The Ecomomist: ANC is "clueless and immoral"

  The Economist

Clueless and Immoral

A country that symbolises human rights and freedom is turning its back on both

Sep 5th 2015

TO UNDERSTAND how far South Africa has strayed from Nelson Mandela’s legacy, one need only peruse the latest foreign-policy paper drafted by grandees of the ruling African National Congress (ANC). The fall of the Berlin Wall, it reads, marked not the freeing of captive nations in Europe but a regrettable triumph of Western imperialism. The pro-democracy protests in Tiananmen Square in China were an American-backed counter-revolution. Russia’s invasion of eastern Ukraine is a conflict “directed from Washington”. America’s policies in Africa and the Middle East have “the sole intention” of toppling democratic governments. As “part of the international revolutionary movement to liberate humanity from the bondage of imperialism”, South Africa should seek to have American military bases thrown out of Africa.

If this were a spoof, it might be amusing. Yet the document is entirely serious: its contents are to be debated at the ANC’s policy conference in October. Its authors include several serving and retired cabinet ministers, including a former foreign minister. South Africa risks becoming a laughing-stock, not least in Africa itself.

When Mandela became South Africa’s first post-apartheid president, he led the country out of isolation. He promised a foreign policy in which “human rights will be the light that guides”. Granted, he and his successor, Thabo Mbeki, applied the principle inconsistently. South Africa called for sanctions against Sani Abacha, Nigeria’s brutal dictator, and was a vocal advocate of the International Criminal Court (ICC). Yet it also coddled dictators such as Muammar Qaddafi, whom Mandela called “my brother leader”, propped up Robert Mugabe even as he led Zimbabwe to ruin, and sided with Russia and China in opposing sanctions on Myanmar.

Dalai Lama, no. Bloodstained despot, yes

Under Jacob Zuma, the current president, the country’s foreign policy has drifted even further from its previous ideals. When the Dalai Lama was invited to attend a meeting of Nobel peace laureates in South Africa, the government refused him a visa. Yet it welcomed Omar al-Bashir, the president of Sudan, despite his indictment by the ICC for orchestrating genocide and mass rape in Darfur. And rather than let a fellow African leader face such impertinent charges, Mr Zuma’s officials whisked him away just before a South African court ordered his arrest.

All countries struggle to balance principles and national interests. Yet South Africa’s revolutionary foreign policy serves neither. On principles: South Africans may be grateful for the Soviet Union’s opposition to apartheid, but they are also proud of their constitutionally guaranteed human rights. Few buy the ANC’s argument that Vladimir Putin’s Russia is a victim and Barack Obama its cruel oppressor.

What about self-interest? The ANC wants to draw closer to the BRICS, a club that also includes Brazil, Russia, India and China and seeks to create an alternative world economic force. Fair enough; trade with China, especially, is important. Yet Europe is still South Africa’s biggest trading partner, and America, which gives South African textiles and manufactured goods preferential access to its markets, comes third. The ANC seems to think that commerce with China will flourish only if South Africa is hostile to the West. This is nonsense: many countries trade profitably with China while staying close to America.

The ANC thinks South Africa should stand up for Africa. But Europe and America are not Africa’s enemies. Quite the opposite. A single American aid programme, the President’s Emergency Plan for AIDS Relief, has saved millions of African lives. None of the BRICs can make similar claims. Nor did they step up—as Western countries did with soldiers, equipment and intelligence—when jihadist militias almost overran Mali or the north of Nigeria.

South Africa’s peaceful transition to democracy offered hope to a continent long tormented by despots and ideologues. If the ANC now rejects South Africa’s liberal friends and throws in its lot with some of the world’s nastier regimes, it will be doing Africans a grave disservice.

South African Rand - Trends and Forecasts

According to Rand forecasts on the Trading Economics website, the Rand should strengthen to R10 to the dollar in 2020 and R8.51 in 2030.

Conversely, economist Cees Bruggemans predicts R22.50 by 2018.

R22.50 to the dollar by 2018?

The Trading Economics website forecasts are based on the following:

South African Rand Forecasts are projected using an autoregressive integrated moving average (ARIMA) model calibrated using our analysts expectations. We model the past behaviour of South African Rand using vast amounts of historical data and we adjust the coefficients of the econometric model by taking into account our analysts assessments and future expectations.


However, looking at the 1 year, 5 year and 10 year history of the Rand shows a near 45 degree angle whereby the rand has gradually deteriorated.

Since 2010; the Rand has lost almost 100% of its value against the US Dollar and UK Pound Sterling. This means that the Rand has lost approximately half its value in 5 years.

Furthermore, the accelerated devaluation of the Rand began during the prolonged trade-union strikes in the mining sector, and subsequent Lonmin Marikana Massacre. This has been exacerbated by an electricity shortage, continued uncertainty of industrial action and proposals for harsher regulations and bigger percentages to be allocated to BEE partners and share-holders.

The above factors are also coinciding with a rising budget deficit. The main risks of a rising deficit is that it increases the chances of a lowering of SA's sovereign credit-rating.

Standard & Poor's credit rating for SA is currently at BBB-.

This is one notch above "junk status" and "non-investment grade".

The budget deficit does not show any near-term probabilities of shrinking; due to rising unemployment, rising population, low tax base of less than 5 million, public sector pay increases, social grants increases and low GDP growth. Five million people are therefore supporting the entire population of approximately 55 million. In the long-term, this is not sustainable if one considers that with low GDP growth of under 2% and rising population and unemployment numbers; the tax base is not growing at a rate which can keep up.

Furthermore, the potential of a $1 Trillion nuclear power-station deal with Russia is increasingly becoming a reality. Such a deal would considerably increase SA's deficit, which in turn could increase the likelihood of a credit downgrade.

On the political side, the influence of the SACP within the ANC and its appointment of members to key positions has increased. The rise of the EFF has arguably also increased their perceived 'need' for anti-white rhetoric as well as the intensification of Black Economic Empowerment (BEE) and 'economic transformation' in order to prevent losing more black voters. Sentiments such as these do not inspire investor confidence and only fuel uncertainty in regards to the economic future of SA.

The Rand is already one of the most volatile currencies in the world, ranging from top 5 to the most volatile. Furthermore, the currency is susceptible to "speculative attacks" via major banks as occurred in 2001; when the currency reached its previous record lows. Political uncertainty, increasingly anti-white and foreign business legislation, electricity shortages and trade-union threats do not help provide stability to an already volatile currency, nor do they contribute positively to overall economic growth.

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ANC Funding Western Cape Farm Strikes

 (Excerpts from Politicsweb)

ANC gives R4,1 million to Black Association of Wine and Spirits Industry (BAWSI) ahead of Western Cape Farm Strikes 

Statement issued by Annette Steyn MP, DA Shadow Minister of Agriculture, Forestry & Fisheries, April 24 2013

In a parliamentary reply to my question, Minister of Agriculture, Forestry and Fisheries, Tina Joemat-Pettersson, has revealed that her department paid R4.1 million to the Black Association of Wine and Spirits Industry (BAWSI).

BAWSI -the farmworker union -had been at the forefront of the violent unrest in the farming regions of the Western Cape.  

In fact, Nosey Pieterse - the union's secretary -had even thanked Minister Joemat-Pettersson for the funding on his blog. 

It is clear from the reply that this funding was given to BAWSI on 8 October 2012, just before the farm strikes began across the province.

This amount of money, coupled with the timing of the transfer, brings into question whether the Department of Agriculture helped fund the farm strikes in the Western Cape.

In the interests of upholding the rule of law and the Constitution, this must be investigated as soon as possible.

UK Terminates Financial Aid to South Africa

(Article from allAfrica.com)

Issued by: Department of International Relations and Cooperation

The South African government has noted with regret the unilateral announcement by the government of the United Kingdom regarding the termination of the Official Development Aid to South Africa as from the year 2015.

This is such a major decision with far reaching implications on the projects that are currently running and it is tantamount to redefining our relationship.

Ordinarily, the UK government should have informed the government of South Africa through official diplomatic channels of their intentions and allowed for proper consultations to take place, and the modalities of the announcement agreed on.

We have a SA/UK Bilateral Forum which is scheduled for some time this year and the review of the SA/UK strategy which includes the ODA, would take place there and decisions about how to move forward were expected to be discussed in that forum.

This unilateral announcement no doubt will affect how our bilateral relations going forward will be conducted.

We are however looking forward to the SA/UK bilateral forum later this year to clear up this matter among others.

FW de Klerk warns against ANC plans for "second transition"

(Article from Politicsweb)

Former President says ruling party wrong to contemplate a break with 1994 consensus

THE ANC PLANS TO END SOUTH AFRICA'S HISTORIC CONSTITUTIONAL CONSENSUS

Eighteen years ago we South Africans reached agreement on the kind of country we wanted to become.   After three years of difficult negotiations we agreed that we wanted a society in which the Constitution - and not the majority of the day - would be sovereign.  

We agreed that that Constitution should make full provision for the protection of all our fundamental rights; that we would have free and independent courts; and that we would establish a truly democratic system of government subject to the rule of law. 

We all agreed on the need for transformation - on the rapid development of our people toward equality, human dignity and the full enjoyment of rights.  We also agreed on the need to protect our languages and cultures and to ensure that no-one could be arbitrarily deprived of their property.

Parties representing some 90% of our people - and substantial majorities of all our communities - endorsed the constitutional accord.  We reached agreement despite our deeply divided and traumatic history.  We succeeded despite all the crises, the walk-outs, the violence and the reality that we all had to make painful concessions. 

Our achievement was rightly regarded by the whole world as one of the crowning glories of the latter part of the 20th century. It was seen everywhere as an example to all divided societies of what could be achieved by rational debate, compromise and goodwill.  I believe that whatever party we belonged to, it was our finest hour.

It was on this basis that the National Party under my leadership surrendered sovereign power - not to another political party - but to the constitution.

Earlier this week, in discussion papers for its upcoming policy conference, the ANC announced that it wants to sweep all this away.  It believes that the balance of power nationally and globally has shifted sufficiently for it to dispense with the compromises that it had made in 1993 and 1996.

According to Jeff Radebe, the ANC's Policy Chief, "our first transition embodied a framework and a national consensus that may have been appropriate for political emancipation, a political transition, but has proven inadequate and inappropriate for our social and economic transformation phase."

Radebe also announced that the ANC plans to dispense with some of the cornerstones on which our new society has been established, including the present role and powers of the provinces.  In line with the controversial Green Paper on Land Reform property rights would also be at risk.   Other cornerstones of the constitutional accord that are already under threat include language rights,  the right to education in the language of one's choice; the freedom of expression and the right to access information.  Most seriously, the government is maneuvering to limit the role of the courts.

None of this should come as a surprise, since the ANC is simply implementing the next steps in its long-announced National Democratic Revolution.

The National Party did not agree to the transition naively or with its eyes closed to the ideological nature of the tripartite alliance.  It realised full well that the ANC might one day reconsider its solemn undertakings. However, it believed that in addition to the guarantees that we had negotiated into the constitution there were other powerful forces that would help to ensure that all parties would honour our accord:

• the collapse of the Soviet Union had swept the ideological ground from under the feet of communists all over the world;
• a new global consensus had developed on the fundamentals of democratic governance and responsible fiscal and economic policy.  In our globalising world, no government could afford to ignore these new international norms;
• we also hoped that as the ANC became used to the complexities of government it would quietly abandon its outmoded ideologies;
• finally, we realised that just as we could not govern the country against the will of the majority, a majority government would not be able to rule effectively if it violated the fundamental rights  of our minorities.  Our symbiotic relationship dictated that whether we liked it or not we would have to work together to achieve success.

We would have been foolish not to seize this unique opportunity for a just and honorable settlement.

The subsequent eighteen years have proved that this was the right decision. As the ANC points out, South Africa has made substantial progress in so many areas.  Our country is respected in Africa and throughout the world as an inspiring example of non-racial democracy.  With all its faults it is a far better and a far more just country than it was in the past. 

We have indeed not made nearly enough progress in addressing unacceptable levels of inequality, poverty and unemployment.  However, these transformation failures cannot be ascribed to our constitution.  They are primarily the consequence of inappropriate policies. 

Evidently, the ANC now wants to jeopardise all of this.  It imagines that it can write off the influence of free market democracies and align itself instead with China, Russia and its friends in Cuba.

It thinks that it can invent a new approach to economic development that will free it from the need for the fiscal responsibility that it practised with such good effect for the first seventeen years of its rule.

It thinks, most dangerously, that it can treat minorities as it pleases and impose new forms of discrimination against them in line with its ideology of the National Democratic Revolution.

It is wrong.

Any move to abandon the solemn national consensus that we reached during the constitutional negotiations would destroy irreparably the brave foundations for national unity, democracy and transformation that we have developed since 1994. It would slash open once again the divisions of the past and divide the country along racial lines. Once the powers of independent courts have been sufficiently diluted - it would end the prospect of a society based on democratic values and fundamental human rights.

There are many other matters in the discussion papers that are problematic, but I have dealt here only with some of the key issues.  As Mr Radebe points out, the discussion papers are intended to be the basis for a vigorous national debate.  He invites "all sectors of South African Society and our people at large to engage with these discussion documents" because they "will have a profound bearing on the future development of this nation."   

In this spirit, I would like to renew my request to the government to hold genuine discussions on these issues with those elements of our society - from all our communities - who continue to support the constitutional consensus that the ANC now wishes to discard.

FW de Klerk

What does a 25% probability for a failed state really mean?

(Article from News24)

Clem Sunter

Since writing the column two weeks ago raising the probability of South Africa becoming a Failed State to 25%, many people have asked me what it means and what they should do about it.

Should I make sure my passport is up to date? Should I be going on an LSD (look, see, decide) trip to Australia? Should I be approaching a head hunter for job options in Europe? Should I legitimately be sending more money offshore to mitigate the declining rand? 

Should I be stocking food?

Connecting the dots

These are all valid questions which have been posed to me. Chantell Ilbury and I have always said that part of thinking like a fox is to connect the dots. You cannot just play scenarios – that’s daydreaming. You have to consider your options for each scenario and then decide what you are going to do about it depending on the probability and impact of the scenario. You can either do something now or prepare a contingency plan just in case. Either way, the whole point of the process is to improve the speed and quality of your response in chasing the opportunities and countering the threats offered by the scenarios.

So, let’s get back to the significance of a 25% probability. Pictorially, it covers an “L” or 90 degrees of a circular disc. If you spin the disc, there is a 25% probability that the needle will end up on that 90 degree segment. What is more is that if you spin it again whatever the previous result, the probability is still 25%. Like spinning a coin where you get ten heads in a row, the chances are still 50:50 that the next one will be a head. The difference between these examples and real life is that real life only happens once and therefore probabilities are far more subjective.

Recently, I had a discussion with a group from MIT in the US who tried to convince me that you can mathematically link the raising of the flags on our scenarios to their probabilities. I am not so sure because of the one time aspect of life; and so much of what happens is due to the animal spirits or irrational nature of mankind.

The bottom line is that the 25% probability on a Failed State is instinctive and should be treated as such. In other words, there is nothing scientific about it and if you have a different figure in  mind, you are quite entitled to base your actions on your figure not ours. Suffice it to say, in our mind, the Failed State scenario is no longer a wild card possibility lurking in the shadows: it is now a genuine threat, the consequences of which have to be thought through.

Impact of the scenario on you

This brings us to the second aspect that has to be considered which is the impact of the scenario on you as a business, you as a family or you as a person. If I said to you that the plane you had booked a flight on had a 25% probability of crashing, you almost certainly would not take it unless you were in a war zone and wanted to escape. The reason is a high likelihood of death in the event that the scenario materialises. Equally, if I gave you a 25% probability of being eaten by a shark when swimming off a particular beach, it would be very foolhardy of you to go in the water. One of the reasons you would not take the risk in either case is that the alternative options are usually easy to exercise: use another airline and go to another beach or swimming pool.

The impact of a Failed State scenario is far more difficult to imagine since so many varieties of a failed state exist, ranging from oppressive dictatorships through perpetual anarchy to civil war and at the extreme end genocide. No expert in the field here has adequately described the different forms that a failed state in South Africa could take. We certainly can’t, particularly as regards timing and rate of descent. 

The only thing we can state with confidence is that the rest of the world will collectively turn its back on us, apart from a few outcasts who will welcome us to the club of pariah nations.

Two categories of options

Hence, the evaluation of the overall risk of this worst case scenario i.e. probability times impact is a highly personal thing. And so too is the selection of options available which depends on individual circumstances such as age, level of wealth and education, business experience and skills, as well as the number of children and other family commitments you have in South Africa. In the case of a business, the opportunity to expand the geographical footprint outside South Africa will be linked to its range of products and services, health of its balance sheet and potential partners elsewhere.

However, options can be divided broadly into two categories: adapting your own strategies and tactics as regards your own future in light of the changing odds of the scenario; or rolling up your sleeves and taking action – however big or small it may be – to reduce the odds of the scenario itself. In other words, you become an active citizen in ensuring that South Africa does not fail.

Far be it from Chantell and myself to give you specific advice on which option you should take. 
What our 25% probability means is that you should give the matter some serious thought if you have not done so already. Then decide on appropriate action or have a contingency plan. That is what a fox would do – logically not fearfully, with a sense of purpose not despair.

Russian Economist Fears 'Failed State' in SA

(Article from Business Day Live)

Russian economist fears ‘failed state’ in SA

South Africa IS in danger of "tipping over" and becoming a failed state, according to Yuri Maltsev, a Soviet defector and economic adviser to former Russian president Mikhail Gorbachev.

Dr Maltsev said on Wednesday that South Africa was at a crossroads and there were dangerous signs of instability, such as the farm protests in the Western Cape, which some see as part of a political attempt to undermine the opposition Democratic Alliance.

"The African National Congress (ANC) is a monopoly, and power corrupts," Dr Maltsev said in an interview with Business Day. He was speaking at a forum organised by the Free Market Foundation.

"What worries me is this can be the point of no return … South Africa is at a crossroads and can tip over."

Dr Maltsev was referring to spreading social unrest, mounting corruption and plans by the governing ANC for more intervention of the state in the economy to alleviate poverty and create jobs.

If South Africa could choose the freedom of an open economy with less regulation, lower taxes and more flexible labour laws, it could "explode with economic growth and energy", Dr Maltsev said.

Nomura emerging markets analyst Peter Attard Montalto said labelling South Africa a "failed state" was to look at the issues of the economy in the wrong way.

"The whole point is that there hasn’t been enough of a dramatic shock to the system yet to push the government, ANC and associated interests into meaningfully doing something about the economy’s problems and providing the leadership required," he said.

"Hence we deal with ongoing underperformance without any ‘blow-up’ situation. Even the situation in the mining labour market does not seem to have been enough."

There are concerns that plans by Anglo American Platinum to cut as many as 14,000 jobs after mothballing four mining shafts will lead to a repeat of the wildcat strikes that hit the sector last year, leading to the loss of almost 50 lives.

Dr Maltsev said the election of business tycoon Cyril Ramaphosa as ANC deputy president was probably a good thing, although he did not approve of the way Mr Ramaphosa had acquired his wealth. Turning to broader issues, he said he was not worried by the growing Chinese presence in Africa as China seemed to be avoiding political influence. Africans could not afford to "pick and choose" who is investing in their economies, he said.

Dr Maltsev praised the formation of the Brics bloc, which groups Brazil, Russia, India, China and South Africa. "It’s a good idea because all the countries are on the same level of economic development," he said.

Before defecting to the US in 1989, Dr Maltsev was a member of a senior Soviet economics team that worked on Mr Gorbachev’s reforms package of perestroika.

He is now a professor of economics at Carthage College in the US state of Wisconsin.