The Editor’s Desk: Times are tough, but Ramaphosa is ready

DUBLIN — Cyril Ramaphosa is in the driver's seat, but the course he has to navigate is full of challenges. From Eskom to Makhanda, Ramaphosa faces a landscape marred by corruption, mismanagement, incompetence, and failure. How he and his team rise to these challenges will determine whether South Africa Inc sinks or swims. This week, Alec Hogg and I discuss some of the problems Ramaphosa must address and focus on one area where he seems to be making the necessary changes: The National Prosecuting Authority. The NPA was eviscerated by the Zuma regime, which didn't enjoy the NPA's attempts to investigate Zuma's corruption. The first step to seeing justice done for the country is the rebuilding of this shattered institution and Ramaphosa is taking steps to do just that. And the good news is that the world is taking note – as we discuss, the SA stock market is showing signs of a return to business-as-usual. This is a great development for South Africans who are thinking about their futures. – Felicity Duncan .Hello and welcome to this week's episode of The Editor's Desk here on Biznews Radio. I'm Felicity Duncan and with me, Alec Hogg. Alec, Ramaphosa's firmly in the driver's seat right now and he's already kicking off with some interesting challenges and I'm thinking here specifically, of the story that we've been following on Biznews, which is the… Let's call it 'the goings on' in Makhanda (formerly Grahamstown) with respect to some misbehaviour there by the Department of Water. Do you want to talk a little bit about this?.___STEADY_PAYWALL___.Yes, and particularly just going back to what you started with; I did some research this week for Biznews Premium on the voter numbers and it's quite clear that the Ramaphosa effect was very significant and substantial for the ANC. Quantifiably, you can see there are more than 300,000 people who voted for other parties at a provincial level but the ANC at a national level. Now usually, it's the other way around. Usually, they would be looking on a provincial level of getting perhaps an opposition – either in power or in a strong position at a local level – so that 300,000 is only a very small percentage of the people who would have voted, or who would otherwise have voted against the ANC, and the major reason they're doing this is because Ramaphosa's come out with this campaign of growing the economy and attacking corruption..Now, in Makhanda there is a frighteningly bad story going on – one that has been exposed by Gift of the Givers, which is a disaster relief agency that goes into different areas on the African continent where disasters have emerged. I think its Muslim primarily and they help to, to sort things out. With Makhanda not having water for ages they were called upon – Gift of the Givers by the department of water and by the local municipality. They went in on good faith, spent quite a lot of money (well millions of Rands), brought in various people to drill boreholes, and did feasibility studies. The numbers that they talk about are around R15m, between R15m and R22m and duly they were reimbursed (or they did it in faith), on being told by the local municipality that, "we're in a crisis, of course we'll pay you"..The Water and Sanitation department agreed to pay as well, but according to Gift of the Givers when the department actually paid the R22m, they insisted that that money not be paid to Gift of Givers who'd done all the work but to certain local Makhanda firms, which is really snouting. There's no other word for it. The work has been done by an NGO and there are now these people who are put in between the NGO and the bank and they're the ones who are scooping up all the cash which is horrific in any way you want to look at it but we shouldn't be surprised. You might remember a couple of years ago Dudu Myeni, the very, the lady is very close to Jacob Zuma who was the chair of South African Airways, who really has been exposed by Paul O'Sullivan as being a thoroughly displeasurable character..She was very involved in the water area and she said quite openly to a guy who then expressed it in court that it was her time to eat and that this was the way she was eating i.e. "it's my turn to take money". If that happened in a, in that kind of Dudu Myeni approach then it shouldn't surprise us that anything to do with water affairs is contaminated and in this case though they really have driven a bulldozer through a tiny little area and exposed the malfeasance that is happening even in crisis areas, even where people come in from the outside to help in disasters. It's a disgusting story and an early test for Ramaphosa's new administration..Absolutely and you know all eyes now will be on Ramaphosa's to see, you know what kind of responses are we going get. Right, what are we going see, prosecutions, are we going to just see more inquiries, what, so practically where the rubber meets the road, what is he going to do. And I think there are already some early signs that his going to take action and now I'm thinking specifically of some staffing moves at the NPA that are quite interesting and quite hope inspiring. .Well we do know that new national director of the national prosecuting authority, Shamila Batohi, she comes highly recommended. She's spent 10 years internationally and on, with the international criminal court and she's getting her feet under the desk. The Hawks under her direction are also making a lot of progress in various areas. We saw the arrests last week of the mayor of eThekwini, in other words, I think it's the 3rd biggest metro in the country, the sitting mayor was arrested for corruption along with 9 of her cohorts but what's happened, what happened on Friday night was the appointment of Hermione Cronje as the head of what is, what South African's would remember as the old Scorpion's, it's part of the national prosecuting authority, it had been, it's an independent investigating body..It had been disbanded by Jacob Zuma, because they were investigating Jacob Zuma and some of his pals and so there was no more the Scorpions. Then they replaced it with the Hawks who were very, well they didn't have too much powers or talents because the people running the Hawks were the wrong people. Now we have this highly independent, obviously a very brainy, miss, advocate Cronje, advocate of the high court, she's got a degree from Harvard University, she went to the Kennedy school there. She got an LOB from UCT in Cape Town, she's been working for the last few years in the United Nations body helping countries in Africa to fight corruption, so, between, with the countries and the United Nations, so its multi-lateral organisation which it had been instrumental in bringing in implementing processes to fight corruption primarily on the African continent and now she's come home to drive, to run the Scorpions..Man, have we got a couple of really, really powerful players in the national prosecuting authority who will be, certainly from their pedigrees out there and attacking the corrupt who have been getting away with it for a long time? One of the thoughts on all of this, I actually wrote…I tweeted on it and said: "Welcome to the person who will be the Gupta's biggest nightmare", because it does appear that is what advocate Cronje has been put there to do..Yeah, we talked about this several times, but for people who want to see concrete evidence that something is being done, that's the place to look – what's happening in the NPA? That was an institution that was really targeted for destruction, I want to say, during the Zuma years and an institution that's really going to hold primary responsibility for ensuring that justice is done, so as much as it's wonderful to see some good cabinet appointments in the past, it's good to see institutions like SARS being rebuilt, what happens at the NPA really is going to be kind of determinative of whether or not we see justice for the criminal and generally bad behaviour of the previous 10 years. And so, as you say, seeing somebody being put into place who appears to be a real, you know, both a serious person and a neutral party who is going to ensure that justice is done without fear or favour, that is to me just a really encouraging sign that the ANC is serious about this and they're taking aim at where it matters most from that perspective..Yes, I would say the presidency theories about this…The jury's still out on the ANC, because there are some pretty deeply implicated members of the ANC. In fact, even members of the current cabinet who have been exposed and are still walking free but we have to take hope from what happened with the mayor of eThekwini being arrested. What's been happening at Transnet with Popo Molefe driving a strong anti-corruption wave there, and now with the appointments in the key area. Felicity, if you don't control or if the criminals control the national prosecuting authority, there will be no prosecutions, because the criminals are effectively being asked to police themselves. That's now being cleaned out. There would surely still be some Zuma people there and when I talk to the pessimists amongst the people here in South Africa they say 'but the rot is so deep and there's so many of the corrupted individuals and in fact, they rely on the system, etc.'.The reality is that South Africa became a republic of no consequences. Their actions had no consequences because there was no one to actually bring you to account. That is changing. The minute you have consequences for your actions you do change your behaviour and that is very much the case that is happening in the country I believe now..Yes, and it's really what it's about, is normalisation – getting back to what South Africa tried to do in its first 10 years, which was build democratic institutions that imposed norms onto the country, norms of behaviour, norms of just obeying the law and respecting the office that you hold and so forth. And that's exciting to see and I think that there's some evidence that we're seeing this kind of normalisation if you look at stock markets right? So, for a period, South African stock markets just, it was sort of blanket negative. Didn't matter really what an individual company was doing. They were all tarred by the same brush. Everyone was headed downwards together and that was because there was some serious doubts about the normal functioning of the economy – is this going to just be a workable normal economy? I think that you're starting to see the market changing back to a market that rewards good performance and punishes bad performance in a way that is in keeping with any market instead of somewhere where it's just, you know, doesn't matter if it's good news or bad news, it's all bad news. .It's a very important point. During my years…20-odd years ago where I briefly went into the corporate field and worked with ABSA, I realised quickly that the international investors at that stage anyway would 1st satisfy themselves with the country then want to know about the company, so 80% of the questions were about the country. What was going on with South Africa? This was at the transition – 1994 – roundabout that time and once they satisfied themselves that things were normalising as you said earlier, then they would look at the company and decide whether or not to buy the shares. If they weren't satisfied with the country, they would just sell and that's exactly what one saw during the Zuma era particularly towards the latter part of it but in the last couple of weeks, we've seen Massmart for instance which that share price has been tumbling on the news that it's chief executive of the last 5 years is leaving – not with immediate effect but – before the end of the year..The share price was down 50% in the past year, which tells you that the performance wasn't that great and international investors weren't that interested but in the wake of the news of the CEO leaving, it's lost about another 15% as well. And we saw a similar story happening with Netcare when their financial results were out that share price has been punished to a large degree because the numbers were poor. On the other hand, when the numbers came out from Vodacom, they were perceived to be better than anticipated and that share price has been on the run as a consequence of it, so you're getting these differences now. There's another one – RCL Foods -. which is a food company which is moving in the right direction in a lot of the things that it is doing..It's not exposed to listeriosis, which was a risk at 1 point; that share price now is appreciated up about a 1/3 in the last month or so. Company-specific information is suddenly becoming important again and that is the sign of a more normalised market so the country over there; Ramaphosa is in power. We know what he wants to do. Sure, he's got a lot of resisters within the party, but it is a case of 'the king is dead, long live the king'. That's all sorting itself out, normalising, so now for investors you can start looking back at stock and start saying 'ah, this one is being punished too much, or this one has got really good prospects, it is a time now to be investing in that for the long term'..Yes, and I think that's the crucial point, that for investors it means you can actually put together a strategy based on a standard assessment of different companies – different strengths and weaknesses – and you can hope that that's actually going to pay off, which is a difference, I think, from certainly some periods of the stock market, where the best stock pickers in the world were going to struggle because they were facing this huge headwind from (as you say) questions about the country rather than questions about the company. And so, for South Africans thinking about their future, that's really important because it's saying, "Look, you can start to really plan for the future because you can at least rely on a market that going to behave more normally, and more like any other stock market." .But isn't it interesting? Everything happens in a developing country from the top. If you look at what Erdogan is doing in Turkey and continues to do in Turkey and how the Turkish lira and the South African rand were closely correlated for some years and have now completely diverged, they're completely uncorrelated because we no longer have an Erdogan running this country. It must make you, give you pause to think ok, if it's going to be a more normal society, how should I plan for the future? Indeed, now I can plan for the future is the point that you made, but it takes a while for people to actually pick that up and to start absorbing that reality..Yes, we've just got to give people time to let that filter through. For the listeners out there, it's important to think about the positive as much as you think about the negative. .Yes, indeed. South Africa is at an overflow of negative news for a long, long time. To me, the miracle of this country is that we've had a country that survived 9 years of Zuma and the institutions were really tested. They were stress-tested (if you like) and yet they survived and they came through it and that has to be a sign of great hope for the future.

The Editor’s Desk: Times are tough, but Ramaphosa is ready

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