The World’s Investors are all Over-Reacting

After the ANC January 8 electioneering and repetitive explanation speech, President Jacob Zuma, went to pains to explain how the thousands of investment bodies that have committed funds to South Africa over the years have over-reacted to his multiple sacking and replacement of the Minister of Finance, leading to them bringing about the crash of South African securities and of the Rand.  He could not understand how his capricious and dictatorial behaviour, still without a credible explanation, could possibly have a bearing on the view by those bodies of the stability of South Africa, explaining multiple times that the Minister of Finance is supported by a trained and experienced staff, implying that the appointment of a total newcomer to the portfolio, a man who has demonstrated his unpopularity by being forced out of office as Mayor of a failing municipality and having his home burnt down by an angry mob, had no bearing on the decisions that will be made by that person in his new office.  His surprise at the world reaction to his actions was a little spoiled by two announcements made during the interim.  The first was the announcement that the Cabinet had approved the proposal to investigate the intention to waste a huge amount – R1.5 billion and rising – on the unaffordable construction of a fleet of nuclear power stations.  This was to be expected from the Zuma-compliant bunch of lackeys in the Cabinet.  After all, they will be the biggest beneficiaries of the finder’s fee that is rumoured to have been negotiated with the Russians, as has, no doubt, been done in numerous other large foreign contracts, starting with the Arms Deal in 1997, which reportedly attracted commissions of about $386 000 000, and will perhaps form the basis of a good end-of-term pay-out for this failed and discredited President (unless, of course, he uses it to support a coup d’état to make the end of term some distant event, as is ever more frequently being rumoured to be Zuma’s intention when his ten years maximum term expires).  This is Africa, after all, and we use African solutions for African problems.

Zuma’s perplexity at the workings of the world financial system was enhanced by Ramaphosa’s explanation to the ill-informed voters that the crash of the Rand is a worldwide phenomenon, that we are all in a market that is subject to a downturn, and our suffering is shared with all other developing markets.  What he failed to mention is that the rest of Africa, with the exception of the leading light for the ANC, Zimbabwe, has grown at a rate a multiple of our own declining GDP growth, that we have repeatedly failed to benefit from opportunities that have been grasped by other developing, and particularly African, economies, and that, in addition to the President’s foot in mouth disease, the ANC Government has developed a remarkable ability to shoot itself in the foot with everything it does. 

The ultimatum to which President Obama was forced, to comply with the US demands by the end of 2015 was missed by the Departments of Agriculture and Trade and Industry, and the triumphant statement by the Minister of Trade and Industry, Rob Davies, that we had clinched a ten-day overdue deal with the United States to allow us to enjoy the benefits of the AGOA Act was promptly negated by a further statement by President Obama (a Black President, in case racists start complaining that the United States is acting in a racist way towards South Africa) notified the world that the facility of AGOA will be available to South Africa only if US goods are actually on South African store shelves by March 15, 2016.  Obama has almost certainly lost patience with the prevarication and delays so frequently displayed by the South African Government!  That is not surprising – many South Africans feel the same way.

Ramaphosa’s explanation that the ANC Government has nothing to do with the crash of the Rand was complemented by a TV interview with Mr Kingsley Makhubele, an executive of Brand SA, that the justice system works in South Africa, which is, supposedly, good news for tourists and investors, who should flock to the country in droves, appreciating the good and honest governance of the country.  He gave as an example the case of Oscar Pistorius, completely overlooking the fact that a Judge of the High Court failed to understand the application of a basic principle of law, that a person who intentionally acts in a particular way should be considered responsible for the foreseeable consequences of that act, and so sentenced him to five years for culpable homicide instead of fifteen years for murder.  That is a principle that first-year Law students were required to know (.e. in the past – one cannot be sure of the situation now, given the abjectly poor standard of education in the universities).  He also failed to mention the case of Annie Diwani, who was shot and killed in Cape Town by a contract murderer for the paltry sum of R10 000 – presently less than $600!).  Her husband, accused of masterminding the crime, was brought to trial in Cape Town after years of legal wrangling in the British Courts about his extradition, at a cost running into millions of dollars (his return was in a chartered aircraft, and he was placed in a mental institution for about two months at State expense before coming to trial), and acquitted when the Court found insufficient evidence to convict him of the charge of murder, notwithstanding that the two men found guilty of the actual deed made statements implicating him!  One would be forgiven for wondering who was paid off to present such an amazingly poor case in the glare of the world interest focussed on the case!  He failed to mention the case of the German tourist who was stabbed on the Durban beachfront some years ago.  His wife appealed to the crowd to call an ambulance, to be told by a Black man “Let the White pig die!”  (Durban is the site of the 2022 Olympics.)  The moral of the story is twofold: first, do not take at face value what any President, Deputy President, Minister, politician or State employee tells you about South Africa; and second, if you plan on coming to South Africa on honeymoon, vacation or investment negotiation, hire several (foreign) bodyguards to ensure your safety.

In conclusion, immediately after Jacob Zuma spouted his pathetic plea for improved understanding of the South African situation, the currency tanked again, dropping to R17.99 to the dollar – when the ANC came to power 21 years ago, it stood at R4.30 to the dollar!

Given these lessons in practical economics, tourists and investors would be well-advised to cross South Africa off their list of destinations, at least until the voters understand that the only recovery possibility for the country lies in sweeping the ANC incompetents and kleptocrats from power.  They will join the ranks of thousands of others who believed that the Rainbow Nation of Nelson Mandela still exists, until they learned the hard way.

AGOA and South Africa

A number of American clients have given voice to their concerns about the frantic attempts by Minister of Trade and Industry, Rob Davies, to convince the American Congressmen and –women that South Africa deserves to be included in the benefits offered by AGOA.  They have pointed out a number of matters that the South Africans have been at pains not to bring to the attention of the American public during the negotiations.  Some of the more important of these matters are addressed below.

South Africa is, at present, the dominant economy in Africa.  The objective of AGOA is to ensure that underdeveloped African countries are given an opportunity to grow by having duty-free access to the American market.  If South Africa is granted that access, it will go a long way to ensure that the country continues to dominate the African economic scene.  South African companies are known to adopt predatory practices in their competition with weaker competitors, both within the country and outside.  That is the reason why large companies predominate in South Africa.  It is also the reason why those countries are moving into Africa.  There is no altruism in South African business, and any small, developing African industrialist would have good reason to fear the entry of one of those large companies into its market.  That fear is multiplied by the close relationships the African top businessmen have with the politicians in other African countries, a relationship that is often greased with money and favours that are beyond the capacity of the smaller business neighbours.  Permitting South Africa to benefit under a renewed AGOA would certainly serve to advance the interests of South African businessmen and top politicians at the expense of the developing businesses in other African countries.

South Africa can no longer be counted on as a friend of the West, particularly of the United States and Britain.  This has been clear for several years, effectively since the accession to power of Thabo Mbeki, who is known to have strong leanings towards Russia, Cuba and China, and it has been intensified under Jacob Zuma.  The leaning is clearly demonstrated by the grants made to Cuba, by the sending of students who cannot gain admission to South African universities to institutions of higher learning in Cuba, Russia and China, rather than to those vastly superior universities in the United States, by the membership of South Africa in the Brics association, in which the two most significant players are Russia and China, by the fact that the African National Congress desired to send Julius Malema, then President of the ANC Youth League, to China for instruction in ‘anger management (or, more likely, indoctrination), by the large number of repatriation the bodies of deceased ANC and South African Communist Party members who died in Russia during the ‘struggle years’, by the unveiling today of a monument to the assassinated Leader of the Communist Party, by the fact that an important participant in the Tri Partite Alliance that enables the ANC to hold power is the SA Communist Party, by the fact that the ANC appears to have difficulty separating the SA Communist Party from Cosatu, and by numerous other examples.  That leaning was dramatically underlined by the speech of Robert Mugabe, President of Zimbabwe, during which he castigated Britain, the United States and the West, and declared his strong admiration for China and Russia.  His remarks were accepted with sniggering gratitude by Jacob Zuma, indicating his strong approval.  Mugabe has long been an advisor to Zuma and others in the ANC, relying on their inexperience, their lack of a Western-style education and their reverence for the ‘elders’.  Mugabe called for the formation of an alliance of African and Arabian nations to stand up to the West.  There can be little doubt that Zuma will follow this demand, in the hope that it will detract from his ignominious performance at home.  The strong support that Zuma gives to Russia and Cuba is, no doubt, a hangover from his terrorist days, when the USSR provided arms, training and funding to virtually any group of terrorists, masquerading under the name of ‘freedom fighter’, in order to extend its power into Africa.  The USSR may be gone, but the Russian dream of empire lingers on.

While industrialists need the assistance that AGOA will give them, the question is really whether the United States would wish to support an economy that enables the ANC to pursue its objectives of building Russia and China as effective competitors of the West, and particularly of the United States.  The American businessmen have stated that they would be more than willing to support a new AGOA that will build friends, but they are unwilling to support one that will assist the development of the irrational hatred of the United States that seems to be so much a part of the psyche of the present Government of South Africa.  They ask why they should grant import duty preferences to a Government that has signed an agreement that will give Russia preferential treatment in a bidding process to construct a new generation of nuclear power plants as well as control for twenty years over every element of nuclear technology that the country is involved in (with attention being given to the fact that South Africa has extremely friendly relationships with Iran and North Korea!), without any indication that American companies will have any significant involvement in the bidding process.  They ask why any unconditional assistance should be given to a country that has shown itself clearly not to be a friend.

If South Africa is to be included in the benefits that a new AGOA will provide, the American businessmen ask that clear commitments be given that America will be provided at the very least an equal opportunity, on a level playing field, to participate in the South African economy, without the need to bribe a senior politician or official.  They ask that the industries they establish in South Africa be given the right to conduct their business in a fair and transparent manner, without duress and unfair usage of the powers that State Departments have to coerce them to do the bidding of the ruling Party outside of the legal boundaries that apply to all, and without the prospect of indigenization of their businesses, which is no more than simple legalised coercion.  They ask that they be treated in the same way as the American Government would treat a South African-owned business.