Nick Binedell: SA’s watershed week – what it means for the future | Fin24
 
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Nick Binedell: SA’s watershed week – what it means for the future

Dec 15 2015 14:49

Founder and former dean of GIBS, Nick Binedell, is a good friend who, like the best of them, is a joy to spend time with. But when we do so professionally he is all focus: articulate, thoughtful and ever challenging assumptions.

He joined me in the Biznews studios to unpack the dramatic events of the past five days and, as ever, Professor opened new avenues of inquiry.

Binedell is delighted at the unexpected turn of events which led to former Finance Minister Pravin Gordhan being reappointed – and suggests there will be significant implications across the economic cluster. He also believes the nation has learnt a great deal about what it means to be a democracy and reckons we’re going to learn a lot more in the weeks ahead.

He will be among those marching in Johannesburg at 10am tomorrow as he regards it as a way for South Africans to express their opinions – the right of all who live in a democracy. – Alec Hogg

Alec Hogg is in studio with Nick Binedell, formerly the dean and the founder of GIBS, one of the preeminent business schools in South Africa. What have you been doing with yourself, Nick?

Well I stepped down at the end of March and I’ve had a wonderful benefit of a six-months sabbatical, to travel, to study, and think a bit about what’s been happening and doing many interviews, to try and find a bit of the story behind the story, about where the country is, where the economy is and what lies ahead.

The mind is fresh.

A little fresher than it was after running a business school for 17 years.

A watershed week for South Africa.

There’s no question – it was a watershed week. It was a very significant moment, the whole sequence of events I think were very significant and there will still be aftershocks. I think one can only assess how big a watershed is, is backwards historically, but it was a very, major event.

Can you relate it to anything else that’s happened elsewhere in the world in history?

Well that would need a bit of thought. Let’s not overdramatize it. We had a president, who made an executive decision, which is his constitutional right, with very little consultation, to change a key portfolio that’s critical in our country.

More importantly, critical at this time in the economy, where we are really facing tough constraints. In that sense it was a watershed moment but I’m not sure what I would compare it to because we still don’t know the aftershocks and consequences of where it’s going and whether it signals a new direction of substance.

It’s certainly, at least for markets, as we know, and stock markets and bond markets – it was a very, major event in a very, short space of time.

Is it usual in a democracy for the president to make these kinds of appointments without consultation?

That’s an interesting question. The President has the constitutional right to do so. It is, as ministers always say ‘I serve at the pleasure of the President’, which is his right but the politics of it is what makes it more interesting I think.

Both within the so called top-six of the ANC were the key leaders, the Secretary-General, the chairperson, Treasurer, etcetera, also within the NEC and Cabinet, and also, of course within the alliance. We don’t know exactly what consultations were made and what reactions there were.

We know there were no consultations because a statement was issued. Zuma issued a statement to say, “I hadn’t talked to anybody about this.”

Exactly, we know that but in politics, things are grey, so we don’t know the full story yet but clearly there was not a consultation in the sense of asking a major group, who then gave a view.

There may have been individuals consulted or maybe a group were consulted, but from the signals we’re getting, as you say, I don’t think that’s the case.

The successor, who lasted, well they’re now calling him the ‘weekend special’, David van Rooyen. Had you heard of him before?

No, I hadn’t heard of him before.

He wasn’t known, certainly in your circles in the business community.

No.

Do you know of anybody who’s heard of him before?

Yes, I think people do know about him. I talked to several people who had worked with him. You had the kind of comment made by our ex-Premier of the Province about him, Sam Shilowa, but in the last few days, the stories come out with a bit of his background and a bit of his history.

Of course, when these things happen and the stakes are so high it attracts a particular kind of commentary, which has been overwhelmingly critical and perhaps negative. These things are always more complex than that. We know he had the extensive experience in the Municipality.

We know that certain things happened in that Municipality. The full story again is not known but he wasn’t exactly the obvious pick. What I said the other day, before Sunday was that if this had been clearly communicated by the President as to why, at the time, he made the announcement and if we’d known where Minister Nene was going.

That would be seen by some as ‘well that’s fair enough’. Thirdly, if we’d had an appointment of significance, at the time, I think the market reaction would have been very different.

South African Airways is right in the middle of all of this. The Chairperson of the Jacob Zuma Foundation is also the Chairperson of South African Airways. Russell Loubser, who resigned off the board, did serve with her. He said if she has any business acumen, it’s extremely well hidden. Yet she was the one trying to push through a transaction that Nene said no to. Is that involved here? Is that part of this whole thing? It certainly has been suggested.

I think the circumstantial evidence is that it’s a part of it but politics are like icebergs. What you see on the surface, there’s a lot under the surface that you may not be seeing and of course, there are various other things. The cabinet and the nuclear deal, and various other things that are at play.

Politics is very complex in that sense, so there are many forces at work. I can’t determine whether the SAA story is at the centre of it but it certainly is in the mix.

The Sunday Times appears to believe it, if you read what the newspaper said over the weekend, and its unusual decision for its ‘Mampara of the week’ to be reversed into a hero, for the very first time and naming Nene as the hero. Why wasn’t he reappointed?

Well that I don’t know. I think the move had been made to appoint him to the bank.

It was only a proposal. There was no appointment and the bank hasn’t even started yet.

I know. I can’t answer why he wasn’t reappointed.

No, but politically was there a political reason that reappointing him would be…

I don’t know the answer to that. He clearly took a line about the SA guarantee and stood by it. I think many people feel that that’s the moment in which the President decided ‘he needed a minister that would accept that’ and other proposals that were on the table at the time.

Why he wasn’t reappointed, I can’t answer. I think he was a well-respected minister and he’d only been there for 18 months but he had a lot of experience, and I think the market has to respect him. Especially the ‘Budget Speech’ a few months ago, when the students were outside Parliament.

He really told the Cabinet and the public, and Parliament that the money has run out and we can’t keep doing all these things. He took a line and a principled line in many ways. I think that’s why people admire him the way the Sunday Times is describing.

It’s the same kind of thing that Pravin Gordhan did just before he was fired.

Remind me.

He said the same thing in Parliament at ‘Budget’. He wanted to cut back on the fringe benefits of Parliamentarians and he didn’t last long after that.

Yes, but I think the move of Minister Gordhan to COGTA, which is a very serious issue because a lot of our problems in delivery are in local government, can be seen differently than this event, with Minister Nene.

It’s still a demotion.

Of course.

Now, what happens at SARS, Revenue Services, and Gordhan? What I’m getting at here is that Gordhan was sidelined, unquestionably. His life’s work, almost, was taken away or dismantled and now he’s back on top.

Yes.

Is there a power shift here, in the ANC?

First, let me say that Minister Gordhan, I think, is regarded by many, not only with his ‘struggle’ credentials, with his time at SARS, and with what he did at SARS in leading it – in his time in the Ministry he was a very effective, disciplined individual both politically and strategically.

I think a lot of credibility attaches to him as a leader, and him going back into finance has implications for SARS. There may be actions because we’ve got a very unusual situation. We have a minister who knows the Ministry of Finance very well. He knows the SAAB issues very well and of course, ran SARS.

This puts him in a very important strategic position. Of course he’s going to have much more influence because of the mess we’re in and the pressure to try and turn this economy around and, of course I suspect the mandate of this reappointment, by Minister Gordhan would have been done in a climate, if not an agreement about action that needs to be taken.

Dawie Roodt said this morning that Pravin is a pawn. He should not have accepted that appointment.

I wouldn’t agree with that. Well, I don’t agree with that.

Why?

I think he’s shown us, over several decades that he’s a man of integrity.

So he’s doing it for the right reasons.

I’m confident of that.

Coronation called it Zuma’s ‘Rubicon’ moment, reminding us of what happened 30 years ago, in Durban with PW Botha. Do you think there are any parallels?

I was remembering Rubicon over the weekend and that remarkable scene, where PW Botha went off script, where he was meant to stabilise the economy, and instead that remarkable phrase of his where he always said, “I’ve been kind and I’ve been patient.

Don’t push me too far.” It was off script – a remarkable moment. Yes, I think this is a moment, certainly. A ‘Rubicon’ moment, these things are always hard to compare but it was a very, major moment and what it might lead to is hard to tell. PW Botha stayed in office for a long time after that.

Talking about being off script. The SABC camera crew followed Jacob Zuma to a small gathering, where he went just minutes or a couple of hours after he’d fired Nene. He went off script and the result of that makes quite confusing reading but problematic in it is his interpretation of the market system, where he says, “Supply and demand actually don’t matter.” More the Marxist kind of approach, which seems to be a little outdated in where we are at the moment. Could that be his ‘Rubicon’ moment?

No, I don’t think so but let me comment on that speech. Firstly, he has made two, I think, quite important speeches at the 30th Anniversary of COSATU, you’d remember it as the petrol and the bread price story.

If you read the whole speech, I think was scripted and it was fairly logical, within his political framework argument about the alliance and about the importance of the remnants of COSATU, which is, as we know significantly a public sector union.

The message to them was back to the hardcore ideology, which I think was an important signal. The other evening, which you transcribed and which I watched on SABC. It was a very unusual thing because it took over the SABC. I think they missed one or two news broadcasts to cover it.

It was a meeting of about 60 or 70 people, half of whom, roughly in my estimation because I was at that conference.

The conference was aimed at building an African Business Leader’s Forum, to get more, formal recognition for African business at the AU and elsewhere. Then he couldn’t speak. He was due to speak and then he committed to the evening after Cabinet. There he spoke off the record. He had no notes and he spoke…

Not off the record but off cuff. A bit like Hansie Cronje – off the record.

Sorry, not off the record but off the track. Exactly, Ronald Reagan. So that was, as you say a very interesting and complex speech because he was addressing an African group from many countries. He felt it appropriate to dig in all the way back, as you know, to the questions of slavery and the colonial struggle, and the Berlin Conference and political power, and whether we’re united on the Continent.

It was a push in an argument towards how do we integrate the Continent more, which I think we all agree with, and that you can’t eat political power. You need economic power. He talked about, as you know, about him being a politician but he wants to be, he may take up in his post-political life more of an active role in the economy as a business person.

Then he talked about commodity prices and that really was remarkable when he said, “Commodity prices, he’s told, because he’s not studied economics are set by the marriage of demand and supply but in fact, he believes the value of a commodity is the price of the value of the labour that goes into it.”

One can understand that argument if you’re coming from a particular perspective but it’s not exactly a postmodern 21st Century knowledge economy point of view.

How would that be interpreted, together with, “All other Continents can fit into Africa,” as a cerebral president or a president in a complex or trying to run a complex economy like this?

Well I think I don’t know where that speech would have gone. I think it was a small group and it just happened to be shown on national television here. I haven’t seen many articles picking it up. People may comment about it.

It’s gone, I can assure you it’s gone viral on the internet and it’s available.

Internationally?

The last I looked there were 50 thousand people that had looked at it.

Okay, well that’s a lot. Look, peoples’ opinions about countries get shaped and informed by many events, and this was not probably a clearly crafted, strategic observation about our future. It was a coherent argument about some of our pasts. You may agree or disagree with that, but he made an argument about the need for African business to stand together and for this Continent to integrate at a faster pace. He went into quite a lot of detail about problems that Africans have had with each other. About the role that foreign powers had played in it, so I’m surprised by it for the time we’re in, let me put it that way. I’m not that surprised by it. People reflect on how we’ve got into the room, and I think what we need is how are we going to get out of the room rather than how we got into the room. I think we all know how we got into the room.

Is he the man to take us out the room?

Well, that’s a different question.

Given the insights that we now have, of how he really thinks. Is he the man to take this economy out of the room?

Ultimately, that is a deep reflection for the leadership in business, in unions, in civil society, in government and in politics, and within the ANC itself. The fact that we have drifted… The story of the global recession is clearly a factor that has led to a stagnant or nearly stagnant economy.

What you need is decisive leadership, with clear executable policies and we haven’t had that. In that sense, I think one can make the argument that he’s struggling to do that. The political crisis of the last few days puts even more pressure on that question.

Whether ministers now, who may look at these differently, are in a stronger position to argue for NDP policies to be implemented with vigour because the lip service has been done to that but I’m sure all the action has been given to that. I don’t know, I mean we’re heading into the era of succession now and the big strategic question is about the ANC leadership post 2017, when the ANC has its Electoral Conference.

I can’t predict whether the core group. The appointment of the President, within the caucus of the NEC is a bit like the Pope. We can all worship but actually, the conclave decides, and the smoke comes out the chimney. That will be an internal discussion and it depends significantly, what those leaders think.

I think what is important up to the lead up to these processes is what rank and file, and senior leaders in the ANC make of the importance of the economy. I think one of the problems liberation movements have, in moving from being liberation movements, which is a very difficult life, as we all know.

In which paranoia, courage, and agility are the core components, into governance, where complexity, consistency, and bureaucratic skills becomes the core component. It’s a big transition and I do think that business has key role to play.

We all have a key role to play in this, as he has pointed out. It’s the economy that we now need to focus on, and that’s got to be the agenda. That’s a futuristic agenda.

What we have to assemble around whoever the leader is, are competent people who believe that that’s the case and, as I’ve said for a long time now, economic growth is the oxygen of a democracy in South Africa. Without economic growth, the politics are going to become even more difficult.

A point that you touched on there was Jacob Zuma’s desire to go into business. There’ve been people, including Martin Wolf from the Financial Times, talking about this curse of entrepreneurial politicians. In other words, you get into politics and you use it to your best ends rather than using it for the reason that you were voted into power in the first place. Is that not the core of the problem here? Is that core of the problem not – ‘I didn’t join the struggle to be poor’?

Well I think it is a core of the issue. I think we may have to think afresh about the code of practice, as to what politicians are able and not able to do, while they serve at the pleasure of the Electorate. I think that question is something that needs to now, be discussed in more depth.

I think it’s fair to say, and I’m not an expert, we have very significant issues, even at Municipal level, in many different spaces where this boundary has been crossed to the point of being extremely difficult. On a scale, that really is a challenge to South Africa.

I think whether it’s the moral argument or whether it’s the legal argument – these boundaries and rules really need to be investigated. We need a professional set of politicians, who are paid to do what they’re meant to do, to serve the citizens of this country, and there must be a boundary between that and their personal business interests.

In the US, for example, the President’s finances are sequestrated for the period, and then are released subsequently. I don’t know what the system should be but I think our constitution and other experts need to say and propose that there is a set of rules about this.

This is how many countries fall over the edge, is when this boundary gets disputed. Then of course, business gets attracted into the murky area of conditionality attached to doing business, and you just simply can’t go too far down that track. I think that is a flashing amber light.

Well certainly, there are many in the business community who are ‘gatvol’, to use a good South African word. Perhaps including business leadership, who today have now issued not the ‘mielie mouth’ statement that we saw over the weekend but something a lot more firm. They are looking forward to working with the new Finance Minister, Pravin Gordhan, to drive economic growth and economic reform. Economic reform – that’s a big topic, within the ANC. Do you think there’s been any learning from the caning that the markets and the country got towards the end of last week, when reforms seem to be the furtherest thing from anyone’s minds?

I would suspect so and I definitely would hope so. I think business leaders in South Africa have to, as they have over the last four days, have had to think a little deeper about what their strategy. It’s one thing to negotiate and to deal with problematic issues, like the visa and other issues behind the scenes, to assist government, and think about how it might go about doing its business.

It can’t all be like… What the last four days have shown us is how high the stakes are. As I said earlier, focussing on the economy is the key and competitiveness is the key.

Business won’t get what it wants because business has a point of view and it’s an agency within a nation, and there are other issues that need to be dealt with but I do think the focus, and it’s a good statement that they’ve made. It’s a more substantive statement. I believe that more resources need to go into these kinds of institutions, and networks and initiatives.

That South Africa as a whole starts to get to understand these things better, whether it’s the church or the trade unions, or civil organisations – we need to understand that if we don’t grow the economy, we don’t have more tax.

If we don’t have more tax, unless we’re going to bankrupt ourselves through debt, we can’t do the transformation work that must be done.

Business probably has to reflect on what an inclusive economy means and big companies, and how we should contribute but I’m hopeful that the dialogue will have a new energy and I’m hopeful that the Minister of Finance will engage in that constructively.

Perhaps a new honesty. The business community appears to have understood that diplomacy hasn’t worked and that they actually need to be a little more focussed in the messages that they’re putting forward.

Yes, I think that’s true, and I think what has to happen is that businesses have to… You know, the way I think about this Alec is that, if you think what’s the value, as we’ve seen, what’s the value of a bank and how vulnerable is it to country effects? This has been unprecedented that big banks would lose this portion of their market equity in the space of three days is unprecedented.

The bond rates – unprecedented. The risk for a big bank is not only dealing with its competitors but probably as, if not more significantly ensuring that the country is stable, that there are good policies, that there’s good capacity building in the country. That we fix education and infrastructure and so on and so on, because that’s in our interest to do that, in partnership with civil society and government.

If you were giving a lecture, now given what’s happened in the last few days, to the chairmen and chief executives of the banking groups, who’ve gone through a very rough ride.

A very torrid time.

Between 15 and 22 percent decline in two days, in their market cap.

Sure.

What would you be encouraging them to learn from this?

This is the very point that we’ve just made is that a stock market and an economy is extremely fragile, and that the South African risk is embedded in the country risk, to a very significant degree. It’s very hard to be a great bank in Zim.

You want to be a great bank in a prosperous, growing economy, I look at Sandton, where we’re sitting, and I look at the capacity of this area and other plots, and other industries, and other companies. South African is amazingly resilient.

It’s pretty creative. It’s becoming globally competitive, as it should, so we’ve got tremendous capacity to contribute to the national question. To the question of how we grow our country. How we empower people? How we educate people and that’s where business has to play more of a role, and it’s not as subtle as just saying ‘well oppose what government is doing’ or ‘government must do this’.

It’s what we had to some extent earlier some years ago where there were far more structured engagements. NEDLAC has become largely dysfunctional. It was built for the purpose of this, and we need to reenergise these institutions or start new ones or start new initiatives.

What’s become clear, I think, to the chairmen and CEOs of big banks is that it is a country risk question and that they are part of the answer. They want to be part of the answer, and I think, hopefully out of all of this, government realises again, because this is not a new discussion – that business is key to the question.

I think the interdependency is a little more obvious. If you’re a Member of Parliament or MEC, or a citizen in government, you pension plan came under siege in 48 hours. I think that literacy we need to make sure people understand.

There was a high level delegation from business that met with a high-level delegation from the ANC, I think no names no pack drill, but what do you think they would have discussed? This happened on Sunday, ahead of the reappointment of Pravin Gordhan.

Ahead of the announcement – I don’t know. I don’t know what they would have discussed but there was a lot of heat in the system, because we’ve seen that certain people were not happy with this by their silence, so I don’t know who was in the meeting.

I don’t know the content of the meeting, and I don’t know what was resolved but I’m sure that the crisis gave a lot of focus to both sides of that equation.

But the explanation of why the market had fallen or reacted the way that it had in the last two days, might have been news to people within esteemed or higher echelons in the ANC, given what we heard earlier in the week of Jacob Zuma’s own philosophy towards modern economics.

I would hope so.

Might that have changed?

It might. I’m sure. For Gwede Mantashe to make the comment that he did, and he was silent on the appointment of Mr van Rooyen, is an important signal. People understand the economy. It’s the question of intimacy and understanding about what to do, I think that’s more important and the history of our country.

We do have to go back to that, in a way. Structurally has meant that it’s only in the last ten years that economics stakes for people who might support the ANC have become visible, and I think that would have sent a signal through the system to say ‘but this is us too now’.

Well, we do have planned marches on Wednesday, seven around the country. Are they likely to go ahead still?

I think they will go ahead. I can’t speak for them. I think they’ll go ahead.

Is there a point to them now, tthat he whole idea was Nene must be brought back. Well, Nene hasn’t been but Pravin has so…

I think the climate of it has changed but I think what we’ve got to do is step back now, you’ve just asked me to reflect on the learning and the implications of where we’ve got to and this is just an event on a bumpy road. We are on a gravel road now.

We’re not on a freeway, at one or two percent growth. With many people entering job markets and inequality growing, so the road is going to be bumpy, so let’s treat this moment, on the road and the bump that we hit, as you said, as a place from which to learn.

I think that civic action and peoples’ commitment, and their interest to the country’s interest is what these marches bring together. If we think about what civil protests and civil action meant in the 80’s, is it formed a kind of bond. It formed relationships, it broke across silos, and people saw who was there and said ‘we will work together’.

That’s really, ultimately a key part of democracy. We need active citizens, as we’ve been saying, as everyone’s been saying. Active citizens saying, ‘okay, this is not okay and we want to be recognised as part of the discussion of it’s not okay’.

Don’t just sit at home and complain. Sit at home and say to myself, ‘I’m going to do whatever micro-scale activity it is – this is the contribution I’m going to do’. I remember the 80’s we used to have a line that said ‘don’t stay and immigrate’.

The problem for many people though, is that we are powerless. What we’ve seen here is Jacob Zuma’s head of his foundation at SAA, very close to her, we know and it’s a known fact. Has tried to plunder the public purse. They’ve been found out. Somebody stood against them. They lost their job. Now that the President has seen that he’s backed the wrong horse, he simply backs a different horse, and all of it goes away. It doesn’t sound as though the public of South Africa will allow that to happen.

Exactly, and I’m not sure I agree with all of the narrative that you’ve just explained.

Okay, well unpack it.

Well I’m not in a position to judge it but you are.

Well Russell Loubser was here. He was sitting in your chair and he told us – this was plundering of the public purse.

That’s fine but I wasn’t in the room, so I don’t know that.

You can read the transcript if you want to.

No, I believe him. I believe Russell Loubser. He’s a man of great integrity.

What I’m saying is the narrative you’ve just unpacked, there are a set of assumptions in there but let me say this that clearly, the question of is it SAA at the centre of this thing? Is not really that clear, and that many people have taken the view that there are many factors involved, as I have said earlier, so you may be right about the way you’re describing it.

What we were talking about was the marches and should people take part, and my argument is, if you feel that you should then do it.

Don’t just sit and complain about it and if people feel powerless, well that’s how power works. If you take however small an action, the cumulative effect of that, and we don’t know what happened now, on Friday, Saturday or Sunday, to replace a minister who had just been appointed.

Something happened. We can’t tell if that was three people, 50 people, or the fact of the markets that got through to people, or the fact that peoples’ decent became more and more visible and we had a newspaper in a weekend full of nothing but this story.

All of those are factors, so the one thing that I think is very important, as citizens we say, “Well we are citizens.” To be a citizen means I’m a participant and I’m in power to make a difference wherever I can find the difference, and I think that’s what lies ahead for all of us, including business.

Why are people going to march on Wednesday?

Well, I think this march has a combination of things. It’s about corruption because there are so many stories that say corruption is part of it, and there was a march a few months ago.

I think there will be questions about the President and whether, as you said to me earlier in this interview, whether he should remain in office, and I think that is going to be part of the agenda. Let people express themselves and make their voices known.

I think that’s what this kind of event does, along with social media and along with debates, in every part of the country.

The last march against corruption didn’t attract as many people as those who organised it, had hoped.

Sure.

What would be a success on this march? Just take the Johannesburg march as an example. How many people would you…? If it were five thousand people, would that be termed a success?

I think five thousand people would be a lot. I think some people will step back and say ‘it’s a Public Holiday – end of the year, I’m heading off to the coast’. Perfectly acceptable. I have no idea how many people will be there.

Nick Binedell, as always, a wonderful discussion and thank you for your insights.

Thanks so much Alec. Thanks for inviting me.

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biznews  |  nhlanhla nene  |  jacob zuma  |  alec hogg  |  sa economy
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