If there is one thing that businessmen enjoy, even more than long lunches, it is certainty.   Whether it is with their own money, or with funds raised from elsewhere, they are more likely to go ahead with a project if they are sure that its finances are predictable, that any support they are receiving from government will be predictable and will be delivered. 

With this in mind, I attended the media launch of the dti’s latest industrial blueprint, the eighth Industrial Policy Action Plan (IPAP).  

Trade and Industry Minister Rob Davies gave an overview of the strategy, and there were some encouraging elements.   A new auto support programme is being drawn up in good time for 2020, when the existing one is due to expire.    It may be that the voice of the auto component sector is to be more closely heard than it was in previous exercises, and the aim is to provide the industry with continuity and certainty about future support.   Tens of billions of rand of taxpayers’ funds are being invested in auto production, so it is good that proper planning seems to be taking place.

There was also a confirmation by Rob Davies that the focus of government incentive support measures will be shifting from wider support schemes to sector-specific ones, such as those for films, auto, clothing, footwear and textiles and so on.

However, once again there was a slightly opaque response to questions about the main incentive scheme for manufacturing, the MCEP, which ran out of money last year and which would have been reignited around now if there had been fresh funds.

In a series of MCEPtively vague responses, Rob Davies and his DG Lionel October (who had erroneously been introduced as DG September) confirmed the shift from wide-ranging programmes to sector-specific ones, said MCEP has been a success, suggested there would be budget lines for MCEP for the next two years (without saying what funds, if any, are available).  He announced that there would be a smaller successor scheme in future which would again be applied across all industries, alongside the growing sector-specific array of grants.

There is logic in government’s approach.  However, I find it strange and irritating that the changes which are being planned have not been clearly outlined, with details such as funding and timing.  I understand that a number of applications were made before MCEP ground to a halt, but never processed, and the companies concerned must be baffled about what is going on.  

Let us hope that the often excellent communications of the dti can be stepped up to ensure that once important changes are decided, they are then communicated.

Government says frequently how important this country’s industrial base is to our growth, employment and exports, and the more detail on how it plans to support this, the better.

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As anyone who has been watching the excellent TV adaptation of ‘The Night Manager’ will know, the arms business can be dirty and nasty.  Therefore, it is important to keep a close eye on each and every arms deal, especially if is conducted with a government as sleazy and corrupt as Jacob Zuma’s kleptocratic administration.    This is why our interest was aroused by a report in Engineering News about US aerospace giant Lockheed Martin.   It is apparently seeking to sell some more Hercules aircraft to the South African Air Force, with the suggestion that SA manufacturers could be involved in producing the roll-on, roll-off systems for the planes.  Engineering News reports: “Roll-on roll-off modules can be used to configure aircraft for maritime surveillance, intelligence and surveillance, firefighting, medical evacuation and VIP roles, for example.”

Sounds good, doesn’t it?  We buy the aircraft and at the same time the deal brings offsets which give a boost to our manufacturing base. However, those of us with long memories recall the ANC government’s first big arms deal, which was concluded around the turn of the Millennium, and involved an array of industrial offset opportunities.  I am pretty sure that the jobs and investment South Africa was expecting did not materialize at anything like the promised levels, and it is also pretty certain that there were millions of rand which changed hands in murky and corrupt exchanges.   There was not a lot of transparency, either.

Would things be any better today?  I doubt it.  We are now seeing reports that on his latest visit to Saudi Arabia, President Zuma may have opened some joint-venture arms factory, an event which was not publicized at the time.  Why not?  So while I have no reason to believe that Lockheed Martin would act in anything other than an honest and above-board manner, my concern is that some well-connected crooks would benefit from any offset agreements.   So let’s just agree that if the deal goes ahead, instead of offsets, there are some well-audited donations to AIDS charities, rhino conservation and the ZA Confidential wine cellar?  Well, it was worth asking.

 

Tweet of the Day:

Shit Jokes (@ShitJokes):  Two peanuts walking down the road.  One was a salted.

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Belgian Attacks

I have been working from home a lot.   This basically means drinking a lot of tea and watching a lot of telly.  So I was able to follow the Brussels bombings for several hours yesterday, on Sky, Belgian TV and French TV.

Having worked in some of the buildings near the Metro station which was hit, and seeing them on the TV screen, it brought home to me how these attacks were so close to my old haunts.   And Zaventem airport is a place from which I departed on many memorable trips while I was based in Brussels.

I am not shocked by the reports of dissent and the fostering of terrorists in the immigrant neighbourhoods of Brussels, having lived in such a neighbourhood myself.   And from my own observations, I have noticed that many Belgians are not always benign about their North African neighbours, or their descendants.  Or very welcoming.

However, I was rather disturbed by attitude of the Sky TV vultures who descended on Brussels, as they had done upon Paris after the attacks there.    Maybe I was just being hyper-sensitive, but the tone of some of the coverage suggested that the Belgians had brought this upon themselves.  Belgian and French TV coverage was a lot more objective.,

Now, I may be wrong, but I have always believed that the terrorists and not the targets are the ones we should blame for the atrocities.   Maybe the Belgian security services were a bit lax, but remember that they have just captured the mastermind behind the Paris attacks, so they can’t be all that useless.

Of course, a good response to all of my moaning is that if the Sky TV coverage annoyed me, I should have just turned it off.   And after a while I did.    Bloody Belgians.

Chris Hart

I haven’t seen the very impressive Chris Hart since he left Standard Bank, after much excitement over a tweet which some believed was racist, although it clearly wasn’t.

However, I see that now he has resigned he is out and about again, and we must all welcome the return to the public stage of one of our finest commentators on economics and on the way this country is being (badly) run.

The best news is that now he has escaped the Standard Bank shackles, Chris is now free to speak freely, and anyone with a love of South Africa should take advantage of this.   If he does not soon embark on a crowded schedule of speaking engagements, there will be something very wrong with those responsible for hiring worthwhile speakers.    I know I cannot wait to attend his next presentation, however disturbing his analysis may be.

 

Tweet of the Day:

Shit Jokes (@ShitJokes):  My Mrs reckons she can tell how good a film is by how many tissues she goes through when watching it. Funnily enough, I have a similar system!

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It was notable that as Sasol’s outgoing CEO David Constable wound up his latest results presentation, the last slide referred to succession.

He must be a­­­­­­ hard worker, because his top job is to be taken over not by one man, but by two.  The incoming joint-CEOs Bongani Nqwababa (who is black) and Stephen Cornell (who is not black) were there to bid farewell to the man with two jobs as they prepare for one each.

In a phrase which belongs more in an employment contract than in a media briefing, Constable said his twin successors would be jointly and severally accountable.   Whatever that means.

Now it is about time that Sasol had a black CEO, partly because this is a new South Africa, and partly because it has had a stormy relationship with government – and black CEOs are perceived to be better at oiling the wheels in Pretoria than we pale-faces.

But why does any black CEO need an equal-in-status side-kick/partner-in-crime?   Don’t get me wrong.  There is no suggestion that either new Sasol boss will be first among equals, or that Bongani is not up to the job and needs a bit of hand-holding.

But this is South Africa, where racists lurk behind every bush and perceptions can sometimes be more important than reality.

There is a similar relationship up the Rosebank hill from Sasol HQ – at Standard Bank, where again there is a joint-CEO structure with (black) Sim Tshabalala being in charge alongside (white) Ben Kruger.

Now Sim has undoubted qualities – which help to explain his leading position in the current dialogue between the business community and President Zuma.

But might he not command even more respect if he were doing the CEO job all on his own?

Certainly, any company which has two equal-in-status, of-any-colour, joint-CEOs will be faced with a higher executive wage bill, as neither would wish to be seen to be paid any less than their predecessor or their boardroom equal.   And maybe there is indeed twice the value for twice the money?

However, returning to the issue of perceptions, and without any suggestion that either black joint-CEO is in any way under-qualified, it might have been better if these two giants of the business community, Sasol and Standard, had taken a slightly bolder step and had just appointed a stand-alone black CEO.

It would have saved a few rand, and given the racists less ammunition for their vile theories.

Tweet of the Day:

Mark Twain (@TheMarkTwain):  Under certain circumstances, profanity provides a relief denied even to prayer.   

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OUTA sight

We hear a lot in ZA about waste and corruption. Maybe because there is so much?  But certainly one of the nastiest stenches at the moment is the Gauteng highway improvement scheme, for which road users are all being asked to pay through high tolls.

Those fine chaps at OUTA – recently renamed: Organisation Undoing Tax Abuse – have done some research into what it cost, and what it should have cost.

An international benchmarking exercise of 11 similar projects concluded that we in Gauteng have paid over the odds by 321%.   Had there been proper budgeting, the tolls would not be necessary.  OUTA is now investigating this and all other projects by the national roads agency SANRAL.   We can’t wait.

For a public body to be this reckless with our money – assuming that OUTA has got its sums right – is such a scandal that it makes the President’s use of public money to tart up his family home at Nkandla an object lesson in frugality and restraint.

Of course, if there was extravagance on that scale, we can only hope that those who dipped their hairy paws into the pot of public money are named and shamed.  Get outing, OUTA.

 

Tweet of the Day

Vladimir Putin (spoof) @DarthPutinKGB:  We will honour a ceasefire in Syria. Like we did in Ukraine.

 

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Foreign Perspectives on ZA

Jacob Zuma and his colleagues have been trying hard recently to convince the world that ZA is open for business, is an attractive place in which to invest, and has a robust economy despite global shivers.  Tell that to Barclays and Anglo.

These two global giants have a significant presence in two of our most significant economic sectors – financial services and mining.   And yet both appear to be scaling back.

In the case of Barclays, a bank which has a local presence through its large stake in Absa, the scale of withdrawal should soon become clear.   Will it scale down its investment, or just pack up and leave?

If so, there will be all sorts of opportunities for black economic empowerment, offset by all the potential dangers of enrichment and corruption which we have seen too often in the BEE arena.

And while Barclays’ culling of its African operations may well be part of a perfectly sensible global realignment, the signal it will send within ZA can only be a negative one.

Our ministers cheer when there is an investment in the country, such as those by the auto giants who are richly rewarded through state incentives.   They may not be as public about fleeing bankers, but some damage will be done.

And what about Anglo?  Despite this company’s rich heritage in South Africa, it has its main listing in London these days, and its current Australian CEO replaced a North American.   While it is not talking about closing down its SA businesses, its plans to exit Iron Ore would mean a goodbye to Kumba, this country’s biggest miner of the mineral.  Similarly, a likely move out of coal would also impact its local profile.   And if is also exits platinum, there would not be a lot left in SA of one of this country’s former giants.

Of course, change happens all the time.  Anglo acquired its stake in Kumba when the old monolithic Iscor was broken up and flogged off.  And in diamonds there was also a flurry of restructuring around Anglo and De Beers.

But at a time when the government is laying out the red carpet for new investors, it must be a worry to see some big players in the local economy wiping their muddy boots on the same carpet as they head for the First Class lounge at ORT.

 

Service.  Please?

Fine food and wine are, of course, essential for an enjoyable dining experience.  And South Africa has both in abundance.

But a meal out is more than just about filling your face and straining your liver.   The ambiance and the service can transform a good meal out into a great one.

Which is why I was so under-impressed when I recently had lunch at the Indian restaurant in the Gold Reef City Casino, South of Jo’burg.

The welcome was warm, it was a quiet lunchtime, and I hadn’t eaten Indian food for a while.

Food and wine were ordered, with me selecting a bottle of Allesverloren Tinta Barocca – a wine I know and enjoy and thought might make a good match for the spicy food.

The waiter arrived at the table with a bottle, and I was able to stop him opening it when I realized it was the wrong wine.   Once again, I told him what I wanted and he went off to fetch it.

This time he not only arrived with the wrong wine – but it was the wrong colour, too.   I enjoy white wine but that was not what I had ordered.

Soon there was a huddle of people around the table, with the manager finally admitting that although the wine I wanted was listed, they were out of stock.

I hastily ordered an alternative, opting for something which was not nice at all, and was way overpriced.

The food was excellent, but because I was crying over unavailable wine, the meal was a disappointment.  Fortunately, I was using up some vouchers I was given at the relaunch of the Casino, so it wasn’t too expensive.  But had I been paying full price, I would have been really annoyed.

Service is a challenge, even in very good restaurants.   I recall the first time I went to Bistro Michel in Jo’burg, the waiter was clearly out of his depth, and the main courses were brought to the table before we had received our starters.

South African restaurants regularly feature in lists of the world’s best, and with the weak rand you can arguably eat better here for less than almost anywhere else.

But if you do not train your people properly, you are not offering the full dining experience.

Besides, take-away curry can taste just as good, without the need to pay for overpriced wine, beer or whatever you choose to glug down with it.

 

Tweets of the Day:

James Martin (@Pundamentalism):  They’re planning to close insect impersonation club. And then where will we bee?

Jewish Comedians (@JewishComedians):  Jerry Seinfeld: If a book about failures doesn’t sell, is it a success? | #Quotes

 

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Policy Uncertainty Index

 

If there is one thing the markets hate, it’s uncertainty.  And if there is one thing the ZA government is good at, it is inflicting uncertainty on us.

So it is good that our chum Professor Raymond Parsons and his team at NW University have come up with a new Policy Uncertainty Index for ZA.

While the launch this week was a bit underwhelming, with too much focus on methodology and too little on the actual findings for Q4 2015, we can only hope that this becomes a valuable tool for those responsible for all the uncertainty, as well as those who are trying to make sense of what is happening in ZA.

The events late last year, when President Zuma changed his Finance Ministers more often than he changed his socks gave the markets a scare, hit the rand, and arguably led to the latest painful jump in interest rates.   While we appreciate this is good for savers, most of us are borrowers, and we are going to hurt.

As with most indicators, the trend can be very important, so while it is worrying that the index jumped from its base level in Q4, it will be interesting to see whether any stability is being achieved in the wake of the return of Pravin Gordhan to the Treasury when the next data are released.   The budget on the 24th should give a reasonable indication of whether he is going to open the floodgates of spending and borrowing, to appease disgruntled ANC supporters, or whether prudence will reign – which might help us avoid a further ratings downgrade to junk, or dog poo, or whatever is used for economies where the fan is turning a nasty brown colour.

It would be sad to think that spreading policy uncertainty is one of the few things our political leaders are good at.

OUTA

We have discussed in the past the importance of OUTA, which began as an anti-toll movement, but is evolving into a wider advocacy movement against unjust taxes and corruption.  ZA Confidential visited the OUTA offices this week, and was impressed by the clarity of thought and commitment of OUTA leader Wayne Duvenage.   A media briefing is being planned later this month to give some insight into the methodology and strategy of the movement, which seems to be attracting growing support and will hopefully be able to match this with sustainable funding.

 

Tweet of the Day:

Shit Jokes (@ShitJokes):  Last night I tried wife swapping for the first time, it’s brilliant!! I managed to get a new lawnmower for mine.

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