tag:theconversation.com,2011:/uk/topics/gupta-35918/articlesGupta – The Conversation2018-11-12T14:41:33Ztag:theconversation.com,2011:article/1067922018-11-12T14:41:33Z2018-11-12T14:41:33ZMuckracking journalists who shaped southern Africa over three centuries<figure><img src="https://images.theconversation.com/files/245066/original/file-20181112-83596-1cm73sz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">New book extends the canon of investigative journalism from 1706 through to 2017.</span> <span class="attribution"><span class="source">shutterstock</span></span></figcaption></figure><p>It was a modest, soft-spoken Catholic nun from the US, <a href="https://www.marquette.edu/universityhonors/honors_mclaughlin.shtml">Sister Janice McLaughlin</a>, who exposed the <a href="https://www.tandfonline.com/doi/pdf/10.1080/03057077708707972">“protected villages”</a> set up by the Rhodesian government in 1977. The villages were ostensibly to protect civilians from the violence of the liberation armies, but were actually concentration camps behind barbed wire. </p>
<p>McLaughlin, using the access the church afforded her, and writing for a London-based Catholic newsletter, gave the world detailed first-hand descriptions of the poor conditions and hardships of these camps. Ironically, she implied that the camps were helping the guerrillas from the liberation armies in their fight fighting against the Rhodesian government. Other media picked up and ran the story.</p>
<p><a href="https://www.bbg.gov/threats-to-press/ricardo-de-mello/">Ricardo de Mello</a> is a largely forgotten Angolan hero of investigative reporting. When the country opened up to multiparty democracy and allowed a free press in the early 1990s, De Mello started a daily called Imparcial Fax. Only a handful of subscribers got it by fax. But he began to report the war in a way that broke through the state propaganda for the first time, and publish leaks from within the ruling elite.</p>
<p>He was murdered in January 1995. His death was widely believed to have been orchestrated by an Angolan minister.</p>
<p><a href="http://campbell.ukzn.ac.za/?q=taxonomy/term/358">Magema Magwaza Fuze</a> travelled through Zululand in 1877 to visit King Cetshwayo. His purpose was to check out stories that the king was killing Christian converts, thus forcing missionaries and converts to flee. He found no evidence of this, and the piece he wrote in Macmillan’s Magazine in the UK in 1878 proved to be an invaluable record of life in the kingdom.</p>
<p>These are three of the 39 stories recorded in our recently <a href="https://www.loot.co.za/product/anton-harber-southern-african-muckraking/hjnv-5731-g9a0">published anthology</a>, <em>Southern African Muckraking: 300 years of investigative reporting that has shaped the region</em>. The book extends the canon of investigative journalism, starting with <a href="https://www.sahistory.org.za/people/adam-tas">Adam Tas</a> in 1706 through to <a href="http://www.gupta-leaks.com/">#GuptaLeaks in 2017</a>. The trove of emails exposed the extent of the “capture” of the South African state by business interests allied to former President Jacob Zuma. The book uncovers a number of forgotten gems along the way.</p>
<h2>A long tradition</h2>
<p>Each case study is introduced by an expert in the area, outlining the context, importance and genesis of the story.</p>
<p>Some would argue that the book uses a very loose definition of investigative reporting. Some of the protagonists were not journalists, and some wrote for outlets other than conventional newspapers, usually stepping in when conventional journalism was blocked. We felt an expansive definition was essential, given the limitations on this kind of work in this part of the world. A more traditional Western definition would have excluded some of the most important and interesting work.</p>
<p>Some of the stories were carried in mainstream media, many came from “alternative” media, and at least one came from a state-owned outlet. Some were the result of extensive sleuthing, some from fortuitous leaks and some from canny editors pointing their reporters in the right direction. </p>
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<p>What these reports have in common is exposing matters of public interest – sometimes at great risk to the journalists – and holding to account those who abuse power. The book shows how rich, varied and inspiring this history is, and how powerful an impact it has had on the region.</p>
<p>What is apparent in this chronological account is that some of the countries of southern Africa – like South Africa, Zimbabwe and Namibia – have long traditions of muckraking, while there has been a surge of recent work from countries like Lesotho, Botswana.</p>
<p>Much of the earlier work is by individuals operating on their own. More recently the work was often done cooperatively by large groups, across borders and media types. Less is now coming from conventional newsrooms, and more from special investigative hubs supported by donors, which might free journalists from the constraints of commercial ownership, but may also leaves them dependant on the goodwill of funders. South Africa’s <a href="https://gijn.org/member/amabhungane-centre-for-investigative-journalism-south-africa/">amaBhungane</a> was a pioneer among these centres, but others have now popped up in Botswana, Tanzania, Mozambique and Lesotho.</p>
<p>It becomes clear that the digital age offers muckrakers a great deal of scope because of the profusion of massive data leaks. But it also poses many threats because of the increased capacity for surveillance and harassment.</p>
<h2>Courage</h2>
<p>Courage shines through on almost every page, whether it comes from the often-unheralded whistleblowers or the five cases where reporters have been killed or disappeared, as well as the many instances of detention and harassment.</p>
<p>At a time when at least one major South African newspaper, the Sunday Times, has had to <a href="https://theconversation.com/why-journalists-in-south-africa-should-do-some-self-reflection-105056">withdraw and apologise</a> for investigative work that went wrong, the book is a reminder that such aberrations are vastly overshadowed by the quantity of really excellent and important work.</p><img src="https://counter.theconversation.com/content/106792/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anton Harber compiled and edited this anthology. The project was supported by the Konrad Audenauer Stiftung.</span></em></p>A new book celebrates the long and rich history of investigative reporting in southern Africa, and highlights some hidden and forgotten gems.Anton Harber, Caxton Professor of Journalism, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1047012018-10-11T09:11:24Z2018-10-11T09:11:24ZSouth Africa’s economy is in a mess. New finance minister must hit the road running<figure><img src="https://images.theconversation.com/files/240064/original/file-20181010-72117-3e0y6p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African President Cyril Ramaphosa, left, introduces the country's new Finance Minister, Tito Mboweni, in Cape Town.
</span> <span class="attribution"><span class="source">Phando Jikelo/African News Agency(ANA)</span></span></figcaption></figure><p>The latest <a href="https://www.news24.com/SouthAfrica/News/live-ramaphosa-to-announce-decision-on-nene-20181009">reshuffling</a> of South Africa’s finance minister, following the resignation of Nhlanhla Nene and appointment of Tito Mboweni, may have negative origins but it brings with it some positive energy.</p>
<p>Nene resigned as finance minister after it emerged that he lied about the nature of his contact with the controversial Gupta family, the friends of former President Jacob Zuma who stand accused of championing massive misappropriation of public funds in a process branded as <a href="https://theconversation.com/why-state-capture-is-a-regressive-step-for-any-society-56837">state capture</a>. </p>
<p>In an initial response to a journalist’s question, <a href="https://citizen.co.za/news/south-africa/2017965/nene-lied-at-state-capture-inquiry-eff/">Nene</a> claimed that he had only met the Guptas in passing. But in his recent testimony to a commission investigating state capture he admitted that he’d met Gupta family members on numerous occasions, including a number of visits to their house and their offices. </p>
<p>The inconsistency tarnished his integrity and sparked massive public criticism. Within a week of making his admissions he resigned. South Africa’s President Cyril Ramaphosa immediately appointed former South African Reserve Bank governor Mboweni as the new finance minister.</p>
<p>On the one hand Nene’s departure must be hailed as setting a new tone for South African politicians, particularly for the cabinet. By falling on his sword, he has taken responsibility for his actions – a rarity in South African politics. It’s tempting to cast his action in stone as the “Nene Rule” that sets a standard for politicians to resign when in the wrong.</p>
<p>On the other hand the appointment of Mboweni brings back someone with considerable skills and the political finesse needed to steer South Africa out of its current economic quagmire. </p>
<p>Mboweni needs to hit the ground running. In late October he must present the country’s medium term budget policy framework. All eyes will be on how he steers the challenge of rebalancing the national budget. His political skills and ranking might come in handy. </p>
<h2>Equal to the task</h2>
<p>Mboweni takes over the finance portfolio at <a href="https://theconversation.com/south-africas-budget-some-good-moves-but-not-enough-to-fix-mounting-problems-73529">a difficult time</a>. Tough decisions will be required in a hostile environment as a strong populist wave sweeps through the ruling party, the African National Congress (ANC). </p>
<p>It’s therefore a positive that he commands a more senior political ranking than Nene had within the ANC. Mboweni claimed the <a href="https://www.timeslive.co.za/politics/2017-12-21-anc54-these-are-the-80-members-elected-to-the-nec/">11th position</a> in the tallying of the votes for the ANC’s National Executive Committee (NEC) during the ruling party’s 2017 elective conference that made Ramaphosa the President. The NEC is made up of 80 members and is the ANC’s highest decision making body between conferences. </p>
<p>In addition to this, Mboweni has a strong financial background. He served as governor of <a href="https://www.bloomberg.com/research/stocks/private/person.asp?personId=25853585&privcapId=398625">the South African Reserve Bank</a> from 1999 to 2009. Prior that he served in Nelson Mandela’s first cabinet as minister of labour. </p>
<p>Both experiences should help equip him to meet the economic challenges facing the country. There’s no doubt that he’s knowledgeable about financial matters and is respected among investors. </p>
<p>His tenure at the Reserve Bank should ensure a smooth working relationship between the minister of finance, the national treasury and the central bank. As a previous governor, Mboweni understands this important relationship while valuing the autonomy and the independence of the various institutions and their responsibilities.</p>
<h2>High expectations of Mboweni</h2>
<p>Mboweni will need to be a quick study. He has only two weeks in which to familiarise himself with the details of the medium term budget.</p>
<p>He can’t afford to disappoint. This year’s budget will be watched more intensely than usual by key stakeholders, including investors and credit rating agencies because it follows closely on an <a href="https://theconversation.com/south-africas-stimulus-package-shows-power-is-finely-balanced-in-the-anc-104418">economic stimulus and recovery plan</a> announced by Ramaphosa. Details are expected to be unveiled in the medium term budget.</p>
<p>The medium term budget is also expected to signal how South Africa is dealing with its fiscal challenges. This is where government faces its very hard choices.</p>
<p>The ultimate aim must be to increase economic growth and eradicate unemployment. But to achieve these objectives the government must revise its expenditure priorities.</p>
<p><a href="https://journals.co.za/content/journal/10520/EJC-1077140800">Expenditure</a> on civil service remuneration, social grants and interest on government debt currently equates to 70% of the government’s tax revenue. This is clearly untenable. If not addressed, South Africa will face a fiscal cliff – the point at which these three expenditure items account for all government revenue and make spending on anything virtually impossible.</p>
<p>At the same time, Mboweni will have to work closely with Pravin Gordhan, the Minister of Public Enterprises, on the restructuring of state-owned enterprises. The precarious financial position of a number of state-owned enterprises is placing a heavy burden on taxpayers. Removing this burden will release resources that can be used to stimulate the domestic economy. Mboweni must therefore help with tough decisions about unaffordable vanity projects.</p>
<p>And, finally, Mboweni must sort out the challenges facing <a href="https://www.timeslive.co.za/sunday-times/business/2018-07-27-pic-staff-want-bosses-suspended-to-be-free-to-speak-out-on-corruption/">the Public Investment Corporation</a> which is responsible for managing civil servants’ pension funds and is worth over R1,5 trillion.</p>
<h2>Restoring trust</h2>
<p>South Africa is in serious economic difficulty. It also faces a trust deficit owing to the state capture project of the Zuma administration. The golden triangle of trust between the government, the public and the business community has been broken. No country can succeed without this. Mboweni can play an important role in restoring it.</p><img src="https://counter.theconversation.com/content/104701/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jannie Rossouw is a C-rated NRF researcher and received research funding from the NRF. He was a Deputy General Manager of the SA Reserve Bank in the period that Mr Tito Mboweni serves as Governor. </span></em></p>South Africa’s new finance minister comes with considerable skills and political finesse needed to steer the country out of its economic quagmire.Jannie Rossouw, Head of School of Economic & Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1021392018-08-28T13:44:20Z2018-08-28T13:44:20ZKey questions the Zondo inquiry needs to pose about the nuclear deal<figure><img src="https://images.theconversation.com/files/233875/original/file-20180828-86135-11cc98u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Deputy Chief Justice Ray Zondo looks into state capture in South Africa's energy sector.</span> <span class="attribution"><span class="source">EPA-EFE</span></span></figcaption></figure><p>South Africa is emerging from a debilitating period where politicians and their benefactors systematically placed pliable individuals into key positions at state institutions to gain undue influence and ultimately financial advantage. The ensuing malaise is called <a href="https://www.dailymaverick.co.za/article/2017-05-26-betrayal-of-the-promise-the-anatomy-of-state-capture/">state capture</a>. </p>
<p>A <a href="https://www.sastatecapture.org.za/">commission of inquiry</a> to investigate state capture was initiated in January, headed by the Constitutional Court’s Deputy Chief Justice Raymond Zondo.</p>
<p>The first week of hearings ended with shocking testimony by former deputy finance minister Mcebisi Jonas. He reiterated his previous claim that a member of the influential Gupta family offered him a bribe of R600 million plus appointment as finance minister in return for favours. He also disclosed, for the first time, that his <a href="https://www.news24.com/SouthAfrica/News/statecaptureinquiry-we-are-in-control-of-everything-jonas-on-what-gupta-brother-told-him-20180824">life was threatened</a> should he fail to cooperate.</p>
<p>Jonas declined the bribe, and eventually went public about the offer – becoming the first and most senior person in government to lay bare the role being played by the Gupta family at former president Jacob Zuma’s behest. The fact that he worked at National Treasury was particularly significant as it was the department that vetted government expenditure. </p>
<p>The testimony of Jonas as well as that of subsequent witness Vytjie Mentor both also <a href="https://www.dailymaverick.co.za/article/2018-08-27-how-vytjie-mentor-resisted-the-gupta-charm/">referred to the proposed nuclear build</a>, and how this was influencing efforts to control state institutions. </p>
<p>The dismissal of Finance Minister Nhlanhla Nene in December 2015 precipitated a <a href="https://www.theguardian.com/business/2015/dec/10/south-africa-finance-minister-nene-departure-drives-rand-down-to-all-time-low">national currency collapse</a> and public outrage that <a href="https://www.news24.com/SouthAfrica/News/timeline-how-south-africa-got-three-finance-ministers-in-four-days-20151214">forced Zuma</a> to remove his replacement after only four days and install Pravin Gordhan. But Gordhan’s tenure was marked by high tension and Zuma <a href="https://theconversation.com/zumas-cabinet-reshuffle-opens-the-door-for-nuclear-deal-in-south-africa-75553">dismissed him</a> in March 2017.</p>
<p>Jonas’s testimony reminded South Africans why Zuma was so keen to have a compliant ally as finance minister. He posited that the reason for the hostility towards Nene was that he was blocking the implementation of a <a href="https://mg.co.za/article/2014-09-23-sa-russia-agree-to-50-billion-nuclear-deal">nuclear deal with Russia</a>.</p>
<p>The inquiry will be probing this further, a welcome development given that so many unanswered questions remain.</p>
<h2>The nuclear deal</h2>
<p>The construction of <a href="https://mg.co.za/article/2010-12-10-countdown-to-nuclear-liftoff">new nuclear power stations</a> was first mooted around 2010 in response to electricity shortages and projected increased future demand. But the idea never gained traction when it became clear that electricity demand was growing less than expected. The hugely expensive new nuclear development was no longer financially defensible.</p>
<p>But Zuma’s government persisted with the idea. It soon became clear that Zuma favoured a Russian bid, and in 2014 the Russian nuclear company <a href="https://rosatomafrica.com/en/">Rosatom</a> stunned the country by announcing it had secured the rights to build the <a href="https://mg.co.za/article/2014-09-23-sa-russia-agree-to-50-billion-nuclear-deal">new South African plants</a>.</p>
<p>It was a move with massive long-term financial implications for South Africa, and <a href="https://www.businesslive.co.za/rdm/politics/2017-01-18-zuma-the-guptas-and-the-russians--the-inside-story/">raised many red flags</a>. The nuclear build soon came to be viewed as the most audacious example of state capture.</p>
<p>One of the questions the inquiry needs to try and answer is why, given that the programme was massively tainted by controversy and was <a href="https://www.iol.co.za/business-report/economy/nuclear-build-programme-is-unaffordable-gigaba-11721499">deemed unaffordable</a>, the ex-president doggedly pursued it.</p>
<h2>The Shiva uranium mine acquisition</h2>
<p>Some reasons are already known. </p>
<p>In 2010 a consortium that included the Gupta family and ex-president Zuma’s son Duduzane <a href="https://www.timeslive.co.za/news/south-africa/2016-05-11-opinion-a-cautionary-tale-about-the-guptas-dud-uranium-mine/">purchased the Dominion uranium mine</a> near Klerksdorp in the North West province. The transaction baffled mining sector observers; in an era of weak global uranium demand, Dominion was <a href="http://www.miningweekly.com/article/uranium-one-shares-plunge-on-froneman039s-surprise-exit-forecast-cuts-2008-02-21/rep_id:3650">considered a poor asset</a>.</p>
<p>But the mine, soon to be renamed Shiva, would become exceptionally valuable if it was going to become the uranium supplier to South Africa’s new nuclear power plants. <a href="https://www.dailymaverick.co.za/article/2018-08-27-how-vytjie-mentor-resisted-the-gupta-charm/">Mentor’s testimony</a> specifically stated that the Guptas already considered themselves the exclusive uranium suppliers. Because of his family association, the former president had a vested interest in the nuclear build coming to fruition.</p>
<p>It was also odd that the transaction <a href="https://www.fin24.com/Economy/nuclear-family-20170423-3">involved Rosatom’s mining subsidiary</a>. </p>
<p>Because the buyers did not have the finance to conclude the purchase, they approached state-linked agencies to attempt to raise the funding. The mine was eventually purchased through a R250 million loan from the <a href="http://mg.co.za/article/2014-12-04-another-state-bonanza-for-the-guptas">Industrial Development Corporation</a>.</p>
<p>The questions that remain unanswered are:</p>
<ul>
<li><p>What were the exact details surrounding the mine purchase, and what was Rosatom’s role in this transaction? And,</p></li>
<li><p>Did ex-president Zuma or other high-ranking officials unduly pressure funding bodies to grant a loan for the mine acquisition?</p></li>
</ul>
<h2>The Russian agreement</h2>
<p>Zuma’s many <a href="http://mg.co.za/article/2014-09-25-jzs-secrete-nuke-stich-up">meetings with his Russian counterparts</a> resulted in the Russian bidders inexplicably receiving preferential status ahead of other potential bidders. This engagement produced an astounding <a href="https://www.fin24.com/Economy/SA-signs-nuclear-deal-with-Russia-20140922">intergovernmental agreement</a>, signed by then Energy Minister Tina Joemat-Pettersson.</p>
<p>After a court challenge from civil society organisations, the Russian agreement was declared <a href="https://theconversation.com/no-nuclear-energy-option-for-south-africa-for-now-at-least-76751">illegal</a>. But this didn’t stop government efforts towards the realisation of a Russian-led nuclear build.</p>
<p>Here the unanswered questions are:</p>
<ul>
<li><p>Why did Joemat-Pettersson sign an agreement she must have known to be unprocedural and irregular?</p></li>
<li><p>Which officials were instrumental in promoting this agreement, and who instructed them?</p></li>
</ul>
<h2>Ministerial reshuffles and redeployments</h2>
<p>The last period of Zuma’s presidency was characterised by the drama of frequent cabinet reshuffles.</p>
<p>National Treasury was at the centre of the reshuffle storm. But the Ministry of Energy was equally afflicted by frequent transitions, with five ministers throughout <a href="https://www.dailymaverick.co.za/opinionista/2018-03-13-south-africas-renewable-nuclear-war/">Zuma’s presidency</a>. </p>
<p>The unanswered questions to the finance and energy ministries are:</p>
<ul>
<li><p>Were two finance ministers and a string of ministers dismissed because they were opposed to the nuclear build, or not pushing it vigorously enough?</p></li>
<li><p>Were these dismissals initiated by ex-president Zuma, or enacted at the request of other parties?</p></li>
</ul>
<h2>Connecting the remaining dots</h2>
<p>The inquiry will undoubtedly investigate the infiltration and abuse of the national power utility Eskom, which also manages South Africa’s nuclear power facilities. In recent years the previously neutral entity had increasingly taken on the role of a <a href="https://www.businesslive.co.za/rdm/business/2017-05-16-we-must-continue-with-our-nuclear-programmes-molefe-tells-eskom-staff/">nuclear lobbyist</a>. </p>
<p>A key question here is:</p>
<ul>
<li>Was the obsessive promotion of the nuclear build by several Eskom leaders driven by a genuine belief in the technology and its affordability, or by pressure?</li>
</ul>
<p>It’s important to know what happened, and how, if South Africa is going to be able to put processes in place that ensure the entire energy sector never becomes compromised again.</p><img src="https://counter.theconversation.com/content/102139/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hartmut Winkler receives funding from the South African National Research Foundation. He is a member of OUTA and Save South Africa, but writes this article in his personal capacity. </span></em></p>The state capture inquiry will look at why former president Jacob Zuma pursued a dodgy nuclear deal.Hartmut Winkler, Professor of Physics, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/929402018-03-08T14:17:17Z2018-03-08T14:17:17ZCan Ramaphosa centre the ANC and quell opposition parties?<figure><img src="https://images.theconversation.com/files/209526/original/file-20180308-30979-kg74rk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African President Cyril Ramaphosa in parliament.</span> <span class="attribution"><span class="source">Brenton Geach/EPA</span></span></figcaption></figure><p>These are early days for the new <a href="https://mg.co.za/article/2018-03-01-ramaphosa-plays-the-hand-he-was-dealt">Cyril Ramaphosa-led government</a> in South Africa. Two crucial and inter-related strategic challenges face the new President: to consolidate support within the African National Congress (ANC), and to consolidate the ANC’s position as the dominant party in time for the 2019 national elections, seeking to reverse the decline it had experienced under Jacob Zuma.</p>
<p>Dealing with internal ANC issues is the most difficult and the foundation for the others. Zuma is <a href="https://theconversation.com/zumas-time-is-up-but-what-does-it-mean-for-south-africa-91873">out of power</a>, and will not be back. Even though his departure will weaken their capacity to work as a coherent force, it will <a href="https://theconversation.com/the-zuma-regime-is-dead-but-its-consequences-will-linger-for-a-long-time-92066">take time</a> to dismantle the alliance that made up disparate elements he built around him. </p>
<p>Ramaphosa has started the job by <a href="https://mg.co.za/article/2018-02-26-cyril-ramaphosa-cabinet-reshuffle-reaction-anc-da-eff-ifp">removing</a> the most obvious symbols of Zuma’s alliance with the <a href="http://www.bbc.com/news/world-africa-22513410">Gupta family</a> who stand accused of being the major perpetrators of <a href="https://qz.com/825789/state-capture-jacob-zuma-the-guptas-and-corruption-in-south-africa/">state capture</a>. These include former ministers such as <a href="http://ewn.co.za/Topic/Communications-Minister-Faith-Muthambi">Faith Muthambi</a> who ran public administration and <a href="http://ewn.co.za/Topic/Mosebenzi-Zwane">Mosebenzi Zwane</a> who had been given the minerals portfolio. Both became notorious through combining incompetence and corruption, and have no independent power based within the ANC. </p>
<p>Others who had some internal support were demoted into less prestigious and powerful positions – <a href="http://www.huffingtonpost.co.za/2018/02/26/bathabile-dlamini-for-women-what-the-actual-hell-say-tweeters_a_23371557/">Bathabile Dlamini</a> who has been made minister of women and children and <a href="https://mg.co.za/tag/malusi-gigaba">Malusi Gigaba</a> who is back at home affairs come to mind. </p>
<p>Picking fights carefully so as not to tackle all adversaries simultaneously is a wise political strategy. Having won with a small margin does not allow him to go ahead with massive purges, an unwise course of action in any event.</p>
<p>As far as trying to forge the ANC into a cohesive force again, Ramaphosa’s real challenge remains closer to the ground. Among local ANC members and representatives an entrenched ethos sees positions of power as key to material benefit and jobs for relatives, friends and political allies. Tackling this is not going to be easy and it’s not clear that Ramaphosa will be able to do it – certainly not in the immediate term.</p>
<h2>ANC as the dominant party?</h2>
<p>His urgent task is to address the <a href="https://theconversation.com/jacob-zumas-demise-is-bad-news-for-south-africas-opposition-parties-91771">electoral challenges</a> posed by the two main opposition parties, the Democratic Alliance (DA) and the Economic Freedom Fighters (EFF). Both cater to different constituencies disillusioned. </p>
<p>The DA’s main policy platform focuses on good governance and rational management. The EFF’s on <a href="https://www.fin24.com/Opinion/is-julius-malemas-eff-a-nation-builder-or-a-wrecking-ball-20180307">radical social change</a>. Their shared opposition to the ANC has made them strange bedfellows in a number of key municipalities, thus removing the ANC from power. But this has already begun to unravel in the wake of Ramaphosa’s ascendancy. In <a href="https://www.dailymaverick.co.za/article/2018-03-04-nelson-mandela-bay-effs-attempt-to-remove-trollip-ushers-in-a-new-unstable-era-for-coalition-politics/#.WqEhVWpubIU">Nelson Mandela Bay</a> the EFF has withdrawn support for the DA, its dominant coalition partner. More political shifts like this may take place in preparation for the next elections.</p>
<p>Ramaphosa can undercut the DA threat by his (re-)appointment of reputable and fiscally-responsible people. He has already done so in the National Treasury with <a href="https://theconversation.com/ramaphosa-has-chosen-a-team-that-will-help-him-assert-his-authority-92538">Nhlanhla Nene</a> and at public enterprises with <a href="https://www.fin24.com/Economy/pravin-gordhan-back-this-time-as-minister-of-public-enterprises-20180226">Pravin Gordhan</a>. And eliminating blatant cases of nepotism and corruption will also <a href="https://www.businesslive.co.za/bd/opinion/2018-03-01-why-a-complacent-da-could-lose-cape-town-to-anc/">steal DA votes</a> for the ANC.</p>
<p>But tackling the EFF is a more complicated task, as illustrated by the recent reemergence of the land issue, which is now the <a href="https://m.news24.com/SouthAfrica/News/if-you-see-a-beautiful-piece-of-land-take-it-malema-20170228">its clarion call</a>. Can this issue affect the ANC’s electoral prospects? What seems to be Ramaphosa’s strategy in the face of this potential threat? </p>
<p>Land isn’t a new issue, having been a material and symbolic <a href="http://www.sahistory.org.za/topic/land-act-dispossession-segregation-and-restitution">concern for centuries</a>. Colonial conquest and settlement centred on the acquisition of land by force, which played a crucial role in driving indigenous people into the labour market in the 19th and 20th centuries. Addressing the consequences of the <a href="http://www.sahistory.org.za/topic/natives-land-act-1913">1913 Natives Land Act</a> was a formative experience for the ANC, which had been <a href="http://www.sahistory.org.za/topic/anc-origins-and-background">created</a> in the previous year, and remains a challenge to this day. </p>
<p>Land dispossession entrenched the distinctive feature of the South African economy: <a href="http://www.sahistory.org.za/archive/the-migrant-labour-system">migrant labour</a> as the foundation for black deprivation and white prosperity. </p>
<p>In 1994 a <a href="http://www.sahistory.org.za/article/land-restitution-south-africa-1994">land restitution process</a> was put in place by the newly elected ANC government. But it hasn’t met the intended targets for a number of reasons. These have included bureaucratic inefficiency, inadequate support structures for small-scale farmers (in financing, marketing, skill development), conflicts among beneficiaries, corruption and limited interest due to the meagre political weight of claimants.</p>
<p>While it is clear that the cost of land due to the need to offer compensation is not the main problem hampering land reform, it has become symbolic of the obstacles facing the process. When the ANC <a href="https://www.businesslive.co.za/bd/national/2018-02-27-parliament-adopts-effs-land-claims-motion-but-anc-seeks-amendments/">joined</a> the EFF in parliament in referring the compensation clause for review, it recognised that opposing the motion would be risky, allowing the EFF to speak on behalf of land-hungry people. </p>
<p>It showed that the land conundrum is <a href="https://m.news24.com/Columnists/MaxduPreez/real-action-on-land-needed-to-counter-extreme-eff-rhetoric-20180306">electorally dangerous</a> for the ANC.</p>
<p>On the other hand, supporting the motion but amending it to conform to other imperatives (stable economy, increased agricultural production, food security) could keep the ANC ahead of the political challenge while retaining its ability to shape the outcome of the review to suit its general policy direction. </p>
<p>Meeting the challenges from the opposition parties will strengthen the ANC’s dominance and Ramaphosa’s control internally. The internal and external challenges could therefore be met in an integrated way. In a sense, this would allow it to return to the position it had enjoyed during Nelson Mandela’s tenure, exercising hegemony over state and society. </p>
<p>But the road is still long and full of obstacles.</p><img src="https://counter.theconversation.com/content/92940/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ran Greenstein does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Meeting the challenges from the opposition will strengthen the ANC’s dominance. How well its new leadership copes will become clearer over the next few months.Ran Greenstein, Associate Professor of Sociology, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/870222017-11-09T13:39:13Z2017-11-09T13:39:13ZZuma’s allies are once again gung-ho about nuclear. Will they get their way?<figure><img src="https://images.theconversation.com/files/193533/original/file-20171107-1068-lvvdwq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's new Energy Minister David Mahlobo, has launched a fresh push to bag the nuclear energy build programme.</span> <span class="attribution"><span class="source">GCIS</span></span></figcaption></figure><p><em>South Africa’s nuclear build programme seems to be <a href="https://www.news24.com/SouthAfrica/News/mahlobo-rushes-nuclear-deal-20171105-2">back on the agenda</a> after earlier indications that it was dead. Recent <a href="https://www.enca.com/south-africa/those-opposed-to-nuclear-sold-out-to-the-west-zuma">comments</a> by President Jacob Zuma and his new minister of energy David Mahlobo, signal a final push to bag the nuclear deal while Zuma is still in power. In December Zuma’s term as president of the African National Congress will come to an end when the ruling party elects a new leadership. His term as president of the country ends in 2019. The Conversation Africa’s Business and Economy Editor, Sibonelo Radebe, asked Keith Gottschalk to assess the situation.</em></p>
<p><strong>Is it still possible for the Zuma administration to bag the nuclear energy programme?</strong> </p>
<p>The worsening financial plight of the state and its parastatals makes the estimated R1 trillion rand cost of the proposed nuclear build programme increasingly unaffordable. The new Finance Minister Malusi Gigaba <a href="https://theconversation.com/south-africas-finance-minister-admits-situation-is-grave-but-offers-no-solutions-86373">said as much</a>. Slow economic activity is squeezing the tax revenue base while social expenditure demands keep rising. This has caused the <a href="https://theconversation.com/latest-budget-underscores-desperate-state-of-south-africas-finances-86362">deficit indicators</a> to rise a cause for serious concern. Its ludicrous for government to insist on adding the humongous nuclear build programme into such dire state of public finances.</p>
<p>It’s also important to consider that government’s atomic ambitions go far beyond the 9 600 MW of extra nuclear power stations. It also wants to rebuild a uranium enrichment plant that dates back to former <a href="http://www.sahistory.org.za/article/dismantlement-south-africa039s-nuclear-weapons">apartheid-era</a> President PW Botha in the 1980’s. South Africa gave up its nuclear capability in 1989. It was the only country in Africa that had the ability to make a nuclear bomb.</p>
<p>Zuma’s administration wants to <a href="https://mg.co.za/article/2017-10-20-00-zuma-set-to-blast-a-nuclear-path">regain</a> some of the lost nuclear capacity. It wants to construct a fuel element fabrication factory. It has talked of a nuclear fuel reprocessing plant. All these also bear steep price tags.</p>
<p><strong>What can stop it?</strong></p>
<p>It’s been reported that Mahlobo, the former state security minister turned energy minister, <a href="https://www.news24.com/SouthAfrica/News/mahlobo-rushes-nuclear-deal-20171105-2">wants to rush</a> through the new process of guiding the nuclear energy plan into fruition. So it’s not going to be easy to stop it.</p>
<p>But South Africa’s nuclear ambitions face stiff opposition from different directions. These include environmentalist critics of nuclear power generation who use a blend of media, street theatre, objections at public consultation processes, and lawfare to try and stop the government’s ambitions. </p>
<p>The SA Faith Community Environmental Initiative group won an important victory earlier this year when the Cape High Court ruled that the government had not followed due process in its nuclear energy plans, and that they had to be <a href="https://theconversation.com/court-ruling-on-zumas-nuclear-deal-is-a-marker-of-south-africas-political-health-76870">halted</a>. This effectively sent government back to square one. </p>
<p>Opposition parties have also been active, using parliamentary channels. They’re also considering taking the legal route to halt the nuclear juggernaut. </p>
<p>And there is palpable opposition within the ANC itself. A number of ANC branches sent motions critical of the costs of nuclear electricity to the ANC’s National Policy Conference. That conference’s report censored out all these motions.</p>
<p><strong>The administration seems to be pulling out all the stops to bag this programme: What’s at stake?</strong> </p>
<p>By now, scandal-weary South Africans will react by saying: follow the money. In December 2016 the government dropped the bombshell that the procurement of its nuclear build programme would be <a href="https://www.iol.co.za/news/politics/eskom-to-take-charge-of-nuclear-build-programme-2078673">taken away</a> from the department of energy and done instead through Eskom.</p>
<p>The reason became clear when months of media headlines <a href="https://www.news24.com/SouthAfrica/News/download-the-full-state-of-capture-pdf-20161102">revealed</a> that Eskom’s procurement mechanisms had been infiltrated and subverted by the Gupta family conglomerate to become a corporate feeding trough. With close ties to Zuma the Guptas stand accused of operating an elaborate mission to capture state business with a keen eye on the nuclear energy build programme</p>
<p>Every nuclear build contract, from “consulting” to turbines, would be inflated by one-fifth to build in the kickbacks to the corrupt middlemen tenderpreneurs.</p>
<p><strong>Does South Africa need nuclear energy at this stage?</strong></p>
<p>South Africa does not need nuclear energy at any stage. </p>
<p>About a decade ago, the government argued that South Africa’s economic growth was 5% per year every year, and that the resultant increase in electricity demand necessitated building 9 600 MW of <a href="http://safcei.org/wp-content/uploads/2017/03/Appendix-A-Review-of-the-Integrated-Resource-Plan-Update-Professor-Steve-Thomas.pdf">new nuclear power stations</a>. Critics pointed out that these <a href="http://m.fin24.com/fin24/Economy/Eskom/call-for-sa-to-halt-energy-decisions-20161104">figures were inaccurate</a>. </p>
<p>Economic growth has shrunk significantly since then together with future projections of electricity demand. But the government still insist that the 9 600 MW of nuclear power proposition is backed by economic fundamentals. Clearly, this is a political decision uncoupled from economic realities.</p>
<p>On top of this, the most <a href="https://theconversation.com/why-south-africa-should-not-build-eight-new-nuclear-power-stations-49967">cost-effective</a> generation of electricity would be a blend of imported hydro, imported gas, solar and wind. But these avenues seems to have been blocked by nefarious agendas.</p>
<p>In 2010, the department of energy proudly announced a <a href="http://www.engineeringnews.co.za/print-version/upington-solar-park-south-africa-2010-10-22">5 000 MW solar park</a> to be built outside Upington. It hosted an international investors’ conference to kickstart progress. Since then, nothing has happened.</p>
<p>In 2014 the department proudly put up on the internet a slide show of how the Zuma and the DRC’s President Kabila had <a href="https://www.ujuh.co.za/movement-on-the-grand-inga-hydropower-project/">signed a treaty</a> guaranteeing South Africa over 10 000 MW of imported hydropower once the Inga dams were constructed.</p>
<p>By December 2016 the department had effectively airbrushed these out of its presentations. Clearly, political power had been applied to compel the department to drop Eskom’s renewable division, and to suck up to its nuclear division. Which political power this was, became exposed this week when Zuma <a href="http://ewn.co.za/2017/11/06/zuma-slams-critics-of-nuclear-programme">smeared opponents</a> of his nuclear plans as western puppets.</p>
<p><strong>What are global trends saying about nuclear energy?</strong> </p>
<p>The building of new nuclear power stations in developed countries is drastically <a href="https://mg.co.za/article/2017-09-15-00-world-renewables-blow-nukes-up">declining</a>. The UK is alone in signing a contract to build a new one. Nuclear vendors have stepped up their sales campaigns in developing countries to compensate.</p><img src="https://counter.theconversation.com/content/87022/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Keith Gottschalk does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>South Africa’s President Jacob Zuma seems to be making a final push to secure the nuclear power deal before his tenure comes to an end. But it won’t be easy.Keith Gottschalk, Political Scientist, University of the Western CapeLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/870182017-11-09T13:39:08Z2017-11-09T13:39:08ZSouth African president’s last ditch effort to ram through a nuclear power deal<figure><img src="https://images.theconversation.com/files/193963/original/file-20171109-27161-1ya2z5f.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">There is a lack of public support for nuclear in South Africa.</span> <span class="attribution"><span class="source">Reuters/Rogan Ward</span></span></figcaption></figure><p>South African President Jacob Zuma’s term of office has been characterised by an absence of vision and <a href="https://africacheck.org/reports/has-president-jacob-zumas-government-done-a-good-job/">associated initiatives</a>. Zuma is instead known for his inaction and overt <a href="http://ewn.co.za/2017/10/26/da-zuma-a-master-of-delaying-tactics">stalling tactics</a>. Examples include delays in setting up the <a href="https://www.dailymaverick.co.za/article/2017-09-13-state-capture-inquiry-zumas-unconstitutional-delay-the-focus-of-court-action/">State Capture Commission of Inquiry</a>, announcing a new board for the <a href="https://www.news24.com/SouthAfrica/News/concern-over-zuma-deliberately-delaying-sabc-board-appointment-20171009">state broadcaster</a>, and delaying the release of a report on the future of <a href="https://www.timeslive.co.za/news/south-africa/2017-10-24-two-years-and-counting-university-fees-frustration-mounts/">university fees</a>.</p>
<p>His recent dramatic <a href="https://www.dailymaverick.co.za/article/2017-10-31-iss-today-is-zumas-nuclear-gamble-still-in-play/#.WgMQOI-Czcs">push to fasttrack</a> an expensive and highly controversial nuclear power station build is therefore very much out of character. But Zuma’s advocacy of the nuclear build needs to be understood in terms of another hallmark of his presidency – <a href="https://theconversation.com/how-the-state-capture-controversy-has-influenced-south-africas-nuclear-build-58879">state capture</a>. This expression refers to the systematic takeover of state institutions by presidential allies and the resulting exploitation of institutions for commercial advantage and profit by his benefactors.</p>
<p>It’s already become clear who is likely to benefit from South Africa pursuing the option to build nuclear power stations. The list includes the <a href="http://www.bbc.com/news/world-africa-22513410">Gupta brothers</a> and Zuma’s son Duduzane through their <a href="https://www.businesslive.co.za/rdm/politics/2017-01-18-zuma-the-guptas-and-the-russians--the-inside-story/">links to the Shiva uranium mine</a>.</p>
<p>And then there’s Zuma himself. Speculation about why the president appears to be favouring a deal with Russian company Rosatom ranges from allegations of grand scale <a href="https://citizen.co.za/news/south-africa/1692639/malema-accuses-zuma-of-chasing-nuclear-deal-repaying-russia-with-new-energy-minister/">individual kickbacks</a> to alleged commitments linked to <a href="http://sa-monitor.com/putin-south-africas-anc-friends-troubled-times-south-african-monitor-13-october-2016/">funding</a> for the African National Congress.</p>
<p>The controversy around the nuclear power option was precipitated three years ago when it emerged that <a href="https://mg.co.za/article/2015-02-12-exposed-scary-details-of-secret-russian-nuke-deal">the government</a> had signed an agreement with Russia that paved the way for the use of Russian technology in planned new nuclear power stations. The problem was that there’d been a complete <a href="https://www.fin24.com/Economy/environmentalists-sa-did-sign-nuclear-deal-with-russia-20160330">lack of due process</a> – no costing, no public consultation, no proper proclamation and no competitive bidding. It was no surprise that the courts declared the awarding of the nuclear build to Russia <a href="https://theconversation.com/no-nuclear-energy-option-for-south-africa-for-now-at-least-76751">illegal</a>. </p>
<p>On top of this a very strong case has been mounted against South Africa pursuing nuclear power. Reasons include the fact that it <a href="https://www.businesslive.co.za/bd/opinion/2016-03-29-nuclear-too-costly-and-sa-does-not-even-need-it/">can’t afford it</a>, and <a href="http://www.engineeringnews.co.za/article/new-study-points-to-90-renewables-mix-being-least-cost-by-2050-2017-09-15">doesn’t need nuclear</a> in its energy mix. </p>
<p>Despite all of these developments, and the growing controversy and mounting opposition to the deal, Zuma appears determined to get it done before his term as president of the ANC ends in December. In the last of the <a href="http://www.huffingtonpost.co.za/2017/10/17/strongman-david-mahlobo-key-in-cabinet-reshuffle_a_23245770/">reshuffles</a> he appointed one of his closest allies, David Mahlobo, to the energy portfolio. This is generally seen as a last ditch attempt to roll out the nuclear build in the face of now massive opposition. </p>
<p><a href="http://www.702.co.za/articles/277533/mahlobo-seems-to-be-the-russians-favourite-cabinet-minister-adriaan-basson">Reports</a> suggest that this reshuffle was occasioned by Russian displeasure over what they see as a broken promise to award the building contract to Rosatom.</p>
<h2>The energy minister’s next steps</h2>
<p>Mahlobo appears to have devoted his first few weeks in office entirely to furthering the nuclear project. He has been active in <a href="http://ewn.co.za/2017/10/18/listen-will-new-energy-minister-push-nuclear-deal-through">the media</a> declaring the nuclear build as a given – and necessary. </p>
<p>Mahlobo’s next steps are likely to be:</p>
<ul>
<li><p>He is <a href="https://www.news24.com/SouthAfrica/News/mahlobo-rushes-nuclear-deal-20171105-2">reported</a> to be planning to release – in record time – a new energy plan. This, some suspect, will be <a href="https://www.iol.co.za/business-report/fast-track-sas-energy-plan-with-immediate-effect---david-mahlobo-11801614">biased towards nuclear</a>.</p></li>
<li><p>Heightened public lobbying. This could include <a href="https://www.iol.co.za/capetimes/news/zuma-slams-critics-of-his-nuclear-plan-foreign-agents-11872687">verbal attacks on nuclear critics</a> as already initiated by the President.</p></li>
<li><p>The issuing of a request for proposals to build the nuclear plants to potential developers like Rosatom. Most observers expect the evaluation to favour Rosatom regardless of the merits of the other bidders.</p></li>
<li><p>Signing an agreement with Rosatom. This could mirror the USD$30 billion deal Russia signed with <a href="https://www.reuters.com/article/us-egypt-russia-nuclear/russia-to-lend-egypt-25-billion-to-build-nuclear-power-plant-idUSKCN0YA1G5">Egypt</a> which, on the surface, will appear attractive because it would offer favourable terms such as annual interest of only 3% and the commencement of repayments after 13 years. But when scaling the 4.8 GW Egyptian agreement up to the 9.6 GW envisioned for South Africa, the total cost then already exceeds R1 trillion. Annual repayments from year 14 to year 35 then amount to about 5% of South Africa’s annual fiscus. Any cost overruns, which are common in many <a href="https://www.theguardian.com/uk-news/2017/jul/03/hinkley-point-c-is-22bn-over-budget-and-a-year-behind-schedule-edf-admits">other nuclear builds</a>, would vastly increase the debt further.</p></li>
</ul>
<h2>What’s changed</h2>
<p>The global energy landscape has changed dramatically since South Africa first mooted the idea of supplementing its power mix with more nuclear. Major developments and changes include:</p>
<ul>
<li><p>Growing <a href="http://news.world.edu/?p=24718">mistrust in nuclear energy</a> in the wake of the 2011 Fukushima disaster; </p></li>
<li><p>A dramatic fall in the <a href="https://www.theguardian.com/environment/2017/jun/06/spectacular-drop-in-renewable-energy-costs-leads-to-record-global-boost">cost of renewable energy</a> and;</p></li>
<li><p><a href="https://www.dailymaverick.co.za/article/2015-11-15-eskom-from-a-crisis-of-capacity-to-a-crisis-of-rising-prices-declining-demand-and-funding/#.WgMWOo-Czcs">Lower than expected growth</a> in energy demand in South Africa.</p></li>
</ul>
<p>Not even government’s own recent energy plans have promoted nuclear. </p>
<p>A 2013 draft energy plan argued against immediate nuclear growth. (The plan was <a href="http://www.politicsweb.co.za/news-and-analysis/anc-misrepresenting-irp-2013-to-aid-russian-nuclea">never formally adopted</a>). </p>
<p>The last <a href="https://theconversation.com/south-africas-new-energy-plan-has-sparked-strong-emotions-heres-why-69383">draft plan released in 2016</a> went as far as declaring new nuclear unnecessary until 2037.</p>
<h2>Will it happen?</h2>
<p>Nuclear plants are major long term investments, and these projects will not survive lengthy construction and operation periods without broad public support. There is definitely a lack of public support in South Africa.</p>
<p>The Zuma-Mahlobo work plan will face major opposition by other parties, civil society and even critics within the ruling party. Lengthy <a href="https://www.fin24.com/Economy/threat-of-court-action-if-govt-steps-out-of-line-with-nuclear-plans-20171022">court challenges</a> will query the validity of the energy plan process, the public consultation, the regulatory aspects, the site selection and the constitutionality of the entire process. Public <a href="https://mg.co.za/article/2015-10-23-sas-students-take-on-union-buildings">protests</a> highly effective in other spheres would now be directed against the nuclear build. The ruling party would probably abandon the scheme if it proves politically costly.</p>
<p>The danger is, however, that huge funds will have been wasted in coming to this realisation.</p>
<p>The stakes are high. Zuma’s efforts to promote this unpopular nuclear project are <a href="https://mg.co.za/article/2016-11-24-news-analysis-zumas-waning-power-exposed-by-stalled-nuclear-plan">weakening him politically</a>. Even party comrades perceived to be in his inner circle – like newly appointed Finance Minister Malusi Gigaba – recognise that going ahead with the programme at this stage would <a href="https://www.iol.co.za/business-report/economy/nuclear-build-programme-is-unaffordable--gigaba-11721499">cripple the country economically</a>. Repeated <a href="http://ewn.co.za/2017/10/17/zuma-s-cabinet-reshuffle-rocks-political-fraternity">ministerial reshuffles</a> to sideline his critics has further damaged Zuma’s standing in the ruling party and in broader society.</p><img src="https://counter.theconversation.com/content/87018/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hartmut Winkler receives funding from the NRF. He is a member of OUTA and SaveSA, but writes in his personal capacity.</span></em></p>South African President Jacob Zuma’s efforts to promote his unpopular nuclear project are weakening him politically but he still seems keen to pursue it.Hartmut Winkler, Professor of Physics, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/869082017-11-06T15:09:05Z2017-11-06T15:09:05ZSouth Africa shows why collaboration is key to tackling global crime networks<figure><img src="https://images.theconversation.com/files/193415/original/file-20171106-1027-ipv99h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African President Jacob Zuma. Mounting allegations of corruption at home are having international repercussions. </span> <span class="attribution"><span class="source">Reuters/Mark Schiefelbein</span></span></figcaption></figure><p><em>Lord <a href="https://www.theguardian.com/politics/peterhain">Peter Hain</a> tabled a series of allegations in the UK’s House of Lords relating to the possible role of British banks in alleged money laundering and illicit financial transactions centred around South Africa’s <a href="http://www.sahistory.org.za/people/jacob-gedleyihlekisa-zuma">President Jacob Zuma</a> and the <a href="https://mg.co.za/tag/gupta-family">Gupta family</a>. The Conversation Africa’s Charles Leonard asked him to explain why he took the step. Hain, who was a vocal anti-apartheid activist, was born in South Africa but grew up in the UK. He is a visiting adjunct professor at the University of the Witwatersrand’s Business School.</em></p>
<p><strong>In the House of Lords you said the illicit transactions were “part of a flagrant robbery of South African taxpayers”. What do you mean by this?</strong></p>
<p>As I explained in <a href="https://hansard.parliament.uk/Lords/2017-11-01/debates/B122FCEA-07C2-4A5E-A5DC-87EB70642A5E/SanctionsAndAnti-MoneyLaunderingBill(HL)#contribution-A31355C8-48D9-441F-B8C2-99717600C294">my speech</a>, the Guptas, a family from India that relocated to South African have, with the connivance of the South African Presidency, been <a href="http://www.bbc.com/news/world-africa-22513410">getting government contracts</a> and allegedly thereby robbing taxpayers of billions.</p>
<p>On regular visits to South Africa – most recently last month – I have been stunned by the systemic transnational financial network facilitated by the Guptas and the presidential family, the Zumas. If there had been more proactive and genuine cooperation between the multi-jurisdictional law enforcement agencies – and within and between the banks, which have been moving money for the alleged Gupta/Zuma laundering network – the <a href="https://theconversation.com/south-africas-jacob-zuma-is-fast-running-out-of-political-lives-80009">devastation wrought</a> on South Africa could have been significantly reduced. And perhaps, the financial institutions involved would have been better able to mitigate their exposure.</p>
<p><strong>So does it point to South Africans benefiting from the illicit transactions?</strong></p>
<p>I had delivered by hand to Philip Hammond, the Chancellor of the Exchequer, printouts of transactions, and named a British bank concerned. I asked that he again refers these to the UK’s Serious Fraud Office, the National Crime Agency and the Financial Conduct Authority for investigation. </p>
<p>This information allegedly shows illegal transfers of funds from South Africa made by the Gupta family over the last few years from their South African accounts to accounts held in Dubai and Hong Kong. Many of the transactions are legitimate. But many certainly are not.</p>
<p>The illicit transactions were flagged internally in the bank concerned as suspicious. But I am reliably informed that the bank was told by the UK headquarters to ignore it. That is an iniquitous breach of legal banking practice in the UK, which I trust ministers would never countenance. It is also an incitement to money laundering. This has self-evidently occurred in this case, sanctioned by a British bank, as part of the flagrant robbery of South African taxpayers. They have lost millions of pounds and many billions of their local currency, the rand.</p>
<p><strong>Was there a specific event that triggered your request to the Chancellor?</strong></p>
<p>I was asked by senior African National Congress figures and stalwarts to do this. My relationships with them go back more than half a century when we stood shoulder to shoulder fighting apartheid.</p>
<p>As before, my latest information has been supplied by South African whistle-blowers deep inside the system who are disgusted by the corruption at the heart of the state.</p>
<p><strong>What do you hope to achieve?</strong></p>
<p>There are disturbing questions around the complicity – witting or unwitting – of UK global financial institutions in the Gupta/Zuma transnational network. There are also disturbing questions about these institutions’ wilful blindness to the reality that the laundering process often necessitates financial systems with lax regulation and controls. Unless we urgently find ways to leverage our respective capabilities to coordinate and influence action between the law enforcement and banking sectors we cannot win this battle. This coordination needs to happen domestically here in the UK as well as globally.</p>
<p>Unless we use the opportunity to crack down meaningfully, those who want to break the law will always be one step ahead. We must therefore get the international authorities to close down any money laundering networks. </p>
<p><strong>As someone who fought against apartheid, how do you feel about having to take up a campaign against the country’s democratically elected government?</strong></p>
<p>Having been active along with my brave parents in the anti-apartheid struggle it’s painful for me <a href="https://theconversation.com/south-african-business-must-own-up-to-its-part-in-the-corruption-scandals-81905">to witness corruption</a> within a monopoly capital elite around Zuma’s family and their close associates the Gupta brothers.</p>
<p>But we should look closer to home, here in the UK. The complicity of our financial institutions in this, as well as the responsibility of law enforcers and regulators in all the concerned jurisdictions, should make government ministers and parliamentarians hang their heads in shame. Just as they were complicit in sustaining apartheid, so today they are complicit in sustaining the corrupt power elite in South Africa which is now betraying the legacy of Nelson Mandela and the anti-apartheid struggle.</p>
<p>Winning the war against financial crime will require coordination, influence, action and accountability between multi-jurisdictional law enforcement agencies. The success of criminal networks also relies on the action or inaction – and cooperation or non-cooperation – of the relevant law enforcement authorities.</p><img src="https://counter.theconversation.com/content/86908/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The son of South African-born anti-apartheid activist parents who, after being jailed, banned, were then forced into exile in 1966 when he was aged 16, Peter Hain led British campaigns to disrupt white-only South African sports tours from 1969. In December 2015 he was presented with South Africa's National Award, the OR Tambo in Silver, for his 'most excellent contribution to the liberation struggle'. He is Vice-President of Britain's Action for Southern Africa and Chair of the Donald Woods Foundation, a charity based at Hobeni in the Transkei and Visiting Professor at Wits Business School. A Labour member of the House of Lords since 2015, he was an MP for 24 years and government minister for 12 years </span></em></p>There are disturbing questions around the complicity - witting or unwitting - of UK global financial institutions in the transnational network set up by President Jacob Zuma and the Gupta family.Peter Hain, Visiting Adjunct Professor at Wits Business School, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/844782017-09-21T15:48:16Z2017-09-21T15:48:16ZLessons from KPMG: be on guard, South Africans are on your case<figure><img src="https://images.theconversation.com/files/187066/original/file-20170921-21005-r60q7w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African protesters hold placards as they march against corruption.</span> <span class="attribution"><span class="source">Reuters/Siphiwe Sibeko</span></span></figcaption></figure><p>Moses came down from the mount with tablets inscribed with 10 commandments. Most of us know (most of) them, and most of us fail to live by (most of) them. But if Moses had turned them over and looked in the fine print on the back, he’d have found the 11th Commandment: </p>
<blockquote>
<p>Don’t get caught.</p>
</blockquote>
<p>That in essence summarises the rise and fall of the South African arm of the international accounting firm <a href="https://home.kpmg.com/za/en/home.html">KPMG</a> which has been <a href="https://www.timeslive.co.za/news/south-africa/2017-09-20-darkness-descends-on-kpmg/">caught</a> with its hands in the slush fund jar. It stands accused of <a href="https://www.dailymaverick.co.za/article/2017-09-20-analysis-unchartered-territory-kpmg-zuptas-and-the-tainting-of-chartered-accountancy-in-sa/">taking money from companies</a> owned by the politically connected Gupta family.</p>
<p>Even more damaging is the charge that it submitted formal reports “confirming” that a “rogue” unit was operating inside the South African Revenue Service (SARS) – <a href="https://www.timeslive.co.za/politics/2017-09-15-kpmg-cans-sars-rogue-unit-report-apologises-to-gordhan/">accusations</a> that were used as the smoking gun to remove ministers and senior public officials who were seeking to hold the line against state capture.</p>
<p>KPMG has miraculously grown a conscience. Suddenly – having broken the 11th commandment – it was reborn as a hand-wringing, apologetic company living up to high ethical standards. It was now willing to <a href="https://www.timeslive.co.za/sunday-times/business/2017-09-15-nine-kpmg-senior-executives-quit-over-gupta-scandal/">fire</a> its CEO and some senior managers, to reject its own findings and to <a href="https://mg.co.za/article/2017-09-15-kpmg-to-donate-r40m-it-earned-in-fees-from-gupta-related-entities-to-ngos">“donate”</a> Gupta-company earnings to education and anti-corruption NGOs. The latter gesture was a revolting display of supine reprehensibility – we got caught in corrupt deals so we’ll hand the profits over to anti-corruption NGOs. Really? Go to jail would be a better outcome.</p>
<p>KPMG isn’t alone. Throughout South Africa’s <a href="https://www.opensecrets.org.za/corruption-in-south-africa-from-apartheid-to-zuma/">history</a>, and across the globe, the litany of private sector corruption is breathtaking. </p>
<h2>Private sector corruption</h2>
<p>South Africans can recall an unending litany of private sector corruption. In the recent past, there was the case of Tiger Brands making <a href="https://www.moneyweb.co.za/archive/tiger-brands-admits-to-bread-pricefixing-pays-fine/">bread more expensive</a> so the poor would pay more to eat. Tiger Brands paid a fine and carried on trading. And a clutch of major construction firms were found <a href="http://column.global-labour-university.org/2013/10/a-lesson-from-south-africa-are.html">looting monies</a> for the construction of stadiums for the 2010 Fifa World Cup in South Africa. They also paid fines and carried on building. The list continues. </p>
<p>The private sector, contrary to those who believe that ‘market forces’ will regulate the ethics of capital, is not taking a strong line against corruption. Those on the front line include, more recently, the portfolio committees in parliament, and previously, the Public Protector and a dwindling cluth of Ministers, MECs and the like. </p>
<p>NGOs such as <a href="http://www.corruptionwatch.org.za/">Corruption Watch</a>, the <a href="http://www.seri-sa.org/">Socio-Economic Rights Institute of South Africa</a> and the <a href="http://www.casac.org.za/">Council for the Advancement of the South African Constitution</a>, have by a long distance, been the most vocal campaigners in the area, and academics have worked with them to <a href="http://pari.org.za/betrayal-promise-report/">uncover</a> the scale and identify the perpetrators of corruption. The media has also played a <a href="http://amabhungane.co.za/#">massive part</a> in exposing corruption.</p>
<p>So let’s not fool ourselves that the private sector has set a benchmark for anything more than export-class venality.</p>
<p>South Africa’s <a href="https://theconversation.com/africa/search?utf8=%E2%9C%93&q=state+capture">state is corrupt</a> – “captured” makes it sound as if this occurred against its will. But - it has found a multitude of willing partners in the private sector. The match between corrupt state and corrupt private sector is perhaps South Africa’s most functional display of <a href="http://ewn.co.za/2017/06/13/mps-debate-willing-buyer-willing-seller-policy-in-land-reform">“willing buyer, willing seller”</a>.</p>
<p>KPMG executives have not set any benchmark for probity, as claimed by some – they simply acted when they got caught. Their focus was on maximising profits, even if it meant signing off on the use of public funds for a <a href="http://www.biznews.com/guptaleaks/2017/06/30/gupta-wedding-taxpayers-kpmg/">private Gupta wedding</a> (among other sins of commission), and now buying their way out of the mess with a few heads rolling and dirty money being donated to NGOs. If this is the standard for the private sector, South Africans are in more serious trouble than initially thought. </p>
<p>The KPMG <a href="https://www.dailymaverick.co.za/article/2017-09-15-kpmg-weak-apology-suggests-company-saw-no-evil-heard-no-evil-therefore-did-no-evil/">“apology”</a> can’t come close to compensating for the damage done. Its report “confirming” that a rogue unit had operated in the South African Revenue Services fuelled developments towards state capture and triggered events that have had a disastrous impact on the country. These included the axing of ministers, deputy Ministers, and the subsequent haemorrhage of senior public servants from the state. </p>
<p>Everyone in South Africa is paying for the sins of KPMG.</p>
<h2>Holding power to account</h2>
<p>Governance is about the distribution of power in society, and the ability of citizens to hold power to account. This requires an engaged citizenry – whether in NGOs, ratepayer associations, street or block committees or faith-based organisations – who are sufficiently organised to call officials to account. </p>
<p>What is fascinating about South Africa is how engaged its citizen are. They kicked out the ruling party from running cities after just two decades of democracy and they’ve given the middle finger to <a href="http://www.enca.com/south-africa/e-toll-drive-slow-%E2%80%98-resistance-growing%E2%80%99">e-tolls</a>. They don’t behave the way they are told to. And they’ve reached a tipping point. When South Africans of all shapes, colours, sizes, creeds share simply being <em>gatvol</em> (fed-up), there’s trouble.</p>
<p>Ask the British public relations firm <a href="https://www.businesslive.co.za/bd/companies/2017-09-12-bell-pottingers-british-business-collapses-after-south-african-scandal/">Bell Pottinger</a> what it feels like. The company faces foreclosure following a concerted campaign - domestically and abroad - to shame it for stirring racial hatred. </p>
<p>Ask the Guptas <a href="https://www.dailymaverick.co.za/article/2017-09-21-bank-of-baroda-what-next-for-the-soon-to-be-unbanked-guptas?utm_medium=email&utm_campaign=Afternoon%20Thing%2021%20September%202017%20Chamber%20of%20Commerce&utm_content=Afternoon%20Thing%2021%20September%202017%20Chamber%20of%20Commerce+CID_e5f871ce65510d308e294e0c3db99f65&utm_source=TouchBasePro&utm_term=Bank%20of%20Baroda%20bails%20on%20Guptas">how it feels</a> now that all of South Africa’s banks have said they aren’t willing to touch their money. </p>
<p>South African residents and citizens have become acutely aware that they’ve been screwed. By many in the state, to be sure. But by as many or more in the private sector, for decades. And they’re sick of it. </p>
<p>The world is watching – South Africans brought down Bell Pottinger. They’re now going after the likes of McKinsey, KPMG and SAP, all of these companies tangled up by <a href="http://www.biznews.com/thought-leaders/2017/09/18/john-mulcahy-sa-kpmg-mckinsey-sap/">allegations</a> of corruption. </p>
<p>The only way South Africans will ever get governance and accountability is by being organised, vocal, obstreperous, and demanding. So keep it this way – private and public sector are both on terms. And South Africans will hold them accountable, or if necessary, break them.</p><img src="https://counter.theconversation.com/content/84478/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Everatt does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The South African arm of the international accounting firm KPMG has learnt the hard lesson: Don’t break the 11th commandment - don’t get caught. That’s because South Africa’s citizens are fed up with corruption.David Everatt, Head of Wits School of Governance, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/842792017-09-19T17:57:29Z2017-09-19T17:57:29ZWhat KPMG’s Gupta imbroglio says about corruption in South Africa<figure><img src="https://images.theconversation.com/files/186581/original/file-20170919-25319-1uqvawo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>As far as corporate accountability goes, the recent announcement that the CEO and seven senior executives at auditing and consultancy firm KMPG in South Africa <a href="http://www.fin24.com/Companies/Financial-Services/kpmg-sa-ceo-7-others-quit-on-guptaleaks-fallout-20170915">have resigned</a> is a welcome development.</p>
<p>By resigning, the KPMG executives reinforced the principle of executive responsibility. This is a matter not taken seriously in South African culture, particularly when it comes to the public sector. The usual pattern when misdemeanours are uncovered is for government ministers and other senior executives to blame their staff – or someone else – when things go wrong. </p>
<p>At this level the action of the KPMG executives is to be respected. The hope must be that this behaviour becomes an example for others.</p>
<p>KPMG executives have set a new South African benchmark: executives assuming responsibility for wrongdoing in their organisations. South Africans should thank the firm for setting a new standard with this decisive action. Its executives have taken oversight responsibility for the action of others.</p>
<p>The role that companies such as KPMG plays is particularly crucial because auditor firms and consultancies are meant to hold companies and state entities to account by ensuring transparency and honesty. The fact that a firm of KPMG’s standing should be embroiled in a matter as murky as compiling false reports to serve the political ends of particular politicians highlights the degree of corruption that has taken hold in South Africa.</p>
<p>In light of this, are KPMG’s actions enough? I believe not. To pull South Africa back from the brink, the auditing firm should opt for full disclosure of all its involvement with the Gupta family as well as the companies they own. This should, inter alia, include all working papers, correspondence and audit findings. This would allow public scrutiny of the work it claims to have done under the banner of professionalism and provide the opportunity for a deeper understanding of the Gupta network. Nothing short of this will clear KPMG’s name. </p>
<h2>From state capture to country capture</h2>
<p>There is no doubt that KPMG’s report on a rogue unit completed for the South African Revenue Service has <a href="https://www.iol.co.za/news/politics/kpmg-report-on-rogue-unit-has-tarnished-sars-future-sa-11241403">damaged South Africa’s image</a>. But it has done more than that and raises the question whether South Africa suffers only state capture, or whether the rot is growing into economic capture of the whole country, what I term “country capture”.</p>
<p>The basis for asking this question is that the South African economy – and as a result its citizens – are paying a heavy cost for the mismanagement of the country’s resources. This has been through a combination of bad and neglectful management and out-and-out corruption. All this for the account of South African taxpayers.</p>
<p>South Africa’s fiscal position is precarious, with a revenue shortfall of more than <a href="https://www.businesslive.co.za/bd/economy/2017-08-21-downgrade-alarm-as-revenue-shortfall-could-hit-r50bn/">R50 billion</a> expected in the fiscal year to 31 March 2018. This growing shortfall is driven by subdued economic performance and will continue until the domestic economic growth recovers.</p>
<p>The shortfall is directly linked to low economic growth and recessionary conditions. These in turn have been caused by state capture. The private sector is reluctant to invest in the midst of corruption. This means that there is no new economic activity being started, a particularly bad situation given that industries such as mining are shrinking. This week Implats <a href="http://www.fin24.com/Companies/Mining/">announced</a> it was in negotiations with unions to lay off 2 500 workers. <a href="https://theconversation.com/the-lesser-known-and-scarier-facts-about-unemployment-in-south-africa-83055">Unemployment</a> is already at 27.7%.</p>
<p>Individual South African taxpayers are therefore being forced to bail out the government as it faces fiscal difficulties, placing the country on the slippery slope of country capture. This is reflected in the fact that government’s final consumption <a href="https://data.worldbank.org/indicator/NE.CON.GOVT.ZS?locations=ZA">expenditure</a> as percentage of GDP currently exceeds 20%. </p>
<h2>What next?</h2>
<p>Having ended up in this precarious position, it’s necessary to consider the way forward for KPMG and for South Africa. </p>
<p>KPMG clearly wants to save itself as a company and South Africa wants to rid itself of state/country capture. In redeeming itself, the firm can render a great service to South Africa in the quest to break the stranglehold. KPMG should disclose all dealings, findings, work papers, interactions and the like with the Gupta family businesses. This would achieve two objectives.</p>
<p>Firstly, it would show who is implicated and who is not. KPMG stated that there was no wrongdoing on its side in <a href="https://www.timeslive.co.za/news/south-africa/2017-09-14-kpmg-denies-any-dodgy-dealings-in-controversial-gupta-coal-deal/">audits it did on companies owned by the Guptas</a>. But this can only be settled through full disclosure.</p>
<p>Secondly, such a disclosure would help to reveal the full scope of state/country capture in South Africa. </p>
<p>Naturally KPMG’s dealings with the Gupta companies and Gupta family are subject to client confidentiality agreements. KPMG should therefore inform the Gupta family of its intention to publish within seven days. If the Guptas object in writing KPMG should approach the courts with a request to issue a clarification order to authorise disclosure.</p>
<p>This is the only way in which KPMG can salvage what’s left of its reputation in South Africa. KPMG should stand for: “Keep Pushing Mighty Guptas”.</p>
<p>At the same time South Africans would be able to use the disclosures as the basis for beginning to understand the full extent of state/country capture and the remedial steps necessary to turn this around.</p>
<p>Here is a small opportunity to make progress towards some light at the end of a very long and dark tunnel. The opportunity rests in the hands of KPMG. South Africa waits.</p><img src="https://counter.theconversation.com/content/84279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jannie Rossouw is a C3 NRF-rated researcher and receives grant funding from the NRF. </span></em></p>KPMG South Africa executives have set a new benchmark for the country assuming responsibility for wrongdoing in their organisation.Jannie Rossouw, Head of School of Economic & Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/817072017-08-20T09:26:42Z2017-08-20T09:26:42ZSouth African social media is giving consumers power to discipline corporations<figure><img src="https://images.theconversation.com/files/181168/original/file-20170807-16724-1ujy659.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>More than 20 years after democracy it seems incredible that a leading South African insurance company, Outsurance would put out a <a href="http://www.iol.co.za/news/outsurance-roasted-over-offensive-fathers-day-video-9844428">Father’s Day advertisement</a> which featured mostly white dads. If their marketing team didn’t see the problem, citizens on social media certainly did and helped the company to see the <a href="http://www.iol.co.za/news/south-africa/outsurance-blames-junior-employee-for-racist-fathersday-ad-9858825">error</a> of its ways – and fast.</p>
<p>Within hours of screening the advertisement, a twitter storm had broken out and the commercial was retracted. Outsurance issued an <a href="http://ewn.co.za/2017/06/18/outsurance-apologises-for-father-s-day-video">apology</a> for any offence caused. It was a quick and decisive response – which is generally the right way to respond in a crisis – spoiled only by the fact that the company subsequently laid the blame at the door of a “<a href="http://www.iol.co.za/news/south-africa/outsurance-blames-junior-employee-for-racist-fathersday-ad-9858825">junior lady</a>” on the social media team. </p>
<p>The Outsurance experience underlines the growing importance of social media in <a href="http://www.blurbpoint.com/blog/the-growing-importance-of-social-media-for-business/">branding</a>. Branding scholars Chiranjeev Kohli and Anuj Kapoor <a href="https://www.researchgate.net/publication/266377736_Will_social_media_kill_branding">point out</a> that:</p>
<blockquote>
<p>This rapidly evolving landscape has left managers at a loss, and what they are experiencing is likely the beginning of a tectonic shift in the way brands are managed.</p>
</blockquote>
<p>Outsurance isn’t the only firm to have been caught in a social media storm. Uber’s CEO Travis Kalanick was forced to <a href="https://theconversation.com/fixing-a-toxic-culture-like-ubers-requires-more-than-just-a-new-ceo-79102">step down</a> after a prolonged online assault leading to a “shareholder revolt”. London based public relations firm, Bell Pottinger, had to lock its twitter handle recently because it had been <a href="http://ewn.co.za/2017/07/07/in-memes-twitter-burns-bell-pottinger-over-apology">twitter bombed</a> by South Africans outraged at the firm’s service to the controversial Gupta family.</p>
<p>Another South African business, the family restaurant franchise Spur, suffered considerable <a href="https://mg.co.za/article/2017-03-22-woman-in-spur-incident-explains-what-really-happened">brand damage</a> after a video showing an altercation between a (white) man and a (black) woman at a Johannesburg outlet went viral, causing a racially charged firestorm. Spur was castigated from different directions for mishandling the matter.</p>
<p>These cases show how social media gives consumers the ability to <a href="https://www.ama.org/publications/JournalOfMarketing/Pages/when-hostile-consumers-wreak-havoc-brand.aspx">influence business behaviour</a>. But, we argue, this power should be channelled in a constructive way to affect lasting change.</p>
<h2>A new kind of activism</h2>
<p>There are many <a href="https://www.researchgate.net/publication/222820715_Anti-branding_on_the_internet">examples</a> of deliberate online anti-brand behaviours targeting well-known brands such as American Express, Coca Cola, and Wal-Mart. Widely respected New York Times technology columnist Farhad Manjoo recently <a href="https://www.nytimes.com/2017/06/21/technology/how-battling-brands-online-has-gained-urgency-and-impact.html">noted</a>, that online campaigns against brands have become a powerful force in business by handing power to consumers. It has also given birth to a new kind of political activism:</p>
<blockquote>
<p>Posting a hashtag and threatening to back it up by withholding dollars can bring about a much quicker, more visible change in the world than, say, calling your representative.</p>
</blockquote>
<p>This is of course not good news to most corporations, businesses and politicians. Those operating in the public domain know the importance of protecting their reputation and fear the power of social media. Many organisations pay research companies for daily feedback on how their brand is perceived. In addition to newspaper clippings and magazine articles, they also have to sift through thousands of tweets and emails.</p>
<p>Not all negative comments deserve to be dealt with publicly. Some outrage may be the result of a vindictive individual or interest groups with less honourable intentions. Responding to comments such as these may only fan the fire, doing more harm than good.</p>
<p>But the power of social media is such that even a falsehood can cause immense damage, ruining businesses and individuals. Social media can awaken the <a href="http://journals.sagepub.com/doi/abs/10.1177/1470593114540677">mob mentality</a> in people. All that’s required is for people to become angry – and have access to a medium where they can be relatively anonymous and vent their fury.</p>
<p>Social media brings out the best and the worst in people. On the one hand, it gives the power to do untold damage. On the other it can be used to do tremendous good.</p>
<h2>Disciplining business</h2>
<p>Take the case of American airline United Airlines. The video of how security dragged <a href="https://www.theguardian.com/business/2017/apr/27/united-doctor-dragged-flight-settlement-david-dao">Dr David Dao</a> off a flight in April 2017 after he refused to leave his seat when he was selected to be bumped off due to overbooking went viral on the Internet.</p>
<p>Millions of people saw Dr Dao being dragged, bleeding and injured, off the plane. There was an enormous backlash from consumers slamming the airline – and other airlines – for the practice of overbooking.</p>
<p>The consequences of all the anger led to the airline revising its policy and operations and spilled over into wider investigations into general procedures at airlines. This resulted in new legislation being drafted in the US, which could prevent airlines from forcibly removing passengers seated on an overbooked flight and providing compensation for those not allowed to board. </p>
<h2>A double-edged sword</h2>
<p>Social media is here to stay – if anything its use is set to become more sophisticated. According to <a href="https://www.forbes.com/forbes/welcome/?toURL=https://www.forbes.com/sites/forbesnonprofitcouncil/2017/06/19/tapping-into-the-power-of-social-media/&refURL=https://www.google.com/&referrer=https://www.google.com/'">Pew Internet Research</a>, YouTube reaches more 18- to 34-year-olds than any cable network in the US, 76% of Facebook users visited the site daily last year with over 1.6 billion daily visitors, and 51% of Instagram users engage with the platform daily. These trends are spreading across the globe.</p>
<p>Users may also become more discerning about which sites they visit and how often. For companies, this means a need to remain vigilant and being aware of how to react appropriately. They undoubtedly stand to profit as well – through clever marketing campaigns that make use of social media platforms.</p>
<p>But the biggest winners could be consumers – should they learn to properly use the power of social media to organise into interest groups, define objectives and agree on courses of action – thereby exerting pressure on companies to see the kind of change in corporations that they would like to see in society as well.</p><img src="https://counter.theconversation.com/content/81707/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Social media is here to stay and gives a platform to companies as well as consumers who hold the power to bring about change.Mlenga Jere, Associate Professor of Marketing, University of Cape TownRaymond van Niekerk, Adjunct Professor, with expertise in Branding, Marketing, Business Strategy, Corporate Citizenship and Social Responsibility. Graduate School of Business, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/773382017-05-11T16:23:48Z2017-05-11T16:23:48ZWhite monopoly capital: good politics, bad sociology, worse economics<figure><img src="https://images.theconversation.com/files/168586/original/file-20170509-11018-gg0xlj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">White South Africans own most companies and shares on the Johannesburg Stock Exchange.
</span> <span class="attribution"><span class="source">Reuters/Philimon Bulawayo.</span></span></figcaption></figure><p>Many would like to consign the polarising debate about “white monopoly capitalism” <a href="https://mg.co.za/article/2017-01-27-00-when-a-catchphrase-trips-you-up/">(WMC)</a> in South Africa to the <a href="http://www.news24.com/MyNews24/why-white-monopoly-capital-is-irrelevant-20170407">margins</a>. They argue that its proponents are nothing more than Marxist ideologues or <a href="https://theconversation.com/white-monopoly-capital-an-excuse-to-avoid-south-africas-real-problems-75143">mischievous political manipulators</a></p>
<p>But, even if we query the integrity of the term WMC, its introduction into South Africa’s contemporary discourse is indisputably good for the country’s politics.</p>
<p>Above all, it’s an urgent reminder that the <a href="https://theconversation.com/south-africa-needs-to-fix-its-dangerously-wide-wealth-gap-66355">inequalities</a> of wealth, income and <a href="https://theconversation.com/why-white-men-still-dominate-the-top-echelons-of-south-africas-private-sector-44873">opportunity</a> in this country are not only extreme but still highly racialised. It forces people to ask why, even under a black government, a <a href="http://www.statssa.gov.za/publications/P0302/P03022014.pdf">white minority</a> continues to dominate the most productive parts of the economy.</p>
<p>The extremes of racialised inequality in the country are not just an affront to social justice but are also politically explosive. Granted, the implementation of <a href="http://www.labour.gov.za/DOL/legislation/acts/employment-equity/employment-equity-act">employment equity</a> and Black Economic Empowerment <a href="http://www.dti.gov.za/economic_empowerment/bee.jsp">(BEE)</a> has somewhat <a href="https://theconversation.com/white-monopoly-capital-an-excuse-to-avoid-south-africas-real-problems-75143">ameliorated</a> racialised patterns of wealth and ownership. But, no one should be surprised when black people at the bottom of the heap get angry. Neither should people be surprised that there are politicians who, for reasons good and ill, are willing to exploit that anger and mobilise around it.</p>
<p>For the last twenty years, mainstream politics has talked a lot about addressing the extremity of inequality, but has done little about it. The governing African National Congress (ANC) has indulged in much <a href="http://www.anc.org.za/content/economic-transformation-commission-report">egalitarian rhetoric</a> while the opposition Democratic Alliance (DA) has targeted <a href="https://www.da.org.za/why-the-da/policies/job-business/economic-policy/">“equality of opportunity”</a>. </p>
<p>In practice, both have embraced the mantra that a rising tide in the economy will lift all boats. But, today the tide has long been out. The boats are stuck in the mud. And it’s taken the rise of the radical <a href="http://www.ujuh.co.za/flopping-bbbee-might-propel-radical-alternatives/">Economic Freedom Fighters (EFF)</a> to shake the major parties out of their complacency by espousing a revolutionary assault upon WMC.</p>
<p>That’s a major plus for the country’s politics. A serious conversation about the continued racialisation of wealth, inequality and poverty is needed. Yet the problem for the EFF, and those who simplistically target WMC, is the dismal nature of their sociology.</p>
<h2>Monopoly capital under apartheid</h2>
<p>White monopoly capital was at its most cohesive and concentrated during the late phases of apartheid. In 1981, <a href="https://zabalaza.net/.../who-rules-south-africa-an-anarchistsyndicalist-analysis-of-the-a...">over 70%</a> of the total assets of the top 138 companies were controlled by state corporations and eight privately owned conglomerates. These spanned mining, manufacturing, construction, transport, agriculture and finance. </p>
<p>Further concentration followed the mounting political crisis of the 1980s. Foreign companies disinvested and sold their assets locally. Unable to invest abroad during late apartheid, the conglomerates invested their excess capital by buying local assets that were often distant from their core business.</p>
<p>By 1990, just three conglomerates – <a href="http://www.angloamerican.com/">Anglo-American</a>, <a href="https://www.sanlam.co.za/Pages/default.aspx">Sanlam</a> and <a href="https://www.oldmutual.co.za/">Old Mutual</a> – controlled a whopping <a href="https://www.businesslive.co.za/bd/.../2013-11-24-unsexy-mutuals-seek-higher-profile/">75%</a> of the total capitalisation of the Johannesburg Stock Exchange (JSE). Given the overwhelmingly domestic and white nature of the ownership of these companies, as well as the astoundingly high level of concentration of capital in a handful of conglomerates, we could fairly – even usefully – refer to “WMC”. But things have changed considerably since then.</p>
<h2>Changing corporate landscape</h2>
<p>The democratic era that started with the ascension to power of the ANC in 1994 has seen major changes in a corporate structure which had historically revolved around a <a href="http://www.tandfonline.com/doi/abs/10.1080/03768359708439989">minerals-energy-complex</a> dominated by the major conglomerates. </p>
<p>The opening of the economy to the global market post-apartheid, led to major processes of <a href="http://www.tandfonline.com/doi/abs/10.1080/10108270.1996.11435064?journalCode=rsar19">“unbundling”</a>, as conglomerates shed their “non-core” assets in search of “shareholder value”. By 2016, <a href="http://salearnership.co.za/anglo-american-learnership/">Anglo-American’s share</a> of market capitalisation on the JSE had shrunk to as low as 15%.</p>
<p>In addition, foreign money poured in, some to purchase unbundled assets, some to invest in an expanding financial sector. Yet some simply sought to make short term returns from high interest rates. Correspondingly, the role of the banks and private investment institutions increased. By 2010, financial institutions (14%) – along with mining houses (37%) <a href="http://wiser.wits.ac.za/system/files/seminar/Southall2012_0.pdf">accounted</a> for over half of market capitalisation of the JSE by 2010. The economy was now dominated by a minerals-energy-finance-complex.</p>
<p>Alongside the growing financialisation of the economy, there has been a shift in racial patterns of ownership. At the end of apartheid, companies listed on the JSE were almost wholly owned by white South African investors. But, by 2016, (if we accept the calculations done by Alternative Prosperity) white South African ownership was down to just <a href="https://www.jse.co.za/articles/black-south-africans-top-100-companies-listed-on-the-johannesburg-stock-exchange">22%</a>. </p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/168581/original/file-20170509-11012-15xm0ee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/168581/original/file-20170509-11012-15xm0ee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=779&fit=crop&dpr=1 600w, https://images.theconversation.com/files/168581/original/file-20170509-11012-15xm0ee.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=779&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/168581/original/file-20170509-11012-15xm0ee.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=779&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/168581/original/file-20170509-11012-15xm0ee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=979&fit=crop&dpr=1 754w, https://images.theconversation.com/files/168581/original/file-20170509-11012-15xm0ee.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=979&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/168581/original/file-20170509-11012-15xm0ee.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=979&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Julius Malema leads a protest by the Economic Freedom Fighters to the Johannesburg Stock Exchange.</span>
<span class="attribution"><span class="source">Reuters/Siphiwe Sibeko</span></span>
</figcaption>
</figure>
<p>Meanwhile, foreign ownership had leapt to 39%, black direct ownership (mainly through BEE schemes) to 10% and black indirect ownership (largely through pension funds) to 13%, with another 16% uncategorised.</p>
<p>Such statistics are always a matter of controversy. President Jacob Zuma recently insisted that black ownership of the JSE was as low as <a href="http://www.sanews.gov.za/south-africa/president-zuma-stands-jse-black-ownership-remarks">3%</a>. Yet the trend towards both greater foreign ownership and increased black ownership is indisputable. Three major issues follow.</p>
<h2>Evolving ownership patterns</h2>
<p>Large scale capital in South Africa is less monopolised and more diversified in its ownership than it was under apartheid (even if major corporates continue to dominate). It follows that the country needs to grasp how the nature of capitalism is changing. For a start, the growth in black pension funds reflects the strong upward <a href="http://ccs.ukzn.ac.za/files/Black%20Middle%20Class%20in%20SA3.pdf">movement of black people</a> into the higher ranks of the public service since 1994.</p>
<p>Even if we continue to refer to “monopoly capitalism” in these circumstances, it makes far less sense to refer to it, uncritically, as “white”. Yes, it’s probable that the major stake of foreign investment is ultimately owned (largely indirectly via institutional investments) by foreigners who are white. But, does this suggest that we would prefer that they were yellow or brown? Surely that takes us on to very shaky territory? Should we categorise the <a href="http://www.ujuh.co.za/guptas-exit-from-south-africa-signals-change-of-fortunes-for-zuma-but-this-war-is-much-deeper/">Gupta</a> empire – the politically-connected family at the centre of state captures – as “brown monopoly capitalism?”</p>
<p>Critics such as <a href="http://www.ujuh.co.za/the-chris-malikane-doctrine-white-monopoly-capital-myth-or-reality/">Prof Chris Malikane</a>, the economic adviser to Finance Minister Malusi Gigaba, have objected that the growth of black investment on the JSE is not significant. That’s because, they argue, black pension funds are largely controlled by white asset managers. And black direct investments via BEE schemes are largely funded through debt owed to white capital. These are certainly very real issues. But, is the main issue here the racial patterns of ownership and control – or the growing power of financial institutions and their lack of accountability?</p>
<p>All this means that it’s simply too crude, too simplistic and too out of date to depict the economy in broad brush terms as under the domination of white monopoly capital. The reality is more complex. It follows that suggestions that the decolonisation of the economy demands the nationalisation of WMC is profoundly bad economics.</p>
<p>The troubled experiences of South Africa’s state-owned enterprises such as <a href="https://theconversation.com/south-africa-must-free-itself-from-the-burden-of-owning-a-national-airline-64004">South African Airways</a>, <a href="https://theconversation.com/why-south-africas-power-utility-isnt-in-great-financial-shape-68441">Eskom</a> and <a href="http://www.fin24.com/Economy/petrosa-to-axe-staff-to-save-its-skin-20170505">PetroSA</a> do nothing to inspire confidence. What the economy might gain in terms of direct state ownership would be confounded by flight of capital and know-how. Class rule by capitalists would be replaced by class rule by state managers who would be no more accountable to ordinary citizens than their predecessors.</p>
<h2>Innovative solutions needed</h2>
<p>South Africa needs to devise far more inventive solutions than nationalisation to tackle the brutally unequal nature of its economy. Citizens need to pose profound questions about how to make international capital more accountable. They must ask questions about how to make the country’s corporate elite more accountable and how state capital can work productively with private capital while remaining responsive to local communities. And, yes, about how present patterns of corporate ownership can be not only de-racialised but democratised.</p>
<p>Yes, it’s a nice idea to think of overthrowing “white monopoly capital”, but we need to think very carefully of what we might replace it with!</p><img src="https://counter.theconversation.com/content/77338/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roger Southall receives funding from the National Research Foundation</span></em></p>The debate about white monopoly capital in post-apartheid South Africa is good for the country’s politics but it tends to come with bad sociology.Roger Southall, Professor of Sociology, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/771942017-05-07T12:41:01Z2017-05-07T12:41:01ZZuma’s attack on capital is digging South Africa into a deeper hole<figure><img src="https://images.theconversation.com/files/168106/original/file-20170505-21018-1exv774.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">REUTERS/James Oatway</span></span></figcaption></figure><p>South Africa’s governing party, the African National Congress, is adopting a dangerous political approach used in failing states like Algeria, Zimbabwe and Venezuela. Its aim is to deflect attention from its <a href="https://www.project-syndicate.org/commentary/south-africa-zuma-knowhow-shortage-by-ricardo-hausmann-2017-03">policy failures</a> and from numerous scandals surrounding President Jacob Zuma, his <a href="http://city-press.news24.com/News/the-rise-and-fall-of-duduzane-zuma-20160409-2">family</a> and the politically connected <a href="http://www.bbc.com/news/world-africa-22513410">Gupta</a> network.</p>
<p>The approach was allegedly crafted by <a href="http://www.timeslive.co.za/sundaytimes/stnews/2017/03/19/White-monopoly-capital-chosen-distraction-in-PR-strategy-to-clear-Guptas1">Bell Pottinger</a>, a London based public relations firm. It focuses on two concepts. </p>
<p>The first is the term “white monopoly capital”. The phrase <a href="http://www.timeslive.co.za/local/2017/03/11/What-exactly-is-%E2%80%98white-monopoly-capital%E2%80%99-Mzwanele-Manyi-offers-a-definition">broadly refers</a> to control of the economy by apartheid beneficiary capitalist oligopolies at the expense of South Africa’s black majority. </p>
<p>Accompanying it is the term “radical economic transformation”. This is defined differently by various senior government officials. But is <a href="http://www.702.co.za/articles/251821/so-what-exactly-is-radical-economic-transformation">understood to mean</a> rapidly changing the economy’s ownership, control, and production patterns in favour of the previously disadvantaged.</p>
<p>However, beyond damaging South Africa’s social fabric, framing the country’s current economic impasse in such a dichotomous politically charged way has negative consequences. </p>
<p>Firstly it distracts attention from the private sector’s real sins. This makes it more difficult to objectively hold business to account for its own nefarious activities. These include tender fraud, collusion, price fixing, fronting, illicit capital flows and <a href="https://panamapapers.icij.org/">tax evasion</a>. Framing the discourse as “white monopoly capital” muddies the waters. It becomes unclear whether exposing private sector crimes is merely a politically motivated assault, or an attempt to uphold the law. </p>
<p>Secondly the ongoing rhetoric will further damage the chances of economic recovery. This is because it will deter long-term domestic and international investment. It will also encourage companies to move their <a href="http://www.businesslive.co.za/bd/economy/2017-04-28-more-investment-in-sa-likely-to-be-put-on-ice/">capital elsewhere</a> and use complex tax avoidance mechanisms.</p>
<p>Thirdly trumpeting vacuous slogans is also unlikely to raise the prospects of credible policies that will deal with the country’s structural challenges.</p>
<h2>Populist slogans don’t fix structural challenges</h2>
<p>Over the last two decades South Africa has failed to modernise its labour and education systems. This has meant limited success in rolling back <a href="http://www.politicsweb.co.za/documents/south-africas-troubles-a-diagnosis">poverty, inequality and unemployment</a>. As a result the country has one of the highest unemployment rates and <a href="http://www.worldbank.org/en/country/southafrica/overview">gini coefficients</a> in the world.</p>
<p>The structural problems in the education system have resulted in <a href="http://www.universityworldnews.com/article.php?story=20100114190733824">poorly prepared</a> senior school and <a href="http://www.capetalk.co.za/articles/240257/black-students-are-not-adequately-prepared-for-university-life-edu-professor">university graduates</a>. This is despite the number of children attending school increasing exponentially since compulsory education was introduced in 1994. </p>
<p>Consequently, the country is poorly positioned to take advantage of the <a href="https://www.weforum.org/agenda/2016/01/the-fourth-industrial-revolution-what-it-means-and-how-to-respond/">“fourth industrial revolution”</a>. This is broadly understood as a range of new technologies that fuse the physical, digital and biological worlds. </p>
<p>Making things worse is the failure to adopt industrial policies to diversify the country’s export mix away from commodities to more <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0351.2008.00337.x/full">sophisticated</a> beneficiation and manufacturing activities. Commodities such as gold, platinum and coal, thus continue to comprise a significant portion of the country’s <a href="http://atlas.media.mit.edu/en/profile/country/zaf/">export earnings</a>. </p>
<p>Although the services-based sectors have given rise to an <a href="http://www.news24.com/MyNews24/Rise-of-the-black-middle-class-20140604">emerging middle class</a>, this new wealth is largely <a href="http://www.destinyconnect.com/2015/05/22/sas-black-diamonds-riddled-with-debt/">debt-fueled and consumption driven</a>. This limits savings, capital accumulation and <a href="https://www.businesslive.co.za/bd/opinion/2017-01-27-household-wealth-drop-trips-up-economy/">class mobility</a> for most of the population. </p>
<h2>What’s at stake</h2>
<p>In mid-2017 the rating agency Moody’s will review South Africa’s <a href="http://www.enca.com/money/moodys-pushes-back-sa-credit-rating-decision">sovereign credit rating</a>. This comes after two recent downgrades by global credit rating agencies <a href="https://www.businesslive.co.za/bd/economy/2017-04-07-fitch-downgrades-south-africa/">S&P and Fitch</a>.</p>
<p>A great deal hangs on Moody’s decision. If it downgrades the government’s rand-based bond credit rating two notches to junk status, the country will be expelled from the <a href="https://www.businesslive.co.za/bd/economy/2017-04-10-sa--risks--losing-r150bn-with-more-downgrades/">World Government Bond Index</a>. This will compromise its credibility as an investment destination. It will stimulate significant capital flight as international bond funds with investment-grade mandates are forced to sell off South African sub-investment grade bonds. </p>
<p>The rand will then depreciate and the trade deficit will widen. The central bank could then be forced to hike interest rates to curb inflationary pressures. Unemployment will rise and the government’s fiscal slack will be further depleted. </p>
<p>A downgrade of the rand denominated bonds would spark economic instability, and potentially significantly weaken the country’s private sector. The country’s politically connected elite could respond to this crisis by seeking to consolidate political power. This could be achieved using “radical economic transformation” to decimate the vestiges of “white monopoly capital.”</p>
<p>In the wake of the recent downgrades, some politicians have been peddling an <a href="http://www.news24.com/Columnists/MaxduPreez/sa-is-making-a-historic-mistake-20170425">illusion</a> that the country’s current woes are simply <a href="http://www.news24.com/SouthAfrica/News/we-want-the-rand-to-fall-so-that-when-it-rises-we-will-control-the-economy-maine-20161222">“short-term pain</a> for long-term gain” for the majority of South Africans. </p>
<p>But the experiences of numerous countries have shown that there is no gain from going down the populist economic path – <a href="http://whynationsfail.com/summary/">only state failure</a>.</p>
<p>There are tentative signs that this risk is beginning to take hold among some ANC leaders. Even Zuma’s newly appointed Finance Minister began watering down the term “radical economic transformation” at the recent World Economic Forum Africa gathering. Instead he opted to use the phrase <a href="http://citizen.co.za/news/news-national/1503159/gigaba-tells-investors-not-worry-radical-economic-growth-talk/">“inclusive growth”</a>.</p>
<p>What needs to be made clear is that the debate around “white monopoly capital” and “radical economic transformation” is about much more than statistics and definitions. It is about the ownership and control of both public and private capital by a politically connected elite. Thus it comes with the potential risk of turning South Africa’s entire economy into a centrally controlled patronage network.</p><img src="https://counter.theconversation.com/content/77194/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Sean Gossel receives funding from the University of Cape Town. </span></em></p><p class="fine-print"><em><span>Misheck Mutize does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The populism politics adopted by South Africa’s ruling party, African National Congress, mask a strategy to deflect attention from the party’s policy failures and to hide its many scandals.Sean Gossel, Senior Lecturer, UCT Graduate School of Business, University of Cape TownMisheck Mutize, Lecturer of Finance and Doctor of Philosophy Candidate, specializing in Finance, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/768702017-04-28T13:46:26Z2017-04-28T13:46:26ZCourt ruling on Zuma’s nuclear deal is a marker of South Africa’s political health<figure><img src="https://images.theconversation.com/files/167175/original/file-20170428-12999-eanx54.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Celebrations outside the Western Cape High Court after it ruled against the South African government's proposed nuclear deal.</span> <span class="attribution"><span class="source">Nic Bothma/EPA</span></span></figcaption></figure><p>The South African government’s plan to bulldoze through a nuclear energy deal has been dealt what might be a <a href="http://www.timeslive.co.za/politics/2017/04/26/Court-finds-nuclear-deal-with-Russia-to-be-unlawful">fatal blow by the Cape Town High court</a> which has declared the plan invalid. It found that the government had not followed due process in making the decision to pursue a nuclear power option, as well as in other critical areas. </p>
<p>The court’s decision has put paid to President Jacob Zuma’s hopes of clinching the nuclear build programme before leaving office in <a href="http://city-press.news24.com/News/anc-pins-2019-fortunes-on-zuma-successor-20161130">2019</a> if he completes his term. </p>
<p>The case was brought to court by <a href="http://earthlife.org.za/">Earthlife Africa</a> and the Southern Africa Faith-Communities’ Environmental <a href="http://safcei.org/">Institute</a>. The two NGOs were challenging the way in which the state determined the country’s nuclear power needs. The plan would have seen South Africa purchasing <a href="http://www.energy.gov.za/IRP/irp%20files/IRP2010_2030_Final_Report_20110325.pdf">9,600 megawatts</a> of extra nuclear power. </p>
<p>The judge, Lee Bozalek, ruled the government’s action unconstitutional and found that five decisions it had taken were illegal. These included the government’s decision to go ahead with the nuclear build and the fact that it had handed over the <a href="http://www.eskom.co.za/news/Pages/Dec20B.aspx">procurement process</a> to the state utility Eskom. The court also ruled that Eskom’s request for information from nuclear vendors, a step taken to prepare the procurement, which ended on <a href="http://www.eskom.co.za/news/Pages/Dec20B.aspx">28 April 2017</a> was invalid. </p>
<p>If it still wants to pursue the nuclear deal the government will have to start all over again. To do so legally it would have to open up the process to detailed public scrutiny. The country’s electricity <a href="http://www.nersa.org.za/">regulator</a> would have to have a series of public hearings before endorsing what would be its highest ever spend on infrastructure. And any international agreements would have to be scrutinised by parliament. </p>
<p>All this will take time – something Zuma doesn’t have. And it’s unlikely that his successors will be as eager to champion a new deal as he has been. Meanwhile the facts about the deal will become public. This will undoubtedly demonstrate two of the biggest <a href="https://theconversation.com/why-south-africa-should-not-build-eight-new-nuclear-power-stations-49967">criticisms</a> of the deal to be true: that the country can’t afford it, and that it’s energy needs have shrunk, making the vast investment redundant. </p>
<p>The court’s ruling has turned the nuclear procurement issue into one of the key markers of South Africa’s political health. It’s not yet clear whether the South African government will appeal the Western Cape High Court’s decision, or comply with the judgement. A third option is that Zuma simply ignores the courts and continues to pursue the deal. </p>
<h2>Demand and affordability</h2>
<p>South Africa currently has more than enough <a href="https://theconversation.com/why-south-africa-should-not-build-eight-new-nuclear-power-stations-49967">electricity</a> to meet its needs. This wasn’t the case about five years ago when widespread <a href="http://www.aljazeera.com/indepth/features/2015/03/crippling-blackouts-paralyse-south-africa-150312044353795.html">outages</a> hit the country. Since then new electricity generation <a href="http://www.eskom.co.za/news/Pages/Nov3B.aspx">capacity</a> has been added, through the the rapid roll out of <a href="http://www.ujuh.co.za/window-4-renewable-energy-nets-r194bn-for-south-africa/">renewables</a>, and the opening up of two new giant coal burning plants. Consumption, particularly by industry, has steadily declined due to faltering economic growth and higher electricity prices. Demand has dropped so much that Eskom plans to <a href="http://www.enca.com/south-africa/numsa-fumes-over-eskom-plant-plant-closure-plans">close</a> five coal burning power stations. </p>
<p>The argument that the country needs another 9,600 megawatts was identified in documents that produced in 2011. These are now widely acknowledged as being badly out of date. Recent <a href="https://mg.co.za/article/2015-07-06-will-putin-pay-for-sas-100bn-nuclear-plan">studies</a> by the University of Cape Town’s Energy Research Centre have shown that the country doesn’t need to consider nuclear for another 20 years. </p>
<p>A number of studies have also shot holes in the government’s argument that the country can afford the proposed nuclear build. The Council for Scientific and Industrial Research has developed <a href="http://www.ee.co.za/wp-content/uploads/2016/11/RE-Futures-Windaba-CSIR-3Nov2016_FINAL.pdf">models</a> showing that new nuclear is likely to be much more expensive than coal or renewables. The price ticket for nuclear – which <a href="http://mg.co.za/article/2011-10-07-r1trillion-nuclear-tender-bidding-war">some estimates</a> put at more than R1 trillion – doesn’t take into account the costs of operation, fuel, insurance, emergency planning or the regulation or decontamination at the end of the life of the reactors. </p>
<p>It would also impose a <a href="http://www.iol.co.za/business-report/economy/nuclear-programme-could-burden-future-generations-committee-told-1414434">financial burden</a> on the country’s fiscus which it can <a href="https://theconversation.com/zumas-cabinet-reshuffle-opens-the-door-for-nuclear-deal-in-south-africa-75553">ill afford</a> particularly now that the economy has been rated at junk status.</p>
<h2>Ulterior motives</h2>
<p>So why is Zuma still pushing for the deal to go ahead? One source of pressure might be the Russians. South Africa’s former energy minister, Tina Joemat-Pettersson, had been instructed to signed a deal with the Russian utility, <a href="http://www.ujuh.co.za/south-africa-enter-into-brave-nuclear-deal-with-the-russians/">Rosatom</a> to build the reactors. South Africa has also already signed nuclear power <a href="http://www.polity.org.za/print-version/unravelling-south-africas-opaque-foreign-nuclear-cooperation-agreements-2014-08-19">cooperation agreements</a> with other countries like the US and South Korea, which the court has declared void.</p>
<p>A more likely reason for Zuma’s zeal is the involvement of the <a href="http://www.bbc.com/news/world-africa-22513410">Gupta family</a> with whom he has close ties. The family’s web of interests around the nuclear deal are complex. </p>
<p>What is known is that the Gupta family <a href="http://www.oakbay.co.za/">controls</a> South Africa’s only dedicated uranium mine. The family has developed close relationships with key individuals at Eskom. In November last year the country’s then <a href="http://www.ujuh.co.za/state-of-capture-public-protectors-report/">Public Protector</a> pointed to overlapping directorships between Gupta-owned companies and Eskom. </p>
<p>The report also suggested that Brian Molefe, Eskom’s CEO, had a close relationship with the family. These revelations led to his <a href="https://mg.co.za/article/2016-11-11-breaking-brian-molefe-resigns-from-eskom">resignation</a> shortly after the report was published.</p>
<p>Another strand in the complex web is the fact that Zuma’s son <a href="http://www.fin24.com/Economy/gupta-link-with-duduzane-zuma-no-risk-oakbay-ceo-20170120">Duduzane</a> is a business partner of the Guptas while other relatives are directly employed by them.</p>
<p>Despite his determination, Zuma has become increasingly isolated in his quest for nuclear procurement. The African National Congress is clearly divided on the issue. This is evident from the fact that Zuma has resorted to <a href="https://theconversation.com/zumas-cabinet-reshuffle-opens-the-door-for-nuclear-deal-in-south-africa-75553">reshuffling</a> his cabinet to make way for more compliant ministers without reference to party officials as would be the norm. </p>
<p>The private sector has also come out <a href="http://www.fin24.com/Economy/why-governments-nuclear-deal-will-destroy-sa-20160915">against</a> the idea while the list of civil society organisations opposed to nuclear expansion goes well beyond the environmental lobby and includes a broad spectrum of foundations, faith communities, human rights campaigners and defenders of the country’s constitution. </p>
<h2>High stakes</h2>
<p>The nuclear judgement in Cape Town indicates that South Africa’s legal system has not yet been “captured” by private interests. </p>
<p>The key question is whether Zuma and Eskom will accede to the verdict, or whether they challenge it while continuing to ignore the rule of law. Not only would this subvert the country’s constitution and its democratic form of government, it would also deny the constitutional right to popular participation in energy democracy. </p>
<p>The stakes are high – for the country as well as for the president. Will he continue to treat the country’s energy future with impunity? Or will this judgement symbolise the rollback of the democratic dispensation envisaged by the authors of the country’s constitution?</p><img src="https://counter.theconversation.com/content/76870/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Fig has had a long association with Earthlife Africa, and serves on the steering committee of the African Uranium Alliance. </span></em></p>The Cape High Court ruling which declared South Africa’s nuclear energy plan as illegal may have put paid President Jacob Zuma’s ambitions of clinching the deal while he is still in office.David Fig, Honorary Research Associate, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/755492017-03-31T12:01:19Z2017-03-31T12:01:19ZSouth Africa has lost a key line of defence against corruption. What now?<figure><img src="https://images.theconversation.com/files/163448/original/image-20170331-31747-shdpgu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The sacking of South Africa's Finance Minister Pravin Gordhan has created uncertainty about the future of the country's finances.</span> <span class="attribution"><span class="source">Nic Bothma/EPA</span></span></figcaption></figure><p>South Africa’s currency and bond markets <a href="https://www.bloomberg.com/news/articles/2017-03-30/south-africa-s-rand-extends-slump-as-zuma-fires-finance-minister">plunged</a> after a dramatic late night <a href="http://www.thepresidency.gov.za/press-statements/president-zuma-appoints-new-ministers-and-deputy-ministers">announcement</a> that South Africa’s President Jacob Zuma had fired the Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas as part of a major cabinet reshuffle. </p>
<p>It’s no exaggeration to say that the removal of the finance minister is the greatest threat to public finances experienced in democratic South Africa. </p>
<p>Let’s be clear, the motive for removing the minister and his deputy had nothing to do with the responsible and safe management of South Africa’s economy. Rather it has everything to do with Gordhan and his team’s intent to safeguard the fiscus against irresponsible and corrupt activities. It follows that whoever replaces them will be amenable to facilitating such activities.</p>
<p>It’s hard to overstate the harm that a corrupt finance minister could cause. The first consequence – which became apparent when Nhlanhla Nene was <a href="http://www.fin24.com/BizNews/zumas-blunder-on-nene-costs-sa-billions-when-will-taxpayers-call-enough-20151213">fired</a> and also as speculation mounted about Gordhan’s removal – is based on a simple loss of confidence. This is reflected in the <a href="https://www.bloomberg.com/news/articles/2017-03-30/south-africa-s-rand-extends-slump-as-zuma-fires-finance-minister">sharp depreciation</a> of the rand before and after Zuma’s announcement.</p>
<p>The rand is likely to suffer further. The cost of government borrowing in the market will rise, further compounding the impact of a formal downgrade by ratings agencies which is likely to follow. Higher borrowing costs will mean less money for expenditure, along with a reduced ability to borrow. Imports will become more expensive, potentially fuelling inflation and a hike in interest rates. </p>
<p>There’s also likely to be an outflow of foreign investment, further exacerbating the weakened exchange rate. At its most extreme this could lead to a balance of payments crisis. All of this will harm already low economic growth.</p>
<p>And there are a number of key decisions – such as the approval of an expensive nuclear deal – that could get the green light, severely damaging the country’s fiscal position.</p>
<h2>So why now</h2>
<p>When Zuma <a href="https://www.businesslive.co.za/bd/opinion/2017-03-28-zuma-recalls-gordhan-from-high-profile-roadshow-as-the-world-watches/">summoned</a> Gordhan back from an investor roadshow in the UK earlier in the week, he is said to have to have acted on the back of a flimsy <a href="http://www.heraldlive.co.za/news/2017/03/29/zuma-justify-gordhan-axing-intelligence-report-sources/">intelligence report</a>. Few believe this to be the real reason.</p>
<p>Others speculated that Zuma’s reason for making the move now might be linked to court cases involving the Gupta family and their associates, or the manufactured crisis relating to the distribution of social grants. </p>
<p>The <a href="http://www.fin24.com/Economy/zuma-joins-gupta-court-battle-to-file-motion-against-bank-20170327">court cases</a> relate to attempts by the Guptas to get the executive branch to intervene in the decision of commercial banks to close their bank accounts. They are also linked to an attempt by the Gupta’s associates to <a href="http://citizen.co.za/news/news-national/1471048/treasury-to-respond-to-gupta-associates-bank-bid/">purchase</a> a controlling share in an existing bank. There certainly seems to be a sense of urgency, with the last bank servicing Gupta companies reported to have started closing accounts. </p>
<p>But my premise on why this has happened now is much simpler. The timing of it ensures that the new finance minister, and other new appointments, have a month’s grace before a vote of no confidence in parliament can be tabled in parliament. Two opposition parties have already called for one. </p>
<p>A vote of no confidence against Zuma could succeed if the ANC caucus turned on Zuma and ANC members joined opposition parties to make up a 51% majority. There were hints of such a <a href="https://theconversation.com/zuma-lives-to-fight-another-day-but-fallout-from-latest-revolt-will-live-on-69587">revolt</a> in February ahead of Gordhan’s budget speech. The chances of it actually happening this time are probably much greater.</p>
<p>But an imminent vote isn’t possible because parliament starts its 2017 Easter <a href="https://www.parliament.gov.za/storage/app/media/Programmes/parliamentary-programme-framework-2017.pdf">recess</a> on the 31st of March, and only returns in early May. My reading of the Constitution and the Rules of the National Assembly suggests that recalling parliament before the recess ends will be difficult, if not impossible. That means that in the absence of some other process to block the president’s machinations, his cronies will have a minimum of four weeks to implement whatever nefarious plans they have devised for the finance ministry.</p>
<p>A lot of damage could be done in that time. </p>
<h2>Harm that can be done</h2>
<p>The consequences of Gordhan’s removal could be potentially dire on a number of fronts. They include, for example, the finance ministry withdrawing from its involvement in various court cases relating to the Gupta family. </p>
<p>Other possible consequences include the worsening of <a href="http://www.fin24.com/Economy/sars-at-risk-of-imploding-20170305-2">mismanagement</a> of the South African Revenue Services and untrammelled corruption at state-owned enterprises. </p>
<p>The approval of the expensive and unnecessary nuclear deal also becomes a real possibility. Eskom already holds hundreds of billions of rand in <a href="https://theconversation.com/why-south-africas-power-utility-isnt-in-great-financial-shape-68441">debt guarantees</a> from the National Treasury and the nuclear deal would likely be financed through the issuing of further such guarantees. </p>
<p>The combination of irresponsibly issued and utilised guarantees, along with an increase in borrowing costs, a ratings downgrade and falling revenue collection, would lead to a dramatic worsening in various public finance metrics, such as the debt-to-GDP ratio. </p>
<p>Corresponding harm could be done to critical institutions that fall under the Ministry of Finance. These include the <a href="http://www.gepf.gov.za/">Government Employees Pension Fund</a> and the <a href="http://www.pic.gov.za/">Public Investment Corporation</a> which are responsible for trillions of rand in public sector pensions. Institutions like the <a href="https://www.fic.gov.za/Pages/Home.aspx">Financial Intelligence Centre</a> and <a href="https://www.fsb.co.za/Pages/Home.aspx">Financial Services Board</a> could also be compromised. And there are significant funds that could be appropriated or misdirected from development finance institutions such as the <a href="http://www.landbank.co.za/">Land Bank</a> and <a href="http://www.dbsa.org/EN/Pages/default.aspx">Development Bank of Southern Africa</a>.</p>
<h2>Where to from here?</h2>
<p>As long as principled, competent public servants remain at the helm of the country’s National Treasury it might be harder for the new minister of finance to engage in corrupt, illegal or irrational actions. To do so he would have to suspend or dismiss numerous officials leaving himself open to legal action on various grounds, including labour law. The presence of good officials also means that there is greater scope for whistleblowing which could inform action by civil society, the judiciary and the legislature.</p>
<p>In principle, parliament should be able to exercise significant oversight over the National Treasury, including the budget. But Parliament’s primary source of technical support has shown itself to be <a href="https://theconversation.com/explainer-the-nitty-gritty-of-south-africas-annual-budget-72901">unable or unwilling</a> to tackle politically sensitive issues. On top of this the Financial and Fiscal Commission, which also advises parliament committees on such matters, currently has no permanent leadership. </p>
<p>It therefore remains to be seen whether there’s sufficient political will and technical competence in the legislature to significantly mitigate the harm that the recent reshuffle will cause. In that context, the best South Africans can hope for is that somehow the harm can be minimised for four weeks, and that the president and his new cabinet are removed shortly afterwards.</p><img src="https://counter.theconversation.com/content/75549/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Seán Mfundza Muller is affiliated with the Public and Environmental Economics Research Centre (PEERC) at the University of Johannesburg, and previously worked for the Parliamentary Budget Office.</span></em></p>The removal of South Africa’s finance minister, Pravin Gordhan, is the greatest threat to public finances experienced in the post 1994 era.Seán Mfundza Muller, Senior Lecturer in Economics, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/738632017-03-02T14:59:05Z2017-03-02T14:59:05ZSouth Africa can’t save itself just by talking the talk. It must walk the walk<figure><img src="https://images.theconversation.com/files/159098/original/image-20170302-14706-aohek0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Leader of South Africa's opposition parties and civil society took part in an anti-corruption march against the government.</span> <span class="attribution"><span class="source">EPA/KIM LUDBROOK</span></span></figcaption></figure><p>South Africa is fast approaching a crossroads at which it will have to choose between structural reform and a lurch to populist nationalism. So, too, is its governing African National Congress (ANC), which later this year must <a href="http://citizen.co.za/news/news-national/1379943/the-battle-for-the-anc-presidency-heats-up-its-ramaphosa-vs-dlamini-zuma/">elect</a> a successor to its president, Jacob Zuma.</p>
<p>With a range of conflicting ideas on how to address the country’s socio-economic challenges, some people are floating the idea of convening an <a href="http://www.news24.com/Columnists/ClemSunter/time-for-an-economic-codesa-20151217">economic Codesa</a>. This borrows from the Convention for a Democratic South Africa - the all-party <a href="http://www.sahistory.org.za/article/codesa-negotiations">forum</a> which negotiated the country’s transition to democracy in the early 1990’s.</p>
<p>In his <a href="http://www.treasury.gov.za/documents/national%20budget/2017/default.aspx">2017 budget speech</a> South Africa’s Finance Minister, Pravin Gordhan, pulled up short of calling for an ‘economic Codesa’. He invited discussion on whether the constitution’s bill of rights should be extended to include “economic rights”. Such rights may include a right to work, a legally guaranteed national minimum wage or even a right to a basic income.</p>
<p>Taken together with Gordhan’s chilling message about the state of the economy, his invitation for discussion deserves some attention. Unemployment remains stubbornly high around the 35% mark, <a href="https://theconversation.com/south-africa-can-expect-zero-growth-its-problems-are-largely-homemade-62943">economic growth remains</a> sluggish around 1% and the budget deficit is ballooning.</p>
<p>Clearly South Africa’s social compact is at breaking point, evidenced in part by the <a href="http://citizen.co.za/news/news-national/1434631/xenophobic-attacks-hit-pretoria/">xenophobic violence</a> and protests against foreigners that swept through Pretoria and Johannesburg recently. </p>
<p>There’s certainly the need for a conflict breaking dialogue even for sharply differing groups within the governing party, the ANC. A view of what was expressed in the president’s 2017 state of the nation address versus the 2017 budget speech lays bare some of the deep seated <a href="https://theconversation.com/south-africas-budget-some-good-moves-but-not-enough-to-fix-mounting-problems-73529">disagreements</a>.</p>
<h2>Raging populism</h2>
<p>Zuma’s address was peppered with reference to the party’s new slogan: “<a href="http://www.ujuh.co.za/zuma-what-do-we-mean-by-radical-socio-economic-transformation/">radical economic transformation</a>”. Zuma pulled his populist punches but added little flesh to the bones of the slogan, leaving Gordhan to offer a more measured and precise vision of “inclusive growth” two weeks later. </p>
<p>And herein lies the rub, and the predicament. Within the governing party there are those who want a nationalist form of transformation. They are pushing for the continued handing of economic power and wealth to a <a href="https://theconversation.com/why-patronage-and-state-capture-spell-trouble-for-south-africa-64704">small group </a>of black politically connected individuals. They care little if at all for the socio-economic precariousness of the majority of their compatriots.</p>
<p>On the other hand, there are those who are still focused on addressing <a href="https://theconversation.com/south-africa-is-at-an-inflection-point-will-it-resist-or-succumb-to-state-capture-66523">substantive inequality</a>. They include Gordhan, the minister for economic development, Ebrahim Patel, and the minister of trade & industry, Rob Davies.</p>
<p>Coming about two weeks after the state of the nation address, Gordhan’s budget speech wrestled with the dilemmas that face South Africa. He’s been vilified for this amid the ongoing warfare within the governing party. </p>
<p>President of the ANC Youth League, Collen Maine – a Zuma loyalist – labelled Gordhan, a stalwart of the ANC’s liberation movement, an “<a href="https://mybroadband.co.za/vb/showthread.php/874488-Maine-reckless-for-calling-Gordhan-an-impimpi-ANC">impimpi</a>”. This is a highly inflammatory term from the 1980s and the height of the struggle against apartheid used to name and shame community informers paid for by the regime. </p>
<h2>Dangerous path</h2>
<p>Why such a vicious attack against Gordhan? He’s been willing to <a href="https://theconversation.com/high-stakes-drama-as-south-african-president-and-finance-minister-square-off-47698">stare down</a> the nationalists within the ANC, who have benefited from the weaknesses of Zuma’s leadership. They wish to extend the era of crony capitalism and “<a href="https://theconversation.com/why-patronage-and-state-capture-spell-trouble-for-south-africa-64704">state capture</a>” by venal private interests such as the notorious Gupta family that began when Zuma took power in 2009. </p>
<p>Gordhan has noted South Africa’s dangerous political trajectory. He quoted from the ANC’s famous <a href="http://www.sahistory.org.za/archive/strategy-and-tactics-statement-adopted-anc-morogoro-conference-april-may-1969-abridged">1969 policy conference in Morogoro, Tanzania</a> where it was resolved that:</p>
<blockquote>
<p>Our nationalism must not be confused with chauvinism or narrow nationalism of a previous epoch. It must not be confused with the classical drive by an elitist group among the oppressed people to gain ascendancy so that they can replace the oppressor in the exploitation of the masses. </p>
</blockquote>
<p>It was a masterful citation by Gordhan: as he’s done for the past year in his stand against high level corruption that’s contaminated the government with its dangerous lurch to elite nationalism. </p>
<h2>Slow transformation</h2>
<p>While seeing the need for some dialogue I’m of the view that calls for an
“economic Codesa” may be fundamentally misguided. The idea that South Africa can summon the wherewithal, and good faith of all the requisite social, economic and political stakeholders, may be wishful thinking during a bitterly contested succession year in the ANC.</p>
<p>The original Codesa which began in 1991 may have been an inclusive, carefully facilitated and mediated negotiation process. Today there’s a sense that in delivering a political settlement, it didn’t do enough to secure economic justice and transformation. </p>
<p>Too much of the “old economy” – as characterised by the powerful political slogan “<a href="https://theconversation.com/zuma-had-a-chance-to-galvanise-south-africans-he-blew-it-72914">white monopoly capital</a>” – remains intact. This gives credibility to the militant, <a href="http://www.ujuh.co.za/flopping-bbbee-might-propel-radical-alternatives/">anti-establishment political brands</a> like the Economic Freedom Fighters. The rise of the EFF, in turn, has triggered the ANC’s call for ‘radical economic transformation’ to regain lost ground.</p>
<p><a href="https://theconversation.com/why-julius-malemas-eff-doesnt-offer-south-africans-a-way-out-of-poverty-59267">Julius Malema</a>, the former ANC Youth League president who started the EFF, presumably, would welcome the opportunity to advance the case for redistribution of land ownership alongside other structural reforms of the South African economy. But who else would join the dialogue and from what angle? </p>
<h2>Constitutional rights</h2>
<p>Gordhan’s talk of economic rights may be seen as one useful avenue. But then South Africa’s constitution already provides a far reaching number of justiciable socio-economic rights. These include the rights to access basic services like housing and education. And so, the question would be: what more can be added to economic rights? </p>
<p>A debate about amending the constitution would arguably be meaningless without a parallel process of debate about economic policy and about the relative roles and responsibilities of labour, government and the private sectors. At a very minimum, such a process would need to surface the true concerns and interests of all the parties. It would need to identify the core non-negotiables of each, while ascertaining those areas where compromise and a shift in position would be possible and valuable.</p>
<p>And are the labour unions willing to sacrifice some of the legal protections that they acquired in the mid-1990s in return for commitments from business that would create, for example, more youth employment and apprenticeships? </p>
<p>In turn, would business be willing to sacrifice profits in return for concessions from labour and government that would enable them to attract larger long-term investments in the productive industrial sector? </p>
<p>And what’s the solution to the painful shortage of skills and the disaster of public education and what do each of the three main players need to do differently to make substantial progress, and quickly? </p>
<h2>Political will</h2>
<p>A properly organised process of constructive engagement and dialogue such as Codesa requires a considerable investment in political capital and goodwill. It’s far from clear if a sufficient number of the key political players are willing to find it. </p>
<p>But it’s surely worth trying. South Africa has probably very little to lose at this stage. Without such a consensus finding process that confronts the fundamental contradictions and the unanswered questions of socio-economic transformation, the clamour for populist nationalism is likely to grow rapidly to the point where it’s overwhelming, in every sense of the word.</p><img src="https://counter.theconversation.com/content/73863/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Calland is affiliated with the Council for the Advancement of the South African Constitution, the Open Democracy Advice Centre and The Paternoster Group.</span></em></p>South Africa’s social compact is at breaking point and the country may need a dialogue similar to its 1994 political transition talks to get out of the crisis.Richard Calland, Associate Professor in Public Law, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/733062017-02-21T16:15:23Z2017-02-21T16:15:23ZSteering South Africa’s budget between excess patronage and prudence<figure><img src="https://images.theconversation.com/files/157723/original/image-20170221-18633-9ypvsv.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Workers at Medupi coal-fired power station during its construction, one of South Africa's most costly and environmentally unfriendly projects.</span> <span class="attribution"><span class="source">Reuters/Siphiwe Sibeko</span></span></figcaption></figure><p>After investigating the “massacre” (as termed by <a href="http://www.huffingtonpost.co.za/2017/02/03/life-esidimeni-tragedy-fuelling-ructions-in-anc-gauteng/">both</a> the opposition Democratic Alliance and African National Congress Youth League) of more than 100 mental health patients under the guise of cutting costs, South Africa’s Health Ombudsman Malegapuru Makgoba <a href="http://www.politicsweb.co.za/documents/the-life-esidimeni-disaster-the-makgoba-report">advised</a> that a “sufficient budget should be allocated for the implementation” of proper care.</p>
<p>Last year’s national <a href="http://www.treasury.gov.za/documents/national%20budget/2016/review/FullReview.pdf">budget</a> imposed real cuts of 5.4% to the health budget and 13% to provincial hospitals – assuming the healthcare inflation rate, according to the Medical Aid schemes, was <a href="http://www.thenewage.co.za/brace-for-a-tough-2017/">11%</a>. </p>
<p>The <a href="https://theconversation.com/why-patronage-and-state-capture-spell-trouble-for-south-africa-64704">battle</a> between Finance Minister Pravin Gordhan’s fiscal prudence and the forces bent on fiscal patronage in the country can be won.</p>
<p>But this can only happen if there’s a rethink of the budget. That would mean rejecting the <a href="http://www.engineeringnews.co.za/article/sps-not-positive-about-south-africas-economic-growth-2017-01-25">demand</a> by credit ratings agencies like Standard & Poor’s for “fiscal improvement” through lower budget deficits – down to a targeted 2.4% of GDP next year. In simple terms this means lower state spending. </p>
<p>South Africa has been down this road before. Threatened with a potential downgrade to junk status last year, Gordhan <a href="http://mg.co.za/article/2016-02-25-the-poor-face-double-digit-inflation">cut</a> the 2016 size of inflation-adjusted social grants and state budgets for housing, municipal services (even before elections) and water (amid a drought).</p>
<p>Poor South Africans are facing increasing cost pressures. The official January 2016-17 inflation rate was <a href="http://www.inflation.eu/inflation-rates/south-africa/current-cpi-inflation-south-africa.aspx">6.8%</a> but a standard food basket for low-income families rose <a href="https://www.businesslive.co.za/bd/economy/2017-01-30-the-poorest-now-pay-an-extra-r300-for-a-basic-food-basket-from-a-year-ago/">16.5%</a>. This is far higher than last year’s average 7.8% rise in the monthly child support grant to <a href="http://www.legal-aid.co.za/selfhelp/?p=170">R350</a> and the measly 3.5% rise in the foster care grant to <a href="http://www.legal-aid.co.za/selfhelp/?p=166">R890</a> per month.</p>
<h2>A higher road of fair taxation</h2>
<p>To do something about these paltry increases, one option the finance minister has is to raise more revenue. But who should pay higher taxes – poor people or rich people and big corporations? </p>
<p>One option is to raise the rate of Value Added Tax (VAT). But this would hit poor people the hardest because it’s a higher share of their income than it is for the non-poor. Leading <a href="http://www.fin24.com/Budget/who-will-feel-tax-pain-in-gordhans-budget-2017-20170129">lawyers</a> and tax <a href="http://www.fin24.com/Budget/why-gordhan-should-raise-vat-by-2-20170217">consultants</a> are lobbying for Gordhan to raise VAT by at least 1 percentage point. </p>
<p>In fact rich people should bear a higher burden of taxes, because the “1%” ultra-wealthy have done extremely well since 1994. Their share of national income was, thanks to apartheid, an impressive 12% in 1994 but by 2008 this had risen to 20%, the highest in a 2016 World Bank <a href="http://www.worldbank.org/en/publication/poverty-and-shared-prosperity#inequality">database</a>.</p>
<p>And in many ways, the state keeps donating to the wealthiest citizens. Last year each time a passenger boarded a South African Airways (SAA) flight taxpayers donated R600 towards their ticket. That’s because the state provided SAA with a <a href="https://www.enca.com/south-africa/saa-losses-rocket-to-r56-billion">R5.6 billion</a> subsidy while the airline carried nine million passengers. </p>
<p>When a passenger boarded the Gautrain – the fast speed service between Johannesburg, Pretoria and the OR Tambo airport – there was another R90 gift – a <a href="http://www.fin24.com/Economy/Gautrain-subsidy-could-fund-entire-freeway-project-AA-20150626">R1.5 billion</a> subsidy covering 17 million trips. </p>
<p>In contrast, operating <a href="https://www.gtac.gov.za/PublicExpenditurePolicy/Public%20Transport%20in%20Metros.pdf">subsidies</a> were less than R5 per trip for the 2.4 million working-class and poor commuters who use Metrorail every day.</p>
<h2>The case for higher corporate taxes</h2>
<p>And big corporates should contribute more towards the country’s tax revenue. In an economy that produced R4.4 trillion worth of Gross Domestic Product (GDP) last year, business <a href="http://www.treasury.gov.za/documents/national%20budget/2016/review/FullReview.pdf">taxes</a> accounted for a paltry R200 billion: just 4.5% of GDP, down from 7% a decade ago and 9% in 2008.</p>
<p>All along, Treasury has <a href="http://www.tradingeconomics.com/south-africa/corporate-tax-rate">lowered</a> corporate taxes: from <a href="https://fds.duke.edu/db?attachment-69--1654-view-826">56% of distributed profits</a> in 1994 to 43% in 1997 to 39% in 2000 to 35% in 2009 and then down to <a href="http://www.sars.gov.za/TaxTypes/CIT/Pages/default.aspx">28%</a> by 2013. Restoring corporate taxes back to <a href="https://fds.duke.edu/db?attachment-69--1654-view-826">7%</a> of GDP would raise R110 billion (five times more than the proposed 1 percentage point rise in VAT). </p>
<p>By comparison, the #FeesMustFall-to-zero demand would cost <a href="http://www.justice.gov.za/commissions/FeesHET/submissions/ga/2016-FHETC-Sub-NationalTreasury.pdf">R30 billion</a> annually, about six times more than Gordhan <a href="http://www.treasury.gov.za/documents/national%20budget/2016/speech/speech.pdf">added</a> to last year’s budget after national protests.</p>
<p>Can local firms afford higher taxes? A typical <a href="http://www.pressreader.com/south-africa/business-day/20170125/281711204362677">rebuttal</a> is that the current 28% rate (before loopholes) is higher than the world average, and that those rates have dropped substantially the last two decades. But among peer emerging market economies the <a href="http://www.imf.org/external/pubs/cat/longres.aspx?sk=44062.0">profitability</a> of South African firms has usually been second or third highest. According to last July’s International Monetary Fund review local corporations claimed a <a href="http://www.imf.org/external/pubs/cat/longres.aspx?sk=44062.0">23%</a> return on equity in 2015 – a year of the worst mining sector <a href="http://www.financialmail.co.za/coverstory/2016/01/14/hot-stocks-2016-its-scary-out-there">collapse</a> in history. </p>
<h2>An end to white elephants</h2>
<p>Then there are Treasury guarantees worth R683 billion that undergird borrowing by the country’s state-owned enterprise. These include the power utility Eskom’s R350 billion exposure for the long-delayed Medupi and Kusile power plants which incorporate dubious coal-supply contracts. Other state owned enterprises given guarantees include the road agency Sanral, South African Airways and Transnet, the state’s rail, port and pipeline company. </p>
<p>Transnet’s self-destructive expansion is based on the mining industry’s R803 billion <a href="http://www.mqa.org.za/sites/default/files/Sector%20Skills%20Plan%202015%20-%202016.pdf">investment strategy</a> to export “coal (18 billion tons), chromite (5,5 tons), platinum (6,3 tons) and palladium (3,6 tons)” through Richards Bay, the large industrial port on the country’s east coast. These plans were made before the price of coal <a href="http://www.indexmundi.com/commodities/?commodity=coal-south-african&months=120">crashed</a> and with no regard to climate change. </p>
<p>Another white elephant is the R250 billion expansion of the coastal city Durban’s port-petrochemical complex. The project is a planner’s fantasy. The white elephant list also includes the <a href="https://www.dailymaverick.co.za/opinionista/2016-12-05-durban-should-quit-as-commonwealth-games-host-city/">wasteful</a> R6.4 billion 2022 Commonwealth Games.</p>
<p>In the battle between the forces of fiscal patronage and fiscal prudence, the fiscal prudence brigade has been extremist in imposing austerity – except when it comes to dubious mega-projects favoured by the patronage network. In the <a href="http://hdr.undp.org/en/content/income-gini-coefficient">most unequal</a> country in the world, the budget offers an opportunity to move away from both the extremes and instead embrace the majority of the society, and environmental sanity.</p><img src="https://counter.theconversation.com/content/73306/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Patrick Bond does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In preparing the 2017 national budget South Africa needs to take heed of warnings that its historical austerity measures are hurting the poor and even costing lives.Patrick Bond, Professor of Political Economy, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/732862017-02-21T08:40:21Z2017-02-21T08:40:21ZReplacing South Africa’s finance minister, or his deputy, would carry a heavy cost<figure><img src="https://images.theconversation.com/files/157660/original/image-20170221-18664-9zq029.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Finance minister Pravin Gordhan, his deputy Mcebisi Jonas, and Reserve Bank Governor Lesetja Kganyago. </span> <span class="attribution"><span class="source">GCIS</span></span></figcaption></figure><p>Many see <a href="http://mg.co.za/article/2017-02-17-brian-molefe-to-be-sworn-in-as-a-member-of-parliament">the decision</a> by South Africa’s governing African National Congress (ANC) to send the <a href="https://www.businesslive.co.za/fm/features/2016-11-03-state-of-capture-report-reduces-brian-molefe-to-tears/">disgraced</a> former CEO of the power utility Eskom to parliament as the precursor to another <a href="http://www.huffingtonpost.co.za/2017/02/17/brian-molefe-becomes-an-mp-next-stop-finance-minister/">attack</a> on the National Treasury and to remove finance minister Pravin Gordhan. </p>
<p>The decision to give Brian Molefe a seat in the country’s parliament has led to widespread <a href="https://www.dailymaverick.co.za/article/2017-02-20-life-of-brian-mexican-standoff-looms-for-zuma-of-guptas-new-cabinet-deployee/">speculation</a> that he is being positioned for a cabinet post – either as finance minister or as deputy finance minister. While some commentators believe that President Jacob Zuma has his sights set on appointing Molefe as finance <a href="http://www.timeslive.co.za/politics/2017/02/17/Molefe-as-MP-seen-as-a-bid-to-oust-finance-minister-Gordhan">minister</a>, others <a href="http://www.huffingtonpost.co.za/2017/02/17/whats-the-real-plan-for-brian-molefe/">argue</a> that the real target is Deputy Minister Mcebisi Jonas. The deputy minister <a href="http://www.fin24.com/Economy/mcebisi-jonas-takes-on-ajay-gupta-over-saxonwold-meeting-20170217">blew the whistle</a> on an alleged bribery attempt by a member of the Gupta family which is at the centre of a political storm amid allegations that it has attempted to exert undo influence on Zuma.</p>
<p>Either way, there is no doubt that Molefe’s appointment to either position would cause substantial turmoil in the country’s financial system and cost South Africa billions of rand. </p>
<h2>The cost of the rand taking a knock</h2>
<p>South Africa would take a massive economic blow because its currency would depreciate dramatically. The rand <a href="http://www.xe.com/currencycharts/?from=USD&to=ZAR">fell</a> through the floor the last time Zuma made a misbegotten attempt to <a href="https://theconversation.com/why-zumas-actions-point-to-shambolic-management-of-south-africas-economy-52174">install</a> one of his cronies at the helm of the National Treasury in December 2015.</p>
<p>This should worry South Africans. The country’s current account <a href="https://www.imf.org/external/pubs/ft/scr/2016/cr16218.pdf">deficit</a> in the third quarter of 2016 was 4.1%. This means that the sum of imports and external debt – borrowing from abroad – is larger than the sum of its exports and lending abroad. Mineral products, machinery and chemical products alone <a href="http://atlas.media.mit.edu/en/visualize/tree_map/hs92/import/zaf/all/show/2014/">constitute</a> more than 50% of South Africa’s imports. A weaker rand would make these more expensive since the country would have to pay more rand per dollar value. This means that prices for everything from consumer products to transportation would go up. South African firms, which often depend on intermediate inputs from abroad, would face a rise in the cost for their products and an erosion of their profits. As a consequence, fewer people would invest in the country.</p>
<p>A currency depreciation would affect investors in other ways too. A weaker rand would diminish their returns and they would therefore be more likely to look for investment opportunities elsewhere. Not only will they stop investing, they would also likely unwind their existing positions. This in turn would drain liquidity from the financial system, making banks less likely to provide new loans for businesses. The knock on effect would be lower growth and higher unemployment.</p>
<p>It is difficult to put a number on the impact of a sudden depreciation of the rand. But some simple back-of-the-envelope calculations can help. South Africa spends roughly US$10 billion more on imports than it gets from exports. This corresponds roughly to R130 billion per year. If the rand weakens from 13 to 14 Rand per US$1, the country would need another R10 billion to finance its trade imbalance. </p>
<p>South Africa has watched this movie before. Between November 2015 and January 2016 when Zuma installed the backbencher Des van Rooyen as finance minister the rand weakened from R14.4 to R16.9 per US$. This R2.5 increase per US$ corresponded to additional R25 billion cost to finance our trade deficit. On top of this <a href="http://www.biznews.com/undictated/2015/12/15/cost-to-sa-of-zuma-v-rooyen-gordhan-nene-r171bn/">private investors</a> are estimated to have lost R171 billion after finance minister Nhlanhla Nene <a href="http://ewn.co.za/2015/12/09/New-finance-minister-announced">was fired in 2015</a>.</p>
<h2>Secondary effects</h2>
<p>Removing either the finance minister or his deputy would also result in rating agencies downgrading the country’s investment rating to junk status. </p>
<p>Zuma has shown in the past that he has no clue about the impact of ratings on the country’s finances. Amidst threats of downgrade late last year Zuma was <a href="http://www.fin24.com/Economy/zuma-we-take-the-ratings-agencies-very-seriously-but-20161025">quoted</a> as saying:</p>
<blockquote>
<p>But although they’re important, their ratings don’t necessarily have an impact on the agreements and commissions South Africa have entered into with other countries.</p>
</blockquote>
<p>This simply is not true. A downgrade affects the interest rates on every new bond issuance. Every year some of our outstanding R2,000 billion <a href="https://commodity.com/debt-clock?off">domestic</a> and R141 billion foreign denominated debt has to be <a href="http://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/7195/08Statistical%20tables%20%E2%80%93%20Public%20Finance.pdf">rolled over</a>. Debt services are already at roughly R150 billion per year – the second largest position in the country’s <a href="https://www.fanews.co.za/article/economy/43/budget-2016/1390/budget-2016-all-about-debt-stabilisation-and-a-social-compact/19856">budget</a>. A 5% increase in the country’s refinancing cost would already cost South Africa additional R7.5 billion every year. Money that is missing to finance social grants, healthcare, police or student bursaries.</p>
<p>The banking group Absa did some <a href="https://businesstech.co.za/news/finance/145453/fears-over-south-africa-junk-status-this-is-how-it-will-affect-you/">sample calculations</a> on how a ratings downgrade would affect the average South African. It concluded that every adult person would lose roughly R2,000 because a ratings downgrade would mean that the banks themselves would face higher refinancing costs. These would be passed on to their customers. </p>
<p>These numbers mirror a World Bank <a href="https://businesstech.co.za/news/finance/145453/fears-over-south-africa-junk-status-this-is-how-it-will-affect-you/">estimate</a> that a ratings downgrade in South Africa would result in a reduction of R1,000 per capita by the end of 2017.</p>
<p>The numbers paint a clear picture. Zuma’s last attack on the National Treasury cost South Africa <a href="http://www.biznews.com/undictated/2015/12/15/cost-to-sa-of-zuma-v-rooyen-gordhan-nene-r171bn/">billions</a>. Molefe’s appointment would be seen as another attack on the institution given that he was implicated by the former public protector Thuli Madonsela in her state capture <a href="http://mg.co.za/article/2016-11-02-breaking-read-the-full-state-capture-report/">report</a>. The effect of his appointment would be equally costly for the country. </p>
<p>South Africans should not allow this raid on the National Treasury to happen. The last time Zuma and his allies attempted to capture a well-functioning institution for their own personal gains the private sector gave them a hiding. The good news is that it is likely that markets will show a strong reaction this time, too. The question is whether ordinary South Africans realise the threat that a captured National Treasury would pose to their wallets and stand up before it is too late.</p><img src="https://counter.theconversation.com/content/73286/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Co-Pierre Georg is a Policy Associate at Economic Research Southern Africa. He writes in his private capacity.</span></em></p>The decision to give former Eskom CEO, Brian Molefe, a seat in the country’s parliament comes with the potential to cause great economic pain for South Africa.Co-Pierre Georg, Associate Professor, UCT School of Economics; South African Reserve Bank Research Chair in Financial Stability Studies, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/730032017-02-15T13:45:02Z2017-02-15T13:45:02ZThe odd meaning of ‘radical economic transformation’ in South Africa<figure><img src="https://images.theconversation.com/files/156805/original/image-20170214-25999-mxsvbj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Siphiwe Sibeko/Reuters</span></span></figcaption></figure><p>The only thing radical about South Africa’s ruling party’s understanding of “radical economic transformation”, a commentator once suggested, is its use of the word ‘radical’. The comment was made a few years ago, when the African National Congress (ANC) was in the habit of using the slogan to describe very modest change. Now it’s back. </p>
<p>In his 2017 state of the nation address South Africa’s President Jacob Zuma brought back the phrase “<a href="http://www.ujuh.co.za/zuma-what-do-we-mean-by-radical-socio-economic-transformation/">radical economic transformation</a>” causing nationwide <a href="https://www.dailymaverick.co.za/opinionista/2017-02-14-radical-economic-transformation-bollocks.-its-a-rent-extraction-opportunity/#.WKP_Dm997IU">debate</a>. Other senior ANC <a href="http://www.politicsweb.co.za/documents/what-we-mean-by-radical-economic-transformation--r">politicians</a> have done the same.</p>
<p>Have the ANC’s intentions changed?</p>
<p>To answer that, we need to understand why “radical economic transformation” is back on the ANC’s agenda. As with much of what happens in the ANC today, factional politics is a crucial part of the story.</p>
<h2>One slogan, two agendas</h2>
<p>The ANC has believed for decades that <a href="http://www.anc.org.za/content/50th-national-conference-resolutions-economic-transformation">change is needed</a> to speed up black people’s access to the economy. It has emphasised this over the past few years as it became clearer that economic exclusion remains a stubborn reality despite two decades of political change.</p>
<p>Translating this into reality is difficult. The country’s racial divisions ensure that government and business do not share the common goals which, for example, produced change and growth in <a href="https://www.google.co.za/webhp?sourceid=chrome-instant&rlz=1C1CHWA_enZA699ZA699&ion=1&espv=2&ie=UTF-8#q=asian+tigers+develoment+theory+miracle">Asia</a>. </p>
<p>At the time of negotiating and <a href="https://theconversation.com/how-ancs-path-to-corruption-was-set-in-south-africas-1994-transition-64774">assuming power</a>, the ANC recognised that it could not impose change since this would scare away capital. And it did not develop an effective strategy for negotiating with power holders in the private economy. The result was a gap between rhetoric and detail. </p>
<p>More than five years ago the ANC began talking about a “<a href="https://www.dailymaverick.co.za/article/2013-02-07-behold-the-second-phase-of-the-transition-ancs-big-plans-for-the-economy-and-the-state/">second phase</a> of the transition” to address social and economic change. Since then its documents and statements have tended to combine radical phrases with plans which simply tweaked what already exists.</p>
<p>And over the past few months, “radical” economic change has become a growing ANC preoccupation. This is not because its policymakers decided this. Rather it’s because its patronage politicians seized on the slow pace of change to justify their continued quest – in partnership with their private allies – to control public resources. </p>
<p>Triggered by the need of the <a href="https://theconversation.com/why-state-capture-is-a-regressive-step-for-any-society-56837">Gupta family</a>, which has been accused of “capturing” the state to protect their interests, they ratcheted up a campaign to paint patronage as a contribution to freedom.</p>
<h2>A familiar tale</h2>
<p>The story they tell has become familiar. “State capture” is actually the reverse: an attempt to take back a state already under the control of private interests. <a href="http://www.politicsweb.co.za/politics/zumas-interventions-will-deal-with-white-monopoly-">“White monopoly capital”</a>, this lobby insisted, controls the state and is determined to prevent a challenge by using claims of “state capture” to defame the forces of economic freedom.</p>
<p>As many commentators have pointed out, this is not about building an economy which includes more people but about justifying why some connected people should get their hands on the public purse. </p>
<p>But ANC politicians who reject this ploy cannot simply dismiss it. The patronage group is trying to exploit the idea of economic change because just about everyone in the ANC – and many people outside it – agree that it is not credible to claim that the economy is now nonracial and inclusive. Their opponents must, therefore, acknowledge that change is needed. But they must try to ensure that it is about including people, not enriching a few.</p>
<p>The stress on “radical economic transformation” – and more militant statements on the economy by ANC politicians such as secretary-general <a href="http://www.iol.co.za/news/politics/anc-shifts-gears-into-radical-socio-economic-transformation-7560267">Gwede Mantashe</a> and parliamentary finance committee chair <a href="http://www.businesslive.co.za/bd/opinion/columnists/2017-01-26-editors-lunchbox-transform-or-else-yunus-carrim-tells-banks/">Yunus Carrim</a> – are part of this attempt to develop a programme for change which is not about giving a free pass to the connected.</p>
<p>This does not necessarily mean that there is always a neat divide between the two change agendas – some policy documents might mix proposals from the both sides. But the attempt to justify patronage has triggered enhanced ANC interest in change.</p>
<h2>More serious than before</h2>
<p>Given this background, the latest version of “radical economic transformation” should be taken more seriously than previous editions. </p>
<p>The patronage group’s opponents need to show that it is possible to achieve economic change which fixes the problem rather than using it as an excuse. So they can’t simply talk about change – they must make it happen. </p>
<p>But are there any signs of attempts to ensure radical change?</p>
<p>The details spelled out in <a href="http://www.iol.co.za/news/politics/anc-shifts-gears-into-radical-socio-economic-transformation-7560267">recent ANC statements</a> provide an answer. They include plans to boost business opportunities in townships and rural areas, and by using “the Constitution, legislation and regulations, licensing, transformation charters, the national budget and procurement, state-owned companies and development finance institutions, as well as government programmes” which, of course, is fairly vague.</p>
<p>The <a href="http://www.gov.za/speeches/president-jacob-zuma-2017-state-nation-address-9-feb-2017-0000">State of the Nation Address</a>, which can presumably be taken as a statement of the government’s intent, ignored the township business proposals and concentrated on tougher competition legislation and a state-owned mining company (a possible gain for the patronage group).</p>
<p>It also emphasised land distribution and using a variety of measures to boost black business: public procurement, legislation to boost black property practitioners, and the black industrialists programme.</p>
<p>How radical these ideas are depends on the beholder. To some lobbies any attempt to interfere with the market is a threat to its survival. But, for those with a greater grasp of reality, the theme seems to be change which goes beyond tinkering with current ways of doing things, but does not seek to tear up the fundamentals which have underpinned policy since 1994. It also seems likely that the proposals are designed for negotiation and are not final decisions.</p>
<p>The patronage lobby’s ideas would, of course, change those fundamentals dramatically. It would tear up many of the controls which protect public money, from rules which award tenders to the cheapest bidder, through to controls on money laundering to the Treasury’s spending safeguards. </p>
<p>Their opponents propose a programme which leaves all of that in place but seeks to nudge the economy in a more inclusive direction.</p>
<p>The land proposals, for example, may use expropriation – which will allow courts to set the price of the land – but, according to land reform minister <a href="https://www.businesslive.co.za/bd/national/2017-02-15-valuer-general-to-determine-land-prices-says-nkwinti/">Gugile Nkwinti</a> will mainly rely on the Valuer-General, a recently created government office which sets the prices of land earmarked for reform. New competition laws may trample on some toes but are hardly radical in a market economy.</p>
<p>This year’s version of “radical economic transformation”, therefore, has more substance than the previous editions. But it is hardly a recipe for a dramatic economic shift.</p>
<p>And, while the content of government proposals has shifted, there are no signs yet that the lack of a strategy to achieve them has been addressed. All of these plans will remain on the drawing board unless ways are found of ensuring that investment not only continues but also grows. That will require a coherent plan to win the support – or at least the compliance – of economic power holders. Until that emerges, “radical economic transformation” will remain the stuff of policy documents rather than concrete action.</p><img src="https://counter.theconversation.com/content/73003/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Friedman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In his recent state of the nation address South Africa’s President Jacob Zuma spoke emphatically of “radical economic transformation” causing nationwide debate. What does it really mean?Steven Friedman, Professor of Political Studies, University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.