🔒 PREMIUM: Alec Hogg: South Africa’s dawn breaking after the darkness

LONDON — And now for the good news. Here’s the audio of Biznews founder and editor Alec Hogg‘s speech at South Africa House, London to the SA-UK Trust Network. As expected, the rational perspective provided at a time when many in the young democracy really need it. Hogg draws on the facts to explain why a new dawn is breaking for South Africa, but that there is much economic rebuilding ahead after the destructive Zuma presidency. – Alec Hogg


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I’ve got a few pictures to look at and I’m going to start off with this one because this actually tells it all. What I’m going to tell you a little later today might surprise you. It might surprise you on the upside. You often will hear that those who see optimism in SA are Pollyanna’s, even boy Pollyanna’s, and that they don’t really know what they’re talking about because of course, it is all doom and gloom. That is the reason why – this is a kudu doe, and coming from where we come from, we would have been to the bush at least a few times, and the reason why she’s got such big ears is because nature has given them to her so that she will listen very carefully for the rustle in the reeds. It is a fact for human beings as well (homo sapiens) that our forefathers – when they heard a rustle in the reeds they ran for their lives because that rustle was existential. It could have been an animal that was going to kill them.

If you read a book by a Nobel Prize winner, Daniel Kahneman, he’ll explain to you that we, as human beings, pay 10 times more attention to negative news than positive news. So, when you read the media you’ll get a very good understanding of why the media produces so much negative news. It’s because bad news sells because homo sapiens are hotwired to absorb it. Sometimes you need to just step away a little bit and the most successful people in the world have managed to do that because they can actually see things in a more balanced perspective, rather than in the perspective to which they’re hotwired so, just bear that in mind.

Okay, I’m going to start off with the darkness and that’s a picture from Zapiro. We’re entitled, because we pay him – not the Guptas, but the reality of SA is what it is. Those of you who have read The President’s Keepers, you’ll know exactly what’s been going down in our beloved country. Those of you who haven’t read Jacques Pauw’s book please do, you need to educate yourself. I’ve only got two cartoons and two graphs, a good balance. The first of these graphs is really the most important thing for SA right now. If you have a look at this. What this is telling us is the debt that the country has relative to its size of its economy. Now, clearly you want as little debt as possible as a proportion of the size of your economy. If you have a look at that turning point you’ll see it is in 2009. That is when the current president, who will be the ex-president very shortly, came into office. It is a straight, one-way line on what’s happened to the country’s borrowing.

If you were to do this in a household you would be pretty worried because this is a way to penury. Remember, Micawber, who I think lived somewhere around here. Charles Dickens wrote about him, and he said that income – 5 shillings and 6 pence, expenditure – 5 shillings result happiness. Income – 5 shillings and 6 pence, expenditure – 6 shillings result misery. So, if you overspend and you start arising debt, as SA has done, you will find yourself in misery at some point in the future. The figure that SA is quoted on is 52% debt to GDP, which is above the threshold that any developing country should be at. If you add in the state-owned enterprises it goes to 70%, which is a concern.

Let’s move to the next graph and remember, this is the dark stuff. If you have a look at that. The grey line that you see there is what is called the budget deficit, and the red line is the economic growth rate. Now, this goes back to the mid-80s. When you borrow more money and you spend more money in an economy generally speaking, in other words, when your budget deficit goes up your economic growth rises as well. As in a household – if you were spending money you would presume that you would be able to grow things. What’s happened in SA is precisely the opposite, which means we’ve really been wasting money or, as the first cartoon showed, we’ve been robbed blind. Pravin Gordhan puts the number at R100bn that the Guptas have stolen from SA.

The result of all of this, when your debt is rising, when your economy is not growing, you get the ratings agencies that no longer value your debt that when you go into the international markets and you say, ‘we’re a developing country, give us money so, we can grow our economy.’ The ratings agencies have downgraded us progressively and as you can see now, two of the ratings agencies have put SA debt into junk. That is not good news. Just the word tells it all to you. We’re still a little bit above on the one, on the third of the ratings agency so, two shoes have dropped. When the hat drops the real problems begin.

Okay so that’s the bad news. That you know. That you can go and slit your wrists about, as most South Africans do day-to-day but actually, that’s not the true picture because the green shoots began a little over, or roundabout a year ago. Then we had the infamous cabinet reshuffle earlier this year, or seven months ago, at which point the man on the right, Pravin Gordhan, the finance minister was then reshuffled out of a job, and that followed with his deputy, the man on the left, Mcebisi Jonas. Why these two fellows are so important is they have become icons in SA for integrity, for the anti-corruption drive. Jonas didn’t have to. Jonas could have left the Saxonwold shebeen, as we know it – the Gupta-compound, with R600,000 in a plastic bag, and R600m to come. The numbers are astronomical but those are the numbers that are seriously being paid to people.

He chose not to do that. He went and told his boss at the time, Nhlanhla Nene, who said, ‘you’ve got to be smoking something.’ Unfortunately, he wasn’t and Nhlanhla Nene was then, as we know in Nenegate, December 2015, was replaced by this man, sorry not by him but he was replaced with what we term in the media, a Zuptoid, a chap called van Rooyen, and the business community was up in arms. The international community was very unhappy and then they replaced him with Pravin Gordhan. Pravin Gordhan stepped into the breach, he did very well and kept the credit rating. However, he himself, was reshuffled as we know, in March, but the reshuffling was a good thing because it freed him to start doing the kind of work he’s being doing.

Here’s a South African or he grew up in SA. He was born in Kenya, and grew up in SA, he was leading the precessions. Jill, you were talking about him right outside, that’s Lord Peter Hain with hair. Well, he had a lot more hair in the past and Peter Hain has been a great friend to SA over these past few months. He’s picked up the cudgels. HSBC has been a great enemy of SA in this past little while, and has been exposed to have laundered billions of Rands on behalf of the Guptas out of SA, into Dubai. The major breakthrough that Peter Hain had, he was told by a whistleblower. He was given all the information and all the documentation, which showed that when Transnet bought a lot of locomotives from a Chinese company, R40bn left the country to Hong Kong, from HSBC. It got to Hong Kong, and then R5bn of it went to the Guptas in Dubai, and the balance was paid to the Chinese company so they made a cool R5bn. It was their biggest deal but they’ve had others as well. As Pravin says, up to a total of R100bn. He’s done great work. Actually, while we were sitting here he sent me a note to say, ‘hey, I’m in the House of Lords – I’ve got another money laundering speech tomorrow.’ So, tune on your television tomorrow and you’ll hear Peter Hain going to bat for SA once more.

I think this is one of Zapiro’s best cartoons. It reflects the crony capitalists who’ve caused so much problems for our country and essentially, it’s some of the very big names who were facilitating the issues or the way that they were managing to get money out of the country. As you can see there, remember when everything we touched turned to gold. Clearly, it smells a little today. This is still ongoing – KPMG, SAP, HSBC, the Bell Pottinger demise. It was incredible if you think that Bell Pottinger represented Pinochet, and Assad – some real dictators around the world. They managed to survive that but when the South African NGO sector got onto them, and the media as well, they collapsed pretty quickly. The issues that are being faced, by McKinsey in particular, and KPMG, SAP, and others are significant.

So this little country of ours makes only 0.6% of global GDP, has got a very feisty NGO sector, and not just in the charity field but in the anti-corruption field. It’s like a flotilla of little ships that are shooting at this big battleship and they’ve put quite a few holes into the big battleship and the battleships are listing badly. The most recent development on this front was the FBI (Federal Bureau of Investigations) in the USA are onto the job, the Department of Justice in the US, and so are the British Serious Criminal Offenses Office investigating all of this. What happens with corruption is when you turn the tap off or the oxygen off, the whole ship implodes, and that’s what’s in the process of happening now in SA. I share this with you as good news. Sure, it happened but the reality is that we have gone through the worst of it.

The media played a huge role in exposing corruption and the other, bulwark of a democracy is the judiciary, and the judiciary has also been stress-tested, as has the media, and it’s come through with flying colours. Now, I share this with you because quite often we forget that the reality of where we live or where our hearts live anyway, for those of us who live in the UK now, as we are expanding our business. Where our hearts live is a young democracy. It is not even a quarter of a Century old yet and we’re still finding our way but we do have these two bulwarks who have held firm against enormous stress. That is something that you need to celebrate and we should be celebrating every day.

Of course, when you are like that kudu doe and you are giving ten-times more relevance to bad news than the good news, these kinds of things pass you by but there are many heroes that have emerged in SA. You could probably name half a dozen off the top of your head who are showing that the spirit of Madiba certainly hasn’t died, and there are many who are still aspiring to the ideals that he gave in us to become better than ourselves. I’m so excited about next year. Jill, what you were saying about 2018, because it’s just come at absolutely the right time. There’s a massive rebuilding job to be done. You saw earlier those graphs about the way the debt has gone – we have to level that out quickly but the rebuilding is possible.

Lots has happened in the last month and what this reflects, in fact, this is only in the last couple of weeks. This shows you what’s happened to the Rand exchange rate since it became apparent who was winning the presidential elective conference. Now, just to put this into context. You have, if you like, the incumbent who is supporting his ex-wife, who is perceived to be continuing more of the same. Against that you have Madiba’s favourite, let’s not forget in 1994, Madiba was very close and he wanted Cyril Ramaphosa to, if not succeed him but at least to become Thabo’s deputy.

So, you have Madiba’s favourite, who has many of those views, the reconciliation views, the nation building perspectives, who has now come in front or is the front-runner. Although there’s all kinds of debate and all kinds of flags being waved that there will be corruption and there’ll be all kinds of issues at the elective conference. The SA exchange rate is telling you that that’s not going to happen. This is an inverted exchange rate so, the higher it is the weaker the Rand. At one point, as you can see, in this month the Rand was trading at R14.50. It is now trading below R13.50 against the US Dollar. Without knowing anything about finance, you have to realise that if people are prepared to give you more Dollars for your Rands – they have a much better view about the future of the country.

So, I’ve had the privilege of seeing Cyril upfront in every year I go the WEF (World Economic Forum) in Davos. This year will be my 14th, and last year he led the delegation to Davos. He was decidedly presidential. It was a huge difference from the previous year when Jacob Zuma led the delegation, where SA was almost off the agenda. It’s a hard job to be done, to get back on the agenda but certainly in that environment you see the best of Cyril Ramaphosa. You’ll remember, he was intimately involved with the National Development Plan, which has been gathering dust now since 2012. If you read his statements of his campaign. It’s completely anti-corruption. Why does he say, ‘anti-corruption?’ Well, he’s incorruptible. Why is he incorruptible? He’s rich enough and he doesn’t need to be corrupted, and that is SA’s number one priority at the moment. Corruption is a cancer that affects the poor the most because corruption takes resources away, which means taxes have to go up, generally indirect-taxes. Indirect-taxes are a tax on the many.

I get quite surprised sometimes when some analysts trot out the figure that 105,000 South Africans are carrying 30% of the tax burden. Well, they aren’t. They’re carrying 30% of the personal income tax burden but indirect taxes make up another third and the rich certainly don’t carry that burden. It’s the poor who do and the poor, of course, can least afford it. Have we got challenges? He knows exactly what they are. We still have the worst Gini coefficient in the world. What that means is that the difference between what the rich earn and what the poor earn is the highest on earth. Now, 24 years after democracy we would have hoped to have made strides in that direction. In fact, we were making strides in that direction but the last nine years we’ve been going backwards in every area, and that one included.

Another issue that has come at just about the right time is Zimbabwe. One forgets how many Zimbabweans are in SA at the moment, and with the new president who has taken over, Mnangagwa, there are of course, once again, people with their kudu doe hats on, seeing the dark side of Mnangagwa. Probably his best reflection of what he might be doing from an economic perspective, was in an interview that he gave, a very rare interview about a year ago. In that interview he explained that the country needed to adopt modern economic policies to attract investment. If you don’t have investment you cannot grow the economy. If you can’t grow the economy you can’t grow jobs – it’s that simple.

Those who have idealistic views and have perpetrated them or perpetrated that misery on their fellows, like in Venezuela and of course, Robert Mugabe, show exactly what the opposite can do. That is Mnangagwa, he appears to certainly know what needs to be done. There has been a lot of criticism about the cabinet that he’s put together but if you talk to Zimbabweans, and a very good friend of mine, he was on my board at Moneyweb, a company I started some years ago, Trevor Ncube, who’s a proud Zimbabwean. He’s very excited about the future and if Trevor is optimistic, then I think that we should really be looking to people who know what’s going on there rather than the pundits who are prognosticating with their kudu doe ears from their couches.

This is the final bit of good news for you. This only came out late last night, and that shows you that all of the branches have now voted in the ANC, ahead of the elective conference and why is this important? Well, because we have two candidates, as mentioned earlier, Cyril Ramaphosa, who would the be the candidate anti-corruption. The candidate who would look to introduce Madiba-type economic growth policies, who would be the candidate who has credibility in the global community, which would then attract international capital into SA, which is what the country needs to grow – he is the yellow line. Nkosazana Zuma, is the white line and the numbers are now in from all the branches. The way it works, without going into too much detail, is the branches have been asked to give their top six, as well as every member of the NEC. They’re meeting from the 16th to the 20th December, and as you can see, Ramaphosa is 500 in front. I think this underestimates his lead and the reason why is because some of the branches, the bigger branches, have more votes and it makes absolute logical sense that the bigger branches are in metropolitan areas and the metropolitan areas is where Ramaphosa has received most of his support.

You’re still going to hear many people coming out with conspiracy theories. In fact, I heard one last week from a CEO of a big company listed in Johannesburg. He said to me that a London friend of his had told him that the Russians had been paid R1bn and had bought the election for the wrong party. Now, you’re going to hear stuff like this. I don’t believe it for a minute. If it were to occur though, if something off the wall were to occur and for some reason the candidate who most of the provinces have voted for, and most of them by quite some distance. The bars to the left are by province, and you can see the yellow bars are Ramaphosa and the white bar is for Dlamini Zuma. You will see that most of the provinces have voted overwhelmingly for Ramaphosa.

If there were to be this stealing of the election next month there’s no doubt that there will be a split in the ANC, and that’s the one thing that the ANC is not keen on doing for many reasons. If you read a book by Jakkie Cilliers called ‘Fate of the Nation,’ what he did was he gave three scenarios. In his opinion the best possible scenario would be for a new ANC to be created to then fight with the old ANC. In economic theory, the best scenario would be for a rejuvenated ANC to be led into the future because when you have a dominant position in parliament you’re able to do the unpopular things. There are going to need to be many unpopular decisions made by the government in the rebuilding process in SA, and it’s going to be a rebuilding process that those of you who were around in 1994, and I guess in this room there would be quite a few of us, will remember how excited we were at the opportunity to remake a country. To make our contribution to invest in a wonderful country that has fantastic people, and the greatest opportunity on earth.

I would just like to leave you with one final graph. That’s the appreciation of the Rand because it does show you exactly want the international community is thinking. If the international community was reading the election differently or if they thought it would just be ‘business as usual’ with Ramaphosa. You wouldn’t have seen such a dramatic increase in the Rand exchange rate. My last point is those of you who have been following international politics would have noticed that in France there was a massive change. A massive move to the centre with Emmanuel Macron, with a whole new party. He hadn’t had a political party, two years before he was elected and now they’re running the country. At a wonderful speech that he made at the Sorbonne about six weeks ago, where he outlined what he believed the world needed. Point four, which seemed to get lost amongst this. I think it was one of the longest speeches by a politician in the Sorbonne, it was 90 to 95 minutes. But point four was all about Africa where he was talking about a Marshall plan for Africa.

Now, a Marshall plan was when the Americans rebuilt Europe after the Second World War, and Macron’s view is that you cannot put walls up if you’re different to someone who lives on the other side of the planet. You cannot put walls up to stop people from coming in. The immigration that Europe is so worried about, cannot be fixed in any other way (in his opinion) than at the source and the source is Africa. His view is that you introduce a new financial tax on every financial transaction – maybe a small tax. They have it in France already where they raise €1bn per year. You put that into the whole of Western Europe to fund a Marshall plan/type of operation. These are interesting things that one many say (and people forget about it); but there is a momentum and a realisation that walls don’t stop people…that you actually need to be integrating your efforts across the board and certainly, at the source. As far as your sector is concerned, all of this information is I think, the kind of thing you should be applying when you’re looking forward into the future because South Africa’s going to need rebuilding and fixing from all areas/many areas. However, in the next year – the next two to three years -, as it dawns on the rich north (if you like) but the role that South Africans are prepared to take (and it isn’t going to be easy), the NGO sector and the charity sectors are surely going to be in the forefront of that whole process.

Thank you, Geoff, for inviting me. Thank you, Geoff, for telling Joe I was available.

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