South Africa's Pravin Gordhan: Grace Under Pressure

WASHINGTON: South Africa's finance minister Pravin Gordhan is at the center of a political storm. 

Four months ago he was brought back to head the finance ministry when his successor was abruptly fired by president Jacob Zuma and replaced with a little known lawmaker. That move shook investor confidence and sent the currency tumbling.  Four days later business leaders and senior ruling party leaders forced Zuma to reverse course and return Gordhan to the position he held from 2009 to 2014. 

In Washington for the spring meetings of the International Monetary Fund and World Bank, Gordhan was relaxed and gave no indication of being a man under immense pressure. A longtime member of the ruling African National Congress, Gordhan is popular in the business community but opposed by loyalists to the embattled president. Enmeshed in numerous corruption scandals, there are increasing calls for Zuma to resign. He has three years remaining in his second five-year term as president. 

In presentations to two think tanks, the Center for International and Strategic Studies and the Brookings Institution, Gordhan described South Africa’s political crisis as the normal workings of a young democracy.  He suggested that the financing scandal about Zuma's personal estate is being resolved. He said the country's public protector--who ordered Zuma to pay back state funds-- had done her job appropriately. He did not comment on the recent sudden departure from South Africa of two Indian born brothers, businessmen who have been close associates of Zuma.  

Gordhan said South Africa wants foreign investment and a strengthened private sector. He expressed concern about a possible downgrading of South Africa’s credit rating to junk status.

In an interview, Gordhan emphasized that South Africa has a good story to tell.  He emphasized the 16% increase in tourism last year.

Asked about the recent rebound in the rand exchange rate to pre-December crisis levels, Gordhan said there is still additional work to be done to restore confidence. The IMF projects that South Arica will grow by less than 1% this year.

Gordhan expressed frustration with global economic policy saying, “no one seems to know what to do to restore growth and investment.” He said South Africa like other emerging economies is a victim of the 2008 and 2009 financial crisis in Europe and America. “These problems,” he said, “came from your shores and were exported to us.”

Gordhan gave every indication that he is delighted to be back at his old post after two years of heading the provincial relations ministry.  

 

South Africa’s Nuclear Agreement with Russia Raises Questions

WASHINGTON: On the sidelines of a conference in Vienna on September 22d, South Africa signed an agreement for Russian nuclear power plants to be built in the country. The deal could be worth $50billion.

Signing ceremony in Vienna: South African Energy Minister Tina Joemat-Pettersson and Rosatom CEO Sergei Kirienko (photo: Rosatom)

Assuming the deal goes forward, they would be the first Russian nuclear reactors in Africa, joining the continent’s sole nuclear facility, the French-built Koeberg power station near Cape Town. 

South Africa badly needs additional generating capacity. Its power grid is overstretched and rolling brown outs have become common. The African National Congress (ANC) government has long favored additional nuclear plants to augment coal-fired facilities. The Russians would build eight VVER reactors with a combined output of 9.6 giga watts by 2030. It would be one of South Africa’s biggest infrastructure projects.

The opposition Democratic Alliance is calling for details of the strategic partnership agreement to be made public. The South African energy department says the accord is preliminary and that constitutionally mandated procurement procedures will be followed.

With the government having a history of shady business transactions, the Russian nuclear deal has set off alarm bells in the South African media. Commentators are calling attention to President Jacob Zuma’s surprise five-day visit to Russia last month, for which no official program was released.  It is known that Zuma met with President Vladimir Putin but it is not known if the nuclear framework was discussed.

Zuma is already under fire for financial irregularities in a $20 million upgrade to his private residence.  In 1999, long before he became president, there were charges of kickbacks to ANC officials-- including Zuma—as part of a $5 billion arms deal with Sweden.

Following the ANC’s victory in last May’s parliamentary election, Zuma reshuffled his cabinet, surprising analysts by elevating his lightly regarded agriculture and fisheries minister, Tina Joemat-Pettersson to the energy portfolio. Last year Ms. Joemat-Pettersson, a communist from Kimberly in the Northern Cape, was investigated for unethical conduct after awarding a fisheries contract to a company  inked to the ANC but with  no experience in commercial fishing. She turned aside opposition calls to resign.

At the signing ceremony in Vienna, Ms. Joemat-Pettersson said the accord “opens the door for South Africa to access Russian technology, funding and infrastructure.”

By signing with Rosatom, South Africa is ignoring the punitive sanctions levied against Russia by Europe, America and Japan to protest Moscow’s intervention in Ukraine. While in Washington in early August for President Obama’s African Leaders Summit, Mr. Zuma called for increased US investment in South Africa.  The Westinghouse unit of Japan’s Toshiba, as well as French and Chinese firms, have wanted to build nuclear plants in South Africa, but analysts say the Russian technology is cheaper.

South Africa is the leading beneficiary of AGOA, the African Growth and Opportunities Act, that allows most African products duty-free entry into the US market.  

South Africa's Election a Triumph of Democracy

The biggest winner in South Africa’s May 7th parliamentary election is democracy itself. Twenty years after the first all race ballot, Nelson Mandela’s rainbow nation is alive and well in the country of 50 million. The election is a triumph of constitutional government and rule of law.

Eighteen million people, 74% of registered voters, peacefully cast ballots at 22,000 polling stations across nine provinces from the Cape of Good Hope to the Limpopo River on the Zimbabwe border. It was South Africa’s 5^th democratic election since 1994 and the first since the death of Mandela last December. Voting took place without violence or disruption. Not one of the 29 parties contesting the election cried foul or claimed vote rigging.

Helen Zille congratulates Jacob Zuma on ANC victory

As with neighboring Botswana, the peaceful South African election provides a model for a continent where—sadly--free elections are rare.

As predicted by polling organizations, Mandela’s African National Congress won by a landslide. The ANC, founded 102 years ago, has won all five of South Africa’s democratic elections, although its victory margin has gradually eroded.

Headed by 72-year-old Jacob Zuma, the ANC got 11 million votes, 62% of the total. The result was only marginally below the 66% it won in 2009.

The official opposition, the Democratic Alliance headed by the premier of the Western Cape, Helen Zille, boosted its vote to 4 million or 22%, up from 16.6 % five years earlier. Significantly, the DA extended its reach beyond minority whites and mixed race voters, winning 700,000 black votes.   

The biggest surprise was the rise of the far left Economic Freedom Fighters of expelled ANC Youth League president Julius Malema. His party was founded only eight months ago. Its message of nationalizing mines and banks and redistributing white farms resonated with youth and the poor. The EFF’s trademark in the campaign was the red beret popularized by the late Venezuelan leader Hugo Chavez.   The EFF won one million votes, 6.3% of the total, more than what had been predicted. 

South Africa’s new parliament convenes in Cape Town on May 21^st.  It will again be dominated by the ANC but the ruling party will not have the two-thirds majority it hoped for. A two-thirds majority is needed to amend South Africa’s 1996 constitution. 

Of the 400 seats in parliament’s lower chamber the ANC will have 249, the Democratic Alliance 89, and 25 for the EFF. The remaining 37 seats are split among 10 smaller parties.  With the presence of the flamboyant, populist EFF, the new parliament promises to be lively as the ANC is challenged from the left and the right. Parliamentary debate is televised by the South African equivalent of C-Span.

The May 7^th election also chose legislatures for South Africa’s nine provinces. The ANC triumphed in eight but the DA tightened its hold on the Western Cape where it has been dominant since 2009. The DA majority in the province rose to 59% while the ANC fell to 34%. The DA hoped to win Gauteng, which includes Johannesburg, but fell short with 31%, to 54% for the ANC.

The ANC landslide means that Jacob Zuma can serve a second five-year term as president. However, the ANC’s executive council can remove Zuma as party leader and president, an action Zuma employ to oust then president Thabo Mbeki in 2007. That extreme measure is considered unlikely as Zuma appears to have firm control of the party apparatus.

Since 1994 the ANC has governed in a tri-partite alliance with the communist party and the trade union federation. The coalition is fraying amid a split in the labor federation and dissension elsewhere. While Zuma’s minister of trade and industry is a communist, that party has been unable to persuade ANC leaders to embrace its call for state control of what the communists call an untransformed free market economy.

Zuma’s choice of cabinet ministers will be a marker for the future direction of South Africa’s economy, the most developed and industrial on the continent. Two years ago Zuma promised large-scale job creation and faster economic growth.  That hasn’t happened as growth slowed to 2% last year while five percent growth is needed to bring down a 25% jobless rate. Analysts are unsure whether Zuma’s new government will hold to its embrace of a mixed economy or become more friendly to business.

Barry D. Wood, a long time observer of South Africa, recently spent five weeks in several parts of the country.

    

The May 7th Vote in the New South Africa

To understand the new South Africa, look no further than the red-robed female jurist presiding at the televised trial of blade runner Oscar Pistorius. “My lady,” as she is addressed in court, is Thokozile Masipa, a 67-year-old lawyer from Soweto. In 1998 she became only the second black woman appointed to a South African high court.

Judge Thokozile Masipa (photo: SABC) 

Here is a judge who in apartheid days in Pretoria could have aspired to being no more than a “tea lady,” or at best a secretary. Now, 20 years after South Africa’s first free elections, it is she who will decide the fate of an Afrikaner Olympian who 18 months ago was a national and even global hero. As an effusive Archbishop Desmond Tutu likes to say, “what a country!”

On May 7th South Africans vote in the fifth parliamentary election since the end of minority rule in 1994. It is the first test of voter sentiment in the land of 51 million since the death last December of Nelson Mandela, the iconic father of South African democracy.

This is likely to be the last election in which Mandela’s African National Congress (ANC) wins a landslide victory. Polling data suggests that the ANC, which has ruled for 20 years, will again receive over 60% of the vote. In 2009 it got 65%, and the IPSOS polling organization predicts that with a high turnout the ANC majority this time could reach 67%.

But polling data doesn’t tell the whole story. The current ANC leader, President Jacob Zuma, is unpopular and has been booed at public events. His sexual indiscretions and lengthening corruption trail embarrass many. The ANC’s alliance with the communist party and trade union federation is unraveling. To its right, the pro-business Democratic Alliance is making gains and its tally could reach 23%, while on the left the new Economic Freedom Fighters of firebrand Julius Malema is projected to get 5%.

The ANC campaigned on the theme “we have a good story to tell.” In many respects this is true. The South African Institute of Race Relations says ANC support rests on its success in improving living conditions of the poor. Since 1994 three million housing units have been constructed, electricity and water connections have been extended into rural areas, and welfare grants have increased from three million to 17 million poor people. The number of blacks in the middle class has doubled to 10%.

But arrayed against this are huge negatives. Corruption is widespread at the top, swirling in particular around the president. A report from the public protector says Zuma personally benefited from $20 million of public money spent on “security upgrades” at his rural Nkandla residence. There are multiple cases of theft in state enterprises and no bid contracts have gone to unqualified ANC cronies under the country’s flawed black economic empowerment program.

Public primary and secondary education has deteriorated with opposition leader Mamphele Ramphele saying, “it is worse now than it was under apartheid.” Crime is endemic, particularly in Johannesburg, although statistics indicate an improvement over the past two years. The biggest deficit for the ANC is the economy. Unemployment remains stubbornly high at 24%, with several economists saying the real rate is closer to 35%.

South Africa’s economy grew by only 2% last year while 5% growth is required to reduce joblessness. There is persistent labor unrest and strikes are typically settled with wage hikes well in excess of inflation or productivity gains.

For me, having spent considerable time in both the old and the new South Africa, the country’s long-term future is bright. Its institutions are proving to be surprisingly robust. All major groups in the rainbow nation of 11 official languages affirm allegiance to the 1996 constitution that US Supreme Court justice Ruth Bader Ginsburg extols as “a great piece of work,” embracing “fundamental human rights and independent judiciary.”

South Africa’s media is vibrantly free as evidenced by daily accounts of official corruption and wrongdoing. Despite the ruling party holding 2/3’s of parliamentary seats, debate is far ranging and contentious. South Africa has its version of C-SPAN where viewers last month could watch an opposition leader speak directly to the president, accusing him of having failed and “ hideously transforming” the party of Nelson Mandela.

Public Protector Thuli Madonsela is identified by Time magazine as among the 100 most influential people of 2014. In March she released a scathing 400 page report of upgrades to the president’s home that was broadcast live even on state television. Constitutional lawyer Izak Smuts calls the report “an outstanding example of the strength of our democracy.”

Property prices, always a good barometer of confidence, are rising in urban centers, particularly Cape Town and the adjoining Western Cape, the only South African province not governed by the ANC. White flight is negligible, an important factor as five million whites disproportionally possess skills needed to efficiently operate Africa’s biggest industrial economy.

Two decades ago South Africa was blessed with visionary leaders who built a foundation for future progress. The essential deal between Afrikaner president FW de Klerk and Nelson Mandela was majority rule—full democracy and an end of white rule—in return for constitutional protection of individual freedoms and property. The civil war that had long been predicted was avoided. Immense problems remain, not least income inequality. But as countries as disparate as the US and China are finding, there are no quick fixes, although education and equal opportunity are essential.

Should the ANC vote fall below 60% or if it loses its majority in Gauteng where Johannesburg is situated, Jacob Zuma will likely be recalled by the party, just as his predecessor Thabo Mbeki was unceremoniously ousted by a leadership group headed by Zuma.

I think of South Africa as a land where two mirrors are visible to all who care to look. One is Zimbabwe, the rich country to the north that under Robert Mugabe 30 years ago made a strong start and then descended into despotism and collapse. The other is the Western Cape, whose bright image the ANC would extinguish because since 2009—unlike the rest of South Africa-- a multi-racial coalition has succeeded in providing quality services while minimizing corruption.

Barry D. Wood was a reporter in South Africa in the 1970s and has returned regularly since 2010. Follow him on twitter @econbarry.