Tuesday, 18 December 2012

Jacob Zuma's Re-Election at Mangaung


The re-election of Jacob Zuma has made a clear statement to the world.  The ANC has decided to choose the way of nepotism and corruption, and the total disregard for governmental incompetence, that has been the hallmark of that association since the replacement of Nelson Mandela.

What does it mean for South Africa?

One clear outcome will certainly be the further decline of the country as a meaningful player in the world, and probably at an increasing rate.  The hope that democracy will bring an improvement in the lives of all its citizens, a hope that was held by all in the country, must at least be placed on the back burner.  The more realistic believe that this re-election marks the second tipping point in the economy – the first occurred when Thabo Mbeki and his Cabinet chose the path of corruption in approving the Arms Deal and then silencing any attempt to question it.  That act gave a clear signal to the politically-connected that there would be no consequences to acts of blatant corruption, and the blind willingness of the ANC delegates to Mangaung to vote in a leader who has proved conclusively that he is willing to plunder the State coffers for his own benefit is a logical continuation of that.

A second clear outcome is the almost certain continuation of the drift of the country towards Stalinist Communism, a system under which cadres who have very little interest in performing their work in the public interest continue to pursue their own financial benefit.  This cannot avoid a further downgrading of the economy on world financial markets, as the Stalinist policies increase the domination of the State in practically every aspect of the life of the citizen, as the level of incompetence in Government continues to increase without consequence for those involved.  It implies an increase in the pay-offs for those who put Zuma into power again, those pay-offs coming at the expense, not only of tax-payers, but also of the poor, who will become poorer as the opportunities are squandered.

A further consequence will be the departure for countries with more honest and more competent Governments of the skilled people, those who are attractive to the countries that desire total growth of the economy more than they desire the enrichment of a few politically-connected people and their cronies.  The months leading up to Mangaung have made it clear that the country’s capable and skilled people saw it as a make-or-break for the country.  Many have made preparations to leave in the event that the outcome at Mangaung was as bad as it could be – they did not expect it to be good, as the ANC has departed so far from its professed ideals that practically no conceivable set of Party election results could have been described as ‘least bad.  Their fears have been realised and the new wave of departures will start shortly.

One further result of Mangaung was visible in the charges laid against a group of people who have been accused of treason.  Their claim is that the ANC is not the legitimate Government of the country.  This is one instance, but it is certainly not the only one.  The ANC is certainly aware of this trend, and the citizens can now expect a slow slide into civil war conditions over the forthcoming years.

It is perhaps relevant to point out that the ANC will, eventually, be held to account for its depredations.  That accountability may take the form of a revolution, with the leaders of the ANC being hung from the lampposts, in the tradition of ‘African independence’, or it may take the form of a new Government replacing the Party that has done so much to bring South Africa down and commencing a forensic investigation into who did what, and then charging them in the Courts.  It is the hope of all true patriots that the latter will be the case.

The ANC Conference - Mangaung


Malusi Gigaba, a member of the ANC NEC, made the proud announcement in an interview with SAfm, broadcast from Mangaung, that the Government has committed to the roll-out of a large infrastructure development program, explaining that practically no infrastructure development had been undertaken by the Government until 2004.

This confession, in any other democratic State, would have been coupled with a resignation of all senior members of the Government.  It is a clear admission that the ruling Party has failed abjectly in its responsibility.  It is, unfortunately, true.  Any observer of the economics of South Africa will have recognised that the collapse of the infrastructure that previously existed is a prime reason for the very high rate of unemployment presently existing.  Unfortunately, Mr Gigaba coupled that statement with another, that it is not necessary to have skills in place to enable the development of the infrastructure, claiming that the required skills can be developed as the projects proceed!  It is interesting to speculate how NASA would have put a man on the moon if it had chosen the route of developing the skills required as it went!  One wonders why the Government has actively pursued policies that have resulted in the exodus of so many of the skilled people in the economy.  It has always been clear that these people would have been in demand in the developing economy that all hoped would be the future.  It is sad that so many of these skilled people were not Whites, but also Blacks, Indians and Coloured professionals.  It would have been bad enough if the policies had driven only the White ‘colonists’ away, as seems to have been the policy of the ANC.

Mr Gigaba also explained that the rail network is being redeveloped, hopefully to bring it back to the state that it was in prior to the advent of the ANC Government.  He ignored the fact that the Government actively worked to dismantle the rail system, selling 3 000 goods wagons to China as scrap steel, before buying an equivalent number of new wagons, of quality inferior to those sold, from China, and closed down numerous railway lines, which now have to be reinstated at massive cost.  He ignores the fact that the ANC Government has achieved a lowering of the investment status of South African bonds on the world market, making it both more difficult and more expensive to raise the funds required for the developments.  He explains that the increase in the capacity of Eskom has resulted in increasing opportunities to BEE entrepreneurs to enter into supply contracts, ignoring that the BEE system has been exposed as a massive source of fraud, corruption and increased costs, all of which come out of the public pockets.

Mr Gigaba announced that the ANC intends to apply itself to improving the quality of education.  Apart from the fact that this promise has been made repeatedly over the years that the ANC has been in power with no result, one wonders why the ANC should now, after being in control of the economy for eighteen years, suddenly decide that education is both a priority and a problem!  The Government induced the problem in the first place, by retrenching thousands of well-qualified White teachers, by closing the Colleges that produced those teachers, by promoting the Trade Union stance that teachers should not be subject to the normal controls, both in regard to management of the schools and within the schools, and in regard to the evaluation of the performance of the teachers, to ensure that they are providing to the children what they are paid to do.  The program that the ANC now has in mind is no better than what existed prior to the ANC starting its depredations of the State coffers.  If it goes ahead, which is always doubtful in the light of the apparent almost complete inability of the ANC actually to carry out any plan that is not well supported by opportunities for corruption, one wonders whether those at the helm will have the competence and the will to bring the education system back to what it was, never mind what it should be.

While Mr Gigaba sounds earnest and convincing, unfortunately, a comparison of the actual performance of his Party with its plans and programs announced with much fanfare over the years, must surely bring any rational voter to the conclusion that the ANC is not, and probably never will be, a party that should be entrusted with the management of South Africa’s increasingly fragile economy.

Friday, 7 December 2012

Subsidising Steel - Will it Work?


 
The South African Government has been engaged in the pros and cons of subsidizing the production of raw steel, even going to the extent of suggesting the possibility of providing preferred access to electricity for the purpose.  The discussion raises a number of fundamental questions that need to be answered before the Government takes this step of skewing the economy to a much greater extent than it has already done.

Steel production, like mining, is one of those activities undertaken by an economy in its early growth phase.  In a rational economy, the capital generated by the production and sale of raw steel is invested in plant to take the downstream manufacturing of the steel to ever-further stages.  Typically, the next phase is the production of tractors and ships, then the output of the manufacturing capability becomes increasingly sophisticated products, such as machine tools.  These more sophisticated products lead to the next stage in industrial development in a rapidly increasing upward spiral, until the advanced electronic controls become the main product, with the steel products being hung on them.  A BMW, in the words of a senior executive of that company nearly two decades ago, is a fancy computer system with automotive parts bolted on.  The original steel plant is no longer necessary, but is a useful facility.

Of course, this progress relies on a number of factors occurring at the same time.  It cannot happen at once, or even very quickly, and certainly not to order  The production of steel requires a low-cost, low-skilled labour force.  As this labour force becomes more sophisticated and skilled, and, of course, productive, so it becomes increasingly capable of the work required to be competitive in the higher-value add products.  The increasingly skilled labour force becomes better educated and better skilled, and the educational institutions, in the broad sense, become more effective in taking the better-educated labour potential and skilling, and up-skilling, it to meet the increasingly sophisticated requirements of the market and, of course, of the economy..  It is a mutually supporting progression, requiring that all parts of the economy move in the same direction at roughly the same speed.  And as it moves, it automatically takes the wages upward with it.

What has happened in South Africa is that the legislative framework, the labour cost add-on attributable to legislation, the Trades Unions influence, the guilt complex imposed on the successful industries, the hopelessly skewed transport system, the collapsed educational system, from schools through to technical training institutions and systems, all have moved in different directions, to put the country into a state of having high-technology labour costs and Third World infrastructure in the broad sense.  Any attempt to fiddle with the underpinnings of this unbalanced economy is bound to have surprise effects, similar to those that even the State President has admitted to in his State of the Nation addresses.  This is particularly so if the theory behind the fiddling is founded in the Communist Marxist-Stalinist principles of a centrally (mis‑)managed economy, as is so evident in South Africa. 

The Government should be told as forcefully as possible to keep its hands off an element as large as the steel industry, or the agricultural industry, or any of the other foundations of the economy.  The country cannot afford another round of bungling such as has been seen in ESKOM, SAA, Alexcor, Transnet, Spoornet, Education, Health, SANRAL, the South African Police Services, Local Government and all the others.  It cannot withstand the disasters that continue to pop their heads up wherever one looks.  Sooner or later, the economy will throw up its hands in despair, or, even worse, simply slide under the mud

There are some very clear priorities for the Government, and, in any rational society, those priorities would enjoy the entire focus of the Government.  It has an absolute obligation to work on these, and these alone, until the average thinking citizen would agree that the problems have been largely solved. 

·         These include Education, from early childhood to post-graduate and encompassing every aspect of a modern economy, skilled trades-people included.  There can be little doubt that this is the most pressing need in the country.  What we are trying to do in South Africa now is to run a Silicon Valley microchip plant with a rockdrill operator skillset.

·         They include Health, the proper and efficient operation of the public hospitals, before any thought can be given to smearing an expensive and almost certainly highly inefficient National Health Insurance scheme all over the cracks that now exist.  Mr Mantashe proudly claimed in his eulogy to Jacob Zuma that South Africa has overcome the AIDS crisis.  That is quite a statement, in the light of the country having only 1,3% of the world’s population and 17% of the AIDS victims!  Perhaps one may excuse Jacob Zuma for part of this situation – he was not the President who declared that AIDS is a syndrome, and syndromes don’t make you ill.  However, he did nothing to disabuse Thabo Mbeki, although he did take a shower after sex!

·         They include a Police Service that assures all citizens of safety and security in all normal conditions, without tens of billions being paid in each year as compensation for wrongful arrests, while the country suffers the highest rape and murder statistics in the world. 

·         They include an efficient transport system, including rail transport at an affordable cost, a road system that costs as little as possible to provide the road transport companies with reliable, good-quality and safe roads for transport where rail is not effective, and a public transport system that permits the voters to reach their places of employment without exposure to the daily carnage on the road caused by the taxi system.

·         They demand a Local Government that provides people with the opportunity to invest the money that they earn in houses that they build on land that has adequate services. 

 

There are other priorities that almost any responsible citizen will be able to identify without too much thought. 

There are also many activities and policies that seem to have become standard.  Every action of Government that we, the Citizens, permit the Government to do in our name must be subjected to careful scrutiny in the light of the basic priorities and their requirements.

·         They do not include frequent visits to foreign capitals by thousands of politicians and civil servants, none of whom seem to have much clue about how an economy works, and none of whom seems to return with new knowledge from the vast expenditure. 

·         They do not include hand-outs for the purpose of gathering votes, or palaces in the country, or huge purchases of munitions that have no greater purpose than providing a means to funnel large sums into the Swiss bank accounts of favoured politicians and their cohorts.

·         They do not include demanding that the platinum mines pay massively-increased wages and benefits to low-skilled mineworkers, simply because ‘they need more.’  A need for more payment is never a good reason to pay more, unless the increased payment will ensure that the underlying business is improved.  Failure to understand and observe this basis principle of economics will inevitably lead to a reduction in the labour force, as well as in the investment flowing into that activity.  The platinum mines and Goldfields recent move to separate its South African activities from the economic world mining are stark statements of a losing gamble, by the mineworkers and by the Government, against the world economic order.

·         They do not include a dramatic increase in the wages paid to agricultural workers without good reason.  The statement by Tony Ehrenreich to the effect that South African farmers must match world wages for farm labourers is an extremely simplistic, and, one suspects, dishonest, political stratagem by him.  True, South African grape pickers are poorly paid when compared with the United States, for example, but one can see why this is so when one watches the grape harvest on a 3 000 Ha wine farm in California, where a total of twenty workers, using expensive and highly sophisticated machines complete the harvest in six days!  Is this what Mr Ehrenreich is telling his ‘working class’ allies when he exhorts them to strike?

 

Given a Government that concentrates on doing its job correctly, honestly and efficiently, South Africa has the potential to become a world player.  You, Mr  and Mrs Citizen, have an obligation to hold them to that.

Tuesday, 4 December 2012

The ANC Elective Process


 
The saga continues.  The ANC is demonstrating very clearly its inability to manage a kindergarten, never mind a country.  Despite denials that anything is going wrong in the Committees and Conferences leading up to Mangaung, reports stream in of violence, vote rigging, rent-a-crowds, and killings as the passionate ANC ‘democrats’ show the world how the ANC really works.  The denials that anything is wrong, the repeated assertions that the ANC is demonstrating an internal democracy that ‘should be an example to other Parties’, are in stark contrast to the reports that show clearly a Party in the first stages of collapse.

The farce has stirred up a new wave of discomfort, among the investors who are staying away from the country in droves, and among the skilled people within the country, who are moving out again in numbers that are heading towards the worst the country has known.  These are not deserters, they are survivors.  The shenanigans of the ANC have given rise to the concern that the country is heading towards a Communist-style ‘democracy’ in which the political structures are decided at a small table, and the results of the elections are locked away in a safe until the people have voted and they can be released. 

One may be forgiven for wondering how a country that had so much hope only twenty years ago could have deteriorated to this state in less than twenty years.  The country is slipping back from its dominant position in Africa to become just another Banana Republic, the education system is continuing its collapse while the Minister for Basic Education announces that the disastrous mathematics examination results (a key for advancement of the nation) will ‘be examined to inform policy decisions in the future’, while the Rand collapses in slow motion, while the ANC in the Western Cape is promoting industrial unrest in order to promote its political standing.  Numerous signs are visible to show those who look that the slip is heading towards a landslide.

One may be forgiven for wondering when the citizens will wake up to realize that the corrupt and incompetent Ministers that pervade the Government must be thrown out, not merely reshuffled, that a competent and honest President must be put into office and his performance assessed, that the continuing statements by the President and his Ministers that ‘the previous Government’ (i.e. the ANC Government!) made mistakes but we are now introducing measures to correct them i.e. introducing new and untried experiments to correct the disastrous outcomes of previous new and untried experiments) show clearly that the ANC does not, and never did have, the capability to manage as complex a country as South Africa.  When will the country start the slow climb upwards from the ravages wreaked on it by Thabo Mbeki, Jacob Zuma and their communist Comrades?

Job Creation - the Reality?


 
The report by the Jobs Creation fund, that the Fund had created a large number of jobs at a capital cost of R17 000 per job, has been subjected to considerable skepticism.  Creating jobs is a science, and one may be entitled to wonder what knowledge or experience an ex-Trade Union Leader could have in the field.  Any sustainable job that involves more than pick-and-shovel work would seem to require a greater investment than the claimed figure, just in the salaries of the people to be employed.  A business doing business with the Government, the easiest way of doing business for a Black person in this economy, would need, say, a month to arrange the business – you can’t start even a building business without any track record, unless, of course, you have the sort of connections that Julius Malema seems to command – and then a month to do the work.  Submit your invoice at the end of the second month and hope that the Government pays it at the end of the third month, or, possibly, at the end of the fifth or fifteenth month – much more likely, according to history – and the working capital fund required simply to pay salaries will amount to at least three to five months’ of salaries.  Let us estimate an average wage to the worker of R8 000 per month with five workers, the salary of the top Manager at R30 000 (equivalent to a share of R6 000 per direct worker), and an overhead, to take into account bookkeeping, transport, transport, leave pay, levies and contributions and all the numerous costs required to run any business, of only ten per cent of the above values.  That gives a total of R15 400 per job per month!  If the carry has to be at least three months, the working capital requirement alone is at least R46 200 per job, somewhat more than the proud boast of R17 000 per job funded, or that estimated R40 000 per job in total capital contribution.

That analysis indicates that the jobs so created are almost certainly mainly in the service sector, which is notoriously subject to quick failure, and are likely to have a very low Multiplier Effect factor.

One is tempted to suggest that the Jobs Creation Fund would have been better served in accepting the offer by a substantial expert in the field of Job Creation, to deliver 350 000 jobs within three years at a total contribution by the Government of only R7 000 000.