The Editor’s Desk: Trump’s SA tweet is the act of a man in crisis

DUBLIN — When Trump tweeted that he wanted to investigate land expropriation and "the large scale killing of farmers" in South Africa, he sent the rand into a tailspin. But the tweet says a lot more about the president than it does about EWC in South Africa. In this episode, Alec Hogg and I discuss Trump's legal troubles and his attempt to divert attention from them with his incendiary tweet about South Africa. While the policy of EWC may be problematic, Trump's Twitter shot has more to do with his anxiety than any real concern with property rights. We also discuss Elon Musk's about-face on taking Tesla private and the many global successes of Boksburg boy Rowan Gormley. – Felicity Duncan.Hello. Welcome to this weeks' episode from the Editors Desk. This is Biznews Radio and I'm Felicity Duncan. With me on the line is Alec Hogg..___STEADY_PAYWALL___.Alec, the biggest news that has hit South Africa this week was Donald Trump's early morning/late night – depending on your time zone – his early morning tweet about his instruction to the Secretary of State to investigate land expropriation and the murders of South African farmers. Do you want to talk to us a little bit about the impact that that's had your take on it in general..Well, Donald Trump if you recall, did the tweet on the same day that his world in many respects, collapsed. Michael Cohen the lawyer, his Mr Fixit man turned away from him and became aligned with the Feds. As a consequence of that, Trump has suddenly found somebody deep inside his organisation. In fact, his most trusted lieutenant who has now become a star witness for the opposition. This is a very, very serious situation for him to be in, primarily because Cohen is going to jail, because he broke the law. He maintains that Trump forced him to break the law, and in many ways it has to be so, because why would Cohen want to wilfully pay off a couple of women who had affairs with Trump or claimed to have had afairs with Trump shortly after he got married, just before the elections. That is the background to it..He then sees this manna from heaven coming his way – remembering that his constituents are very much the Rust Belt, the white, seemingly disenfranchised American who would align themselves with the white farmers or the Boers in South Africa on a emotional level if not really an intellectual level. And as a consequence of that, everything to do with expropriation of land without compensation just plays into his hands. It's an attack, or can be designed as an attack, on property rights, an attack on the Constitution, the beginning of a slippery slope, the start towards Zimbabwe. We've got to get involved, says Trump, we give South Africa access to the American market – and it's true because South Africa's trade surplus with the United States is substantial because it has duty-free access. So here it, he can now launch a rocket which potentially will divert attention from his own troubles. So, in a way it is politics and in another way it was manna from heaven. In another way it is high reactive to what had happened to him on that day, where he is in deep, deep trouble and looking for some kind of a scapegoat or some kind of a diversion, and unfortunately the whole expropriation of land without compensation story is just playing straight into his hands..So in this case, little South Africa – which, if it were an economy in the United States, a state in the United States, would rand only 23rd behind Montana – little South Africa is now suddenly big news in the United States because the President is making it so..That's the background. That's what it's all about. Whether the rationality of all of this… that didn't even come into the conversation. Then, of course the Rand got affected. There is more uproar in South Africa this time more of a unifying force pulling people together against Donald Trump, which I guess is a very good thing for a change. But it also reminds us that we have been moving on a very dangerous path in the country. A path of fanning resentments rather than a path of nation building. Maybe it will wake the policitions up to realize that everybody has got resentment for whatever reason. Everybody can feel hard done by in some way or another. You don't want to stir it up on a nationalistic basis. You actually want to build the nation like Nelson Mandela tried to recommend..You know that is such a good point and I'm really glad you brought up that this is all taking place against the context of what's been happening with Michael Cohen, with Trump's lawyer, and various other convictions that have been going down. So, really, you're right – Trump is coming from a place where he is facing what might potentially be something fairly serious, which is essentially an involvement in a crime. He has been implicated – whether or not it is true, we'll obviously find out over time – but certainly this is not the kind of attention you want when you are the sitting president. So, any tweets that he is putting out there should be seen in that context right? He often does use Twitter as a way to create a diversion when he is not happy with the way the national conversation is going. I'm really glad that you brought that up. It's an important piece of context..It's critical. Yes it is a critical part of it and it's not an alleged crime, it is a crime. Cohen has admitted to it. Instead of going to jail for 65 years, which is what the potential penalty was for influencing an election, he is going for 5 years. But where this all gets very, very intestesting is that Cohen has said he will co-operate with Mueller, who is investigating Russian influence, the way that the Russians influenced the Presidential election..So here you have the right hand of Donald Trump, the candidate who was elected, who is saying, I know where the bodies are buried. I'm going to tell you where they are. And all of this now on top of which we also have another huge deflection from the Trump inner circle, also going across to the other side if you like, to start spilling the beans. There is only so many times you can call this fake news. When a guy actually goes to jail, when an American court rules that he broke the law on the candidate's behalf, then the candidate is very much in the firing line..And, of course, again the context of this: we have the mid-term elections coming up in November. The Republicans at the moment are in total control of Capitol Hill. In November, the more mess that Donald Trump gets into, the worse he can look, or the more of his misdemeanours are shown to the public, the less chance the Republicans have got of maintaining that position. Then, who knows? If you have a blue wave as they call it, the Democrats sweeping through, the next step potentially is attacks on Trump himself. Perhaps even impeachment proceedings? He could still hold on to it, onto the Presidency, because it's a very complicated. But for him to think that he could be re-elected in two years time, now looks very, very slim. That is what he was on against. So, it's the background that we have got to see. We're small in South Africa. South Africa is a tiny economy. 0.3% of the global GDP. As I say, if it was an American state, it would be only ranking mid-size and it gets dragged into these things from time to time..Cyril's got to box very, very cleaver here, because he doesn't want to antagonize, exessivly, a Donald Trump who is erratic and who does have the power to pull the duty-free accesses that South African exporters get in the US market, which is the third-biggest market. Very, very significant impact on jobs and a whole lot of other things. So, we have got to see some leadership coming out of Pretoria and I think so far they have handled it very maturely..I agree and this week Cyril also – I call him Cyril like we best friends – President Ramaphosa also published an op-ed in the Financial Times and I thought the timing was pretty good, it was right around the time that this whole tweet crisis was breaking. He published an op-ed where he discussed the expropriation policy in, I thought, a fairly measured way. Whether you agree with it or not, he, I think, laid out very clearly the thinking that is behind this and where they going..And so I think I agree. I think that the South African government has come out of this looking very rational and very sensible compared to a very emotional, erratic, and now potentially criminal President in the United States. And you know what was also interesting, I thought, was that initially the Rand took quite a wallop when the tweet came out, but it quite quickly recovered and it has not had the terrible week, despite all of what has been going on. Which I think tells you something about the reaction from the South African government and the credibility of President Trump's claim that he is going to start investigating this..Well, it's not over till the fat lady sings. He has done crazier things so far has Mr Trump. But what we must not lose sight of here, and as much as Ramaphosa is saying he is going to manage this land question appropriately and sensibly, the fact is this was one of the issues that was negotiated most aggressively and for the longest time at Codesa in 1994, precisely to ensure that there wasn't fiddling with property rights. That there was not a slipperly slope. Because once you change one thing in the Constitution, you can change anything. It's like somebody stealing a R10 note. Next time, why not steal a R100 or a R1,000 and so on?.And this is where the issue lies. You can argue that it is going to be done sensibly and Ramaphosa is a good President and he is a rational man. But what happens if we have the next President who is not quite as rational and as sensible as he is? This is a lesson South Africa should have learned from the appalling decade of Jacob Zuma and it seems as though we still not quite getting the message. And the message is, from the international community, don't fiddle with things that are core to your potential success of the country..We've got to remember one big thing. South Africa has been going backwards at a rate of knots. The GDP of the Country was $420 Billion in 2011, and at the end of 2016 it was $280 Billion. That is a big, big regression, at a time when other emerging market countries were going forward. So, there is so many other issues that needs to be focused on, so many other ways that benefits can be made. It's like this story of limited resources. When you have an economy that goes backwards, suddenly even the smallest thing becomes a mountain. The less resources there are to fight over, the more people start getting antagonistic about it..The main priority for South Africa is: grow the damn economy. Grow the pie and once the pie is grown, once people are starting to feel more hope and that they can participate in a better future, that's when these political issues that get so emotional and so heated up, they start hitting the back burners. That is where I would love to see Ramaphosa focusing, on the stuff that is going to grow the country rather than the stuff that plays to resentment and retribution..Absolutely and I think that the Zuma decade had… Among its many negative effect, one of the things that, I think, it has done that is partularly troubling is that is has eroded the faith of ordinary South Africans in the possibility of economic progress. They really feel like we have spent 30 years in a market system and they haven't seen the results. Of course, there is a lot of complexity to why that is. But there is a sort of growing sense of disenfranchisement and frustration among poor South Africans and the Zuma years really just entrenched that. And that is why you start to see these sorts of more extreme policy positions being discussed at a national level. We kind of keep counting the costs of the Zuma decade, and one hopes that we are able to navigate the way out of it into, as you say growing, the economic pie instead of fighting over the scraps of a shrinking pie. Because that is really that's the only way that everybody's living standards are going to get better at the same time and over time..Before we run out of time here Alec, let's talk a little bit about Tesla. I was saying earlier it looks Elon Musk has taken your good advice to heart..Well, I'll tell you what. This has been a story of stories hasn't it? The gift that keeps on giving if you are a journalist. I have been following the Tesla story quite closely, not least because he is from South Africa – Elon Musk and his brother Kimbal, who who are both intimately involved, and, of course, the cousins, the Rive boys, who had SolarCity, which is also part of Tesla now. We had it in our Global Portfolio for a period of time. We sold out of it when it looks like he was losing it, and what he did subsequent to that tends to suggest that was not a crazy decision..What has happened now? If you see the development in the past week: Elon Musk was under the misguided, let's be generous to him, the misguided view that the Saudi public investment fund was going to fund him to buy out minority shareholders in Tesla and he could take it private. He tweeted a figure per share $420, the share price reacted very strongly according to that, because if a CEO says "I'm going to buy the company out and I've got the funding" – well, clearly you have to believe it. And subsequent to that tweet it has becomes very obvious that he had, again to be generous, the cat by the braces. The Saudi public investment fund does not have the money, first of all, to buy out Tesla. Indeed, this week it had to borrow $11 billion from banks in the UK to meet existing commitments. It's certainly is not in a place where it is going to suddenly find $70 Billion to help Elon Musk. And there was no due diligence. There was no suggestion about the price at which they would pay..He has got himself into a lot of trouble. Legal issues – the Securities and Exchange Security Commission in the United States is investigating, there are people who are claiming, two class actions already have been launched against him, people who have lost money on it. And his reaction to this has been "Aw, shucks, I've been working too hard.".Well, this morning, Saturday morning, he has finally come out with a statement to say he is not going to be taking Tesla private anymore, he's going to leave it public. So, that has now unleashed the other consequences. Unfortunately for Elon, they aren't going to disappear. He has done something which has cost a lot of people a lot of money. Of course, it's made some other people a lot of money. Those who have made money aren't going to admit to it. Those who have lost the money, want it back from him. It's a mess. And, so, it is something that is going to take quite a long time and a lot of legal fees to unravel. But at least he has made the first step towards some kind of improvement of the situation that he has got himself into..Yes, it's so frustrating to watch. Really, what a huge waste of time, energy and resources which Tesla really can't afford to waste. You know, they really need to be focussing on the Model 3 ramp-up – the much vaunted model 3 ramp-up that has yet to really materialize – and this was just a huge diversion of resources, of board resources, and of Musk's time. Very disruptive for the company and for no point. He is now saying "Oh we're not going to do it.".And now we are going to just watch the consequences play out – absorbing yet more time and more resources. Just so frustrating. And, to be honest, I'm quite surprised everyone on the board and many investors continue to feel such confidence in Musk's leadership. Because really, I think, you could count on one finger the number of CEO's who would get away with this and remain in control. Imagine if this the head of JP Morgan had done all of this? He would be out..It is so. But it reminds me a bit of Bitcoin where you got Millleninials who get the story in their heads. They understand it. They understand that Elon Musk is this genius and he is going to go to Mars, and he is going to change the world and we going to back him no matter what. And then you get the people that have been around the block a few times who are saying, yes the world does change but nobody has the monopoly on distruption, nobody has the sole guide to the future..So, the same as Bitcoin going up to, what was it, $15,000 now back to $6,000. Elon Musk's company going up to nearly $380, now back to $300, likely to get another cold shower Monday when the markets open again. You have just got to be aware that the media hype, the world of attention-deficit focus towards investment, is a very dangerous place to be playing in. Investments take a long time. Nobody makes money overnight. Nobody changes things overnight. You do have disruptive technologies, but even they take years before they take away the status quo. So, Elon, is he likely to survive this? Big question mark..The guy who started General Motors was there for the first 10 or so years and then he disappeared. And we don't even know him now. We know the guy who replaced him – Alfred Sloan – and built General Motors into the biggest car company in the world. Shareholders in this company are probably thinking along the same lines. Can we afford to have another Elon folly sometime in the future? And some will probably decide not.Yeah, I think we could learn a lesson from the fate of Nikolai Tesla, the inventor for whom the company is named. He was also an innovator, a genius – came up with so many brilliant things. But the person who made all the money from a lot of Tesla's idea was Edison, because he was a better marketer and a better business builder. One wonders, you know, electric cars absolutely are here to stay and we can thank Elon Musk for bringing that into our lives and for making them a reality, but is Tesla going to be the company that benefits from them or from the next generation of car technology and self driving cars? Potentially not. Because ultimately building a business is quite different from having a brilliant idea and it requires a lot more practical skill as opposed to visionary skill..The last thing I want to touch on right before we wrap up Alec is – do you want to tell us, briefly about your interview with Rowan Gormley? Apparently this one has been doing real under-the-radar success for us..Our whole podcasting story has been incredible. There's a tipping point. You know, we're getting literally hundreds of thousands downloads of our podcosts now, which has just caught me completely off guard. But this has been one of our top ones. Rowan Gormley is a South African from Boksberg, went to Selbourne High in East London. He came to the UK as a young man, a young accountant, joined private equity. Worked for a guy there called Mike Stoddart who is one of the legendary private equity players in the UK and was then hired by Richard Branson. Richard Branson had the guys around the table and, as Rowan tells it, they were talking about what to get into. Rowan said finanacial services and Richard said, then do it. And the consequence of that was the creation by Rowan Gormley, a South African boy from Boksberg, of a business that we know as Virgin Money that was sold a couple of months ago for £1.7 billion..He then moved on into wine, where he is disrupting at the moment. He started his own company that was called Naked Wines and it was bought by Majestic which is the biggest wine retailer in the UK – a £500m turnover company – and Rowan runs it now. He is moving into the United States. It's just an amazing success story of a South African who has globalized. I went to see him where he lives in Suffolk, which is kind of the eastern bulge of England. Spent an hour or so in his garden. Go and listen to the podcost if you have not yet. It's inspiring..As a woman from Edenvale, I'm very excited to see the East Rand representing on a global scale. So, congratulations to Rowan. Everyone should go and definitely take a listen to that interview. Just bask in the glory that is the East Rand of Johannesburg.

The Editor’s Desk: Trump’s SA tweet is the act of a man in crisis

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