A Word of Advice to the SA Minister of Finance

In an interview prior to his planned post-Easter Roadshow to the United States, Minister of Finance Gigaba stated that he would reaffirm the ANC Government’s commitment to fiscal prudence, and all the other nice things they have been promising for years, but consistently failed to deliver. He then went on to explain that the Government would undertake a drive, spearheaded by him, to use the Government’s annual spend of R500 billion to promote Black Economic Empowerment, in accordance with its (new-old) policy, which was designed to deprive White Monopoly Capital of a part of its lifeblood, in the process assisting the Small and Medium Enterprises to develop. The theory sounds good, particularly to the voters, deprived of formal employment by the ANC’s policies over the 23 years it has been in power, until one starts to examine the facts.

The first thing that should be taken into account is that the economic strength of South Africa was built by that Capital, which has now become substantially owned by Black citizens, in the process creating millions of jobs, which paid over to the citizens a multiple of the money accruing to the shareholders, and to the fiscus taxes totaling tens of times the dividends the shareholders received. That strength was built on the capital, the risk-taking, the management capability and the enterprise of the shareholders, the lenders and the employees, Black as well as White.

The BBEEE policy provides for an overcharge of up to 90% of the value of the work done for the Government or goods supplied to the Government if provided by Black enterprises, who, in any event, will sub-contract much of the work to qualified Whites and purchase almost all of the goods supplied from White-owned companies. Apart from the fact that a substantial part of the surplus cost will flow to corrupt cadres, that is a huge burden for the Government (read the Taxpayers) to bear, one that no commercial enterprise could survive, even if it were a financially-strong, effectively-managed and competitive entity. In the current state it will be destructive, where the Government is heading towards insolvency, with falling revenues, debt of over 53% of GDP, increasing loan-carry costs probably biting off an additional 10% of the revenue stream (even before taking into account the expected decline in that revenue stream), management at all levels that has been shown to be hopelessly incompetent and corrupt to a level that is surprising even in Africa, a rapidly-retreating foreign investment body of former well-wishers, a new group of Ministers who have, in many cases, already shown their abysmally poor capability to actually do the job (unless that job is defined as kowtowing to their corrupt boss), a cadre of Ministers who consistently refuse to comply with their constitutional obligation to account to Parliament, and a Parliament, the ultimate oversight body, that has repeatedly shown that it will support the dishonest President, even at the cost of breaching their constitutional Oath to represent the citizens of the Republic.

Gigaba confidently states that the foreign investors will understand that his statement of the plans for ‘inclusive growth’, even though they specifically exclude the most productive part of the economy, represent a responsible way of managing the economy. He seems not to have heard Einstein’s definition of insanity as doing the same thing over and over and expecting a different result. The present insanity is the same as the insanity that has systematically brought a vibrant economy to its knees over the 23 years of ANC misrule. They believe that a policy that states support for a small part of its voter base will make up for the systematic destruction of tens of thousands of (previously) sustainable jobs by a corrupt group of ANC cadres who want to acquire, at practically no cost, viable businesses, and do so by using the Department of Minerals to cancel the mining licenses of operating mines that were generating tens of millions of dollars of foreign exchange each year in the export of processed minerals, by using SARS to impose bogus tax claims, including penalties, amounting to tens of millions of dollars on honest companies in order to drive them to the point of accepting nominated (ANC cadre) shareholders at practically no contribution in cash or in expertise of any sort (other than the ability to make the tax demands go away. They have also bled the foreign and local investors dry by failing to provide trains for transport of export goods as agreed in writing by Spoornet until a huge bribe had been paid by way of ‘consulting fees’ to ANC hangers-on, by delaying tax queries until the last day of the six-month response time allowed for decision on objections by taxpayers against an assessment (using the principle that the SARS demand be satisfied by payment before an objection could be considered), and then reimposing the same demand, possibly at a slightly-reduced amount, the following day, over and over, so dragging out the effective resolution of the objection for at least several years. They have reinforced this tactic by appointing the attorney of the taxpayer in question as a ‘collection agent’, requiring him to pay over to SARS any amount paid to him by the taxpayer, so effectively depriving the taxpayer of the ability to avail himself of legal advice, by using the South African Reserve Bank to freeze the taxpayer’s bank accounts, as well as those of all other companies which shared a director or even an accounting firm, thereby imposing a form of illegitimate compulsion that goes well beyond a right to collect any legitimate tax demand, and then, when all of this fails to achieve the objective, by demanding disclosure of all documentation held by the taxpayer’s attorney in respect of that taxpayer or any remotely-possible connected party, totally ignoring the right of the client to confidentiality in its communications with its legal adviser, and then, when that fails to beat the taxpayer into submission, to threaten the attorney with a VAT audit that, in all probability, will suffer from the same level of illegal conduct that he is protecting his client against.

Gigaba totally ignores the fact that, under the ANC, business in South Africa has becoming extremely difficult and expensive, quite apart from the declining economy’s effects on the market, with dozens of rules and regulations to comply with every month, most of which have no conceivable use in the management of the company or the economy, nor that the Government bodies that undertake the controls of every form of activity are abjectly poor in the performance of their functions. A request to the Companies Registrar for disclosure of the directorships held by the requesting party fails to elicit any response. A birth certificate, which was paid for in advance three years ago, remains outstanding, with the Department of Home Affairs (the Ministry previously managed(?) by Gigaba and before him by Nkosazana Dlamini Zuma, an aspirant President who managed the Department so badly that the United Kingdom was forced to impose a visa requirement on South Africans for the first time ever) promising that they will look into the matter. An enquiry in writing to the Department of Education that manages the certification of new SETAs (a registration required before training can be offered) failed to elicit any response for five months, notwithstanding fortnightly reminders, leading to the company wishing to offer such training at an advanced level of professionalism, to refer prospective trainees to a sister organization established in Germany, leading to the loss of hundreds of thousands of Euros per year in fee income, as well as the loss of several highly-qualified lecturers. An offer to provide a subsidized project to establish a minimum of 350 000 sustainable jobs over a period of three years drew an interested response from the Premier of KwaZulu Natal, whose ‘personal representative’ demanded an up-front payment of 30% of the total cost of the project (which was to be subsidized by payment of 60% of the total by a foreign investor), stating that “You should not be concerned, because the payment includes the Premier and the MEC for Economic Development”.

The examples set out above have cost the country in excess of US$254 000 000 investment, an amount that was already committed, in addition to at least several billion dollars of investment under consideration. At least 300 Black people lost their jobs as a result of the dishonesty and corrupt actions of the ANC Government, and many of those jobs were at junior management level, with plans already in operation to upgrade their capabilities to a more senior level, and several hundred thousand prospective jobs were canceled when the investors realized that their main function in assisting the Rainbow Nation to achieve the aspirations of Nelson Mandela was simply to be bled dry by the crooks that run the nation.

Mr. Minister, please do not believe that the foreign investors are stupid, that they have permanent rose-tinted spectacles when they read your drivel. Please understand that they have seen it all before, and that your pious protestations, no matter how badly articulated they might be by you, merely serve to plunge the country deeper into the morass of disbelief inculcated by your racist, communist President. Your amateurish efforts to pull the wool over the eyes of the American Division of White Monopoly Capital, which you court for their money while proclaiming to hate with your very soul, will be assessed by people who are smart enough to know what the real truth of South Africa is.

Mr. Gigaba, if you wish to pull the country out of the hole your Party has dug for it, what you must do is vote in favor of the Motion of No Confidence against the President, admit to what you have done wrong, and allow competent and honest politicians, if there are any left after so many years of your Party demonstrating that the easy way to wealth is to exploit the sucker citizens, to take over the reins of Government and start the long and painful process of rooting out the corruption and incompetence that have become deeply ingrained in every part of the Government and Civil Service over the past 23 years, so that 52 000 000 people can say with pride that they are part of the Rainbow Nation.

Stop the lies to foreign investors, to South Africans and, above all, to yourself.

A Bad Day for Zuma

Wednesday, March 16 2016, was the sort of day that Jacob Zuma must have wished would never happen.  In that one day, already threatened by the arrival of the Moodys team to consider the downgrading of South African investment instruments to junk status, was made worse by the declaration by a former ANC Chairperson of the Portfolio Committee on Public Works, that she had been offered a Ministerial position by the Guptas, while Jacob Zuma was skulking in an adjoining room so that he could claim not to have been a part of the Constitution-breaching act by his co-conspirators.  That was aggravated by the statement of Mcebisi Jonas that he had been offered the position of Minister of Finance by the same Gupta family, an act also in breach of the Constitution and strenuously denied by the Guptas, Zuma and the ANC.  That was exacerbated by the incredibly stupid comment by an ANC spokesperson that the offer could not have been made, as every appointment to the Cabinet was made by Zuma, in his capacity as State President, after close consultation with the Cabinet.  Either Zuma and the ANC are lying, or the whole Cabinet, who expressed clear surprise, as well as lack of foreknowledge of the replacement of Minister Nene by a backbencher, whose sole qualifications for the job (later strenuously denied by Zuma, claiming that van Rooyen was the best-qualified Minister of Finance that the country had ever had) were that his house had been torched by exasperated residents, and that he was more compliant in allowing the Guptas, as well as his son, to advance their personal interests at the costs of the citizens.  That statement implies that the entire Cabinet lied to the people, on more than a few occasions, when they disclaimed having had any part in that disastrous act by the State President.  That came after the Court judgement condemning in very strong terms the permission granted, surreptitiously, to al Bashir, a wanted murderer, and saying that the Government, almost certainly at the direction of Zuma, had committed an act of international criminality in failing to observe an unequivocal Order of the High Court to place the wanted man under arrest and in disregarding a binding Warrant of Arrest by the International Criminal Court.  Then, just to top it off, FIFA has declared that the South African Government paid a bribe to get the 2010 Soccer World Cup, and then lied about its actions in covering up that act of criminality.  Those last chickens are yet to come home to roost, when the facts are revealed of who authorized the bribe, who paid it, and who benefitted from the World Cup, then hailed as a major achievement of the country.  What is the betting that the names ‘Zuma’ and ‘Gupta’ will be part of those revelations?

These facts are a vindication of the increasing level of disgust felt by the average South Africans about the man who tries to fill the space left behind by Nelson Mandela.  It is no surprise that the word ‘Zuma’ is now viewed by South Africans as a swearword, embodying every evil perpetrated by the ANC under the man.

The next question is ‘now what?’

Zuma can take the honourable course and step down from his role as Head of State.  That is unlikely.  Zuma has proved repeatedly that he is a man totally devoid of honour, of any feeling of responsibility for the honest management of the economy in the interests of the people.  In addition to that lack of honour there must also be the fear of the punishment that any halfway decent replacement will wreak on him.  Quite apart from his many criminal acts as State President, he still has to face the 783 criminal charges that were made to disappear in order for him to embark on his role of accumulating wealth while he destroyed the South African economy and spread racial disharmony throughout the population.  The chances are that Zuma will spend the rest of his life behind bars, to the extent that the fellow criminals will permit him to live, given the seemingly prevailing view that Zuma is the Anti-Christ.  The chances seem to be good that Zuma will try to prevent this happening.  That would imply that he is able to enlist the support of the Cabinet Ministers in order to tough it through, spreading liberal amounts of largesse, even more than he has done so far to keep his corrupt group of cronies in office, in order to buy their support.  It seems unlikely that the thinking members of the Party will believe that that process will be able to endure for too long, with the country already on its knees and likely to hold on for much longer in the face of the punishment that will almost certainly be meted to the country for the actions of their leaders.

The chances seem to be good that the only way out for Zuma will be to declare a state of emergency as soon as the impending ratings downgrade becomes reality, making the already tight financial constraints on the country infinitely worse.  Zuma, in his mind a proven State President with the practically unlimited resources of the Gupta family to support him, will take full control of the economy, appointing his henchmen to key positions (those key positions that are not already in his control) and bypassing Parliament altogether, rather than by means of using his horde of witless and unthinking ANC cadres to rubber stamp his insanities.  He has the example of several friends in Africa, people he admires limitlessly, such as Mugabe and al Bashir, that strongman tactics are the best and the easiest.  In addition to that, he has proven, to himself and to the world, that it is possible for the State President of a modern, supposedly civilised country to disregard the Constitution, to lie to Parliament, to ignore questions relating to his conduct, to enrich himself and his family beyond imagination, to brazenly appropriate the funds of the State to his own benefit, and then to suborn a supposedly respectable and honest Cabinet Minister to provide a cover up for his actions.  He has openly displayed his contempt for the laws of the country, even the most important of them, the Constitution, he has repeatedly breached his sacred Oath of Office, he has misled the Ministers of his Cabinet, supposedly honourable men and women sworn to uphold the Constitution and the law, he has ignored the Orders of the High Court on several occasions, and he has got away with it.  Why not now, when his entire future hangs on it?  He has misread the mood of the people, of the country and of the international investment community, and he has believed, and continues to do so, that he is above all of them.  After all, the Speaker of the House has told the world that the President is above the laws that apply to others, that he does not answer to them.  There is certainly nothing, in the sly but untutored mind of this goatherd made good, that can stop him in his quest for complete control, no answerability to Parliament or the people, no overarching rule of law, no moral compunction, to prevent his taking the country as his personal fiefdom.  To strengthen that view, Zuma has a personal security force of seven thousand, paid by the people, and answerable only to him.  He has the Hawks, the South African Police Service, the National Intelligence Agency and the South African Defence Force in his pocket.

What is the betting that we will see a move in this direction in the next days?

While today was a bad day for Zuma, the heavy clouds on the horizon portend much worse for the country in the near future.

Pravin Gordhan is to Compensate for Zuma's Blunder

After making a monumental error in firing Nhlanhla Nene as Finance Minister, bringing about a crash of the Rand against all other currencies and a collapse of world business confidence in South Africa, Jacob Zuma has now fired the unknown he put into the top ministerial position in his government and reinstalled Pravin Gordhan.  No doubt he is hoping that Gordhan will restore South Africa to the luster it once held in the eyes of the investment world.

There is some hope that this may work, to a small extent, but it is clear that huge and long-lasting damage has been done.  The world has now had solid evidence that South Africa is run at the whim of a capricious and solely self-interested man.  The only reason for the change back to what might be perceived as competent leadership of the Finance portfolio can be that Zuma was facing a revolt from his multitudinous Cabinet Ministers, all of whom, no doubt, understand that the huge salaries and perks they enjoy were finally on the line.  Zuma’s arrogance in making the announcement of Nene’s firing, and the subsequent comments by Minister Radebe that ‘the President is entitled in his discretion to appoint and replace Ministers’ must have long-term consequences throughout the international investment community, and his hasty back-stepping is almost as weak as his original decision.  Gordhan must have been involved in the discussions (if indeed there have been discussions) regarding the acquisition of the new Presidential aircraft and regarding the ongoing support of the Board of SAA in the face of the continued illegality of the racialist and economically retrogressive policies it is pursuing.  Gordhan was at the helm at the time that Zuma was bleeding the poor of the country dry to fund the monument to his ego that is Nkandla, as well as during the build-up to the undoubtedly corrupt Russian nuclear deal.  He held the portfolio at the time that Eskom was building down to the near-collapse of the electricity supply of the country.  He was instrumental in providing continuing funding to the frequently-insolvent SAA.  He was the head of the South African Revenue Services at a time that it was involved in corrupt and illegal activities.  It would be folly to assume that Gordhan will suddenly see the light and reform his ways to become the sort of honest politician that South Africa deserves.  It is much more likely that Zuma has grasped at the Gordhan straw for two reasons:  Gordhan has gained a reputation for his ability to squeeze the last drop of blood out of the diminishing taxpayer base, and he has some reputation at least for being one of the best of a series of incompetent Ministers of Finance. 

Unfortunately, the ability to squeeze tax out of the public is one of the least desirable qualities needed in the South African Government, particularly at a time of galloping collapse of the economy.  Remember the smirk on Gordhan’s face when he announced that the Budget had, for the first time, exceeded one trillion Rand?  It did not seem to occur to him that the removal of that huge sum of money from economic use, to be applied to buying the votes of the bloated and ineffective Civil Service and undertaking projects that would most easily bleed off funds to the ANC and the Party favorites, would hasten the economic decline that the ANC seems to have been determined to achieve.  Gordhan’s return to the post seems to be a warning to taxpayers that the squeeze will be tightened dramatically, if the questionable solvency of the country is to be retained, at least in the short term, until the miracle occurs that the ANC hopes will pull it back from the brink.  It seems also to be a warning, if such is still needed, to all businesspersons that the downward spiral of the country will continue, increasing in steepness year by year.  The move toward China and Russia will continue, at the cost of worsening relations with the West, from where most of the country’s foreign funding flows (for the present – the future in that regard seems bleak).  The move to favor Blacks in every way, regardless of their ability to contribute effectively to the economy, will continue, regardless of the very clear injunction in the Constitution to treat every South African equally, regardless of race.

The recent days have demonstrated very clearly that Jacob Zuma, and by implication, the ANC, are prepared to sacrifice South Africa, all South Africans, to feather their own nests.  They are willing to pursue their lunatic and discredited economic and social policies, regardless of their patently negative effects.  One can only hope that the investors who, in the past have been willing to overlook the many failings of the country in the interests of gaining an extra 1% on their money, perhaps influenced by the lingering view that the South Africa that Nelson Mandela aspired to still exists, will now see that the country is managed by a kleptocracy.  If those investors wish to support the dream of Mandela, they must understand that their best hope is to withhold investment in the country until economic sanity once again prevails.