RIP DVD – a major con on the consumer

By John Fraser

All good things come to an end, and my faithful Blu-ray player needed replacement.   I sought advice from a contact at Makro, who told me Samsung is no longer importing them into South Africa.

A trip to a couple of retail outlets revealed a couple of display units still on offer, along with some really expensive units.   A trip to the Takealot website showed a few units, but no direct replacement for my dying one.

So I suspect the writing is on the wall.    Just like VHS players (of which I could find none on the Takealot website) DVD, Blu Ray, CD players are slowly on the way out.

I did manage to find a suitable Blu-ray rayplacement, purchasing it from Amazon in the US.  It was expensive to ship, the import duties were harsh, and it had the wrong plug.

But it was soon up and running, working well, and it plays my Blu-rays, CDS, DVDs, while having an excellent streaming facility which gives me access to Netflix and YouTube.

But what do I do if this one lasts less long than I do?  I have a good collection of CDs and DVDs, many of which replaced now-discarded VHS and audio cassettes and vinyl (I did not expect the vinyl revival).

My assertion is that the people who sold me all of these discs of one sort or another should have some responsibility for keeping them valid.  Either by getting their associated electronics businesses to continue churning out the players, or by starting their own production.

When I asked someone in the industry about my fears of the death of DVD, he responded: “Have you tried streaming?”

I have, yes.  But I still want to return to the favoured drama, comedy and music for which I have already paid.    Streaming is not cost-free.   If you don’t have uncapped data, it can be cripplingly expensive.  And not everything is readily available online.

So, it worries me that as technology evolves, some of the hardware to drive your home entertainment is facing extinction.

I would like to think the entertainment industry shares my concern, but there is a nagging doubt that it will recklessly continue to offer new products, new systems, so it can cash-in afresh, again and again.

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SA’s red tape is keeping away vital skills

By John Fraser

party glass architecture windows
Photo by Negative Space on Pexels.com

Top global talent is willing to help close SA’s chronic skills gap, but is it often impossible for international executives to move and work here.

This is the claim of Debbie Goodman-Bhyat, CEO of Jack Hammer, Africa’s largest independent executive search firm.

“Internationally-based executives and entrepreneurs continue to inquire about career opportunities in South Africa, despite the challenges facing the country, including political uncertainty and crime,” she stated.

“South Africa remains a very attractive destination for global talent

“But even though these high-level leaders are in a position to drive growth and job creation locally, the current policy environment makes it almost impossible for them to do so.”

Goodman-Bhyat said that since the expansion of her operations into the US, they have been approached by highly-qualified and experienced executives and entrepreneurs about a potential move or expansion into South Africa.

“Unfortunately, they come back to earth really quickly when we share the realities of attempting such a move, because even once they have gone through the arduous process of applying for a work permit, the chances of them securing one are minuscule,” she warned.

jack Hammers says that in 2016, the Department of Home Affairs noted that “South Africa has not yet put in place adequate policies, strategies, institutions and capacity for attracting, recruiting and retaining international migrants with the necessary skills and resources”.

However, it fears that the situation remains the same today, with a recent report from the Human Sciences Research Council (HSRC, June 2018), noting that South Africa is unable to find the critical skills which are desperately needed.

“Note here that we are talking specifically about people who bring scarce skills, resources and capital, who will, in fact, grow the economy, create jobs, and contribute to the fiscus by way of taxes,” said Goodman-Bhyat.

“These are people who are motivated to invest their resources in the country, and have the potential to balance the impact of the brain drain, that continues to flow offshore.”

Goodman-Bhyat noted that top talent is global – meaning that the best talent is very mobile – and that the most competitive companies will secure this talent, from wherever they may be in the world.

“The ability of companies to do this is, however, completely dependent on whether the relevant policies are enabling or dis-enabling. In the case of South Africa, attracting global talent is a very long, steep, uphill battle.”

The recent enquiries from abroad are further evidence that South Africa is losing out on high-quality talent.

“Despite our challenges, the grass is still pretty green this side. Our cost of living, quality and cost of education, access to some of the best lifestyle-related assets in the world – these are very attractive factors to some of the best intellectual capital out there. If you had to compare all of this to working and living in San Francisco, for example, it’s an absolute no-brainer to want to work in SA.,” Goodman-Bhyat argued.

“We have to start looking at the big picture. Addressing transformation and employment equity can happen alongside a willingness to be open-minded and attract great talent – the two are not mutually exclusive. Yet at the moment, we are ignoring – even actively shunning – the intellectual capital that can contribute to the growth of the country.

“South Africa must realise that it is losing out to other countries seeking to attract critical skills, and understand the impact of doing so. Yes, the country finds itself at a difficult junction right now, and this might not seem like the most pressing issue.

“But if stabilising the economy, and ensuring future economic growth and job creation really is a priority, then getting the brightest brains to join the project will be a help, not a hindrance.”

President Cyril Ramaphosa has routinely said that SA wants to make it easier to do business in this country.  However, the government’s actions have yet to match the rhetoric.

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Pravin: Human error or sabotage accounts for half of Eskom’s plant breakdowns

Gordhan

Public Enterprises Minister Pravin Gordhan

By John Fraser

The systemic and ruthless destruction of state utility Eskom on Jacob Zuma’s watch was laid bare this week by Public Enterprises Minister Pravin Gordhan, who claims as many as half of all breakdowns are related to human failures, and therefore not to mechanical factors.

He was addressing a business forum in Johannesburg, organised by Business Unity South Africa (BUSA).

Gordhan told a panel discussion that the crisis at Eskom means that it needs funding of R420bn.

“SOEs (State-Owned Enterprises) are in difficulty, particularly those at heart of state capture.  They became operationally weak,” he noted, referring back to Jacob Zuma’s kleptocratic reign.

“Incompetent people were put in place, for example at Eskom power stations,” Gordhan stated.

He said he has been told 40% of Eskom breakdowns are a result of the human factor. “I believe it is 50%,” he warned.   And he speculated that some of the actions may be deliberate.

He said of the state-owned enterprises that in SA, following the Zuma years we “are left with a bit of a disaster.  We need governance, the right management.  We might need outsiders to give us the technical input we require.”

“We need to get them generating more revenue, to make them more viable.”

He confirmed a major restructuring of Eskom is underway, and the question of whether Eskom is unbundled into three is being discussed.

“We need very fast movement.”

In a later BUSA conference session, President Cyril Ramaphosa hit out at Zuma.

“Our SOEs are not behaving as they should be.  We are in a messy situation,” he stated.

“We have a mechanism which is ferreting (corruption) out.  After that, there has to be real, serious action.”

Without naming Zuma, he said: “there is a notion there are people who will fight back, as they will.  They are going to resist.  And so must we.

“We should not be defined by acts of corruption which have gone out of kilter with our values.

“Transparency International says (in a recent report) we are one of the most corrupt countries in the world.    This is the last time.”

He said of the Zuma years that “unfortunately in the last 9 years or so, policy was almost done on the hoof.  This led to policy uncertainty and inconsistency.

“The state has been denuded of good people, who gave it all up and left.  Some have been hounded out.  The state has been weakened severely.

“That is why we need to cooperate between business and the state.  We need to put all hands of South Africans on deck.”

It was reported, Wednesday, that Zuma had hit back at Ramaphosa, which confirms the mammoth task facing the new-broom regime which is now attempting to turn around the economy.

Ramaphosa also met business leaders in a separate engagement, and there was agreement on a sector-by-sector approach to reviving economic growth.

“Business people and ministers are beginning to imagine a South Africa which will have a 5% and a 7% growth,” the President cheered.

“They are looking at sectors, which for me is the holy grail we should all aspire to touch.  That is where we want to be.

“They tell me: we want the government to deal with the inhibitors.  I found that enormously uplifting.

“This is a no-brainer.  We must remove the inhibitors for growth.  South Africa must go and grasp that high growth.  South Africa is on the runway.  Let’s take off. ”

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What needs to be done to stop Zimbabwe’s violent meltdown

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Tapiwa Chagonda, University of Johannesburg

Zimbabwe is sliding into a violent meltdown, which is expected to worsen unless there are some serious interventions.

Days of mass protests have been characterised by violence, looting and heavy-handedness by the police and army. It has led to the deaths and injury of many people, largely in Harare and Bulawayo’s high-density areas. According to the Zimbabwe Human Rights NGO Forum, at least 12 people have been killed and thousands injured.

In addition to placing many urban areas under military siege, the government has also shut down social media platforms such as WhatsApp, Twitter and Facebook. These are viewed as the avenue through which the opposition and other civil society bodies have been communicating messages of “anarchy”. The internet has been shut down twice on separate occasions.

The deadly violence was triggered by President Emmerson Mnangagwa’s announcement of steep fuel price hikes on Saturday 9 January. Made in the dead of night, the announcement proved to be the straw that broke the camel’s back for a largely peaceful, if not somewhat passive, populace that has borne the brunt of two decades of an economic meltdown. Mnangagwa’s regime increased the prices of fuel by a staggering 150%, making Zimbabwe’s fuel the most expensive in the world.

The sharp fuel hike prompted the country’s largest trade union body, the Zimbabwe Congress of Trade Unions, and other civil society bodies such as the Crisis Coalition, to call for a three-day mass stay away from work.

The reaction was hardly surprising. Conditions have become fertile for a massive militant mass revolt. Shortages of a lot of goods have become the order of the day. Long fuel queues, and incessant electricity and water cuts have not helped the situation for poverty-weary Zimbabweans.

Mnangagwa, and those he can rally behind him in the ruling Zanu-PF, need urgently to take steps towards forming a government of national unity, as has been done before in the country. This will require the opposition Movement for Democratic Change Alliance (MDC-Alliance) to get its act together by behaving maturely. Another urgent step that’s needed is that the country’s chaotic currency situation needs immediate resolution.




Read more:
Bold steps Mnangagwa should be taking instead of fiddling with the petrol price


Currency crunch

Prior to the deadly protests, Zimbabweans endured a tumultuous few months economically as the country’s cash crunch worsened.

Just before Professor Mthuli Ncube was appointed Minister of Finance in September 2018, he said he wanted to phase out the country’s quasi-currency, the bond note, nicknamed “bollars” by the market. The rationale behind scrapping the bond note was that it was promoting the black market, as individuals were using this quasi-currency to mop up scarce US dollars.

Ncube also argued that Zimbabwe needed to come up with its own proper currency, which could be recognised as legal tender.

The bond note was introduced in the second half of 2016 in a bid to ease the cash squeeze the country was facing as a consequence of using a multiple currency regime which was anchored by the US dollar. But a lack of investment in Zimbabwe, combined with few exports, meant that the US dollar was not readily available on the market.

The bond note was meant to fill the cash gap on the market. Instead, it spawned a flourishing black market last witnessed during Zimbabwe’s dark days of hyperinflation in 2008. Dealers, including top government officials, used the quasi-currency to mop up scarce US dollars on the market.

The Zimbabwean government has consistently argued that the bond note is equivalent to the US dollar. But the market has suggested otherwise. Most retailers have a three-tier pricing system – US$, bond notes or Ecocash, the country’s PayPal like service that is making transactions possible. The reason for providing these options is the shortage of US dollars and the bond notes. Those that are available are largely in the hands of currency speculators.

The bond note’s death knell, which was sounded by Ncube, has sparked panic and led to a devaluation of the quasi-currency. This, in turn, led to retailers increasing their prices of goods and services for people using bond notes.

The knock-on effect is that doctors, teachers and other civil servants are demanding that they be paid in dollars – not bond notes.

Shortages of foreign currency have also led to companies like Delta, the country’s largest brewer, failing to import adequate raw materials for alcohol and soft drinks.

Zimbabwe’s largest cooking oil producer, Olivine, has also closed shop, citing a lack of foreign currency to import raw materials for their products.

What needs to be done

To stem the tide of the current crisis, before it totally overwhelms Mnangagwa and the ruling Zanu-PF, the president needs to immediately cease the brutal onslaught on civilians. In addition, Mnangagwa and his officials have to get off their high horse and facilitate talks that can lead to a government of national unity with the Movement for Democratic Change Alliance (MDC-Alliance).

This has proved to be successful before. A government of national unity was formed in the wake of the violent elections in 2008 that plunged the country into chaos. The 2009-2013 government of national unity helped to stabilise the Zimbabwean economy and brought the country back from the brink.

The MDC-Alliance also has to stop fomenting acts of violence that have become the party’s hallmark since its leader Morgan Tsvangirai’s death in February 2018.

Lastly, Zimbabwe needs to introduce its own currency so the cancerous black market that’s been wreaking havoc on the economy can be eliminated.

Tapiwa Chagonda, Associate Professor of Sociology, University of Johannesburg

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

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Comment from economist Dawie Roodt:

I disagree with this article!

For one, a new Zim currency will not work because nobody will trust it. Best they can do is to use the ZAR, which they must earn first! That means a CA (current account) surplus!

But the major issue is that there are too many civil servants. First step must be to get rid of them – politically difficult.

What South Africa’s matric pass rate means for universities

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South African universities aren’t doing justice even to top-performing high school graduates. Shutterstock

Suellen Shay, University of Cape Town

South Africa’s Minister of Basic Education announced a 2018 matric pass rate of 78.2% in the first week of January as well as a number of other significant achievements. These are academic results of students in their final year of high school. The results are used to gauge the state of the country’s education system. Based on this performance, the argument is that South Africa’s education system is on the right track and making steady, if slow, progress.

Whether the country accepts this or not, the question that needs to be asked is what these matric results mean for higher education, and more importantly, for the future professions that top matriculants aspire to.

One of the purposes of the National Senior Certificate – South Africa’s main school-leaving certificate – is to identify students who are sufficiently prepared for tertiary study. While tertiary education is not for everyone, the country needs a pool of talented matriculants to provide the high-level skills it needs for its economy and broader society.

So how is South Africa doing? I illustrate the progress by looking at the subject of mathematics. Mathematics develops logical reasoning and problem-solving and hence a “gateway” subject for many of the professions such as engineering, commerce and health sciences.

What do the final exam results say about the size and quality of the pool of matriculants who passed mathematics? What does their performance at tertiary level demonstrate about the pool of graduates ready to enter a workforce affected by changing work environments, particularly the rise of technology?

Small pool

The data suggest that the pool of matriculants who wrote mathematics is small and not strong. Over the past five years, significantly less than 50% of the matric final exam writers wrote mathematics as a subject. Of the 11 top subjects, mathematics is consistently the lowest performing. In 2018, out of a total of 270,516 mathematics writers, 37% passed with 40% and above. The percentage pass has been consistently between 30 and 35%.

From the point of view of selective universities who require 80% and above for programmes in commerce, engineering, science, health sciences and quantitative social sciences, the pool is extremely small. Out of the total mathematics writers, 5828 passed with distinction (80% or above) which is only 2.6% of mathematics writers.

From this very small pool, universities then compete to attract and retain these highly talented students. How well are they doing? Data collected on the past three years performance (2015-2017) of an entry-level mathematics course in one of South Africa’s selective universities shows a sobering reality: those who come in with a National Senior Certificate mathematics mark of 90% and above pass the course (with an average mean of 64%). Those who entered with a score below 90%, fail the course.

This is a course convened and taught by award-winning, highly committed teaching staff, where significant resources have been allocated to provide additional support for students, including an extended degree taught by highly experienced teaching staff.

Failure of higher education

South Africa can draw two conclusions from this data: firstly, although growing and strengthening this pool will require efforts at the primary and secondary level, the onus for growing the pool of qualified graduates lies with higher education. This underscores the argument made in 2013 by the Council on Higher Education which pointed to a systemic failure of universities because they were failing to graduate the strongest pool of students that the schooling system had to offer.

Even if the schooling system is able to enlarge the pool of matriculates passing mathematics, the data suggests that this will not inevitably result in a larger pool of students who succeed in mathematics as a gateway to their chosen field of study. There is a great deal of work to be done at the university level to grow and strengthen the pool from the existing talented school leavers.

Secondly, the problem of the “gap” between schooling completion and university preparedness is not new. Nor are solutions: South Africa has 30 years of interventions aimed at addressing this problem. However, a critical look at the high failure rates in these gateway courses (such as mathematics, physics, statistics, economics) despite a wide range of interventions would suggest that the sector is not doing as well as it should.

Perhaps some of the persistent educational problems, in part due to gross educational inequalities, require a different way of thinking. Perhaps the higher education sector needs to shift its resources from interventions for those deemed “at risk” (thereby leaving the rest unchanged) and to focus on systemic change. This means focusing on structural changes and the core business of teaching and learning itself –- curriculum that is flexible to accommodate diversity, teaching that actively engages students, an assessment that not only tests but promotes learning.

Contrary to the perception that this constitutes a “lowering of standards”, these systemic changes will profoundly raise the quality of teaching for all.

Higher education has no choice but to work with the pool of talent it receives. The challenge is how.

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Remember your sunscreen. And your sheep.

sheep

Baaaad for tourism

By John Fraser

Wow!  Who would have thought just a few weeks ago that the country would be in a tizzy over:

a) first the presence on a beach of a band of security guards, and then

b) a sheep having its throat cut on one of CT’s poshest beaches?

The racial polarisation over this issue would be hilarious, were it not so worrying.

Before my own questions on all this, here is a fairly measured statement by the CT Mayor:

CITY OF CAPE TOWN

31 DECEMBER 2018

STATEMENT BY THE EXECUTIVE MAYOR OF CAPE TOWN, DAN PLATO

City outlines actions around events at Clifton 4th Beach

The City of Cape Town will be taking a series of actions in response to the events which unfolded at Clifton 4th Beach in the last week.

In respect of events on Sunday 23 December 2018, where a private security company, Professional Protection Alternatives (PPA), were accused of requesting beachgoers to leave the beach following several alleged safety concerns, the City will be laying a complaint with the Private Security Industry Regulatory Authority (PSIRA) once its offices reopen after the festive season.

The organisation is a nationally constituted body that governs the private security industry. We are laying the complaint so that the matter can be fully investigated by the appropriate structure so that any wrongdoing can be identified and addressed accordingly by PSIRA.

In respect of events on Friday 28 December 2018, where a sheep was slaughtered during a protest on the beach, the City will serve a notice on the protest organiser as the act was performed in contravention of the City’s By-laws. It is our understanding that the Cape of Good Hope SPCA will also open a case of animal cruelty.

Many persons have asked why the City did not act. It should be noted that during public order policing situations, the South African Police Service assumes command over all policing staff on the scene. Senior SAPS officials in charge of the situation at Clifton on the day would not allow City and SPCA staff to act to prevent the slaughter.

We will be engaging with the SAPS on this matter, as well as with the Western Cape Police Ombudsman, as we cannot allow anyone to undermine City By-laws and prevent them from being implemented.

At issue was an allegation by the African National Congress (ANC) that a private security company acted inappropriately and this claim subsequently went viral on social media – at no point was an actual complaint directed via the correct channels for investigation.

The feedback I have received is that, despite the insinuation that particular races groups were targeted, all race groups were in fact asked to leave the beach; and they were asked in a peaceful, non-aggressive manner. PSIRA will have to get to the bottom of this, but to manipulate this information as has been done over the past week is disgusting and plays on the emotions of many.

Going forward, we remind the public that our facilities are open to all and that only uniformed City staff have the power to enforce by-laws.

Anyone else who claims to have such powers is likely impersonating a peace officer, which is an offence.

Furthermore, we encourage visitors to City-owned public facilities to report any problems or concerns about the conduct of staff or any person claiming to have peace officer status to our 24-hour hotline on 0800 32 31 30, which is monitored by an independent service provider.

Any safety concerns or requests for emergency assistance can be directed to the City’s Public Emergency Communication Centre by dialling 021 480 7700 from a cellphone or 107 from a landline.

End

Issued by: Media Office, City of Cape Town

OK?   Well, I have a few questions:

Given the sensitivity of the issue, why did we not immediately know exactly what happened when people were asked to leave the beach?   Why were they asked to do so?   If there was no racial discrimination, why was the situation not immediately diffused by a statement to that effect?  Sorry, Mr Mayor.  This was a fuck-up of note.

Why was there no clear plan to prevent the sheep slaughter on the beach?  Why were the correct authorities not deployed – early and in force?  If the SAPS had the authority, why no proper liaison with the City?  Which political and police authorities were incompetent?  Or has some other agenda?  They must be identified and sacked.

There is, as yet, no law preventing people who do well from purchasing expensive properties in Clifton, and other seaside spots, and enjoying the lifestyle.

Equally, there is no reason why people who follow the law and behave responsibly should be stopped from enjoying each and every one of our public beaches.

All of this is a very dangerous storm in a turbulent teacup.

Instead of making it all go away, the bungling authorities have taken a tense situation and made it far, far worse.

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Podcast: Marketing SA wines. And tasting a couple from Lanzerac.

John Fraser hosts another podcast, which explores the opportunities and challenges of marketing SA wines around the world.  He is joined by Malcolm MacDonald from Clientele, Gumtree’s Jeff Osborne, and top economist Mike Schussler.

They also sniff and slurp two red wines from the Lanzerac Estate in Stellenbosch – the Merlot and the Pinotage.

Click here to give it a listen:

Jeeves and the artisanal gin fad (with apologies to PG Wodehouse)

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 By David Bullard

I’d just popped into the old flat after lunch at the Drones in time to catch the news on the wireless that some political Johnny had threatened to kill five white people for every black person killed.

Now killing a couple of surplus-to-requirement aunts or even Sir Roderick Spode would have been fine in my book, and I may well have mailed the killer a fiver or two as a sort of inducement. But killing perfectly decent, law-abiding chaps whose only vice in life is to overstay their welcome at lunch, or put some money on the gee-gees, is a bit rich. I don’t mind saying I was a somewhat unsettled and in need of some refreshment.

As if by some sort of telepathic miracle, in shimmered Jeeves. Now, for those of you who haven’t kept up with my past adventures (shame on you) Jeeves is my valet. He prefers to call himself my gentleman’s personal gentleman, but valeting is what I call it. And he’s very good at it, particularly as he has the uncanny ability to anticipate the young master’s needs.

For example, I was late dressing for dinner at the Kelvin Grove one evening and had misplaced a cuff-link. Couldn’t find the bally thing anywhere when in floated Jeeves (he does sort of float rather than walk) with a perfectly serviceable pair of spares. I hadn’t even let out a wail of distress, and yet somehow he knew I was experiencing grief in the lost cufflink department.

Anyway, back to the story and the need for some refreshment to soothe the troubled brow, with the threat of genocide looming.

“Jeeves,” I said. “I think I’d like one of those local artisanal gins I’ve been reading so much about lately. You know the ones: they lob in some fynbos or black pepper and strawberries and charge double the price of normal gin for the bottle”.

Jeeves coughed discreetly.

“I shouldn’t advise it, sir.”

“And why jolly well not?” I demanded of him.

“Well sir, if you permit me saying so, they are what I believe is known as a ‘rip off’ among the gin cognoscenti. Gin is traditionally made with juniper berries and that formula seems to have worked well thus far.

“To add garden cuttings and bits of left-over vegetable matter to the solution adds, in my opinion, no great value. Particularly as gin is usually drunk with something sweet and sickly like tonic water”.

I felt I had to remonstrate with the man: “But Jeeves, my dear, deluded valet, they come in very fancy bottles, they’re locally-produced, and they cost twice as much as imported gin. They must be better”.

He hit back: “It’s a common misconception I fear, sir, that if something costs a lot of money it must be more valuable than something that doesn’t. Many owners of Breitling watches would no doubt agree with me. However, a closer examination of the labeling on a gin bottle reveals a uniform alcohol content of 43% by volume. Without wishing to labour the point, sir, five doubles of any of the artisanal gins in question will have much the same effect on your driving skills as five doubles of the cheaper variety. And with your morning-after headache, you’ll have the residual taste of whatever was added to the mixture to add to your misery.

“Now, if you’ll excuse me, I will mix your usual London gin and tonic with a dash of Angostura bitters and a twist of lemon”.

“But Jeeves” I pleaded, “I’ve been collecting all sorts of fancy gins these past few weeks. Even one from my old chum David Bullard, the disgraced ex-scribbler. What am I to do with them?”

Jeeves sniffed in that sniffy sort of way he has.

“I have taken the liberty of donating them to a local organization where I am sure neither price or quality will be of any consequence. The ANC Women’s League are having their Christmas party next week and Mrs. Dlamini was a most grateful recipient. She asked me to wish you Joyeux Noel”.

David Bullard is an accomplished luncher, wit, and writer

SA may need crisis plan if there is a hard Brexit

teresa-may

Embattled Theresa May

By Raymond Parsons

The latest U.K. political developments regarding Brexit now need to be closely monitored by SA to protect its economic interests in the event of a hard Brexit on 29 March 2019.

There remains a great deal at stake for SA in the eventual outcome of Brexit, as the EU and the U.K. are SA’s largest trading partners. The decision by the U.K. Government to delay the Parliamentary vote on the Brexit deal has now pushed the process back into uncharted waters.

The real danger now exists that the U.K. may well crash out of the EU without a withdrawal agreement and, if that occurs, it would have serious ripple effects through key parts of the international trading system and supply chains, including SA.

If a worse-case no deal scenario happens, Britain would immediately change from the trade rules of the EU to those of the World Trade Organisation (WTO). Its economy would then also become subject to the EU’s common external tariff and customs requirements.

Changing to WTO rules is however more than about tariffs, and involves other legal and economic changes which would seriously affect many sectors of the U.K. economy with whom other countries do business.

Trade beyond the EU, such as with SA, might also be involved, as many trade deals Britain benefits from were negotiated through the EU, and would lapse with a no-deal Brexit. It would also require the imposition of a hard border between the Republic of Ireland and the six U.K. counties of Northern Ireland.

Various institutions, including the UK Treasury and the Bank of England, have emphasised the heavy economic cost of a potential Brexit no-deal for the U.K.

The International Monetary Fund estimates that, in the event of a no-deal, the U.K. would lose about 5% of its GDP within a few years – the Dutch, Danes and Belgians would lose 1% or more as well.

The Irish would probably lose about 5% of their GDP. And although the expected fall in the pound would be helpful to exporters, the resultant inflation and potentially higher interest rates are seen by some analysts as presaging a shrinking U.K. economy with much less market potential in future.

For SA, there will eventually be both risks and opportunities in the event of a hard Brexit in March 2019. A fresh audit of the latest EU-U.K. economic developments therefore needs to be made.

It is important now that both government and the business sectors in SA most affected by Brexit remain alert to the possibility of a no-deal Brexit as one possible outcome and how it might affect key EU-UK-SA economic relations.

It may be necessary to evolve contingency plans to ensure that SA’s economic interests in the U.K. and the EU are adequately protected and any likely disruption to trade be kept to the minimum.’.

Professor Raymond Parsons is at NWU

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Ramaphosa is missing an economic policy. What needs to be in it.

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South Africa needs a new economic policy that envisages an overhaul of the power utility Eskom, which can’t keep the lights on.
EPA/Nic Bothma

Mark Swilling, Stellenbosch University

As the entrails of the era under South Africa’s former president Jacob Zuma continue to be exposed each day before a commission set up to investigate corruption, so the country witnesses the consolidation of the political project spearheaded by the new head of state Cyril Ramaphosa.

But a key piece of the puzzle is missing: Ramaphosa’s government doesn’t have an economic policy. All that’s been forthcoming is a stimulus package, plus two summits – one on jobs, the other on investment. Do these add up to an economic policy?

The answer is no. Here’s why.

I agree with South African economist Duma Gqubule that the stimulus package is a mix of short-term stimulus measures and longer-term structural transformation measures, without doing justice to either. The short-term measures don’t include the usual elements of a stimulus package such as lower interest rates and increased spending. And the longer-term structural transformation measures, such as the infrastructure investment programme, is nothing new.

More importantly, the longer-term vision ignores the changing nature of the global economy. This is being transformed by three factors: new information and communication technologies, the renewable energy revolution and the recomposition of work, as old jobs fall away and new ones created.

South Africa urgently needs a coherent economic policy that takes account of these realities. This can’t be driven by an industrialisation strategy that relies on 20th Century capital intensive sectors like mining, chemicals, pharmaceuticals and the military. Many are in decline. Take coal mining: mines are being closed as countries switch to renewable energy, which is now cheaper than fossil fuels in nearly 100 countries, including in South Africa. Investment in renewables in 2017 was R280 billion, twice what was invested in fossil fuels and nuclear combined in that year.

And the new policy mustn’t be written only by economists, as in the past. Economists need to work with South Africa’s scientists.

South Africa has dug itself into a deep hole. Ramaphosa’s efforts to root out corruption are a good – but not sufficient – first step to getting the economy onto a sound footing.

The history

The recent resignation of Home Affairs Minister Malusi Gigaba from government should not be underestimated. It was on his watch, as head of several ministries, that the influential Gupta family, which sits at the centre of the country’s web of corruption, secured a free hand to “capture” key state owned enterprises. He, together with other ministers, agreed to participate in a political project that resulted in a silent coup that effectively marginalised and hollowed out the African National Congress (ANC). The goal was to capture and repurpose state institutions.

Gigaba represents a generation that has done okay under the ANC since 1994, but want to do a whole lot better by grabbing their share of key sectors. They gambled on the alliance with the Zuma-Gupta network. And burnt their fingers.

Zuma was elected president of the ANC at its Polokwane conference in 2007 on the back of a wave of discontent. Black business was no longer willing to hang onto the coattails of white business; trade unions were fed up with limited state intervention; the ANC was unhappy with the centralisation of power in the presidency; and provincial leaders felt snubbed.

After some years of dithering, what became known from 2014 onwards as “radical economic transformation” was in fact a strategy to build a black industrial class by using the procurement spend of around R200 billion by the country’s state owned enterprises.

In theory, not a bad strategy. After all, this is a way of using state resources to build real assets owned by black people. As recent research showed, 90% of all assets are owned by 10% of the population, most of whom are white.

To operationalise the strategy speedily it was necessary to circumvent the legal framework. For that, brokers who were prepared to take the risks were needed. And so, enter the Guptas. A host of politicians were drawn into the web as well as South African and global businesses, including KPMG, McKinsey, SAP, T-Systems and Bain.

Chicken and egg: investment and growth

During the recent investment summit Ramaphosa grandly announced that the “investment strike” was over.

But many economists, such as Professor Adrian Saville, argue that investment never drives growth. Instead, investment follows growth.

In theory, heavy state investment in infrastructure (as promised in the stimulus package) is a good thing. But what matters is the type of infrastructure and how private investment is crowded in, without flipping into privatisation (which has its own set of challenges). For example, the massive investment in renewable energy (over R200 billion) since 2011 would not have happened if the state did not reduce risk by providing guarantees for the loans.

Given South Africa’s vast array of state owned enterprises, which includes the power utility Eskom as well as the national airline SAA, it’s obvious the country needs an economic policy that prioritises their investments. Yes, most need to be cleaned up and refinanced. But that is not enough. Radical thinking needs to be applied to entities such as Eskom, which has requested a R100 billion bailout.

Its role could be redesigned entirely. But a plan for a complete overhaul would be best served by merging the country’s best economic and scientific thinking. Together, they could generate an economic policy that puts energy at the centre. In line with global trends, this would need to be renewable energy, because it creates more jobs, is distributed across small towns rather than concentrated in a few industrial nodes, and can drive a new job-creating industrialisation strategy.

In short, South Africa needs a policy that drives growth and positions South Africa for the 21st Century. For such a policy to work, the country will need an effective and capable state. And the great divide between science and economics must be bridged.The Conversation

Mark Swilling, Distinguished Professor of Sustainable Development, Stellenbosch University

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

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