South Africa at Davos

South Africa has sent a team of about eighty to the World Economic Forum at Davos, a sure indication of:

1. The desperate need of the country to pull the wool over the eyes of the investment community.  Jacob Zuma will, doubtless, take the lead in this, attempting to do to the world what he and his Party have done to the gullible voters in his home fiefdom.
2. An urgent need to bleed whatever is left to be taken from the South African taxpayers, a desire to enjoy whatever is left before the axe falls.

It is ironic that Jacob Zuma will lead the group.  He has shown convincingly that neither he nor his Party have any ability to manage a modern (or any other) economy.  He has also proven to the world that his primary interest, apart from remaining in power for as long as possible, to take what little is left, while he works to ensure that his successor will not instigate investigations into what he and his cohorts have taken from the country (like the quarter billion Rands for the construction of his private homestead at Nkandla, as one small example) and to prevent the criminal charges still outstanding – 749 at the last count, but, no doubt to be supplemented by further charges when the injured persons consider themselves to be safe from State retribution for speaking the truth – from finally being brought against him.  His credentials would be sufficient to deter even the boldest investor putting money into the country he has managed to a new low, quite apart from the fact that, by making an investment in the country, they are implicitly support the criminal conduct of the South Africa Government in ignoring an unequivocal High Court judgment requiring it to place under arrest a man, Omar al Bashir, who is the subject of an International Criminal Court Warrant of Arrest on charges of genocide.  It is to be noted that Zuma is known to be a frequent visitor to this wanted criminal!  The purely financial reason for not wanting to invest in South Africa is clear in the fact that the value of the Rand has crashed by 30% in the past year, and is now about one-quarter of its value when the ANC came to power!  If you desire to lose a substantial part of your investment, put it in South Africa!

Zuma will be supported by a group of sycophants and yes-men, and even the new new Minister of Finance, Pravin Gordhan, cannot claim to be free of responsibility for the state of the country.  He took over the portfolio, for the first time, coming fresh from a spell as Commissioner of Inland Revenue – the tax collection agency – during which the SARS systematically applied blackmail and undue means to force companies that the ANC wanted for its own to enter into deals that were not in the interests of the country or of the economy, and were not supported by any law.  SARS was assisted in this by the South African Reserve Bank, which instructed the commercial banks to freeze the accounts of a wide range of companies associated with their target company.  This action, accompanied by an appointment of the target company’s legal representative, was designed to prevent that company from defending itself at law, an action that was completely in contravention of the Constitution and one of the prime tenets of any civilized legal system, the right to representation in a Court Hearing.  The fact that SARS got away with this form of conduct is a good indicator that they will be comfortable using it again.  After his appointment as Minister the first time round, Gordhan managed the financial side of the economy with such success that he managed to allow his boss, Jacob Zuma, to bleed a quarter billion Rand from the taxpayers for his private purposes, and any claim for innocence that he might have made would have to be silenced by his deafening silence when Zuma spent over a year ducking and diving the findings of the Public Protector that he had unduly benefitted from the State funds, as well as failing to raise even the slightest protest when Zuma prevailed on the Minister of Police to dish out the flimsiest possible excuse for his actions to Parliament, even though Gordhan was a Cabinet Minister at all relevant times.  In the view of most taxpayers, all of the multitudinous Ministers are culpable in their tolerance of the misdeeds of the State President.  When the truth ultimately comes out, it is certain that most of them will be shown to have benefitted hugely from their positions while contributing practically nothing to the struggling economy.

So, if you plan to go to Davos, treat anything you may hear from Zuma and his lackeys with the highest possible degree of suspicion and skepticism.  Better yet, don’t waste your time listening to him spouting the untruths that the long-suffering South African public have come to expect from him.

Why is South Africa Failing?

The question that is being asked seldom attracts a complete answer.  While the reasons given below are not complete, they are more accurate than the Government is willing to concede.

The Government blames all the problems on three main factors:

1. The collapse of the world commodity market.  This is a factor that any competent market observer could have foreseen two years ago, or even longer.  It has been clear for a long time that the Chinese economy was reaching a turning point in its headlong growth of expenditure on infrastructure.  New buildings were being completed and remaining unoccupied, the market for its exports was reaching a peak or even starting to decline, and the centrally-planned economy was showing signs of strain, which were not being addressed, adequately, or sometimes at all, by the government.  In the case of South Africa, the policies of the Government and its inability to restrain the excesses of the trade unions have been having the effect of holding back the ability of South African businesses to capitalize on the boom conditions, and setting the ground for the current economic decline long before it started. 
   Not only did the Government fail to foresee this development, it failed to maximise the benefits to the economy of the boom while it ran, and they frittered away what little cash it produced in pork barrel political investments, hand-outs to the ANC voter base, abjectly poor management of whatever it did, corrupt practices which involved opting for large bribe-producing projects rather than run-of-the-mill maintenance, rather than making the strategic investments, often at small scale, that would help to develop the industrial, agricultural and mining base of the economy.
2. The evil White capitalists, who have withheld from investing the large sums of capital they have accumulated on their balance sheets.  There are three main faults in this reason.  The capitalist system is blamed for not doing what the Government wants it to do, but capitalists will refrain from making investments unless they are assured that the investment will pay off in the form of increased, or at least stable profits in the long term.  The ANC Government has failed dismally in this.  It has, instead, assured the capitalists that committing themselves to the South African economy is an almost sure way of inviting the ANC to raid their fixed assets by means of laws to demand the donation of shares of their businesses or costly employment of unqualified people as Directors, managers or simply employees under the disguise of racial equity, and it has invited the trade unions to hold them up, like highwaymen, demanding ‘protection money’ in the form of excessive wages and benefits demands in order to avoid ruinous strikes and violent confrontations, often leading to murder and arson.  These tactics work, in the short term, because the fixed investment is too valuable to abandon, but they teach the capitalists, who are neither short-sighted nor stupid, that South Africa is not a good place to invest.  Those who can, move to another investment destination, withholding any further non-essential investment in the local economy, and those who do not have this option available to them, simply sit back, to ride out the storm with as little exposure as they can manage, in the hope that a new Government will be in place within the foreseeable future.
   The fact that many of the capitalists are White is a result of a long history, not the least of which is that the European nations that founded the economies of Africa were capitalists for centuries in the past.  They do not suffer the negative effects on investment that the tribal structure of much of Africa remains saddled with, and they have not had to undergo the long learning process that many of the leaders of the ANC do not appear to have completed.  The recent rambling speeches of the State President bear testament to this.  He appears to believe implicitly that the market price for a good is determined by a meeting of all concerned parties, apparently without regard to the realities of input costs, the value of innovation, the scarcity of the good or its components, the price offered by other potential purchasers, reward for risk-taking, or the myriad other factors that go to influence the final price.  Of course, his limited understanding of how the world works is based on the education and brainwashing he received from the Soviet Union and its lackeys, and remains influenced by the Communist ‘brothers’ around him, many of whom continue to hold high positions in Government.  None of these people appear to understand that the ignominious collapse of the Soviet Union was caused, among other reasons, by the failure to understand the workings of the market economy, and not by the nefarious schemings of ‘capitalists’, who, seemingly, had nothing better to do than spend three-quarters of a century in plotting to bring an end to the ‘worker’s paradise’ that was responsible, under Josef Stalin alone, for the killing of sixty million of its subjects and the subjection of hundreds of millions to abominably poor living conditions and education.  Of course, not all capitalists are White.  There are many Black, Coloured and Indian capitalists in the country, and, remarkably, most of them do not support the ANC.
   The belief that White capitalists are all evil is equally without foundation.  Many White capitalists have gone along with the stated motivation of the Government, in supporting the training of the previously disadvantaged, in supporting charities to help the (predominantly Black) poor, in providing assistance to the Police, the Education Departments and to other worthy causes.  Their actions in this regard have been damaging to their own businesses and to their long-term interests, and have been undertaken almost solely to benefit their fellow man, and not in the belief that this benefit would accrue to themselves, except in the broadest possible way.  It is a fact that a large proportion of the donations that have brought about the partial recovery of the AIDS disaster caused by the ANC denial that AIDS was a disease (remember Thabo Mbeki’s humiliating speech that ‘AIDS is a syndrome, and syndromes don’t cause diseases’, and the equally humiliating pronouncement by his Minister of Health that onions and garlic cured AIDS, not to mention the comment by Jacob Zuma that he showered after having sex, and so could not have contracted the disease?) is provided by the (predominantly White capitalist) United States, and that 60% of US citizens regularly make voluntary donations to charities.  Neither Whites nor capitalists are inherently evil, nor is the United States, as propounded by Zuma’s idol, Robert Mugabe, and hinted at by Zuma and many of his stooges.
3. The unwillingness of the Press and other media to support the ANC, confounding every attempt by the noble ANC, the champion of the people, to bring an understanding to the mass of South African voters of the benefits of ANC actions and policies.  Unfortunately for the ANC, the free media has within it many astute, educated and knowledgeable people, who are able to pick out of those actions and policies the likely unrealised potential effects of what they are doing and plan to do, as well as to come to the truth of the many acts that the ANC seeks to conceal under the many words which shower on the public to withhold from the public what is really happening.  The media are, if they are truly free, the champions of the public, the poor and ignorant ANC voters as well as the jack-booted evil White capitalists.  They are able to take a transcript of a Jacob Zuma speech and point out to the public the abject lack of understanding and comprehension contained in it.  They can analyse the probable results of a proposal, such as the recent one by the Minister of Water Affairs to steal the privately-owned dams of White farmers in the Northern Province and distribute the water contained in them to ‘the poor’, at the almost certain cost of the demise in short order of the farmers who built those dams, at high cost to themselves, to ensure that they are able to survive the sort of drought conditions that now pertain and that were foretold at least several years ago, without the ANC Government doing anything to forestall the almost certain results.  Bringing this knowledge to the attention of the public is their duty, as it is of the Government, and the fact that they are critical of the Government in doing that is not disloyalty, as the ANC claims, but the unbiased performance of that duty.  The fact that the ANC is shown to be lacking, in foresight, in intelligence, in moral standards and in the expected level of integrity in the performance of their duties is the fault of the ANC, not of the media.

The truth of the matter is that there are many reasons behind the collapse of the economy.

The collapse of the commodity markets is a factor, but this was a probable event, able to be understood and acted against in the decades prior to the present.  South Africa failed miserably to take advantage of the boom conditions while they pertained, because the Government saw the private business sector as a cow to be milked as much as possible, without making provision for the future.  It encouraged the wildly excessive demands of the labour unions, because the increased affluence of the workers was sold by the ANC as a direct result of the efforts of the ANC.  It was not.  It was a result of the success of the capitalists who had built those businesses to the level of success they enjoyed, offering increasing numbers of jobs to a poorly-educated and –trained workforce, and making up the deficiencies of those workers at the cost of the investors.  Those businesses were operating in the real world, where the price of an ounce of platinum is determined by the forces of supply and demand, not by negotiating by unequal partners across a table, and where supply is determined by whether a mine can produce those ounces of platinum at a cost that will enable the company to reward the capitalist investors for the risk and the time they wait for the reward, and the demand is determined by how many ounces are needed by the users, by the cost of alternative ways to meet the need, and by how many ounces can be purchased at a particular price.  There are no secret negotiations involved in the process, no bribes being passed under the table, no consensus of like-minded parties, only the setting off of needs, demands, supply and costs to reach a coldly-calculated value.  There is no space for consideration of the needs of the ‘poorest of the poor’, for the wish to placate a demanding Government or trade union.  If the cost is too high, the sale will not be made, the production will reduce and, with it, the demand of the labour required to produce.

Part of the cost of production is every element of direct and indirect cost that is required to make that production.  The direct costs include wages, benefits to labour, levies to Government at all levels, including the compulsory payments to the Companies Office, to the Ombudsman, to the adjudication of labour disputes, to Sanral for toll fees, the cost of electricity paid to Eskom and incurred by the need to have and operate stand-by generators when Eskom fails to supply, for fuel to transport the products out and the raw materials in, including the levies paid to Government, for SETA levies, to provide for the training of the potential workers to the point where they might become productive, and all such similar costs.  The indirect costs include the loss of earnings on the shareholding transferred to non-productive shareholders under the BBEEE schemes, as well as the loss of earnings caused by unjustified strikes in support of demands for excessive wages and benefits. 

Contrary to Government view, the cost of transferring a shareholding to a Black shareholder, even if it is paid for at an agreed price, is the loss of earnings to the original shareholders who would have earned that share of the profit.  If a company earns R100, and a shareholding of 26% is transferred to a Black shareholder who played no part in bearing the risk or the capital outlay of setting that company up and putting it in business, then the original shareholders have lost R26 per year.  Paying them a price of R260, probably over five or ten years, is far from adequate compensation for the profits and capital growth they expected, and even paying interest of 30% p.a. would, in most cases, not compensate for the loss.  If that investment is coupled with representation on the Board by persons who would not, in the ordinary course of events, have been chosen for that role, it compounds the problem, because the original shareholders, who have clear ideas of where the company should go, now have to accommodate the wishes and desires of people who, in most circumstances, have little understanding of the business and, probably, considerably less capability to make the business succeed than the original shareholders.  If they were the equal of the original shareholders, the chances are that they would have set the business up for themselves!  Again contrary to the deeply-held belief of the ANC, a business is not a training ground for less-skilled operators, certainly not at the top management and Board levels.  That is a fact that is implicit in the fact that progression to those top ranks has always been accompanied by years of exposure, development of skills and capabilities and experience.  The ANC has attempted to upset that natural order by the legal requirement to bring in people at top level who have none of those qualities, and the result has been a catastrophic collapse of the competitiveness of South African businesses, accompanied by the brain-drain of skilled Whites, who could have sustained those businesses but who have seen the writing on the wall – qualified Whites have no future in South Africa.  They have taken their skills, knowledge and experience to foreign climes and, understandably, have seen that their South African competitors are now soft targets.  The foreigners who might have added their capital and skills to the country have also recognized that, unless they are Chinese, Russian or Guptas, they are seen by the ANC Government as legitimate targets.  They have seen numerous examples of the Government bodies working in illegitimate and internationally unacceptable ways to squeeze them, and they have pulled back from the country to await a more honest and more perceptive Government.  The losses to the ‘poorest of the poor’ have been huge.  Tens of thousands of jobs have been lost directly, and hundreds of thousands of potential jobs have evaporated, along with the substantial foreign exchange earnings they would have brought.  The development of the economy has been reversed over the twenty-one years that the ANC has been in power, taking a country that was the hope of the world to put it in the category of most corrupt, least effective, ratings-degraded, Zimbabwe-style basket case economies.

Another profound reason for the current failings of the South African economy is that the ANC believes that a country can be operated in a political way.  Businesses need firm rules within which to operate, not a constantly changing set of conditions that are unclearly defined and subject to the whim of a dictator-style Minister.  A business cannot be an ANC-style democracy, where every decision is debated ad infinitum and then agreed, probably too late, to accord with the whims of an uneducated majority.  A business needs decisive management which is capable of assessing the objective facts and making decisions, and then putting them into effect.  It cannot take into account the desire to mollify an undefined body of the ‘poorest of the poor’ – that can only be taken into account in the way that the taxes of successful companies and businesspeople pay.  Building houses for the workers and their large families, supporting the education of their children, meeting a ‘corporate social responsibility’ that has nothing to do with the objectives of making a legitimate profit all fall within the responsibilities of the employees and the Government, particularly in a country in which many businesses are hanging onto survival by their fingernails.  The surest way to bring an economy to its knees is to foist all of the Government’s wish-list requirements on the people who are making the economy work.

Another reason for the continuing failure of the South African economy is the substantial amount extracted from the economically productive sector by means of taxes, levies, fees, increased costs of property taxes, electricity and water (in order to subsidise the non-productive sector, including the social grants, the free education at university level for the tens of thousands of matriculants who would otherwise have gone on to the unemployment roll), the massively-expanding Civil Service of overpaid and underperforming persons, and other disguised Government take.  The fact is that the money that the Government extracts from the small productive sector to redistribute to the poor – another way of saying that it bribes the voters to support them at the cost of the taxpayers – would, in normal circumstances, have been applied to development of the business, with a small proportion being peeled off to reward the investors who took the risks and provided the capital, knowledge, contacts and skills, which reward would have provided reassurance to potential investors, local as well as foreign, that South Africa is really open for business.  The more the Government take, the less will be the new investment and the slower the development.  And of course, as the development and investment fades, the economy declines, and the actions of the top politicians become more erratic, more determined by the desire to grab what they can while it, and they, are still there.  The extent to which that is happening can be readily gauged by the intensity of the Government’s desire to ensure that the media toes the Government line, that the investment funds remain in the country, by compulsion if necessary, and that the businesses that remain effective are brought within the control of the regulations that bleed them.

Probably the largest single reason why the South Africa economy is failing is that the Government’s focus is on its voter base, the ‘poorest of the poor’.  In a business, the concentration of top management must be on the business activities that produce the most profit, with attention being given to those that cost the most.  The same applies to an economy.  The Management of the economy cannot afford to place its greatest effort on the sector of the economy that produces practically no taxes, the lifeblood of a Government.  The greatest effort should be applied to maintaining and fostering the growth of the sectors of the economy that presently, and in the future, provide the greatest contribution to the GDP.  That attention, if competent and up to the task, will continue to support the flow of taxes to the Government as well as providing the jobs to the people, whose income will supplement those taxes.  In time, those activities will trickle down to the lower levels, enabling those who now receive an adequate education to enter the fields of the economically active, contributing to the fiscus and dragging their comrades along with them.  This process may be supported by programs designed to accelerate it, by tax concessions and other incentives to enhance it, but it cannot be the central focus of Government thinking and action.  Like it or not, the poor contribute very little to economic improvement, and the best ways to improve their lot is not to subsidise them, but to find ways to motivate them to work their way out of poverty, using their skills, abilities and self-motivation to achieve for themselves what the ANC has failed so completely to do.  The fact that they may well decide to cast their vote in favour of a Party that is pro-business (NOT anti-poor) is a factor that should motivate the Government in power to maximise the success of that process, but never to support it to the detriment of the economic activities that make such self-rescue possible.  The obvious way to do that is to prove an excellent education (rather than finding excuses why the poor education is becoming worse) and relevant technical training, to make the youngsters able to earn a living immediately, rather than making it possible for them to continue their schooling by means of ‘progressing’ to the next grade by the simple expedient of failing twice in a grade, or giving them free university education as a means to postpone their coming onto the labour market for four or six years, while they hold back the education of those who are able and willing to succeed.  Best of all, adopt policies that reward effort and ability, and, wherever possible, drop any notion that someone is ‘entitled’ to something merely by virtue of his or her presence.

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.

South African State-Owned Companies are Properly Managed!

It is now official, coming directly from the Deputy State President.  South African State-owned companies are properly managed and so will not need to be privatised.  The glib statement was made by Cyril Ramaphosa during a question and answer television discussion which included a large share of the top brass of the ANC.  The fact that there were no gasps of astonishment from the ANC leadership, no cries of ‘Liar!’ entitles one to believe that those leaders all subscribe to the view of Ramaphosa, supposedly an experienced, competent businessman, that the State-owned companies are in fine fettle.

An item on the news today mentioned that Citibank has withdrawn a R250 million facility previously granted to South African Airways, on the ground that the risk of collapse of that State-owned company and default on the loan was too high.  The suggestion was made that the facility would be reinstated if a Government guarantee were to be made available.  A recent letter of the Legal Advisor of SAA stated unequivocally that the company was de facto insolvent and trading illegally in an insolvent condition.  SAA recently made a spirited attempt to subvert the directions of the Treasury to honour an agreement to lease five Airbus aircraft from Airbus, a deal struck when SAA found that it could not pay for the purchase of ten aircraft, preferring to lease them through a local company.  The proposed lease would have cost SAA significantly more, and it would have provided those involved with a very lucrative source of corrupt funds, and yet the Chair of SAA, rumoured to be a close friend of Jacob Zuma (possibly even to have had a child by him) remains in office, enforcing a lunatic and illegal policy of demanding a 30% share in the companies that do business with the airline.  That policy alone acts to push up the operating costs of SAA dramatically.

Another news item referred to the fact that PetroSA, another ‘well-managed State-owned corporation, was in a similar position after having cost the country (I.e. the taxpayers, not the ANC) about R1,5 billion in the past two years, with more to come.

Recent experience with the South African Post Office, with a registered letter posted from Midrand to Pretoria, a distance of less than 50 kilometres, taking more than five weeks for delivery, while the delivery service to a post-box in the Bryanston Post Office was unaccountably suspended for more than three months, after a year in which postal strikes interrupted service for about eight weeks, all with no notification to the customers.

Spoornet, which provides (?) essential rail services to mines, refineries, forestries and agriculture, undertook to provide a specified number of rail trucks per week to a mine, exporting a valuable bulk, semi-processed mineral to Durban Harbour.  When the first train was called up in accordance with the agreement with Spoornet, it simply failed to arrive, with no explanation.  Many telephone calls were made to track down the reason for the failure, with no result.  Eventually, a Director of the company discussed the matter with his partner and close confidant, a Black advocate, who informed him that the matter could be speedily resolved by payment of a fee to the advocate of R300 000 (approximately four days demurrage on the freighter waiting to be loaded in Durban Harbour.  Payment was made and the train arrived within three hours.  Subsequently, the advocate advised that the delay in service was the result of the mine company not employing a Black company to arrange the delivery of the trains.  Seeing the obvious illegal blackmail, the mine employed such a company, and the trains ran smoothly for a few deliveries, and then stopped again, unaccountably and without notification.  After a day spent walking the corridors of Spoornet Head Office in an attempt to find a responsible Manager to resolve the impasse (one of the people interviewed who referred the two Directors of the mining company to someone else, and they were referred again to him after seven hours of fruitless effort, was asked by one of the Directors what work he did.  The reply?  “I hold down a position.”) the two Directors barged into a meeting of the General Manager of Spoornet with several Heads of Departments and demanded to know the reason for the refusal of service.  The reason was given the following day.  The Black company arranging the service had failed to pay an amount to Spoornet.  After proving that the company had met every obligation to Spoornet and to the Black company, the General Manager was adamant.  The mine had to pay an amount of R260 000 to settle the debt of the Black company to Spoornet.  Payment was made under protest, and the service resumed.  A visit to the Black company to resolve the problem and recover the money revealed that the three Directors of that company had each purchased a new 7 Series BMW.  Numerous companies, employing tens of thousands of workers, have withdrawn from South Africa as a result of the high cost, unreliable service and outright dishonesty they have experienced in their dealings with Spoornet.

Of course, the prime example of a well-managed State-owned corporation is Eskom, which has single-handedly brought about a significant share of the decline in the GPD of the country by its inability to provide a reliable supply of electricity to industry.  The very high cost of that electricity has had effects that are more long-term in character, driving away companies that might have invested in new industrial capacity.  In case there is a statement from the ANC that we don’t really need investors from the USA or Europe (no longer favoured sources of investment, in view of the country’s developing rapprochement with Russia and China), many of those investors are South Africans, who would have liked nothing better than to invest in a way that will benefit their homeland, if only there was a Government they could trust, managed by politicians who they could believe to speak the truth!

If Cyril Ramaphosa can claim that these examples of State-owned corporations are well managed, one must have strong doubts about his ability to manage the country, and one must further take extreme care to check the accuracy and veracity of any statement he must make in the future.  On the evidence of this statement alone, Ramaphosa has disqualified himself from any future position of trust in the Government of South Africa, as much as his boss did when his indiscretions were revealed in their nakedness!

Water Shortage – a Reason for State Theft?

During a televised panel discussion – more of a question and answer session during which carefully-selected ANC cadres put prepared questions to leaders of the ANC for the purposes of a publicity campaign in preparation for the upcoming municipal elections – the Minister of Water Affairs let slip a frightening new idea.  She stated that the Government is taking steps to ensure water security to the ‘poor people’ of the country.  One of these steps is the plan to “remove control of privately-owned and –constructed dams from the White farmers” and make the water they contain available to the community.  There are several aspects of this statement that need careful consideration, because of their very wide implications to the agricultural and investment community.

A brief background to this comment is a statement made by the State President that the ANC is the leader in ensuring racial harmony and equality throughout the country.  This statement is no more than a barefaced lie.  The ANC, and particularly the State Presidents since Nelson Mandela, have been a potent force in the racialization of the country, after the racial conciliation of Nelson Mandela.  Jacob Zuma has put considerable effort into ratcheting up the racial tension, presumably in the hope of attracting the votes of the increasing poor Black sector of the economy, making statements such as that blaming all the problems of the country on Jan van Riebeeck, the first Governor of the colony in 1652, a man who was in that position for only seven years, and other statements to the effect that White capital is purposely depriving poor Blacks of work opportunities by their recruitment policies and by holding a ‘monopoly’ position in many aspects of the economy.  Of course, statements such as this are, at best, cheap politicking and, at worst, purposefully intended to enhance the racial divide, a remarkably stupid action given that the Whites represent probably 90% of the knowledge assets and 95% of the experienced skills base of the economy.  The reasons for this are partly historical, in that it requires many years for a manager of an organization to acquire the ability to manage effectively (as has been so clearly demonstrated by the abjectly poor performance of the ANC cadres who have been elevated to top positions in organisations such as Eskom, Spoornet, SAA, Petro SA and numerous others without having gained the necessary experience and competencies, and partly the result of the incredibly poor education that the ANC has foisted on the country since its accession to power 21 years ago.  Whatever the reason, the fact is that driving the Whites away, which appears to be the policy of the ANC and the EFF, will certainly result in a catastrophic collapse of all sectors of the South African economy.

One aspect is that the statement is a clear indication of the intention of the Government to steal the dams owned by the White farmers, who constructed these dams for two main reasons.  The first reason for the construction of the dams is the need to manage the flow of water over the farm lands.  In South Africa, the rain tends to be irregular and in huge quantities at one time, leading to drought conditions or to flooding, with the erosion of the valuable top soil being a frequent result.  That is important to the farmer, any farmer, including one of another racial group, although the concentration of the new policy on White farmers tends to demonstrate the fact that Black farmers have, historically, been less prudent in the management of water flows to prevent erosion.  The second reason, of course, is a desire to ensure the availability of water in times of scarcity.  As a water-poor country, that investment has been a prime reason why South Africa, in the past, was a substantial exporter of food to the world.  Now the Government plans to deprive the White farmers (please note that the plan does not seem intended to apply to Black farmers) of their right to use the water they have worked to save.  The water will become subject to the management of one of the many incompetent Government bodies, to be made available to communities and Black farmers that have invested nothing to make it available, so depriving the (productive) White farmers on an essential element of their farming and food-producing activities.  What little water the management body may deign to make available to the White farmers will, no doubt, be at a high cost, as per the example of Eskom, and the discretion of allowing that ration to the White farmers will hand the Government another tool to drive the White farmers from the country at no direct cost to the Government.  Farmers with experience know that a valuable asset such as water is not to be wasted.  They know equally that the cost of building and maintaining a dam is high, in terms of cash, time and deprivation of the use of the land it occupies.  Farmers do not build dams capriciously, or to deprive others of the use of the water (this latter has been shown admirably by the generosity of White farmers in springing to the assistance of Black farmers in the present drought by the provision of water from their own resources, often at the risk of running out of water themselves, or providing grazing or fodder to suffering Black farmers).  The dams that the Government now plans to steal are very important assets that are needed for the continued life of the farms.  Appropriation of them by the Government will be akin to a theft of the seed grown by the farmers (perhaps on the basis that the starving poor need them now, while the ‘wealthy’ farmers will need them only in the future and, in any event, can afford to buy more) or the appropriation of the lambs or calves produced on the farm.

A frightening thought is the extension of this sort of policy by the ANC.  They have already stolen the BBEEE proportion of the share capital of companies and of their allocation of salary and related expenses by companies in order to reduce the number of unemployed, almost always at significant cost to the companies involved in terms of profitability and longevity, and to the country in galloping inflation and nose-diving international competitiveness.  The demand that a proportion of the shareholding in mining companies be held by Black shareholders who are unable to offer either capital or skills has been one material cause in the reduction of investment by foreign companies in the industry in South Africa and the driving away of some investors who were already here (one international client alone left the country, with $254 000 000 –R4,3 billion at the current rate of exchange - of direct investment already made and the cancellation of several other investment plans in local industry, helped by the illegal and immoral actions of the South African Reserve Bank and the South African Revenue Services, and numerous other clients, hearing the story, have backed off intended investments in the country).  The results of these regulations are clear to see in the current state of South Africa.  However, they have been implemented by Zimbabwe, that model country in the field of economic management, so, to the State President, an earnest admirer of Robert Mugabe, they must be right! 

One can only wonder which sector of the economy will be the next target.

Democracy in Action ANC-Style

Benjamin Franklin famously described democracy as two wolves and a lamb deciding what to have for dinner.  There can be no better example of that view than South Africa, where a large proportion of voters are unemployed, live on social grants and are led by tribal chiefs and kings, one of whom has recently been jailed for culpable homicide, arson and other charges arising out of his ‘disciplining’ an errant subject.  And the proportions will be skewed even more in the years to come, as the large number of youth reach voting age without the prospect of employment in the rapidly-collapsing economy.

Contrary to Jacob Zuma’s fatuous and demonstrably erroneous statements during his January 8^th speech to the ANC brainwashed, the abjectly poor state of the economy can be laid squarely at the feet of the ANC.  Zuma made the bald-faced statement that the ANC Government had achieved success in the education of the youth, totally ignoring the fact that the Matric results, even on the basis of a lowered standard, had declined by 10% in 2015.  He claimed as a major success the fact that the ANC was rescuing a large number of failed students, by means of ‘progressing’ them to the next grade when they had failed twice, ignoring the fact that a disproportionate expenditure was lavished on 10 00 learners (or should they be called ‘non-learners’?) and their presence in the class of normally-performing learners was almost certainly a mill-stone around the necks of the rest of the class, as well as the teachers, to achieve a passing grade for 6 000 of them, out of a total of nearly a million matriculants!  Even by the wantonly distorted standards of ANC mathematics, a proportion of 0,6% cannot be held out to be a huge success, particularly when the failing of those students was almost certainly a result of the continuously-changing curriculum, the poorly-qualified teachers and the lack of modern standards in the schools they attend.  Zuma’s allegation that the present economic situation in South Africa, a desperately poor situation even by the standards of the Third World, is the result of the ‘stealing’ of land by the Whites from the Blacks should also be held up to the light of truth and history.  The fact is that only a very, very small proportion of Blacks were ever commercial farmers.  Most of their farming activities was at the lower end of the subsistence scale, and the loss of their land, however it occurred, could have had little effect in bringing them to destitution.  The land was acquired from them by the Government of the time, or by the Whites who wanted it to farm on an economic scale, by purchase.  In most cases the calculation of the price was on no less fair a basis than the ANC has enacted in recent years for the reverse process.  In addition, the land acquired by the Black ‘farmers’ under the land restitution process has, in most cases, reduced in productivity very dramatically, with over 90% of those farms failing within three years.  On top of that, the land was, in most cases, held under the tribal system, with the chief or king (unelected and having no qualification for leadership other than birth into the ‘royal’ family or patronage by that family) deciding who could use the land and how it should be used.  There was very little private Black ownership of farms at the time the Whites acquired that land.  In such a situation, how could the acquisition of the land by the Whites have thrown the Blacks into destitution?  The only way that could have occurred was by the Blacks being moved from a situation of subsistence farming (which could not stand up to the rigours of the modern world, as has been amply demonstrated by the mass movement of such people from rural areas to the cities) to a situation of employment, for which they had received no education or training, as is exactly the situation for a large proportion of the rural Blacks today, 21 years after the advent of the ANC to the feeding trough.

Zuma had the nerve to state publically that the ANC would continue to work hard to stop corruption, ignoring the fact that he disregarded a finding by the Public Protector that he had benefitted wrongly from the State expenditure of R246 000 000 on his private homestead, and then compounded that breach of the Constitution by inducing the Minister of Police to make a rigged finding that he had not benefitted in any way!  It is well-known that a mainstay of the activities of the ANC and its senior members has been to benefit unfairly from corruption, as is evidenced by the granting of a large turbine contract to Mitsubishi after the ANC had acquired a 25% shareholding in the local operation of that company and been given a $1 000 000 ‘finder’s fee’, by the fact that the ANC acquired a 25% stake in the local operation of Shell, which was then granted an open-ended exploration licence to frac in the Karoo, after a huge and well-founded public opposition to that activity, by the strongly-supported effort by South African Airways to switch a lease contract for five Airbus aircraft from that company to a locally-owned leasing company, to be set up for the purpose, and by numerous other examples of large-scale corruption, of which no Police investigation has been made (except for the case of the Nkandla corruption!), and no convictions of guilty parties have ensued.  No thinking person would believe the statement of Zuma, but the audience of ANC supporters applauded!

To compound that, Zuma stated openly that the ANC supported the Chapter 9 (of the Constitutions) institutions, naming, among others, the Public Protector!  The disdain, amounting in many cases to outright hatred, of Zuma and numerous other functionaries of the ANC for the office of the Public Protector has been well documented over the term of Zuma’s Presidency, yet he now declares the ANC support for it!

Zuma stated that he supports the demands of the university students for no fee increase, a demand to which he acceded only after the students had staged a march on Parliament, and his Minister of Higher Education, as well as Zuma, had hidden away from the students, preferring to make the climb-down by means of a security-guarded Press Statement!  A fine example of leadership from the rear!

Zuma went on to state that the ANC policies support service delivery (an area of failure of governance that has instigated thousands of riots and demonstrations), honest and efficient government (!), good education (against a backdrop of falling Matric passes, low examination standards and rating of the level of education at 183 out of 187!).

Zuma held up as examples of good leaders Shaka and Moeshoe, both of whom have been documented in history (the real history, not the ANC version fed to gullible children) as bloodthirsty tyrants equal in their genocidal practices to Adolph Hitler (6 000 000 deaths), Josef Stalin (60 000 000 deaths), Mao tse Tung (more than 100 000 000 deaths) and Robert Mugabe (40 000 deaths), all of whom have been openly praised by members of the ANC.

And through it all, the ANC supporters, egged on by the Party plants in the crowd, applauded.

Zuma made another concession to ‘democracy’, ANC-style, by informing the world that the Branches would now draw up a list of three candidates, for whom the Members would then be permitted to vote, to become representatives of that Branch.  One wonders what democratic processes would be applied to the selection of those three candidates, particularly in the light of cancellation of many Provincial congresses, ANC Womens’ League congresses, and ANC Youth League congresses, until the Party leadership had a chance to assure themselves that the outcome of those congresses would meet the desires of Zuma and his cronies.  This style of ‘democracy reminds the educated and thinking observers of the story about the concern of the Soviet leadership when they found that the results of the upcoming election had been stolen!

As Benjamin Franklin said, democracy is two wolves and a lamb voting on what to have for supper.  There can be little doubt, regardless of Zuma’s lip service to non-racialism, as to who, in Zuma’s twisted thinking, plays the role of the lamb in South Africa today.

Believing your own Advertising

The Minister of Basic Education spent a lot of time and effort in promoting what her Department has done in the past year, leading any seasoned ANC watcher to understand that the real meat of her presentation still to come, the percentage of learners to pass the Matric examination, was almost certain to be worse than the worst of their expectations.  The excuses, that the number of ‘learners’ writing the examination was greater than it has ever been, and the fevered efforts to ‘save’ those who failed in a single grade for the third time, were no more than window-dressing to draw attention away from the appallingly bad results her Department has achieved, results that will scar many youngsters for the rest of their lives, and do much to damage what little of the South African economy that remains in operation after two decades of ANC bungling.  The stark fact is that the Department of Basic Education, despite having a huge budget at its disposal, has managed to allow, or possibly force, almost 30% of people who have given up as much as a quarter of their lives in an attempt to gain an education that will enable them to become useful, productive members of society.  The significantly better results obtained in the Western Cape, 84,7% passing against a national average of 70,7%, proves that the young people of the nation are capable of producing significantly better than is now being achieved.  The only difference between that Province and the rest of the country that means anything is that it is under the competent management of the DA, rather than the cadre-dominated incompetence of the rest of the country.  When the national average of the private schools is brought into the picture, at better than 90% passing, the true state of the inability of the ANC to provide the country with anything approaching an acceptable level of education is highlighted.  One can only wonder when the ANC voters, all of whom are adversely affected by this incompetence, will start to understand that loyalty to the myth that the ANC has built about itself is destructive, almost to the point of being suicidal.

Of course, all of this ignores the fact that the Matric examination passed by these ‘learners’ is at a much lower level than they could expect in most of the world.  What used to be accepted at face value by the Western world as an indicator of a degree of competence is now treated with suspicion.  Even the Bachelor degrees (those gained after study at a University for at least several years, not the Matric certificate now promoted by the Minister as a Bachelor degree) are treated with suspicion abroad, to the extent that they carry very little credibility in an employment situation.  And with good reason.  The Law Society, not many years ago, reported that Ll B graduates were no longer able to use language effectively!  The ‘increased’ pass rate boasted of by the Minister in years past has been bought at the cost of imposing a lower standard in the examinations.  This has hit South African business hard, and probably accounts for the fact that so many of those with new degrees are not employed – they are probably not capable of doing the work that a Matriculant would easily handle in the years before the ANC stamped its personality on the education system.  The ANC has worked hard to compensate for this inadequacy by imposing the BBEEE regulations, to ensure that a proportion of the ‘previously disadvantaged’ are given employment, no matter how limited their capability is to do a decent job.

The incompetence of the ANC to manage the economy of a once-sophisticated country has been demonstrated repeatedly, in the Eskom debacle, which has set back South African development by years, in the inability (unwillingness?) of the Police to stem the rising tide of crime that has threatened to drown the country, in the inability and demonstrated lack of desire of Parliament to hold the State President to the standards of conduct required by the Constitution, absolving him of any liability in the expenditure of R245 000 000 of State funds on his private home (remember the fatuous statement by Zuma that he was not aware that so much money was being spent on his private property?), in the lack of service by the Post Office (the Bryanston Post Office was closed three months ago, without any notification to renters of Post Office boxes, apart from a single notice in the window, put up a few days ago, saying that the persons expecting post could collect it at the new location, which was expected to ‘open soon’, and giving telephone numbers, neither of which are answered), in the Department of Trade and Industry’s inability, after many months warning, to respond to the American Government’s demand for the dropping of an import duty on chicken, failing which South Africa will be excluded from the benefits of AGOA (the deadline given by President Obama was 30 December 2015, but, of course, we saw fit not to respond in time – the ANC Government appears to be totally incapable of acting on time, even preemptively!), with the probable result that many agricultural and other exports to the USA will become subject to import duties in that country, at a time when South Africa needs every dollar of export sales it can achieve, in the Department of Homeland Affairs’ disastrous insistence on a new visa regime, requiring every applicant for a visa to attend personally at the Consulate (there are two in the entire area of China!), resulting in a loss of foreign tourism to the country at a critical time for the economy, in the arrogant and undemocratic, if not unconstitutional behavior of President Zuma in replacing an internationally-acceptable Minister of Finance with an unknown backbencher (unknown except for his disastrous tenure as Mayor, ending in his house being burnt down by desperate citizens – perhaps not a bad example of how to deal with his boss!), and then backtracking a few days later by reappointing Pravin Gordhan, who was himself sacked a couple of years earlier, presumably for failing to rubber-stamp Zuma’s corruption.  The examples are legion.  It is hard to think of one Government Department that has not committed some act of flagrant stupidity or incompetence, and if one adds corruption on a large scale to the list of qualities not desired in a Government Department or body, the only place to look for a righteous man is in the Western Cape.

Listening to the lengthy explanation of the Minister of Basic Education about the excuses for her Department’s failures, excuses claimed as achievements, one was struck by the fact that she dwelt so extensively on the care and attention given to the ‘progressed learners’, those who were simply advanced to the next grade up after failing for two successive years.  She was proud to state that some 6 000 of those ‘progressed learners’ had passed Matric in 2015, and she promised increased care and attention to them.  It is hard to understand how 6 000 children (probably young adults by then, who have spent at least 15 years clogging up the educational system) can merit so much attention when the remaining three-quarters of a million matriculants, representing the apex of a pyramid of at least ten million(!) struggling pupils in the school system, are struggling under the grossly ineffective educational system!  Surely the place to start any corrective action is where the bulk of the problems lie? 

That seems to be typical of the ANC policies – find a group that commands a lot of publicity at grass-roots level, and lavish money on it.  The publicity, hopefully, will last long enough to carry the Government over to the next crisis, such as the Marikana shootings, which have now resulted in the construction of R110 million of houses.  Fortunately, the more outspoken of those subject to this sort of publicity-directed action are starting to speak out, questioning the basis on which those few chosen to receive such largesse at the expense of the cash-strapped State have been selected.  The answer is probably that they offer Zuma and his cohorts the best photo opportunities!  One would be forgiven for believing that the criteria for action by the ANC cover first the question of which projects can most easily be skimmed for corrupt purposes, then which will be the best to secure the ANC an election victory (as confirmed by the Deputy State President, Cyril Ramaphosa, when he stated that the most important thing for the ANC is to secure an election victory!)  Any other consideration, such as the good of the country, or the creation of an economic structure in which job-creating investors will feel at home, are of secondary importance.

These chickens will come home to roost, and the signs are increasingly strong that the roosting will take place much sooner than the ANC would wish.  Until then, the flight of Capital, the loss of brainpower and experience, the deterrence of investment, the loss of foreign markets, will all continue, at an increasing pace.