Tuesday, November 26, 2013

Resource curse breaks bond of accountability

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26 Nov 2013 | Tony Leon | Original Publication:  BDlive
There are few, if any, developing democracies, which rely on oil and gas for the bulk of their exports, that have been certified as ‘free democracies’, writes Tony Leon

UNTIL fairly recently, residents of high-end Malibu in California and Clifton in Cape Town had something in common, in addition to occupying some of the most expensive property in their countries: both these beach-facing bolt holes for the super-rich provided grand shelters for Teodoro Nguema Obiang Mangue, son and heir apparent of Teodoro Obiang Nguema Mbasogo, who has ruled Equatorial Guinea since 1979.

The Malibu estate, priced at about $30m, was on a lavish scale in comparison to the Clifton "bungalow", which was purchased for R23.5m in 2004. The Californian dwelling comprised a 6.5ha property, with a palm-lined driveway leading to a mansion surrounded by swimming pools, tennis court and a four-hole golf course. Its garage housed more than two dozen cars including a $2m Ferrari and eight other Ferraris.

Obiang’s international property empire has another common provenance, well described by Larry Diamond, director of the Centre on Democracy Development and the Rule of Law at Stanford University: "What made these extravagant possessions all the more remarkable was that they belonged to a government worker from a small African country who was making an official salary of about $80,000 a year."

This was in October 2011, when the US department of justice obtained a court order to seize the Malibu property on the grounds that Obiang’s property riches were the result of corrupt practices such as "personal taxes" he levied against timber companies operating in his country, to wit a $28.80 tax for every log exported when he was minister of forestry. Earlier last year, French authorities seized his Parisian mansion worth about €100m.

Although his estates in California and France have diminished, his political career back home has flourished — he is now Equatorial Guinea’s second vice-president.

South Africa’s government lacks either the instruments or the appetite to attach Obiang’s local assets. Thus the residents of Clifton are, via the "Bungalow Owners Association", using municipal bylaws to have the rat-infested property declared "derelict".

Aside from providing a potential episode of Lifestyles of the Rich and Famous, the Obiang family provides a poster for the so-called resource curse, as even more than its abundant forests, the country is one of the most oil-rich in the world, having exported 400,000 barrels of oil a day for the past 18 years. Diamond and Jack Mosbacher, in a recently co-authored article in the journal Foreign Affairs, point to the cruel paradox of this bonanza. "The country is wealthier, in terms of GDP per capita, than France, Japan and the UK. Little of this wealth, however, has helped the vast majority of Equatorial Guinea’s 700,000 people: today three out of four Equatorial Guineans live on less than $2 a day, and infant mortality rates have barely budged since oil was first discovered there."

Depressingly, the authors make a wider point: although, in general, Africa has made impressive strides in improving governance over the past 20 years, according to the World Bank, the continent’s oil exporters rank in the bottom quintile globally in their ability to control corruption, formulate and implement effective policies, regulate private sector development and enforce the rule of law. And there are few, if any, developing democracies anywhere, which rely on oil and gas for the bulk of their exports, that have been certified as "free democracies". South Africa, for which minerals are its export mainstay, is something of a democratic outlier here, but oil and gas seem more problematic.

The economic distortions the "resource curse" inflicts on countries — from inflated exchange rates, to undermining manufacturing competitiveness — are well known.

Less explored but now of some moment in view of the slew of East and West African countries soon to emerge as new players on the oil and gas scene is the democratic deficit it creates. Oil revenues, in simple terms, are "rents", or unearned income in the hands of governing elites. Taxes, in contrast, from citizen to government create a democratic and accountable bond between government and people. The sale of natural resources "reduces government’s reliance on revenue from its people and thus weakens the incentive to serve them". When resource rents replace taxation as the primary revenue generator for the state, this incentivises the political elite to focus on the "private accumulation of wealth" and not on delivering public goods, such as roads and schools. Hence Malibu mansions and high infant mortality both come from the same source.

The key is to ensure that the people themselves receive the direct benefit of the resource revenue stream, as cash transfers into bank accounts and the government then taxes back a portion of it. This ingenuous scheme is elaborated by the authors. It’s a lot more "transformative", even revolutionary, than the recycling of stale ideas that often informs the debate on empowerment.

Leon is the author of The Accidental Ambassador (Pan Macmillan). Follow him on Twitter: @TonyLeonSA OR on Facebook: facebook.com/TonyLeonSA

Tuesday, November 19, 2013

Why debate when you can just slap on a label?

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19 Nov 2013 | Tony Leon | Original Publication:  BDlive

Recent debates are reminders that we prefer our politics to be binary and eschew complexity and nuance by slapping labels on views we most dislike, writes Tony Leon

JEANE Kirkpatrick, the US liberal democrat, became a political apostate, when, in 1980, her fierce detestation of communism led her to embrace Republican presidential candidate Ronald Reagan, in whose cabinet she would later serve.

Kirkpatrick was not overfussed about being labelled. Despite migrating from a youthful embrace of the Socialist Party of America to a middle-age conversion to the conservative cause, she shrugged off attempts to pigeonhole her ideologically: "Labels in politics are like parsley on a dinner plate — decorative but not nourishing."

She would, however, have had a hard swim in our waters had she been born in, say, Deneysville, Free State, rather than in Duncan, Oklahoma. Recent debates here are reminders that we prefer our politics to be binary and eschew complexity and nuance by slapping labels on the views and voices we most dislike. It’s not simply a matter of prejudice; it also has the convenience of closing down a debate before it has properly begun by suggesting bad faith or irrevocable bias on the part of certain participants.

Ironically, this week we celebrate the attainment of the constitutional settlement at Kempton Park 20 years ago. The chief architect of the bridge constructed there was Cyril Ramaphosa. Yet, just last week, the avatar of the nonracial and equal democracy with which his name and contribution will be associated forever, struck a very different and discordant chord.

Campaigning in Limpopo, Ramaphosa warned: "If you don’t vote, the Boers will come back to control us." This all-purpose swipe against all opponents of his African National Congress, without nuance, presumably embraces everyone from Julius Malema to Pieter Mulder. He later clarified this remark, explaining he meant it as a reference to "former apartheid oppressors", not to whites or Afrikaners as a group.

Just as the wells of nonracial co-operation built at Kempton Park were being spiked, the government announced that Robert McBride was the best qualified person in South Africa to be head of the Independent Police Investigation Directorate. The opposition spokeswoman on police, Dianne Kohler Barnard, noted that she had voted in favour of the previous incumbent, nominated by the same government, "as his legal qualifications were impeccable, added to which he had an uncontroversial and upstanding reputation". She then pointed out that in order to panel-beat the qualifications for the post to meet McBride’s lack of qualifications, "the crucial legal qualification necessary for (this) post had been excised from the job advertisement". Instead of explaining this striking omission or dealing with the serial controversies that have attached to McBride since 1994, his defenders followed the less nuanced or complex route. Two public servants "writing in their personal capacities", Busani Ngcaweni and Vusi Mona, did not bother with rebutting such bothersome technicalities. They simply averred that opponents of the ill-starred McBride "want to hold onto white privilege".

I then reread Kohler Barnard’s critique and could not find a single direct or implied reference to McBride’s race in it. No matter, her critics will cry, it is her racial origins that count, and condemn her views to the bin.

Correctly, we measure the mountains of progress achieved since the dramatic final days at Kempton Park 20 years ago. But far less visible there than Ramaphosa and other designers of our new order was the quietly spoken and intellectually towering legal academic, Etienne Mureinik. Many of the clauses in our bill of rights owe their provenance to him. Sadly, he committed suicide in August 1996, so he never witnessed the signing of the final constitution by Nelson Mandela.

But months before he died, at the University of the Witwatersrand, Mureinik was embroiled in a row over the fitness for office of William Makgoba, at the time a deputy vice-chancellor. The details are perhaps less important than the terms of engagement in that now largely forgotten debate. However, with his pioneering writing and brave advocacy during apartheid, Mureinik could not be defined, on Ramaphosa’s version at least, as a "Boer". He did far more to rebut the oppressive old order than many others. But he was white. Makgoba dismissed Mureinik and his fellow critics "as a typical group of racists". Mureinik’s response was both instructive and eerily predictive of the whirlwind to come. He called it "stigma labelling". He wrote: "A white person who dares to question a black person’s credentials will automatically be called ‘a racist’, a label which makes one a moral criminal, and consigns one to the nonworld of those who can safely be ignored."

But while it might silence the debate, what does this do to the constitutional order? Once again, Mureinik suggested, it removed the essential pillar on which the entire construction rested: "It destroys any hope of equal accountability." Perhaps in the war of words, we sometimes destroy better than we know.
Leon is the author of The Accidental Ambassador (Pan Macmillan). Follow him on Twitter: @TonyLeonSA OR on Facebook: facebook.com/TonyLeonSA


Tuesday, November 12, 2013

The many faces of ‘Government Sachs’ reports

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12 Nov 2013 | Tony Leon  | Original Publication:  BDlive
When the Goldman Sachs report on South Africa moves from data on the past to challenges of the future, it enters less solid territory, writes Tony Leon

IN 2009, US journalist Matt Taibbi entered the lists of immortal phrase makers when he wrote about global investment banking giant Goldman Sachs. In his coruscating article for Rolling Stone magazine, he described it as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money".

In the same year as the Rolling Stone piece, Goldman CE Lloyd Blankfein got into a lot of trouble when he described his banking career as "doing God’s work". He obviously had never heard of the expulsion of the moneylenders from the temple. But while the banking czar retracted this heresy, Goldman’s activities in the US subprime crisis, from which it emerged enhanced, proved it to be nothing if not agnostic. At the time, it was racking up losses north of $1.2bn in residential mortgage-backed securities. But it made even more money for itself by betting against, or shorting, the same market.

The public release last week in South Africa of the Goldman Sachs report, titled Two Decades of Freedom — What SA is Doing with It, and What Now Needs to be Done, at first blush seems suggestive of another moniker slapped on the banker — "Government Sachs". Finance Minister Pravin Gordhan was on hand at the launch and African National Congress (ANC) treasurer-general Zweli Mkhize was quoted as describing the report as "positive for the ANC". Undoubtedly the fact that Goldman’s advisers include party heavyweight Tito Mboweni could fortify this impression.

But I thought that Goldman country head Colin Coleman’s introduction of the report as "empirical and data-rich" provided some disclaimer against bias.

Some of the metrics it reveals, in more than 60 pages of detailed analysis, could be gainsaid only by the wilfully blind. It shows a vast improvement in living standards, the growth of a significant black middle class, and major repairs in the sovereign balance sheet and its growth rate, and a quadrupling of the overall size of the economy.

These achievements have also been achieved without too much recourse to the printing press, as, in the same period, inflation was tamped down from an average high of more than 14% at the tail-end of the apartheid years to just more than 6% today.

As former US president Bill Clinton is fond of saying: "Everything is compared to what?" And benchmarking our achievements under two decades of democracy with South Africa’s global isolation and its internal strife, indicated by a siege economy, replete with sanctions and disinvestment, swingeing exchange controls and protracted violence is to compare parallel universes. It’s somewhat reminiscent of the story about when the most unpopular man in the community of an old village, or shtetl, in Russia was being buried and the presiding rabbi could find nothing good to say about the deceased. Finally, a village elder announced: "Well, his brother was worse."

Indeed, when the Goldman Sachs report moves from data on the past to challenges of the future, it enters less solid territory. It veritably tiptoes around some of the hard choices that need to be made to conquer the low growth and high unemployment and the failed labour market scenario it rightly identifies as being the most pressing future issues. It talks very vaguely of ending "endless policy debates" and makes hortatory claims for a "Team SA approach" and an end to "finger-pointing". Though we are going into an election, the opposition does not get a look-in.

But Goldman’s tentacles do indeed stretch across the world. In the week its report was launched here, a Goldman report in India was causing no end of trouble to the banker in New Delhi. India, like South Africa, faces a national election in the first quarter of next year.

But, in studied contrast to the South African report, which features Nelson Mandela on its cover, its Indian report was headlined, "Modifying our view: Raise India to Marketweight", this being a reference to the leader of the opposition in India, Narendra Modi, whom the banking giant cites as the possible next prime minister. It notes that "optimism for political change" under a Bharatiya Janata Party-led government "could be beneficial for investment demand pick-up in our view".

The fact that this ultranationalist Hindu politician is banned from visiting the US at present, due to his suspected complicity in the massacre of more than a thousand Muslims in 2002 in his home state of Gujurat, is not mentioned in the report. Naturally, in studied contrast to over here, the government of India seethed at the report and dismissed it as "inappropriate and objectionable".

Is Goldman Sachs simply being two-faced, or just agnostic?

Perhaps its different approach in India and South Africa confirms another missing, and unmentioned, aspect of our report card: the presence of competitive politics to drive transcending change in the one place, and its absence in the other.
Leon is the author of The Accidental Ambassador (Pan Macmillan). Follow him on Twitter: @TonyLeonSA OR on Facebook: facebook.com/TonyLeonSA

Tuesday, November 5, 2013

DA at sixes and sevens over racist employment bill

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05 Nov 2013 | Tony Leon | Original Publication:  BDlive

In seeking to offer itself as an agent for redress and to attract a new base, the Democratic Alliance is far too scared of having the antitransformation label stuck on it, writes Tony Leon

GEN Colin Powell achieved some notable firsts in a star-spangled career. He was both the first African-American chairman of the US joint chiefs of staff and later secretary of state. He also offered some singular advice for business and political leaders: "Be prepared to be lonely."

I remember feeling quite lonely in Parliament in August 1998, when the Democratic Party and I went against the African National Congress juggernaut and led the opposition to the Employment Equity Bill. That legislation was the first, and by far the most powerful, signal that the nonracial prospectus of the new South Africa would be undercut by the compulsory race classification by "designated employers" of their workforces on pain of criminal sanction for noncompliance. Other than labour minister Tito Mboweni, who did not use racial invective, most of his caucus dismissed our stance as "antitransformation" and worse.

Shortly after the bill’s approval in Parliament, I received a call from the doyenne of the movement which I then led. It was Helen Suzman, never shy about expressing her approval or disapproval — both privately and publicly — for the party that she supported, often critically. This time she was in staunch support of our position and told me that, in her capacity as a member of the South African Human Rights Commission, she had submitted a minority report opposing the bill on exactly the same grounds as I had articulated in Parliament. The legislation was antiinvestment, racially coercive and fundamentally illiberal. She also advised that she intended to go public in her opposition.

As good as her word, a few days later, on September 6 1998, she was interviewed by the Chicago Tribune. One of the questions she was asked, with reference to her close relationship with Nelson Mandela, was why she did not join the African National Congress (ANC). After offering some kind words about the Democratic Party, her answer was very instructive. "I didn’t join the ANC because of its alliance with the Communist Party and because it introduces bills like the Employment Equity Bill. You don’t sacrifice efficiency, competence and merit."

Last Saturday, at a rally, the Democratic Alliance’s (DA’s) premier candidate in Gauteng, Mmusi Maimane, invoked the name of Suzman, alone among a pantheon of former ANC and Pan Africanist Congress leaders he cited with approval. Yet, just a few days before, the DA parliamentary caucus voted in favour of a bill that strengthens and increases the original penalties of the Employment Equity Act. The amending bill widens ministerial discretion, ramps up criminal sanctions for noncompliance and leaves unaltered the compulsory racial classification basis of the legislation.

The crisp question is: why has the party of Suzman embraced the very policies that she in her lifetime so resolutely opposed?

It should be added that a far less consistent (in terms of partisan support rather than any slide away on liberal principles) former leader of the party, Frederik van Zyl Slabbert, was even more vehement. In June 2006, he was the keynote speaker at a conference held on "The Revival of Race Classification in Post-Apartheid SA". He offered both a warning and a prescription. On the one hand, he called for South Africa to move away from its "stubborn obsession" with race, and he predicted that "if you make yourself hostage to a racist past, you can bank on a racist future". The intervening years have proven those words eerily prophetic. The solution to the issue of redress, he suggested, was to use the socioeconomic backgrounds of people rather than the blunt instrument of race as the best means of transforming the country. The DA’s flip-flop on employment equity suggests that whatever its other lapses, the ANC now comprehensively dominates the intellectual space and defines terms of the debate within it. This brings to mind an observation of Argentinian strongman Juan Domingo Peron. He said, "Argentinians might belong to different political parties, but at the end of the day we are all Peronists." A weekend DA statement cited no fewer than 10 problems with the legislation which the caucus had just voted in favour of, but added that the party remained committed to the cornerstone of the legislation.

Apparently it will now seek to amend some of its provisions in the National Council of Provinces. This confusing position brings to mind US Democratic presidential candidate John Kerry’s convulsions in 2004, when he tried to explain how his initial vote in favour of the invasion of Iraq was replaced later by his opposition to the war. "He was in favour of the war before he was against it," his Republican opponents pilloried him. The lesson here is: if you make a mistake, own it.

In seeking to offer itself as an agent for redress and to attract a new base, the DA is far too scared of having the race and antitransformation labels stuck on it. Van Zyl Slabbert offered another warning: "You can never out-Mau Mau the Mau Mau.
Leon is the author of The Accidental Ambassador (Pan Macmillan). Follow him on Twitter: @TonyLeonSA OR on Facebook: facebook.com/TonyLeonSA