odds against Ramaphosa’s removal lie in several factors. These relate to the weakness of the supposed gripe, its timing and the likely backlash.

A weak case

The complaint that Ramaphosa’s presidency has not implemented its conference resolutions, especially on the expropriation of land without compensation, and nationalisation of the South African Reserve Bank, is unconvincing and self-implicating.

Ramaphosa has been persistently vocal on the land question and parliament is currently considering a bill to give effect to the resolution. Deliberations on the bill consider both fair and reasonable compensation as well as expropriation in the instance of refusing a fair price. Both these considerations are in line with the caution of the resolution that the land question be handled in a way that redresses the injustice of dispossession, without disrupting food supply.

A similar commitment is evident on the central bank. Ramaphosa has reiterated the intention to put the bank under public ownership, but only if there’s money to buy out the private shareholders. For any criticism on this point to gain support within the rank-and-file of the ANC, it must make a case for urgency and identify funds that should be diverted from what most would view as more pressing matters.

This will be difficult. Firstly, it’s proving hard to show that public ownership of the bank will allow government to influence the bank’s decisions. Even under state ownership, the resolution insists that the bank should still remain independent, which is also guaranteed by the Constitution. This questions the rationale for insisting on ownership without influence.

The truth is that the idea had little to do with policy. It was originally mooted by those wanting to protect the Gupta family as allegations of state capture mounted. The family’s beneficiaries in the ANC sought to gain control of the central bank so that its regulatory powers could be used to punish commercial banks that were closing the family’s accounts.

These efforts backfired. The Gupta proxies could not mount a convincing argument for removing the independence of the central bank. Now they have a resolution that is meaningless, but are simply insisting on fake bravado.

Besides the weakness of their gripe, Ramaphosa’s detractors are vulnerable on the same point they wish to use against him. There’s little movement on organisational reforms. These relate to, among others, modernising registration for party membership by taking it online to minimise manipulation. Another is to bolster the powers of the party’s integrity commission by making its recommendations binding, as resolved by conference.

These are all administrative matters that are handled by the secretary-general, Magashule. He is actually guilty of the charge that he seeks to throw at Ramaphosa.

Bad timing

Nor is the timing for removing Ramaphosa suitable. Local government elections are scheduled for next year. Most ANC-controlled municipalities are plagued by maladministration, and corruption is rife.

The blame lies squarely with the ruling party.

Take the Eastern Cape’s Makana municipality, for instance. The party ran that municipality into the ground and the provincial government, which has the responsibility to intervene, did nothing. It took the High Court to stem the rot by ordering that the Council be dissolved and the municipality put under administration for “failing to promote a healthy and sustainable environment for the community”.

Ramaphosa is currently leading an initiative that involves all levels of government to aid struggling municipalities. This initiative will most likely become the mainstay of the election campaign next year. The ANC is desperate to improve on the lowly 54% it received in 2016.

The various steps he’s taken, combined with his broader reform agenda, makes anyone who suggests his removal look deranged. Most in the ANC may be wrongheaded, but still want to remain in power. To retain power, they accept that they need Ramaphosa.

That said, Ramaphosa’s reelection at the next ANC conference in 2022 is not guaranteed.

Big risks ahead

Prospects of Ramaphosa’s reelection hinge on his public ratings. He is more popular outside the ANC. That’s why the ANC elected him in 2017: to win the 2019 election.

Once it appears that Ramaphosa no longer enjoys better public ratings, he stands a high risk of not being reelected party president, especially if the membership system remains unchanged. Most current members are rented – paid by one faction or another – to vote in one way or another.

Given this risk, it goes without saying that Ramaphosa needs to accelerate reforms. Most urgent is improving operations at the power utility Eskom. Power blackouts are the biggest source of unhappiness, and are spoiling the public mood. More importantly, they disrupt economic activity, leading to retrenchments. This, in turn, stifles the major promise of his presidency – job creation.

Unfortunately, reducing unemployment will take a while to achieve. This then makes fighting corruption, and the actual conviction of those implicated, key issues that will retain public support behind him. And he needs to urgently to take drastic measures to strengthen law enforcement agencies. National director of public prosecutions Shamila Batohi continues to face resistance, for instance, from some prosecutors within the National Prosecution Authority. They are stifling attempts at prosecuting cases arising out of state capture.

Ultimately, though, it is critical that Ramaphosa appreciates that salvation lies outside the ANC rather inside. He has to please the public more than his party. Public approval is his defence against enemies within.

The author’s new book, Anatomy of the ANC in Power: Insights from Port Elizabeth, 1990 to 2019, will be published by the HSRC Press in March 2020.

Mcebisi Ndletyana, Associate Professor of Political Science, University of Johannesburg

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

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Matthew Graham, University of Dundee

When Cyril Ramaphosa took over as president of South Africa in early 2018, there was a great deal of talk about a “new dawn”. But his term in office has failed to deliver, raising the question: has the legendary deal-maker lost his touch?

When Ramaphosa replaced former president Jacob Zuma many South Africans believed he would usher in a new era after the disastrous reign of his predecessor. The country and the governing African National Congress (ANC) both urgently needed rescuing from the malaise.

Ramaphosa inherited an unenviable hand from Zuma – state institutions had been weakened, the economy was in a parlous condition, the ANC was in internal turmoil, and the political elite regularly exposed for fraudulent and corrupt activities, which culminated in “state capture”.

Ramaphosa promised to rectify the situation through a series of initiatives. These included reforms to state-owned enterprises, economic growth and job creation as well as an anti-corruption drive.

Yet, two years on, very little has changed. In fact, things have deteriorated markedly. Even Ramaphosa was forced to admit that any positivity he once stimulated is now over.

His legendary negotiating skills have been incapacitated in the face of South Africa’s current predicament.

Public frustration

South Africa’s current predicament is well documented. It is characterised by interlocking crises encompassing growing unemployment, negative growth and unsustainable national debt. State-owned enterprises such as South African Airways and Eskom, the power utility, are failing. And, a “junk status” rating is looming.

Factor into this scenario a renewed series of xenophobic attacks against foreigners, the military deployment in Cape Town to curb gang murders, and a half-hearted response to the #AmINext movement protesting against gender violence.

Add to these the ongoing conflicts within the ANC, with leading cadres taking to Twitter to express their divergent opinions, and it is abundantly clear why there is growing public frustration with the Ramaphosa administration.

It was not supposed to be like this. Ramaphosa was the president who would save South Africa. Almost universally revered, expectations were running high that he would make use of his impressive political credentials, not least his record of past achievements that bore testament to his success as a deal-maker.

Deal-making skills

Ramaphosa has a formidable political pedigree that stretches back to his struggle activities in the National Union of Mineworkers in the 1980s, through to his contribution to the constitutional negotiations to end apartheid in the early 1990s.

These different experiences forged his reputation as a wily, tough and pragmatic deal-maker. Over the last 40 years, he’s shown time and again his ability to broker major deals. Just look at the wage concessions he extracted for mine workers and how he helped establish the basis for the country’s new Constitution.

Ramaphosa’s negotiating style is based on debate, building trust between participants, manipulating proceedings to his advantage and reaching consensus through rounds of dialogue. Even those on the other side of the negotiating table recognised his skill. Former apartheid-era President FW De Klerk once described him as “coldly calculating” and silver tongue[d]).

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Read more:
Ramaphosa fails to show leadership as difficult and decisive year looms

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Compromise based on a position of strength is integral to the success of his negotiating strategy. Most notably this came to the fore during the challenging constitutional talks.

Ramaphosa had established a close rapport with reformist MPs from the National Party, which ruled the country then, such as Roelf Meyer. These men were willing to negotiate with the ANC. More importantly, they were willing to make significant compromises to achieve an end to white minority rule.

Talks, debate, and compromise were the foundations for these negotiated outcomes.

Different times

Competing economic and social pressures, as well as the internal battles within the ANC, don’t allow for Ramaphosa’s preferred style of negotiation or leadership to succeed. In retrospect, the belief that he could address the challenges by finding a common position through a debate-led strategy seems naive at best.

A key problem is that Ramaphosa is constrained by his tenuous control over the ANC, while the party elite is locked in a factional conflict for power and influence. The historic “unity” of the party is disintegrating as rivals such as Secretary-General Ace Magashule, threatened by the promised reforms and anti-corruption initiatives, undermine Rampahosa’s leadership.

There is no room for debate in this febrile atmosphere, and definitely no appetite to seek common ground when disloyalty from within the party is so prevalent. When power and survival are at stake, compromise as a negotiating position goes out the window.

The upcoming National General Council of the ANC, scheduled for June, will only threaten Ramaphosa’s position further. The conference is held halfway between the party’s national conferences, to debate the “strategic organisational and political issues” it faces.

Meanwhile, the economic and social challenges require tough and decisive action. Yet, the ANC’s January 8 statement marking its birthday, repeated old adages of unity, growth, employment and transformation. It offered nothing new in terms of vision or solutions.

Ramaphosa’s favoured strategies continue to be through commissions and joint working groups. Yet a consultative approach is time-consuming and will simply not succeed when space for debate is marginalised and vested interests are at stake.

Is there a solution?

Tough choices

Fundamentally an immediate change to his negotiating strategy and leadership is required. Although decisive action is not in his playbook, Ramaphosa can no longer hope to appease everyone through consensus-based leadership. Structural reforms to prevent further economic decline are required quickly. These involve painful decisions and a stronger vision for the future, none of which are evident at the moment.

But, to implement economic reforms and to strengthen anti-corruption initiatives will be immensely unpopular, especially among the ANC hierarchy. Many don’t support Ramaphosa. Others fear the loss of their patronage.

Unless Ramaphosa can exert control over a recalcitrant ANC to make difficult decisions, he’ll stay stuck in a no-win situation, caught between the need to avert economic meltdown or keep the party intact.

The choice ahead for Ramaphosa lies between what is best for South Africa, or for the ANC.

Matthew Graham, Senior Lecturer in History, University of Dundee

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

 

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By John Fraser

Today’s Cape wine tasting podcast goes terracotta potty.

Food and wine guru to the stars Michael Olivier introduces a highly unusual white blend – the Spice Route Obscura 2019 – a qvevri wine.

Our guest tasters are Cova Advisory’s Duane Newman, economist Ian Cruickshanks, Clientele’s Malcolm MacDonald, and the man with the brand Jeremy Sampson.

The panel also discusses the delights of the neighbouring farms of Fairview and Spice Route, and the importance of promoting wine tourism.

Click below to join in the fun.

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By John Fraser

The annual yawn-fest in Davos will have a few fewer VIP visitors next week.

It is not often I have a word of praise for the vile Boris Johnson, but I did applaud the announcement that he will not be heading for the alpine posing parade.

Now, we learn that President Cyril Ramaphosa has done something that Boris rarely does. He has pulled out.

Not just from Davos but also from an investment conference in London.

But why?

His Trade and Industry Minister Ebrahim Patel and Finance Minister Tito Mboweni invited the media to a baconless breakfast briefing this week, stressing that there is good news about SA and that the problems are being addressed.   The message at Davos will be a bullish one.   It may be spun into the stratosphere, but it will be reassuring.

Now, Cyril had no problem recently in flying halfway around the world to watch a rugby match in Japan and seems to spend a good chunk of his time on trips.  

He has no fear of flying.

Possibly he is very fearful of his political pals.   The ANC remains as divided over policy as the British Conservative Party was over Brexit (until Boris pedalled to the rescue).

Continuing commie calls for the nationalisation of the Reserve Bank, an Energy Minister who seems allergic to private-sector power generation and a residual stench of state-capture-lust hang like a maggot-ridden rotting corpse over the ANC.

And then there is Davos itself.

A self-indulgent, preening event which still has some relevance but which has lost its sparkle.

Of course, it still offers the chance for business and political leaders to chat and to do deals.  I hear it will offer one climate-obsessed Nordic schoolgirl the chance to once again play truant.

But business and political folk can find many other warmer places to swap notes.  The restrooms at Heathrow Airport?  The fringes of the oh so many other international Summits, gathering and VIP funerals which they tend to attend. in their droves

Oh, and there is always Skype.  It doesn’t offer air miles or a decent wine list, but it is good value, even if you have to pay SA’s highly-inflated rip-off data charges.

Risking ice-induced broken limbs and the wrath of the climate-change brats, the SA delegates who attend will each get a free scarf.    So they are happy to represent the country, while Cyril is grounded.

Cyril’s job seems to be on the line from the troglodyte wing of the ANC, so he has wisely decided to forgo the free scarf.

It might be very wise for him to stay at home, to continue the fight, to watch his back.

For if he fails, no amount of bullish bullshit in London or Davos will save this country, which would tailspin into economic misery if the relatively-reassuring Ramaphosa is toppled.

He may lose out on a few air miles, but it is a small price to pay.

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By Dawie Roodt

No 20/20 vision, but the picture is getting clearer

20/20 vision refers to a clear vision over a distance of twenty feet. Now, I certainly do not have a clear vision of what can be expected for 2020, but slowly a picture is emerging, and it is not a pretty one.

I want to ease into the bad news, so let’s start with a thin silver lining.

South Africans owe Lesetja Kganyago, governor of the South Africa Reserve Bank (SARB), a huge debt of gratitude. Kganyago defended the independence of the SARB quite successfully last year after a politically inspired attack.

Additionally, the lower inflation rate at the end of 2019 proves that he was also successful in his primary objective of protecting the value of the currency. But even more importantly, future inflation expectations are also slowly “drifting” lower which shows that the SARB succeeded in its endeavour to “manage” inflation expectations lower.

Although the official inflation target of the SARB remains between 3% and 6%, they recently announced that 4.5% is their preferred target. Markets didn’t really believe this but at the end of last year, inflation reached its lowest levels in many years. It’s even possible that the inflation rate can fall to below 3%.

This strict monetary policy approach supported, amongst others, a stronger rand the last couple of months, and this could last for a while still.

The South African financial markets are also particularly attractive in terms of valuations. Even if we are downgraded, something I’m strongly suspecting, the rand and our financial assets may just perform well in 2020. This is good news because the SARB then has room to cut interest rates.

So, to conclude, the good news: expect a strong rand and a nice run on our (especially financial sector) assets and the capital market.

And now for the bad and even worse news.

The same record is still playing. The mismanagement of especially Eskom, and the subsequent limited supply of electricity, means that the rate at which the South African economy can grow is severely constrained. I expect an economic growth ceiling of approximately 1% which means that growth could be lower but unlikely to exceed 1%.

Onto the “state’s” dire finances. The (central) state’s debt is at a record high and rising fast, while our beloved Eskom alone owes more than R500 billion. The rest of the SOE’s are also mostly mismanaged while the finances of the local authorities are at a similar state of collapse.

I think we can safely say that the “state” is in the process of collapsing.

In order to stabilise the states’ finances, only two options are available; limit state spending (expenses) dramatically or increase the state’s revenue (more taxes), or a combination of the two.

The downside: any of these two options will reduce the stimulatory effect of the fiscus and hence will further stunt economic growth in the short term. And can we look at minister Tito Mboweni to deliver the goodies in next month’s budget? I expect that he will try to limit the state’s spending, as well as try to increase revenue through higher taxes.

I believe Mboweni is the best man for the finance portfolio, but he faces enormous odds. The ANC’s raison d’être is to seize the state in order to feed and maintain its own massive patronage. Without consistent high state spending, the ANC simply loses its reason for existence.

So, it’s unlikely that a significant reduction in state spending will be possible at all. I’m also not holding my breath that Mboweni will last that long as the minister of finance…

So, what can be expected on tax proposals?

I have no doubt that several taxes will be increased.

My only uncertainty is whether VAT will also be increased and by how much personal income tax will be increased. A VAT increase, which is the least damaging option, is politically almost impossible while higher personal income tax will be much easier to implement.

But since a reduction in spending or an increase in taxes will weigh on economic growth, in the short term, the 1% “ceiling” (compliments of Eskom) will be reduced even further.

Then there is also the very likely possibility of other stupidities. Further steps are likely to be implemented to follow through on the planned National Health Insurance – which is anyway doomed to failure – prescribed assets may come a step closer, and an increase in forex controls is also possible.

And this just further entices the downgrading-sword hanging over us. Not that a downgrade should make much of a difference, I believe that much of the bad news has already been priced into the markets.

Back to the 1% ceiling; perhaps we may consider ourselves lucky if we even reach this. In an environment where the population is growing at more than 1.6%, it’s unavoidable that unemployment and poverty will increase yet again.

The president will be shocked and disappointed…

Dawie Roodt is Chief Economist at the Efficient Group

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By John Fraser

Is it a bird?  is it a plane?  No!  It’s a podcast.

The ZA Confidential tasting panel confidently tastes a Cape red blend, Benguela Cove Collage 2017.   (Spellcheck alert:  mine tried to turn ‘Cape red’ into ‘capered’).

Corked crusader Michael Olivier introduces the wine to a vintage panel of top tasters.  Cova Advisory’s Duane Newman is joined by Brander Jeremy Sampson, economist Ian Cruickshanks and IT supremo Malcolm MacDonald.

Click below to dive into the fun….

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Do also check out:   http://www.michaelolivier.co.za

Andre Duvenhage, North-West University

On the eve of the statement marking the 108th birthday of the governing African National Congress (ANC), South Africa’s finance minister Tito Mboweni tweeted:

If you cannot effect deep structural economic reforms, then game over! Stay as you are and you are downgraded to Junk Status! The consequences are dire. Your choice…

Similar sentiments have been voiced by many well-respected commentators concerned about the state of South Africa’s economy as well as its politics – and the ability of the ANC to provide effective leadership to address the major challenges it faces.

South Africa faces perhaps many more challenges than it did in the build-up to the new constitution of 1994. These include a moribund economy and a governing party that is faction-ridden and ideologically disorientated. This is blamed for enabling much of the massive corruption and nepotism in the country best described as “state capture”.

What South Africa needs is a reformer who can redirect its politics to address issues related to economic growth and development, political stability, social cohesion, service delivery and several issues related to governance, management and administration.

It should all start with President Cyril Ramaphosa and the ANC, which he leads.
He had the opportunity to set the tone this weekend when he delivered the ANC national executive committee’s January 8 statement to mark the party’s birthday. Such statements are viewed as being important because they provide direction for cabinet discussions ahead of the new legislative sitting of parliament as well as the state of the nation address delivered in February every year by the President.

Ramaphosa was expected to lay out the political direction for South Africa during 2020. Unfortunately, his speech failed to hit the mark. It didn’t offer any radical new ideas on the structural reforms hinted at by Mboweni. Ramaphosa showed a complete lack of party as well as political leadership. His inability to be bold and decisive about what needs to be done suggests that he is increasingly becoming a victim of his own party’s inability to deal with the difficult circumstances of the current negative state of affairs in the country.

What was missing

There was nothing new in the speech outside of the existing policy and strategy of the ANC. The core of his presentation was the usual talking points about rebuilding the state, reinforcing the state-owned enterprises, the battle against corruption and state capture, social cohesion, and economic growth and development.

Despite an emphasis on making state companies, specifically the power utility Eskom work, and making progress with land reform, no fresh proposals were made. More rhetoric, a lack of strategic vision and political survival at all costs seem to be the name of the game.

This is a far cry from what’s needed.

Even more difficult times lie ahead for Ramaphosa. His promise that this year will see decisive action against those implicated in widespread corruption – among them influential party leaders – will no doubt add to his precarious position in the party.

The ANC’s 108th birthday bash provided fresh evidence that Ramaphosa faces a very difficult political environment in the party. There were expectations that about 35 000 people would turn up. In the event, only 11 500 arrived to hear him deliver his speech. Some party leaders bemoaned the poor attendance.

This shows that, beyond any doubt, 2020 is going to be dominated by the battle for control of the ANC. That battle will gain a lot of momentum towards the party’s national general conference which is due to be held in the middle of this year. The national general conference is held midway between party conferences, to debate the “strategic organisational and political issues facing the movement”.

There are already those who are already beginning to shows signs of mounting a challenge against him. These include those implicated in state capture, among them ANC secretary-general Ace Magashule, as well as other disgruntled members of the ANC presenting themselves as a “coalition of the wounded”.

The outcome of this battle will have far-reaching implications for the future for South Africa, and its ability to deal with its numerous challenges.

Decisive year ahead

The year ahead promises to be a very difficult but also a very decisive year for South Africa. Is Ramaphosa the man to take the country into a new dawn, or is he going to be the victim of a well-organised campaign to disrupt his intended initiatives?

This year will provide a perspective on the way forward. If strong forces within the ANC get their way, someone other than Ramaphosa will present the January 8 statement in 2021.

For ordinary South Africans, this presents a very difficult scenario, with the strong possibility that the economy will slide into recession.

This, plus amending article 25 of the constitution to enable the expropriation of land without compensation, will result in even lower investment levels, higher levels of political instability and bigger challenges in terms of food security.

This does not augur well for the future of the country and the well-being of its citizens.

Andre Duvenhage, Research Director, North-West University

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

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