South Africa Nationalization Talk Worries Investors

JULY 28, 2011, 5:40 A.M. ET

-- Disconnect between government and business threatens investment - CEO, Frontier Advisory

-- Templeton's Mark Mobius says debate over nationalizing mines is worrisome to foreign investors

-- Foreign investment inflows to South Africa in 2010 fell to a quarter of 2009 levels -- U.N. study

By Jenny Gross

Of DOW JONES NEWSWIRES

JOHANNESBURG (Dow Jones)--Nationalization talk and the growing divide between government and business leaders could badly deter needed foreign investment into South Africa.

"There's an extreme disconnect between government and business," said Martyn Davies, chief executive of Johannesburg-based Frontier Advisory. "The [ruling African National Congress] will say we're open for business, and at the same time you have the second government (unions), which is making the country a far less attractive investment destination relative to our emerging-market peer economies even in Africa."

To make matters worse, recent fiery rhetoric on nationalizing South Africa's mines only serves to shatter the confidence of foreign investors, Davies said.

The influential youth wing of the ANC said it wants to take 60% of private mining assets without compensation to create jobs.

Declining investment has already caused concern. The U.N. Conference on Trade and Development said in a report this week that South African foreign direct investment slumped over 70% to $1.6 billion, a level one-sixth of the country's peak in 2008.

"We need to do better and work harder to create the right climate," Finance Minister Pravin Gordhan said in a March forum on investment, according to local media.

The statistics raise questions about South Africa's status as the gateway to the continent, Frontier's Davies said.

"South Africa has tremendous opportunity and great resources, but they're not getting the level of foreign investment," Mark Mobius, the executive chairman of Templeton Asset Management, told Dow Jones Newswires in a recent interview.

"You have workers who cannot be fired and they're not working," said Mobius, who oversees about $50 billion in emerging-market funds. "Any investor who goes in there and looks at South Africa has to take that into account."

The U.N. report said half of the top 20 destinations for foreign investment were developing and transition economies, up from seven in 2009. In Africa, though, foreign investment has been falling since 2009. Unrest earlier this year in North Africa deterred investors from injecting money there.

A World Bank report published last week said South Africa's negligible foreign investment is a paradox for a country with long-term returns as high as China. In addition, South Africa is the highest-ranking sub-Saharan African country in global competitiveness, the World Bank said.

The government, meanwhile, worries that a drop in incoming capital investment could retard the country's economic recovery, already suffering from the rand's strength on foreign-exchange markets.

The government has to encourage foreign investment and now foreigners are afraid to enter the market because of talk of nationalizing mines, Mobius said.

-By Jenny Gross, Dow Jones Newswires; +27 11 784-8347; jenny.gross@dowjones.com

South Africa 'on verge of being dysfunctional'

South Africa is on the "verge" of joining the ranks of dysfunctional states as the effects of corruption debilitate all spheres of life, the chairperson of a constitutional watchdog said on Wednesday.

"In the changing circumstances of our times, a conservative assault on the Constitution from some of the most powerful in our society threatens to fatally undermine our capacity to overcome poverty and inequality," Sipho Pityana, the chairperson of the Council for the Advancement of the South African Constitution (CASAC) said.

"It is now beyond doubt that corruption and patronage are so pervasive, rampant and crippling in our society that we are on the verge of being deemed a dysfunctional state..."

Pityana said a study by CASAC had found three potentially crippling legal and institutional weaknesses in South Africa - a lack of effective monitoring and enforcement agencies, no institution with a clear mandate to drive educational campaigns on corruption and no "true" independence for organisations tasked with fighting corruption.

CASAC, he said, was proposing "a dedicated, independent agency" that would be responsible and accountable for the investigation of corrupt activities alongside "pro-active preventive measures" such as education of the public.

Pityana said the agency would need significant political support to ensure that it was well funded.

"If there is truly no political will to address corruption, no mechanism existing or proposed can succeed," he said.

- SAPA

SA failing, Manuel says.

Trevor Manuel, addressing members of the European Union and South African legislative sector at the 2010 International Consultative Seminar in Cape Town, noted the following regarding the role of legislatures in achieving the UN's Millennium Development Goals (MDG),

South Africa was placed at 137 out of 150 countries on a scale that measured proficiency in maths and literacy. On the African continent, South Africa was part of the bottom of the list. "In fact we perform poorly, even by our own standards," said Manuel.

While these numbers were likely to be less prevalent in the "leafy" suburbs, they represented the reality of life for the majority of South Africans.

Soweto was an indication of the severity of the education crisis. "If a large complex like Soweto still underperforms the rest of the Gauteng province on virtually every indicator... then there is of course a huge problem, because if we don't fix schools in the industrial heartland of South Africa, then the future for many of us is going to be very severely impaired."

He said parliaments needed to ensure tools for oversight and analysis were properly utilised. Relying on official statistics was not enough and governments should not have to wait for protests to "know what is happening in the lives of the people".

He said several questions needed to be asked, such as: "Who is responsible and how can they be made to account? Will the MPs and legislators be bold enough to speak their minds and to deal with the complexity of these issues?"

Ministers should be held responsible for the outcomes on their performance agreements. "I want to challenge members of parliaments and legislatures... we must hold each other accountable," he said.

ERASING THE AFRIKANER NATION

CNN’s Kyra Phillips has led her viewers to believe that dangling a noose—an impolite and impolitic form of expression—is a hate crime; a black man beating a white man to a pulp—not so much. Being maimed or murdered, evidently, doesn’t compare to being maligned. Phillips and the feminized establishment media have difficulties differentiating a felony from an affront to feelings. No wonder these wonder men and women are mum about who’s killing whom in the democratic South Africa, the pride of the liberal press.

While black South African criminals are not neglecting other blacks, they are, overwhelmingly, targeting Indians and whites. According to the South African Institute of Security Studies, “Only 32 percent of all blacks questioned knew someone who was a victim of crime,” compared to 66 percent of Indian adults and 56 percent of white adults. The color of crime and its casualties both in America and South Africa is the proverbial elephant in the room—to be touched upon only if the victims can be vilified as racists.  

The BBC as well as New Zealand and Australian television news-networks have covered the racially motivated killing campaign Africans are conducting against the Afrikaner farmers of South Africa. Not Kyra and her colleagues at Fox, MSNBC, ABC, and CBS. No wonder, then, that the orchestrated ethnocide against the entire Afrikaner people has not been brought out into the open, as they like to say on CNN.

Ethnocide, as defined by Michael Mann, a leading historical sociologist, is “state-induced cultural assimilation, through hegemony and suppression.” The warmed-over Marxists governing South Africa with the West’s blessing are leading the charge against the country’s Afrikaner past, patriotism, and institutions.

Afrikaans, in particular, has come under the ANC’s attack, as the government attempts to compel Afrikaans schools to adopt English. Afrikaans-speaking universities, for example, have been labeled racist in the New South Africa and have been forced to merge with “third-rate black institutions so that campuses may be swamped by blacks demanding instruction in English,” to quote the Afrikaner intellectual, Dan Roodt.

The ANC’s attempts to tame and claim South-African history have been extended to landmarks in the annals of the founding people—these are being slowly erased, as demonstrated by the ANC’s decision to give an African name to Potchefstroom, a town founded in 1838 by the “Voortrekkers” (Dutch pioneers). The leader of those pioneers, Marthinus Pretorius, founded the capital, Pretoria. It is now Tshwane! Durban’s Moore Road (after Sir John Moore, the hero of the Battle of Corunna) is Che Guevara Road; Kensington Drive, Fidel Castro Drive. The cherry on the cake is Yasser Arafat highway, down which the motorist can speed on the way to the Durban airport.

As a subject in the school curriculum, history was initially neglected during the transition to majority rule. The establishment of the “South African History Project” changed that. The Project’s aim, according to Sasha Polakow-Suransky of the Chronicle of Higher Education, has been “a resurrection of the subject as a prominent field of study in the national school curriculum.” Unfortunately, following the American academy’s example, the trend has been away from “the pursuit of objective historical truth,” toward a postmodern, politically correct reconstruction of historical events, with the aim of fostering “certain values,” in the words of Kader Asmal, the minister of education in 2000.

“You have books appearing that interpret the history of South Africa only according to the perspective of the liberation struggle,” avers Pieter Kapp, a retired professor of history at Stellenbosch University. Indeed, “Since 1994, tales of European conquest are slowly beginning to disappear from the nation's classrooms, giving way to epic accounts of black anti-apartheid heroes,” writes Polakow-Suransky.

Like it or not, the modern marvel that was South Africa—with its space program and skyscrapers—was not the handiwork of the black nationalist movement now dismantling it; but the creation of those persecuted, pale, patriarchal Protestants.

©2007 By Ilana Mercer

WorldNetDaily.com

November 23

http://www.ilanamercer.com/newsite/raves.php

By Laurence Fletcher

LONDON, March 4 (Reuters) - South Africa is flawed and set to "blow up" within the next 15 years with more serious consequences than Libya, says Toscafund, one of the UK's most high-profile hedge funds, which tips commodity-rich Russia and Australia to benefit. Chief economist and partner Savvas Savouri, who has been researching Africa's biggest economy, cites emigration of professional workers and what he sees as a "lack of centralised leadership" when it comes to dealing with problems such as the AIDS epidemic.

"It's socially, politically and demographically flawed. It will malfunction within 15 years. It will go the way of MENA (the Middle East and North Africa) but the blow-up will be much more serious," Savouri told Reuters in an interview this week.

"Professional whites and blacks are leaving in hordes -- the human capital is decaying," he said.

Savouri's comments come as Libyan ruler Muammar Gaddafi struggles to contain a two-week-old popular uprising in the world's 12th-largest oil exporter, which has helped push Brent crude above $115 a barrel.

The unrest across North Africa and the Middle East has also seen the ousting of Egyptian leader Hosni Mubarak and Tunisian leader Zine al-Abidine Ben Ali, as well as protests in Bahrain and Saudi Arabia.

Savouri said a "malfunction" in South Africa, which is the world's biggest producer of platinum and a major producer of palladium alongside Russia, would push commodity prices higher, benefiting rival commodity-rich countries.

"Clearly Russia and Australia will win out. The surge in commodity prices will benefit them," he said.

Savouri, who is known for being outspoken in his predictions, said in January that the financial services industry was practically "lawless".


http://af.reuters.com/article/libyaNews/idAFLDE7230N220110304?pageNumber=2&virtualBrandChannel=0&sp=true

Entitlement distorting transformation

I can predict when South Africa’s “Tunisia Day” will arrive. Tunisia Day is when the masses rise against the powers that be, as happened recently in Tunisia. The year will be 2020, give or take a couple of years.

The year 2020 is when China estimates that its minerals-intensive industrialisation phase will be concluded.

For South Africa, this will mean the ANC government will have to cut back on social grants, which it uses to placate the black poor and to get their votes. China’s industrialisation phase has forced up the prices of South Africa’s minerals, which has enabled the government to finance social welfare programmes.

The ANC inherited a flawed, complex society it barely understood; its tinkerings with it are turning it into an explosive cocktail.

Former British prime minister Margaret Thatcher once commented that whoever thought that the ANC could rule South Africa was living in cloud-cuckoo-land.

Why was she right? In 16 years of ANC rule, all the symptoms of a government out of its depth have grown worse:

Life expectancy has slid from 65 to 53 since the ANC came to power.

In 2007, South Africa became a net food importer for the first time.

The elimination of agricultural subsidies led to a loss of 600 000 farmworkers’ jobs and the eviction from commercial farming of 2.4 million people between 1997 and 2007.

The ANC stopped controlling the borders, leading to a flood of poor people into South Africa.

What should the ANC have done? When they took control of the government in 1994, ANC leaders should have identified South Africa’s strengths and weaknesses and decided how to use the strengths to minimise or rectify the weaknesses.

A wise government would have persuaded the skilled white and Indian population to devote some time – even an hour a week – to train blacks and coloureds.

Instead, when the ANC came to power it identified what its leaders and supporters wanted. It then used South Africa’s strengths to satisfy the short-term consumption demands of its supporters – in essence, black economic empowerment.

BEE promotes extremely negative socio-economic trends. It promotes a class of politicians dependent on big business and therefore promotes big business’s interests in the upper echelons of government.

Second, BEE promotes an antientrepreneurial culture among the black middle class by legitimising an environment of entitlement.

Third, affirmative action, a subset of BEE, promotes incompetence and corruption in the public sector by using ruling party allegiance and connections as the criteria for entry and promotion in the public service.

I first came across the concept of BEE at a company, which no longer exists, called Sankor, the industrial division of Sanlam.

The first purpose of BEE was to create a buffer group among the black political class that would become an ally of big business. This group would use its new power as controllers of the government to protect the assets of big business. The buffer group would also protect the modus operandi of big business and thereby maintain the status quo.

Sanlam established BEE vehicle Nail; Anglo established Real Africa, Johnnic and so forth.

The conglomerates gave their marginal assets to politically influential black people, with the purpose, in my view, not of transforming the economy but of creating a black political class that is in alliance with the conglomerates and so wants to maintain the way our economy operates.

There are many things wrong with how conglomerates operate and how they have structured our economy:

The economy has a built-in dependence on cheap labour.

It has a built-in dependence on the exploitation of primary resources.

It is unfavourable to the development of skills in our general population.

It has a bias towards importing technology and economic solutions.

It promotes inequality by creating a large, marginalised underclass.

Conglomerates are a vehicle not for creating development here but for exploiting natural resources without creating in-depth, inclusive social and economic development, which is what the country needs.

The second problem with the formula of BEE is that it does not create entrepreneurs. You are taking political leaders and politically connected people and giving them assets which, in the first instance, they don’t know how to manage.

So you are not adding value. You face the threat of undermining value by taking assets from people who were managing them and giving them to people who cannot manage them. BEE thus creates a class of idle rich ANC politicos.

My quarrel with BEE is that what the conglomerates are doing is developing a new culture – not one of entrepreneurship, but one of entitlement, whereby black people who want to go into business think that they should acquire assets free, and that somebody is there to make them rich, rather than that they should build enterprises from the ground.

We cannot build black companies if what black entrepreneurs look forward to is the distribution of existing assets from conglomerates in return for becoming lobbyists for the conglomerates.

The third worrying trend is that the ANC-controlled state has internalised the BEE model. We are seeing the state trying to implement the same model that the conglomerates developed.

What is the state distributing? It is distributing jobs to party faithful and social welfare to the poor. This is a recipe for incompetence and corruption.

This explains the service delivery upheavals that are becoming a normal part of our environment.

So what route should South Africa be on? Given the implosion of the former Soviet Union, the creation of a state-owned economy is not an option.

If we want to develop the country instead of merely shuffle existing wealth, we have to create new entrepreneurs, and we need to support entrepreneurs to diversify into new economic sectors.

Mbeki is the author of Architects of Poverty: Why African Capitalism Needs Changing. This article forms part of a series on transformation supplied by the Centre for Development and Enterprise and first appeared in Business Day.