kameraad mhambi

Barack Husein Obama was accosted this week by a plumber - Joe - that wants to start a business. Joe feels that Obama tax plans - which aims to cut taxes for the poor and tax richer Americans more - is bad for him and bad for entrepreneurial America.

Obama’s response is fantastic. He engages Joe, is truthful, knowledgeable and charming. In short he is authentic. Obama is a political super star.

Kameraad Mhambi is a Obama man!

Do check this video where Obama explains where he is from. Planet Krypton! And he got his middle name from somebody who thought he’d never run for American president.

In case you don’t know. This afternoon is crucial if we are to stave off an event as calamitous as the great depression. That’s according to Robert Peston. If your not from the UK you might ask Peston wie?

And the question is, originally uploaded by SouthbankSteve.

Robert Peston - the BBC financial editor - has become a celebrity overnight in the UK because of his clear analysis and foresight as to what is going on in the financial markets.

But he is no ordinary reporter. His father was a well know economist. And he used to be banker, but gave up on that.

“God, it’s boring” he is reported to have said.

Peston broke the story that Northern Rock, a British Mortgage (Bond) lender was in trouble. He had been monitoring them for months. The Guardian reported last week on Peston’s rise on the back of the credit crunch.

“The BBC’s business editor had been observing Northern Rock’s balance sheets for a couple of years before he went on air at 8.30pm on September 13 2007, and announced that the country’s fifth biggest bank was technically insolvent.

‘What concerned me was this: here was a very basic business - it’s a retail bank, it’s taking in savers’ money and it’s providing mortgages - I mean there’s nothing revolutionary or different or particularly … innovative in any of that. Yet it was growing much, much, much faster than any of its competitors. And there are really only two ways in what you might call a mature, basic industry, to grow at that kind of speed. One is that you do actually find some incredible breakthrough - you’re a car manufacturer and you invent some amazingly new low-pollution engine. Or you take excessive risks that other organisations aren’t taking, and I looked at this business and I just thought this is a business that seems to be taking excessive risks. But for a couple of years I looked like a total idiot, because its share price kept going up and it seemed to be doing extremely well.’ “

Peston was on the button and first again when another UK bank HBOS was reported to be in trouble.

Today - a few minutes ago actually - he wrote this - A global solution needed - on his BBC blog.

“In the past 50 years, there haven’t been many - if any - meetings of the world’s seven richest developed nations as important as today’s.”

“If the leaders of rich Europe, Japan and North Amierica fail to find such a plan today or over the weekend, the painful consequences could scar a generation.”

Alarmist?

Well his arguments are simple:

“Markets are in meltdown. Investors are dumping almost any asset that can be sold for cash - and never mind the price.

It’s a vicious downward spiral.

When the prices of assets fall sharply, that triggers margin calls for other investors, a hideous, insidious form of feedback that triggers another round of asset liquidations.

Which in turn undermines the capital of banks - which forces them to dump yet more assets and call in more loans.”

Ever heard of the Minsky moment? Well the process Robert explained does have an end game.

“It’s a terrifying process, the precursor to a “Minsky Moment” - called such after the economist who described a breakdown of the entire financial system caused by a panicked mass liquidation of assets.”

Can anything be done?

“To ward off the Minsky Moment - which would have devastating economic consequences - a circuit breaker has to be found. And only taxpayers can provide that circuit breaker, by - inter alia - underwriting the banking system so that lenders to banks regain confidence that they’ll get their money back

I don’t mean just British taxpayers. We’ve been doing our bit. I mean the taxpayers of the developed world (because this is the developed world’s mess, our mess, whether we like it or not).

The problem is global so the solution has to be global.”

How would this effect South Africa if world leaders don’t agree on a solution today and we have a Minsky moment?

In spite of the good regulations that have kept our banks out of this crisis the indirect impact will be huge.

Imagine a huge drop in exports of commodities like steel, platinum and coal, of farming goods like wine and oranges, imagine no European holiday makers, no buyers of our cars manufactured in the Eastern Cape.

Imagine if all the Western money that that helps funds our current account deficit were to be withdrawn. The currency will fall. Imports will become very very dear.

That’s even if Jacob Zuma marries into the Oppeneimer family.

DSCF6593, originally uploaded by peregrinari.

The BBC reports that the US National debt clock in New York City has run out of digits to show the level of government debt.

The clock measures all US government debt.

When it passed the $10 trillion point last month, the sign could not display the full amount.

The board was erected to highlight the $2.7 trillion level of debt in 1989.

Some economists believe the $700bn bail-out plan for ailing US financial institutions could send the national debt level to $11 trillion.

You can still watch the US national debt whiz upward by using this website.

Ex deputy finance minister  Jabu Moleketi warned in the UK’s Financial Times yesterday that any major policy shifts by the ANC would be suicidal. Moleketi is one of the ministers who resigned in protest at the sacking of Mbeki.

banana controversy, originally uploaded by phitar.

With a massive current account imbalance South Africa is a country that survives “at the mercy of foreign investors” said Moleketi.

Why thank you Mr. Moleketi. Just where we want to be. Foreign investors is after all that steadfast, long term, principled and socially conscious lot.

And Mr. Moleketi has helped us become dependent on them.

Now Mhambi has lefty sympathies but I do see the vital importance of foreign investment, don’t get me wrong.

But in supporting a strong rand and not nurturing (and protecting) local manufacturing, like China, and other Asian countries have done, Trevor Manual and Mr. Moleketi has done the poor and whole country - a massive disservice.

As Moeletsi Mbeki, Thabu’s brother noted on the legacy of the Mbeki administrations economic policy (before it was ended).:

“The election of Jacob Zuma at the rowdy ANC conference at Polokwane has led many people to worry about the future of the country’s economic policy.

The underlying assumption is that Zuma and his trade union and communist backers will disrupt what are perceived to be the good economic policies of the current ANC administration.

I differ. The current government is NOT pursuing good economic policies.

Many of its policies are detrimental to the majority of people and to the country’s future.

I must admit, though, that these policies do benefit a powerful and vocal minority — perhaps a quarter of the population.

But ANC government policies have contributed to about half a million farm workers losing their jobs in the past decade and a half.

This has resulted in an estimated two million people, if we include all family members, losing their homes.

Another example is that of the collapse of South Africa’s footwear industry as a result of reckless trade liberalisation policies.

In 1997 the industry employed 23600 workers; 10 years later it employed only 10000.”

I cant agree more.

My girlfriend is a shoe designer. I have seen first hand how factories stand empty in the Cape and expensive machines are sold off to companies operating in the east.

I have mentioned before that allowing companies like Anglo and Old Mutual to list off shore was another of Trevor Manual’s big mistakes.

But Lucky for us Trevor and Jabu did not have the gall to lift all the paranoid capital protection measures the Nats built. Else we would no doubt have, like much of the West, now have had a banking crisis or critical proportions.

Hillary Joffe in yesterday’s Business Day How ‘bananas’ give SA shelter from the storm explains the strength of the South African banking system.

“…one might have expected that SA, of all places, would have had a subprime crisis, given the political pressure for banks to lend more to low-income earners. But SA has prided itself on having a world-class banking system. And that’s the other irony — our banking system wasn’t nearly first world enough to allow for the more exotic and excessive derivatives trade that ended up destabilising the global financial system. “

In short, our rules and regulations did not allow for the kind of financial instruments that Warren Buffet called financial weapons of mass destruction.

Joffe again:

“That SA’s banking system is, so far, immune from any of the direct effects of the global credit crunch is thanks to regulation in the broad sense — banking regulation, but also credit regulation and foreign exchange controls. Regulators (and policy makers) deserve some credit, but it’s not necessarily that they were geniuses — more that they were a product of SA’s often quirky history, which bred an almost obsessive caution about the financial sector.”

South Africa had our own mini crisis in in 1982 and 2002 and of course economic sanctions. All lead to more regulation. Especially the 2002 crisis had a great impact on our policy makers.

“…in the wake of the crisis, banking regulators became ultra-cautious and even more determined to be more first world than the first world.”

But its the exchange controls that has helped most.

“But SA’s exchange controls, which have been liberalised over the years but never shed, did even more to prevent excesses. Not only did they prevent financial institutions in SA from investing directly in subprime paper and other toxic assets, they also limited the development of markets in credit derivatives, for example, because regulators wouldn’t allow exposures that might mean money would have to flow out of SA.”

One result?

“Only 3% of the funding of SA’s banks is foreign. Even if Europe’s banks, for example, ceased all loans to SA’s banks, the effect would be tiny. “

Jabu meanwhile told the FT that SA can not act as if its an island. “In this current environment to talk about fundamental change of economic policy is suicidal.”

Notes the FT, a paper not known for its left wing sentiment, that  Jabu may be right. However a change of policy by SA, mused the FT, might be eminently sensible otherwise.:

“…economists and policymakers point out that the acute sensitivity of investors - already jittery over the intentions of Jacob Zuma, the ruling party leader whose allies led the palace coup against Mr Mbeki last month - may be preventing South Africa from taking decisions that many say would be eminently sensible.

South Africa is being held hostage due to our current account gap said the FT.

“Even if Wall Street were not imploding, South Africa would be particularly vulnerable to investor sentiment because of the yawning deficit in its current account. Constraints on exporting industries, a lack of domestic manufacturing and an appetite for costly imports have conspired to open a deficit equivalent to 9 per cent of the economy’s entire annual output.”

Currently jittery investors are already withdrawing money. The fall in the currency is bad for the South African economy, an economy structured around the wealthy. It will make imports dearer. And this will push up inflation.

But As Michael Power a strategist at Investec Asset Management has noted in an article Currency and the Economy: Think about how SA works before you pick your rand a while ago:

“My essential view — which I have doggedly maintained for more than a decade — is that the rand remains structurally overvalued. The main reason I give is that the rand’s current trading range is trapped in the straitjacket of what works for SA’s first economy. But, at this elevated rate, the overvalued rand prevents the second economy from having even the remotest of chances of working, literally and metaphorically.

The result? We have unemployment of more than 25% as a quarter of all South Africans remain priced out of the global labour market, plus 12,7-million South Africans living off social grants from the national treasury, all set within a dichotomous di-conomy where those who live in the formal first economy (myself included) cannot begin to understand what it means to live beyond it.”

Moeletsi Mbeki makes the same point.

“Goldman Sachs has, I think rightly, predicted that, 30 years from now, South Africa will be in nowhere near the dominant economic position it occupies in Africa today.

Many things about the South African economy are going the wrong way. The fastest- growing sectors of the economy do not export, and they absorb the least amount of labour. These are financial services, real estate, business services, construction, trade, transport and communications.

The sectors that are the leading exporters and thus should absorb the most labour — manufacturing and mining — are in fact declining.”

The FT notes that the central disagreement between the Mbeki supporters and those of Zuma is inflation targeting. And the FT thinks the Zuma-ites has a point. SA’s current target is well below that of the US.

“The principal economic battleground between Mbeki loyalists and Zuma allies has been the central bank’s inflation-targeting mandate, which has seen the bank ratchet up interest rates to 12 per cent to try to bring inflation of 13.6 per cent back within the target band of 3 to 6 per cent.

Analysts from across the political spectrum have argued that a country where at least one in four people is unemployed would be better served by a broader target, making some provision for fostering growth or creating jobs. But though such a shift would merely bring the mandate into line with that of the US Federal Reserve, any tinkering risks being punished by investors.”

Those pesky investors again!

Mhambi agrees with Investec’s Mr. Power. We as a country should decide on what side we want our bread buttered.

Our currency should not only be low. It should be kept stable so business can plan and invest in productive capacity. What the Motlanthe government should do is peg the rand low just like China did.

Initially investors might take fright. But if South African manufacturing recovers and grows it will come back. They want to make some money after all.

Michael Power again:

“Now comes SA’s hangover. Retail sales growth is negative. Some house prices are falling. Car sales have not been this bad in years. Our purchasing manager s’ index is well below 50. And to cap it all, those fickle foreigners — shame on them! — are leaving our shores with their capital and dumping our rand in the process. Sound familiar? It should — SA has become a mini-US.

It is time to catch a wake-up, SA. Is this roller coaster we are riding going to be the way we continue to run our economy for ever and a day? Is our economic development plan to become little more than a case of surfing the ebb and flow of the credit cycle, while all the time being subject to the capricious kindness of strangers and their capital? Will we ever remain little more than a slave to America’s unhealthy rhythms? Must we wait for the planets to align in our favour again, enjoy the party that follows, only to rue the hangover that follows thereafter? And worst of all, by far worst of all, are we in the first economy going to continue to avoid addressing the plight of those trapped in the second economy, unemployable in today’s global economy given today’s rand’s exchange rate?”

Power wrote this 6 months ago. We might be in for far more than a hangover. What is sure is that the Western economies will experience quite serious recessions - if not more - in the coming years. They might drag South Africa into recession.

But so too are the Anglo-Saxon ultra laissez fair doctrines of unregulated markets discredited. State intervention at critical junctures can put our economies on the right path. That is what we need now.

South Africa should look East and help its poor.

It’s time to go Bananas.

Pot, Kettle, Black, originally uploaded by anataman.

Lately news from South Africa has been if not great, very heartening.

The country has been buffeted by tremendously explosive political and financial events. So far, so good.

I can not agree with commentators that the removal of Thabo Mbeki was an act of revenge AND unacceptable. Perhaps there was dollops of revenge that drove the process, but its beside the point. His position had become untenable. He should have been forced to resign along time ago.

A heartening development is the fact that ANC members are resigning in loyalty to Mbeki. This kind of political loyalty is at odds with much of African politics.

In the Criminalization of the State in Africa Bayart points out that sudden changes of allegiance - a following of the power - is a hallmark of dysfunctional and corrupt African states. Loyalty, even if misplaced is a sign that our politicians do have principles.

I can not therefore agree with archbishop Tutu (my ex boss at the TRC) that we should withhold our votes in an attempt to heal the rift in the ANC. Sipho Seepe today said it best:

Archbishop Emeritus Desmond Tutu’s pronouncement that he will not vote because of his unhappiness with the ANC is self-defeating. SA does not begin or end with the ANC. Tutu is in good company. The people of Khutsong also withheld their vote rather than vote for a different party. Too many people sacrificed their lives so that we exercise this right. We should not betray them.

But it has to be said, it’s ironic that Terror Lekota and others are complaining about the lack of democracy in the ANC. Terror is a pot calling the kettle black, even if he is right about certain distasteful tendencies in Zuma’s ANC (like threats of violence).

Steven Friedman once called this “the right issues being raised by the wrong people”. But that’s beside the point. His cheap political point scoring is politics as normal. This is how adversarial politics is supposed to work.

Normal politics is all about exploiting political Achilles’ heels in your opponent, even if your walking around half naked. But you need at least an opponent!

Therefore dear Archbishop:

A split - even a small one - in the ANC is good for the country.

Institutions strengthened

Much have been written about the merits of the Nicholson Judgment where Jacob Zuma’s trial was stopped on a technicality. In particular the finding that the prosecuting authority (NPA) must consult an accused before charging them has come in for much criticism.

I personally think consulting in this manner places a ridiculous burden on the prosecution. These arguments against the judgment might very well be found to be correct on appeal and be overturned.

But what many commentators have lost sight of is the wider implications. In particular the strengthening of the hands of the NPA due to the judgment.

Judge Nicholson has delivered a detailed and strong defense of the separation of the NPA and government. So strong as to make it very difficult and downright dangerous for individual members of government to interfere in the NPA in the future. He said:

There is no refutation that the Selebi warrants were cancelled by Mr Mpshe after political interference and that Pikoli was suspended because he refused to do so. There is an admission that Pikoli reviewed only Selebi’s case, at the request of the Minister of Justice. The other admission relates to the fact that the President suspended Mr Pikoli as NDPP, stating that there had been an irretrievable breakdown in the working relationship between Mr Pikoli and the Minister. . .

The NDPP states unequivocally that the NDPP Mr Pikoli was suspended by the President because of a breakdown in his relationship with the Minister of Justice. There should be no relationship with the Minister of Justice – certainly insofar as his decisions to prosecute or not to prosecute anybody from the Commissioner of Police downwards. All that is clear from the Constitution, the NPA Act and the various prosecution policies, directives and codes of conduct. The suspension of the National Director was a most ominous move that struck at the core of a crucial State institution.

Nicolson questioned why Zuma was not charged with Shaik for corruption long ago.

If there was a prima facie case of serious corruption against the Deputy President there were, in my view, no reasons of public policy why he should not have been prosecuted simultaneously with Shaik. Its failure to do so brought justice into disrepute. The NDPP should either have charged the applicant or made no mention of a case of corruption.

Nicholson squarely put the blame on the then minister of justice for interfering, and calls it a serious criminal offense.

Put at its very lowest Mr Maduna seems to have played a not insignificant part in the planning of the strategy in question, whatever its end objective might be. Given the constitutional imperative for the NDPP to be totally independent, and decide without fear or favour it was a most regrettable occurrence, in the light of the fact that it also constituted a serious criminal offence.

I do hope that ex minister of justice Penual Meduna will be prosecuted for interfering in the courts as Judge Nicholson recommended.

In any event the South African Parliament also seems to be flexing it muscles. It has sent back the legislation that is supposed to end the elite police unit the Scorpions. Says constitutional law Professor Pierre de Vos:

This bold move by Parliament seems to suggest that there is a fluidity within the ANC in Parliament created by the divisions between Thabo Mbeki’s supporters and the incoming Jacob Zuma factions within the ANC. It is refreshing to see that Parliament is actually doing its job and subjecting draft legislation to the rigorous process of analysis and critique.

Prediction. Once parlaiment wields its constitutional muscle, it might just acquire some muscle memory. It won’t rid that easlily.

The case of the problematic judge Hlhophe
So too was the majority judgment in the case of the Constitutional Court vs Judge Hhophe, contrary to popular opinion a victory for the independence of the courts. Yes, the judges were split along racial lines, but not on the issues that mattered.

Advocate Michael Osborne puts it well:

Mojapelo DJP dismissed Hlophe’s prayer that the judges of the Constitutional Court had committed gross misconduct; dismissed the argument that the publication allegations in the media had violated Hlophe JP’s right to privacy; dismissed the contention that Hlophe JP’s right of access to court had been violated; and, most importantly, rejected the application for a declaration that the decision to lodge a complaint was unlawful and legally incompetent.

Once again as with the Nicholson judgment some parts of the judgment can be criticised and attacked in higher courts.

Had the court attempted to stop the Judicial Service Commission’s (JSCs) prosecuting of Judge Hlophe it would have been another matter altogether. Hlophe deserves to answer these allegations of gross misconduct which he should not have escaped last time round. But that is not what the court found.

Unlike the previous time he appeared before the JSC - in the time when Mbeki held a steely grip over all government functionaries including the courts - I predict that Hlophe would get his just deserves now. How ironic. Hlophe is after all a Zuma man.

If Hlophe is dismissed we would have won another important victory for the criminal justice system, unthinkable just a few months ago. The fact that a lower court found in the way they had - even if wrong on some counts - shows the country has an increasing plurality of opinion and independent thinking in positions of power.

The Treatment Action Campaign (TAC) has held a celebration as Barbara Hogan replaced the controversial Mbeki confidant and Aids denialist minister Tshabalala-Msimang.

Hogan, a woman from white working class roots in Benoni the East Rand spent 8 years in jail after joining the ANC underground. She was close to Andrew Feinstein, the ANC member who helped open up and fight corruption in government and wrote After the Party.

Like Feinstein, who was fired by Mbeki as the ANC head of Scopa, the parliamentary accounts committee for investigating that arms deal, Hogan’s principled stance also ran into trouble.

As chairperson of the parliamentary portfolio committee Hogan sought to ensure the provision of drugs to fight HIV.

She was called in and reprimanded by President Mbeki for querying Trevor Manual, the minister of finance’s budget because Manual had not costed the provision of anti retro virals (ARV’s) into his budget. Like Feinstein she was also fired from her position as chairperson.

Fantastic news that she is in government.

I’m wondering how well informed is William Gumede. The writer of Thabo Mbeki and the battle for the soul of the ANC is after all like me, not in South Africa.

He wrote an article in the UK Guardian (For the good of SA Zuma must go) claiming that now that Mbeki is out of the way, some of what he calls the 5 groups in the anti-Mbeki coalition, are having doubts about Zuma.

“Now the Zuma coalition are divided between those who want Zuma at all costs to become president, such as those seeking a pardon for corruption or patronage, versus those who are prepared to look for a unifying ANC leader that will be pro-poor – the latter include the more serious elements of Cosatu and the SACP.”

He also claims that Zuma is not in control of his coalition and that the likes of Sexwale are upstaging him.

Yet, Zuma is not entirely in control of his own coalition: rather they may actually be in charge of him. He opposed efforts to oust Mbeki, because he feared he will inherit a divided party, unprepared to run a general election. However, he was rudely overruled by his own militants. Furthermore, in the week when Mbeki detractors within the Zuma coalition moved to oust him, all the old presidential rivals of Mbeki, Cyril Ramaphosa, Mathews and Tokyo Sexwale, again took centre stage within the ANC, dwarfing Zuma, almost like a decade ago.

As proof he offers the appointment of Kgalema Motlanthe over Baleka Mbete as interim president, who was long the safe choice of those bent on a Zuma presidency.

“However, Motlanthe’s elevation as interim president shows that divisions with Zuma’s coalition are now deepening. Motlanthe was the choice of those in the Zuma coalition who are more interested in keeping the ANC united, and securing a pro-poor government focus, rather then putting Zuma into the presidency. They have long seen him as an alternative candidate for the presidency if Zuma stumbles over his legal hurdles.”

I do hope Gumede is correct. It will be the first really significant bit of good news for some time.