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South Africa
Tuesday, April 1, 2008
Of cadres and comrades……

There is an essential element of Japanese age-based status referred to as Senpai and Kohai in which the more experienced teach their juniors . One of the dreadful consequences of apartheid was that this relationship was destroyed through various features such as ‘migrant labour’, pass laws and the creation of ‘homelands’.

Education should begin in the home and be extended and supported through schooling. Since homes were inadequate and schools were ill-equipped and under-resourced it perhaps should be no surprise that we are reaping serious ills as a result.
But ‘two wrongs don’t make a right’. And affirmative action favouring those who belonged to ‘the struggle’ is simply racism in reverse.
The solution is surely through economic freedom, rather than restrictive, prejudiced socialism. To get a suitable blue print one can do a lot worse than look at the United States.
There are essentially three factors that have made the US the most powerful economy in the world:
• Free markets
• Immigration
• Global confidence

For the five years to 2005 there was an estimated net immigration into the US of 1,3 million people per year, many bringing with them qualifications, skills and a desire to try and achieve in what they perceived was a free market economy. Not only are people voting with their feet; global investors have been so confident about the country that they are happy to fund the US deficit, currently running at about US $2,7 billion per day. In other words the country is importing more goods than it is exporting requiring it to borrow around $68 billion a month from everyone else.
The model has proved so successful that in varying degrees other countries have been following suit. It helped that the USSR disassembled its communist republic into 15 countries from February 1991 (the Berlin Wall had been dismantled in November 1989). But perhaps the greatest examples have been India (population 1 130 million) and China (1 322 million) together accounting for almost 37% of the world’s population. Referred to as ‘Chindia’ by global investors, the massive economies are responsible for an equally massive increase in the demand for raw materials and power resources in the form of oil and coal. Growth in this region of up to 12% a year is largely responsible for higher prices of commodities with the price of oil peaking at $106 to the barrel quite recently. The phenomenon is partly behind global food inflation too.
Though raw materials suppliers have been benefitting, South Africa has been singularly losing out. Even its coveted position as number one gold producer has been lost to China, which produced 276 tonnes last year against SA’s 272 tonnes.
Why is it that while gold touched a record $1033/oz we are producing less? And why is it that, at the time of writing the rand plunged further to R8,20 to the dollar? Isn’t the United States supposed to be in trouble, not South Africa? In all we’ve lost 45% in value since our best rate of R5,60 in 2005.
Get this: the United States is about to go into recession on the back of its credit crisis (instigated by the so-called sub-prime fiasco). Its trade deficit per day is double South Africa’s monthly deficit (which was R10,2 billion in January). Yet it is the rand, not the dollar that falls, falls and falls. It is now down about 20% in all against the dollar on the start of the year.
Comments Joel Stern of Stern Stewart & Co New York , “The third world countries, the so-called ‘emerging markets’ have being growing at between 5% and 8% a year for a number of years, and South Africa has not. It barely reached 5% last year and its growth has started to slow down again. The question is how is that possible?
“Of all the third world countries South Africa has them all beat in terms of education, a strong work-force, reasonable taxation, an agrarian economy as well as manufacturing, and you have, not a tropical climate, but a temperate climate – like the Mediterranean. And that has got to be good, good, good for your economy.
“The question is how come you are going to be growing at barely more than 4% a year the next three years when the other guys are growing at 8% or more a year?
“Unfortunately the answer is you are paying a price for the black economic empowerment story and for affirmative action. What this is doing is convincing young white people and young white families to move out of the country because they feel they won’t be given a fair opportunity to succeed.
“Black economic empowerment is like a very strong affirmative action programme on top of affirmative action. BEE says to foreign investors, for example, we would like to have a black person as the ceo, and the outsider says OK but if you have a black as the ceo of an outsider firm and if he does a poor job will we be allowed to sack him?
“And the answer is ‘no’. So this is called a one way street. You can’t expect you are not going to pay a price for this. The price that’s being paid is that you are getting less foreign investment than you should, and you are getting less talent into the country than you should,” he explains.
“When the government announces, or people complain about a shortage of skills, there can never be a shortage of skills because if there is a shortage of skills then you offer more and then the shortage is over. So the question is why do we have a persistent shortage of skills and my answer is very simple: what you have done is you are not permitting the free mobility of talented people into the country to reduce the skills gap. There is a skills gap and you’re paying a price for it that you don’t have to pay in order to maintain what you call ‘racial preference’.
“Now the irony, of course, of this is that the Africans in South Africa suffered apartheid for a very long time and they are beginning to practice the very same policies, but in reverse. It’s like when you talk about the United States, when we lean over backwards, well for how long?
“Although don’t get me wrong. I am convinced as a white person that black South Africans are entitled to reparations. They were done a very grave injustice. Some of it can never be fixed. They did not get proper education; and no training programme will ever substitute for a proper education, and some form of reparation should be made to those people who were denied. How to go about it is a different story. I do not think that black economic empowerment that goes to a handful of people making them millionaires and billionaires is the solution for the people who were denied,” he comments.
“How can you possibly justify BEE for two handfuls of people? It just doesn’t make any sense.”
He points out that the United States continues to grow rapidly because it continues to import quality people into the country — over a million people a year — it’s quite fantastic.
“By the way, imagine getting foreign aid. South Africa is sending people to university and to medical school and then these graduates pick themselves up, leave South Africa and come to the United States. We want to thank South Africa for its foreign aid programme!”

Comrades and cadres

The frequent reference to the terms ‘comrades’, ‘cadres’ and ‘revolutionaries’ is quite disturbing (see definition) — completely opposite to concepts of democracy and free markets.
Very recently ANC President Jacob Zuma was in Angola (to commemorate the 1988 Battle of Cuito Cuanavale) thanking ‘comrades’ whose ‘sacrifices would forever remain etched in the history of the South African liberation struggle.’ Cubans and Russians were also there to share in the accolades. This may be true, but the symbolism is creepy, at least in the eyes of the Americans. It reminds them of what happened in Israel and Cuba many years ago, and leaves those in the US viewing blacks on the African Continent as ‘tribal socialists’, rather than democratic free marketers like Colin Powell, Condoleeza Rice or Barack Obama.
Says Stern, “There was one thing that Nelson Mandela did that really surprised the Americans. And it stopped them dead in their tracks from being overwhelmingly supportive of South Africa. It was when he went to the Middle East and embraced Yasser Arafat who was an admitted terrorist.”
Arafat later walked away from the Bill Clinton settlement proposals in the Middle East during the 2000 Camp David Summit. By inference, in the eyes of the Americans at least, the great hug supported this failure. Mandela did the same with regard to Cuba when he hugged Fidel Castro.
Comments Stern, “The embracing of Castro and Arafat was a counter-punch against South Africa as viewed by the United States.”
More recently we read of the unfortunate passing away of Ncumisa Kondio, the ANC Parliamentary caucus chairperson, described as “an outstanding cadre and highly regarded by her comrades….. one of the most respected women revolutionaries…”
Back in Luanda Zuma’s words rang hollow for those hoping for economic freedom when he added, “We salute all combatants who laid down their lives…. (and) …. paid the ultimate price so that the oppressed people of southern Africa could be free from racism, neo-colonialism, proxy wars and underdevelopment.”
Free from racism? Under development? Really?
According to the 2008 Index of Economic Freedom assessing 162 countries, South Africa has slipped again, down two places to 57th. And the word ‘Mismanagement’ springs to mind: mismanagement of everything from the economy, the infrastructure and the government, to labour and domestic, even foreign policy.
There is, of course, the Eskom fiasco. And now the latest is we have an even more serious water supply problem. Skills shortages are rife, becoming the most boring topic on the planet. Nervous management issues are also putting the hosting in Cape Town of the 2010 Fifa World Cup in jeopardy. Meanwhile, most of South Africa’s beaches are losing their ‘Blue flag’ status — a tourist rating of cleanliness and leisure suitability.
Another headline recently blared out, ‘South Africa’s borders are a shambles.’ Indeed, the Zimbabwe fallout has emphasised our country’s evident lack of sovereignty . We now have between 3m and 5m illegal immigrants. The government has failed to control crime (we have the highest murder rates in the world), and several in authority are implicated in fraud and corruption. “No confidence in police or courts,” reads another headline. We cannot even control our own documentation — with the UK, for example, threatening to impose visa requirements because our passports are easy to obtain fraudulently. Drug syndicates find SA an all-too-easy conduit.
Mismanagement of the country as a whole underpins our inability to maximise efforts and accelerate the upliftment of the poor. The lack of adequate social welfare, a decrepit national health service, and poor education standards demonstrate an appalling failure of the 1994 mandate.

The modern world

In the modern world, increasing numbers of countries are joining the free market, a democratic model of governance and economic pursuit. The USSR and China are just the biggest of many members joining the global free market community.
Comments Joel Stern, “What has been very wonderful to see is the benefits of globalisation for third world countries.
“The main reason is that India and China are becoming free market enthusiasts, and suddenly the demand for raw materials went through the roof.” He says this hugely befitted certain parts of Asia that are rich in raw materials such as Indonesia, and other raw material supplier countries such as Australia and South Africa.
But while our country has clearly benefitted from demand by free market economies, it should not squander the opportunity for growth by ignoring its trading partners’ beliefs. These embrace not just the simplest tenet of free markets, but the whole concept in terms of free mobility of labour, fair access to employment opportunities for all races, colours and creeds, relatively low taxes, transparent government, assertive sovereignty, and the ‘rule of law’. There is no room for nativism and tribalism in all this.
Western democracies have grown out of hundreds of years of development in many spheres, not least of all in the rule of law.
Notes Stern, “We decided not to use fisticuffs, but to substitute the rule of law and use a judicial system to settle disputes. We agreed to defer to a third party to adjudicate; and to carry out whatever the courts decide.
“Aside from this our individual goal should be to maximise our own happiness. We want to be able to choose our life activity, and to maximise the present value of our future happiness.
“In the business world this is often expressed in terms of the price of your shares. Over time your shares will rise to reflect the innovations you bring to the market place.”
In the modern view of global democracy, a country’s currency is its share price. At R8,17 to the dollar we are not valued very highly. If the South African government doesn’t get back to the boardroom quickly and sort out an effective way to manage its business properly, well then more investors will sell their shares, both literally on the JSE, and figuratively, in the form of a continuing exodus of skills. By Nigel Benetton

Footnotes

[1] Loosely translated Kohai means ‘mentor’ and Senpai ‘acolyte’. The kohai are expected to respect and obey their senpai, and the senpai in turn must guide, protect and teach their kohai as best they can.

[2] Stern Stewart & Co was founded in New York 25 years ago, and is now the leading international management consultancy for ‘value management’. Its aim is to help corporate executives implement their goal to increase value in four key areas: corporate management, customer value management, organizational development, and incentive compensation.

[3] Cadre is a tightly knit group of zealots who are active in advancing the interests of a revolutionary party; a member of such a group.

Comrade is a fellow member of the Communist Party; hence Communism, which is a system of government in which the state plans and controls the economy and a single, often authoritarian party, holds power.

[4] Sovereignty is the exclusive right to have complete control over an area of governance, people, or oneself. A sovereign is the supreme lawmaking authority, subject to no other.

 

Copyright © Insurance Times and Investments® Vol:21.3 1st April, 2008
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