How Zuma persuaded ANC to drop the ‘N’ word

THE African National Congress (ANC) has ditched the concept of "strategic nationalisation" in favour of "strategic state ownership" after an 11th-hour intervention by President Jacob Zuma.

He told the drafters of the party’s economic policy resolution at its conference in Mangaung to remove the word "nationalisation" — a bold effort to restore policy certainty for investors and turn around South Africa’s flagging credit ratings.

An attempt by the ANC Youth League to have the word reinstated when the resolution was presented to conference delegates on Thursday, failed.

"The state will increase state ownership in strategic sectors where deemed appropriate, on the balance of evidence ," the resolution read.

The state would further increase its participation in the mining sector through equity, using the state-owned mining company as its vehicle.

The resolution implied that there will be higher taxes for the mining industry, but did not specify what form these might take. It said the state should "capture an equitable share of mineral resource rents and deploy them in the interests of long-term economic growth, development and transformation".

Enoch Godongwana, chairman of the ANC’s economic transformation committee, told a media briefing this could take the form a resource rent tax, a "windfall tax" on super profits or another, unspecified, measure. "There will be a tax, what form it will take has not been decided."

The resolution further raised the prospect of export taxes on designated "strategic minerals" deemed important for industrialisation or as key inputs into downstream products. Among those in line for designation are iron ore, coal, base metals and gas.

The party said it wanted to assure investors that "nationalisation was off the table".

"The national conference has refused to be drawn into the (use of) the word nationalisation," said Public Enterprises Minister Malusi Gigaba. "This means that the issue of nationalisation, that we have discussed over the past few months, is off the table.

"We are providing final clarity. There shouldn’t be any expectation from here that we will come out and say we are going to nationalise."

Mr Zuma called the drafters of the resolution — who included Thaba Mufamadi, chairman of Parliament’s standing committee on finance, Mr Godongwana and Mr Gigaba — to an early morning meeting on Thursday. Participants close to the process said the president told them they should take out "that word".

Provincial chairpersons and secretaries were hurriedly briefed before the presentation to the plenary on Thursday and asked to support the resolution.

But global rating agencies are likely to continue sitting on the fence for a while in terms of their assessment of South Africa.

Standard & Poor’s (S&P) MD for Southern Africa Konrad Reuss said on Thursday the agency would wait to see what follow-through action the government took before revisiting its sovereign rating of South Africa, which it downgraded in October. "From our perspective the jury is out — we have to see what it is that is going to be implemented as far as policy action is concerned ."

Anything that would support growth in the economy, deal with social and labour market issues, and support fiscal consolidation, would be constructive for South Africa’s rating, Mr Reuss said.

S&P has put a negative outlook on its BBB credit rating for South Africa, citing the recent wave of strikes, which it said might increase "uncertainties" related to the country’s economic policy framework.

The Black Business Council (BBC) said it was "relieved" that the ANC had "once and for all buried the threat" of the wholesale nationalisation of mines and banks. "The BBC believes the ANC should better manage the perceptions around its economic policy choices and reaffirm the private sector as the appropriate agent for accelerated economic growth and employment creation."

The council believed the role of the state should be to create conducive conditions for good and socially responsible business.

MD of Pan African Investment and Research Iraj Abedian, said the ANC’s economic policy resolution was " more of the same".

"The ANC has always engaged in rigorous, left-sounding debate, or more recently, populist oriented, but when all is said and done there are fairly pragmatic and realistic policy choices ."

The ANC further resolved that there would be no ban on labour brokers. The South African Chamber of Commerce and Industry welcomed the resolution.

" One must take it as an appreciation by the ANC that labour broking has a role to play in job creation," CE Neren Rau said.

"On the issue of nationalisation, it’s good that this has been clarified. It will be positively received by the international community."

Source: BD Live

Have faith in ourselves and in our future

IT WASN’T a great moment for the South African Communist Party (SACP). In 1922, under pressure from declining gold prices, mine owners tried to deracialise job categories to reduce costs by hiring cheaper black workers. This act of grubby capitalism and high morality led to one of the most violent miners’ strike in South African history, of which there have been plenty.

White miners, led by the SACP under the slogan, "Workers of the world fight and unite for a white South Africa", began three months of civil insurrection. The mainly English-speaking communists were inspired by a form of violent Bolshevism, and organised themselves into "strike commandos". They began to engage in violent threats against "scabs", as labour movements do.

The prime minister at the time, Jan Smuts, at first tried to take a nonaligned position, saying if there was a strike, the "government would draw a ring round both parties, do its best to maintain law and order, and let the two parties fight it out". His "unaligned" position was typical of his legalistic, eminently "proper" way of conducting government business. He was presumably also influenced by the desire to retain the political support of the miners, on the one hand, but maintain the enormous income generated for the state by the mines on the other.

As it happened, events overtook him. The workers interpreted this neutral position as support for the mine owners, since he wasn’t putting pressure on mine owners to enforce the colour bar. The result was mayhem; on March 7, the entire reef went on strike and there was blatant sabotage and vandalism. Railway lines were blown up and telephone lines cut. Black miners were arbitrarily attacked because of fears of a black backlash. On March 10, Smuts declared martial law.

Also typical of Smuts, once he decided to go to war, was that he was absolutely ruthless. He used tanks, artillery and air support. The Benoni strikers’ position was machine-gunned from the air and the mine hall was bombed, says the NewHistory website. On March 17, the trade unions called off the strike.

It was never clear how many miners were killed, but what we do know is that it must have been a lot, since the death toll on the other side was very high: 72 soldiers and policemen. In total, 81 civilians were killed and 650 people were injured. The courts were jammed after the strike: 853 people were tried on various charges, 46 of them on murder charges. Eighteen were sentenced to death but the public outcry that followed was such that 14 were reprieved, NewHistory records.

This all happened a century ago, yet some of the basic parameters remain. The first is the truism that SA’s history is demarcated by its geology. The mines, deep and expensive, struggled then as they do now. The link between mining and politics is strong, too. Smuts lost the 1924 election, as the strike had radicalised the population along racial lines. It hardened attitudes and provided the first inklings of the creation of apartheid a few decades later.

But I suspect it did something else too. It created what might be called the default South African narrative: pessimism streaked with nihilism, the country forever on the edge of a nervous breakdown.

Writing in the wake of Marikana, the Financial Times’s former South African correspondent, Alec Russell, really captured it perfectly: "One of the lazier syndromes in the international media of recent years has been the way that every political, social or economic drama of the post-apartheid era, from the rise of the firebrand Julius Malema to the fluctuations of the rand, has been presented abroad as an existential crisis. So, the sort of conflict of interest that in, say, India or Brazil is seen as irksome but not disastrous, is in the South African context routinely depicted as a step on the road to Zimbabwe."

The problem is that it’s not just the international media, it is South Africans themselves. Not everything, not even Marikana, is a step on the road to inevitable calamity. It is time to develop a faith, not only in ourselves but in our future. It is time for South Africans to wipe away the tears, clean up the mess, and stop crying the beloved country.

• Cohen is contributing editor.

Source: Business Day Live

South Africa, a wealth of opportunity

Business Visual Audio from BIG Media on Vimeo.

Final reports expected on coastal power station

An independent expert Is compiling the final environmental impact assessment report for a nuclear power station with a maximum capacity of 4000MW along the coast, with Thyspunt in the Eastern Cape still the most likely location

LINDA ENSOR

Published: 2012/04/12 07:45:09 AM

An independent expert was compiling the final environmental impact assessment report for a nuclear power station with a maximum capacity of 4000MW along the coast, with Thyspunt in the Eastern Cape still the most likely location, Energy Minister Dipuo Peters said yesterday.





The final report was expected to be submitted by the end of the year to the Department of Environmental Affairs for evaluation and a decision on an environmental authorisation.





The fact that Thyspunt is still the preferred location — despite intense opposition from the local community — contradicts the view expressed by Women, Children and People with Disabilities Minister Lulu Xingwana in October that "the development will not proceed". She was minister of arts and culture at the time.





This was because the South African Heritage Resources Agency had refused to approve the heritage impact assessment report on the grounds that the proposed power station would have a negative effect on the heritage of the Khoi San.





Three possible sites have been identified: Bantamsklip, east of Hermanus; Duynefontein next to the existing Koeberg power station; and Thyspunt in the Eastern Cape, on the coast between Oyster Bay and St Francis Bay.





Thyspunt was the site that was recommended by the revised draft environmental impact report released last year on condition that it received the required authorisation and approval.





Studies of the three sites had not revealed any "fatal flaws", Ms Peters said in reply to a parliamentary question by Democratic Alliance (DA) MP Pierre Rabie. If the Thyspunt site was not approved for the first new nuclear station, it was possible that either the Bantamsklip or the Duynefontein sites may be approved.





"With respect to the Thyspunt site, issues have been raised relating to transport, the chokka (squid) industry and debris flow. These issues are being investigated by the specialists and if there are substantive changes made in the respective specialist reports, the public will be provided with the opportunity to comment on these reports. Further work is also being undertaken by the heritage specialists," she said.





Ms Peters said more than one site would be required for the programme envisaged in the integrated resource plan. The plan provides for an additional 9600MW of nuclear energy between 2010 and 2030, giving nuclear a 23% share of the total new energy build and a 20% share of the total energy mix in 2030 from its 5% in 2010.





The minister said Bantamsklip could be used for a subsequent nuclear power station if Thyspunt was used for the first one.





She said the final report from the environmental expert would take into account the public comments received on the revised draft report as well as the 28 specialist studies related to fauna and flora, wetlands, dune morphology, transport, heritage and socioeconomic activities such as the fishing industry, tourism and agriculture.





A few revised specialists’ reports would be made public in a few months’ time.




Questioned by DA MP Jacques Smalle about the planned solar park in Upington, Ms Peters said a process of appointing a consultant to conduct the feasibility study for the project was under way, though it had been delayed for a while.

Into Africa - by Wired Magazine

If you want to become extremely wealthy over the next five years, and you have a rudimentary grasp of technology, here's a no-brainer: move to Africa. Seriously.

The internet is only now arriving, and - with a billion people on the continent still mostly offline - there exists a once-in-a-lifetime opportunity to build the next Zyngas, eBays and Groupons for a huge untapped local market.

You need only to look at the map of huge broadband fibre-optic cables currently being laid on both east and west coasts, from Djibouti to Dakar, to understand how quickly and ambitiously an entire continent is being connected. It's like being back in 1995 again, and realising there might just be a market for an online bookshop or auction website.

Don't take my word for it: David Cameron is so keen to give British entrepreneurs a foothold that he recently took a delegation of CEOs to Nigeria and South Africa to highlight "one of the greatest economic opportunities on the planet".

The trip - featuring the bosses of firms such as Barclays and the Royal Mint, Vodafone and Virgin Atlantic - was hailed by Downing Street as "an historic visit to a continent with a trillion-dollar economy and the potential, according to the IMF, to grow faster than Brazil over the next five years".

Much of that growth will come from startups that bring the mobile internet to businesses and consumers who have until now been offline. That's why Cameron's team invited along the British founders of red-hot mobile-money business Monitise, a clever text-messaging system called Frontline SMS - and your own Digital Life columnist with his trusty notebook.

It was, admittedly, a surreal four-day schedule, taking in South Sudan, Rwanda, Nigeria and South Africa that, at the last moment, was squeezed to just two days and two countries (well, there was the small matter of a domestic phone-hacking crisis to distract the prime minister's attention).

But it was long enough to get a sense of the extraordinary opportunities - at a time when McKinsey and Ernst & Young are forecasting that £92bn will flow into Africa by 2015, and that consumer spending will reach £863bn by 2020. No wonder Helios Investment Partners could recently raise a £550m fund specifically targeting the continent.

So where could you make your own tech-based millions? A few obvious markets are primed for explosive growth:

Mobile money: Who needs banks if you can use your mobile to send and receive cash? More than a quarter of Kenya's GDP now passes through a phone-to-phone network called M-Pesa and, in Uganda, MTN Mobile Money has almost two million users.

As Cameron put it in a speech to Lagos Business School, "Today, mobile banking systems mean we can cut out the middlemen and make a direct impact on the lives of small farmers who can produce more food, feed their families, sell more food at the market and in turn purchase more seed."

E-commerce: You don't need a smart-phone, let alone a PC, to shop online. The American startup SlimTrader runs a service called MoBiashara, which lets African consumers shop by mobile on basic phones. And there are more than half a billion of those in Africa.

Business directories: The British startup entrepreneur Stefan Magdalinski - formerly of UpMyStreet and Moo.com - moved to Cape Town a couple of years ago to run a bunch of firms for international media group MIH, including a Kenyan business directory, Mocality, that gave many companies their first online presence. Why? Because he wanted to be where the action was.

Health: Not only do mobile phones turn into blood-pressure monitors and ultrasound devices that can connect rural communities, they can also detect counterfeit medicines: the startup mPedigree works with pharmaceutical companies to let patients text codes on packs of antimalarials to receive confirmation that they're genuine.

Leapfrog tech: If a tiny fraction of, say, Zimbabweans have access to the "big" internet, then why not make the internet accessible via SMS on their 2G phones? That's what Econet Wireless Zimbabwe is offering its five million mobile phone subscribers, turning their mobile handsets into virtual smartphones with technology from ForgetMeNot Africa that turns e-mails and chats into text messages.

Now insert your own big idea here, and book your air ticket. Sure, Africa still faces huge hurdles - in South Africa, eleven million people live below the poverty line, and almost six million have HIV; in Nigeria, 110 million out of a population of 158 million live on less than £1 a day. But when one telco alone, Bharti Airtel, recently announced £8bn in African revenue, you know it's time to abandon our traditional assumptions.

As Cameron said in Lagos, "Which continent has six of the ten fastest growing economies in the world? Africa is transforming in a way no one thought possible 20 years ago... and suddenly a whole new future seems within reach."


And why shouldn't you have a profitable role in that future?

David Rowan is editor of Wired magazine.

African roots create market for SABMiller

Brewer launches low cost cassava-based beer for Mozambican market to capture previously untapped low income earners

WITH the introduction of the first commercially produced cassava-based beer in Mozambique, SABMiller aims to increase its footprint in the relatively untapped home-brew beer market in Africa, which could be four times the size of the traditional market.




Almost half the alcohol made on the continent outside SA was made at a "subsistence" level, CEO Graham Mackay said yesterday at a Johannesburg press conference launching the product. It was a market that paid no tax and had no quality control, he said. "We always looking for new markets and opportunities."




The price of mainstream beer offered by brewers on the continent such as SABMiller and the UK’s Diageo means it is largely inaccessible to a large segment of alcohol consumers and is seen as a luxury purchase.



According to the United Nations, at the end of the 20th century, there were 315-million Africans living on less than $1 a day, which could increase to 404-million in the next four years.




Mainstream beer on the continent costs about $1, while homebrews can cost 85% less.




The informal market had "enormous untapped potential", Simon Hales, analyst at London-based Barclays Capital, said yesterday. "Your usual lager beer in the usual form is still too expensive," he said.




SABMiller will brew its Impala beer in Mozambique with local subsidiary Cervejas de Mocambique. "We hope the Impala brand gets about 10% of the market share eventually," MD of the brewer’s Africa unit Mark Bowman said. "An attractive price is important."




The beer will sell for 75c for a 550ml bottle, compared with the average price in Africa of $1 for an equivalent unit.




The brewer first invested in its Mozambique partner in 1995. Average per capita consumption of beer in the country is around 8l a year, against 60l in SA.




Impala is brewed using 70% cassava — a root vegetable that grows widely on the continent.



SABMiller will make use of the locally grown starch, which will be much cheaper to use than importing alternatives such as maize, Mr Hales said.




"It also enables them (SABMiller) to partner with local farmers and that wins favour with local authorities."



The brewer aims to increase local raw material sourcing in Africa to 50% over the next two years. SABMiller now imports about 80% of its raw materials.




Initially, the Impala brand will be restricted to rural areas — basically where cassava is grown, Mr Bowman said. "We’ll check the commercial success and in five to six months of running this then decide where to expand."




SA, which does grow some cassava, is not one of the markets primed for the product, according to Mr Mackay.




"There’s no discount category beer market in SA."

Source: Business Day

New rail project a game changer in southern Africa

Botswana, through Zimbabwe and into Mozambique and Malawi could prove a game changer in regional logistics and exports and challenge South Africa's dominance in this area.

The proposed 1 100km southern African rail network, which has many links to it, will connect to Ponta Techobanine, a proposed deep-sea port in Mozambique that could compete with the congested Richards Bay Coal Terminal, presently used as the main port for exporting commodities from ­southern Africa.


Read more

Accountability

Zuma helped our democracy pass a crucial test this week

By Steven Friedman

DESPITE the hand-wringing in much of our national debate, our democracy is in much better shape than many people imagine. That is the message of this week’s Cabinet reshuffle and the announcements that accompanied it.




The firing of two ministers and the suspension of the national police commissioner are important steps forward for democracy, which may make it easier to fight corruption. They also highlight flaws in the way many of us understand our politics.




Three ways in which President Jacob Zuma ’s announcements are being analysed all say something important about how not to understand our current condition.




First, some cling doggedly to the stock explanation for anything Zuma or the government does — that it must aim to influence the African National Congress (ANC) leadership election in Mangaung next year.



When Zuma announced an inquiry into the arms deal, or promised to release the Donen report on oil-for-food transactions, we were bombarded with analysis explaining how this was all about strengthening his position and weakening his enemies. This was despite the fact that, in both cases, a much more obvious explanation was available: the government faced court action and may have decided to deflect it. That this was what was happening seems now to be confirmed — the arms deal inquiry will last two years, and so it cannot be used to influence a leadership election only 15 months away.




Nor is there any clear link between the reshuffle and the ANC election. Despite Zuma’s usual attempt to ensure that every faction has been accommodated, none of the changes seems likely to help him.



It remains a mystery why he insists on playing musical chairs with some of his ministers, but it is hard to see how doing this aims to get him re-elected.




ANC presidential politics are important. But they — and the ANC — are not the only political game in town. There are many other factors in our democracy that shape what the government does: citizens’ groups, the media, public opinion and the institutions set up by the constitution. The obsession that everything the government does must be linked to Mangaung ignores the many forces with the power to shape our society.




The reshuffle and the other announcements responded to pressures from society and the institutions — they were not an attempt to influence Mangaung.




While most of this response was positive, some may be less so: a two-year commission may be used to deflect pressure on the arms deal. But they are reminders that we need to take all the forces that shape our democracy seriously and not project all our anxieties onto the majority party.




Second, some reduce what happened to a debate on the virtues and vices of the president. They are divided between those who wax lyrical about his statesmanship and those who grumble that he could have done more, sooner. This repeats another of our fallacies — the obsession with "leadership" and the belief that our future depends entirely on the merits or otherwise of the people in political office.




Zuma did not "do the right thing", to use the public protector’s phrase, because he is a fearless fighter against corruption. If he was, he would have acted far sooner and he and his colleagues would have made it clear that the ministers acted improperly and that the commissioner may have done the same.




It was not easy for him to act: he is of that generation of ANC leaders that is used to showing loyalty to each other in the face of external attack. He is rooted in the politics that allows figures such as Winnie Madikizela-Mandela and Manto Tshabalala- Msimang to win large shares of the vote at ANC elections because they ran afoul of the media or the courts, even though few in the ANC thought they should be leaders.




Zuma has also packed the government’s security cluster with allies from his home province — police commissioner Bheki Cele is one. Until now, members of this inner circle have been guaranteed their positions, whatever else changes in the government.




And so it must have been particularly hard to suspend — and perhaps jettison — Cele.



Zuma acted, then, not because he wanted to but because he was convinced that he needed to act.




But why should this matter?




The issue is not whether Zuma is "good" or "bad". It is that the system worked. That it did so in the face of presidential reluctance makes what happened on Monday more, not less, momentous: it may show that some democratic principles are becoming so ingrained that a president who would have preferred to stand by his colleagues felt he could not.




If constitutional government is indeed taking root, that is far more important than the qualities of the president.




The second lesson, then, is that we need to base our assessment of how the country is doing on whether democracy is taking root, not on whether we have found a super hero to lead us.




Third, there is the "take it for granted" brigade for whom no democratic advance is good enough because we don’t look like an idealised version of western Europe.




Nothing much has changed, they insist, because Zuma did only what he was forced to do and he did not root out every single vestige of corruption.




But the government did not have to do this. Legally, it could ignore the public protector’s reports or denounce them as smears. The ANC would still have won the next election if it did that. That the government listened despite this was remarkable.




There is nothing automatic in any society about the idea that political office-holders should listen to public protectors or, indeed, public opinion.




If this accountability is achieved at all, it requires trials of strength between the political power-holders and those who hold them to account. Any new precedent that makes the government account is a step forward, even if the gain is limited. That a reluctant government with a secure majority agreed to be held to account is a huge step forward for democracy and accountability, even if it did it so half-heartedly.




The public protector clearly understands the limits of her office better than most commentators. Thuli Madonsela is our most active public protector yet and she understood that there was nothing automatic about the accountability her office is meant to instil. She seems to have concluded — accurately — that her only credible weapon was public opinion. Through road shows and media briefings, she galvanised the citizenry — or those sections able to make politicians take notice — and this must have played a key role in Zuma’s decision.




So the third lesson is that democracy does not spring fully formed from a new constitution. It will always be tested as power- holders try to remain as unaccountable as possible and, each time we pass a test, democracy is more secure.




For all the imperfections of Zuma’s announcements, our democracy has passed an important test and this will make it more difficult in future for people in high places to abuse public trust.




Much work remains to be done if democracy is to take root and the government is to account to citizens. But this week’s presidential decisions have made the task more than a little easier.




• Friedman is director of the Centre for the Study of Democracy.

SA Census begins

 The third census since the end of apartheid began on Monday (10 October 2011) and continues to; Census 2011 got underway this week.

The nation-wide headcount will be carried out by 120 000 South Africa fieldworkers and targets 14-million households. The final bill is estimated to be around R2-billion.

A South African census is undertaken every 10 years, in line with international standards.

Residents –citizens or not – are legally obliged to answer the 75 questions in the 14-page form. The questions focus on demographics, migration, health, income, education, employment, fertility, mortality and access to services.

The final data will guide the allocation of state resources and provision of services such as health and education.

First to be counted were the homeless and children born in hospitals from midnight onwards on 10 October.

More difficult to count will be Zimbabwean nationals, many of whom reside illegally in South Africa. The Home Affairs department instituted a four-month Zimbabwe Documentation Process, which ended in December last year, in an attempt to regularise the residence of as many as 1,5-million Zimbabwean migrants. A moratorium – since lifted – was placed on the deportation of illegal Zimbabwean immigrants for the period.

The registration process met with limited success: only 275 000 Zimbabweans applied for residence permits. This can be partly attributed to distrust, widespread in Zimbabwean expatriate communities, of South African immigration and law enforcement officials.

The estimated million-plus illegal Zimbabwean immigrants are therefore likely to avoid the headcount – despite the legal obligation to answer the questions, and a statutory undertaking that no information can be shared or used for other purpose.


Source: SouthernAfricaReport.com

Investing in Africa: All to Play For

Just five years ago nobody would have described Africa as a safe haven. But as accepted safe havens such as the US and European government bonds and equities continue to provide disappointing returns — and the prospect of far worse than that — global investors have been forced to cast their nets wider.

Some of the obvious destinations, such as the popular Bric quartet of Brazil, Russia, India and China, are looking expensive now, though there have been opportunities for quick- witted investors to buy in recent market dips, particularly in India.

SA has been one of those pricey emerging markets, upheld until mid-September by a strong rand.
People in search of high returns now have to look at what are termed frontier markets. These include many countries on several continents, such as Africa’s Nigeria and Kenya, South America’s Argentina, Europe’s Romania and Central Asia’s Kazakhstan.


It should be as natural for SA investors to invest elsewhere on the continent as it is for the British to invest in mainland Europe or Americans to invest in Canada and Mexico, but it is not.

The legacy of the apartheid years means Lagos and Nairobi remain far less known to SA fund managers than London, New York or Hong Kong. SA pension funds can now invest a further 5% of their assets in the rest of Africa, on top of the 25% overseas allowance, but few have taken up the offer. There are some structural issues that make it difficult (see page 36), notably the lack of liquidity in all African stock markets other than the JSE itself.

Eric Kibe, who manages Sanlam’s African Frontier Markets fund from Nairobi, Kenya, says African markets have taken a beating over the past three months. “But this has been due to factors outside our control. The risk appetite of international investors has been reduced because of the threat of a double-dip recession in the US.”

Nothando Ndebele, head of sub-Saharan African research at Renaissance BJM, says that 40% of Africa’s GDP is made up by agriculture yet it is hard for a global fund manager to invest into this sector. “There are parts of the Democratic Republic of Congo that are so rich they can grow three crops a year.”

Mark Mobius, chairman of Templeton Asset Management — once called the Indiana Jones of emerging markets — says that investing in the second tier (the frontier markets) is worth the effort.
In Africa markets are at different stages of development, ranging from Zimbabwe, which opened its first stock exchange in 1896, to Angola, which has a spanking new stock exchange building but no listings yet. Brian Mugabe, head of Africa research at Imara Securities, says SA is the outlier as it is struggling to grow at 3,5% — half the rate of the rest of the continent.

“Angola is growing even faster than the rest so you can appreciate how much excitement the listing of a blue chip such as Sonangol, the national oil company, would create.”

Plus the jobs created for firms such as Imara to trade shares at a generous commission.
Investor relations are also starting to become more professional across the continent, and most listed companies now look to the Big Four auditing firms, plus a few reputable cottage firms such as Grant Thornton, to audit their books.

Nigeria is one of Goldman Sachs’s “next eleven” countries — those it considers to have the potential to become economic giants along with Egypt. (SA didn’t even make the cut.)

“Frontier markets, generally, have companies that are oriented towards their respective domestic economies rather than the global economy, so we believe that they have less correlation to global issues,” says Mobius.

He says Templeton, an early adopter of new markets, is looking at lesser-known economies such as Nigeria, Egypt, Kenya, Botswana, Ghana, Morocco and Tunisia. But though markets in some African countries are developing quite rapidly, they have a long way to go before their potential is fully realised, he adds.

Meanwhile, private equity investments present an alternative channel for direct foreign investment , and private equity companies are looking more closely at the continent . Carlyle, one of the big three global players, recently set up offices in Johannesburg and Lagos.

Within a generation there will be 1,5bn people in the whole of Africa, and China’s population will be in decline.

Ndebele says that financial services will become more sophisticated. There is already a large banking sector in Africa, which dominates most stock exchanges, but very little mortgage finance, while short-term and life insurance are both at an early stage in their evolution.

Though the African Union is not held in high esteem by the outside world, and does not seem to have done a great deal for unity, there is a greater realisation among Africans that economic and political co-operation is necessary and will further the national objectives of all countries on the continent.
Still, there are a lot of negatives , and SA is by no means immune to these.

Ndebele says that in many African capital cities, power cuts are a regular feature. The power infrastructure is awful, she says. “We hear that hydroelectric power is the answer, until the next drought.”

Porous borders and corruption affect SA, but it does not have one of the violence- prone governments that still rule by force on much of the continent. As we know, this has led to poverty and the deterioration of health among segments of the population in certain areas.

But there are some positive developments. Reforms are moving ahead and market economies have been growing and prospering in a number of countries. Ghana, the first in Africa to win its independence, back in 1957, is now, after several false starts, one of the best examples of this. Even blighted Rwanda has had two successful new listings this year.

Mobius argues that the long-term outlook for the continent is bright: “With its substantial wealth in natural resources such as gold, oil, platinum, iron ore, copper and large areas of arable land, Africa is well placed to benefit from increased growth and higher demand in emerging markets such as China and India.”

In 2010, Anand Sharma, India’s minister of commerce & industry, announced that his government planned to invest US$1trillion in Nigeria and other parts of Africa during the next decade.

In Angola, Nigeria and Ethiopia, rapid economic growth has resulted in better living conditions, lower child mortality, higher primary school enrolment and greater access to clean water.

The headline numbers on economic growth are compelling.

The continent, outside SA, is expected to grow more than 7%/year in the next 20 years, due to an improving investment environment, better economic management and China’s rising demand for its resources. SA, if it is lucky, will grow at about half that rate.

More than 100 African companies elsewhere in Africa have revenues in excess of $1bn. Africa also has impressive stores of potential resources, not only in minerals but also in food — 60% of the world’s uncultivated arable land is found on the continent north of SA.

The Bric countries have shown heightened interest . These emerging countries need resources and are willing to invest in infrastructure, which will help African economies.

It sometimes looks as if China may be trying to take over all the plum resources . Mobius says Chinese investments in Africa were subjected to intense media scrutiny in the past, but it only accounted for 2,6% of Chinese outbound investment . More than 70% of its outbound investment was still within Asia in 2009, while 13% was in Latin America.

According to an Ernst & Young survey of African investments, China was one of the top five foreign direct investors in just two sub-Saharan African countries, Ethiopia and Zambia.

Increasingly, Africa is not seen simply as a resources play. The most valuable shares on the exchanges are subsidiaries of the multinational consumer companies such as Unilever Ghana, Heineken’s Nigerian Breweries and Diageo’s East African Breweries.

The big disappointment recently has been Vodafone’s Safaricom, by far the largest IPO in Africa over the past five years. That was mainly because its margins were cut to the bone after a price war with Bharti Airtel.

The demographics are also favourable for growth. No less than 45% of the 1bn -strong population on the continent as a whole is aged between five and 24.

“The rising number of Africa’s youth could have vast potential, if they improve their education and skills. They could be a great asset to drive and sustain the continent’s growth and development ,” says Mobius.

The growing population is by no means an unmixed blessing.

The World Bank estimates that enrolment in secondary education in Africa is between 20% and 35%, compared with 40% in East Asia and 55% in Latin America.

And it is worth remembering that Africa (including SA) accounts for just 1,8% of world GDP — by 2015 it will have crept up to 2,4%. Australia’s share of world GDP will be similar.

GDP per capita in Africa, including SA, will still be only 40% of East Asian levels , though at independence in the 1960s this continent had a higher per capita income than Asia. In 1960 Ghana had a higher income per capita than South Korea.

It will take years to erode the perception that Africa is not a go-ahead continent.

Source: Financial Mail

South Africa targets $17bn investment bonanza

South Africa expects 115 billion rand ($17 billion) worth of investments flowing into Africa's biggest economy over the next three years, the trade and industry minister said on Tuesday. 

Rob Davies told parliament the figure was a “realistic target” and the deals would come from the emerging market BRICS powers as well as Japan, Germany, France, the United Kingdom, the United States and countries in the Middle East. 

“We anticipate that this work programme will translate over the next three years into an investment pipeline of projects valued at R115 billion,” he said. 

The past year saw investments worth 28 billion rand flow into South Africa, creating approximately 13,000 jobs. 

Foreign investors have been cautious about sending capital because of growing concerns over corruption and the country's rigid labour market, which makes producing goods more expensive when compared to other emerging economies. 

Turning to international trade, Davies said the stalled Doha Round of talks could collapse. “Renewed efforts to conclude the Doha Developmental Round this year appear to have come up against major, and perhaps fatal, obstacles,” he said. 

 

Major stumbling blocks include bigger economies wanting greater access to developing countries in the areas of industrial tariffs and services, while emerging states are wary of acceding to this demand without reciprocity.

South Africa recently joined the BRICS grouping that also includes Brazil, Russia, India and China.

Source: Reuters

South African companies continue expansion into Africa

Metropolitan Holdings , which aims to create SA’s third- largest life assurer by merging with Momentum, has plans to earn at least 25% of its annual revenues from international operations within five years.

The group will even attempt to break into non-English-speaking countries as it prepares to take on the big players on the continent. 

This year, however, the group would rather focus on consolidating its operations in Ghana and Nigeria, and also the merger with Momentum, one of the largest corporate deals to be concluded in SA so far this year.

The embedded value of Momentum — a subsidiary of FirstRand — was estimated when the deal was announced last month at about R18bn for the transaction, while that of Metropolitan was R12bn. The embedded value in insurance terms measures the present value of future profit plus net asset value of a life assurance company. 

Metropolitan CE Wilhelm van Zyl said international expansion would secure adequate growth opportunities rather than merely becoming another means of diversifying its source of profits, and would also provide a cushion against the competitive nature of the new business landscape.

Mr van Zyl could not be reached yesterday to comment on how the merger with Momentum would affect Metropolitan’s international expansion.

The group joins a clutch of South African companies venturing further into Africa, targeting potentially high-growth markets such as Nigeria, whose large population makes it an attractive proposition for the financial and telecommunications sectors. 

Standard Bank , Africa’s largest by assets, already has operations in Nigeria and is said to be eyeing further growth, while FNB and Nedbank are also known to be seeking out opportunities.

Mr van Zyl said Metropolitan was committed to deriving up to 25% of its earnings from international operations in five years . 

In the year to December, it reported diluted core headline earnings of R934m, compared with R1,01bn the previous year, according to a five-year review in the report. 

“Plans to establish ourselves in new countries are on hold for 2010 while we consolidate operations in Ghana and Nigeria … but we are planning to expand into at least three more African states within the next five years.

“In all likelihood, we will then also cross the self-imposed boundary of countries using English as their official means of business communication for the first time,” Mr van Zyl said.

Kraft Foods Highlights South African market, makes $150m investment

South Africa is now a priority market for Kraft Foods, says Sanjay Khosla, President, Developing Markets, Kraft Foods, during a recent visit from the company’s US-based global headquarters. The combination with Cadbury in 2010 gives the company a much larger footprint in South Africa, adding the market to the roster of 10 priority developing markets that will receive disproportionate investment.

Khosla announced that the company is pouring $150 million into local manufacturing in Africa over the next three years for brands including Stimorol chewing gum and Cadbury Dairy Milk chocolate, of the $150m, R750m will be spent on its PE plant.

During his visit, Khosla also outlined his Winning through Focus strategy for the company’s $13-billion developing markets business … the company’s growth engine. This strategy tripled the company’s developing markets net revenues from 2006 to 2010 and is centred around three pillars: focus, glocal and people.

Focus is a big part of winning in a business with more than 100 brands in more than 60 countries. “We focus on just five categories, 10 power brands and 10 priority markets. South Africa is a priority market for us, where we focus on power brands like Cadbury chocolate,” said Khosla. Together, these 10 markets make up the majority of the growth in the company’s developing markets business.

Khosla’s second strategic pillar, “glocal,” combines the best of global and the best of local. “We encourage independent thinking and entrepreneurship among local leaders who understand the local market, while taking full advantage of our worldwide strengths in areas like technology, sales and marketing,” said Khosla.

People is the third pillar of Khosla’s strategy. Khosla expressed that he’s investing in the development of diverse talent and future leaders, who have the opportunity to gain experience not only in South Africa, but around the world. “South Africa is a great source of global talent. Regional and international mobility is a phenomenal development opportunity for our people,” said Khosla. With female leaders making up 50 percent of the local management team, three of whom are equity candidates, Khosla said, “South Africa’s diversity is a major competitive advantage.”

Source: Moneyweb

Not spent yet

Research into the demographic shifts occurring among SA’s low-income groups forecasts a new wave of consumption- fuelled growth.

Foreign investors often say that SA doesn’t have a growth story to tell, certainly not like China’s or India’s. But research by Bank of America Merrill Lynch (BAML) suggests otherwise.

“SA has a growth story,” insists BAML economist Matthew Sharratt. He’s part of a team of researchers who believe SA will reap a “demographic dividend” over the next few years as hundreds of thousands of households move above the poverty line for the first time. It will buoy consumer spending and elevate economic growth.

So confident is BAML that SA’s consumption story has legs that it is expecting the country to achieve above- trend GDP growth of 5% by 2013, driven partly by accelerating consumer spending.

Over the past 10 years, consumer spending has been driven by the emergence of the black middle class. In the future, BAML says, the most important new driver of SA growth will come from households moving from just below the poverty line to just above it, and from informal markets into formal ones.

“The near-term cyclical slowdown in global and SA growth may certainly delay this process,” Sharratt concedes, “but we’re talking about a structural evolution that has already begun.”

Between 2001 and 2010, the number of households in the D income category (earning R5000-R9999/month) grew from 1m to 1,9m — a rate of 7,2%/year. BAML expects this to accelerate to 9,5%/year between 2010 and 2013 as 600000 households move off the bottom rung — from the D Low (DL) category (those earning below R4999/month) to the D category (see graph).

Low-income households that migrate up the income ladder have a high propensity to consume. Because of the size of this low-income base — about 9,3m households fall below a poverty line of R4999/month — even a small amount of jobs growth at this level boosts overall spending.

Whether this trend accelerates, as BAML is positing, depends almost entirely on the pace of job creation among semi- and unskilled workers. It believes SA can plausibly create 600000 low-income jobs by 2013 or 2m jobs over 10 years, an assumption the researchers feel is conservative, given government’s ambition to create 5m jobs by 2020.

“People are too pessimistic about the ability of SA to grow and create employment,” says Sharratt. “If the economy averages 4% growth over the next few years, it can create this number of jobs based on past performance.”

Government’s focus on creating jobs, greater credit extension to low- income households and the continued provision of public infrastructure, especially housing, should also help.

Sharratt says the research has generally been favourably received by retailers, though some are sceptical of government’s ability to follow through on its job-creation plans and doubt the economy’s ability to create jobs, even with fiscal support. “Though we believe we have made conservative assumptions regarding job creation, a serious delay or failure could mitigate the shift in household mix we expect by 2013,” he concedes.

BAML has used a unique database of the number and purchasing power of SA households developed by the Fernridge Group, a consumer demographics research company. It performs aerial image mapping and geo-coding of households which allows it to count fast-changing household formation in informal settlements.

It finds the most recent official estimate, Stats SA’s 2007 Community Survey, understates the number of households by more than 10%. Fernridge arrives at a total of 13913907 households.

Moreover, BAML’s research suggests the number of households will grow by over 2% a year, driven partly by population growth but also by one of the fastest rates of household fragmentation in the world, as urbanisation continues.

But while growth in the absolute number of SA households looks set to sustain the momentum of consumer spending, it is the changing mix of households that will act as an additional turbo charge.

This is because household spending rises threefold on average as households migrate from the DL category to D.

DL category households typically live in a squatter shack, survive on social grants, have little access to credit and shop at informal outlets. D category households have one member permanently employed, live in basic formal housing, use formal retail at commuter nodes and qualify for microfinancing.

BAML concludes this migration will be the main driver of retail growth from 2010 through to 2013 and aggregate retail spend will rise by almost a third over this period from R605,5bn to R805,7bn.

As households shift from DL in 2010 to D in 2013, the big winners will be food and groceries (on which spending by this group is set to double); leisure, which the researchers maintain is set to grow tenfold in spending terms; and clothing, footwear, textiles and accessories, on which spending should jump fivefold (see graph).

Applying these trends to Soweto suggests its food and grocery spend will rise by R7,6bn by 2013 — a 42% increase. If formal retailers retain their 26% market share, it represents a gain of almost R6bn over 2010. If they make inroads into the informal and independent market, the upside could be much greater.

Given that Soweto’s current food and grocery spend of R5,2bn is equivalent to the entire food and grocery spend of Zambia, BAML thinks retailers rushing into Africa might be underestimating the opportunity right under their noses.

“It’s not all about moving into Africa,” agrees Pick n Pay chairman Gareth Ackerman. Having visited low- income nodes in Pinetown and Umlazi in KwaZulu Natal this past week, he’s been “blown away” by the vibrancy of trading in these markets.

“People are moving up rapidly in SA; there’s a shift from people shopping in informal to formal, branded stores,” he says. “We’re rolling out as rapidly as we can to these low-income markets. There are big opportunities here .”

Source: FM

South Africa's hidden economy

Consider these cases. A builder has about eight people who work on his projects on a more or less regular basis, but his company has only one employee, himself. Everyone else contracts to the company.

Case number two is a small business owner involved in the manufacturing of signage, who outsourced his operation to a labour broker after protracted disputes with a union. He now has one-third fewer workers, the same productivity and, from his point of view, hassle-free labour relations.

The third case is a Mpumalanga plantation owner who has 18 farms on which 400 people work, but not a single one of them is an employee; the work is all done on an out-sourced, contract basis.

Official figures show that the number of jobs peaked at 14.1-million in 2008 and has fallen since to 12.9-million. The latest Statistics South Africa quarterly labour force survey -- for the second quarter -- shows that unemployment is at 25.7% and 174 000 more people are unemployed than in the previous quarter.

The Democratic Alliance's Ian Ollis said: "Since 2009, when President Jacob Zuma took office, South Africa has shed a net total of 902 000 jobs."



Finance Minister Pravin Gordhan this week bemoaned the over-regulation of the labour market. He did not give details, but treasury has been trying unsuccessfully for some years to introduce a youth subsidy for first-time workers. Gordhan has said that the new scheme will begin in April next year. His complaint comes as the National Economic Development and Labour Council is deliberating on new labour market restrictions.

But policymakers in the department of economic development argue that critics of labour regulation fail to give specifics when invited to do so. They say that at a median wage of just R2 800 a month South African wages cannot be considered excessive or the labour market to be too regulated.

Taxpayers
When the democratic South Africa dawned, gross domestic product (GDP) stood at a humble R550-billion; tax collected amounted to R113-billion. This year GDP will top R2.7-trillion; tax collected comes in at R664-billion.Social spending -- welfare, health and education -- increased from R33-billion in 1995 to R181-billion today. The number of registered taxpayers has increased tenfold from 1.8-million in 1995 to 10-million; companies registered to pay tax have exploded from 456 000 in 1995 to two million.

The increase in tax revenue has funded a dramatic increase in social spending, including on grants, which were paid to 2.9-million people in 1997 compared with 13.1-million now.

Unemployment stands at 25% of the economically active population, but employment grew by 62%, from 8.7-million in 1997 to a peak of 14.1-million in 2008, before declining to the present 12.9-million.

The 62% growth in employment represents 5.4-million new jobs, but the size of the economically active population (anyone aged 15 to 64 employed or looking for work) increased more or less as fast as the job growth rate: from 13.5-million in 2001 to 17.4-million in 2011, according to data from the Commission for Employment Equity. This increase in population size has meant that the unemployment rate has remained stubbornly high, at about 25%.

The poor performance of manufacturing has been blamed for the lack of employment growth; this sector's contribution to the GDP has fallen from 20% in 1995 to 17% now. But this is a relative decline -- finance and business services have increased from 16% of GDP to 24% in the same period. In terms of value-add manufacturing has grown from R106-billion in 1995 to R459-billion last year.

A war of words broke out earlier this year between Adcorp's Loane Sharp and Stats SA's Pali Lehohla after Sharp claimed that the government underestimates the true size of the job market by as much as four million.

Adcorp estimates the job market at 12.8-million formally employed and 3.8-million temporarily. It estimates that close to one million people are employed through labour brokers.

Stats SA shot back, saying that it uses rigorous, peer-reviewed methodology whereas Adcorp has not disclosed the research methods that underpin its findings. Both measurements include the contribution of the informal sector, but Adcorp sees this to be greater than Stats SA.

Earlier this month the Commission for Employment Equity published its biannual review based on the compulsory reports of 18 500 companies each of which employs more than 150 workers.

It found significant evidence of informalised labour. Of the 926 976 new jobs included in its 2010 reports, nearly half -- 445 703 or 48% -- were temporary.

The official number of employed people may stand at about 13-million, but many more people have bank accounts and are accessing credit.

National Credit Regulator records show that 18-million people have credit accounts and banking statistics show that 21-million people have bank accounts. This is up by 53% since 2004, when the number stood at 13.7-million.

The regulator's data show that the biggest category of credit facilities accessed is through store cards (38%), with credit or garage cards (32%) and overdrafts (16%) making up the bulk of the rest.

The gross monthly income of the people who had credit facilities granted to them was lower than R10 000 in 72% of cases.

How easy is it to get credit? The RCS Card is indicative of most others and works at 14 000 shops. All that is needed for an application are proof of employment, bank account and residence. These details are checked and the card company then decides to grant credit or not. For most bank-related credit facilities it is the same -- some require a minimum monthly salary, but most just ask for proof of employment for the previous three months.

South African Revenue Service (Sars) data show a rapid growth in people moving up the tax brackets. In 2003 37% of the 3.35-million taxpayers were below the pay-as-you-earn threshold; by 2009 this had fallen to 18% of 3.58-million taxpayers. Only 14.3% of taxpayers were in the R150 000 to R400 000 bracket in 2003; by 2009 this number had more than doubled to 35.5%.

Sars does not provide a racial breakdown of who pays what tax, but All Media and Products Survey data analysed by economist Servaas van der Bergh have shown that an additional 5.6-million people joined the working and middle classes -- earning above R200 000 a year (for a household of four) between 1994 and 2008. This is an impressive 65% growth from 8.6-million to 14.2-million people.

The black share of these classes grew from 33.4% in 1994 to 80% in 2008, according to Van der Bergh. In the case of the higher-middle class -- R320 000 annual income for a household of four -- the black share jumped from 12.3% to 36.4%.

The Commission for Employment Equity review showed that black people remained under-represented in senior management and in general were making slow progress up the ranks. An exception was qualified black professionals, who were up by 50% since 2006.

Source: Mail & Guardian

Transnet, Eskom bonds beat US ratings

Transnet and Eskom bonds are now more highly rated than US government bonds, according to the latest ratings by Fitch and Moody’s Investment Services.

After revising the parastatal’s outlook last month, Fitch affirmed Eskom’s national long-term rating at AAA(zaf) with a stable outlook.

The agency also affirmed Transnet’s government guaranteed bond issue at AAA(zaf).

The utility’s national long-term rating was affirmed at AA-(zaf) with a stable outlook.

These ratings meant that the two South African utilities were now more creditworthy than the US after rating agency Standard and Poor’s (S&P) downgraded the country’s credit rating from the top-notch AAA on Friday to AA+.

The favourable rating would ease the cost of borrowing in international markets for both Eskom and Transnet as they were currently seeking funds for multibillion-rand expansion programmes.

S&P adjusted the ratings and outlooks of the two parastatals in January, moving Eskom up to stable from negative, and affirmed the company’s long-term South Africa national scale rating at ZaAA and long-term foreign and local currency corporate credit ratings at BBB+.

My note: This report is incorrect in that it assumes AAA(zaf) is the same as AAA worldwide. In fact, AAA(zaf) is far inferior to AAA globally. Unfortunately the journalist and Business Report are mistaken. Nevertheless, it makes for fun reading.

Source: BusRep

Temasek, Oppenheimer set up $300m Africa PE fund

Singapore's Temasek Holdings is teaming up with the investment holding company of the Oppenheimer family to set up a $300m private equity fund that will focus on consumer and agriculture businesses in Africa.

Tana Africa Capital will be an equal joint venture between E. Oppenheimer & Son and Temasek's indirect wholly-owned subsidiary, Sennett Investments (Mauritius).

"With a growing population of more than a billion, the African domestic economies are growing with the emergence of a middle class with an increasing disposable income. We believe that the consumer and agriculture-related businesses will strongly benefit from this trend," Temasek's investment managing director Nagi Hamiyeh was cited as saying.

Tana Africa may also consider opportunities in the media, health and education sectors, he said.

Temasek, which had a portfolio valued at more than $160bn as of March 2011, has a 45:55 mix between emerging and mature economies. Given the slowdown in mature markets, it said it would focus on emerging economies, growing middle income populations and "emerging champions" for its investment picks.

Tana Africa Capital would appear to ticks all those boxes.

Source: FMTilt

Despite high returns, investors slight SA

South Africa offers “stunning” returns to investors, according to Sandeep Mahajan, a World Bank economist. Yet the economy fails to attract enough investment to achieve the government’s 6.5 percent annual growth target.

Growth of that order is needed to create 5 million jobs in the next 10 years – the goal of the New Growth Path outlined by Economic Development Minister Ebrahim Patel.

Mahajan was speaking at the launch, in Johannesburg yesterday, of a World Bank economic update on the country, the first of a new, twice-yearly series. The second issue will be released in December.

The report says real returns for owners of “physical capital” – such as factories – have risen sharply since the early 1990s, to an average rate of 15 percent between 1994 and 2008. If inflation is included, returns are as high as 23 percent. Moreover, the rate of return accelerated over the period.

In the five years before the global recession – 2003 to 2008 – real rates of return picked up from 15 percent to 20 percent. If inflation is added, nominal returns were close to 30 percent. This rate of return puts South Africa in the same league as China, according to Mahajan.

But private investors had failed to respond, he said, because they also looked at risk and barriers to doing business.

The report identifies four key issues that deter investors: industrial competition in South Africa is much weaker than in its international peers; skills development; labour relations; and low savings rates.

Based on the experience of other countries, South Africa’s savings rate would have to be ratcheted up from its present level of about 16 percent of gross domestic product (GDP), and its investment rate from 19 percent, to 25 percent to reach the state’s growth target.

Marcelo Giugale, a World Bank director, said the outlook for most emerging markets was bright, as the engine of growth switched from the developed to the developing world. He forecast average growth of 6 percent a year over the next five years. “Even Africa will have growth of at least 5 percent.”

Giugale described the report as a contribution to help South Africa catch this “fast-moving train”. Present estimates are that South Africa will grow at 3.5 percent this year, 4.1 percent next year and 4.4 percent in 2013. The report says: “The long-term potential growth rate under the current policy environment is estimated at 3.5 percent.”

To catch up with the emerging market trend, South Africa would have to work for “more effective internal integration” of its own developed and informal economies and “smarter regional integration”.

It says a big push is needed on public transport infrastructure to address the problems created by “spatially separated townships and informal settlements where the bulk of the unemployed live”. It also advocates programmes to “enhance financial inclusion and improve the cognitive and technical skills of youth”.

Source: Business Report

FIONA FORDE: Scenarios

Walking together to a new SA is meant to look like this

Published: 2011/07/22 07:11:16 AM

WHEN Adam Kahane facilitated the Mont Fleur scenarios 20 years ago, someone trotted out a joke that lodged in his mind.

"In the face of our unbelievably complex challenges, there are two options available to us: a practical option and a miraculous option," the story went.

"The practical option would be for us to get down on our knees and pray that some miraculous person will intervene and do it for us. The miraculous option would be for us to argue and talk and work together and figure it out ourselves."

Those words echoed loud when he facilitated the Dinokeng Scenarios a couple of years ago, which got SA talking about where the country was headed and what the future held. The scenario planning started out in 2008 and Canadian-born Kahane was brought in to facilitate it. He was joined by a group of conveners and a team 30 or so people, drawn from different walks of life. Between them they crafted what has become known as the Dinokeng Scenarios .

It was against the backdrop of extraordinary political disquiet. The African National Congress had elected a new leadership in Polokwane who were opposed to the members of the party who were running the country and it wasn’t clear whose hands were on the steering wheel.

In hindsight, Kahane feels the timing was perfect because it is during periods of uncertainty "that scenarios should be carried out, when you can’t see the road ahead, it’s foggy. And you want to pause and think about what’s going on and what our choices are."

But just as the Dinokeng team was about to hold their first three-day workshop in September 2008, the fog became thicker. Jacob Zuma had become the subject of a high-profile case of corruption and days after that first workshop, Judge Chris Nicholson invalidated the charges and implicated then president Thabo Mbeki in what he believed was political interference in the saga.

By the time the team gathered for their second session in October, Mbeki had been ousted; and by the time the third took place in November, the formation of the Congress of the People (COPE) was under way.

"We had the feeling every time we met we were in a completely different situation," says Kahane. "And it was really difficult to articulate what was happening", which made equally difficult the task of interpreting the period from 1994 to that point and particularly contentious the challenge of casting their minds into the future.

"The biggest disagreement was over the question of how bad things were. Was the tone, ‘We’re doing OK, we have to keep doing OK’? Or was the tone, ‘We’ve made mistakes. There are real problems and we have to deal with them or things will go downhill’?"

It was only after much debate that the second interpretation prevailed and the team recognised they were storing up trouble if they did not address the problems. And from there, the three scenarios eventually emerged which they put words on during their final workshop in February 2009: "Walk together", "walk apart" or "walk behind".

"Walk apart" imagined an unhealthy world by 2020 where everyone was looking out for themselves or their people in the face of such problems, be it their family, their organisation or their faction, depending on how they defined people.

"Walk behind" depicted an interventionist state that would try to manage challenges on behalf of all who lived in the country.

"Walk together" captured a country where the various actors — the government included — worked in concert towards a better future.

Not surprisingly, the team took the view that the ideal scenario was "walk together". In "walk behind" they felt the state didn’t have the capacity to be any more interventionist than it was , while "walk apart" imagined a situation that went from bad to worse.

The scenarios started a conversation that kept the country talking for the rest of 2009. They tapped into extraordinary goodwill and an undeniable sense that South Africans wanted to make this country work. But they died a sudden death at the end of that year and little has been heard of them since.

Yet two years on they are as relevant, if not more so, than they were then. And Kahane believes, perhaps surprisingly, that SA is already falling into the ideal third scenario — walk together.

"Let’s not forget ‘walk together’ is the high-conflict scenario," he says. "By definition this is the scenario with lots of voices, lots of actors, therefore lots of contestation, lots of protest marches, lots of arguments in the press, lots of court cases, lots of yelling and screaming. And if you don’t realise that you will be alarmed at the conflict. But if you understand that ‘walk together’ necessarily implies a high level of conflict, then you will interpret that conflict in a different way."

Hence SA in 2011 is a place "not of ill health, but of health. That’s what walk together looks like."

Yet there is a definite tug in certain quarters to lure the country into a situation where we would end up "walking behind" our leaders. Since the scenarios were launched there has been a sense that the democratic space is diminishing, not expanding, a point magnified by the continuing debate around nationalisation, for example. And that’s where it is important to reflect again on what the scenarios highlighted.

"The argument the team made is that the South African state does not and cannot have the competency to play that role. It is a state that wasn’t designed to serve the population as a whole and because of that, today it is struggling to accomplish even its current tasks," he argues.

"So having the state take on more functions raises understandable concerns. We have a complex economy and a poorly functioning state. And if the municipalities can’t deliver and the state is doing a mediocre job of managing parastatals, how pragmatic would it be to take over the function of the private sector by nationalising the mines or any other sector?"

The debate today is nationalisation. Tomorrow it may be something else. But the message two years ago from Dinokeng was that it was not a good idea to leave the future of SA up to the government.

So why are we feeling that tug today?

"My sense is that the situation is particularly fluid. We are going through another transition."

Is it time to plan another set of scenarios? "No. The Dinokeng Scenarios are still a perfect fit."

I want to ask him why we don’t hear more about the scenarios today, but then I’m reminded of the practical versus the miraculous option. Two years ago, we were all talking coherently about the scenarios. They provided something of a compass, a practical guide. But today we are living through the scenarios in what often feels like an incoherent way.

Perhaps Kahane is right. Perhaps we are walking together. And as he would say, that’s miraculous.

But maybe the practical gave way to the miraculous too soon. Maybe a little more of the practical — more guidance on how to frame these pressing conversations — would make us miraculously more able to inhabit this miraculous state.

• Forde is a freelance writer.

Clamp down on cadres in municipalities

In addition to prohibiting senior party office bearers from holding top municipal jobs, the new legislation aims to ensure that municipalities are managed by skilled people

BEKEZELA PHAKATHI

Published: 2011/07/13 06:28:52 AM

CAPE TOWN — Political parties may no longer deploy cadres into top municipal positions now that the Municipal Systems Bill has been signed into law by President Jacob Zuma .

In addition to prohibiting senior party office bearers from holding top municipal jobs, the new legislation aims to ensure that municipalities are managed by skilled people. The act also stipulates that any municipal official found guilty of fraud and corruption may not be hired for 10 years after conviction.

These new requirements follow a recent finding by Public Protector Thuli Madonsela that Hessequa mayor Christopher Taute had abused his power by soliciting funds from businesses for the African National Congress’ s (ANC’s) May municipal election campaign.

Mr Zuma, who signed the bill at the weekend, faced pressure from the South African Municipal Workers Union (Samwu) not to sign the bill after Parliament passed it in April.

Samwu had raised concern about several clauses in the bill, particularly the one prohibiting senior party members from holding top municipal jobs. The union said this would limit individuals’ right of association.

The 115000-strong union threatened to withdraw its support for the ANC in the May election in protest against the bill.

Samwu general secretary Mthandeki Nhlapo said yesterday the union would not comment.

"We have decided not to issue any comment on this matter until after our special central executive committee meeting on Thursday when we will discuss this issue," Mr Nhlapo said.

There are indications the union will embark on a strike in the next few weeks to show its dissatisfaction with the new law.

The South African Local Government Association ’s spokeswoman, Melissa Kentane, said yesterday the association would ensure that all councillors and municipal officials were aware of the act and its implications on municipal operations.

"Guidelines will be circulated and, if requested, legal opinions will be provided," Ms Kentane said. She said the prescribed municipal skills and competencies had not yet been published for consultation .

Last month the auditor-general complained that up to 80% of municipalities used consultants to assist with their year-end financial statements, and only seven municipalities achieved unqualified audits .

The director of the University of Western Cape Community Law Centre, Prof Nico Steytler said yesterday that even though Samwu contested the legislation, it was still justifiable. "The ANC leadership was clear on it and this was a well thought out bill which will help in the provision of proper and impartial service delivery," Prof Steytler said.

The Independent Democrats (ID) Parliamentary leader, Joe Mcgluwa, said Mr Zuma may have failed to uphold his constitutional obligations by delaying signing the bill.

"The ID hopes the signing of the bill marks the first step in a concerted effort by the ANC to bring this disastrous policy of cadre deployment to an end," Mr Mcgluwa said.

He said the fact that the bill was signed so long after it was approved by Parliament on April 19 was cause for concern.

"Section 237 of the constitution clearly states that all ‘constitutional obligations must be performed diligently and without delay’.

"The delay in the president’s signing of the bill means that its provisions will have had no effect on key municipal appointments made between April 19 and July 2."

Source: Business Day