Local leaders at risk of failing Berlusconi test

30 Oct 2012 | Tony Leon | Original Publication: BDlive

We have advanced down the road where know-who rather than know-how is the price of admission to corporate riches, writes Tony Leon

ON FRIDAY, Silvio Berlusconi, Italy’s former prime minister, was sentenced to four years’ imprisonment for tax fraud. The more sensational of his trials — allegedly paying "Ruby the heart-stealer", an underage dancer, for sex and then abusing his position to secure her release — still lies ahead.

South Africans will be familiar with this trope: the lurid intersection of public office, abuse of position and problems with the taxman. Earlier this year, Berlusconi opined that "political credibility is like virginity — easy to lose, difficult to maintain and impossible to regain if lost".

A number of South African politicians — serving and aspiring — are currently in the dock of public opinion on issues of credibility. In the recessionary world, reputation management and how to repair damaged credibility is a growth industry, and in South Africa there is no shortage of clients.

First in the line-up is Cyril Ramaphosa, Lonmin director and a favoured deputy presidential candidate, according to some in the camp of President Jacob Zuma. The Prince Hamlet of the African National Congress is accused, based on e-mails he wrote to fellow Lonmin executives on the eve of the Marikana mine massacre, of being "complicit in mass murder". Sunday Times editor Ray Hartley did a suitable demolition job on the accusation and on advocate Dali Mpofu, who advanced it. He described this characterisation as "an absurd and slanderous lie". But it was a less sensational communication from Ramaphosa that compels attention and invites unease, even if in the tangled web of political influence-peddling by impeccably connected businessmen it causes little surprise.

In an e-mail to Lonmin chairman Roger Phillimore about the conduct and lack of action by Mineral Resources Minister Susan Shabangu, Ramaphosa advises "we should have a discussion (with her) to see what she needs to do". The idea that a company director can tell a minister "what to do" underlines how far we have advanced down the road where "know-who" rather than "know-how" is the price of admission to corporate advancement and riches.

South Africa is perhaps an extreme example of this tendency but it hardly stands alone. Even in the US, where generally (see Mitt Romney) success in business is the prologue to political office and not the reverse, we have the case of Dick Cheney, the veritable Darth Vader of modern politics. Before he crossed to the "dark side" of approving waterboarding and other torture exotica as state policy when vice-president, he was CEO and chairman of energy giant Halliburton. But his appointment to corporate office was based entirely on his impeccable political connectivity, having served in the administrations of presidents Gerald Ford and George Bush and then for 20 years in Congress.

Next in the field of evolving local reputations is Mamphela Ramphele. An avatar of good governance, harsh critic of government corruption, apostle of transparency and, on some accounts, an aspiring political leader, she is also chairwoman of Gold Fields. The company is currently in the frame with a controversial black economic empowerment deal concerning one of South Africa’s richest mines, South Deep. Some dodgy characters and powerful politicians were included in this bonanza. Her somewhat lame response to a Financial Mail inquiry — "I was not part of the decision-making at the time" — might be technically true, but hardly inspires confidence about shouldering responsibility or sweeping out the Augean stables of the political influence-peddling of which, in other contexts, she loudly complains.

Finally we have Finance Minister Pravin Gordhan. Of a dozen or so Cabinet ministers I shepherded around Argentina during my diplomatic stint there, he probably did most to advance South Africa’s international image. This was not because some of his colleagues underperformed during their visits. Rather, it was due to his credibility as a thoughtful steward of public finances. This proved to be sweet breath on the local air of Buenos Aires, weighed down by runaway government spending and high inflation.

In Parliament last week to present his medium-term budget policy statement, he promised to rein in government expenditure by, among other things, looking closely at the number of employees in the public sector, suggesting billions of rand could be saved by identifying "ghost and surplus workers".

His credibility test lies in making good on this promise. He needs to prove he doesn’t just sign the cheques but has the will and the power to obtain quos for the quids he dispenses. A good place for him to start would be South African Airways, for which he recently provided a further R5bn bail-out. He would do well to look up the website Avcom.co.za. It reports that SAA operates with about double the world average of employees per aircraft (957 per plane). If Gordhan does not start to make the necessary cuts he promised, he too might find he fails the Berlusconi test.

• Follow Tony Leon on Twitter: @TonyLeonSA

Resolve opposition’s dilemma for the good of SA

23 Oct 2012 | Tony Leon | Original Publication: BDlive

When former president Thabo Mbeki decided the destruction of the DA was a political priority, he appointed Mosiuoa Lekota as his hit man, writes Tony Leon

WHEREVER in the world former Sasol and Anglo American CEOs Pieter Cox and Tony Trahar are these days, last week’s speech by erstwhile president Thabo Mbeki must have caused them to smile at the irony of it all.

In 2003, both men were at the receiving end of Mbeki’s invective when they said, respectively, that black economic empowerment was a "risk factor" and that the risk factor for South Africa was "starting to diminish, although I am not saying it has gone".

Mbeki accused Sasol of "bad-mouthing South Africa" and suggested that Trahar’s stance amounted to Anglo suggesting that "democratic South Africa presents the business world … with a higher political risk than apartheid South Africa".

What a difference nine years and loss of office makes. In his African National Congress (ANC) centenary lecture last week, Mbeki joined the doomsday chorus in far more direct and stark terms than these corporate titans ever did. He spoke of South Africa being afloat on a sea of troubles, characterised by "a dangerous and unacceptable situation of directionless and unguided national drift".

Mbeki is hardly alone as a latter-day canary-in-the-coal-mine warning of the noxious gases that threaten to engulf the country. The Economist, which recently upgraded Africa from "hopeless" to "hopeful", decided, also last week and after two sovereign credit downgrades, that South Africa was sliding downward toward "sad country" status. Embedded in the article is a central truth: South Africa — at the most recent general election, the spread between the governing party and the official opposition was more than 40 points — is "a de facto one-party state".

I recently noted that it is difficult to establish a real and competitive democracy (and the first adjective is conditioned by the second) on the back of such a huge deficit, especially since our much admired constitution is noticeably weak in its checks and curbs on a super-majority government. Thus the motivating spirit and finer detail of the constitution can be ignored and bypassed by the government for the simplest of reasons: because they can be.

In this context, the recent call by Democratic Alliance (DA) leader Helen Zille for a realigned and larger opposition is both politically and constitutionally necessary. But as someone who still bears the scars from the last large-scale opposition merger a decade ago, I can attest that it will not be easy.

The only party with which the DA appears to be engaged in serious discussion toward this end is the much diminished Congress of the People, which, because of the 2009 election results and despite its self-destructiveness since then, remains the second-largest opposition force in Parliament, led by Mosiuoa Lekota.

There is deep irony at play here too. Mbeki decided the destruction of the DA was a political priority, he appointed as his hit man the national chairman of the ANC — Lekota. Thus it was that Lekota, with the carrot of floor-crossing and the promise of the Western Cape premiership, tempted Marthinus van Schalkwyk to lead his New National Party rump out of the DA and into the fatal embrace of the ANC.

Four years later, when parliamentary floor-crossing, which probably did more injury to democratic deepening than many other constitutional predations before or since, was at its height, the same Lekota set about personally luring DA members across the parliamentary aisle. In one case, he even offered DA MP Rafeek Shah a "deputy ministry". When I exposed the offer, which Shah informed me of and commendably declined, Lekota telephoned me to tell me "it was only a joke". Presumably, these days Lekota is more seriously engaged in helping to broaden an opposition he once so assiduously attempted to destroy.

From the’s DA perspective, demographics represents political destiny. In last year’s municipal elections, the party’s improved performance in reaching about 24% of the vote was hailed as scaling new electoral heights and proof that the party had, at last, established a small base among black voters. Actually, only the latter but crucially important fact was new. In 2000, shortly after the formation of the DA, the party notched up more than 23% of the national municipal vote. The reason for the standstill in its total over the past decade has not been because of a failure to obtain black votes but because of the rapid decline, demographically, in its core minority — especially its white — base.

Increasing its size remains the vital and unfinished task for opposition leadership. This is a proposition about numbers. But there is another equally compelling dilemma: how to do so and retain ideological and policy coherence and not reduce the clear blue water that separates, or should divide, the opposition and the government.

On squaring this circle, not just the fortunes of the opposition but the constitutional good health of the country depends.

• Follow Leon on Twitter: @TonyLeonSA

A handy guide to staying out of the losers’ circle

16 Oct 2012 | Tony Leon | Original Publication: BDlive

On the basis that misery likes company, it is comforting, although not reassuring, to look around the globe, writes Tony Leon

WARREN Buffett, the famed US investor, noted: "Only when the tide goes out do we see who has been swimming naked." This seems an apt metaphor for diagnosing the ills afflicting South Africa and the world at present.

On Sunday, The New York Times, so often a cheerleader of South African exceptionalism, published a grim piece, as a result of the recent waves of violent strikes, under the headline, Upheaval Grips South Africa as Hopes for its Workers Fade. In similar tenor, Lex, the Financial Times’s anonymous but hugely important arbiter of investor sentiment, recently heralded South Africa’s rainbow’s end. Noting the "volatile cocktail" of flat-lining growth, currency slide, surging protests, inflationary pressure and government paralysis, it suggests a "South African Spring" will soon be upon us. This is, of course, not a reference to the seasons but to the sociopolitical revolution that gripped much of North Africa and the Arab world last year and which continues to hold Syria in its grip.

Since my return to our shores just two weeks ago, after three years away, I have been struck how we seem to be displaying collective signs of a national nervous breakdown. And this is not just the noises from the "usual suspects" in the opposition ranks and the suburban chattering classes. It appears to have afflicted, in equal measure, some significant personalities in and many ordinary, and increasingly disenchanted, supporters of the governing party.

On the basis that misery likes company, it is comforting, although not reassuring, to look around the globe. Last week, the Nobel committee awarded its peace prize to the European Union. It might have helped keep the postwar peace, Yugoslavia excepted, but the grand design of an increasingly close and more inclusive and prosperous union is unravelling, especially in its southern flank.

To return to Buffett: many of the institutions we built to bed down democracy in South Africa and the world and improve its condition do just fine when growth is up and conflict is down. But they sometimes falter when they are stress-tested by adverse currents and rough tides. The paralysis of the United Nations Security Council over Syria, the inability of the eurozone to arrest the fear of debt default in its southern flank and the difficulty of the Group of 20 in turning around the global financial crisis are three instructive examples. Simply put, some of the challenges we face are simply too big for the institutions designed to contain them.

There is much talk, as well, of the decline of the world’s hyperpower, the US, and whether it is temporary or terminal. Another endless debate concerns whether China’s rise is assured and what this means to the Pacific and beyond. The developing world is also "enjoying" a better financial crisis than developed economies, but according to the latest International Monetary Fund forecast, both are severely underperforming.

But however fundamentally these shifts in the tectonic plates of international economics and diplomacy reset the future world order, right now we are somewhat suspended in a leaderless world. Political consultant Ian Bremmer described this new order as the unstable "G Zero World".

South Africa spends much time and effort exporting to the world the example of our constitutional "miracle"; indeed, in my recent work abroad, I found it to be an excellent example of South Africa’s "soft power". However, the other day I felt obliged to ask: "If our constitution is so good, why do things seem so bad?" Perhaps the great Thomas Jefferson gave us the answer more than 200 years ago when he noted that the best constitutions are those that are "most sceptical about the virtues of the powerful". This is something Parliament and the African National Congress should remember as they go about poking into the work of Public Protector Thuli Madonsela, who appears to share this Jeffersonian scepticism.

A recent official visitor of mine in Buenos Aires, one of our Cabinet’s wiser and more distinguished members, was engrossed in reading arguably the most important recent addition to the vast literature on what separates winning nations from the also-rans. Why Nations Fail: The Origins of Power, Prosperity and Poverty, by Daron Acemoglu and James Robinson, reaches an influential conclusion. Good institutions, they argue, separate the winners from the losers. These in turn take root and flourish in countries that are "inclusive states" that give everyone access to economic opportunity. Political power in such places rests with a broad coalition or a plurality of groups. This is a relatively elite set of countries.

Far more crowded is the losers’ circle, the "extractive states" controlled by a narrow ruling elite that tampers with institutions in order "to extract as much wealth as they can from the rest of society".

As our ruling elite goes about selecting its next leader, I hope my recent visitor passes the book around the Cabinet table.

• Follow Tony Leon on Twitter: @TonyLeonSA

Opposition must take on Government

11 Oct 2012 | Sue Segar | Original Publication: Cape Times

Former DA leader backs united opposition

11 Oct 2012 | Original Publication: BDlive
Opinion By Bekezela Phakathi

But Tony Leon also warns that a grand alliance has its drawbacks

FORMER Democratic Alliance (DA) leader Tony Leon on Wednesday backed calls by the party’s incumbent head, Helen Zille, for opposition parties to unite. However, he warned that a grand alliance had its drawbacks.

Mr Leon said joining forces with other parties could alienate some of the DA’s core supporters.

Ms Zille last month called for the "realignment" of South African politics in a bid to create one large political movement to challenge the ruling African National Congress (ANC). The DA hopes to unseat the ruling party by 2019 — not necessarily on its own, but most likely as part of a coalition.

The party has already joined forces with Patricia de Lille’s Independent Democrats.

Mr Leon said there was a need for political leaders to have a conversation with the electorate and present them with choices. "If you want to create a bigger party by merging everyone together, that has its own consequences.

"If you create a party that is very strong on values then you might (lose) some of the allies you want to go on with. Nick Clegg got to be deputy prime minister in the (UK) but as far as his voters are concerned he sold them out.

"There are a lot of people who vote for the DA for reasons of belief, ideology and identity — you cannot take them for granted. Equally, the voters and supporters of other parties (do the same).

"The DA has got to do the whole thing (work with other opposition parties); we did it once before (otherwise) the DA would not have governed the Western Cape."

Mr Leon said the real reason the DA governed the Western Cape was because of the coloured vote. Most coloured voters found a political home with the New National Party, which was in coalition with the DA.

"I have got the scars on my back; between 2000 and 2006, we took enormous amount of punishment to create an effective governing party that could govern Cape Town in 2006 and the Western Cape in 2009," Mr Leon said.

The New National Party was in a short-lived alliance with the DA that ended in 2001.

Mr Leon further said that the DA continued to grow and its "diverse leadership" was only good for the party.

The DA has been on a drive to attract more black vote s and some analysts believe that the election last year of Lindiwe Mazibuko as parliamentary leader could give the party "black appeal".

In addition, the appointment of Mmusi Maimane also last year as party spokesman was seen as an attempt to promote more black leaders in the party.

On Wednesday, the party’s youth leader, Makashule Gana, said he would accept the nomination for the position of federal council deputy chairman. "If I am elected, I would like to use this position to strengthen our presence on the ground. I believe I will do well ," he said.

The DA is due to have its national conference next month.

Mr Leon recently returned to the country from Argentina where he had been the South African ambassador since 2009.

As SA’s colours rise with SAA, so do the losses

09 Oct 2012 | Tony Leon | Original Publication: BDlive

SAA may not just be a drag on growth but may also contribute to the widening of the current account deficit, writes Tony Leon

IN 1960, in the first ever televised US presidential debate, Richard Nixon showed up with five o’clock shadow and looked shifty compared with the uber-cool John F Kennedy; in 1988, George Bush looked at his watch during his encounter with Bill Clinton; in 2000, Al Gore sighed audibly in his TV duel against Bush’s son, George. All three went on to lose the presidential election a month or so later. On such twitches of body language the hinges of a nation, and the world’s sole, albeit declining, hyper-power would appear to turn.

Last Wednesday, in his first debate with challenger Mitt Romney, President Barack Obama posted a "subprime" performance. He looked peevish and was widely accused of being defensive and, in place of his fluid eloquence of four years before, of showing up with a grimace and "looking as though he would be rather anywhere else".

But if a different Obama showed up in Denver, so did a different Romney.

Gone was the right-wing Tea Party-appeasing hardliner. In his place was the Massachusetts moderate. It is entirely in the realm of conjecture as to which Romney will present himself in the event that he comes from behind and beats Obama next month.

When Romney was debating Ted Kennedy in their contest for the US Senate in 1994, the liberal senator killed Romney’s chances with a memorable put-down. At that time — a position he has reversed several times subsequently — on the issue of abortion, Romney proclaimed himself "prochoice". "No you’re not," snapped Kennedy, "as with everything, you’re multiple choice."

Obama never brought to the debate any of the sound and fury of his barrage of negative advertising against Romney, which portrays the Republican as a vampire capitalist job-destroyer from his time as the founder of Bain Capital, the private equity firm that netted Romney a fortune of about $250m.

There is a direct connection between Bain Capital and the continuing misfortunes of South African Airways (SAA). One of Romney’s closest associates and a co-founder of Bain Capital is the notorious Coleman Andrews, who between 1998 and 2001, pocketed R232m from the grateful and unsuspecting South African taxpayer for 20 months’ work as SAA CEO. Now, 11 years and four CEOs later, SAA has returned to the fiscus for another R5bn bail-out, this time dressed up as a "guarantee". David Gleason estimates that since 1997, the taxpayer has stumped up more than R16bn to keep the flag flying. Yesterday’s revelation that the airline’s balance sheet is far redder, to the tune of about R1.25bn in losses last year, than previously thought suggests that the ailing airline will revisit, soon enough again, the government trough.

Relax, it could be worse: in Argentina, state carrier Aerolineas Argentinas loses a whopping $2m a day, making its annualised losses about five times worse than the leaked balance sheet of SAA suggests.

The CEO of Aerolineas proclaimed with nationalist fervour: "The colours of the Argentinian flag rise with every takeoff." And, like SAA, so do the losses. I was struck on my recent flight homeward to read the remark of SAA (now former) CEO Siza Mzimela: "We will continue to be a catalyst for economic growth in SA and the rest of the continent." On current trends, SAA may not just be a drag on growth but may also contribute to the widening of the current account deficit.

All this raises the question of the role of the state in the business of owning airlines. The old Tory adage that "the business of government is not the government of business" has been upended in the wake of the financial crisis, which put the kibosh on the light-touch, low-tax regime in which the Bain Capitals of this world flourished and wreaked their trail of "creative destruction".

During my years in Argentina, when we increased the tourist arrivals from there to here by more than 100%, SAA was a vital and valued partner. So, I am forced to admit, given that its political head, Marthinus van Schalkwyk, is my political nemesis, was SA Tourism, which, in a sea of state dysfunction, is an island of professional excellence.

But neither of these facts suggests that state supervision has improved matters in government-owned entities. All of which leads back to Andrews who, in the event of a Romney win, could be a very big figure in the next US administration. In Parliament in June last year, Jeff Radebe — today in the firing line over various failures on his justice watch but who was then minister of public enterprises — memorably tore into then Transnet CEO Saki Macozoma for the multiple lapses of corporate governance around the Andrews appointment.

Macozoma, Radebe and Andrews have all moved onward and upward since then. Meanwhile, SAA and its state owner are nose-diving over the fiscal cliff and widening our national deficit, the one matter Obama did talk about last Wednesday.

• Follow Tony Leon on Twitter: @TonyLeonSA.

Parallels between apartheid and Argentina

07 Oct 2012 | Tony Leon | Original Publication: Financial Times

Argentina is heading, and not for the first time, over an economic cliff as the population races to dump pesos for dollars and a zealous government fights back through draconian currency controls, manipulating economic data and import-suppression measures.

At the UN Ms Kirchner hit back at Christine Lagarde, IMF managing director, who had threatened to “red card” Argentina because of its fudged national statistics. Invoking “sovereign independence” to justify Argentina’s outlier behaviour, Ms Kirchner sounded like the vanquished white president of yesteryear whose UN representative encouraged the world “to do its damnedest”, which it duly obliged to do.

A crucial difference is that Ms Kirchner received an emphatic democratic mandate in October last year, something no pre-1994 South African government ever won. And Argentina’s president is hardly alone among political leaders in displaying symptoms of political hamfistedness.

South Africa, whose $400bn resource-dependent economy almost exactly matches Argentina’s, also received its own yellow card from Moody’s in September when its government bond rating was downgraded one notch. The rating agency cited concerns about political stability amid labour unrest and socioeconomic stresses. In South Africa there is much talk about nationalisation. In April, Ms Kirchner seized control of the oil company YPF from Spain’s Repsol. In both cases, the effect on foreign investment is chilling.

The writer is the former South African ambassador to Argentina

Lessons from the Boks for SA and Argentina

02 Oct 2012 | Tony Leon | Original Publication:  BDlive

The response of South Africa and Argentina to warnings by international financial institutions and ratings agencies is revealing, writes Tony Leon

MY WEEKEND return from three years away as SA’s ambassador to Argentina coincided with the two countries’ rugby teams competing again against Australia and New Zealand, respectively, in the near-final rounds of the Rugby Championship.

I was delighted to see the Springboks recover their mojo — and thump Australia at Loftus. Argentina this time put in a much less assured performance against the All Blacks in La Plata. These were tough matches with tight refereeing.

Away from the playing fields, another unforgiving referee was dishing out some yellow cards and SA and Argentina were at the receiving end. Moody’s downgraded SA’s bond rating, citing concerns for political stability, labour unrest and socioeconomic stresses. The same rating agency also downgraded 30 Argentinian banks from "stable" to "negative", citing "high amounts of official intervention in the economy".

Argentina’s eccentric economic policies also received the attention of the International Monetary Fund (IMF) last week. Its dubious national statistics (which famously underreport inflation by about 50%) received the threat of a red card.

The response of both sovereigns to these warnings was revealing. Argentinian president Cristina Fernandez de Kirchner used her appearance last week at the United Nations General Assembly to thunder back at the IMF and announce that — despite bequeathing to the world such football gods as Diego Maradona and Lionel Messi — "Argentina is not a soccer team. It is a sovereign nation that takes decisions in a sovereign way." Interestingly, from the same global podium last week, President Jacob Zuma chose not to address burning topics, such as the recent Marikana mine massacre, which clearly provided the trigger for the Moody’s downgrade. He stuck to safer matters, such as the universality of the rule of law. But to transpose Andy Warhol’s famous dictum, when you have "15 minutes of fame" on the world stage, you shouldn’t squander them.

Aside from defying or ignoring the red and yellow cards from these pesky (to the presidents) but hugely influential (to the markets) international arbiters, SA and Argentina have much in common. Our economies and populations are almost identical in size and we are both extractors of natural resources. In Argentina’s case, its rocket-like growth over the past decade, at about 9% a year, has now slowed due to unsustainable and ultraloose fiscal and monetary policies. Still, as Bill Clinton recently noted at a dinner in Buenos Aires, as one of the top three producers of soybeans in the world — the globe’s cheapest form of protein — you shouldn’t bet against Argentina. "We don’t know how consumption patterns in the world will change," opined the former US president, "but everyone in the world has still got to eat".

The Centre for Development and Enterprise published a study on Brazil and its lessons for SA last week. Indeed, one of my "takeaways" from South America is the huge significance of Brazil for the world. There are only three countries on the planet with a land mass of more than 8-million km², population of more than 200-million and an annual gross domestic product of more than $2-trillion: the US, China and Brazil.

But there are other nations breathing down the necks of both Argentina and SA and which prove that the hyperconnected and ultracompetitive world waits for no country, and complacent assumptions about the future flowing from the past are utterly unreliable. Two other South American countries enter the frame here.

While SA waits for striking miners, leaden managers and clueless policy makers to get their act together and salvage our mining sector, it is instructive to look at Peru. In 2000, SA was the largest gold producer in the world, producing 16.6% of global output. Far behind was Peru at 5.2%. Last year, SA’s production slumped to fifth place at 7%, while Peru’s increase to 5.6% of world output brought it within our range. Now South American mining mavens say Peru is well placed, with careful policies and significant reserves, to overtake us.

Colombia also offers no end of lessons for Argentina and the world. The received wisdom was always that Argentina would remain the largest Spanish-speaking economy in South America and the second-biggest after Brazil. But, hang on, what is the former narco-state of Colombia now doing? If you take the more reliable measure of purchasing power parity (rather than the dubious — in Argentina’s case at least — official rate of exchange), Colombia’s current economic size of $478bn now exceeds Argentina’s. Perhaps the clue here is that while Kirchner earlier this year seized control of the foreign ownership of Argentina’s oil giant, YPF, Colombia went about concluding a free-trade agreement, and investor protection codes, with the US.

On Saturday, Springbok coach Heyneke Meyer listened to his critics, carefully studied his competition and changed key players and his game plan. SA won in splendid style. It’s quite a good approach for the countries competing in the Rugby Championship to try out on their economies as well.

• Follow Tony Leon on Twitter: @TonyLeonSA.