The Editor’s Desk: Why hasn’t the NPA sent the bad guys to jail yet?

DUBLIN — Cyril Ramaphosa has been President for almost exactly one year. His ascension to the presidency following Jacob Zuma's resignation was dramatic, and hopes were high that he could turn things around for South Africa. But one year later, despite several investigations and a host of apparent evidence of corruption, we have yet to see any major arrests or prosecutions of those responsible for robbing South Africa of billions. With the recent appointment of advocate Shamila Batohi to lead the National Prosecuting Authority, many South Africans are asking: "Why haven't you arrested anyone yet?" In this episode, Alec Hogg and I discuss the challenges that prosecutors face in bringing wrongdoers to justice and what to key steps to look out for. We also look at resurgent global markets and the role of recent Federal Reserve actions and discuss the latest results from Apple and Amazon. – Felicity Duncan.Hello, and welcome to this week's episode of The Editor's Desk. This is BizNews Radio and I'm Felicity Duncan. With me, on the line, BizNews editor-in-chief, Alec Hogg. .___STEADY_PAYWALL___.Alec, another big week in SA politics and specifically of course what I'm talking about here is the appointment of the new NPA director Shamila Batohi, and – I saw this news today – recently a number of world leaders have written to our president, Cyril Ramaphosa, telling him he needs to start arresting people. .So, we're starting to see some real movements in the criminal justice side of things, in the moves around prosecution, around arrests, and a lot of people have been saying, why has it been so slow – why haven't we seen arrests – why aren't people in jail yet? What do say to people who say that?.I think that there's a lot of frustrations amongst South Africans because you've had this outpouring of muck and exposure of a lot of malfeasance that went on so, now we know it's for sure. On BizNews, for years now, we've been writing about this stuff and I guess for public you look at this and you must be saying to yourself – it's just way beyond. It can't be so but now that it's all coming out in those three Commissions of Inquiry that it is so. That this was the way that things were going on. People are really angry, SA citizens are furious that their tax money had been abused in this way and that the State resources have been plundered so, no, not surprising that there's anger. .But on the other hand, Advocate Shamila Batohi has only just taken office at the NPA. Remember, she's been in the job at the NPA for three whole days, she's had one working day, being Friday. We cannot expect the impossible. Miracles are okay but it's going to take a whole. She hasn't even read the dockets yet so, cut her some slack. The point I think we have to look at is, is this the right person and how different is she from the people who were there in the past? Well, Shaun 'the sheep' Abrahams – his nickname tells you everything so, he was never going to move against the corrupt. .In fact, people like Paul O'Sullivan, the ace forensic investigator says that (former NPA head) Shaun Abrahams facilitated a lot of this mess that we're in so, that's the one point. The second point is that Advocate Batohi has had a glittering career. She started off in the early days in the violence in KwaZulu-Natal where members of the ANC and Inkatha were murdering each other. She was very instrumental in getting that to settle down, which is an untold story that I picked up from somebody who was there at the time recently. Then she next came into the public consciousness while she was working for the NPA and she was the prosecutor on the Hansie Cronje trial, and did an extremely good job on that one. Then she went off to the International Criminal Court, and had spent a decade there doing some very high-profile work, very significant work as well, from a global governance perspective..So, it's almost like she's been built for the job she's got now at the NPA. This is a lady who is not for turning. She is extremely well-qualified. She was appointed not by a president who just picked her from somewhere. She went through a rigorous process, a recruitment process, through a very high profile and a very competent board of recruiters who were drawn from various parts of society. So, she's got everybody's support. Now, it's her turn to be the SA equivalent of what we've seen in Operation Carwash in Brazil. We'll remember it's the equivalent of, if you take it from an American perspective, a president and the leader of the House and the leader of the Senate all being put into jail. That's what happened in Brazil. In SA it's going to be up to the new director of the NPA to effect something similar to get corruption out of the system. And don't push her too hard to go to court before she's ready. She's got to go there and her whole background would suggest that she's going to have her ducks in a row when she starts taking these people to court, to make sure that she gets convictions. So, I'm very positive about this. The sense though is, just be patient for a little longer. .What would you say people should be looking out for to see that movements are happening? I definitely hear from a lot of people, just the frustration that we're a year into this process and there's still no movement. So, what would you say the next steps are that people should be looking for so, when they see that they can say, 'okay, good, something is happening?' .Well, there are some quick ones that are likely. There's no doubt that for instance, what's happened at the VBS – that whole scandal. It's out in the open now. We've had the report from the investigator. There they have a thing called the Section 140 in the Financial Services Legislation, which enables people who were directly involved to tell the story and if they tell their story and then to escape prosecution. It comes from what's happened in the USA, and it really is a way of catching the big fish by letting the little fish tell on them, if you like. That's happened in the VBS issue so, I guess from her perspective what she now needs to do is to first bring the people who can help her because if you've had a Shaun Abrahams running it, you can just imagine that there are a lot of his people still there and he would not have been hiring in possibly the best brains and/or talent. .Not to say that there aren't a lot of talented people in the NPA, I'm sure there are, but she might need a little bit more support, and to go for the quick ones. The VBS scandal is a quick one. The evidence is all down there. You've got witnesses who have sworn towards things, about things and it seems pretty easy to put a few people in jail. I think that's what it's all about. All of the information that is now coming out of these three Commissions of Inquiry are going to lead to prosecutions and jail time unquestionably, for lots of people but it just takes time and we've got to go through the court of law as SA is not a lawless society..Now, changing gears a little here. We saw the S&P 500, the Dow Jones, all the US markets had a very jubilant week. Some really big numbers posted. The S&P was up to an eight-week high in the middle of the week, and it was all down to some good news from the Federal Reserve. Now, can you explain to the listeners a little how that works. Why would the Fed's actions send stocks surging?.Extraordinary, isn't it? If something happens in US, Washington and it has an impact on shares everywhere in the world, including Johannesburg. The reason for this is that the Federal Reserve, up until the end of last year, was starting to getting very hawkish. Jerome Powell, who is the Head of the Federal Reserve, was putting out a message that there would be significant interest rate hikes in 2019. When you talk about hawks – the way the markets, they love to put people into different boxes and the box on the one side is bulls, who think share market prices are going up, and then bears, who think they're going down. But when it comes to the Federal Reserve, Hawks are angry, they want to increase interest rates and squeeze the economy, as it were. Then doves, who want to let thing go, of course they don't have talons, they couldn't squeeze much. .What's happened in the Federal Reserve is it's moved 180 degrees, from being a hawk to being a dove and the reason for this is what has happened in the interim, since the previous meeting. So, this was the first meeting of the year, that happened this year for the Federal Reserve's Monetary Policy Committee. The same as in SA – they have them every two months and then they come out with a statement on interest rates and either adjust interest rates up, leave them where they are, or they reduce them. .A hawk you would expect, or a hawkish Fed you'd expect them to increase interest rates. A dovish Fed would leave them where they are or even reduce them. What has happened here because of developments globally, in the interim, i.e., the trade war between the US and China, which has escalated. It looks like it could come under control now. They've had meetings this week and Trump now wants to meet with Xi hopefully, to take all the credit for managing to settle everything down before the new tariffs come in on the 1stMarch. If that happens then things will stabilise a bit more but as things stands right now, the global is very nervous. .We saw in Davos, for instance, the CEO's through the PwC survey this year saying they're extremely cautious. They're not sure if they're going to invest anymore because they don't know where the future is going. If this trade war escalates between China and the USA it is going to affect the global economy. Now, when you've got a global economy that is contracting the last thing you need to do is increase interest rates because it will just accelerate the contraction, and that's what we're seeing from the Feds..So, the Federal Reserve is saying, we see the American economy is doing very well, but we're worried about the future so, we're not going to increase interests to the degree that we said e would. That immediately sends a message to the markets that businesses are going to have a better time as far as profitability is concerned, and that is what keeps share prices going up because the stock markets – people look six to nine months ahead..That's interesting – against the backdrop of these very strong markets and strong rallies and stock markets that we saw on the back of the news of the Fed, we also saw some stock perform badly. I'm thinking here specifically of Amazon and Apple, both of which released results last week and both of which have disappointed the markets, because in both cases the share price got dinged after the results were released. Even though, in the case of Amazon at least, there were real record-breaking results for the fourth-quarter, we still saw the stock prices take a bit of a hit upon the release of the numbers. Do you want to quickly explain to us what happened there?.It's been quite interesting. In fact, they had a different move starting with Amazon. Amazon moved up very strongly ahead of the results. The anticipation was that they were going to give us some more gang-busters. In fact, on the 29thJanuary, Amazon was sitting at below $1,600 a share, just to put that in perspective. Just before the results it had gone up to over $1,700 a share so, it had gone up more than $100. That was anticipating some really good news. The good news did not come through because the projection for the next quarter, and in America the traders work quarter-by-quarter, the projection was that there would be revenue growth, which is the number that everybody watches there, of between 10% and 20%, not above 20%..Now, it is unrealistic. If you do your research into Amazon, you'll see they acquired a company called Whole Foods. Whole Foods is now starting to come into the numbers. It's a retailer, and retailers don't grow at 20% in the same way as exponential companies like the rest of Amazon do. So, as a consequence you cannot expect that the overall revenues are going to go up but that doesn't matter. That's not the headline. The headline, as far as the traders are concerned, is that Amazon's growth is slowing. .If you then have a look so, it went down, it dropped after results, from $1,700 to around about the mid-$1,600s and it's trading there at $1,626, at the moment. So, it's above where it was, five-days ago, but it's below where it was in anticipation of the results. If you're an Amazon shareholder try and ignore the aberration of the last few days. This is a stock that was up 60% last year or in the last 12 months so, you really can't ask for a whole lot more than that. It's unlikely that you're going to continue to see that kind of growth because it is coming back to reality. Amazon's numbers were excellent, anyway you want to look at them..Apple was a different kettle of fish entirely. Anticipation of the results or the message that was sent by Tim Cook to shareholders was extremely well-managed. Ahead of the results, they said a couple of weeks ago that they would not achieve their own forecasts for the fourth-quarter of last year, i.e., three months to end December. As a consequence of that the Apple share price came under a little bit of pressure and when we went to the results themselves, even though Apple released financials, which showed the first decline in its sales in something like 15-years, the share price went up. So, we went from around the early $1.050s to over $1.060, where it' held at the moment..So, the results in Apple's case were considerably worse than you would have expected a quarter ago, three-months ago, yet the share price has picked-up from the expectation that they were going to be even worse. In fact, it got down at the beginning of January, it was down $140 a share, and it's now over $160. Whereas, in Amazon's case there was an anticipation the results would be better than they were. Amazon obviously, is not quite as skilful as Apple is in managing expectations and Amazon's shares went down. .What you've got to do as an investor is just try and look through all of this. Try and forget about this, and say, 'why did you buy the stock in the first place? What is the longer-term outlook and forecast for the company? When you did your homework, were you looking at Apple because it is selling lots of iPhones and that the traders are going to bump it this or that way, depending on iPhone sales? Or do you look at Apple and say, there's a billion iPhones that are out there, more than half of them, which are in use at the moment. Let alone the iPads, and the Macs and laptops – these people are part of the Apple ecosystem. That hasn't really been priced into the shares, which is sitting on a price to earnings ratio of round 12. So, once the ecosystem starts really kicking in, then from an Apple point of view, you will see greater growth into the future, apart from all the other secret stuff that that they're doing on the side. .So, that's the way you've got to look at it and I think the point you raise there about Apple and Amazon's results, and the markets reaction to them, is and emphasising once again, that you've got to look past the quarterly numbers and you've got to understand why you're investing in the share in the first place, otherwise it's going to drive you crazy.

The Editor’s Desk: Why hasn’t the NPA sent the bad guys to jail yet?

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