South Africa

Ferial Haffajee is a journalist that I have a lot of respect for. As Editor of the M&G she consistently delivers the goods with easily the best paper in SA. However, her latest Comment and Analysis piece on BEE left me a bit on disappointed. While I did agree with some of the things she wrote, on other counts I thought she was off the mark.   

BEE is spoken of in a language of limitation and of failure, instead of potential and success. The currency of this debate has quickly become that of “usual suspects”; “waBenzi” and “elite”. It is particularly galling because the commentators are usually privileged (white) people who live in leafy suburbs and who choose not to drive Mercs: in other words, elites themselves but with different motoring habits and of liberal and left politics.

Even if their modes of transport are beat up Jettas and their dress of choice scruffy Levi’s (or Fairtrade denims), they have had the benefits of inter-generational wealth transfer and the comfort of bequests and annuities that allow for good education for their children and ensure comfortable golden years. This inter-generational wealth and dignity is so taken for granted that many of these commentators are blinded to the fact that for many of the compatriots they so label, the goals are just the same; I am, for example, the first generation in my family to have a retirement annuity. For many of my cousins and I, we are the first generation (most of us beneficiaries of employment equity) who will bequeath to our children.

Now to me most of the negative characterisations of BEE have arisen recently because many have started to believe that the promised mass based program has been hijacked by the politically well connected who have changed a well meaning program into a get super-rich Casino. The words that Haffajee chooses  “usual suspects”; “waBenzi” and “elite” shows this, if people were truly against BEE they would use different, much harsher adjectives to vent their rejection of BEE. The motoring habits comment I just find bizarre and I think Haffajee misses the point. Again, the way BEE was sold to South Africa was as a means to empower and enable the majority through providing them with the tools to succeed. I do not remember reading in the BEE charter a section that recipients should be filthy rich and engage in as much conspicuos consumption as possible! The "annuity" aside is just a lowblow meant to reinforce Haffajee's perception that the White Liberal Middle class has no right to complain about any part of BEE, as if it makes any difference -- valid criticism is valid criticism no matter who makes it. Would it make any difference if it was someone in the townships making the same comments (as many do).  

Of course, like all rapid wealth creation, and especially that which is so aggressively state-assisted, BEE is swashbuckling with all the elements of frontier capitalism.

 

It is replete with quick fortunes, backbiting, shady characters and eyebrow-raising business habits, many of which we cover in the Mail & Guardian. It is a capitalist process, after all. Established business in South Africa has always had such eyebrow-raising habits: cartels are commonplace; corporate governance is new and not terribly well entrenched; there are few links between performance and pay and, until the era of unbundling, the usual suspects owned everything. Apart from a few laudable exceptions, the coverage of these practices by analysts and journalists was nowhere near as robust as that of BEE.

 

Double standards?

BEE is many things but is most definitely NOT capitalism. It is much closer to a form of hybrid socialism, which is another reason why the obscene fortunes made by so many BEE Kings is all the more depressing. Is the coverage a double standard? Of course it is! Capital in SA has got away with too much for too long, but if we work from this precept then why shouldn't BEE deals be held up to higher scrutiny? Aren't you Ferial, falling into the same trap of "BEE [being] spoken of in a language of limitation and of failure". Instead why don't we raise the scrutiny of ALL Capital rather than reduce our focus on BEE, now we are talking in the language of "potential and success"

Yet to label and malign the whole process, does not allow for a textured and nuanced debate the era requires. Of course, the accumulation of connection as symbolised by the former director general of communications, Andile Ngcaba, whose stake in Telkom earned him more than R800-million is ripe for criticism.

He bought a stake from the Thintana consortium, a Malaysian-American joint venture, to which he had initially sold a stake in Telkom as the director general of communications. Ngcaba has gone on to erect an empire of IT interests; he is there in every big deal.

 

That is the smoking gun for BEE in its present form and I agree with Haffajee wholeheartedly on this count. The entire BEE process is not a failure and there are a number of noticeable successes, however we still have a very long way to go before we can consider the program a success that all South Africans can be proud of.

Today in History : 2001 - Enron, the largest US energy-trading concern collapses after its credit is downgraded to junk-bond status and its smaller rival, Dynegy Inc., backs out of a $9bn deal to buy the troubled company.

According to the Snohomish County Public Utility District, which obtained audiotapes of trader conversations from the Justice Department and transcribed them, traders openly discussed creating congestion on transmission lines, taking generating units offline to pump up electricity prices and overall manipulation of the California power market.

 

For example, in one transcript a trader asks about "all the money you guys stole from those poor grandmothers of California." To which the Enron trader responds, "Yeah, Grandma Millie, man. But she's the one who couldn't figure out how to (expletive) vote on the butterfly ballot."

 

Conversations that involve Forney, Belden and Richter appear throughout the transcripts. In one of those transcripts, a trader says to Richter, "So, uh, somebody's figured out how to set congestion?" Richter: "Well, we ... we can set it if we want. I mean, it's not a hard game to do ..." In another, an Enron trader identified as David discusses shutting down a steamer from a generating unit to increase prices.

 

"I was wondering, um, the demand out there is er ... there's not much, ah, demand for power at all and we're running kind of fat. Um, if you took down the steamer, how long would it take to get it back up? "Oh, it's not something you want to just be turning on and off every hour. Let's put it that way," another trader says. "If we shut it down, could you bring it back up in three — three or four hours, something like that?" David asks.

 

"Oh, yeah," the other trader says. "Well, why don't you just go ahead and shut her down, then, if that's OK," David says.

 

There's one for the "the best market is an unregulated market" crowd... 

Since the news of the week on Someamoungus seems to be BEE (no pun intended), I thought I'd roll with it and hopefully get some feedback from all of you. I have an idea that I'd like to share and get some of your thoughts on (is it possible, how could you do it etc.) I think it would be fascinating to see diagramatically a chart showing the different BEE deals being made and the personalities involved. My guess is it would form a massive spiderweb because often the same people are involved in multiple deals.

The "software" itself would work like this : you'd enter the BEE Cronies' name (eg Smuts Ngonyama), the name of the Company the deal was with and finally how much the Fat Cat had been "Empowered" (to the nearest million of course). The program would then draw lines from each name and literally connect the cronies, so we could see a) how many times they had been "empowered" b) who were the main players and, finally most importantly c) the pattern that seems to be OBVIOUSLY developing. 

Ideas, comments and suggestions are welcome. The Comments section of my site has been really pedantic of late so maybe it would be better if you mailed me and then I could stick up your thoughts in the Comments section. 

PS - usually comments work if you publish immediatley (ie. do not Preview) and also check both "Remember info." and "Subscribe to the Thread".    

As a nice post-script to yesterdays little tantrum by Someamoungus, checkout John Qwelane deliver his judgement on BEE!

After a hard day negotiating their latest BEE Deal, the ANC cronies BEE businessmen took the afternoon off.

The Fat Cats just keep on getting fatter....any respect I had for BEE as a program flew out the window this past week. It is now perfectly apparent what BEE is -- a form of wealth expropriation designed to enrich a small clique of the politically well connected. Witness the following (bit long but well worth it to get the blood flowing):

Three government officials are beneficiaries of two deals announced this week. The head of communications in the Presidency, Murphy Morobe is a shareholder in Lereko, which has secured part of a 7% stake in Sun International. Foreign Affairs spokesperson Ronnie Mamoepa and presidential adviser Titus Mafolo have been allocated 8% and 3% respectively of Phatsima, which has taken a 20% stake in Aerosud. Mafolo, who has landed two lucrative deals in a week, is also a shareholder in Lereko.

 

South Africa’s ambassador to The Netherlands, Hlengiwe Mkhize, is an existing shareholder of Aerosud, with an 8% stake. Aerosud features in a R6,4-billion government deal to buy eight military transport aircraft from European aircraft giant, Airbus. The purchase means that two local manufacturers, Denel and Aerosud, will manufacture components worth R3,2-billion for Airbus.

 

A further concern is that the politically connected continue to dominate BEE transactions. Manne Dipico, Popo Molefe and Valli Moosa, members of the ANC’s national executive committee, its top ­decision-making body, feature in two of this week’s deals. In addition, Max Sisulu, an executive director and general manager at Sasol, is a beneficiary of the Aerosud deal. Sisulu chairs the ANC’s economic transformation committee. And Cheryl Carolus, formerly ambassador to Britain, gets a 4% stake in De Beers Consolidated Mining, a 100% subsidiary of De Beers, housing its South African operations.

 

Analysis of the deals shows that the share allocation continues to be highly unequal between high-profile and rank-and-file BEE beneficiaries. Dipico, with a R342-million stake in De Beers’ South African operations, gets 4 600 times that of an ordinary employee beneficiary in De Beers deal. Just seven people — Dipico, Barend Petersen, Moss Mashishi, Carolus, Wendy Lucas-Bull, Dolly Mokgatle and Thandi Orleyn — get R1-billion of De Beers’ R3,8-billion allocation.

 

In the Aerosud deal, just four people — Herman Mashaba (54%), Mamoepa (8%), Mafolo (3%) and Sisulu (3%) — get 68% of the BEE allocation. Mkhize’s 8% stake brings Aerosud’s BEE shareholding to 28%. Heightening the risk of conflicting interests is the fact that state-owned or state-controlled entities feature in two of the three deals. The Public Investment Corporation sold the 7% stake worth R392-million in Sun International to Dinokana, in which Lereko is the lead investor with a 28,05% stake.

 

At the same time, the Industrial Development Corporation sold its 20% holding in Aerosud to Phatsima. The value of the stake has not been disclosed. Dipico and Molefe are former premiers of the Northern Cape and North West provinces respectively, while Moosa is a former Cabinet minister. Lulu Gwagwa, a lead investor with Molefe and Moosa in Lereko, is formerly deputy director general of public works.

 

Lereko’s principal empowerment deal to date, before Sun International, was the 7,5% stake it took in Imperial. The consortium’s website details its other investors as Eric Molobi, Monhla Hlahla, Seth Phalatse and Tsheko Ratsheko. Meanwhile, former communications director general Andile Ngcaba appears set to grow his telecommunications empire through the probable purchase by Dimension Data of a controlling stake in Plessey from Worldwide.

 

Worldwide has told the M&G that it intends selling the 51% stake, as it wants to focus on the energy sector. Dimenson Data, which has Ngcaba as a 26% empowerment investor, owns 49% of Plessey and has a pre-emptive right to the other 51%. A deal is understood to be imminent. It is unclear whether Ngcaba will take a direct stake in Plessey. While controversy has been growing around empowerment, mainly because a few high-profile individuals have featured in so many deals, the Aerosud and Sun International deals break new ground in that the beneficiaries include government officials, Mamoepa and Mafolo, and Morobe, respectively.

 

Previous deals have allocated stakes to ANC office bearers, including ANC Secretary General Kgalema Motlanthe, who landed 7% of Pamodzi, and Smuts Ngonyama, who got an undisclosed stake in Telkom, as part of the Elephant consortium. Moosa, Molefe and Dipico are ANC national executive committee members, joining NEC members Saki Macozoma and Cyril Ramaphosa, who have notched up a string of BEE deals. A nexus appears to be emerging, with some of the BEE beneficiaries popping up in multiple BEE companies. Titus Mafolo has stakes in both Phatsima (Aerosud) and Lereko (Sun International).

 

Dipico, lead beneficiary in Ponahalo Investment Holdings, which has a 50% stake in Ponahalo, which in turn has 26% of De Beers Consolidated Mines, is a co-investor in Pamodzi with Motlanthe.

 

A growing empire

 

Former communications director general Andile Ngcaba looks set to up his stake in the information and communication technologies (ICT) sector, writes Lloyd Gedye. Worldwide African Investment Holdings has announced that it will sell its 51% stake in Plessey South Africa, which it jointly purchased for R1,6-billion with Dimension Data Africa (DiData) in 1998.

 

DiData is 75% owned by Dimension Data Plc and 25% by an empowerment consortium lead by Ngcaba. Dimension Data, which owns 49% of Plessey, has pre-emptive rights on Worldwide’s 51% stake. Kevin Handlesman, of DiData investor relations, confirmed that the company held pre-emptive rights, but said it was currently in a closed period before its results were announced and could not comment.

 

Analysts told the Mail & Guardian this week that it was likely that Dimension Data Africa would purchase the stake, but reiterated that a deal was always dependent on price. An analyst said that Ngcaba had shown his ability to open certain doors and it would probably make sense for DiData to involve him in a possible Plessey deal. However, he added: “I am concerned that this brings him into a greater conflict of interest situation due to his shares in Telkom.” Plessey South Africa is a key supplier to Telkom.

 

In May this year Ngcaba concluded a deal with the Public Investment Corporation in which the Elephant consortium bought a 10,1% stake in Telkom, paying for it over five years. gcaba is thought to have secured a 1,15% stake in Telkom for himself, worth R887-million at current prices. Another analyst said that if Dimension Data was to exercise its pre-emptive right, Ngcaba would be involved either through his stake in Dimension Data Africa or directly in Plessey SA. The analyst said the deal would offer Dimension Data a simplified structure and access to Plessey’s cash flow.

 

What a friggin joke! While the talking heads continue to wax lyrical about benefitting the majority, it is obvious the exact opposite is taking place. Particularly galling is the oh-so-obvious desperate lunge by those in government who are petrified that some sort of 'cooling-off' time period might be legislated, thus holding them back from plunging their snouts into the trough ASAP. A truly sickening display!

What gets to me even more is that there seems to be no limit to the greed, the sheer avarice that is displayed by these BEE Kings...is once enough? No! Well how about twice? NO! Three times...and so it rolls on,  a disgusting and unseemly spectacle. They seem to be screaming on a daily basis  "SCREW EQUITY! I'M GETTING MINE, NOW!" All this set against the Prez. and Kgalema Motlanthe railing against the "unseemly accumulation of wealth" :

ANC secretary-general Kgalema Motlanthe warned earlier this week that the sorry state of the organisation could be blamed on the "cancer" of moral decay and corruption among members.

 

Motlanthe dedicated an entire section of his organisational report to the issue under the heading: Lead us not into temptation - the challenge of renewing our revolutionary ethics.

 

You know Kgalema its a bit hard to hear you when you're mouth is so full of gravy (checkout the Pamodzi deal above)! Seriously this farce has got to stop, these people are robbing the rest of us blind and doing it with the full support of the law.

This is not Equity. This is not Justice. This is just about a bunch of greedy piggies rolling in the gravy... 
 

I've never been a big fan of the pimps of death weapons industry with their widespread corruption and shady dealings, but even this made me sit up and take notice.

Seems the uppity Indians took exception to our attempts to buy favour and cancelled the deal in the sale of 400 Anti-Material Rifles as well as deals for an ammunition plant and artillery. I mean what is the world coming to when an arms deal can't be tainted with the stink of ill-gotten gains. This travesty cannot stand and I suggest we sent the Minister of Corruption Deputy President of the ANC (Jay-Z) to ensure that the global standard of corruption be equally applied to this deal forthwith! I mean come on we had to put up with the same BS during OUR arms deal, why should the Indians have it any better. (suddenly the penny drops) The shock, the horror........you mean.....it is possible to.....CANCEL these deals after proven corruption?? Someone get EAAR on the line immediately.  

Of course the cherry on the top is the apparent cronyism that has also "torpedoed" other deals -

"If alleged undue influence cost Denel its market in India, it appears the alleged asking of bribes by a senior manager has poisoned the Middle East as a market as well. The manager, whose name is known to Sapa, and who is the brother of a senior Defence Secretariat official left Denel at the end of July. But in the wake of his activities, several Gulf states are said to be reluctant to deal with South Africa, leaving just Africa as a "natural market" for the company"

 

Interesting write-up in the Sunday Times about the supposed cash difficulties Brett Kebble was facing. A good read...for me the most interesting parts in the story were the following paragraphs :

"There have been indications that with the drying up of the money with which he dispensed patronage, he was becoming tight-fisted in funding the lifestyles of his political connections"

"Industry leaders this week made it clear that Kebble was fast running out of powerful friends in the world of mining finance. Peter Flack, former executive chairman of Randgold & Exploration and Kebble’s one-time boss, said: “I knew him incredibly well — I was very fond of him at one stage — and then I chose not to know him at all; many, many other people have taken a similar view.”

 

Still no further information from the police about the killing. I also enjoyed the Editorial piece, which I believe was a little more honest (compared to other stories being circulated in the Media) about Kebble the man and his effect on the SA political and business landscape. Some quotable quotes :

"We will not, however, join in the cacophony of eulogies to a man who has been described by some as a patriot and a great South African. Even though convention requires that we speak well of the dead, we will not be part of a lie."

"Brett Kebble was not a good South African. He was the Great Corrupter, a dirty businessman who had little respect for the law or codes of good practice. He corrupted politicians and created a parasitical network of politically connected beneficiaries who affectionately called him “umlungu wethu” (our white man)."

"So today we say farewell to the Great Corrupter. May no more like you be born."

Heavy stuff...

Taken from Finance24 : -

Addressing delegates at the eighth Southern Africa Telecommunications Network and Applications Conference (SatNac), Telkom (TKG) CEO Papi Molotsane said the Convergence Bill must enable sector profitability, encourage constant innovation and the ongoing investment required to stay abreast of advancing technology.

 

The Bill must protect the rights of existing licensees, and their substantial investments in the changeover from existing legislation. This protection is critical to preserving investor confidence, he said. In line with other speakers, Molotsane also agreed that convergence cuts across several different spheres and is driven by "unstoppable" advances in technology.

 

"At a market level, a proliferation of converging technologies continuously becomes available. Regulators have their work cut out to keep up with developments to provide a workable framework for sustained development of the ICT (information and communications technology) sector," he said.

 

I can't help it. I'm biased. Whenever I see a Press release or commentary from Telkom or one of their functionaries I just see red. I guess its got something to do with constantly getting the shaft for the past 10 years in phonebills, service etc. while better alternatives were denied to me. So lets look at the latest trash to roll in from the jokers at Telkom. First off, lets just remember where Telkom came from and who put up the the capital for Telkom to become a viable company - the South African taxpayer. Lets also not forget who for the past 10 years has had a virtual monopoly on Telecoms in this country and has been found guilty of anti-competitive practises.

Against this background lets turn now to these latest utterances of Papi. "The Convergence Bill must enable sector profitability", I'm sorry but I wansn't aware it was the governments job to "enable" ANY sector of the economy to be profitable. That is entirely the job of those businessmen who make up that sector. This is not pre-primary school where Mommy has to come hold your hand and take you to the lunch line so you can be sure to stuff your face. If thats what you want (to be profitable) DO IT YOURSELF - the days of state-sponsored hand-outs are over.

"The Bill must protect the rights of existing licensees, and their substantial investments", again all those who invested in Telkom have not been forced to do so, they did so voluntarily and accepted both the benefits and risks involved. I didn't hear any complaining from investors after Telkom gouged that massive R6.807-billion profit last year! So why the sad lament now to protect the "rights" of the investors (indeed what about the rights of the SA economy at large you idiot)...?

"Regulators have their work cut out to keep up with developments to provide a workable framework for sustained development", here I'll agree with Papi. Regulators DO have their work cut out for them, however the biggest challenge they face is from Hellkom moving in and rolling over all new startups!

RESIST the Telkom agenda! 

The new GDP figures are just in from Stats SA -

"South Africa's real gross domestic product (GDP) at market prices on a quarter-on-quarter seasonally annualised and adjusted basis rose by 4,8% in the second quarter of 2005 from 3,5% in the first quarter, Statistics South Africa (Stats SA) said on Tuesday"

 

Good stuff!

Interesting article in the M&G concerning the high unemployment and the skills mismatch in the economy. This says a lot for our tertiary education where clearly a) more guidance is needed in advising graduates in career direction b) greater emphasis needs to be placed on equipping graduates with the skills they need to succeed in the labour market.