DUBLIN — He’s an unlikely hero is Shaun Abrahams, the now-disgraced former head of the National Prosecuting Authority (NPA). But Abrahams may inadvertently have done the country and the currency a world of good by getting sacked amidst the emerging markets currency crisis. The rand, which by all logic should have tanked in the wake of the ongoing Turkish lira crisis, held its ground to a remarkable degree last week. It’s a head-scratcher until you remember that Abrahams’ head rolled last week, sparking hope that the country may get a better NPA boss who can start to clean things up around here. Alec Hogg and I discuss events at the NPA and their impact on markets. We also take a look at the ongoing chaos at Tesla and the role of the board in allowing it to continue. – Felicity Duncan
Hello, and welcome to this week’s episode of From the Editor’s Desk. This is BizNews Radio and I am Felicity Duncan. With me on the line is Alec Hogg.
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Alec, it was a big week in SA, in terms of turmoil on the political front, but in a positive way – specifically, what’s been happening at the National Prosecuting Authority (NPA). So, to kick us off just give us a sort of bird’s eye view of that and then we’ll talk about the implications that this has had for the currency?
Well, sometimes you get lucky with the timing of the reading that you do and certainly, this has been the case for me. I read Rule of Law, Glynnis Breytenbach’s book, last week and finished it off in about four days. It was an incredibly interesting book. A bit difficult for the first half but boy, when she gets into her stride you can’t put it down. What’s really good about this is that she unpacks exactly what’s been going on at the NPA.
Now, for those who just see it as an anagram – it’s a critically important part of the whole fight against crime because the State Prosecutors are effectively the people who put the criminals in jail. So, you can have rampant crime and you can have a fantastic police force, but if the police force cannot give the information to prosecutors, who can then build a case and put the miscreants behind bars, the crime will just continue because there’s no disincentive for people to commit crime.
What has happened though, at the NPA, is much more sinister. In essence, over the last few years, you had a president, who is himself deeply complicit in criminal activity, who has been appointing people on the strength of their ability to protect him from prosecution – not just him, but his cronies. And essentially, when you go through the Breytenbach book, this becomes so abundantly clear. We had Bulelani Ngcuka, as the first National Director of the NPA. He was appointed as part of one of the negotiated settlements at CODESA, which was back in the early 90s, before democracy dawned in SA in 1994. The ANC insisted that the head of the NPA would be a political appointee. It would, in other words, be appointed by the president.
Now, at the time, there was a lot of debate about this. The National Party didn’t want it to happen. But then they saw, well, the president was Nelson Mandela and he would probably appoint a very good guy, and away we went. And as many things happened in SA during that time, many of the ideas and the negotiations and the laws were written for a president like Nelson Mandela. Not for a president like Jacob Zuma.
So, as a consequence, reading through Breytenbach’s book, you get to see how the system has been abused for years and the latest incumbent was installed there because his predecessor – who was appointed by Zuma, in a way that he expected him to follow his path or what Zuma wanted – this guy turned out to be too independent. As a consequence, he was given a R17m golden handshake to go away. They found stuff in his history, which could be used to say he was ‘unfit for office’ and this was after a previous NPA director, Vusi Pikoli, was fired because he was too independent and he wanted to investigate the arms deal and other things.
So, you have Ngcuka, who leaves, who didn’t prosecute Zuma, which he should have done. Then you get his replacement, who was fired because he wasn’t towing the line. Then you get the next guy, who was fired because he also wasn’t towing the line, but he was given a big handout. Then to make sure that the head of this critically important organisation listens to the president, who doesn’t want him and his pals to be prosecuted – they appoint Shaun Abrahams. They take him from four layers below the position that he was in and stick him into that position and the consequence of all of this was that crime was just going rampant. You had the plundering of South Africa, you had no prosecutions of those who were perpetrating the crimes, and that all came to an end on Monday.
So, it’s a long story but there’s a lot of history to it and on Monday, Shaun Abrahams lost his final appeal. He’s booted out of office. Now, we wait for a new NPA head to be appointed and then the prosecutions and then the investigations can begin into the mass criminality that South Africa has suffered.
Right, so essentially, this comes down to who is going to be appointed, right? Because if we get an appointment with a very credible person – a person who is not implicated in any of the shenanigans of the last ten years, and somebody who people can count on to be independent and to pursue wrongdoers without fear or favour – if we get somebody like that appointed, then things are really looking up. But, on the flip side, if we get somebody appointed who is not as pure as the driven snow, then again, fresh questions arise. And we again, start to worry, is this going to just be a whitewash? Is this going to be a continuation of what we’ve seen before? So, there’s a lot hinging on this appointment.
It’s too ghastly to contemplate, if you have another appointment like a Zuma-type one. What Zuma did was he got rid of independent thinkers, and put in yes-men. It happened with the Public Protector, when Thuli Madonsela’s term of office came, Zuma couldn’t wait to put in one of his plants, who has really appallingly bad, the new Public Prosecutor.
Similarly, with the Mining Minister when Ramatlhodi was standing up against the Guptas, he got dispatched and in came a backbencher from the Free State government called Zwane. Similarly, with what he tried to do with the Finance Minister. I can’t imagine. I couldn’t even begin to believe that that is what is going to happen in this case.
Ramaphosa stood on an anti-corruption platform. He has been supported by people. The evidence of what corruption has done to SA, it’s there for everyone to see. The economy’s contracted since 2011, from a GDP of $420bn to $280bn. It needs to be done.
So, Ramaphosa is aware of all of this. I just can’t believe that he wouldn’t put a highly respectable and independent person in that place. If he doesn’t, it will be a huge shock and the Rand will them completely blowout, because there has been an international belief that Ramaphosa is the guy who is going to fix things and here’s an opportunity for him. He’s not going to flub it.
Yes, and that’s certainly something that we’re going to be closely watching. Now, in this week we also saw some very interesting movements around the currency. So, just by way of background, of course, the ongoing crisis in Turkey, the U.S. imposing a lot of sanctions and there’s a lot of questions about Turkey’s ability to pay its debt, about the future of the Turkish economy, about the leadership of Turkey. This has obviously caused a contagion effect in markets. We’ve seen a big sell-off of emerging market currencies, and emerging market stocks, to an extent. Now, in the course of this week we saw, for example, the Indian Rupee plunging. We saw the Peso in Argentina taking a big hit. But we didn’t see the Rand collapsing, certainly not to the extent you would expect, give that it has, historically, had a very close relationship with the lira and all these other emerging market currencies. So, people look at the Rand and say, ‘It didn’t do great this week, this is a problem.’ But really, it could have been a lot worse.
You’ve put your finger on it. I did some numbers ahead of our webinar, which we had this week, to have a look at how the Rand had actually performed and where it should have been going. My thesis was, what would have happened if Ramaphosa had not won the elective conference and that you had a continuation of the Zuma legacy? The results of that are absolutely fascinating. Because if you consider the way the Turkish lira has performed, you then track that back to the South African Rand and you would then get an idea, because Erdogan is very similar to Zuma in so many ways. He’s a wannabe dictator, well, in his case he’s pretty much an autocratic dictator and he has very weird ideas on how economies should be run and how his friends should be favoured. If you go back with the Rand, it has followed the Turkish lira slavishly, for years. It started diverging only in January this year.
So, when you got to January, if you would have a look at the comparison of the South African Rand and the Turkish Lira against the U.S. Dollar – they were on a par, if you like, call it on the 1stJanuary. Subsequent to that, the SRand has actually outperformed the Turkish lira by no less than 51%.
So, what that tells you was that if the South African Rand had not.. if we hadn’t had a Ramaphosa, instead of the Rand sitting where it is at the moment, in the R14s, we’d be sitting with a Rand in the R20s.
And that’s the sum total of it. Because the Rand followed the Turkish Lira or rather, they were twins, they were almost joined at the hips. They are emerging market currencies. They had similar economic trajectories. They had similar leadership philosophies, and that was Zuma and Erdogan. Today, the Turkish Lira has depreciated, since January, by half against the South African Rand. So, we’re at R14.68 on the Rand. Had we not had a sensible, economic leader in the presidency we would be in the R20s, and that’s something to consider.
Yes, and that really puts it into perspective, right? People are quite critical of Ramaphosa. They’re critical that it hasn’t happened fast enough. Not enough stuff has been done. There’s this, that, and the next thing, but that is a real concrete number that says, look, maybe it’s not perfect but things are changing.
Indeed, well, fortunately we’ve got this absolute parallel that we can look at because it is something that has happened for many, many years. The two currencies have not diverged until now. So, there we go. Thanks, Cyril. The ANC elective conference voters didn’t really, I guess, think about this when they put their marks on the paper. But they can actually pat themselves on the back for getting really lucky, and the country missed a big bullet.
Absolutely, we’re coming close on time here, but while we still have a few minutes, do you want to touch a bit on this week’s adventures in Tesla, because really, there’s never a quiet moment, right? Yet, another week full of news, out of a company that is starting to look a little chaotic.
No, it’s bizarre. I think the problem here is that when you start believing your own PR, as a human being – hubris, ego, call it what you will – you do start making weird and erratic decisions. Because the people around you either think you are so brilliant and so clever that they cannot challenge you, or, you believe that they should not be challenging you because you are so brilliant and so clever. And that seems to be happening in Elon Musk’s life. We’ve been going back and warning about this. You actually started waving the flag some months ago. We’ve been following his pronouncements very carefully, and partly, because we had Tesla in the BizNews Global Portfolio, and we decided some time ago to actually exit that investment.
As it happens right now, you might criticise it and say, but Elon Musk is talking about taking the company out at $420 per share. I think we sold out in the $330s, but if you have a look at the credibility or the substantive substance of that comment – it’s just unravelling. It seems like he decided he wanted to have a go at short sellers, he pulled that figure out of the air because that’s what he thinks the company is worth. Will investors, if they exist – and he steadfastly maintains that there are investors who would back him to take the company private – would they be prepared to pay $420? Then on top of that, would they be prepared to have a CEO with erratic behaviour that Elon Musk has been displaying lately? All of these things are looking pretty weird. But I think what you’re referring to is that article in the New York Times on Elon Musk, and maybe you should just go through that quickly.
Yes, it’s a very interesting piece. Elon Musk sat down with the New York Times and they had a very long interview. He says, this has been the most difficult year of his life. He was talking about how he’s been working 120 hours a week. He worked on his birthday, and he nearly missed his brother’s wedding and it’s been so difficult.
And it’s true, right, he is a human being and he has been putting in the hours. No one is questioning that he spends half his nights on the factory floor. He’s really working very hard. But, to me, that is just further fuel for concern, because nobody can sustain this pace of work. I don’t care how committed Musk is to Tesla. You just can’t work 120 hours a week for 10 years and expect to be doing a good job, right? Because you’re exhausted. You have no time to rest, and you’re just going to start to make silly mistakes, like that crazy tweet.
To me, it just says, why is Musk or why is Tesla not willing to ease his burdens? He’s the CEO and the chairman of the company – get some other management people involved. Spread the burden so, if, for example, Musk wants to focus on production then let him focus on production. Hire some sort of operations manager, hire somebody who can worry about the finances, worry about, should we go public or should we go private? Let him focus on the thing that he’s passionate about, where he can make the most impact.
To me, letting him burn himself out like this, I think the board should come in for some criticism for not saying, look, we can’t have one person shoulder the wellbeing of this entire company. We need to, if we’re going to be a long-term, sustainable business, we have to be more than just the glamour of Elon Musk. We have to have a team in place, who can make sure that things are run smoothly, that things happen, and he is not tweeting after a night partying with his girlfriend, Grimes, and sending the stock price shooting up or shooting down.
To me, reading the article, I certainly feel for Musk. He seems to be emotionally in a bit of a troublesome place, but that just says, somebody needs to step in at the business and say, how are we going to run this for the future?
Yes, it’s quite interesting. You mentioned Grimes, his girlfriend, who is 30 years old, and Elon is 47. Let me tell you, that is a challenge in itself and apart from that, she’s really artistic and very interesting, when you look at her videos and her mindset must be extraordinarily different to that of his. But its got to influence him. It’s got to also suck quite a lot of energy out of him, at his age.
Even though he is a wonderful innovator, there’ve been many, many instances in history, including the original founder of General Motors, which often has been used as a parallel now for Elon Musk and Tesla. Many examples of people who’ve been brilliant but then they’ve over-reached. They’ve just got too big. They haven’t known how to… as a business person your biggest challenge is to know how to delegate, how to pass over so, that you can take a business to a certain stage, but it’s very rare that people have the ability to adapt towards that.
Steve Jobs didn’t. Steve Jobs had to leave Apple for a dozen years, and then be brought back in with a different mindset, before he could make Apple into the company that it is today. But when he left the company, after that tussle that he had, if you recall, in the 90s. That was a consequence of being over-reached, exactly like Elon Musk and I’m sorry, Elon Musk is great but is he a Steve Jobs? I don’t think he’s quite achieved that level of competence yet. That’s what makes Jeff Bezos so special. That he’s been able to continue and slowly build up this incredible model that he continues to be involved in. He continues to have a focus on customer satisfaction or customer obsession, as he calls it.
And I just know from my own business experience, Felicity, you can so quickly be pushed into a position, where you let a business get too big too quickly. Instead of building it slowly and realising that everything on earth requires time. You need roots of a tree to be as far down as they are, for the tree to be above surface. Businesses should be the same way, one step after the other.
Why I’m talking about this, and why I’ve been reminded of this was I had lunch this week with Tony Manning, who to me, is just in a different league to any other management consultant that I know. And I’ve engaged and stayed close to Tony over many years. He writes magnificent books. Tony was just saying to me that one of the problems of South Africa’s economy, which we touched on earlier, is that we’ve forgotten that we actually, need to do the basics right. When you get the basics right in any business then you have a foundation, from which you can grow. But you don’t want to grow too quickly because then you aren’t getting the basics right anymore, and it seems like that’s what’s happened with Elon Musk.
He’s trying to do everything himself, or far too much himself, without actually getting the basics right of putting people around him. Exactly as you’ve said, there should be a financial director who’s talking about taking the company private. He can have the idea but he doesn’t have to execute it all himself. He isn’t the world’s only genius. In fact, he’s one of many geniuses on earth and I’m sure he could attract others to assist him. He might be very smart, in fact, he might have an IQ far higher than you and I put together. But even so, there comes a limit to what you can do.
