Land of Messi and Peronism discovers limits of populism

29 Jan 2014 | Tony Leon | Original Publication:  BDlive

Argentina’s defiance of the economic laws of gravity invited its isolation from world financial markets, hastened disinvestment and provoked civil unrest, writes Tony Leon

IN LATE September 2012, on my last day in residence as South African ambassador to Argentina, I took a farewell stroll down the tree-lined boulevards of Recoleta, a suburb of Buenos Aires. I noticed the empty display windows in one of its up-market emporiums.

Argentinian President Cristina Fernandez

Fashion retailer Louis Vuitton — a favourite of Cristina Fernandez de Kirchner, the handbag-wielding president of Argentina — had just announced it was closing its doors. Its exit from the country, following fast in the departure of other international luxury brands, much loved by local fashion aficionados, was the latest scene, back then, of what I dubbed the long-playing melodrama: the Crisis of Cristinanomics.

Sixteen months ago, and not for the first time either, Argentina was heading over an economic cliff as the population raced to dump pesos for dollars and a zealous government fought back through draconian exchange controls, bullying tax-intrusive measures, manipulating economic data and import-suppression measures.

In an article I wrote on my return here for the Financial Times, I noted an eerie parallel between Argentina then and the apartheid government at its nadir in the 1980s.

Although, of course, Argentina had none of the racial policies then in place in South Africa that isolated this country, its stubborn pursuit of eccentric economic policies suggested some parallels. Its defiance of the economic laws of gravity invited its isolation from world financial markets, led to a dual currency in which arbitrage and round-tripping — not investment — became the names of the game, all of which hastened disinvestment and provoked civil unrest.

I was also struck how South Africa back then and Argentina more recently were increasingly detached from the world and determined to defy it, either because of racially repugnant policies or outlier economics respectively.

In the intervening period since my return, the Argentine government managed — despite political defeats in Congress, the ill health of its president and continuing investor and consumer unhappiness — to more or less avert total meltdown. In the same period, underlying the disconnect between its fantastic human capital and its poor governance, it gave to the world some outsize individuals: the first non-European pontiff, Pope Francis, football supremo Lionel Messi and the Queen Consort of the Netherlands, Princess Maxima.

Two factors helped pull Argentina back from the cliff in 2012, which strike some uncomfortable chords with South Africa today: surging growth in China (Argentina provides it with 40% of its soya bean imports) and the rapid printing of dollars by the US Federal Reserve through its programme of quantitative easing. Higher, though risky, Argentine yields provided a carry interest market for the adventurous. But with both those trends now reversing, and investors exiting emerging markets with great haste, Argentina took a huge hit. It was not alone, as the battered rand, the shrinking Turkish lira and the diminishing Brazilian real reflected.

But, on a swelteringly hot day last Thursday, Argentina led the field with the dubious distinction of posting the largest fall in a single day of any (emerging or other) currency, as its peso fell an astronomical 15%. Over the week, it fell about 18%, its sharpest descent since the country posted the biggest single sovereign debt default back in 2002.

And that default, with its consequential debt obligations, fuelled the need to preserve dollars, which in turn led to drastic remedies, ranging from "haircuts" for foreign bond holders, nationalisation of foreign companies without agreed compensation, extreme protectionism to deter imports, fudged or manipulated financial statistics, and associated maladies. But this in turn led to the country being excluded from vital foreign credit markets, and incurring the extreme displeasure of the International Monetary Fund.

Broken air-conditioners and lifts in the capital city hardly helped the mood last Thursday, which was well captured in the headline of the fiercely independent Buenos Aires Herald: "Official Exchange Rate: $8.10; Temperature 34 degrees; Unofficial Exchange Rate $12.10, real temperature, with humidity, 46 degrees!"

That headline, aside from reflecting the uncomfortable weather, was shorthand for another phenomenon well remembered here from the days of the "Rubicon rand", the uneasy existence of two parallel local currencies. In Argentina’s case, it is more acute. Its "blue" or black-market rate of exchange, always a more realistic reflection of the currency’s worth, traded at about a 40% differential from the official rate. The latter was propped up by the central bank’s determination to buy up dollars to prop up the country’s currency. But as a particular nemesis of Argentina, former British prime minister Margaret Thatcher, once famously observed: "You can’t buck the markets."

And the proximate reason for the peso’s vertiginous collapse was the central bank’s announcement that it would stop intervening in the market to defend the currency (a wise policy long practised over here). Necessity was the mother of virtue in Buenos Aires: its foreign reserves had drastically diminished due to the triple headwinds of central bank dollar purchasing, tapering by the Federal Reserve and stagnant commodity prices for its world acclaimed agri-exports.

But another realistic and historic spectre hangs over Argentina: the fear and reality of hyperinflation. With the government hitting the printing presses to fund its populist vote-winning social handouts and subsidies, inflation is reckoned to be about 28%, although the official, and discredited, figure places it at about a third of that. Dollar retention was thus a key reason to prop up the local currency. But, by the weekend, when the government reversed course and in effect allowed the currency to devalue, the big question in Buenos Aires remained unanswered: as John Paul Rathbone of the Financial Times put it: "If the flight to dollars is being caused by high inflation, cutting inflation means also cutting public spending and the money-printing used to finance it — which Fernandez’s left of centre government is loath to do."

Simply put, a crisis is an excellent moment to make deep structural reforms rather than ad-hoc Band-Aid measures, which the market soon discounts. Peronism is the vote-winning brand of Argentine populism and politics, but it has many doppelgangers elsewhere.

For example, Economic Freedom Fighters "commander" Julius Malema has borrowed both his beret and what passes as his economic policy from Venezuela’s late president, Hugo Chávez. Argentina in turn practices a sort of Chávez-lite policy, which is slightly less economically radical but minus the sea of oil on which Venezuela sits. Both provide a cautionary lesson in South Africa to the threadbare and impoverishing nature of populist economics in practice.

I asked Buenos Aires resident and the former head of retail and business banking at Standard Bank of Argentina (now ICBC), Johan Roets, for some local parallels. "A relatively small economy (Argentina and South Africa have roughly the same weight in the world) cannot control its own currency," he said. "Argentina’s leaders today are populists rather than leaders. Populism might help you get elected but eventually you fall off the cliff. What happened last week in Buenos Aires was simply the acceleration of a very long process of mismanagement."

A sombre note from the other side of the South Atlantic, or perhaps a home thought from abroad.

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

 

The prospect of a weakened ANC is intriguing

28 Jan 2014 | Tony Leon | Original Publication:  BDlive

Tony Leon: Will a panicked and diminished ANC government then decide to veer sharply leftward economically?

ONLY in South Africa, and a clutch of other one-party-dominant democracies, would the possibility that a government in power for 20 years and facing multiple crises of misgovernance might slip below 60% of the vote in the next election cause much interest.

But a conflicting emotion might apply to the 60% conundrum.

Whether you are an opposition stalwart or even a disinterested believer in the constitutional virtues, it’s a no-brainer that "cutting the African National Congress (ANC) down to size" would be an unalloyed good.

It would make politics more competitive and hold out hope for more answerable government; who knows, it might even help arrest the decline of the battered rand.

The continuance of President Jacob Zuma in high office might be in jeopardy as an anxious party, at its next elective conference, decides to commit regicide again.

But what of the other side of your brain, the economic one, if the ANC dips below 60%? Will a panicked and diminished ANC government then decide to veer sharply leftward economically?

Enthralled by the rise of Julius Malema and his Economic Freedom Fighters (EFF) — which will have to win more than 10% of the vote for the ANC-below-60% scenario to be realised — the ANC decides that it’s in a race to the bottom with its defecting left flank and lets go of the brakes. Of course, the government is hardly in danger of being accused of being business-friendly or pro-market.

But South Africa still has a long way to go until it falls off the cliff of populism a la Argentina or Venezuela, or even Zimbabwe.

Macroeconomic, if not microeconomic, policy here is still grounded in the world of reality and does not try to defy the laws of economic gravity, as is the case with certifiable failed states.

But what if the election results remove the restraints that have bound South Africa to the laws of investor attraction, give or take the tearing up of bilateral investment treaties, et al?

Then you are looking down the barrel of a spiralling current-account deficit, rampant inflation and the evils associated with fiscal and monetary incontinence. R11 to the dollar will seem like a happy memory.

But how likely is the ANC to fall below 60% of the vote?

For this to happen, obviously, the opposition in its various formations will have to get more than 40%.

The only significant double-digit contender at the moment is the Democratic Alliance (DA), which achieved 16.7% last time out, top performer in a combined opposition total of just less than 34%.

On paper, it is easy to see the EFF winning more than 7%, which means you arrive at a below-60% ANC.

But that presupposes that all previous opposition voters stay in the fold, which is unlikely, given the implosion in the Congress of the People and the continuing puncture of the Inkatha Freedom Party.

Between them, they received 12% of the total in 2009, and recent by-elections suggest that many of their voters have migrated back to the ANC.

Therefore, if the DA does not get much beyond 25%, there is a real prospect that the ANC returns at about 60%.

Of course a lot can happen over the next four months.

And the variable here, and the real focus of the campaign, is voter turnout.

If many ANC supporters stay away from the polls, then these percentages can dramatically shift.

And there could still be some blockbuster candidates to be announced in the DA’s "confidential" candidates’ slots, which could move more voters.

But assume that the ANC returns in significantly reduced form to Parliament.

This happened before to a ruling party, the National Party (NP), in September 1989. Its 49% of the total vote (its worst result in a generation) could have obliged it to take heed of the big gainers in that election, the ultra-right Conservative Party (30%).

Instead, in his revolutionary speech at the opening of Parliament, FW de Klerk, who was president at the time, looked straight past the Conservatives, and announced (by mentally tallying up the NP and Democratic Party vote of 20%) that "South Africans have voted irreversibly for change".

So will a diminished but re-elected Zuma announce in his post-election speech that 85% of South Africans (the combined total of all ANC and DA votes) have voted in favour of centrist economics in the form of the National Development Plan and that the government is now proceeding, full speed ahead, to implement it?

This could be as interesting as the election. Or perhaps a case of wishful thinking.

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

 

 

 

DA faces ANC in a changed environment

21 Jan 2014 | Tony Leon | Original Publication:  BDlive

It was the events around and after the memorial service and funeral for former president Nelson Mandela that revealed a changed reality in South Africa, writes Tony Leon

ENGLISH soccer great Gary Lineker once observed that "football is a simple game. Twenty-two men chase a ball for 90 minutes and, at the end, the Germans always win."

Give or take the ascendancy of Spain and one or two others in soccer, this seems to be a handy user’s guide for watching the unfolding general election campaign in South Africa, and predicting its final outcome.

In horse-racing terms, the African National Congress (ANC) is a dead cert to win nationally, and odds-on favourite to retain its grip on eight of nine provinces.

Gauteng has been put in play through a combination of factors — a fractious ruling party, extremely unpopular e-tolls and spiralling delivery failures, and the energetic and fresh-faced campaign of the Democratic Alliance’s (DA’s) top candidate, Mmusi Maimane. But even Maimane, the new hope for the opposition, perhaps realises how long the odds are in reality.

In the previous provincial poll in 2009, the ANC obtained 63.99% of the vote, a shade higher than it achieved in the home province of President Jacob Zuma in KwaZulu-Natal.

Even dreams of the opposition combining to force the ANC below 50% in Gauteng must yield to the reality that as far as co-operation between, for example, the DA and the Economic Freedom Fighters (EFF) goes, there is, as the meretricious Julius Malema would say, "no way, Madam". Perhaps this caution explains why Maimane himself has apparently taken a two-way bet on the outcome and reserved a place for himself on the DA’s list for Parliament as a form of electoral insurance.

But, of course, beneath the predicted headline outcome, a great deal of the small print in the results will also set the course of our political economy for years to come.

It was the events around and after the memorial service and funeral last month for former president Nelson Mandela that revealed a changed reality in South Africa.

There is no doubt that, in life, Mandela had a significant regard for Zuma.

Back in September 2002, when Zuma was still deputy president and had been obliged by the guardians around President Thabo Mbeki to issue a statement saying he had no ambition to become president, Mandela told me — and doubtless others: "JZ is the key man in the party and the movement."

I thought at the time that this showed the great Madiba to be startlingly out of touch with the national zeitgeist.

Events proved just how canny the old man actually was.

Even in death, Mandela’s touch seemed to advance Zuma further.

On December 5 last year, the ANC was due to commence a difficult national executive meeting at the very moment when Nkandla and the serial scandals around it were raising serious internal questions about the party’s president. Mandela’s passing rewrote the timetable.

It was also a moment for the country and the world to perhaps embrace the leader who stood in Mandela’s stead.

But as The Economist noted, even before the cascade of debacles at the FNB Stadium: "Without the protection of Mandela’s saintly aura" the ruling party and its leaders "will be more harshly judged".

Just how quickly the mantle proved to be nontransferable was revealed when sections of the crowd at the FNB Stadium booed the president, a moment of exquisite personal embarrassment and national shame.

But it might be of (cold) comfort for the president to know that he is not alone in this unhappy league.

I witnessed then-Australian prime minister John Howard being raucously jeered at a packed rugby stadium in Sydney, in September 2001, at the Bledisloe Cup rugby grand finale.

Tony Blair was roundly booed by 10,000 people at a women’s institute conference in London in 2000.

Although neither of them then used national security agents to filter future crowds, both Howard and Blair went on to win hefty majorities at the next elections.

By our standards of glorifying regnant leaders, the FNB Stadium wake-up call signalled the arrival of more normal and less deified politics on our shores.

Barely had Mandela been laid to rest in Qunu than the ANC’s most powerful trade union partner, the National Union of Metalworkers of South Africa, chose to announce its disaffiliation from the ruling party.

The iron unity of old is now more of a circular firing squad.

All this uncivil chatter and churn leads to the central question that remains unresolved: will the ANC be returned with a total greater or less than 60%?

More on this, anon.

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

 

Like Whitman, Mandela contains multitudes

10 Dec 2013 | Tony Leon | Original Publication:  BDlive

 

It is difficult to pay tribute to Mandela without resorting to cliché and overworked superlatives, writes Tony Leon

PARLIAMENT was recalled on Monday to pay homage to Nelson Mandela, who in death achieved what he managed in his later life to do as none before him had done. He united our fractious local polity and the wider disunited world, from Afghanistan to Zimbabwe.

English Premier League football players, platoons of leaders from the good and the great to the venal and corrupt, the religious and the secular, the famous and the obscure, bow their heads to acknowledge the passage of greatness.

Born among peasants and chiefs in Mveso in rural Transkei, he died in Lower Houghton, Johannesburg, the historic lair of our mining Randlords.

It is very difficult to pay tribute to such a rare phenomenon as Mandela without resorting to cliché and overworked superlatives.

When, on March 26 1999, the same Parliament, gathered to pay tribute to a very live and alert Mandela, on his departure from what his biographer Anthony Sampson called "the golden perch" of his presidency, the cliché-machine was also in overdrive. This was necessitated because words sometimes seem unequal to capturing heroic deeds.

In Parliament more than years 13 ago, I wondered how a political opponent pays tribute to this singular president.

He was both a staunch and wily partisan politician, and yet flew solo in the rarefied stratosphere while the rest of the political class never reached higher than the cumulus clouds far below.

I thought then and now that the essence of Mandela’s leadership was his special kind of grace, which raised the sights of our politics. Were there other such leaders? In my tribute back then, I suggested there were, but very few of them: "There are three categories of great political leaders.

"The first is the great and the bad: this includes Hitler and Stalin.

"The second is the great and the good: this includes Winston Churchill and Franklin Roosevelt. And then there is the third category, also of good, but of a leader born with a special kind of grace, who seems to transcend the politics of his age. This is a very small category, and in fact I can think of only two such men in this century: Mahatma Gandhi and Nelson Mandela."

Years later, I came across an essay by arguably the greatest political writer of the same century, George Orwell, an avowed enemy of cant and cliché. It was a reflection on Gandhi, published in January 1949, a year after the great Indian’s assassination. He wrote: "Saints should always be judged guilty until they are proven innocent, but the tests that have to be applied to them are not the same in all cases. In Gandhi’s case there is strong evidence in his favour…. For his whole life was a sort of pilgrimage in which every act was significant."

In Mandela’s case, one of the posthumous facts to have been confirmed, but much contested by his own flame-keepers while alive, was his membership of the Communist Party and its central command.

Between his final illness in July and his death last week, an energetic correspondence on this topic was published in the New York Review of Books. In the one corner was our acerbic local literary hero, Rian Malan, who had proffered evidence that Mandela was indeed a communist. This had been supported by the research of Stephen Ellis and former South African Communist Party (SACP) member Paul Trewhela. This in turn had been denounced by Bill Keller, who at the time of Mandela’s release had been New York Times bureau chief in Johannesburg.

Statements in recent days prove that, on this fact, Keller was wrong and his opponents were correct. Yet, on the larger question of what, if anything, this signifies, I think Keller called it right. On acknowledging that he "should not have been so categorical in saying that Mandela was not a communist", he noted: "Nelson Mandela was, at various times, a black nationalist and a nonracialist, an opponent of armed struggle, and a practitioner of armed struggle, a close partner of the SACP and in his presidency, a close partner of South Africa’s powerful capitalists…. But he was not a communist in the values he upheld, the politics he practised, the constitution he negotiated, or the presidency he held."

Another ace journalist, John Carlin, popularised the fact that Mandela’s favourite poem was Invictus by William Ernest Henley. But perhaps in terms of how he straddled the paradoxes he so singularly embodied and grafted them to causes greater than himself, we should reflect on the words of another poet, Walt Whitman: "Do I contradict myself? Very well I contradict myself, I am large, I contain multitudes."

Mandela might not have resolved every contradiction his life and work embodied, and he never claimed to be a saint. In his essay on Gandhi, Orwell concluded: "But regarded simply as a politician, and compared to the other leading political figures of our time, how clean a smell he left behind."

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

 

‘Stupid enough’ Eglin saw dangers of inequality

03 Dec 2013 | Tony Leon | Original Publication:  BDlive

Colin Eglin joins the pantheon of political leaders of the modern, much contested, liberal tradition in South Africa, writes Tony Leon

COLIN Eglin, who died on Friday in Cape Town, joins the pantheon of political leaders of the modern, much contested, liberal tradition in South Africa. Jan Steytler, Zach de Beer, Harry Oppenheimer, Frederik van Zyl Slabbert, Harry Schwarz and Helen Suzman had all gone before him, and each of them held high political office on the opposition side of the fence, but none of them ever attained political power. Oppenheimer certainly exercised vast economic influence, and for critical years also funded the liberal opposition, but in political terms he was never in power.

Strangely enough, Eglin titled his memoir Crossing the Borders of Power, although they are a plainly written testament to the prodigious pursuit of principles and ideas in a mostly unforgiving political climate. It is not clear at which point, if ever, this highly intelligent, palpably decent public servant crossed the boundary separating the power of ideals from the ideals of power. Perhaps his short stint on the transitional executive council at Kempton Park, which briefly exercised authority in tandem with the departing National Party government between December 1993 and April 1994, provides a clue.

I always thought that Eglin’s political and personal friend, De Beer, who also succeeded him as party leader, came closest to nailing the liberal purpose in the body politic, when he dusted off the old and bleak aphorism of Prince William the Silent, "One need not hope in order to undertake, nor succeed in order to persevere." In an appropriately more unvarnished style, Eglin provided his party, during the two terms when he led it, with the caution that they were involved in "the politics of the long haul".

Eglin, a quantity surveyor by training and constitutional lawyer by inclination, held fast to the idea that the only bridge across the chasm of 350 years of racial division and conflict would be constructed of durable material forged in the furnace of direct political negotiations between hitherto warring parties: a nonracial, democratic constitution built by consensus and underpinned by strong checks against an overcentralising political authority. He once self-deprecatingly remarked at a Liberal International conference at Oxford in 1997, shortly after helping to midwife more or less just such an instrument, "if we were ‘stupid enough’ to share political power, we’d better be ‘stupid enough’ to make sure we share the economic wealth of the country as well."

He saw, earlier than many others, that the lurking danger for the new South Africa was a separation, again racial, between the holders of political authority and the possessors of the country’s economic patrimony. But he was not blind to the limitations and contradictions of present transformation, which he perceived to be a top-down reshuffling of elite wealth, not an inclusive and sustainable construction of a shared economy.

The roll call of white liberal leaders past indicates they were more successful, ironically, in glimpsing, and in some measure shaping, the future of the new South Africa than they were in constructing a political vehicle to enter it. This had much to do with their political provenance. With the exception of Van Zyl Slabbert, each of them had risen up the political ladder of the old United Party (UP), which they kicked away, first in 1959.

In fact, before 1994 every liberal political iteration was essentially involved in the rearrangement of political furniture from the disintegrating UP. It is quite striking, from today’s vastly changed vantage point, how very few voters were attracted from the majority ranks of the National Party to the Progressive Federal Party and its successors.

The grafting of an Afrikaans leader, variously Steytler, Van Zyl Slabbert and De Beer at the top of the party did not move Afrikaans votes any more than the bilingual, but English-speaking, Eglin could, or could not. Perhaps, with adaptation, there is a cautionary lesson here for the present opposition as it considers its future leadership. It was only the separation of Afrikaans voters from the levers of political power after 1994 that led to their migration, en masse, from the ranks of the National Party, which, shorn of power, was soon enough bereft of political purpose and existence.

Eglin lived a long and purposeful life. But he did not live long enough to see whether the political history he helped to shape on the white opposition side of the fence, might, as history so often does, repeat itself in the broad ranks of the black liberation movement — the African National Congress — an organisation he in some ways admired, but opposed.

Certainly some familiar stress fractures are in plain sight: the circular firing squad between warring alliance leaders, the looting of state assets and the confusion between personal and party interests on the one hand, and the national and constitutional interests on the other. But even a veteran like Eglin never hazarded a guess as to how long the disintegration would take, or whether some act of renewal would arrest the process.

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

 

Resource curse breaks bond of accountability

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

Why debate when you can just slap on a label?

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