It’s the SOEs, stupid

ANTHONY BUTLER: Politicians, take note: It’s the SOEs, stupid

Business Live 10 February 2022 and Business Day 11 February 2022

Amid SA’s plethora of urgent and important challenges, one stands head and shoulders above the rest: failing state-owned enterprises (SOEs).

The wellbeing of communities and the fate of the economy alike depend on functional utilities and network industries. Load-shedding, price rises that destroy private businesses, collapsing transport systems and congested ports are merely the visible faces of the SOE crisis.

The fiscal framework cannot survive repeated bailouts and recapitalisations, enormous unexpected expenditures or further exposure to huge contingent liabilities.

The importance of SOEs has been underlined by a recently published paper on macroeconomic risk from Ricardo Hausmann and others at Harvard’s Growth Lab. The paper explores SA’s post-2009 combination of slow growth and rapidly rising debt.

Hausmann first debunks a comforting account that blames external factors, especially declining mineral prices after 2008. The resource sector’s limited contributions to growth and tax revenues make it merely a contributory factor.

He then punctures cherished macrowaffle from both right and left, including say that high government spending significantly crowded out private investment, or that Treasury fiscal consolidation was self-defeating. Macroeconomic policy choices didn’t reverse the slowdown, but they didn’t cause it either.

Instead, Hausmann and his colleagues show that only microeconomic accounts of the growth slowdown fit the facts. “The last decade has seen a worsening of the performance of state-owned enterprises,” Hausmann observes, “which are key to the performance of network industries such as power and transportation.” Misguided and corrupt investment and procurement decisions ultimately lie behind rising tariffs and debt.

Declining productivity in energy, transport and mining sectors created a drag on productivity across the economy, reducing productive investment and growth. Hausmann backs the joint Treasury-presidency Operation Vulindlela initiative that is pursuing urgent structural reforms in key network industries. Government needs to rein in contingent liabilities, and exercise tighter fiscal control and oversight over SOEs. All this requires financial, structural, and also governance reforms.

The Growth Lab is merely the latest of many domestic and international critics of our SOE governance. Even the state capture commission recently ventured that political interference in board and executive appointments must be stopped.

Rafael Leite, a researcher at the Government & Public Policy think-tank, has observed that we have copious analyses of SOE governance failings, and many strategies for rectifying them, but no implementation of these remedies. The key question is why.

The broadly political impediments to addressing the unfolding SOE governance disaster are becoming clearer by the day. There are specific interests, for example organised workers, whose vulnerability to change needs to be understood and accommodated.

Intellectual or ideological disagreements about the proper role of the state and private sector in the economy need to be negotiated less dogmatically.

More intractably, SOEs sit at the centre of the ANC’s broad black empowerment framework, linking enterprise creation, the building of a black bourgeoisie and employment equity. The current iteration of that framework makes reform virtually impossible.

Other stubborn problems flow from ANC dependence on parastatals and their supply chains for party donations and high income patronage jobs. Eskom’s Medupi and Kusile debacles can be traced back to party funding front vehicles in the Thabo Mbeki era. A recently leaked recording of President Cyril Ramaphosa speaking at the ANC’s national executive committee confirmed that SOEs still fill campaign war chests for internal factional contests.

Meanwhile, as recently released minutes reveal, the ANC’s national deployment committee really has no idea of the damage it is doing.

The time has come to update James Carville’s famous campaign epigram, coined during Bill Clinton’s 1992 presidential campaign, and to plant it on our politicians desks: “It’s the SOEs, stupid.”

• Butler teaches public policy at the University of Cape Town.

The future of SOEs

ANTHONY BUTLER: If only Telkom rebound could pave way for ailing SOEs

First published in Business Day

28 JANUARY 2022

The career of former Telkom CEO Sipho Maseko, who stepped down at the end of last year after nine successful years at the helm, raises interesting questions about the future of our state-owned enterprises (SOEs).

Maseko’s leadership has been presented as a model to be followed. But does it really offer a guide to a better future?

In the early 2000s Sizwe Nxasana led Telkom to profitability and a partial listing on the stock exchange. It then fell on difficult times, with one failing CEO after another. The company’s bloated staff complement, exploitation of its monopoly position and technological backwardness all marked it out as a typical SOE.

Maseko joined Telkom in 2013 alongside incoming chair the late Jabu Mabuza. A turnaround strategy was drawn up and implemented. The company caught up with its rivals in mobile telephony, information technology and fibre. A smooth transition plan means these advances will continue into the future. Or so we hope.

Can the Telkom rejuvenation experience be repeated now that President Cyril Ramaphosa’s new dawn has broken? Most SOEs still veer from one crisis to another, raising the costs of basic goods and services to the detriment of citizens. They destroy small businesses, obstruct infrastructure investment and threaten the fiscus.

One fear must be that Telkom’s recent past may simply be an aberration. The broad alignment between Mabuza and Maseko was crucial in providing the CEO space to develop and then implement a turnaround strategy. They enjoyed considerable insulation from political interference because the state was merely a minority shareholder. Telkom did not have to traverse the regulatory labyrinth that makes investment so complex for fully state-owned entities.

We have seen a reshuffling of utility boards and CEOs since Ramaphosa became president in February 2018, but little progress with structural reforms. Impediments include the role of parastatal supply chains in formal and informal political funding; the power of “privatisation” resistant trade unions; and an ideological predisposition towards state-driven development.

These forces are bound together and operationalised by the ANC’s continued interference in the appointment of senior executives and board members.

The recent trajectory of the SA Post Office (Sapo) suggests a quite different vision for the future to Telkom. Sapo had also become a technological laggard, gradually losing its core revenue stream of mail delivery. Banker Mark Barnes was appointed CEO in 2015, and launched a fresh strategy to exploit Sapo’s huge client base and physical infrastructure, deliver social security grants and offer financial services to the poorest South Africans.

Like Maseko, Barnes enjoyed the broad support of his board, and the parastatal was recapitalised by the state to enable its rejuvenation. However, he resigned a little more than two years ago as a result of a disagreement about the full integration of Postbank and Sapo. At the time he claimed Sapo had “turned a corner”, and insisted his comprehensive overhaul of the executive team had put in place a firm foundation for continued success.

But it wasn’t long before a familiar litany of problems recurred: dubious suspensions of senior executives, repeated acting appointments to key positions and collapsing operations.

The relentless decline of SA’s major transport, logistics and defence parastatals has been depressing. More disheartening still, however, are the SOEs that have undergone complex, painful and costly restructuring exercises and begun to operate as orthodox enterprises: Telkom and Sapo, but also SAA and the SABC.

With no change in the underlying approach of the ANC to deployment, and no intellectual shift with regard to the role of the state, the experience of Sapo, rather than that of Telkom, may be our best guide to the future of our SOE sector. And that, I am afraid, includes Eskom.

• Butler teaches public policy at the University of Cape Town.

Lindiwe Sisulu’s presidential bid

ANTHONY BUTLER: Why we should pay attention to Sisulu’s ambitions

Though her chances of becoming ANC president are slim, the terrain she has chosen to fight on is significant

First published in BusinessLive 13 January 2022

Lindiwe Sisulu’s supposed presidential leadership bid should be taken seriously, not because she might win — she won’t — but because of the terrain on which she has chosen to fight.

It is a tall order to evict an incumbent president after a single term in office. This requires a nationwide coalition and huge financial and political resources. There are not many countries in the world in which a minister of tourism can launch a campaign for the highest office in the land.

The odds lengthen still further when Sisulu’s age is considered. She is no spring chicken: in May 2024, when she hopes to be sworn in as president for the first time, she will turn 70.

With age, it might be argued, comes experience. But, as the wisest Marxist of all (Groucho) once observed, “anyone can get old … all you have to do is live long enough”.

Daughter of ANC giants Walter and Albertina Sisulu, she has often been accused of exile elite arrogance, most notably when she asked in 2017, of then secretary-general Gwede Mantashe, “Where was he when we were fighting for this freedom in exile and in jail?”

The high point of her career thus far has been an unsuccessful 2017 challenge for the deputy presidency of the ANC. This came after an abortive campaign for the top job, fought on the basis that the time for a woman president had come.

Her popularity among some of the party faithful should not be underestimated though. After her defeat to David Mabuza in 2017 she came second in the elections for the national executive committee.

Sisulu may once again settle for a shot at a lesser position, such as deputy president, as the 2022 conference draws near. It is more likely she already senses that she will be cast onto the scrapheap of history and would rather go down fighting — if not for something she believes in, then at least as a grandiose pseudo-revolutionary gesture.

It is for this reason that her choice of the terrain of battle — the law — is so significant. A rambling piece to which she put her name last week described the constitution as a “palliative”  and decried “the co-option and invitation of political power-brokers to the dinner table, whose job is to keep the masses quiet in their sufferance while they dine on caviar with colonised capital”.

The writers of the piece also complained that our most senior judges are “mentally colonised” Africans, “confused by foreign belief systems”, and “happy to lick the spittle of those who falsely claim superiority”.

These contentions have drawn predictable calls for Sisulu to be sacked, which was presumably her intention. After all, it is virtually impossible to be demoted from the humble tourism portfolio to which Ramaphosa humiliatingly appointed her in August.

The fear must be that Sisulu and her advisers are merely “useful idiots”, manipulated by others with a wider political strategy. After all, they have drawn acting chief justice Raymond Zondo, figurehead of the state capture inquiry, into a regrettable — and arguably political — public condemnation.

This comes at a difficult time for the judiciary, with attempts by the ANC’s national deployment committee to interfere in the appointment of judges recently revealed in minutes of Luthuli House meetings.

Hostility towards liberal constitutionalism is not motivated solely by the kind of miscreants whose conduct has been documented by the Zondo inquiry. There is also a close relationship between those who decry the rule of law as a foreign imposition, and those who may refuse to accept the outcomes of properly conducted national and provincial elections such as those that will be held in SA in 2024.

• Butler teaches public policy at the University of Cape Town.

We still need Santa

ANTHONY BUTLER: If we stop believing in Santa, he will vanish

Father Christmas better not disappoint the boys and girls

First published in BL Premium

9 December 2021

Ho ho ho! We have reached that point in the year when all the little children dream about an overweight man in a red suit bearing a sack filled with Christmas gifts.

Santa has a tough job. He has to hire the reindeer who pull his sleigh, manage the elves’ workshop in which the toys are made, and deliver thousands of presents to a demanding schedule.

Eric Harvey’s handy management text, The Leadership Secrets of Santa Claus, famously advises Santa to “choose his reindeer wisely … hiring tough so you can manage easy”. But Santa Cyril’s ministerial reindeer have made a weakly team.

As the University of Alaska’s equally lucid Reindeer Health Aide Manual observes, the animals are vulnerable to warble flies, nasal bots, roundworms, tapeworms, and lungworms. They may not all be parasites themselves, in other words, but parasites often drain them of their energy.

The toy workshop itself is in great disarray. The elves complain that the head reindeer, Ebrahim “pointy ears” Patel, has made manufacture all but impossible. Gifts such as short-sleeved knit tops must be delivered with cardigans and knitwear. Crop bottoms must be packaged with boots and leggings.

Meanwhile, the venerable Pravin Goblin has kept Santa’s Aviation Authority (SAA) in the air — or rather on the ground. “We have a new pandemic business model,” he recently told investors. “So long as nobody is allowed to fly, the airline has plenty of capacity to meet demand.”

On another positive note, the goblin observed that the Passenger Rail Authority for Santa (Prasa) “now has no liabilities, such as tracks, electric cables, or trains. This means it will be far easier to operate at 100% capacity — within network constraints.”

There is also good news at Santa’s Automatic Reserve Bank (SARB), where egghead economists have with great fanfare announced a “nominal target for present delivery”. According to SARB modelling, this will by itself result in the delivery of more presents on December 25.

Meanwhile, renowned “alternative boffins”, including Gilad the Gnome and Mr Coleman’s Mustard, have released an Excel sheet ostensibly proving beyond doubt that “Santa is a sovereign issuer of presents”, and that he therefore faces no constraints whatsoever on his ability to deliver gifts to little boys and girls.

Unfortunately, almost everybody has forgotten about the little children themselves. Red Tellytubby Julius, and his cute friend Floydinia, got out their crayons many months ago, and asked “Doc” Mbuyiseni to write out their present lists. “We want the land! We want the land!”, they exclaimed, somewhat single-mindedly. But, in the end, it turned out they didn’t. What they really want is a blue light sleigh convoy — and a new Venda Piggy Bank (VBS) from which to borrow.

Will Santa Cyril stay on? You better hope so. Notorious political agitator “Herman the Hairman” insists that he should be Santa instead: “I got an overwhelming majority of 16% in the City of Gold,” he correctly observed, “so I should be in charge!”

As for Santa Cyril’s more serious rivals, a series of unfortunate events seem to have befallen all of them. Digital Zweli, Red DD, The Princess, and Perfect Paul: they have all been eating a lot, and for a long time, but they are still far too skinny to be Santa — even if Vlad the Impaler were to decide to befriend one of them.

Leadership Secrets reminds us that Santa exists because the little children say he does. If Father Christmas lets them down, the boys and girls across the land will stop believing in him, and he will simply vanish. Without a Good Santa, Christmas will come early every year, as it did this July in the magical kingdom by the sea. Then we will all be sorry.

• Butler teaches public policy at the University of Cape Town.

Economic diplomacy rules

ANTHONY BUTLER: Ramaphosa brings international relations to a new level

Foreign policy is harnessed for the first time in decades to build trust and secure SA’s economic interests

First published in Business Day

26 November 2021

Kenya President Uhuru Kenyatta concluded his visit to SA this week without any fanfare. He and President Cyril Ramaphosa reportedly reached tentative agreements about modest infrastructure and trade partnerships, and how to patch up this country’s dysfunctional visa regime.

Should we yearn for the supposed “glory days” of SA foreign policy, when Nelson Mandela was a global icon, Thabo Mbeki created new institutions to bring about a united Africa, and Jacob Zuma launched us into the dizzying firmament of the Brazil, Russia, India, China and SA (Brics) grouping?

In retrospect, these leaders’ grandiose initiatives were almost all counterproductive. What we need today is a prudent foreign policy president who places economic diplomacy at the forefront of all of his international interventions. Mandela tried to place human rights at the centre of foreign policy, but he alienated potential allies across the continent and created an albatross of unrealisable expectations among do-gooders in the West.

Mbeki championed conflict resolution and institution-building across Africa, but the resources needed for SA’s anticipated role were never available. His pet project, the African Peer Review Mechanism, became a tick-box exercise. The only country now fearful of its judgments is SA itself.

Mbeki must be credited for helping to create an India, Brazil, SA Dialogue Forum (Ibsa), which brought together middle-income democratic states. But he also made possible SA’s Zuma-era participation in Brics. 

What did Brics add to Ibsa? Two authoritarian partners who are the world’s most aggressive salesmen for nuclear generators. Nuclear power procurement is a magnet for corruption, taking place behind a smoke screen of vendor financing and under a national security secrecy blanket.

This was not the worst of Zuma. The SA government battled to secure the position of chair of the AU Commission in July 2012 for Nkosazana Dlamini-Zuma, a role from which large countries have been excluded by convention. Disgracefully, all this was simply to build Dlamini-Zuma’s political “seniority”, so that she could run for the ANC’s presidency in 2017. Little wonder the country is viewed with distrust.

Ramaphosa is well-equipped to be a foreign policy president with his history as a trade unionist, co-chair of the Commonwealth Business Corporation, a mediator in peace processes and a former director of SA’s most international bank, Standard Bank.

In the past he enjoyed rubbing shoulders with the global great and good as much as any politician. Today, however, SA foreign policy is harnessed for the first time in decades for building trust and securing the country’s fundamental economic interests.

Ramaphosa has appointed a serious and independent-minded foreign minister in Naledi Pandor. As AU chair last year he focused efforts on the implementation of the African Continental Free Trade Area agreement.

He remains alert to the importance of SA’s second-biggest trading partner, China, and continues to promote a role for SA banks facilitating trade between Asia and Africa and providing financial services to Chinese companies operating on the continent.

At the same time, he is aware that duty-free access to the US provided by the African Growth and Opportunity Act is due to expire in 2025, and that this programme has contributed significantly to export-led job creation in agriculture and vehicle manufacture.

SA’s complex climate diplomacy recently achieved some provisional successes in Glasgow. Similar complexity — and now also urgency — surround a fast-approaching global shift towards electric vehicle manufacture.

Finding ways to move forward in these sectors seems for the first time to be occupying centre stage in SA foreign policy. Ramaphosa’s government has remained pragmatic with regard to its potential international partners. Moralising, posturing and grandiose national exceptionalism are nowhere to be seen.

When it comes to foreign policy we should all hope that Ramaphosa has an equally focused — and unexciting — second term as SA president.

• Butler teaches public policy at the University of Cape Town.

Will the ANC finally lose in 2024

Having just lost an outright majority nationally for the first time, it is entirely possible that the ANC could lose the country in 2024. But having got to this point, there are a number of possible futures for the country — and some of them are quite scary

First published in Financial Mail and BusinessLive

11 NOVEMBER 2021 – 05:00

The November 1 local government elections were the second of just two “watershed moments” in SA’s recent history, says the Sunday Times.

The first was the 1994 elections, “when, for the first time, all South Africans, irrespective of race, voted together for a common government”. This second watershed saw “the post-apartheid mould of one-party dominance … to all intents and purposes, broken”.

It’s a bold assessment — but perhaps a little hasty. More cautious observers believe a real epochal shift will not come until 2024, if at all. There is a long and perilous journey between a fading dominant-party regime and a competitive multiparty system.

After all, the ANC has been drinking in the last-chance electoral saloon for almost a decade. The party’s Gauteng result in May 2014 (54%, from 64% in 2009), and its disastrous performance in the 2016 local government elections (54% nationally, from 62% in 2011), made this long-term decline evident. It was obscured only temporarily by support for the ANC in KwaZulu-Natal (KZN) during Jacob Zuma’s presidency.

However, what does mark out this result as special is the breaching of the 50% threshold, with the ANC securing just 46% of the vote overall.

A paltry 36% in Gauteng, further losses in Joburg and Tshwane, the failure to turn back the tide in Cape Town and Nelson Mandela Bay, and the loss of eThekwini confirm the movement’s decline. The party’s once-professional campaign machinery was a shambles: little money, no message, strikes at Luthuli House, and pitiful excuses for defeat.

But it is too soon to write the ANC’s obituary, or to describe it as a party of the former bantustans and rural areas. It remains the biggest party in 161 municipalities.

Far from storming the gates, the major opposition parties have failed to capitalise on the ANC’s vulnerability.

The fact is, the DA secured around 1,400 seats, against the 1,800 it won in 2016. The botched removal of former party boss Mmusi Maimane has contributed to a collapse of black support for the party, and support from coloured voters has shrunk badly (see page 25).

While the DA may have stemmed the growth of the Freedom Front Plus (FF Plus), it has failed to recapture lost support among white Afrikaners. As a result, its support in the Western Cape fell to 54%, and it lost strongholds such as Cape Agulhas and Breede Valley.

Perhaps party leader John Steenhuisen is pleased that the party got voters out at all, in an election where the genial Cyril Ramaphosa, rather than the Zuma bogey-man, served as leader of the governing party. And the party does have opportunities for anti-ANC coalitions thanks to the fragmentation created by the rise of the FF Plus, ActionSA and the Patriotic Alliance.

Julius Malema’s EFF secured 10% overall. Over the past decade, the party has transformed itself from a regional and ethnic formation to an organisation with a national footprint. It has continued to perform well in Gauteng, Limpopo and the North West, but it also has a substantial presence in KZN and now, for the first time, in the Eastern Cape, where it secured 8% of the vote.

ActionSA’s targeted Gauteng campaigns brought it 16% of the vote in Joburg and 7% in the province’s other metros, Tshwane and Ekurhuleni. In KZN, the IFP secured 27%.

While these and other smaller parties campaigned strongly, and will have some leverage in specific municipalities, the three big parties will dominate coalition politics.

Maturing coalition politics

Coalitions or governance agreements are unlikely to be finalised until we approach the 14-day post-election deadline for councils to meet, in a week’s time.

But it will be tricky. In 2016 there were just 27 hung councils. Today we have 66.

The bigger parties have taken coalitions seriously and considered the permutations and scenarios. They have identified “red lines” and set out “principles” that they claim will govern deal-making.

The DA appears to be the party with the most straightforward strategy, summarised by Steenhuisen as: “No unstable coalitions!”

After a weekend of deliberation, the party has reiterated that it will not work with the EFF, but also that it is now not interested in doing any deal — formal coalition or co-operation agreement — with the ANC.

This shows it learnt from 2016, when it co-operated with the EFF and others. It was a confusing mess that tarnished the party’s image, and cost it votes.

With its clear intention to govern only where it is in control, DA leaders seem happy to act as official opposition watchdogs rather than as direct participants in local governance.
This suggests their focus is squarely on the 2024 national and provincial elections, when the party hopes the ANC will again fall below 50% of the vote nationally — and in several of the provinces. The DA is also clearly harbouring resurgent hopes that the ANC may contrive to explode, or split, as a result of continued turmoil in government and divisions between internal factions.

It’s a risky strategy for the DA, as voters might punish the party for sitting on its hands, rather than responding to Ramaphosa’s call — echoed by some DA benefactors — for all parties to work together to rescue municipalities from collapse.

But Steenhuisen’s leadership is almost certainly right that these risks are dwarfed by the dangers of participation in unruly coalitions, especially with an unreformed ANC.

The EFF’s position is equally complex. One trouble for the EFF is that many opposition parties, including the DA and the IFP, have said firmly they will not work with the red berets.

This limits its ability to play suitors off against each other.

Still, there is clearly hunger for power and patronage appointments, with EFF secretary-general Marshall Dlamini angling for control of Tshwane and stating that “we are not playing around this time”.

The EFF has set the bar for coalition or co-operation agreements very high, however, by including demands for national policy shifts — specifically, land expropriation and the creation of a state bank — that seem unrealistic. This suggests the EFF, too, would ideally prefer to wait for 2024, when it hopes to use its leverage to secure major policy concessions and ministerial appointments from a floundering ANC.

Voters queue outside in Macassar, Khayelitsha to cast their vote during the 2021 Local Government Election. Picture: Esa Alexander
Voters queue outside in Macassar, Khayelitsha to cast their vote during the 2021 Local Government Election. Picture: Esa Alexander
The ANC, for its part, is in the most difficult position. As soon as the results were announced, Ramaphosa called on party leaders to work together.

“If we are to make this a new and better era, we as leaders must put aside our differences and work together in a spirit of partnership, of co-operation, of collaboration and common purpose in the interests of the people,” he said.

From the ANC’s point of view, agreements with the DA could bring stability to the hung metros, while parallel pacts with other parties, including the EFF, could reduce factional outrage about such deals with the official opposition.

In other words, responsibility for the ongoing chaos in municipal government would then be spread among all the ANC’s major competitors.

Yet the messages about potential partners from those involved in ANC coalition planning (including acting secretary-general Jessie Duarte, treasurer Paul Mashatile and policy head Jeff Radebe) have been inconsistent.

But the DA’s refusal to play ball makes it hard for the ANC to avoid deal-making with the EFF — especially when it comes to major centres such as Ekurhuleni and eThekwini, that it desperately wants to control.

Three possible futures

The era of ANC dominance has been drawing to a close over many years.

One-party control brought many positive consequences, as the ANC was able to take some unpopular economic policy decisions, keep a lid on ethnic and racial mobilisation, promote gender parity, and entrench the institutional preconditions for democracy and constitutionalism.

But these gains always co-existed with negative features of party dominance: the blurring of party-state boundaries, the looting of state and parastatal resources for party and personal gain, and arrogance based on leaders’ ability to ignore electors.

In the end, these negative features began to decisively outweigh the positive and, indeed, to undermine the gains of the first decade of ANC rule.

As its dominance began to fade, the ANC tried to listen to voters more attentively, and where other parties gained power, it began to restore the lines between party and state.

Equally, the end of ANC dominance will come at a cost. This may include the rise of populist economic and social policies (as the ANC tries to retain supporters), racial and ethnic mobilisation as the party fragments, and increasing chaos in its system.

None of these changes is inexorable or pre-ordained, however.

We tend to believe one-party dominance is an abnormal product of the politics of liberation. Many assume it will follow a well-trodden pathway through corruption, intolerance of opposition and economic imprudence, only to collapse into factionalism and recrimination, and replacement by a “normal” multiparty system.

The rosiest scenarios envisage the emergence of a centre-right party — perhaps a merger between the DA and “respectable” elements of the ANC — together with a centre-left party that brings together the proponents of redistribution, state-driven development and liberation ideals. These parties could then alternate happily in power.

But there are three alternative pathways into the future.

First, it is a mistake in today’s world to rule out the possibility of authoritarian rule.

Democracy is in retreat, and many in the ANC find more inspiration in the Chinese party-state than in the liberal and social democracies of Europe, Asia and the Americas. The continued fall in electoral turnout is a matter of pressing concern. Of 39-million eligible electors, just 26-million registered to vote, and 12-million actually cast a ballot. When people do not vote, they stop fighting for the free media and effective electoral institutions that democracy requires.

Second, the reality is that dominant parties in middle-income countries rarely disappear when they fall below 50% of the vote. They typically survive, and sometimes they thrive, in more competitive party systems.

Mexico’s Institutional Revolutionary Party ruled from 1929 to 2000, when it inadvertently lost a presidential election. By 2012 it was able to recapture the presidency, and has since gone back into opposition.

The United Malays National Organisation, similar to the ANC in its empowerment ideals, dominated the Barisan Nasional coalition that ran Malaysia from 1957 to 2018. It was ousted by its own former leader, Mahathir Mohamad, in 2018, after major corruption scandals unfolded — but it returned to power again in 2021.

Parties — even once-dominant parties — can lose and then win again. Though large organisations find it hard to change because of entrenched interests, they can also be shocked into reform — and it is electoral defeat that is the most common precipitant.

It will be interesting to see if Ramaphosa uses his window of opportunity for internal party reform at, and after, next December’s ANC conference.

Third, a “secret” ANC fallback position has always been to embrace the return of the EFF to the mother body after a national election defeat. With the ANC down to, say, 40%, and the EFF on 15% — and the rest of the opposition itching to bring the ANC down — the red berets would have unprecedented leverage. Jobs and patronage could be shared, and the liberation project would live on for another day.

Perhaps the most important outcome of these local government elections may be that most opposition parties are refusing to deal with either the ANC or the EFF. In this way, they are driving those two parties together before they are ready.

Much depends on who voters will punish in 2024 for whatever now follows.

Method in Mantashe’s madness

ANTHONY BUTLER: There is method in Gwede Mantashe’s mineral ‘madness’

The energy minister is treading a fine line between constituencies while taking flak for the president

First published in BL PREMIUM, 11 NOVEMBER 2021

Have we been underestimating mineral resources & energy minister Gwede Mantashe?

This supposed “policy dinosaur” was lambasted in recent days for his contributions at the Africa Energy Week conference in Cape Town, where he called for African solidarity in the face of a Western drive for a renewable energy transition. “We are being pressured, even compelled,” he claimed, “to move away from all forms of fossil fuels, including resources such as gas, which have been regarded as key resources for industrialisation.”

This is the latest episode in Mantashe’s long-running climate change soap opera. In June, when President Cyril Ramaphosa announced a liberalisation of the licensing regime for private generation of power, Mantashe made a great show of having been coerced into signing on the dotted line.

Two months later, when Eskom CEO André de Ruyter floated a plan to secure international concessional finance in exchange for the accelerated retirement of coal-fired plants, Mantashe told parliament that SA is, “a strange country that is so keen to commit economic suicide … China is building 15 coal-fired power stations today, as we sit here”.

In October Mantashe declined to meet climate envoys from the UK, US, Germany, France and the EU, who flew to SA to discuss concessional loans and grants. He also refused to attend the COP26 climate conference in Glasgow, arguing that “many people will be frightened” or even ask why a “coal fundamentalist” is there.

Yet Mantashe is not a climate denialist and he shows full awareness that the carbon intensity of SA’s economy threatens our debt servicing and our access to crucial international markets. There are four possible contributions he may be making to the government’s overall negotiating strategy.

First, he has been designated to deliver rude, or at least uncomfortable, truths to ostensible international benefactors. In particular he has flagged developed countries’ failure to honour previous multibillion-dollar commitments to fund energy transitions. African countries, he has noted, should not be condemned for failing to dump coal generation when developed countries “keep postponing the deadlines of when they will shut down their coal mines and oil and gas industries”.

Second, Mantashe has steered a careful path between the positions of international allies. His words have quite closely shadowed the policy positions of SA’s diplomatic partners in the Brics group of countries — Brazil, Russia, India and China — pointing repeatedly to the legacies and obligations of the historical beneficiaries of carbon-driven industrialisation, primarily in the West.

Third, the minister’s avowed stance on a just transition showcases the government’s claim to be heeding the voices of the tens of thousands of workers in the energy sector who depend directly on the coal economy. In this way he is taking political bullets that would otherwise hit Ramaphosa. He is also gradually winning over labour and union audiences to the need for a transition, by showing he is their advocate and not simply a poodle of business or wealthy Western countries.

Finally, the presidential climate commission has set out a realistic pathway towards an energy transition. Hopefully, this shows international audiences that SA is not simply crazy. In the deal recently announced at COP26, rich northern countries have agreed to source $8.5bn to support SA’s move away from coal, and to help accelerate the transition to a lower-emission economy.

Northern donors might understandably feel environment, forestry & fisheries minister Barbara Creecy could not look such a gift horse in the mouth. However, Mantashe invariably forefronts the strong domestic political resistance that may obstruct any such deal. In this way he makes it clear to international partners that more limited conditionality — and additional concessional funding — will be required to smooth the way to a just transition.

• Butler teaches public policy at the University of Cape Town.

Reasons for mandate hesitancy

ANTHONY BUTLER: Compulsion without legitimacy always fails

Persuasion must be the primary driver of compliance in vaccination drive

First published in BusinessLive

28 OCTOBER 2021

At first sight, the case for immediate mandatory vaccination against Covid-19 is strong. Vaccines protect against hospitalisation and death, and reduce the emergence of new variants. The risk of adverse effects is small.

The health-care system is in dire straits, and lockdowns have brought huge economic and social costs. With fewer than 20% of adults fully vaccinated, surely we are justified in using every available lever to increase uptake?

The trouble is that most mandate proponents view them as an alternative to participation in a well-designed and inclusive public health programme, rather than as a supplement to it.

When indoor smoking was banned, no smoking police were needed because the argument about passive smoking had already been won. To see what can go wrong with compulsion, when such legitimacy is absent, look at Gauteng’s road tolling system, with its payment rate of less than 30%.

We have domestic violence laws, but they have not been much enforced because police officers do not believe in them. The vaccine shy can buy a fake Covid-19 vaccine certificate for R5,000 — a potential danger to the credibility of hoped-for international passport schemes.

The classic vaccine mandates were simple and they applied to all the people who would together benefit from them. Children have been vaccinated against tuberculosis for decades. Compulsory vaccination for all front-line health and care workers, sensitively applied, has been introduced in many parts of the world, and there is a case for it in SA today.

An argument could also be made for mandatory vaccination for all over-60s: they are by far the most vulnerable to severe illness and death, half are fully vaccinated, and they will continue to overwhelm the health system at the peak of infection waves.

Even in such cases it is necessary to respect rights and religious beliefs, and to treat persuasion as the primary driver of compliance. A piece of paper is not a substitute for the hard work of providing access to vaccines, combating misinformation, and changing people’s minds.

Most of the vaccine mandates under consideration in SA take a different form. They relate to the employees of private companies, staff and students at educational institutions, and people attending hospitality venues. Excluding unvaccinated people from commercial premises, restaurants, gyms, or shopping malls is certain to prove divisive.

The resources expended on compulsion will be diverted from more productive uses. Mandates’ complex legal process bring high levels of conflict, distracts managers, and reduces trust. The main beneficiaries will be the lawyers.

Indeed, such narrow mandates are likely to be counterproductive because they could well result in a lower level of vaccination than would have been achieved in their absence.

Quite unlike the classic mandates for smallpox or tuberculosis, or a compulsory post-60 Covid-19 vaccine, these are not in any sense “universal”: they are targeted at small groups of people who enjoy formal employment, are mostly well-educated, already enjoy easy vaccine access, study in universities or attend cultural events.

Turning such “insider” institutions into long-term zones of compulsory vaccination will undermine any broader vaccination drive. Consider how elite schools worsen the performance of failing public schools, by recruiting the best teachers and poaching the activist parents who can hold teachers to account.

Citizens with private health-care absorb the services of the majority of doctors, but they also disengage from the problems of the wider public health system. Private security guards make wealthy insiders feel safer, but displace crime to areas that do not enjoy their protection.

Broad mandates can sometimes work, but we need persuasion before, and then alongside, the compliance they help to secure. As vaccine boosters become normal, mandates that reinforce and then cement the insider advantages of small groups could easily undermine the wider national vaccination project.

• Butler teaches public policy at the University of Cape Town.

More problems with BIG

ANTHONY BUTLER: The big problem with BIGs: loan sharks and vampire firms love them

Large social grants have become collateral for debt, a Black Sash report has shown

First published in BusinessLive 14 October 2021

Social grants are not really a local government issue, even if the ANC manifesto celebrates 18-million social grants per month. The basic income grant (BIG) has not been a central part of the election campaign for any party.

A recent report by consultancy Intellidex pointed to a failure by BIG advocates to deal with the implications of the tax increases necessary to fund it. But fiscal probity is unlikely to be the real reason for parties’ BIG-hesitancy during the campaign.

Some retired businesspeople and bankers have recently described social grants as unconditional benefits for their recipients. Their brothers on the left, in the same vein, see BIG as a cure-all that can relieve poverty, spur investment and enhance human freedom.

For electors themselves, however, grants are legitimate, but they are far from being a panacea. In 2020 Afrobarometer reported that 76% of SA respondents support government social protection for the poor. But a majority also believe people should work for their payments.

Grants create problems as well as solving them. In particular, as the Black Sash explained in 2020 in a report on “reckless lending” in SA, there is a troubling relationship between social grants and indebtedness.

On the face of it, when you give people grants they have more money to spend, so their debt should fall. The trouble is that grants also attract predatory lenders.

How does this happen? Unemployed adults who survive on casual work are vulnerable and “congregate” around grant recipients, including grant-receiving mothers or grandmothers. Despite receiving a grant, beneficiaries are almost invariably required to borrow, because they support up to a dozen people in multigenerational households.

The idea that grants will be used as a “developmental tool” is great in theory. In practice, as the Black Sash observes, “we found … no cases of people borrowing to fund investment in small enterprises, and no-one we met was able to repay their loans from a successful business … almost all grantees were using credit merely for immediate consumption needs or emergencies.”

Moreover, grant recipients remain poor, and they face challenges for which they cannot reliably set aside monies: school and university fees, illness, disability, job losses, or family deaths. Worse still, the failures of the state — such as inadequate public health care or late payment of university bursaries — force people to borrow multiples of their available resources without warning.

When people must borrow, a steady state-guaranteed income attracts predators beyond the usual purveyors of store cards, furniture and insurance policies. Neighbourhood moneylenders and loan sharks love the prospect of reliable repayment, especially where they can relieve clients of their ATM cards and PIN numbers.

After 2012 the SA Social Security Agency’s contract with Cash Paymaster Services made more than 10-million grant recipients sitting ducks for shady financiers marketing their products to social grant recipients. The sharks used debit orders to deduct repayments directly from recipients’ accounts.

Illegal practices continue, despite the move of most grant recipients to “special disbursement accounts”. Beneficiaries are still forced to seek credit on unfavourable terms and they still end up in interminable debt enslavement.

The Black Sash points to the paradox this poses: “SA has a large social grant system meant to provide resources to poor people, but these grants have become collateral for debt. Grantees need extra money to smooth consumption and cope with shocks, but the credit available to them often has exploitative terms and conditions.”

The disheartening implication is that “the very social grant meant to provide support for vulnerable people is eaten up in high interest rates, fraudulent repayments and bank charges”.

A poorly designed BIG could simply result in a feeding frenzy for the great vampire squids of SA’s formal and informal financial systems.

• Butler teaches public policy at the University of Cape Town.