Confidence, not cash, will decide whether Zille can turn Joburg around: Katzenellenbogen

Johannesburg votes on 4 November. If the DA's Helen Zille can form a workable coalition, she inherits a city that is un-creditworthy, deep in debt to Eskom and kept afloat by the patience of National Treasury. She has ruled out rates increases in her first term, so money for a turnaround will be scarce. The real currency, this analysis argues, is confidence: quick, visible wins on potholes, water, refuse and policing that persuade residents, developers and businesses to invest again, which would lift property values and the rates base. Expect early pushback from the unions. For South Africa, Johannesburg is the test of whether broken municipalities can be fixed..By Jonathan Katzenellenbogen*.If Helen Zille, the DA candidate for Mayor of Johannesburg, is able to rule with a workable coalition after the 4 November election, she will still have a hard time turning around the city.She is the leading candidate, but it is unlikely that the DA will achieve an overall majority which would allow Zille to rule on her own. Ruling without coalition partners demanding favours would give her a free hand in taking some politically tough decisions.And the less her reliance on smaller parties, the greater the confidence of voters, ratepayers and business will be in a new Council. The fewer the coalition partners she needs, the greater will be the strength of her mandate from the voters.The largest force in favour of a DA-led Johannesburg coalition doing its job in turning around the city is confidence. That is the trust of residents and businesses that a new City government will be able to improve things.That alone is what will allow the new City administration to retain support while a likely prolonged turnaround takes place. Confidence will also help bring in the money from city rates as businesses invest in new projects in the city.Retaining the trust of the electorate in her ability to turn around the City will be Zille’s biggest task if she is able to build a workable coalition.If elected, she will have a tortuous job in restoring the city’s finances. Dealing with networks of patronage, crime and corruption in the municipality will be another arduous task. Then she has to ensure that roads get repaired, refuse is collected and security is improved.The roots of the city’s financial problems are a combination of overstaffing with cadres, overly generous salary settlements, corruption, and black empowerment middlemen who take multiple cuts in contracts. Zille is not talking about how she will deal with possible layoffs and how she will deal with corruption and overstaffing. There is bound to be pushback from the unions and the cadres, who will be intent on resisting a Zille shake-up. How far and fast she can go in confronting these problems as well as putting in place a new billing system are key to a financial turnaround.The city is currently un-creditworthy and raising additional revenue from rates is a problem. She has said she will not raise rates and service charges, at least in the first term.The city is heavily in debt to Eskom and other suppliers and the bond market could not possibly finance an un-creditworthy entity. Without the indulgence of the National Treasury and Eskom, the City would be bankrupt.She can’t slap residents with a rates increase as one of her first acts. Until delivery improves, it would be politically treacherous for there to be a fresh round of rates increases in the absence of improvement in service and infrastructure.So, from where will the revenue for a turnaround come?The big factor that will boost the Zille project is the restoration of confidence in the city and, to an extent, the country. It will show that voters are prepared to vote for a party, or at least allow it to lead a functional coalition, that can bring pragmatism to governing.Confidence will be the great force multiplier for any workable coalition. It is what will put the city onto a virtuous circle that begins with faith that a turnaround is possible, that potholes are being filled, the council is doing something to avert power and water cuts, that the roads are being cleaned, refuse collected on time and city government cleaned up, and security is improving. With confidence, businesses invest and grow, and that leads to a larger revenue intake for the City from rates and various service charges. Greater confidence in Johannesburg will mean that property prices will rise and with that so will revenue from rates.With confidence, real estate developers go ahead with projects they have been sitting on for years and look for new ones in an improved environment. Big projects are mostly built when there is a firm belief that the future is secure for the society.But Zille will not have much to spend on ensuring that the city meets its maintenance and infrastructure backlogs.So, any DA government or a fresh ruling coalition will initially be highly restricted in what it is able to achieve. Disciplinary hearings and a Madlanga-type commission to investigate wrongdoing in the City could take ages.A Zille administration will be able to put in far tighter financial controls to make it difficult for the criminals.With our restrictive labour laws and the empowerment restrictions on hiring and procurement, high costs are built into running a council. At least a Zille administration might be able to ensure that these are controlled. But that does not mean there will be enough money to meet some crucial needs.In the face of inevitable rough patches, Zille will have to build and maintain confidence, by proving to them that better days lie ahead.Just doing many of the basics right, including being transparent and issuing financial reports on time, will help build confidence in the City.To build confidence, Zille will need some quick wins to show that she is fully in charge and can achieve things. The potential big quick wins will be to ensure a quick response to reports of potholes and water cut-offs. Ensuring refuse is collected on time, grass is cut on the verges of roads, and that the Johannesburg Metro Police steps up its enforcement of by-laws and traffic regulations will also help.Better policing is key. The “broken window theory” introduced by James Q. Wilson in the early 1980s argued that signs of disorder, vandalism and negligence create an environment in which vandalism and crime thrive. If the City does its job, private property owners might see an improved environment in which to do repair and maintenance. That helps boost confidence.Building partnerships with business and non-governmental bodies will help her project and further build confidence.And it is very likely that the unions will test a new DA-led coalition. Unions might well want a showdown soon into the life of the new coalition simply to test its resolve and power over salary hikes and layoffs. If the coalition wins, the confidence of the residents and business in the City will have been given a big boost.The wins for the City are enormous from a restoration of confidence. It is not an insurmountable job.Speak to real estate developers and people in business and they will tell you that they are ready to expand.The importance of the Zille project is that on the matter of reform and turnarounds, SA is Johannesburg writ large. If it can be done in Johannesburg, it can be done nationwide. If Zille is in power, it will show that once near desperation hits, the voters are prepared to go for pragmatic reform-minded parties. And if those parties succeed, it shows the turnaround job can be done..Read more:.How Johannesburg can be pulled back from financial collapse: Helen Zille.Confidence is heavily psychological and why and when it is boosted is not always clear. Market sentiment can change overnight on what many would see as minor developments. Confidence can dissipate overnight if expectations are not met.The thing about confidence is that it is contagious and can be a very powerful force. Exciting times may lie ahead for Johannesburg..*Jonathan Katzenellenbogen is a Johannesburg-based freelance journalist. His articles have appeared on DefenceWeb, Politicsweb, as well as in a number of overseas publications. Katzenellenbogen has also worked on Business Day and as a TV and radio reporter and newsreader. He has a Master's degree in International Relations from the Fletcher School of Law and Diplomacy at Tufts University and an MBA from the MIT Sloan School of Management..This article was first published by Daily Friend and is republished with permission..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. 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Confidence, not cash, will decide whether Zille can turn Joburg around: Katzenellenbogen

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