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CNBC Europe recently caught up with former president of South Africa, FW de Klerk to speak about the state of the country&#8217;s economy amongst other issues. The conversation started with claims of deep-seeded corruption in government.

FW de Klerk speaks on SA’s economic decline

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OUTA released a compelling case document in an effort to convince Parliament and other organs of state, including the Constitutional Court if need be, to have Jacob Zuma removed as the President of South Africa.

OUTA reveals compelling case document to unseat President Zuma

Like the proverbial cat with nine lives, South Africa’s scandal-ridden president, <a href="http://www.sahistory.org.za/people/jacob-gedleyihlekisa-zuma">Jacob Zuma</a>, may well have escaped yet again with his political life. This despite another resounding loss in the country’s highest court.
The Constitutional Court <a href="https://www.timeslive.co.za/politics/2017-06-22-read-in-full-concourt-ruling-on-secret-ballot/">ruled</a> that there was no constitutional bar to the Speaker of the National Assembly, <a href="http://www.news24.com/Tags/People/baleka_mbete">Baleka Mbete</a>, opting to employ a secret ballot in a no confidence vote in parliament. She’d originally asserted that she didn’t have the authority to make this decision, prompting several opposition parties – furious at Zuma’s increasingly dictatorial project of <a href="http://ewn.co.za/Topic/State-Capture">“state capture”</a> – to take the matter to court.
South Africa’s judicial system continues to hold firm. This is despite the fact that there appears to be a concerted and well coordinated campaign by a group of politicians and businessmen to undermine the integrity of state institutions as well as to exploit their weaknesses to prosecute a project of self-enrichment and rent-seeking. The campaign is pivoted around the now notorious <a href="https://mg.co.za/tag/gupta-family">Gupta family</a>.
Zuma has been brought to book repeatedly by the courts. In March last year, the Constitutional Court <a href="http://city-press.news24.com/News/constitutional-courts-damning-judgment-zuma-violated-his-oath-of-office-20160331">found</a> that Zuma, as well as parliament, had violated the Constitution. They did so by failing to defend and uphold the constitutional authority of South Africa’s ombud – it’s Public Protector – who had conducted an investigation into the president’s private homestead, <a href="https://mg.co.za/report/zumaville-a-special-report">Nkandla</a>. She found that Zuma and his family had unlawfully benefited. He was required to pay back nearly R8 million to the state. Yet, following a <a href="http://ewn.co.za/2016/04/01/Full-text-of-President-Zumas-speech-on-Concourt-Nkandla-judgment">half-baked apology</a>, Zuma held onto power.
In parliament he’s survived a number of no confidence votes <a href="http://www.sanews.gov.za/south-africa/mps-reject-motion-no-confidence-against-president">mounted</a> by the opposition. He also dodged two such attempts in the national executive committee of his own party, the ruling African National Congress (ANC) – <a href="http://ewn.co.za/2016/11/27/anxious-wait-for-outcomes-of-hanekom-s-motion-against-zuma">one</a> in November last year and most recently <a href="http://citizen.co.za/news/news-national/1526627/netshitenzhe-tables-motion-of-no-confidence-in-zuma-at-nec-meeting/">in late May</a>. He’s been backed by an increasingly slender yet sufficient number of loyalists and nationalists for whom Zuma provides political cover for their populist and self-serving call for “radical economic transformation”.
<h2>Tipping point</h2>
The tipping point for the latest legal skirmish was Zuma’s reckless and apparently self-interested decision to <a href="https://theconversation.com/firing-of-south-africas-finance-minister-puts-the-public-purse-in-zumas-hands-75525?sr=16">fire</a> South Africa’s widely respected minister of finance, Pravin Gordhan, on 30 March this year.
Despite a cold war with Zuma, Gordhan had <a href="https://theconversation.com/south-africa-cant-save-itself-just-by-talking-the-talk-it-must-walk-the-walk-73863?sr=7">held the line</a> against “state capture” for 15 months after his reappointment in December 2015. And so as night follows day, Gordhan’s removal precipitated an immediate ratings’ agency downgrade. The downgrade added further pressure to an already weak economy, undermining any prospects of economic growth to address the high levels of unemployment and inequality that threaten its precarious social stability.
Once again, in response to Zuma’s <a href="https://theconversation.com/stakes-for-south-africas-democracy-are-high-as-zuma-plunges-the-knife-75550?sr=21">ill-considered cabinet reshuffle</a>, the largest opposition party, the Democratic Alliance, tabled a motion of no confidence in the national assembly. There has been an apparent shift in attitude in the ANC’s parliamentary caucus suggesting that the no confidence vote might have a chance of succeeding. Many ANC MPs are now anxious about the party’s prospects at the 2019 national election and their own political future.
But there’s also concern over Zuma’s apparent hold over many backbench MPs. Many of them fear retribution and expulsion should they vote against the president. If an MP ceases to be a member of the party on whose list they stood at election time, they automatically lose their seat in parliament.
Because of this one of the smaller opposition parties, the United Democratic Movement, requested the speaker to use a secret ballot to enable MPs to vote with their conscience. Mbete, who is also the national chairperson of the ANC, refused. She claimed that she did not have the power to make the decision.
The Constitution is unclear. It provides for the president and the cabinet to be removed by the national assembly by a bare majority following “a vote”. In the secret ballot case, the court could have interpreted “a vote” to mean “a secret vote”. Equally, however, the failure of the Constitution to specify a secret ballot in the case of a no confidence vote could mean an open ballot was intended.
So on June 22, the Constitutional Court took neither route. It held that,
<blockquote>the Constitution could have provided for a vote by secret ballot or open ballot. It did neither.</blockquote>
Rather it held that,
<blockquote>the national assembly has … in effect empowered the Speaker to decide how a particular motion of no confidence in the President is to be conducted.</blockquote>
Accordingly, the Court set aside the Speaker’s decision that she lacked constitutional power to order a secret ballot. Notably, Zuma had entered the proceedings to argue, like the Speaker, that there was no power to order a secret ballot and no need to do so.
The court pointedly observed that Mbete has “an enormous responsibility” to ensure that when she decides whether on a “situation specific” case-by-case basis a secret ballot should be employed. She should do so on a “rational and proper basis”, with due and careful regard to a purpose of the no confidence vote. Importantly, the court noted that the primary duty of MPs is to the Constitution and not to their parties.
The implication is that the ability of MPs to vote with their conscience in such a situation is clearly a factor that the speaker should take into account when making her decision. Some critics will regard the court’s “guidance” as insufficiently precise. But the court was clearly anxious not to encroach on separation of powers – perhaps mindful of the virulent claims from some quarters of “judicial over-reach”.
Mbete will have to choose between her loyalty to her president as one of the ANC’s <a href="https://mg.co.za/tag/anc-top-six">“top six”</a> leadership and her duty to the Constitution as speaker.
<h2>Zuma unperturbed</h2>
Later on the same day of the judgment Zuma was <a href="http://ewn.co.za/2017/06/22/watch-zuma-answers-questions-on-state-capture">answering questions</a> in parliament. Judging by his typically thick-skinned signs of confidence, the president is not unduly perturbed by the court’s ruling.
While the court stated the power to decide on whether to hold a secret ballot or not should “not be exercised arbitrarily or whimsically”, Zuma has already made it clear that he expects Mbete to decide that a secret ballot is inappropriate or unnecessary.
Parliament returns after its current mid-year winter recess in August. If Mbete once again declines to hold a secret ballot, her decision will, in turn, then be subject to judicial review application. In due course the court could be forced to order her to hold a secret ballot.
So despite the Constitutional Court judgment, and the lucidity of it’s reasoning, a no confidence vote held with a secret ballot is still some way off. Until then, Zuma lives to fight another day.
But with every day passing, December’s ANC national elective conference gets closer. Then Zuma’s term as president of the ANC expires. Then his power will decline potentially decisively.
One way or another, Zuma is running out of political lives.

Op-Ed: South Africa’s Jacob Zuma is fast running out of political lives

What kind of financial system is sure to collapse if the central bank cares about people’s well-being?
The <a href="http://www.pprotect.org/library/investigation_report/2016-17/Report%208%20of%202017&amp;2018%20Public%20Protector%20South%20Africa.pdf">recommendation</a> by South Africa’s Public Protector that the Reserve Bank’s mandate change, says much about Busisiwe Mkhwebane, none of it flattering. It says just as much about mainstream economic debate &#8211; and none of that is flattering either.
Mkhwebane recommended that the central bank’s constitutional mandate, which makes protecting the currency its primary goal, be changed to one which requires it to “promote balanced and sustainable economic growth while ensuring that the socio-economic well-being of the citizens are protected”. She also said the constitution should require the bank “to achieve meaningful socio-economic transformation”.
This triggered a wave of protests, as well as an announcement from the <a href="https://www.resbank.co.za/Lists/News%20and%20Publications/Attachments/7852/PRESS%20RELEASE%20FOR%20SARB%20.pdf">South African Reserve Bank</a> that it would take the matter to court. The <a href="https://probonomatters.co.za/south-african-reserve-bank-says-public-protector-is-overreaching/">Reserve Bank</a> had no option. The constitutional court has ruled that the Public Protector’s findings are binding unless they are challenged in court. Her recommendation wildly exceeded what she is allowed to do by the constitution – or democratic good sense &#8211; and the Reserve Bank could not allow it to stand.
Democratic constitutions are changed by large majorities of the people or their elected representatives – not by individuals. By making a binding recommendation that the constitution be changed, Mkhwebane signalled that she either doesn’t understand – or does not care – for democracy.
Her report is also very useful to a faction of the governing party which wants to <a href="https://theconversation.com/pursuing-a-30-year-old-bailout-is-sending-south-africa-on-a-wild-goose-chase-79792">deflect charges of state capture</a> by claiming that white monopoly capital already controls the state. There are real questions about the fitness for office of a Public Protector whose report seems more interested in protecting connected politicians and business people than with taking the people’s will seriously.
But the reaction did not stop at insisting that Mkhwebane has no business telling the people what the constitution should say. Much of it objected not only to her saying what the Reserve Bank’s mandate should be, but to anyone at all doing that.
<h2>An important debate</h2>
The prize for the wildest reaction went to the commentator who declared that Mkhwebane’s ideas on the Bank’s mandate were <a href="https://mg.co.za/article/2017-06-21-the-holocaust-denier-the-public-protector-and-the-reserve-bank">inspired</a> by someone who denied that the Nazi genocide happened. Others stopped short of tarring constitutional change with the same brush as mass murder but were united in claiming that to suggest that the Reserve Bank’s mandate be broadened is “<a href="https://www.timeslive.co.za/ideas/2017-06-21-public-protectors-bizarre-instruction-harms-our-wellbeing/">economically illiterate</a>” and deeply damaging.
Absa, who was the subject of a separate finding by the public protector on the issue of a <a href="https://probonomatters.co.za/the-public-protector-in-her-own-words-on-the-bankorpabsa-matter/">controversial bailout</a>, asked a court to rule that her proposed change posed a “<a href="https://www.timeslive.co.za/sunday-times/business/2017-06-21-in-full-absa-goes-to-court-over-public-protector-report/">serious risk to the financial system</a>”. For its part the rating agency Standard &amp; Poor’s, happy as ever to police the boundaries of economic correctness, warned that any interference with the Reserve Bank’s independence could trigger new downgrades.
To insist that anyone who proposes changing the Reserve Bank’s mandate is economically damaging and stupid is as contemptuous of democracy and dangerous to the economy as Mkhwebane’s excess. It is undemocratic because it seeks to close down policy debate by declaring that only one view of the Reserve Bank’s mandate can ensure a healthy economy. It is dangerous because it blocks the search for economic remedies by seeking to bully even those who propose only mild changes to what the country now has.
The idea that the Reserve Bank should have a broader mandate is neither radical nor dangerous. The most famous central bank, the <a href="https://www.federalreserve.gov/aboutthefed/structure-federal-reserve-system.htm">US Federal Reserve</a>, has a broader mandate. Its dual mandate requires it to seek maximum employment as well as price stability.
The <a href="http://www.rba.gov.au/monetary-policy/">Australian</a> equivalent’s mandate includes “maintenance of full employment and economic prosperity and welfare of the people”. <a href="https://www.ecb.europa.eu/ecb/html/index.en.html">The European Central Bank</a>, famed for its love of austerity, has a mandate to seek “sustainable growth”.
And the <a href="http://www.bankofengland.co.uk/Pages/home.aspx">the Bank of England’s</a> website says that, subject to its goal of price stability, it aims to support the government’s economic objectives.
In South Africa, not only has the view that the central bank’s mandate is too restrictive been repeated periodically but it may well have been implemented for a while. In 2010, then finance minister Pravin Gordhan <a href="https://www.moneyweb.co.za/archive/pravins-letter-to-gill-marcus/">wrote</a> to then Reserve Bank governor, Gill Marcus, proposing a mandate which included growth and employment. Marcus <a href="http://m.fin24.com/fin24/Economy/Inflation-debate-not-over-20100219">reacted positively</a>, which suggests that the bank acted on Gordhan’s letter. The financial system survived.
The US, European and Australian financial systems have also not collapsed. Their mandates have not triggered a downgrade and no one has accused these societies of economic illiteracy.
So either double standards are being applied or we are being told that restrictive central bank mandates are essential only if countries are in particular parts of the world (such as Africa) and governed by particular types of people (Africans).
And why does a change in the Bank’s mandate undermine its independence? A central bank loses its independence if politicians (or anyone else) can tell it what to do, not if its mandate changes.
For all its flaws, the Public Protector’s proposal would retain the Reserve Bank’s independence, leaving it to the bank to decide what promotes the “well-being” of the people or “transformation”.
<h2>Closing down debate is common</h2>
None of this means that the Reserve Bank’s mandate must change. Or that central bank independence must go. But it does mean that no one should be discouraged from debating the issue, as people routinely do in other democracies and market economies. What, besides that prejudice which we prettify by the term <a href="http://www.encyclopedia.com/history/dictionaries-thesauruses-pictures-and-press-releases/afropessimism">Afropessimism</a>, explains the insistence that we may not debate what is freely discussed in most other places?
Closing down debate in this way is common in South Africa. It also lies behind complaints of policy uncertainty which does not mean, as it does elsewhere, that government keeps changing its mind and sending mixed messages – the macro-economic framework has been stable for more than two decades. It means, rather, that some people – who some others may take seriously – raise policy ideas the economic mainstream does not like.
This demand that people can say anything they like about economic policy as long as the mainstream likes it too offers a misleading view of the economy. It says that there is nothing wrong with it except political interference and that it will flourish if politicians simply leave alone what is done now.
The <a href="https://theconversation.com/business-needs-to-change-and-stop-blaming-others-for-south-africas-ills-64942">contrary evidence</a> is offered by mainstream organisations such as the International Monetary Fund and the South African Reserve Bank itself which have shown that the current economic rut is a product of problems in the private economy as well as what government does.
This means that the economy must change. This, in turn, requires new ideas. They will not emerge unless everything is up for debate and ideas are not silenced because they trigger the fears and prejudices of a few.

Op-Ed: South Africa’s central bank row points to dangerous levels of intolerance

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It seems as though President Jacob Zuma has dodged yet another attempt to get him removed from office with the Constitutional Court ruling that the issue of MPs voting in secret is the prerogative of the speaker of parliament.

Is state capture South Africa’s new normal?

CAPE TOWN (Reuters) &#8211; South African President Jacob Zuma is consulting legal advisers about setting up a judicial inquiry into allegations of influence-peddling within his government, his deputy Cyril Ramaphosa told parliament on Wednesday.
New allegations in recent weeks of inappropriate collusion between state-owned companies and business interests close to Zuma have put more pressure on the scandal-plagued leader and ministers close to him.
(Reporting by Wendell Roelf; Editing by Hugh Lawson)
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S.Africa Zuma consulting advisers on setting up inquiry into graft allegations: Ramaphosa

South Africa&#8217;s Finance Minister Malusi Gigaba on Tuesday denied unlawfully granting citizenship to five members of the wealthy Gupta family, who are friends of President Jacob Zuma, during his time as minister of home affairs.
New allegations in recent weeks of inappropriate collusion between state-owned companies and business interests close to Zuma have put more pressure on the scandal-plagued leader and ministers close to him.
Gigaba has come under fire after Julius Malema, leader of the opposition Economic Freedom Fighters (EFF) party, tweeted pictures of government documents showing Gigaba had fast-tracked the naturalization process for Gupta family members.
In a statement, Gigaba confirmed the authenticity of the documents but denied they showed he had acted unlawfully.
&#8220;I have requested the Department of Home Affairs to provide chronological details of how all applications by the Gupta family have been handled by the Department of Home Affairs from the beginning,&#8221; Gigaba said. &#8220;We have no doubt that the whole process has been handled by the book in terms of our laws.&#8221;
He said it had been within his powers as home affairs minister to shorten the citizenship process and that such courtesies had been extended to business executives and sports people as well as the Gupta family members.
Gigaba was appointed as finance minister in March, replacing Pravin Gordhan, a favorite of international investors, who was sacked by Zuma. The cabinet reshuffle prompted ratings agencies to downgrade Africa&#8217;s most industrialized economy, citing heightened political risk.
Gary van Staden, a political analyst at NKC Independent Economists said the allegations against Gigaba risked further undermining investors&#8217; confidence in South Africa, although they were unlikely to immediately impact investments.
South Africa depends on foreign investment to finance its big budget and balance of payments deficits.
The EFF last week filed a criminal complaint against Gigaba over what it says is evidence of corruption in a lucrative government tender. Gigaba and the Gupta family have denied doing any wrongdoing.
Malema is the leader of the ultra-left EFF party which emerged as electoral kingmaker in Johannesburg and the capital Pretoria at municipal elections in August last year. A former protege of Zuma, he was expelled from the ruling African National Congress in 2011 for bringing the movement into disrepute.
(Reporting by Mfuneko Toyana and Tanisha Heiberg; Editing by James Macharia and Catherine Evans)

S.Africa’s Finance Minister Gigaba says granted Gupta family citizenship lawfully

Politics are in shambles across the world. Populism and political gambles are making headlines from London to Washington. Southern Africa is no exception. If it’s any comfort, this suggests that there’s nothing genuinely typical about African versions of <a href="https://www.dandc.eu/en/article/populism-common-southern-africa-where-former-liberation-movements-have-become-dominant">political populism</a>. Nor are the flaws in democracy typically African.
This might put some events into wider perspective. But it’s nonetheless worrying to follow the current political turmoil in some southern Africa countries.
The regional hegemon, South Africa, is embroiled in domestic policy tensions of unprecedented proportions since it became a democracy. And the situation in the sub-region is not much better.
The state of opposition politics and democracy is in a shambles too. The fragile political climate and the mentality of most opposition politicians hardly offer meaningful alternatives. This is possibly an explanation – but no excuse – for the undemocratic practices permeating almost every one of the region’s democracies.
Beyond multi-party systems with regular elections, they resemble very little of true democracies.
<h2>South African hiccups</h2>
At the end of May the dimensions of “state capture” in South Africa were set out in a report published by an <a href="http://www.timeslive.co.za/politics/2017/05/26/FULL-REPORT-%E2%80%98How-South-Africa-is-Being-Stolen%E2%80%99-a-report-on-state-capture">academic team</a>.
It shows how deeply the personalised systematic plundering of state assets is <a href="https://www.dailymaverick.co.za/article/2017-05-26-betrayal-of-the-promise-the-anatomy-of-state-capture/">entrenched</a>. Additional explosive evidence was presented only days later through thousands of leaked e-mails. Dubbed the “Gupta Leaks”, they document a mafia-like network among Zuma-loyalists and the Indian Gupta family.
The evidence points to massive influence, if not control, over political appointments, the hijacking of higher public administration and embezzlement of <a href="http://www.timeslive.co.za/sundaytimes/stnews/2017/05/28/Here-they-are-The-emails-that-prove-the-Guptas-run-South-Africa">enormous proportions</a>.
Some 65% of South Africans want Zuma to <a href="http://www.politicsweb.co.za/news-and-analysis/65-of-south-africans-want-zuma-to-resign--ipsos">resign</a>. An all-time low approval rating of 20% makes him less popular among the electorate than even <a href="http://time.com/4785127/michael-temer-nicolas-maduro-donald-trump/">US President Donald Trump</a>. Despite this – combined with growing demands from within the party that he steps down – the ANC still backs its president.
But divisions within the party are deepening, with some in its leadership demanding an <a href="https://www.ft.com/content/88337066-4797-11e7-8519-9f94ee97d996">investigation</a> into the Gupta patronage network.
For his part, Zuma is focused on pulling strings to secure Nkosazana Dlamini-Zuma as <a href="https://www.theelephant.info/dispatches/2017/03/10/zuma-succession-the-businessman-vs-the-ex-wife-or-is-it-all-smoke-and-mirrors/">his successor</a> as president of the party. The other front-runner candidate is Deputy President Cyril Ramaphosa.
Zuma’s assumption appears to be that, once in office, his former wife would not endorse any legal prosecution of the father of her children.
But the country’s official opposition party, Democratic Alliance (DA), isn’t reaping the benefits of the ANC’s blunders. It has its own problems, which are constraining the gains it might otherwise be making from the ANC’s mess.
The party is divided over what to do about its former leader and Premier of the Western Cape province, Helen Zille following a tweet in which she defended the legacy of colonialism. The comment whipped up a storm of protest and for weeks the party had been at pains on how to deal with the scandal.
<img loading="lazy" decoding="async" class="size-medium wp-image-127318 alignleft" src="http://cnbc.africa/wp-content/uploads/2017/06/Helen-Zille_Tweet-300x127.png" alt="" width="300" height="127" />
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DA leader Mmusi Maimane finally announced that Zille had been suspended from the party and that a disciplinary hearing would decide what further <a href="http://www.bbc.com/news/world-africa-40143710?ocid=socialflow_twitter">political consequences</a> she might face. But a resilient Zille immediately challenged <a href="http://m.news24.com/news24/SouthAfrica/News/das-u-turn-on-zille-suspension-20170603">the decision</a>.
Whatever the outcome, the DA’s image is damaged. Its aspirations to be the country’s new majority party has been dealt a major blow.
<h2>Regional woes</h2>
In Angola, 74-year-old Jose Eduardo dos Santos, who has been in office since 1979, has decided to select a <a href="http://www.dailymail.co.uk/wires/afp/article-3995176/Angolas-President-Dos-Santos-stand-2017-state-radio.html">successor</a>. The scenario will secure that the family “oiligarchy” will remain in control of politics and the country’s economy, while the governing People’s Movement for the Liberation of Angola (MPLA) uses the state apparatus to ruthlessly suppress any meaningful <a href="https://www.pressreader.com/south-africa/the-mercury/20170221/281706909446949">social protests</a>.
In contrast Robert Mugabe – reigning in Zimbabwe since independence in 1980 &#8211; shows no intention of retiring. He was nominated again as the Zimbabwe African Nation Union/Patriotic Front’s (ZANU/PF) candidate for the 2018 <a href="http://www.bbc.com/news/av/world-africa-30365706/mugabe-confirmed-as-zanu-pf-candidate-for-2018-election">presidential elections</a>. But everyone is anxiously following the party’s internal power struggles over the ailing autocrat’s <a href="http://www.thezimbabwean.co/2017/04/zimbabwes-make-break-moment/">replacement</a>. Fears are that the vacuum created by his departure might create a worse situation.
While the regime’s constant violation of human rights is – as in Angola – geared towards preventing any form of meaningful opposition, there are concerns that the unresolved succession might add another violent dimension to local politics.
Zambia’s democracy also looks sad. The country’s main opposition leader Hakainde Hichilema of the United Party for National Development (UPND) is on trial for high treason. Hichilema has been embroiled in a personal feud with President Edgar Lungu of the governing Patriotic Front (PF) for years. He was arrested in early April after obstructing the president’s motor cavalcade. The charge of high treason is based on the accusation that he <a href="https://zambiareports.com/2017/04/09/hichilema-willfully-put-pres-lungus-life-danger-state-house/">wilfully put President Lungu’s life in danger</a>.
The trial is feeding growing concerns over an increasingly autocratic regime. The once praised democracy, which allowed for several <a href="https://www.themastonline.com/2017/05/15/its-time-to-start-talking-about-zambia-says-cheeseman/">relatively peaceful transfers</a> of political power since the turn of the century, is <a href="https://www.lusakatimes.com/2017/05/16/birmingham-university-professor-cheesemans-ignorance-democracy-shocking-regrettable/">now in decline</a>.
Lesotho is also in a mess. It provides a timely reminder that competing parties seeking to obtain political control over governments are by no means a guarantee for better governance. Aptly described as a <a href="https://mg.co.za/article/2017-06-02-00-lesothos-groundhog-day-election">“Groundhog Day election”</a>, citizens in the crisis-ridden country went to the polls for the third time since 2012 with no new <a href="http://africanarguments.org/2017/06/02/lesothos-night-before-the-elections-photo-of-the-weekexplainer/">alternatives or options</a>.
Their limited choice is between two former prime ministers aged 77 (Tom Thabane) and 72 (Pakalitha Mosisili). The likely election result is another fragile coalition government – provided the military accepts the result.
Meanwhile, the biggest challenge for relative political stability in the region might still be in the making: President Joseph Kabila, whose second term in office in the Democratic Republic of the Congo (DRC) ended in December 2016, is still hanging on with the promise that he’ll vacate the post by end of this year.
Despite a constitutional two-term limit, his plans remain a matter of speculation. In a recent interview, he was characteristically <a href="http://www.spiegel.de/politik/deutschland/die-lage-am-samstag-aggressiver-nationalismus-plus-atomraketen-a-1150544.html">evasive</a>. He refused to give a straight answer on whether he’s still considering <a href="http://www.news24.com/Africa/News/kabila-says-he-never-promised-to-hold-elections-in-drc-20170603">another term</a> and flatly denied that he had promised anything, including elections.
Kabila’s <a href="http://www.upi.com/Top_News/World-News/2016/12/21/Up-to-20-dead-as-Congo-police-protesters-clash-over-president/6411482288306/">extended stay in office</a> threatens to exacerbate an already explosive and violent situation, with potentially devastating consequences.
His continued reign would not only provoke further bloodshed at home. Any spill-over will challenge the Southern African Development Community’s willingness and ability to find solutions to regional conflicts in the interests of <a href="https://theconversation.com/what-southern-africa-can-learn-from-west-africa-about-dealing-with-despots-71722">relative stability</a>. A stability which is at best fragile and indicative of the crisis of policy in most of the regional body’s member states.

Op-Ed: Democracy is looking sickly across southern Africa

TJ Strydom
South African President Jacob Zuma has denied owning a &#8220;palace&#8221; in the United Arab Emirates, his office said on Sunday, after local media reported that an influential family bought him a home in the wealthy Gulf state.
Graft accusations in more than 100,000 leaked documents and e-mails last week heaped more pressure on the scandal-plagued Zuma only days after he survived a no-confidence vote by members of his own party&#8217;s top body.
South Africa&#8217;s Sunday Times newspaper reported that several independent sources had told it that the Gupta family had bought Zuma a retirement home for 330 million rand ($25 million) in an upmarket suburb of Dubai.
The newspaper did not name the sources, but said they included businessmen, senior officials in the ruling African National Congress and people close to the Zuma family. It also cited some of the leaked e-mails.
The Gupta family, wealthy Indian-born businessmen whose companies have contracts with state-owned firms, have denied all allegations of influence-peddling or improper dealings and through a spokesman last week labeled the e-mails &#8220;fake news&#8221;.
&#8220;President Zuma does not own any property outside South Africa and has not requested anybody to buy property for him abroad,&#8221; his office said in a statement, adding that the report about a &#8220;palace&#8221; in Dubai was a &#8220;fabrication&#8221;.
&#8220;The president has also not received or seen the reported emails and has no knowledge of them,&#8221; his office said.
South Africa&#8217;s anti-graft watchdog called in November for a judge to investigate alleged influence peddling in Zuma&#8217;s government and focused on allegations that the brothers, Ajay, Atul and Rajesh Gupta, influenced appointments of ministers.
Zuma is fighting the report in court and has not appointed a judicial commission to investigate. He denies any wrongdoing.
Last year, South Africa&#8217;s top court found that Zuma had failed to uphold the constitution by ignoring instructions to pay back some of the $16 million in state funds spent on renovations at his private home.
(Reporting by TJ Strydom; editing by Mark Heinrich)

South Africa’s Zuma denies owning ‘palace’ in Dubai

Mfuneko Toyana | PRETORIA
South Africa&#8217;s Finance Minister Malusi Gigaba said on Friday he would not be implicated in documents leaked to the media that allegedly expose influence-peddling in government.
Gigaba said allegations he was involved in anything untoward were &#8220;made to impugn my integrity and is meant to divert us from the work of transformation and growing the economy&#8221; adding that he had &#8220;done no wrong&#8221;.
Some South African media reported on Thursday they had access to over 100,000 leaked documents and emails that showed improper dealings in lucrative government contracts by business friends of President Jacob Zuma.
(Reporting by Mfuneko Toyana; Writing by TJ Strydom; Editing by Joe Brock)
http://cnbc.africa/trending/state-capture/2017/06/02/south-african-graft-accusations-expose-split-anc-zuma/

South Africa’s Gigaba says not implicated in leaked documents

Joe Brock | JOHANNESBURG
The ruling African National Congress said on Friday it is gravely concerned by leaked documents alleging influence-peddling by friends of President Jacob Zuma, deepening a divide in South Africa&#8217;s ruling party over its leader.
Some South African media reported on Thursday they had access to over 100,000 leaked documents and emails that showed improper dealings in lucrative government contracts by business friends of Zuma.
The latest allegations of influence-peddling may deepen divisions in the ANC as factions battle for control ahead of a party conference in December where a successor to the beleaguered, scandal-plagued Zuma will be chosen. Zuma can remain as head of state until an election in 2019.
Zuma and the Gupta family, wealthy Indian-born businessmen whose companies have contracts with state-owned firms, have not commented but have denied similar allegations in the past. Reuters could not independently verify the new allegations.
&#8220;These reports contain very worrying claims about the nature of the relationship between government and private interests,&#8221; the ANC said in a statement, calling on government to urgently establish the veracity of the leaks.
&#8220;The ANC views these allegations in a very serious light as, if left unattended, they call into question the integrity and credibility of the government.&#8221;
The statement appeared to contradict Zuma, who said at a parliamentary session on Thursday that he was not interested in &#8220;hearsay&#8221; published in newspapers.
A backroom schism in the ANC over Zuma has burst into the open in recent weeks as his opponents seek to oust him or ensure his chosen candidate does not take over the reins.
Analysts say Zuma&#8217;s camp will back his ex-wife and former African Union chair Nkosazana Dlamini-Zuma in December, while another faction will support Deputy President Cyril Ramaphosa.
ANC SPLIT IN TWO
&#8220;This week we have seen there are clearly two ANCs,&#8221; said political analyst Daniel Silke.
&#8220;One ANC sees very little wrong with crony capitalism, kickbacks and shady payments. The other ANC sees the reputation of the party among the electorate disintegrating and fear the real possibility they could lose power.&#8221;
Opposition parties have made upbeat comments about unseating the ANC in 2019, an unthinkable scenario a few years ago for a party that has led comfortably since it swept to power under Nelson Mandela at the end of apartheid in 1994.
Zuma survived a call to resign at an ANC meeting last week due to disputes over political appointments and his friendship with the Gupta family.
Parliament is expected to hold a no-confidence vote in Zuma later this year but he has survived similar attempts before.
When Zuma sacked respected finance minister Pravin Gordhan in March, three of the top six members of the ANC, including Ramaphosa, openly criticising his decision, breaking the party&#8217;s strict rule of showing unity in public.
Gordhan&#8217;s replacement Malusi Gigaba has been accused of having close ties to the Guptas. Gigaba said on Friday that he had done nothing wrong and the leaked documents would not link him to the family.
(Additional reporting by Olivia Kumwenda-Mtambo, TJ Strydom and Tiisetso Motsoeneng; Editing by Mark Heinrich)

South African graft accusations expose split in ANC over Zuma

South Africa has, in the past, been credited with taking on innovative corporate governance <a href="https://www.ft.com/content/bb4557d2-5b75-11e4-b68a-00144feab7de">standards</a> and integrated reporting. So it’s particularly depressing to see the spectacle around the country’s largest state-owned enterprise, its power utility Eskom.
The <a href="http://www.timeslive.co.za/politics/2017/05/12/Molefe-didnt-resign%E2%80%9A-says-Eskom.-He-retired">drama</a> has revolved around Eskom’s CEO Brian Molefe, who has returned to the job just months after quitting. The contradictory explanations of his return point to huge flaws in the accountability systems of the country’s state owned enterprises. It’s clear that Eskom flouted many basic <a href="https://www.icaew.com/en/technical/corporate-governance/overview/does-corporate-governance-matter">principles</a> of sound corporate governance.
This poses enormous risks as these systems are imperative for ensuring an ethical public service and society.
When Molefe announced his <a href="https://www.businesslive.co.za/bd/national/2017-05-12-brian-molefe-did-not-resign-that-is-why-we-can-reinstate-him-eskoms-board-says/">departure</a> from Eskom, he specifically connected his leaving to “corporate governance”; he was certainly accurate in that. On top of the issue of his claimed connections to the <a href="http://www.bbc.com/news/world-africa-22513410">Gupta family</a>, the <a href="https://www.ujuh.co.za/state-of-capture-public-protectors-report/">allegations</a> that spurred his exit spoke to breakdowns in information sharing and decision making that were made to benefit only a few.
The National Executive Committee of the ruling party, the ANC, has since ordered that Molefe’s return to Eskom should be reversed, a decision seen to be going against the wishes of its President Jacob Zuma.
There are many flaws that need to be examined in this saga, but let me flag three foundational faults in corporate governance. Firstly, there were serious lapses around Eskom’s senior executive remuneration processes. Secondly, it looks like the basic rules of consultation around critical decision making were flouted. And thirdly, creating a <a href="https://www.ujuh.co.za/lynne-brown-brian-molefes-return-to-eskom-is-better-than-r30m-payout/">false dilemma</a> between handing Molefe a R30 million payout or allowing him to return to his Eskom job points to a simple disregard of the rules.
<h2>Process failures</h2>
The compensation question: the question of fair and justified compensation for senior executives looms large in the Eskom saga. There’s still no clarity over why Molefe left Eskom in December last year: whether he “retired” or “resigned” remains a contested point. More recently, South Africans were informed that he was, in fact, on <a href="https://mg.co.za/article/2017-05-22-now-eskoms-molefe-was-on-unpaid-leave">unpaid leave</a> in the months between his departure in December and his return in early May.
Whatever the reason for his departure, Eskom’s board chose to award Molefe <a href="http://www.iol.co.za/news/politics/why-did-brian-molefe-get-a-r30m-golden-handshake-8690587">R30 million</a>. This raises the first potential failure in the accountability system: the responsibility of board members to decide fair and justified compensation for senior executives.
This is true regardless of whether they retire or resign or go on unpaid leave. Each is governed by sets of rules to guide a board’s decision-making. Leaving aside the obvious contradiction that anyone would be paid R30 million for being on unpaid leave, none of the normal remuneration rules seem to have been followed. But without a basic understanding of the terms of his departure, a proper analysis is almost impossible. This failure of transparency in the process makes justifying the award on the grounds that it was in the interests of Eskom’s stakeholders even less likely.
Flouting consultation processes: The second failure in the governance system is a lack of clarity around the <a href="https://www.ujuh.co.za/lynne-brown-brian-molefes-return-to-eskom-is-better-than-r30m-payout/">role</a> of the Public Enterprises Minister, Lynne Brown. Her decision to contradict the board and deny the R30 million pay-out triggered an evaluation of what to do about Molefe’s connection to Eskom. In her statement, Brown highlighted the fact that she hadn’t been consulted and referred to decisions that appeared to have been made without the required approvals.
An effective corporate governance system has clearly delineated processes for both consultation and decision making.
In this case, it seems that steps in that process were skipped over, and key people weren’t consulted, leading to an unsupported outcome.
Creating a false dilemma: Brown claimed that there were only two options open to her – to pay Molefe R30 million or reinstate him. But by doing so she created a false dilemma that stood to benefit the person who stepped down, rather than the company and its stakeholders. In the process, the board and the minister ignored multiple options that would have likely been better.
For example, if neither the board nor Brown could agree on severance compensation, Molefe could be paid his old salary in the interim, while final negotiations took place (there is a paid leave option in his contract). This type of bridging arrangement would create fairness for him while avoiding disruption to Eskom’s operations.
<h2>A question of ethics</h2>
A fundamental principle of good governance, laid out in <a href="http://www.iodsa.co.za/?page=KingIV">King IV</a> (a set of guidelines for strong corporate governance which companies/directors should comply with and explain their choices), that applies here is that:
<blockquote>governing bod[ies] should govern the ethics of the organisation in a way that supports the establishment of an ethical culture.</blockquote>
Regardless of political ideology, it is difficult to see that Molefe’s return to Eskom can be said to be in the best interests of creating an ethical culture.
Strong accountability systems create ethical cultures because everyone knows the rules, and believes the rules are being followed. As a result, people trust that when things don’t go their way, there’s a clear explanation. While they may not agree with choices, they are confident that a decision was made after a known process was followed.
Strong accountability systems can certainly privilege some people over others in different circumstances, but they clarify what gets rewarded and what gets punished. This leads to an ethical culture because there’s a common understanding and, crucially, some levels of shared purpose.
<h2>Not just about following the rules</h2>
Good accountability systems are about more than creating and following rules; while compliance is an aspect of these systems, it is really the bare minimum. They create and support a sense of shared destination, bolstered by agreed processes.
Recently, leaders have too often relied on their legal “right” to do something, ignoring their ethical obligation to the greater good: the good of their company, their portfolio, their electorate, their country.
While the legal grounds for better governance are worth debating and enforcing, South Africans must never neglect the profound ethical impact of failed accountability systems. Eskom’s current situation is about more than fulfilling its legal obligations. It’s a warning that South Africa’s ethical culture might slip through our hands. Let’s hold on tight.

Eskom CEO saga highlights massive systems failure in South Africa

Introduction
Much attention has been paid recently in the public debate to reports of corruption in the South African Government and state-owned enterprises and to the so-called phenomenon of “state capture”. A new phase in the public debate has, in particular, been fueled by a report of the South African Council of Churches, by hearings of the Parliamentary Committee on Public Enterprises and by the publication of a study by the State Capacity Research Project. Each of these events is dealt with below, together with an analysis of their content and impact on the national debate on corruption and state capture. 
 
The SACC report
The South African Council of Churches announced the findings of its “Unburdening Panel Process” on 18 May 2017. It had created this process in April 2016, describing it as a safe space and a “facility” offered by the churches to persons who wish to relieve themselves of a burden, caused by the experience of being pressured to perform a corrupt act or where they had witnessed such an act. The SACC emphasized that this was intended as a pastoral process for the people involved, and not as an investigation. It stated that it had created this “listening facility” as a result of the ANC’s unwillingness to deal with recent revelations on the subject of state corruption. In its statement introducing the report on 18 May 2017, the SACC said that 
Today we are therefore seized with Anchoring Democracy, as we have come to recognize that South Africa may just be a few inches from the throes of a Mafia State, from which there may be no return – a recipe for a Failed State….
It now seems that the problem is far greater than corruption, but organized chaos. We have now come to learn that what appears to be chaos and instability in government may well be a systemic design of the madness that ills our governmental environment – a chaotic design. A careful analysis makes the case for the following observable trends of inappropriate control of State systems through a power-elite that is pivoted around the President of the Republic that is systematically siphoning the assets of the State. They do this by:
Securing control over state wealth, through the capture of state-owned companies by chronically weakening their governance and operational structures. 
Securing control over the public service by weeding out skilled professionals. 
Securing access to rent-seeking opportunities by shaking down regulations to their advantage, and to the disadvantage of South Africans. 
Securing control over the country’s fiscal sovereignty. 
Securing control over strategic procurement opportunities by intentionally weakening key technical institutions and formal executive processes. 
Securing a loyal intelligence and security apparatus. 
Securing parallel governance and decision-making structures that undermine the executive. 
What we see persuades us that the present government has lost moral legitimacy. The question that this has raised is in the constitutional dimension. Does the conduct of the government render it to have violated its constitutional mandate? That is a matter for the lawyers to explore further
We urge the African National Congress as the governing party to examine itself and mend the ways of government before we reach the point of no return – for this has implications for the ANC in government, for its leadership and members. We appeal to the civil servants in government, to note and remember that whereas governments come and go with elections, they as civil servants are part of the permanent State system of the citizenry, and the instrumentation of the public good envisioned in our constitutional dispensation. 
 
The Parliamentary Committee on Public Enterprises 
 
The members of the Parliamentary Portfolio Committee on Public Enterprises unanimously called a meeting on an urgent basis, in an attempt to obtain clarity on recent events at Eskom, especially regarding the re-appointment of its CEO, Brian Molefe, and specifically whether he “retired, was retrenched, resigned or did he step down” (as the Committee’s Chairperson put it). During the Committee’s proceedings on 23 May 2017, questions and comments were put to the Minister of Public Enterprises and the Chairman of the Board of Eskom, mainly on the question of the status and nature of Brian Molefe’s employment contract.
The former Minister of Finance, Pravin Gordhan, now an MP and member of this Committee, put it as follows: 
The public is connecting the dots… The public is increasingly aware that you are abusing state property and state resources in the name of yourselves and not in the name of the South African public, that you are part of, wittingly or unwittingly (and in some cases there is enough evidence to say wittingly), a conspiracy to capture Eskom for the benefit of the few. That’s the reality, let’s not play around with technical questions… 
What the South African public is worried about is that we are reaching a stage in managing governance in South African where there are a significant number of people in the bureaucracy and elsewhere, and on the boards, that are taking the view that ‘I don’t care, I don’t care if you know what I do, I don’t care if you know that public resources are going elsewhere, I don’t care how many reports the Public Protector or anybody else provides, because I am protected.’
The Chairperson stated at the end of the hearing that the Committee is concerned at the state of governance in Eskom and views the reappointment of Brian Molefe as illegal. It is interesting to note that the Minister and Eskom’s Chairperson received no support whatever from any of the ANC MPs who are on the Committee. 
Study by the State Capacity Research Project
The State Capacity Research Project published its study entitled <a href="http://cnbc.africa/trending/cabinet-reshuffle-17/2017/05/26/inside-the-capture-of-africas-most-advanced-economy/">Betrayal of the Promise: How South Africa is being Stolen</a> on 25 May 2017. This has been widely reported on in the media. The State Capacity Research project describes itself as an interdisciplinary, inter-university research partnership that aims to contribute to the public debate about ‘state capture’ in South Africa.
The study makes the following findings: 
Until recently, the decomposition of South African state institutions has been blamed on corruption, but we must now recognise that the problem goes well beyond this. Corruption normally refers to a condition where public officials pursue private ends using public means. While corruption is widespread at all levels and is undermining development, state capture is a far greater, systemic threat. It is akin to a silent coup and must, therefore, be understood as a political project that is given a cover of legitimacy by the vision of radical economic transformation. The March 2017 Cabinet reshuffle was confirmation of this silent coup; it was the first Cabinet reshuffle that took place without the full prior support of the governing party. This moves the symbiotic relationship between the constitutional state and the shadow state that emerged after the African National Conference (ANC) Polokwane conference in 2007 into a new phase. The reappointment of Brian Molefe as Eskom’s chief executive officer (CEO) a few weeks later in defiance of the ANC confirms this trend”
This raises the question about whether there is, in fact, a strategic centre of sorts. In general, the answer is no. Nor is there one single powerful network that overrides all others. The clearest and most disturbing indicator that the South African rent-seeking system tends towards the chaotic end of the spectrum is the collapse of the cabinet system as the core of the executive branch of the state. There is evidence that Zuma tends to govern via a set of ‘kitchen cabinets’ comprising selected groups from different networks. Kitchen cabinets are small informal reference groups that are convened on an as-needed basis. They can also be shell structures that are activated when needed. As will be demonstrated, they have been known to be drawn from the state security establishment, Gupta networks, SOE sector, sub-groups of cabinet ministers and deputy ministers, family networks, international networks (e.g., Angola, Russian intelligence), key black business groups, the ANC (in particular the Premier League and Magashule), and selected loyalists in the public service (usually loyal director generals).
The evolution in recent decades of rent management systems within neo-patrimonial regimes around the world has taken many forms. In summary, though, they can be characterised within a spectrum that ranges from centralised/coordinated to chaotic. The South African rent-seeking system is a kind of hybrid, partly because of Zuma’s personally vulnerable position due to outstanding and unresolved charges against him, the Constitutional Court finding on Nkandla and his embeddedness within a well-structured constitutional order. He aspires to be like Putin or Angola’s Dos Santos, but is entangled by constitutional state requirements he cannot dispense with (like reporting to Parliament and subordination – at least for now – to the Constitutional Court) and competitive dynamics within the shadow state that the Gupta networks do not always control (witness the PRASA debacle).
The report also highlights the effect of this perverted management system on the poorest sections of society: 
The politicisation of procurement as a means to achieve radical economic transformation frequently results in the subversion of service delivery mandates. Therefore, in recent years there have been purges of professional public servants and the repurposing of administrations away from their constitutional and legislative mandates. It has also opened departments and especially SOEs to massive competition and rivalry, not so much about policy, but about who gets what tenders. This weakens and often breaks administrations, which are then unable to deliver services. A vacuum is created that can be filled by transactions that occur within the shadow state. This is especially devastating for working families and for the poor, who are more dependent on government services than the middle class and the rich. Failures in health and education, for example, reproduce historical, racialised patterns of inequality. It distracts attention from the economy itself and the inclusive structural transformation that is needed to make the economy more productive and labour-absorptive.
Comment
These events demonstrate that the intensity of the public debate on corruption and state capture has been ratcheted up a couple of levels. In this process, certain aspects which were not a regular part of the public debate have now come to the fore and the manner in which they are expressed, show that they are accepted as fact and not mere conjecture:
&#8211; the connection is increasingly being made between certain events and the acts of representatives of Government and state-owned enterprises, i.e. the dots are being connected, showing systemic corruption; 
&#8211; that chaos and incompetence have become part and parcel of the whole system. It is therefore not corruption on its own that needs to be confronted, but the fact that a corrupt system has been facilitated by the removal of adequately experienced professionals/bureaucrats from Government and state-owned enterprises; and
&#8211; the concept of a “mafia state’’ is now firmly entrenched as part of the public debate. The Deputy President, Cyril Ramaphosa, has also referred to this threat in his speeches immediately after the SACC report was made public.
The reports by the SACC and the<a href="http://cnbc.africa/trending/cabinet-reshuffle-17/2017/05/26/inside-the-capture-of-africas-most-advanced-economy/"> State Capacity Research Project</a> and the proceedings at the Parliamentary Committee on Public Enterprises, have provided important additions to the public understanding of how major functions of Government and state-owned enterprises have been subverted for the benefit of a select few. The reports rely on information which is already in the public domain and therefore do not provide much new evidence, but they do make a valuable contribution in helping the public to make sense of the damaging and pervasive effects of state capture and corruption.
Unravelling is well under way, and more of it can be expected in the coming months.
*Anton van Dalsen is from the Helen Suzman Foundation

South Africa's Quantum Foods warns of 38% drop in first-half profit

South Africa’s Quantum Foods warns of 38% drop in first-half profit. budget_shutterstock_249974521

The unravelling of SA’s state capture

The Public Affairs Research Institute has released a report into state capture.
The report called the “The Betrayal of the Promise: South Africa Is Being Stolen” looks at Finance Minister, Malusi Gigaba&#8217;s role in state capture and suggests that South Africa has experienced a silent coup, that has removed the African National Congress (ANC) from its place as the primary force for transformation in society.
According to the report, four public moments define this new era: the Marikana Massacre on 16 August 2012; the landing of the Gupta plane at Waterkloof Air Base in April 2013; the attempted bribing of former Deputy Minister of Finance Mcebisi Jonas to sell the National Treasury to the shadow state in late 2015; and the Cabinet reshuffle in March 2017. Resistance and capture is what South African politics is about today.
The report documents how the Zuma-centred power elite has built and consolidated this symbiotic relationship between the constitutional state and the shadow state in order to execute the silent coup.
<a href="http://pari.org.za/betrayal-promise-report/">Read the full report here</a>.

Inside the capture of Africa’s most advanced economy

The <a href="http://citizen.co.za/news/news-national/1515927/anc-wants-govt-deal-brian-molefes-return-eskom/">return of Brian Molefe</a> as CEO of South Africa’s largest state owned enterprise, the power utility Eskom, has caused <a href="http://www.timeslive.co.za/politics/2017/05/17/ANC-demands-that-Molefe-be-axed-from-Eskom1">outrage</a> due to the circumstances under which he resigned in December last year.
Molefe left the power utility after a Public Protector’s inquiry alleged that he may have been involved in nefarious activities. The <a href="http://www.ujuh.co.za/state-of-capture-public-protectors-report/">State of Capture</a> report by the then Public Protector, Thuli Madonsela, showed extensive and irregular communication between Molefe and the <a href="http://www.bbc.com/news/world-africa-22513410">Guptas</a>, a family with close ties to President Jacob Zuma.
At the time Molefe’s backers – including board chairperson Ben Ngubane – <a href="http://www.fin24.com/Economy/Eskom/eskom-regrets-molefes-exit-says-its-a-great-loss-20161111">glorified</a> him. They attributed a turnaround in Eskom’s fortunes as a function of the CEO’s 18-month tenure. His supporters branded him as a <a href="http://www.fin24.com/Economy/Eskom/eskom-regrets-molefes-exit-says-its-a-great-loss-20161111">messiah</a> whose departure would have negative consequences for the power utility.
Similar sentiments were expressed more recently by <a href="http://ewn.co.za/2017/05/16/ngubane-s-comes-to-molefe-s-defence">Ngubane</a> and Public Enterprises Minister <a href="http://www.news24.com/SouthAfrica/News/molefe-innocent-until-proven-guilty-lynne-brown-20170512">Lynne Brown</a>. She told a press conference that she supported his return as CEO as he was responsible for the fact that load shedding (organised power cuts) had stopped and the power utility was on sound financial footing.
But was Molefe’s performance as great as his supporters say it was? I suggest not.
It’s true that under Molefe’s reign power cuts across the country were brought to an end. In addition, Eskom reported better financial results last year.
But neither of these two developments had much to do with Molefe’s capabilities as a CEO. The power cuts <a href="http://www.fin24.com/Economy/zuma-we-will-never-have-load-shedding-again-20160506">ended</a> primarily due to a decline in electricity demand – partly the consequence of a weakening economy – and new generation capacity that had been in the pipeline for years. And the improvement in a number of Eskom’s financial ratios was due in large part to massive <a href="http://www.ujuh.co.za/nene-2015-medium-term-budget-policy-statement/">financial support</a> provided by the government in 2015.
<h2>Did Molefe end the power cuts?</h2>
Prior to Molefe’s arrival as CEO in March 2015 the power utility’s finances had been worsening and it was struggling to meet electricity demand. These challenges were largely due to a delay in investment by the government as well as slow increases in tariffs.
The delay in investment was due to government’s <a href="https://mybroadband.co.za/news/energy/122710-here-is-how-government-was-warned-in-1998-about-sas-electricity-crisis.html">indecisiveness</a> over a protracted period of time. And the slow increase in tariffs was the result of a desire to shield consumers from sharp increases and a mistrust of Eskom’s claimed needs.
South Africans lived through a period of extensive <a href="http://www.fin24.com/Economy/EXCLUSIVE-6-reasons-why-Eskom-is-load-shedding-20141124">power cuts</a> in 2007. Electricity generation capacity was unable to keep up with demand. The situation was largely saved by slowing economic growth combined with greater energy efficiency. These factors meant that electricity demand was already well below forecasts prior to Molefe’s appointment and continued this trajectory during his tenure as CEO.
Falling demand created a virtuous cycle in operations: lower demand put an end to the need to impose power cuts. It also opened up the opportunity to do maintenance on infrastructure, leading to greater availability of capacity and an even lower probability of power cuts.
To be sure, Molefe still had to ensure that Eskom continued to get the basics right. There’s little evidence that he did more than that. Instead, it seems that his predecessor, Tshediso Matona, was excessively negative in his outlook. This set up Molefe to appear as though he had pulled-off a dramatic success.
<h2>Molefe’s bailouts</h2>
What of the improvements in Eskom’s financial situation?
The view that Molefe was behind Eskom’s short-term financial turnaround was used to award him a R2.5 million performance bonus for the year ended 31 March 2016. (Molefe appears to have secured a <a href="http://www.news24.com/SouthAfrica/News/molefe-innocent-until-proven-guilty-lynne-brown-20170512">R30 million</a> retirement package when he tendered his resignation. Under the terms of his return to the job this will now no longer be paid.)
But a closer look suggests that Eskom’s financial improvement can’t be attributed to Molefe. In many respects it was the result of extraordinary support afforded to the power utility by the government in 2015.
This support, facilitated by two special appropriation bills passed by Parliament, had two main components. The first was an <a href="http://www.engineeringnews.co.za/article/government-sells-vodacom-stake-to-pic-to-fund-eskom-bail-out-2015-07-01">equity injection</a> through which the National Treasury under which Eskom received R23 billion in exchange for shares. Since government is the sole Eskom shareholder, this translated into a straight cash gift.
The second component was even more significant. This involved government writing-off a <a href="http://www.timeslive.co.za/sundaytimes/stnews/2015/06/21/Eskom-bailout-dressed-up-as-a-loan-turned-into-a-gift1">R60 billion</a> loan which had been approved in 2008 and disbursed in multiple tranches between 2008 and 2010.
If we treat Eskom as a genuinely independent entity, the full cost to national government and therefore the taxpayer of writing off the loan had two parts:
<ul>
<li>the remaining principal amount (around R30 billion), and</li>
<li>an additional R86 billion, the estimated cost of the state foregoing interest payments on the loan. According to the loan conditions, Eskom would have been required to pay this interest in the event that its financial situation improved.</li>
</ul>
Whether this financial support was desirable depends on your view of Eskom’s recent history. Many analysts agree that additional government support was overdue. But in relation to Molefe it raises a simpler question: if many of the improvements in Eskom’s financial ratios were due to massive transfers of cash and assets from taxpayers, did it make sense to pay its CEO a bonus that effectively also came from taxpayers?
Either way, closer analysis of Molefe’s supposed successes reveal that they are not what they have been made out to be. Combined with the <a href="http://www.ujuh.co.za/state-of-capture-public-protectors-report/">failures</a> of corporate governance with which he has been associated, the case for reappointing him as Eskom CEO appears to be paper thin.

Why Brian Molefe’s return to Eskom can’t be justified

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LIVE: Opposition parties in South Africa march to #ConCourt to fight for a #SecretBallot

Business Leadership South Africa calls on elected leaders to stop state capture.
<ul>
<li>Our President’s irrational and inexplicable changes to the Cabinet have caused a sharp, expected an unnecessary decline in South Africa’s global financial standing.</li>
<li>Those within the government and ruling party who disagree with the President’s actions are being vilified and criticised and the robust debate that has characterised South Africa’s liberation movement since 1912 is being silenced.</li>
<li>Certain individuals and organisations, who do not understand the severe implications of a weakening currency and sovereign downgrade to “junk status”, either deny the cause or use ideology and pseudo economics to dismiss the effects.</li>
<li>Propaganda, slogans, racism, lies and fake news is misrepresenting the nation’s anger with state capture and corruption, attempting incorrectly to reflect this anger as an attack on the ruling party.</li>
<li>With few exceptions, our state institutions and enterprises are poorly governed, inefficiently managed and over indebted, functioning way below their capacity and the expectations and needs of citizens.</li>
</ul>
South Africa is being divided into three groups: an elite who benefit from patronage and corruption; those too fearful to do anything about it; and millions who will suffer as a result.
All of these developments can be traced back to state capture centred mainly around the President and one family, aimed at the illegitimate acquisition of South Africa’s natural and financial assets. 
Business Leadership South Africa (BLSA) does not accept this. South Africans, including the business community, should not stand by and allow this to become the “new normal”. We stand for a constitutional democracy, rule of law, respect for the independence of state institutions, an effective state, zero tolerance for corruption in both the private and public sectors, and a growing and inclusive economy that works for all. 
South Africa’s business sector is under constant attack despite providing employment for 13.5 million or 86% of the country’s working population and the bulk of the direct and indirect taxes that pay the salaries of 2.2 million government employees. 
Despite this we have no desire, intention or mandate to involve ourselves in party politics. We respect the Constitution and the means by which political leadership is determined. These are matters for the citizens of South Africa and their elected representatives. 
However, we regard the present situation as the political and economic low point of our young democracy. We know that without decisive action by leaders in every sphere of South African life our future is bleak. 
As corporate leaders BLSA makes an urgent appeal to all our elected representatives in parliament, and the ruling party and alliance partners in particular, to exercise their conscience in taking whatever immediate steps are needed to reverse corruption and state capture and to restore confidence in our country’s leadership, our economy and the future of South Africa.

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