Hagedorn: Why SAA deal (R16bn) should be compromised. Live to fight another day.

Compromise, a tough nut to crack as whatever the deal, someone always walks away in a healthier position. But in the case of SAA, independent strategy advisor Shawn Hagedorn says this is a point where Pravin Gordhan and Jacob Zuma should find a middle ground. The finance minister has already called on the current board to be removed, while the airline itself has sought creative means in trying to raise the R16 billion it needs, as Gordhan is not willing to release the funds. SAA is a clear network of patronage and with Dudu Myeni at the helm, President Zuma has his own interests. But Hagedorn says avoiding a cabinet reshuffle is a more vital ingredient for the nation than SAA, so reckons Gordhan should compromise to keep stability at the Treasury. But any compromise could signal a slippery slope, and there’s no stopping such events repeating themselves. Some will ask when will the bleeding stop, if ever, and who ends up paying for it at the end of the day? The taxpayer. – Stuart Lowman

By Shawn Hagedorn*

Shawn Hagedorn

SAA’s solvency issues must be swiftly addressed amid the balance of power within, and among, SA’s most powerful groups having been jolted by the recent election expressing a state capture backlash. The risks of missteps by key actors is now perilously elevated. Public commentators and the general public must also be especially prudent and realistic.

If Pravin Gordhan can negotiate that Treasury sidesteps the coming cabinet reshuffle by his agreeing to a seemingly unsavory compromise around SAA, such an imperfect outcome will be easy to criticise through traditional and social media channels. However, navigating out of SA’s economic cul-de-sac requires that pride and principles accommodate power politic realities.

Making Pravin Gordhan a martyr is a chapter in SA’s history that no one should want to see written. The various key actors should be open to climbing down from their positions to consider distasteful options which will reduce the likelihood of a downwardly spiralling economy. To talk of the ANC getting their comeuppance in 2019 is to overlook the intervening risks and opportunities.

“Fixing” SAA is far less important than protecting Treasury’s ability to safeguard the fiscus and pension assets. The SAA situation has become urgent for Zuma whereas maintaining a vigilant treasury is vital for the nation.

There are no clear and clean wins available to anyone. The DA and EFF deserve credit for targeting patronage. Yet the pending charges against the president have been held at bay by his lawyer’s so-called Stalingrad strategy of creating endless delays.

Chairman of the Jacob Zuma Foundation Dudu Myeni - real life example of the way "entrepreneurial politicians" pull State levers of power for personal benefit.
Chairman of the Jacob Zuma Foundation Dudu Myeni

The more time spent pursuing criminal charges against Zuma, the more aggressively he will put the economy at risk. The latest twist is that a prolonged legal and political stalemate may now suit opposition parties. If Zuma remains as state president, and under siege by various corruption allegations, the ANC’s internal cohesion, and its national electoral majority, could both be imperiled.

That Zuma orchestrated an immense patronage network over many years without the benefit of a compliant finance minister warrants a bit of awkward admiration. However, had he been better advised on the economics, he might have avoided the economic stagnation risks inherent to an overly indebted and insufficiently skilled workforce. He should also have been warned about the size of the patronage machine and the risks of a prolonged decline in commodity prices.

If the other power holders persistently attack on moral grounds without showing a willingness to compromise, Zuma can be expected to maintain his Stalingrad legal strategy and with regard to the economy. He and his cohorts are prepared to hold the economy hostage to their being assured a retirement free of legal threats.

Read also: Gordhan on SAA: Targets state-independency. Support structures in place.

Opposing patronage on a purely moral basis blocks necessary compromising. The ANC’s over reliance on its liberation credentials have highlighted that the country’s challenges are economic. Pursuing fraud charges is less morally satisfying if millions of innocent families are made to suffer amid years of legal manoeuvring.

Ancient Greeks queried whether ethics are constant and universal or whether they change with the form of government. Democracy was later abandoned for over a millennium as forms of feudalism became nearly universal.

Feudalism and monarchies were socially and politically stable structures for pre-industrial agrarian economies. They emphasised obedience, loyalty and a sense of duty – as does the ANC’s electioneering. Conversely, democracies are grounded on an ethic of accountability. Democracy is far better suited for industrial economies and particularly for 21st century information age economies.

The re-emergence of democracy traces to the English constitutionalist versus the royalists. Zuma acts like a royalist who believes constitutional processes, such as his trial and imprisonment for treasonous activities, are largely deceitful tools to manage the masses. Where Zuma is unequivocally wrong has less to do with morals than economics. This is far more obvious today than, say, three years ago.

SA’s moral high ground will be achieved when young people can routinely pursue their aspirations. That day is as distant as ever. Tricky navigating and difficult negotiations lie ahead. Narrowly reasoned principles should be among the first casualties among many uncomfortable compromises.

Zuma has entrenched a formidable patronage network but he has miscalculated regarding the economy’s ability to feed it. A languishing economy threatens to imperil all of SA’s factions.

Gordhan understood from the start that he would be the finance minister of a state captured by broad patronage. He should now express his willingness and ability to grow the economy while shrewdly downsizing SA’s patronage.

Zuma and Gordhan should agree an SAA deal. Even if the terms are well short of hopeful expectations, our support for Gordhan should not waiver.

  • Shawn Hagedorn is an independent strategy adviser. Follow him @shawnhagedorn.
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