Those were the days... Scams define end of an era

The sub-prime fiasco was a pyramid scheme of its own, argues Thomas Friedman
Ronald Reagan is dead and Margaret Thatcher is a remote and, through advanced illness, a figure far removed from the world stage.
The revolution they jointly led in the ’80s of ever-advancing markets based on light regulation, easy credit, distrust of the state and unleashing of the “animal spirits” of capitalist accumulation have been discredited as the world faces the worst economic crisis since the Great Depression.
Perhaps it is no coincidence that the cardiac arrest suffered by world markets, including our own, since the collapse of Lehman Brothers on Wall Street last September has brought to light a series of mega-sized Ponzi schemes in the US and, more recently, in South Africa. The lure of easy, outsize pickings and staggeringly high rates of return explains the existence of pyramid schemes, such as those operated by Bernard Madoff, Allen Stanford and our own alleged Ponzi king, Barry Tannenbaum, now conveniently resident in Australia.
Ponzi schemes — named after the eponymous Italian immigrant to the US in the early 20th century who arbitraged the value of postage stamps — essentially pay back early investors with either the proceeds acquired from later investors or even with their own money. The scheme collapses and the fraud is finally revealed when people stop investing and there is no more loot to pay out the creditors. As author Michael Lewis explains, “something for nothing — it never loses its charm”.
Madoff, who apparently embezzled a staggering 50-billion from the rich and even banks and top charitable institutions, kept his operation going for over 30 years by offering consistently above-market rates of return, but not by such a wide margin as to attract either undue suspicion or to be unsustainable — until the unprecedented credit crunch last year caused a mass of withdrawals, which Madoff could not meet, since he had never invested most of the deposits originally received.
Tannenbaum, in contrast, is alleged to have lured hundreds of South African and overseas investors with the promise of a rate of return of between 90% and 200% per annum. Instead of postage stamps, his investors were invited to help buy active pharmaceutical ingredients (APIs), allegedly on behalf of South African drug-makers, and then shared in the proceeds of the profits when the APIs were sold to the drug companies.
The neatness of the scheme is that it fell outside the watch of the Financial Services Board. But when one creditor sought to recoup his investment, plus interest, well, the bird had flown the coop — and the personal cheques which Tannenbaum had issued were dishonoured.
These schemes usually involve high-level fraud, including cooking the books, and financial techniques to make actual losses look like bumper profits, or simply invent non-existent investments or sales. But the detail is less significant than the result. Not only are investors — the greedy, the gullible and innocent third parties — ruined, but the system itself gets discredited.
Last December, when the Madoff scandal broke, I was living temporarily in Washington DC. Two of the city’s most thoughtful commentators saw a much wider implication for the future of free enterprise.
Anne Applebaum described how difficult it was for her to acquire an apartment in Warsaw in the early ’90s — endless form-filling, visits to notaries and the seller requiring to be paid in hard currency and in cash. She described a culture of “low trust”, in which the market and its mechanisms are treated with suspicion.
In contrast, when she bought a car in Washington, she could drive it out of the showroom simply by providing a personal cheque, without any identification. It was this “high trust” culture, which both fuelled American capitalism and allowed its dark underside, in the form of Madoff and the like, to operate. As she put it, “Madoff’s pyramid scheme may have been made possible by our tradition of trust and lawfulness. And now he will bring that tradition down.”
Thomas Friedman was more damning. He saw in Madoff a scheme only slightly more outrageous than the “legal” one Wall Street was running, fuelled by easy credit, low standards and high greed. For him, the sub-prime fiasco was a pyramid scheme of its own: “What do you call giving a worker who makes 14000 a year, a nothing-down and nothing-to-pay-for-two-years mortgage to buy a 750000 home and then bundling that mortgage with hundreds of others into bonds that Moody’s or Standard & Poor’s rate AAA — and then selling them to banks and pension funds the world over. This is what the financial industry was doing. If that isn’t a pyramid scheme, what is?”
Friedman’s fury found an answer last week, when President Barack Obama produced plans for regulatory reform, including an expanded role for government. Clearly, the era of Reagan-Thatcher has ended. The age of exuberance has yielded to an era of control. Let’s just hope that the new medicine doesn’t amount to a treatment that kills the patient.


*Published Sunday Times 28 June 2009

State religion does not have all the answers to jobs crisis

OUR state religion appears to be the worship of the state. Heaven knows, to sustain the analogy, there now appear to be no shortage of new and unlikely adherents to this belief. Barack Obama’s administration is now effectively the controlling shareholder of General Motors and Gordon Brown’s government owns 70% of the Royal Bank of Scotland. The deep global recession has created some unlikely converts from unfettered market capitalism to more state directed economic leadership.
But, back home in SA, as I surveyed the jobs massacre contained in the figures for the first quarter released this week, which show that 179000 jobs were lost and that the “distressed labour market” could yet shed another 200000 jobs before year-end, it occurred to me that what we need now is a healthy dose of local agnosticism in order to innovate and create new work. In other words, less ideology and more realism.
Last Friday, Economic Development Minister Ebrahim Patel appeared to make an important concession: he said that government’s policy of promoting “decent work” would not exclude “the creation of temporary, low-paid jobs in the short term”. He made the further concession that the 500000 jobs to be created under the expanded public works programme “would not, in themselves, be proper, permanent, well-paid jobs”, but they could create a bridge into the labour market.
This dose of realism seemed to be in line with the candour of Trevor Manuel , who in his previous incarnation as finance minister said, after presenting his last budget in Parliament, that the problem with “decent work” in a time of crisis was that “all jobs are hard to come by, and the more adjectives you add, the harder they will be”. Or, as the old adage expressed it, the only thing worse than being exploited is not being exploited at all.
Whether these statements represent shafts of light or a false dawn on the gloomy debate around job creation is difficult to assess. This becomes even more apparent when the assault launched by Labour Minister Membathisi Mdladlana on labour brokers and the casualisation of work is taken into account. Last month, he told the congress of the National Union of Mineworkers , “the reality is labour broking is a form of human trafficking. These companies sell the labour of workers to the highest bidder and then pay them the lowest wage ... it allows workers to be traded for profit just as if they were meat and vegetables.”
When I visited the headquarters of the largest private employment agency in SA, Adcorp , this week, I expected after the minister’s pronouncement to find a Dickensian pit of human misery. Instead, the ultramodern office block in Bryanston houses a go-ahead company where I had an interesting discussion with the splendidly named Loane Sharp, who serves as the company’s labour market analyst.
He made the point that the much-maligned labour brokers represent a R23bn industry, which since 2000 has introduced about 3,5- million temporary, part-time and contract employees into the labour force, approximately 2- million of whom are first-time jobseekers, 92% of whom are African, and 85% of whom are aged 18-35. Of even more significance was his analysis that a third of these employees secured traditional permanent jobs within a year and 47% did so within three years.
In other words, far from being reprehensible and “human traffickers”, the brokers are, in fact, SA’s principal entry point into the labour market for unemployed African youth.
Sharp’s analysis runs counter to the Congress of South African Trade Unions’ (Cosatu’s) blunt instrument: they are calling for a ban on labour broking, which could lead to the loss of, perhaps, a million jobs. The labour minister is advocating the quasi or de facto nationalisation of private employment agencies. But the agenda behind this agenda is, simply, that the bulk of these temporary or casual workers are nonunionised. They, therefore, compound Cosatu’s crisis of relevance and its shrinking membership and revenue base.
Another voice, which deserves to be heard is the estimably sensible one provided by Ann Bernstein and the Centre for Development and Enterprise/Business Leadership SA’s “5- million jobs initiative”. They offer a welter of practical initiatives to resolve the exquisite Catch 22 in which the vast pool of young, unskilled jobseekers find themselves. As Bernstein put it: “They can’t get a job because they have no work experience and they can’t get work experience because they can’t get a job”.
The most persuasive statistic the centre provides to bolster this assertion is the fact that more than 70% of 15-30 year olds who want a job have never been able to find one.
To quote the vanquished Thabo Mbeki , the crisis on the job front calls for a “business unusual” approach. And that means that adherents to the old gospel of the state religion need to listen to a few agnostic voices.

*Published 26 June 2009 in Business Day

Goals have little to do with soccer

Before this week’s blood-curdling threats issued against me by the Justice for Hlophe Alliance force me into the obscurity of a witness-protection programme, I thought that, like the nation, now in thrall to the Confederations Cup, I’d switch attention from politics to soccer.

But I’ve discovered that there is more than a stitch or two that threads together two of our nation’s, and the world’s, favourite pastimes.
And I’ve also learnt another of the perils confronting the apprentice weekly columnist: the tyranny of the deadline. This prevents me from knowing whether yesterday’s clash between Bafana Bafana and Spain reclaimed our national honour or not.

But last Sunday’s opening between our boys and Iraq resulted in what that country’s latter-day conqueror, George W Bush, would have called an “underwhelming” performance.
We stuttered to a goalless draw, and our team ignored the advice of the Sunday Times’s soccer maven, Carlos Amato, who had warned them that nothing short of “Zen concentration” would achieve a win.
Presumably, the reason for South Africa not attaining the single-minded concentration demanded by 12th-century Japanese Buddhists was that their attention was elsewhere.

It brought to mind a withering put-down I once heard of the talented, but underperforming Pakistani cricket team: “They are more preoccupied with issues in the change room than with the state of play on the field.”
One of the change room issues apparently occupying the minds of our players was a demand for R34-million from Safa, should they win the eight-team tournament. This led sports writer Mninawa Ntloko to harrumph in Business Day that “Bafana’s shameless greed and blatant opportunism” could prove to be “the team’s undoing.”
Whether their backdown from this “ransom attempt”, or opening-night nerves, or some other malady explained our disappointing loss of mojo is not known.
But, whatever perils await the Iraqi team back home, the advantage of post-Saddam Iraq is that their soccer team does not have to reckon with Saddam Hussein’s psychopathic elder son, Uday.

Apparently, a performance not to his liking could result in torture sessions, which included “ritual head-shavings”, “punching and slapping”, “sessions of kicking a concrete ball”, and “fitness work-outs that lasted 12 hours”.
But the international spotlight now shining on South Africa for the Confederations Cup has encouraged other sectors to ventilate their demands, and use the tournament as leverage to enforce them.

This week, the beleaguered and leaderless SABC was threatened by its unions with a blackout of Confed match coverage unless pay demands in excess of 12% were met.
Quite how the national broadcaster — R800-million in the red and seeking a taxpayer-funded bailout of R2-billion — intends to even pay its proffered 8.5% increase is an accounting mystery, a little like the creative book-keeping of our newly enthroned Ponzi king, Barry Tannenbaum.
A union official put the blackmail in straightforward terms: “No agreement, no Confederations Cup. .. a complete blackout.”
Doubtless, the cash will be stumped up, and the tournament will be televised.
Another no-show at the tournament was the much-anticipated Rea Vaya, the first phase of the bus rapid transport system.
The plug was pulled due to an election promise of President Jacob Zuma. Undoubtedly, its on-time introduction during the cup would have unleashed taxi mayhem on the streets.

Whatever the merits of the so-called Bafana “mercenaries” and other bandwagon climbers, the world of soccer is actually dominated by stupendous amounts of money. Three days before the Confed kickoff, Real Madrid set a world record when it paid £80-million for Manchester United’s Portuguese winger, Cristiano Ronaldo — making Bafana’s pay claim look like peanuts.
And this signing came just days after the club had paid £58-million to acquire Kaka, now on display here for Brazil, from AC Milan.
Those two transfers approximate half of the R4-billion national sports budget of South Africa.

Interestingly, Real Madrid was described by soccer writer Simon Kuper as “a populist democracy”. Its recently returned president, Florentino Perez, was elected by the club’s 70000 members.

The club, rather like a country, has no shareholders, only members. As Kuper explained, “he bought Ronaldo to please them”.
As I was totting up the revenue figures of Real and the other nine richest soccer clubs, all European (I arrived at the total of € 2.5 -billion), I came across a report stating that the world’s leading hunger fighter, the United Nations World Food Programme, had less than € 1.1-billion in its budget, and was obliged to slash its programmes and, among other cuts, suspend food distribution to 600000 seriously hungry people in northern Uganda.
As the old banking advert used to say, “It makes you think, doesn’t it?”

*Published Sunday Times 21 June 2009

Case for serious reflection in a dangerous season for justice

AFTER last Saturday’s M-Net-Via Africa literary prize I found myself in the unexpected position of participating in a post-award interview.
Trying to match the occasion with some book knowledge, I did no better than invoke the character of Robert Jordan in Ernest Hemingway’s A Farewell to Arms. He spoke of things “which are worth the fighting for”.

In the dying hours of the constitutional negotiations, back in November 1993 at Kempton Park, I led the fight-back against a National Party-African National Congress deal that would have empowered the president and his cabinet to have effectively hand-picked their own Constitutional Court. The minuscule Democratic Party, sidelined on many other key issues, managed to win this battle.
My efforts to provide a Judicial Service Commission to act as a filter between the executive and appointments to the highest court in the land drew both cynicism and praise.

Both the cynicism and excessive praise were overblown. I just reckoned then, as now, that without an independent constitutional court which owed fealty to the constitution, not to the government, SA’s brave new democratic world would be stillborn.

Reading the criticism and concern which greeted the unprecedented adjournment of the first meeting of the Judicial Service Commission (JSC) since the election, I thought perhaps another of Hemingway’s aphorisms applied to the body on whose establishment I had expended so much energy all those years ago. He used the phrase “beautiful fatalism” to describe people “who stay loyal to a doomed cause”. Are the causes of judicial independence, and the JSC as a vehicle to ensure it, doomed?
Certainly the JSC has been knocked all over the legal ballpark recently. It has made a meal and, the South Gauteng High Court suggests, a hash of investigating complaints of misconduct against Cape Judge President John Hlophe.
On the appointments front, new Justice Minister Jeff Radebe prevailed, on a majority vote, to postpone proceedings, in part, he said, to allow him meaningful input on the question of the transformation of the judiciary, “with regard to race and gender representivity”.

Actually, inside one of the documents that members, including Radebe, received for the meeting, was an appendix baldly entitled “Demographics”. Here, in detailed racial arithmetic, was the result of the JSC’s handiwork on the transformation front over the past 15 years. At the commencement of the new constitutional order, 97% of all judges were white men. According to the JSC document, today 54% of the country’s judiciary are black, and 27,2% are female. To widen the pool of women appointees, the JSC has inaugurated a special training programme targeting women practitioners. In terms of race, the JSC has ensured that 87% of the nominees it proposed for high court positions in the past year were black.

But such progress, impelled in part by the constitutional requirement that the judiciary “reflect broadly the racial and gender composition of SA”, is quite insufficient for the taste of the Black Lawyers Association. According to their document, which was attached in support of one of the candidates up for consideration, nothing short of full-scale proportional representation will suffice: “The judiciary, and therefore the JSC, cannot pretend that it is proper that justice should be meted out to the majority black population by a majority white judiciary, or a marginally black majority bench.”

Strangely , there was no document before the JSC that dealt with any of the violations we have witnessed over the past few months of section 165(3) of the constitution, which provides that “no person or organ of state may interfere with the functioning of the courts”. No doubt a vast file could be filled with threats made against the judiciary in recent times .

Last weekend, Democratic Alliance leader Helen Zille warned against reducing the judiciary to puppets of the ruling party. Doubtless, Radebe will have regard for this concern. He should also use the period of reflection he has arranged to consider how best to balance the sometimes competing claims of diversity and competence. Supreme Court of Appeal Judge Carole Lewis last year drew attention to inexperienced high court judges meting out “horrifying convictions and acquittals where judges had simply not understood the fundamental rules of evidence or criminal law”.
I suspect most South Africans, of all stripes, would rather appear before a judge, of any colour, who could competently apply the rule of law, without prejudice, and hold the ring for them against the mightiest forces in the land.
That is, indeed, “worth the fighting for”.

*Published 19 June in Business Day

Lesson to be learnt is that humility trumps hubris

Last week provided a study in contrasts between the use and exercise of power, at home and abroad.
In President Jacob Zuma’s rural redoubt of Nkandla, it was easy to be blind-sided by reports of black economic empowerment bling, relating to the helicopters and flashy cars that transported the ascendant elite to the head of state’s home village thanksgiving.
But Zuma’s speech was not aimed at the ostentatious. It suggested a sense of someone, who, whatever his past and future failings, remains absolutely rooted and secure in his identity and mindful of the communal ladders which lifted him to prominence.
Zuma assured his audience: “I will never forget my origins ... even as president, I will not change. I will still listen to you and do whatever you tell me to do ... Even if I live in a big house. You will tell me if I do wrong.”
Nkandla, in other words, will provide Zuma with the moral compass for his presidency.
My wife, Michal, who practises as an executive coach, drew my attention to a vast range of literature which differentiates between “external” or “hard” power and emotional intelligence, conveyed by “internal” or “soft” power. Most political leaders follow the first route, believing that the externalities of power, detached from emotion, are the ticket to leadership.
Yet, the more effective form of leadership often originates from your internal power: your own sense of identity based on the strength derived from your personal relationships and your ability to recognise, and manage, your emotions — and to empathise with others.
That’s a pretty tall order. But someone else whose soft power was on conspicuous display last week, in the cauldron of the Middle East, was US President Barack Obama. His masterful speech at Cairo University resulted in a standing ovation — no mean feat given that his immediate predecessor, George W Bush, on his last visit to the Middle East, had a pair of shoes thrown at him.
In place of the Bush rhetoric, made vivid with the formula “you’re either for us or with the terrorists”, Obama managed to draw on his own multicultural background, and his middle name “Hussein”, to navigate through the multiple minefields of Middle East politics.
The usually staid Financial Times exalted Obama for reaffirming his country’s “unbreakable” bond with Israel and for recognising the “intolerable” plight of the Palestinians. Obama “dodged the ambushes, without evading the issues”.
But it was another paragraph in the superpower leader’s speech, which caught my attention. He reached back to the words of President Thomas Jefferson: “I hope our wisdom will grow with our power, and teach us that the less we use our power, the greater it will be.”
Of course, as one critic noted, the eloquence of action is more powerful than the eloquence of rhetoric. But the speech did provide a refreshing start to what is hopefully a new chapter in US-Middle East relations.
However, across the oceans, in London, Gordon Brown’s premiership appeared to be in a political death spiral.
Last weekend, as Zuma celebrated and Obama basked in his warm Egyptian reception, Brown faced up to the loss of six senior cabinet colleagues, and the slump of the governing Labour Party to third place in the European elections.
Compounding Brown’s misfortunes was the leaking, last weekend, of e-mails penned 18 months ago by the past master of the dark arts of political intrigue, Lord Peter Mandelson. In the hasty reshuffle of the cabinet, he effectively became Brown’s deputy prime minister.
Yet, when marooned behind the front line of British politics, Mandelson had cast doubts on his leader’s mental hygiene, describing him as “insecure”, “complex”, “self-conscious” and “angry”.
In Mandelson’s view, Brown “tries too hard to be a normal person”. But perhaps Brown is onto something.
Former British politician, and one-time neurological registrar, David Owen, has diagnosed a condition to which too many political leaders are prone.
In a recent book The Hubris of Power, he suggests — drawing on his observations of Bush and Blair, and framing them around the invasion of Iraq — that something happens to the mental stability of some leaders while in power.
He suggests that hubristic behaviour is an occupational hazard of high office. Exacerbated by isolation and deference, it can lead to patterns of reckless behaviour, bad judgment calls and a tendency to see the world as an arena in which the leader can exercise power, based on “a delusional sense of personal infallibility and divine exemption from political accountability.”
Let’s hope, for our sake (and the world’s), that Zuma and Obama remain grounded.
They could do worse than to follow, with the necessary updates, the Roman example.
Wise emperors apparently placed a slave behind them on their chariots. His purpose was to whisper: “Remember, you are only human.”

*Published in Sunday Times 14 June 2009

Circling back to Tiananmen Square in a failing western light

A VOGUE word now in play is “decoupling”. It is shorthand for the view that China, and other emerging markets, will be the economic locomotives to pull the world through the global economic recession — the worst on record since the Great Depression of the 1930s.
The markets certainly reflect this sentiment: last month, for example the FTSE emerging markets index outperformed the developed markets index by 48,8%. Hard statistics support the disposition of the bourses. For example, China’s aggressive domestic stimulus saw its purchasing managers index surge above 50 , suggesting that almost alone, of the significant economies, it was enjoying growth while the world, especially the west, contracts. The equivalent index in the US measured 42,8 , while SA posted just 37,3 . Little wonder Goldman Sachs is predicting more than 8% gross domestic product (GDP) growth for China. Its extraordinarily low levels of household spending (less than 33% of GDP, about half SA’s, and a third of the US ), and its accumulation of more than 200bn in foreign reserves, suggest it has room for manoeuvre and expansion, denied to the overborrowed, underperforming developed economies.
Last week saw another instance of decoupling. Last Saturday, the Allied leaders of the US, Britain, France and Russia gathered in Normandy to mark the 65th anniversary of the D-Day landings in nearby Colville-Sur-Mer. History records this event as the decisive moment of Europe’s liberation from the Nazis. Two days before that, last Thursday, another anniversary was commemorated, or more accurately smothered at the site of its occurrence, the marking of 20 years since the Tiananmen Square massacre in Beijing.
While the events and outcome of the Second World War are beyond contestation, the import and consequence of Tiananmen Square remain contested. No figures have ever been released of the number of protesters shot and killed by Chinese soldiers on June 4 1989 — the figures range from hundreds to over 2500. In any event, the square itself was closed last Thursday — and Chinese officials erected what one wag called “the Great Firewall of China”, blocking internet sites, the BBC, and even the anodyne CNN, alongside Twitter, from informing the Chinese of the epic events of two decades ago, when student protestors confronted the fist of Chinese authoritarianism.
However, decoupling applies within China as well: the enclave of Hong Kong, which under its basic law enjoys civil liberties denied to the mainland, allowed hundreds of thousands of protesters to hold a candlelit vigil.
But 1989, the year of Tiananmen Square, was reckoned at the time to be a unique moment, the arrival of unipolarity, not decoupling. The fall of the Berlin Wall, the end of the Cold War and, here at home, the ascendancy of FW de Klerk and his reform agenda were famously — or fatuously — described by Francis Fukuyama as “the end of history”. The liberal, or Washington, economic and political consensus appeared ascendant and unchallengeable.
But China, and far less successfully Russia, challenged that consensus by adopting what Israeli academic Azar Gat describes as “authoritarian capitalism”. By shifting their economies from communism to capitalism, they switched to a “far more efficient brand of authoritarianism”. Ironically, the two defeated powers of the Second World War, Japan and Germany, with far smaller economies and with incomparably worse predations of human rights, had attempted something similar, and failed. But the ability of the west, in the wake of the current financial crisis, to continue to define and influence the course of economic and democratic events has been damaged. Globalisation guru Martin Wolf suggests that “the collapse of the western financial system, while China flourishes, marks a humiliating end to the unipolar moment”.
Last week, the New York Times thundered: “Beijing may be able to repress the memory of Tiananmen, but the yearning for freedom remains.” But, in fact, a number of influential commentators, who acknowledge the suppression of freedom, question this assumption. And it’s not simply the fact that, according to the World Bank, Chinese economic growth and planning have seen the fastest reduction of people living in absolute poverty in recent economic history, accounting for over 75% of the developing world’s total. James Kunge, who witnessed the events of 20 years ago, wrote in the Financial Times last week: “In a world of moral fluidity, Tiananmen is a gratifyingly fixed reference for our judgment of others... (but) I question the western assumption that the demonstrators were ‘pro-democracy’. The reality was less coherent.”
Perhaps in 20 years’ time, on the 40th anniversary of Tiananmen and the 85th commemoration of D-Day, we will know just how ascendant the Chinese alternative to liberal democratic capitalism has become.

*Published Friday 2 June 2009 in Business Day

Judge Hlophe seeks to destroy from within

During the Spanish Civil War, General Emilio Mola was asked which of his four army columns would capture Madrid. He replied: “The Fifth Column.” This was a reference to citizens inside the capital loyal to Franco. Thus the term “fifth columnist” entered the political lexicon — a reference to members of the community with a loyalty to the state, or a constitutional body, but determined to strike a blow, perhaps a crippling one, against it.
I’m beginning to get the feeling that Western Cape Judge President John Hlophe and his outriders have become home-grown vandalisers of our constitution. If I’m wrong, then the imputation is even more serious. Because according to Judge Hlophe, the entire Constitutional Court, the president of the Supreme Court of Appeal (SCA) and the leadership of the Judicial Service Commission (JSC) are, variously, “liars”, “biased” and serial violators of the fundamental rights they have sworn to uphold.
Since May 2008, Judge Hlophe and his supporters have used whatever weaponry available — from legal bazookas to rhetorical flame-throwers — to avoid or delay facing charges of gross misconduct levelled by 13 permanent and acting Constitutional Court judges. The court said he had approached two of them in an attempt to influence a pending judgment relating to the Jacob Zuma search-and-seizure warrants case.
They referred the complaint to the JSC — the constitutional body that deals with judicial misconduct. Judge Hlophe’s lawyer claimed the Constitutional Court, by issuing a media release about its planned action without advising him first, had “acted with unseemly haste ... to crucify him in public”. Ironically, in a recent interview, Judge Hlophe indicated a wish to serve on the same court.
And that was just the start — the latest round was a split-court decision on Monday in South Gauteng which found that by starting proceedings while Judge Hlophe was ill in April, the JSC had violated his rights. While Judge Hlophe and the JSC search for a date on which the proceedings can recommence, perhaps we should pause to consider the damage.
According to Anthea Jeffery of the Institute of Race Relations, at various stages over the past year Judge Hlophe has accused Chief Justice Pius Langa and his deputy, Dikgang Moseneke, of lying and urged the JSC to investigate them for gross misconduct, since both might have been politically motivated to back “a trumped-up complaint”.
In a recent attack, two members of the JSC — its acting chairman and president of the SCA, Judge Lex Mpati, and veteran human rights lawyer George Bizos — were accused by the “Justice for Hlophe Alliance” of “the most nefarious and despicable acts their minds could conjure up”.
And if that was not serious enough, Judge Hlophe complained in a case he ultimately lost before the SCA in March that basically every one of his constitutional rights — from dignity to equality, right down to the presumption of innocence — had been violated by the Constitutional Court. The ordinary citizen must wonder: if Judge Hlophe is correct, and if this is how the highest court of the land treats a member of the judiciary, what hope do I have of a fair trial?
Alongside all the other taxpayer-funded trials and applications Judge Hlophe has embarked upon, his attempt to appeal this judgment to the Constitutional Court, the very body that launched the complaint against him in the first place, is bizarre.
Since the bulk of the court would have to recuse itself, Judge Hlophe simply suggests that its members be replaced by a sort of tribunal constituted by the minister of justice. This has been dismissed by constitutional law expert, Professor Pierre de Vos, as “daft and dangerous” in terms of the separation of powers doctrine and the principle of judicial independence.
Judge Hlophe has his rights and they are obviously entitled to protection. But Justice Louis Brandeis once observed that the “lawyer has a duty to the case as well as to the client”. When you take a wrecking ball to every carefully constructed constitutional edifice, with the scorched earth tactics employed by the Judge Hlophe camp, compromise becomes much harder. If the courts and their disciplinary body climb down now, then the stain of Judge Hlophe’s charges against them and the administration of justice will remain.
Last July, the ANC warned judges not to “undermine the integrity of the courts”. The new government needs to remember that warning when, later this year, it considers replacements for the Constitutional Court. It would do well to remove from consideration one of the chief underminers.

*published in the Sunday Times 7 June 2009

Zuma will have to disappoint allies to create prosperous SA

After all, it was as recently as January that then president Kgalema Motlanthe told the World Economic Forum SA would be able to grow at 4% on the back of strong infrastructure spend.
The expenditure remains — it was front and centre of Zuma’s maiden state of the nation address. But since then SA entered a deep recession — the first an African National Congress (ANC) government has had to confront. Now we will do well, even heroically, if we achieve zero growth by year end.
As I pondered the import of Zuma’s prescriptions for our economic ills — which seemed to be drawn largely from the casebook of John Maynard Keynes, now enjoying a global surge in popularity — I thought of previous presidential debuts I had witnessed.
In February 1990, FW de Klerk made a speech of thermonuclear intensity — the effects of which are still with us today. He overturned the 350-year-old racial order of SA. In May 1994, Nelson Mandela set the tone for his inclusive rainbow presidency — although in his case “the medium” (or his persona) was the message. In June 1999, Thabo Mbeki also set the seal of his presidency with a root-and- branch attack on his opponents, describing the official opposition Democratic Party as no less than the “pedlars of a soulless theology ... who define some races as subhuman”.
Zuma’s speech detonated no bombs of change, but equally his constant referrals to the frail Mandela, seated and smiling above him in the gallery, perhaps signalled a decisive break from the isolationism which characterised the Mbeki era. Zuma explicitly reached out to the broad spectrum of SA — from rural dwellers, to Afrikaners and explicitly to the opposition, “in the spirit of putting SA first”, he explained.
Zuma’s promise remains hugely ambitious given the cramped fiscal space in which his presidency commences: an expansive developmental state, without rollovers, purged of corruption and premised on performance targets centred on the creation of 4-million “job opportunities” within five years, over 10% of which will be rolled out by year end.
While the president took a swipe at under- performing teachers and honestly faced glaring deficiencies in the culture, management and performance of public services, he offered little of comfort to the private sector, or the hard-pressed tax-payer. Obviously, Zuma’s core constituency is the 11-million, largely poor, South Africans who gave him his mandate. But as Anthony Altbeker reminded an Institute of Race Relations conference only last week, just 400000 South Africans, most of them far from rich, provide half the personal taxes in the country. And the taxpayers, overall, fund the 13-million South Africans who receive government welfare grants.
The only sustainable path is obviously to increase the number of taxpayers, not widen the pool of beneficiaries.
In the 10 priority areas touched on in the speech there was scant recognition for the role of enterprise as the driver of growth. In New York recently, Prof Niall Ferguson sounded an important warning: “It is very easy to forget, in your iron indignation at the failure of the market, where the true mainsprings of economic growth lie. The lesson of economic history is very clear. Economic growth does not come from state-led infrastructure investment. It comes from technological innovation, and gains in productivity and these come from the private sector, not the state.”
Indeed SA’s private sector remains, in key areas, globally competitive. Our much-admired banking sector, for example, ranked 15th in the latest World Economic Forum Global Competitiveness Survey. In studied contrast has been our slide down the Human Development Index, on the measurement of “living a long and healthy life”. We have dropped a vertiginous 36 places in just 10 years. It remains a moot point whether improvements in life chances can be delivered on the back of a state machine which, in key areas, is broken. Perhaps this means that private sector solutions are required for public sector problems, not the reverse.
Zuma did not enter the snakebite territory of demanding restraint from the public sector unions — either in terms of lowering the inflationary wage demands, or in the arena of relaxing the rigidities of the labour law, especially for first-time job seekers. The government is sitting on a welter of reports which all point precisely in this direction.
At the conclusion of the speech, Congress of South African Trade Unions chief Zwelinzima Vavi took time off from threatening a season of strikes to describe Zuma’s effort as “bold and brilliant”. Yet if Zuma is to create “the prosperous nation” he promised he will need to disappoint, not enthrall, some of his key allies.

*published in the Business Day 5 June 2009