PETER ATTARD MONTALTO: Scrap the empty rhetoric and be a bit of a dictator

Posted in: Economics, i-Blog, Politics, SOEs, South Africa, Sovereign risk on January 20, 2020

This column was first published in Business Day 

How many times can you say the same thing and still have people come along for the ride? When a process is mired in a lack of transparency can you say the opposite of what is actually happening?

All these rhetorical devices are part of the repertoire of politicians and fine in moderation.

However, two years into the Ramaphosa administration these devices are becoming increasingly dangerous — both economically and politically. This is made worse by parts of the mainstream media ready to regurgitate without critical analysis.

The January 8 anniversary statement was a plea for status quo at state-owned enterprises (SOEs), the centrality to the developmental state and the fact they would all be “fixed”.

Equally it was stated that energy policy and embedded generation was being sorted out.

No, they are not; no, it is not.

There is clearly no fundamental mindset change within the ANC or presidency on the role of SOEs and their inability to manage and be responsible owners of them.

A chief restructuring officer has been appointed at Eskom who has not provided any unique value to the process. The government cannot find good people to join boards or management of SOEs (as most recently evidenced by the SA Nuclear Energy Corporation board appointments and the delays to appointing a new Eskom board).

The energy war room, equally, was instigated as a supposed recognition of the energy policy emergency — to politically unblock the deliberately stalled process by the department of mineral resources & energy. Yet it has not met, yet nor as of last week did it have a terms of reference or advisers at all.

Meanwhile, SAA is on the brink. Something has gone seriously wrong when everyone thought the government was providing money but then they couldn’t because of the law. A business rescue process may well be a necessary political fig leaf for a more orderly form of liquidation of the status quo (asset sales and so on) but the reality is that this should have been done at speed — especially when there were problems with cash flow and non-appearance of a bailout.

The Eskom chair resigns and the story is allowed to develop that he has honourably fallen on his sword — yet his resignation letter made it clear that he had provided the appropriate warnings to the president in December that a load-shedding-free holiday could not be guaranteed and was clearly resigning then for other reasons.

The government is championing its reform to child immigration rules at the end of 2019, yet this was changed in April 2019, but the department forgot to get the rule change signed into law, causing misery and lost opportunity for tourists.

The line of land reform is continually repeated, and that a constitutional amendment is needed to allow for expropriation without compensation, yet this is unnecessary and is a distraction from the bureaucratic blockages to necessary land reform.

Even the SA Reserve Bank is not immune from this communications challenge and is increasingly being seen by investors to miscommunicate, as it has cut rates without providing an adequate runway of consistent explanations ahead of a likely rate cut by Moody’s Investors Service in March. In November Moody’s was a shock to be worried about and so rates were not to be cut; now it’s something that can be looked through like an oil shock and so you can cut? People are scratching their heads.

The problem is that business and investors are wading through rhetorical treacle — constantly being told things are changing and getting better and actions are being taken when they are demonstrably not, or at the very most, the government is running to stand still. This is why business sentiment is not only not improving but is getting worse and is going to be increasingly hard to turn. Growth forecasts are being consistently revised down, now to about 0.6% for 2020.

Politically the rhetoric we are seeing is providing a continual set of bear traps this administration has laid for itself that a new factional axis within the ANC (and in particular one that is emerging from within the broad Nasrec Ramaphosa faction) can exploit to its advantage and put the president on the back foot and then into a box.

As his own broad coalition starts to crumble, so the president has a choice. There is the repetitive rhetoric and a state-of-the nation address along the same lines as the January 8 statement, the references to not being a dictator and the social compacting to death.

Or there is an alternative route.

Using the term dictator is an unfortunate distraction — a straw-man fallacy. Some secret sauce is needed: picking winners and losers; ruthlessness; moving at speed; yes, breaking things; decisiveness; and the ability to think and incorporate stakeholder perspectives without the death-cult of social compacting. That’s leadership. Being a leader is always some percentage dictator and some percentage clear communications, but mainly its action.

Embrace this, otherwise business sentiment will be elusive and with it growth.

This year will bifurcate depending on the route taken and will be a bumpy and hair-raising ride as a result.

• Attard Montalto is head of Capital Markets Research at Intellidex.

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