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Any politician worth his salt won’t pick a fight when the odds are stacked against him. Which is the dilemma facing President Cyril Ramaphosa as the deep roots of the parasitic Zuptoid decade and crippling party policies see him choosing party unity above our (failing) State. This is a sobering story reflecting how global institutions which influence our future are now beating the drums deafeningly, signalling the urgency with which Ramaphosa has to take hard decisions – with seismic implications for his fractured party. When your own finance minister says it’s ‘game over,’ unless there’s deep infrastructural reform, in addition to what you’re about to read below, then Ramaphosa’s impending State of the Nation speech becomes pivotal. The biggest danger in 10 days’ time will be if our not-entirely-fearless leader echoes existing pledges to ignite growth, citing SOE and NPA management changes, plus investment – without taking on his internal party faction and revising growth-toxic ANC policies. His supporters will say anything unexpected would be political suicide, but you could argue over whether he’d be risking a fatal leap or potentially fatal slow poison. At least with slow poison there’s a chance of a death-defying antidote. Optimists are waiting to exhale… – Chris Bateman

World to Ramaphosa: Do something fast to save South Africa

By Prinesha Naidoo and Mike Cohen

(Bloomberg) – Pressure is mounting on South African President Cyril Ramaphosa to stabilise the government’s shaky finances and rescue an economy teetering on the brink of recession.

Since taking office in February last year, Ramaphosa has repeatedly pledged to ignite growth and reverse nine years of misrule by his predecessor Jacob Zuma. His ability to undertake reforms has been constrained by a ruling party faction that wants the government to play a greater role in the economy and by powerful labor unions opposed to state-spending and job cuts.

Warnings that South Africa is on a precipice have come from the International Monetary Fund, the World Bank, business executives and economists from Absa Bank Ltd. and other lenders. Even Tito Mboweni, Ramaphosa’s finance minister, has taken to Twitter to vent his frustration at the slow pace of reform.

Here are samples of the growing drumbeat:

The IMF

When Ramaphosa took office, “market expectations for growth-enhancing reforms were high,” the fund said in a Jan. 30 statement. “However, sluggish implementation and persistent policy uncertainty did not validate those expectations, and business confidence is now close to all-time lows.”

The World Bank

“Weak growth momentum has reflected an array of overlapping constraints,” the lender said Jan. 8. “These include persistent policy uncertainty, constrained fiscal space, subdued business confidence, infrastructure bottlenecks – especially in electricity supply – and weakening external demand, particularly from the euro area and China.”

Absa Economists Peter Worthington, Miyelani Maluleke

“In addition to clean governance, South Africa needs better economic policies in the form of structural reforms across a broad set of activities and sectors,” the economists said Jan. 20. “Frustrations continue to mount about a perceived slow pace of change.”

Sibanye Gold Chief Executive Officer Neal Froneman

“I know that our president inherited a very difficult situation, but to be clear and blunt he also hasn’t made some of the difficult decisions that need to be made,” Froneman said in an interview Jan. 28. “It’s time government acted in the national interest and not in the interest of the one party.”

Finance Minister Tito Mboweni

“If you cannot effect deep structural economic reforms, then game over!” Mboweni said on his Twitter account Jan. 10. “Structural economic reforms inertia is frustrating. Let’s get on with it. Movement!! Many steps at a time!!”

Ramaphosa says he’s committed to getting the economy on track, clamping down on graft and making the government more efficient. He can point to some progress since taking office, including appointing a new chief prosecutor and head of the national tax agency, and replacing the boards and management of several state companies. He’s also embarked on a drive to attract $100 billion in new investment over five years, with a substantial portion of that already committed.

Political analyst Ralph Mathekga cautions that Ramaphosa hasn’t gone far enough, largely because he is pandering to competing interests within the African National Congress, which has ruled South Africa for 25 years.

“Unfortunately, the president is going to fail everyone equitably if he doesn’t take a position. He is seen as not to be willing to pick a fight,” Mathekga said. “I think we are having a presidency here that is resigning itself to being a crisis manager instead of a reformer.”

Ramaphosa’s office didn’t respond to a request for comment. The government is committed to fostering economic growth, creating jobs, turning state companies around and ensuring it appoints suitably qualified people, he told leaders of the ruling party in Pretoria on Jan. 20.

“We have been frank about the extent of the difficulties in our country,” Ramaphosa said. “We acknowledged where we have fallen short in the implementation of our policies and have devised realistic measures to address these.”

Article by BizzNews

The Department of Rural Development and Land Reform has published a new ‘land donations policy’, allowing groups to donate property to speed up the land reform process.

Released for public comment on Friday (7 February), the document states that donations should be expedited from large institutional landowners. This includes agri-business, mining companies, financial institutions, churches and other groups.

“Specific procedures should be established to respond to offers of donations so that the department becomes responsible and expedites acquisition and transfer of the donated land,” the policy states.

“The state will also undertake an assessment of all state and public land that is suitable and available for distribution (donation) to the prioritised beneficiaries for agricultural and secondary agricultural production, residential and human settlement, commonage and industrial development.”

The policy accounts for donors who have preselected beneficiaries and land which will simply be given to the government to redistribute.

In cases where there are no identified beneficiaries, the farm dwellers, labour tenants, small families and cooperative farmers, the landless in informal settlements, women, youth, and persons with disabilities will be prioritised, the policy states.

The donation process

The state will register properties and a due diligence process will follow, the policy states.

This process will include assessments in terms of land suitability and the extent of the state’s financial, administrative and technical responsibilities for such land.

This will also involve land rights enquiries, farm/property assessments and special technical attention given to the donations concerned.

The policy outlines the different steps of the donation process as follows:

• Donated land coming with pre-selected beneficiaries – Where land is made available for donation and comes with preselected beneficiaries, it will be prioritised for disposal. Such land will follow the due process but will not be advertised for allocation and will be tabled directly at the appropriate selection and allocation panel.

• Where the land has no identified beneficiaries – Where the donated land has no identified beneficiaries, it will be prepared for the beneficiaries who have been prioritised by the Beneficiary Selection and Land Allocation Panel. Due diligence will also be required to check whether there is a claim to the land in terms of the Restitution of Land Rights Act. Where required, an added assessment will be undertaken in terms of a rating methodology and software developed, to rank strategically located land-based on natural resources, availability of infrastructure and proximity to markets.

• Land donated primarily for agriculture or for human settlement purposes – All donated land that is agricultural and cleared, will be registered and logged into the Agricultural Land Holdings Account. Such land will be advertised for selected beneficiaries to apply. Where the donated land is for human settlements, it will be processed via the Department of Human Settlements, Water and Sanitation.

• Valuation of donated land – The valuation of the donated land will be done after the above-mentioned assessments have been conducted.

• Transfer of donated land –  All land acquired for donation will be subjected to the normal transfer process, which will include the appointment of conveyances, the transfer of the properties, property management and land disposals to the identified beneficiaries. This will be in the form the signing of lease agreements and/or hand over of the properties in freehold form, mainly to farm workers, labour tenants, restitution claimants and other designated groups. In certain instances, a reversionary right to the state will apply to such land.Articel by BusinessTech

This sober, rational – and frightening – analysis by the Institute of Race Relations is a classic illustration of the ‘boiled frog’ syndrome where South African land owners get lulled into a sense of false security by banks eager to please ruling politicians. It’s among many examples of socialist command-and-control policy-creep that threatens to push this country beyond economic viability. Banks and many big businesses seem to have grown from vigorous tadpoles thriving in lukewarm water to inert, full-grown frogs in fast-warming water, and the IRR is screaming at them to wake up and get out. Before they collapse under the weight of unpaid loans as the latest EWC draft bill gives ANC cadres power to expropriate without any compensation, leaving land owners (urban and rural) without ready cash to pay back outstanding loans. No prizes for guessing what will happen to the property market. An example of the seemingly hypnotised state of lenders is the public statement by SA Home Loans which shows a naive trust in the EFF-led EWC. It says the rights of all parties will be considered in any expropriation processes and that it has no reason to believe that residential properties will be affected. Not at all so, says the IRR. Read on… Story courtesy of The Daily Friend. – Chris Bateman

Don’t throw the little guy under the EWC bus

By Frans Cronjé*

Last week, mortgage lending firm SA Home Loans took to social media to state that in the event of a client’s property being expropriated, the client would remain liable to settle the outstanding mortgage balance. Our enquiries suggest that firms across the financial services sector are taking a similar line. This underscores the deeply troubling moral, legal, and financial ramifications of the government’s expropriation without compensation (EWC) proposals.

This is, verbatim, what SA Home Loans had to say on Twitter:

‘In the event of expropriation, the bond payments would still remain owing to the mortgage lender. However, we understand that the rights of all parties will be considered in any expropriation processes and have no reason to believe that residential properties will be affected.’

Break that statement down into its component parts and consider them one at a time.

Whether bondholders could or should refund lenders in the event of an expropriation is becoming an area of contestation. The current draft of the Expropriation Bill of 2019 – which is likely to be enacted once the government has its EWC constitutional amendment in the bag – says that the mortgage bond will automatically be terminated on the date of expropriation, when ownership passes to the state. This means that the lender (a bank, for instance) can no longer foreclose on the property now that it is owned by the government.

However, the loan secured by the mortgage does not come to an end. Instead, the usual rule is that the expropriated owner must still pay the loan off to the bank. This, however, may be difficult for the owner to do where compensation is minimal and, in particular, where EWC applies.

If some compensation is payable, the Expropriation Bill directs that this should be apportioned between the borrower and his or her bank, according to the agreement reached between them. (If no agreement has been reached, the compensation will be paid to the Master of the High Court until such time as the dispute has been resolved.)

A similar situation applies under the current Expropriation Act of 1975, which also provides that the mortgage bond comes to an end on the date of expropriation. The critical difference, however, is that the compensation payable under the Act is market value, plus a further solatium. This amount will generally exceed the outstanding loan, making it relatively easy for the expropriated owner to pay what he or she still owes.

However, if EWC applies – or if the compensation paid is far below the amount of the outstanding loan – then many difficult issues arise.

The first complex question is whether, in the EWC situation, it is morally justified to compel the expropriated owner to pay the outstanding debt on the property that has been confiscated from him or her.

Expropriation is being held up by politicians, the government, policymakers and activists as a ‘social good’ and as a key means of bringing about redress, prosperity, and social cohesion, among other things. President Cyril Ramaphosa once suggested that EWC would bring about a Garden of Eden. Some business leaders have also gone on the record to say that they support the principle of expropriation.

If expropriation is a social good, and the country as a whole is thus set to benefit from it, then whatever costs are attached to any expropriation should be carried by the broader society and not by expropriated individuals. Hence, the costs of loans that remain outstanding following EWC expropriations should be carried by taxpayers.

At the same time, some politicians and activists argue that it is wrong to expect compensation to be paid for expropriated property as all land was improperly acquired – and has therefore improperly benefited those who have dealt in it. But that argument would apply just as much to banks and their shareholders as it does to individual home owners.

Political considerations are relevant, too. Some banks and other financial services institutions, including their directors, were instrumental in helping the Ramaphosa administration into power through their financial support, lobbying, and related activism. They strongly endorsed Mr Ramaphosa when he became president in February 2018, and repeatedly depicted him as a committed reformer who could be trusted to put the country on the right track.

The ‘Save South Africa’, ‘Vote Cyril’, ‘Make Cyril Strong’, and ‘CR17’ campaigns, supported and financed by many influential figures in business and their representatives, were probably sufficiently persuasive among middle-class voters to push the combined African National Congress (ANC)/Economic Freedom Fighters (EFF) share of the vote above the two-thirds level needed to force the EWC constitutional amendment through the National Assembly (the ANC/EFF collective vote came to stand at 68.3%). If the combined ANC/EFF vote had remained below two thirds, Mr Ramaphosa would still have been elected president – but the threat to property rights would have been much reduced. Disturbingly, as late as 2019, many businesses, their directors, and the broader organised business community pressed ahead with campaigns for a bigger ANC share of the vote, what became popular as the ‘mandate threshold’ argument, even though the EWC risk was already writ large and the IRR and other organisations were loudly flagging the dangers of a two-thirds majority for the ANC and EFF. For those same institutions and people to stand back now and say that their clients alone must carry the EWC costs seems particularly unfair.

This brings us to the second part of the SA Home Loans’ statement: ‘that the interests of all parties will be considered’. Legally, this is very much what is envisaged under the 2019 Expropriation Bill. It also echoes what Section 25 of the Constitution presently requires.

Section 25 now stipulates that the expropriation of property must be accompanied by the payment of ‘just and equitable’ compensation. The compensation payable must also strike ‘an equitable balance’ between the public interest in land reform and the interests of the expropriated owner. The section also gives the courts the task of deciding on the amount of compensation in the light of these criteria. However, the ANC now wants to exclude the courts from such decision-making. It will presumably seek to change the Draft Constitution Eighteenth Amendment Bill of 2019 – which is now open for public comment until 29 February – to achieve this.

The ANC is adept at using policy ‘incrementalism’ or policy ‘creep’ to achieve its long-term goals. It is particularly skilled at stepping back at times from demands it has made in order to lull society into a false sense of security. Before long, however, the organisation will renew that same demand, or shift to another that is equally or more damaging.

We in the IRR have tracked this process with regards to EWC for over a decade and the pattern is unmistakable. What the ANC’s latest demand clearly shows is that the ruling party is pushing for a new property rights dispensation in which officials (its deployed cadres) will decide who has access to property and on what terms. The present ‘just and equitable’ regime is thus on the way out. So, too, is the current emphasis on the need to balance societal interests against those of affected individuals.

A third stance taken by SA Home Loans is that they have no reason to believe that residential properties will be seized. This suggests that they are out of touch on EWC developments.

For some time now, various political leaders have said that land reform efforts will be focused on both rural and urban areas. Many of these leaders are in the EFF, but the EFF is ideologically allied to the ANC and often gives voice to goals the ANC in fact shares. A formal ANC/EFF alliance could also be concluded over the next decade – and discussions about this are ongoing. Consider the EFF as the sharp tip of the EWC spear, with the ‘more moderate’ ANC as the shaft. But even that supposed difference is becoming less evident.

That urban homes are in the EWC firing line is also now clear from the wording of the Draft Constitution Amendment Bill. This states that both land ‘and the improvements thereon’ may be expropriated for ‘nil’ compensation. ‘Improvements’ clearly include houses (and other structures) in both rural and urban areas.

Some observers continue to maintain that land reform is restricted to rural property, but this is simply not the case, as many politicians and policy makers have made clear with reference to urban housing inequalities and shortages. The government has also been very critical of what it terms a ‘lack of transformation’ in the property sector generally and catching urban property in the broader EWC net will provide the government and the ANC with significant leverage over all players in the urban property industry, from developers to owners, banks, other lenders, estate agents, and insurers. Consider further how many state-capture suspects remain in that government and the dots to where this may lead connect themselves.

Let us return to SA Home Loans’ position that their clients must go on servicing bonds for many years to come for assets they no longer own. Two points are central here. The first is that if banks do not recoup the money they have loaned, they will betray their fiduciary obligations to depositors and their businesses are likely to collapse. Let banks and other mortgage lenders start going under and you precipitate a chain of events that may culminate in a collapse of the entire banking sector. Second, the agreements that banks have signed with their clients must retain their binding legal force if the rule of law is not also to collapse.

At the same time, financial institutions are operating in an economy in which regulators have significant discretionary powers. Many thus understandably fear the consequences of getting on the wrong side of the political equation. But if any of them think they can circumvent all these pressures by throwing their clients under the EWC bus, they are quite wrong.

Banks and other lending institutions will, of course, battle to survive if substantial debts by many expropriated owners remain unpaid. However, they also cannot realistically put debt collectors on to those hapless individuals who fall victim to EWC. Expropriated property owners will be deeply traumatised and in severe financial distress. Many will have been financially ruined. They’re not just going to go back to work the next morning, move into new homes, and carry on with their lives as if nothing had happened.

If some expropriated owners still possess other assets, will SA Home Loans try to seize these – in a wave of secondary asset seizures? Imagine the headline, ‘SA lender forces family onto the streets’, with accompanying pictures of hapless children, suitcases in hand, with nowhere to go. Yet this is exactly the situation that SA Home Loans and other lenders will face.

Secondary seizures of this kind will also tip the economy into even deeper distress and send asset values plummeting across the economy. Who would ever again buy property in South Africa? Who would take out a mortgage loan? The property market would soon be in freefall, with owners seeking to cash out and salvage what money they could. Lenders perhaps have yet to understand the enormity of the catastrophe that is likely to unfold.

Given these many troubling legal, moral, and practical realities, SA Home Loans would have done better to warn against the enormous risks that EWC poses to the entire society; stress its own commitment to publicly opposing all pending EWC laws; emphasize its willingness, in the event of its clients facing the uncompensated expropriation of the properties they own, to do all in its power to recoup the amount of their outstanding loans from the government of South Africa – the institution that has brought about the crisis; and, lastly, to admit what is now apparent, that should the constitutional amendment and Expropriation Bill be passed by Parliament as the ANC envisages then South Africa will come to stand at the edge of an abyss from which its economy may not recover for a very long time.

• Frans Cronjé was educated at St John’s College in Houghton and holds a PHD in scenario planning. He has been at the IRR for 15 years and established its Centre for Risk Analysis as a scenario focused research unit servicing the strategic intelligence needs of corporate and government clients. It uses deep-dive data analysis and first hand political and policy information to advise groups with interests in South Africa on the likely long term economic, social, and political evolution of the country. He has advised several hundred South African corporations, foreign investors, and policy shapers. He is the author of two books on South Africa’s future and scenarios from those books have been presented to an estimated 30 000 people. He writes a weekly column for Rapport and teaches scenario based strategy at the business school of the University of the Free State.
• The IRR is fighting EWC with every resource it possesses. But we need your help. Become a Friend of the IRR if you aren’t already one by SMSing your name to 32823 or clicking here. Each SMS costs R1. Terms & Conditions Apply.

  article by BizNews

The first wave of state capture had its origins in the cadre deployment and transformation policies of the African National Congress (ANC) which degenerated into the looting of state institutions. These policies allowed the party, through the government, extraordinary regulatory and administrative powers and deployed cadres just could not withstand dipping into the public purse.

A senior ANC leader once told me that what the party desired was a model of ‘sustainable wealth extraction’ in which the party, through the state, could draw wealth out of the country without driving investment out of the country – but bemoaned that greed and infighting among cadres was so great that they could not help but destroy the institutions they were deployed to lead.

The consequences can be seen in Eskom, in creaking infrastructure, failing municipalities, toxic rivers, dangerous hospitals, and corrupt policing. They can be  read in the testimony to the Zondo commission, the Gupta leaks, and the reports of the Auditor General. As Minister of Public Enterprises Pravin Gordhan is reported to have said, ‘If you thought it was bad, it was worse.’

But I am afraid that if the first wave of state capture related to the destruction of public institutions and infrastructure, the second (and later) waves may relate to the attempts at their rebuilding.

The formulae for those subsequent waves will have three components. The first will be large amounts of corporate, pension, and development financing being made available for rebuilding. The second will be the nominal ‘privatization’ or private contracting of firms to rebuild that which has been broken. The third will be to apply the above via the same regulatory and administrative mechanisms that led to the first wave of state capture.

Here are some practical examples:

The energy parastatal/municipal water works/public hospital/mining industry is failing. South Africa suffers an electricity/water/healthcare/mining crisis. Something must be done. New generating capacity/refurbished infrastructure/better healthcare administration/new mining investment must be brought on line to save the country. Large amounts of development financing must be raised, with business, government, labour, and the international community (especially under wave three) working closely together. Collectively they will agree that the ‘private sector’, or at least private-public partnerships, must do the delivery as the capacity of the state is so eroded. Calls will go out for applications from suitably qualified firms to do the work or lead these partnerships. But these firms and the contracts they win will be surveyed by the same political leadership and through the same prisms of cadre deployment and transformation that led to the first wave of state capture.

We at the Institute of Race Relations (IRR) think transformation is very important in the sense of introducing effective empowerment and affirmative action policies that identify people on the grounds of socio-economic disadvantage and help them into the middle classes. But what passes as transformation in the government and the ANC is not that but rather a racial nationalist policy that acts as a fig leaf to conceal corruption, malfeasance, and the looting of public funds by painting any critic of the policy as racist.

Put it quite bluntly; you can grow rich off looting Eskom into the ground, and then win the financing and tenders to supply the renewable energy that South Africa needs to keep the lights on. When anyone questions what is going on you can again throw the racism accusation at them (and in the case of renewable energy) the climate-change denialist accusation.

What ends up happening is that, having exhausted the resources available from public institutions, the ANC’s political elite pivot under the guise of privatization and reconstruction to keep the cash taps flowing. State capture is ongoing – it is only the business and financial model that has changed. If you have any doubt think about what has happened at South African Airways (SAA) where banks and a development financing institution have stumped up several billion rand to keep the cash flowing without which that fragile cadre-deployment house of cards would already have come tumbling down. When asked why they did it, the development bank said that if they had not then SAA would have folded – not the basis of sound banking or investment policy.

An implication of our ‘waves of state capture’ thesis is that it is too early now to speak of public-private partnerships, raising development finance, and rebuilding, and will remain so as long as the current political elite that looted the country is still in charge.

The first cycle of state capture lasted almost twenty years before running out of cash in the aftermath of the 2009 financial crisis and the frenzied looting that followed. If the looting had been done in moderation it might have lasted longer. The second may not last as long but given the quantum of private funds held within the country, including pension funds, it could last for many years. The third wave will come after those private funds are exhausted and international funding agencies are forced to step in.

The IRR first warned about the implications of cadre deployment and what is today called state capture almost twenty years ago. For much of the time that followed, the warnings were ignored or loudly countered. It is important to say that because this is not our first rodeo and the methods and tools we used to make that call 20 years ago are the same as those that allow us to flag the lining up of state capture ducks all over again.

If you ask how these next waves can be avoided, the most compelling answer now is the complete defeat of the ANC so that it is out of government. Short of such an outcome, and short of a sincere effort to jail the corrupt in its ranks, our assessment is ever more that the ANC in government will repeat the cycle of state capture time and again, simply changing the source of finance ahead of each new wave.

Twenty years ago very few influential people were willing to admit, let alone speak out or act against, the dangers inherent in the nexus between cadre deployment, what passes as transformation policy, and the enormous administrative power of the state. Today, equally few seem able to admit that the ANC must be driven out of government to stop the cycle.

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Article by daily Friend and Frans Cronje

The 2020 Budget is approaching and by all accounts, we are likely to witness an embarrassing display of a policy with no answers. We have chosen to be popular. We have chosen to “trash capital”.

Let me give you an idea of the knock-on effects when you decide to “trash capital”. What we are doing in South Africa at the macroeconomic level is the equivalent of students burning down libraries because they are unhappy with education policy. For those of you, close to national accounts and budgets, bear with me, I have rounded and dumbed down the numbers to make it easier to understand.

First some concepts:

A Nations’s capital includes the land, the buildings, the stock, the financial assets. In the case of South Africa about R 25 Trillion. GDP is the total amount of our turnover – our output in South Africa is about R4,5 Trn. The Capital/Output ratio is the amount of capital required to generate a certain output, in South Africa about 5 to 1. The employed labor force is directly associated with the GDP and capital, in the case of South Africa about 15 million people. The tax collected in South Africa is directly related to GDP, around 26%.

So working it backward in South Africa if we want to keep our new youth entering the market at the rate of 500,000 per year and we wish to keep a growing portfolio of social services, we need to increase GDP by around 5% per year or increase capital by about R 1 Trn a year. The simplest way to do that is to have a rising property market that creates a tide that lifts all ships. The richest countries own the most valuable properties. The most fluid working capital flows are underscored by property.

Government can fiddle a bit but you cannot really escape these numbers. More jobs require more capital. Less capital available means fewer jobs. Lower GDP, means less tax less money for social services, more burning of libraries. These are not iron clad ratios like gravity or the melting point of water, but they are certainly strong forces that cannot be ignored.

Now take the situation where our President Cyril Rhamaphosa, his Finance Minister Tito Mboweni and the economic cluster – including his advisory panel of esteemed economists, take a “Trump- First” style approach to Expropriation Without Compensation. Understand that all these politicians and all these esteemed economists really, really like their jobs and the trappings and status that come with it. In South Africa, it is very unpopular to speak out against EWC. I can understand this from people that do not understand economics, but for people who do, the silence goes beyond cowardice and lands squarely in the lap of narrow short-sighted self -interest.

Go through the numbers:

The ANC calls for Expropriation without Compensation and the President, Finance Minister, and the esteemed economists, toyi-toyi along with the masses. The crowds love the beat and elect them for another term. No one bothers to notice that the property market drops by 20% and wipes over R1,5 Trn off our Capital base. No one wants to connect the dots that this causes a drop of GDP of over R 300 Bn and Job losses north of one 1 Million Jobs! No one can figure out why tax targets come in R 100 Million lower. No one figures out why SOEs are failing. Duh?

A man cannot understand a logical argument when his wages depend on not understanding it. The dancing continues and lunch is served to the guests – its avo and prawns. Cocktails follow and more dancing. Outside it is getting darker.

The fastest way (instantaneous – can happen before the end of February) to inject R 1,5 Trn into the South African Economy is to revoke EWC!

Wait – you actually have to do more – you have to give assurances to the landowners that this was a mistake and that it is good and safe to invest in South Africa. Bring your capital onshore, build your warehouses and factories and fill them with stock. Plant blueberries, avo and olive seeds that will only yield crops in five years’ time. Drill new mine shafts. Build dams on your farms, you can keep the water. Assure the landowners that if they are successful we will not overtax them. Commit to dropping the Tax to GDP ratio. The profits will always be theirs and they will have a Government that will guarantee this. Then take the R 100 Bn increased taxes that will certainly follow and use that to buy land for the poor using tried and tested market mechanisms.

The land Issue is very important. Trashing capital does not solve it. It does exactly the opposite, it destroys land value and burns the libraries.

President Rhamaphosa, Tito Mboweni and every one of those esteemed economists that take their paychecks this month, should be ashamed for putting their short term self-interest before what is good for South Africa – popular or not.

Article by Philip Copeman

#copeman academy Tito Mboweni Mzwanele Nyhontso

JOHANNESBURG – SAA business rescue practitioners have approached the Unemployment Insurance Fund (UIF) to discuss the possibility of using the R100 billion surplus that the UIF controls to fund inevitable retrenchments at the troubled state-owned airline.

The rescuers, Les Matuson and Siviwe Dongwana, on Wednesday confirmed that they had held numerous meetings with the UIF to seek ways to handle the retrenchments, which were expected to be finalised within the 60-day consultation process stipulated in the Labour Relations Act.

On Wednesday, the rescuers were locked in meetings with the trade unions that represent SAA workforce to discuss the process.

An insider with deep knowledge of the happenings within SAA said retrenchments at the airline had become inevitable.

“There is just no way that the SAA workforce cannot be cut if we are serious about turning the airline around,” the insider said.

“The question now is the numbers (of those who would be retrenched.”

SAA first flagged retrenchments during the presentation of its restructuring plan in November, charging that it would need to cull more than 900 jobs to save about R700 million a year.

The airline started section 189 consultation processes with the unions, but the discussions were scuppered after workers went on strike demanding higher wages.

Matuson and Dongwana said they would continue to have discussions with other parties to seek solutions to alleviating financial challenges to both SAA and its employees “that may result from retrenchments during the business rescue proceedings”.

However, they said “no agreement whatsoever has been concluded with the UIF to make any funds available for the retrenchments of any SAA employees” at this stage.

The rescuers’ spokesperson, Louise Brugman, confirmed the meeting with the trade unions, but refused to comment further.

“We are not commenting on that at this point,” Brugman said. “But I’m thinking we are going to put out something this week, not so much on the UIF. We are not commenting on that UIF and DA (press) release.”

Another source said the business rescue practitioners were busy with their restructuring plan that had identified an extensive workforce that was not compatible with the airline’s operational requirements.

“The plan is still being workshopped internally, and the worry is that if they start communicating it in a public platform, they would have problems, especially with trade unions,” the source said.

“The timing is just not right. At a board meeting yesterday they were still working on the plan. This is Les’s plan, and if he says so many people must go, he would know the technical reasons for saying that.”

SAA employs 5 146 workers. In December, the airline was placed in business rescue following a shortage of funding for its operational expenses.

The national carrier has failed to submit its audited financial statements for two successive financial years. It posted a loss of R5.67 billion for the year to the end of March 2017.

Last month, SAA received R3.5bn from the Development Bank of Southern Africa to fund its operations.

The National Union of Metalworkers of SA and the South African Cabin Crew Association, which together represent about 3000 SAA workers, say SAA’s financial problems stem from its failure to manage its R25bn procurement budget, rather than excessive wage costs.

The unions have requested a meeting with SAA’s creditors so they can understand the rationale for their demands to cut jobs.

The UIF has a R100bn surplus that it wants to use to create jobs and train retrenched workers.

DA spokesperson Alf Lees said the discussions between the rescuers and the UIF were unwarranted.

“There can be absolutely no special deal between the bankrupt SAA and the UIF in order for the national carrier to get access to the UIF’s coffers,” Lees said.

BUSINESS REPORT

South Africa’s new Administrative Adjudication of Road Traffic Offences (Aarto) Act will be in full effect from June next year (2020), says Transport minister Fikile Mbalula.

Speaking at the launch of Transport Month in Gauteng on Saturday (5 October), Mbalula said that the new system will greatly improve safety on the country’s roads and help reduce fatalities.

Signed into law by President Cyril Ramaphosa in August, the act will introduce a new demerit system meaning all traffic fines across the country will now carry the same penal values.

However, not all infringements will carry demerit-points with roughly half of the infringements contemplated in schedule 3 of the Aarto regulations carrying no demerit points at all, according to Justice Project South Africa’s Howard Dembovsky.

“You may incur no more than 12 demerit points without your licence being suspended,” he said.

“On the 13th point, and for every point thereafter, your licence, operator card or permit issued in terms of road transport legislation will be suspended for three months for each point over 12.

“For example, if you incur 15 demerit points, the suspension period will be nine months.”

While the points and fines may change as the system prepares for a national roll-out, the tables below give an overview of how the points may be allocated as currently set out by the Road Traffic Infringement Agency (RTIA):

Effective land reform is still required, but the Draft Constitution Eighteenth Amendment Bill of 2019 (the Draft Bill) will needlessly undermine the property rights of all South Africans: from the 1 million whites with home ownership to the 8.5 million black, ‘coloured’ and Indian families who own houses too. It will also hurt the 17.5m black people with customary plots, and the thousands of black South Africans who have bought more than 6 million hectares of urban and rural land since 1991.

The Draft Bill has two key clauses. The first allows the courts to decide that ‘nil’ compensation may be paid for land and ‘the improvements thereon’ if these are expropriated for land reform purposes. Improvements include all fixed structures: from houses and office blocks to shopping centres, factories, hotels, and hospitals. The ANC has thus reneged on its earlier promises that expropriation without compensation (EWC) would be confined to land alone.

The second key clause gives Parliament the power to adopt, by a simple (51%) majority, any number of new statutes setting out ‘the specific circumstances’ where the courts may decide that ‘nil’ compensation should be paid.

This will vastly expand the instances in which EWC may apply. It will clearly pave the way for the enactment of the Expropriation Bill of 2019, with its vague and easily expandable list of six instances (already up from the original five) in which nil compensation may apply.

This second clause could also pave the way for a new statute vesting the custodianship of all land and improvements in the government – and stating that this vesting falls within ‘the specific circumstances’ where nil compensation may be paid. Under such a law, title deeds would ‘mean nothing’ (as the EFF has put it) and every individual and business would need a revocable land-use licence from the government for the homes or buildings in which they live or work.

The Draft Bill paves the way, in short, for the custodianship option that both the EFF and the ANC have long desired.  Two stages will be needed – first this Draft Bill and then an ordinary statute – but the custodianship goal will then have been achieved.

The Draft Bill has many other disturbing ramifications. For example, the ANC has repeatedly claimed that EWC will ‘return’ the land to ‘the people’, but this is not so. Land and improvements taken without compensation by the state will be kept in the ownership or custodianship of the government. Ordinary people will not gain individual title, but will at most be given ‘access’ to land on the terms set by the state.

In addition, the Draft Bill will do nothing to cure the ills afflicting land reform. As the Constitutional Court noted in the Mwelase case in August 2019, ‘it is not the Constitution, nor the courts, nor the laws of the country that are at fault’, but rather the massive administrative inefficiency within the state.

Other key constraints, according to the 2017 report of the High Level Panel of Parliament, include ‘increasing evidence of corruption by officials, the diversion of the land reform budget to elites, lack of political will, and a lack of training and capacity’. Important too is the state’s refusal to transfer ownership to emergent farmers, as this bars them from borrowing working capital from banks.

In the urban context, moreover, the Draft Bill will not address the inefficiency, corruption and poor policy choices that underpin persistent failures in state housing delivery. Municipalities lack the skills to service vacant land, while RDP houses are small, poorly located, and often so badly built that people have long been urging the government to transfer the housing subsidy directly to them, as they could do a better job of meeting their housing needs.

The economic fall-out from the Draft Bill is likely to be severe. Even without EWC, the growth rate in 2020 may be a paltry 0.5% of GDP, well below the population growth rate of 1.6%. Public debt already stands at some R3.2 trillion (61% of GDP) and is set to rise to R4.5 trillion (71% of GDP) by 2022. The budget deficit is likely to average 6.2% over this period, while tax revenues will be R250bn lower than projected. Business confidence is at a 35-year low, and capital and skills are fleeing.

The Draft Bill could also trigger a 10% reduction in fixed capital investment (capital formation), which is the life blood of the economy. Such a reduction could tip the country into lengthy recession, further reduce tax revenues, increase public debt, trigger additional ratings downgrades, push up interest rates, and cost tens of thousands of jobs.

Despite the enormous damage likely to result from the Draft Bill, its economic consequences have yet to be evaluated, as required by the government’s Socio-Economic Impact Assessment System (SEIAS). The Draft Bill should, at minimum, have been accompanied by a final SEIAS report setting out its likely costs and consequences – but this has been omitted.

The absence of a final SEIAS report makes it harder for the public to ‘know about the issues’ raised by the Draft Bill and to ‘have an adequate say’. The time allowed for written comments (from 13^th December 2019 to 31^st January 2020) has also been too short, given the four-week festive season when most people were away from work and home.

The ANC has now further undermined the public participation process by declaring that the Draft Bill must be amended to give the power to decide on compensation to the executive, rather than the courts. Judicial review of the executive’s decisions cannot be excluded, given the Constitution’s guarantee of administrative justice. But the power to review is more limited than the power to decide – which the ANC now wants to reserve for its own cadres.

The ANC’s demand seems calculated to demoralise people and make them question the value of making written comments on a text that may soon change. However, little could be more important than for all South Africans to use the little time remaining to voice their strong objections to the Draft Bill and the massive damage it is sure to cause.

Article by Daily Friend

The public enterprises minister is looking to save the 16,000 jobs dependent on the power utility.

Although not explicitly stated, the problem is that retrenching people from the power utility would be extremely difficult politically. The minister therefore appears prepared to consider the Cosatu proposal, which suggests that the PIC together with the Industrial Development Corporation and the Development Bank of South Africa should take over Eskom’s debt.

“Cosatu is saying: use the workers’ pension money to mitigate the debt burden that Eskom has,” said Gordhan.

“That is a great move on the part of labour to say we are part of the solution, not just antagonists to any change that is happening,” he added.

“Over the next month or two we are going to see fascinating exchanges, helping to get all the resources available in the country to save an important institution like Eskom and get it back to the levels of effectiveness and efficiency required.”

The rotters

Gordhan began his comments about the power utility by emphasising the extent to which Eskom has been hollowed out by state capture, and the size of the challenge faced in managing its recovery.

“Eskom was one of the institutions what was severely damaged by corruption,” he said. “From the outside, one often hears the narrative: replace the board and CEO, put in a few new managers and you’ll get it right.

“However, simply replacing the leadership at the utility is not enough. Expertise, processes and experience all need to be restored.

“What we’ve learnt in the last 18 months is the systemic effect of corruption is huge,” said Gordhan.

“In the case of Eskom, it breaks down the engineering disciplines – what the engineers call their engineering rhythms – and it gets the operations to decline to a point where basic disciplines are not followed any longer and need to be reintroduced.

“And in the process of corruption, the good people either leave or the good people are marginalised, and the rotters rise to the top.”

Prepare for long-term load shedding

Gordhan also indicated that part of the plan for turning Eskom around would likely involve ongoing load shedding.

“We need a clearer idea – and it’s being discussed quite intently – of what kind of rigorous maintenance plan we can put in place that is both sustainable and lasting,” the minister said.

“What we’ve had in the recent past is lots of money spent, but a decline in Eskom’s effective output.

“So who is making money out of all this maintenance work, and what kind of quality of maintenance are we actually getting?”

Part of the solution, Gordhan suggested, would be long-term load shedding to take pressure off the system.

“We are likely to go through a period when we are going to have load shedding,” he said. “But we want to be in a position where the calculations that we are making at an Eskom level are as accurate as possible, not speculative, and substantiated with proper data and statistics.

“When that is ready, a proper and formal announcement will be made so that businesses can prepare appropriately.”

The split is coming

The minister added that the process of splitting Eskom into three separate entities – generation, transmission and distribution – is underway.

“The decision has already been made and the process has already started,” he said. “The transmission entity will be a self-standing entity in one form or another within the next month or so.

“That is the beginning of the structural change that we need to undertake as far as Eskom is concerned.”

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Victory for participative democracy as Parliament extends deadline for public submissions on land expropriation amendment

24 hours after non-profit organisation DearSA announced Parliament’s IT servers were blocking public submissions on the proposed change in the Constitution to allow land expropriation, the Parliamentary committee responsible for the issue extended the deadline for comments to 29 February.

Earlier in the week, Parliament was adamant that there would be no extensions beyond the previously agreed deadline of Friday 31 January 2020 – despite requests from many other organisations and parties.

After much consultation with parliament, DearSA on Thursday morning received notification from the committee that it had changed its tune, giving the public another month to make submissions.

Within the last ten days, reports began surfacing of submissions that were being rejected by Parliament’s IT servers for “unacceptable content”. This triggered a public outcry and prompted participative democracy organisation DearSA – which offers a web-based platform for citizens to make official submissions – to approach Parliament to explain why certain submissions were being rejected.

DearSA founder Rob Hutchinson says Parliamentary IT servers may have spam filters set too high, but in other cases, certain email domains appear to have been blacklisted.

“We are pleased that the comment period has been extended. It may have been technical issues blocking submissions, but either way, it is unacceptable. When we inspected the blocked emails, we could not find anything offensive or unacceptable about the content. Parliament cannot appear to be censoring views – consciously or otherwise – on such a vital national issue,” says Hutchinson. “All of the blocked submissions we have seen have one thing in common: they are opposed to the Constitutional amendment allowing land expropriation without compensation”.

“This is, without doubt, the most serious Constitutional issue facing South Africa since the birth of democracy in 1994. It is vital that as many voices as possible are heard from all points of view on this issue,” says Rob Hutchinson, founder of Dear South Africa, who has so far facilitated more than 160,000 public responses to this amendment. 

More than 80% have come out against the amendment to the Constitution that would allow expropriation of land without compensation.

This compares with 57% who were against the proposed amendment when DearSA ran a similar campaign last year.

The web page for submissions can be accessed here: https://dearsouthafrica.co.za/constitution-eighteenth-amendment-bill/

Human rights advocate Mark Oppenheimer says Parliament must be seen to be observing the utmost transparency around this highly sensitive issue. He says it is well known that all embassies in South Africa are closely watching the manner in which Parliament is handling the land expropriation issue, and reporting back to their governments. 

Various groups have already threatened legal action over the land expropriation issue. “If Parliament is seen to be trying to smuggle the issue through without giving citizens a proper opportunity to have a say in the matter, this opens up new potential avenues of legal challenge,” says Oppenheimer.

–ENDS– 

Issued by: Dear South Africa

Contact: Rob Hutchinson: 0845574828

Email: rob.hutchinson@dearsouthafrica.co.za

DearSA is a registered South African non-profit which operates independently of government and free from any political party influence.