(This article of mine was published in October 2009 in The Monday briefing and in the Leadership Intelligence Bulletin)
If ANC youth leader Julius Malema says the nationalisation of South Africa’s mines will happen, the ironic truth is that it probably will, even despite repeated denials and assurances to the contrary offered by a variety of senior ANC and government leaders when Malema first broached the subject some months ago.
For Malema - whether his many critics like it or not - has become one of the most feared, most powerful and most influential figures in the ANC in recent times. And he has been spot on with his “predictions” in the past. For example, a week before anyone else knew that then President Thabo Mbeki was to be fired, Malema was telling the world that it was a foregone conclusion.
And when Malema started making remarks about minorities, race and transformation in government and business, it soon became a rejuvenated national debate spearheaded by the ANC, the Departments of Labour and Trade & Industry, and by organisations such as the Black Management Forum (BMF). It still dominates with many calls for a revamp, among other things, of broad-based black economic empowerment and the seven scorecard elements used in its application.
And the Congress of South African Trade Unions (Cosatu) came out backing Malema when he objected to the number of ministers from minority groups running economics cluster ministries. It was also Malema who knew, long before anybody else, that former Education Minister Naledi Pandor’s star was busy falling and that it was therefore safe to attack her in public. Although some in the ANC huffed and puffed at his brashness and he had to apologise to Pandor, no action was taken against him and Pandor has since been shunted sideways to head the politically insignificant Science and Technology portfolio.
Malema has the ear and protection of President Jacob Zuma and other influential figures in the ANC Alliance. He often accompanies Zuma on important missions. Malema has also received the blessing of Nelson Mandela who requested private time with Malema shortly before the April general election. In fact, there are many in the ANC and elsewhere who see in Malema a latter-day Mandela who himself, like Malema, once headed the ANC Youth League (ANCYL) and also had a reputation as one who spoke his mind, albeit perhaps more politely and more articulately.
A further demonstration of Malema’s standing in the ANC was offered by the newspaper The Mail & Guardian last week when some of its reporters waited in line for an interview with Malema at Luthuli House, the ANC’s headquarters. The paper’s reporters described how important people such as Kirsten Nematandani, the newly elected South African Football Association (Safa) head, the leaders of the National African Federated Chambers of Commerce (Nafcoc), former ANC spin doctor Carl Niehaus and others were humbly made to wait in line for an audience with Malema...who kept them waiting.
Even the influential new Deputy Minister of Police, Fikile Mbalula, himself once an ANCYL president and now would-be challenger for the position of ANC secretary-general currently held by Gwede Mantashe, was told by Malema to wait his turn until Malema had worked his way through the queue of people outside his office.
Malema is not without enemies in the ANC and the ANCYL. There are many who are seeking to topple him, but they have never dared to step forward out of their anonymity. It is also common knowledge in the ANC that Malema digs and keeps on file the dirt on all influential or potentially influential people in the Alliance and that he is not averse to using it to blackmail them to get his way.
The esteem in which he is held in the ANC is also evident from the fact that a special group of elder advisers was established in the ANC to help guide Malema and raise him politically for a future role. And even Zuma’s spokesman, Zizi Kodwa, has indicated, according to the Mail & Guardian, that a great future awaits Malema in the ANC.
Malema derives his power from the fact that he brings to the ANC the critical youth constituency which backs him. He also speaks the language of the downtrodden, the marginalised, the impoverished masses and, important, of the militant formations in the Alliance. In this regard he has picked up where Winnie Madikizela-Mandela left off. Furthermore, he has powerful connections like Zuma and Cosatu’s Zwelinzima Vavi and he enjoys the backing of Cosatu and the SACP among others.
Therefore, against this contextual perspective, when Malema says the mines will be nationalised, notice should be taken by all concerned. When Malema first raised the issue, Zuma, Mantashe and Mining Minister Susan Shabangu immediately tried to calm the panic that set in by rejecting any such notion. However, within days Mantashe changed his position and called for a debate on nationalising the mines, a call since taken up by many others in the ANC. And Cosatu and the SACP gave Malema their full backing.
Since then the government decided to undertake an audit of the state’s mining interests while discussions around the establishment of a state mining company were renewed and the role of an existing state mining company, the African Exploration Mining Finance Corporation, was re-examined. In addition any further disposal of state mining interests was suspended.
Last week Malema told the annual conference of the Black Management Forum that the nationalisation of mines in South Africa, as called for in the Freedom Charter, would inevitably happen. Malema seemed to favour the Botswana model where the state, according to him, owns 51% of a mine, with private interests holding the other 49%. The bottom-line, it would seem, is that where Malema makes smoke, there may well be fire.
Worth His Salt
The erstwhile hippie activist now an environmental campaigner
By Stef Terblanche
(This article of mine appeared in Leadership Magazine, Edition 294, June 2009)
From the heady maelstrom of leftwing hippie and student activism in Johannesburg, London street protests against nuclear power and apartheid, and Greenpeace campaigns in the Arizona desert, to being a troublesome fly in the nuclear ointment of Eskom...and finally on to a “respectable job” managing the Climate Change Programme at the World Wide Fund for Nature (WWF).
That, apart from a relatively shielded childhood in conservative Bloemfontein, a stint in fringe theatre, getting a degree and getting married, basically sums up the life so far of veteran environmental campaigner, Richard Worthington.
To those with even the slightest interest in South Africa’s nuclear power activities, Worthington’s face is a well known one. For a decade or more his was often the lone public face of the ant-nuclear campaigns of Earthlife Africa in Johannesburg, issuing press statements with rapid-fire frequency.
His interest, and the focus of Earthlife, later shifted increasingly to climate change and in May 2008 he made the move to WWF to take charge of its Climate Change Programme.
I first met Worthington back in 2001 for an interview which took place in his “office” – the kitchen of a chaotic red-brick house in Johannesburg’s western suburbs. Off to one side was a small cubicle with computer, copier and dangerously leaning stacks of documents and books everywhere. The nerve centre of many an anti-nuke campaign in those days.
At the time Worthington presented himself for the interview barefoot, with long hair and dressed in jeans and an old, stretched jersey. In between brewing cups of tea and talking passionately against the plans of government and Eskom to develop the pebble-bed modular nuclear reactor (PBMR), he rolled and smoked suspicious-looking cigarettes which, today, he swears were strictly tobacco. The quintessential lefty-hippie activist.
However, the bald-headed, serious-looking Worthington of today is still as passionate as ever about his subject matter when he talks of the position paper WWF has prepared for the next round of UN-sponsored climate change talks for a new international deal to cut carbon emissions and which will succeed the Kyoto Protocol.
That he ended up a left-wing activist is rather ironic, having attended Clifton School in Nottingham Road, KwaZulu-Natal and later St Andrews School in Bloemfontein, the one a private school and the other an “independent” public school with an Anglican character...both conservative schools by Worthington’s admission.
His mother, however, rejected conservative values and taught him and his brother to questions things, putting him on course for a life of activism.
“I did have some exposure to environmental issues though, through the horse stables in the restricted area of the school grounds,” he quips. “My experience was that horse cubes actually make fair eating for a hungry boy… thus learning about product cycles and value chains accorded to diff components of ecosystem service.”
At the University of the Witwatersrand his first real, tentative step towards his future career came with his involvement in political theatre. It was during his 11-year spell of living abroad that he became involved in environmental issues.
Armed with a BA degree from Wits, he spent time in London, joining marches of the Campaign for Nuclear Disarmament and marches against apartheid, doing “various odd jobs” and working in fringe theatre. The latter he gave up when he found the entertainment industry as a vehicle for encouraging social change did not work for him.
But it was while living in Los Angeles in the US, waiting for his green card, that he started working with Greenpeace as a volunteer.
“I then progressed to canvassing door-to-door for membership and donations, which was a great educational experience at a time when climate change was first taken up as a mainstream campaigning issue, following the Rio Conference,” he recalls.
“We focused strongly on a campaign against a radioactive waste dump hat had been proposed on Native American lands. We went and hung what we believed to be the world’s largest banner on the London Bridge in Arizona – the bridge bought and brought across the Atlantic by a rich man wanting to put Lake Havasu ‘on the map’ as he thought he was getting the Tower Bridge!”
Worthing says he received “some activist training” which included abseiling and handling inflatable boats. At the time he also volunteered with the Rainforest Action Network In 1995 he returned to South Africa.
He joined both Earthlife and the Environmental Justice Networking Forum as a volunteer among other things. With money received from the Heinrich Böll Foundation, Worthington and others started an anti-nuclear, pro-renewable energy campaign which later became known as Nuclear Energy Costs the Earth – one of his pet projects.
At the time he also worked in adult education, started working one full day a week for Earthlife and became involved in an air pollution campaign in Johannesburg.
“We never did persuade the City of Johannesburg to introduce vehicle emissions standards and mandatory testing, although the suggestion was always well received,” he says.
Worthington goes along with a description of Earthlife Africa having evolved in 1988 out of a hotbed of student activism at Wits and a base of “lefties, liberals and hippies”.
“From all I have met, I’d say this is accurate. Two key founders are now personal friends; one was a hippie, the other a punk. Peter Lukey is now Chief Director of Climate and Air Quality Management at the Department of Water and Environmental Affairs [Subs: this is new name of department] while the person who was serving as branch co-ordinator when I joined is now my wife.”
From 2001 Worthington was the project coordinator of Earthlife’s Sustainable Energy and Climate Change Project (SECCP). The project aimed, through a combination of awareness-raising, research, advocacy and local and international networking, to mobilise civil society for support of a more sustainable energy development path and responsible climate change policies in South and Southern Africa. It also sought more effective engagement with the new, democratic government.
“When I joined in 1996, policy processes by the new government were taking attention and effort away from single issue campaigns. I started with toxics and nukes and focused most on Nuclear Energy Costs the Earth for some years, then started to focus more on climate change.”
In between he managed to continue his studies and in 2006 received a BSc Honours (cum laude) in Energy Studies from the University of Johannesburg. In 2007 he registered for a Masters degree at UJ but has had to delay this due to work pressures.
Worthington serves or has served in various capacities in the South African Climate Action Network (SACAN), the global Climate Action Network (CAN), and the GreenHouse People’s Environmental Centre among others. In 2002 he was named Energy Personality of the Year by the Sustainable Energy Society of South Africa (SESSA).
With the original SECCP brief having been largely accomplished, it was finally time to move on. At WWF his job entails talking to corporate members and other interested parties with a view to achieving a coalition of demand for effective local, national and international climate change response.
This includes developing information materials and major events and opportunities, to managing a growing team and coordinating SACAN activities and building capacity in Africa to participate in global CAN and international processes. He also participates in policy development processes, national and international NGO networking, some capacity-building and commissioning of research.
On the outlook forward – with the next round of UN climate talks scheduled for June 1-12 in Bonn, Germany as part of a series that is expected to culminate in Copenhagen in December with a new deal to succeed the UN’s Kyoto Protocol – he says a fair, equitable and effective post-2012 climate change agreement will require a just transition to sustainable energy and will also require much greater recognition that economy and ecology are concepts that cannot be separated.
“We cannot sustain economic success without ensuring the viability of ecosystems. The minority can continue to enjoy privilege and unsustainable lifestyles for a limited time. But ultimately everybody needs to participate in reversing the trend from environmental degradation to restoration. The longer we take, the more the majority will suffer.”
The WWF-SA has a position paper it will be submitting. Worthington says that as agreed in the Framework Convention, the industrialised countries – the so-called Annex 1 countries - must take on very ambitious absolute caps, preferably under a second five-year commitment period of the Kyoto Protocol (which would require some amendments).
“On aggregate the Annex 1 countries should reduce their emissions by at least 40% against 1990 levels. Fairness or equity requires that in addition to this target for domestic actions, Annex 1 countries must support both mitigation and adaptation actions in developing countries, including mobilising at least $145 billion per annum by 2020. The longer we delay transformation to low-carbon economies, the higher the cost will be,” he says.
“Fairness is of course relative, as the richer countries have already used up about 70% of the carbon-carrying capacity, or ‘atmospheric space’ available within a two-degree threshold. We live in a very unequal world and a new global deal on climate can’t address this as a five year period. It must, inter alia, ensure more democratic governance of international financial institutions.”
“We need a carbon market to mobilise private finance, but the system must be much more robust than to date and ensure that the carbon market does not entrench vested interests,” says the erstwhile hippie activist who today occupies a senior position in what has become a respectable, mainstream occupation in today’s threatened world.
By Stef Terblanche
(This article of mine appeared in Leadership Magazine, Edition 294, June 2009)
From the heady maelstrom of leftwing hippie and student activism in Johannesburg, London street protests against nuclear power and apartheid, and Greenpeace campaigns in the Arizona desert, to being a troublesome fly in the nuclear ointment of Eskom...and finally on to a “respectable job” managing the Climate Change Programme at the World Wide Fund for Nature (WWF).
That, apart from a relatively shielded childhood in conservative Bloemfontein, a stint in fringe theatre, getting a degree and getting married, basically sums up the life so far of veteran environmental campaigner, Richard Worthington.
To those with even the slightest interest in South Africa’s nuclear power activities, Worthington’s face is a well known one. For a decade or more his was often the lone public face of the ant-nuclear campaigns of Earthlife Africa in Johannesburg, issuing press statements with rapid-fire frequency.
His interest, and the focus of Earthlife, later shifted increasingly to climate change and in May 2008 he made the move to WWF to take charge of its Climate Change Programme.
I first met Worthington back in 2001 for an interview which took place in his “office” – the kitchen of a chaotic red-brick house in Johannesburg’s western suburbs. Off to one side was a small cubicle with computer, copier and dangerously leaning stacks of documents and books everywhere. The nerve centre of many an anti-nuke campaign in those days.
At the time Worthington presented himself for the interview barefoot, with long hair and dressed in jeans and an old, stretched jersey. In between brewing cups of tea and talking passionately against the plans of government and Eskom to develop the pebble-bed modular nuclear reactor (PBMR), he rolled and smoked suspicious-looking cigarettes which, today, he swears were strictly tobacco. The quintessential lefty-hippie activist.
However, the bald-headed, serious-looking Worthington of today is still as passionate as ever about his subject matter when he talks of the position paper WWF has prepared for the next round of UN-sponsored climate change talks for a new international deal to cut carbon emissions and which will succeed the Kyoto Protocol.
That he ended up a left-wing activist is rather ironic, having attended Clifton School in Nottingham Road, KwaZulu-Natal and later St Andrews School in Bloemfontein, the one a private school and the other an “independent” public school with an Anglican character...both conservative schools by Worthington’s admission.
His mother, however, rejected conservative values and taught him and his brother to questions things, putting him on course for a life of activism.
“I did have some exposure to environmental issues though, through the horse stables in the restricted area of the school grounds,” he quips. “My experience was that horse cubes actually make fair eating for a hungry boy… thus learning about product cycles and value chains accorded to diff components of ecosystem service.”
At the University of the Witwatersrand his first real, tentative step towards his future career came with his involvement in political theatre. It was during his 11-year spell of living abroad that he became involved in environmental issues.
Armed with a BA degree from Wits, he spent time in London, joining marches of the Campaign for Nuclear Disarmament and marches against apartheid, doing “various odd jobs” and working in fringe theatre. The latter he gave up when he found the entertainment industry as a vehicle for encouraging social change did not work for him.
But it was while living in Los Angeles in the US, waiting for his green card, that he started working with Greenpeace as a volunteer.
“I then progressed to canvassing door-to-door for membership and donations, which was a great educational experience at a time when climate change was first taken up as a mainstream campaigning issue, following the Rio Conference,” he recalls.
“We focused strongly on a campaign against a radioactive waste dump hat had been proposed on Native American lands. We went and hung what we believed to be the world’s largest banner on the London Bridge in Arizona – the bridge bought and brought across the Atlantic by a rich man wanting to put Lake Havasu ‘on the map’ as he thought he was getting the Tower Bridge!”
Worthing says he received “some activist training” which included abseiling and handling inflatable boats. At the time he also volunteered with the Rainforest Action Network In 1995 he returned to South Africa.
He joined both Earthlife and the Environmental Justice Networking Forum as a volunteer among other things. With money received from the Heinrich Böll Foundation, Worthington and others started an anti-nuclear, pro-renewable energy campaign which later became known as Nuclear Energy Costs the Earth – one of his pet projects.
At the time he also worked in adult education, started working one full day a week for Earthlife and became involved in an air pollution campaign in Johannesburg.
“We never did persuade the City of Johannesburg to introduce vehicle emissions standards and mandatory testing, although the suggestion was always well received,” he says.
Worthington goes along with a description of Earthlife Africa having evolved in 1988 out of a hotbed of student activism at Wits and a base of “lefties, liberals and hippies”.
“From all I have met, I’d say this is accurate. Two key founders are now personal friends; one was a hippie, the other a punk. Peter Lukey is now Chief Director of Climate and Air Quality Management at the Department of Water and Environmental Affairs [Subs: this is new name of department] while the person who was serving as branch co-ordinator when I joined is now my wife.”
From 2001 Worthington was the project coordinator of Earthlife’s Sustainable Energy and Climate Change Project (SECCP). The project aimed, through a combination of awareness-raising, research, advocacy and local and international networking, to mobilise civil society for support of a more sustainable energy development path and responsible climate change policies in South and Southern Africa. It also sought more effective engagement with the new, democratic government.
“When I joined in 1996, policy processes by the new government were taking attention and effort away from single issue campaigns. I started with toxics and nukes and focused most on Nuclear Energy Costs the Earth for some years, then started to focus more on climate change.”
In between he managed to continue his studies and in 2006 received a BSc Honours (cum laude) in Energy Studies from the University of Johannesburg. In 2007 he registered for a Masters degree at UJ but has had to delay this due to work pressures.
Worthington serves or has served in various capacities in the South African Climate Action Network (SACAN), the global Climate Action Network (CAN), and the GreenHouse People’s Environmental Centre among others. In 2002 he was named Energy Personality of the Year by the Sustainable Energy Society of South Africa (SESSA).
With the original SECCP brief having been largely accomplished, it was finally time to move on. At WWF his job entails talking to corporate members and other interested parties with a view to achieving a coalition of demand for effective local, national and international climate change response.
This includes developing information materials and major events and opportunities, to managing a growing team and coordinating SACAN activities and building capacity in Africa to participate in global CAN and international processes. He also participates in policy development processes, national and international NGO networking, some capacity-building and commissioning of research.
On the outlook forward – with the next round of UN climate talks scheduled for June 1-12 in Bonn, Germany as part of a series that is expected to culminate in Copenhagen in December with a new deal to succeed the UN’s Kyoto Protocol – he says a fair, equitable and effective post-2012 climate change agreement will require a just transition to sustainable energy and will also require much greater recognition that economy and ecology are concepts that cannot be separated.
“We cannot sustain economic success without ensuring the viability of ecosystems. The minority can continue to enjoy privilege and unsustainable lifestyles for a limited time. But ultimately everybody needs to participate in reversing the trend from environmental degradation to restoration. The longer we take, the more the majority will suffer.”
The WWF-SA has a position paper it will be submitting. Worthington says that as agreed in the Framework Convention, the industrialised countries – the so-called Annex 1 countries - must take on very ambitious absolute caps, preferably under a second five-year commitment period of the Kyoto Protocol (which would require some amendments).
“On aggregate the Annex 1 countries should reduce their emissions by at least 40% against 1990 levels. Fairness or equity requires that in addition to this target for domestic actions, Annex 1 countries must support both mitigation and adaptation actions in developing countries, including mobilising at least $145 billion per annum by 2020. The longer we delay transformation to low-carbon economies, the higher the cost will be,” he says.
“Fairness is of course relative, as the richer countries have already used up about 70% of the carbon-carrying capacity, or ‘atmospheric space’ available within a two-degree threshold. We live in a very unequal world and a new global deal on climate can’t address this as a five year period. It must, inter alia, ensure more democratic governance of international financial institutions.”
“We need a carbon market to mobilise private finance, but the system must be much more robust than to date and ensure that the carbon market does not entrench vested interests,” says the erstwhile hippie activist who today occupies a senior position in what has become a respectable, mainstream occupation in today’s threatened world.
A New World Beyond The Global Economic Crisis
(This article will appear in the next Jan/Feb edition of Leadership magazine.)
The global economic crisis of 2008 – which most experts agree is far from over – is turning into a major shakeout of the world as we know it. The world that will emerge on the other side of the crisis is bound to be very different and the crisis is having a far bigger impact in far more ways than most of us can yet imagine.
It is not merely about economics or banking systems. It affects global power relations, the internal stability of countries, political systems, financial and business systems, the war on poverty and disease, unemployment, consumer behaviour, property markets, entire industries such as the automobile industry, the fight against global warming, the scramble for resources, ideologies, food production and security....yes, almost every aspect of life as we know it.
As Prof Andre Roux, Director of the Institute of Futures Research at the University of Stellenbosch puts it: “It is a trend break, a disruption of previous beliefs about relations between variables, stakeholders, organisations, ideologies, and paradigms. What we have here is a trend break similar to the Great Depression, the two world wars, the fall of the Berlin wall, 9/11. So, life will not be the same as it was a year ago.”
While revolutionary changes are starting to take place in many spheres such as the motorcar industry, or the newspaper industry, it is especially in the two areas of global power relations and financial systems – closely intertwined in our globalised world – where the biggest impacts are being felt. From there it is a ripple effect that touches everything else.
Balance between state and markets
“A very important issue already emerging is a re-examination of the balance between state and markets,” says Prof Roux. “Some say capitalism has failed, others say it is misunderstood. I don’t think capitalism will go away. But at the same time I think we are rediscovering the fact that even in capitalism governments and states do have a role to play.”
Roger C Altman, a former US Deputy Treasury Secretary, writing in the latest edition of Foreign Affairs, says the US and some European governments have nationalised their financial sectors in contradiction of modern capitalism in an attempt to re-establish stability.
“Much of the world is turning a historic corner and heading into a period in which the role of the state will be larger and that of the private sector will be smaller,” says Altman. The crisis, he says, reflects the greatest regulatory failure in history.
Systems overhaul
On January 15 the World Economic Forum released its report entitled The Future of the Global Financial System; A Near-Term Outlook and Long-Term Scenarios which it had developed in collaboration with global strategy consulting firm Oliver Wyman.
According to the report, with the onset of the current financial crisis, an initial unwinding of global imbalances that were built up over the past decade has been experienced after years of expansionary monetary policies, financial deregulation and excessive credit utilization.
The report explores a near-term outlook for global financial system characterized by an expanded scope for regulatory oversight, back to basics in the banking sector, some restructuring by alternative investment firms and the emergence of a new set of winners and losers in the insurance industry.
Over the long-term, the report finds that a range of external forces and critical uncertainties have the power to significantly shape the global financial system. In particular, the World Economic Forum’s study found that the pace of geo-economic power shifts from today’s advanced economies to the emerging world and the degree of international coordination on financial policy are the two most critical uncertainties for the future of the global financial system.
Future scenarios
The report came up with four future scenarios, each describing key forces and turning points that could fundamentally shape the governance and structure of the global financial system in the next decade. In the first, called Financial Regionalism, three major blocs on trade and financial policy take shape. In the second, called Re-engineered Western-centrism a highly coordinated and financially homogenous world has yet to face up to the realities of shifting power and the dangers of regulating for the last crisis rather than the next. In the third, called Fragmented Protectionism, the world is characterized by division, conflict and currency controls that deepen the long-term effects of the financial crisis. And in the fourth, Rebalanced Multilateralism, initial disagreement is overcome in the context of rapidly shifting geo-economic power.
Another report released two days earlier by the World Economic Forum predicts a rather gloomy scenario ahead in which massive government spending to support financial institutions will threaten the already precarious fiscal positions in countries such as the US, United Kingdom, France, Italy, Spain and Australia.
Global Risks 2009 identifies deteriorating fiscal positions, a hard landing in China, a collapse in asset prices, gaps in global governance and interconnected risks stemming from the scramble for natural resources and climate change policy as the pivotal risks facing the world this year.
Interconnected risks
With major developed economies under severe pressure due to massive spending by governments to bail out failing financial institutions, it is unlikely much financial assistance will be given to poor nations to fight global warming as pledged by developed nations at the UN climate change conference in Bali.
Roux agrees that due to the financial squeeze fighting diseases, poverty alleviation or global warming may not top the agendas of countries. The downside is that even temporary setbacks can have a long-term effect as deteriorations might become irreversible. Roux also fears that this situation could undo the investments of the last few years in the search for alternative energy sources.
Altman supports a similar view, pointing out that with Obama about to inherit a US$1 trillion plus budget deficit, the largest ever incurred by any country in history, international spending in the form of aid and donations will not be forthcoming. The IMF will have to provide, and that institution too is stretched to the limit. And Altman believes Western capital markets will not return to full health for years.
Consumer depression
Prof Roux also points out that in most countries, but especially the US and Europe, the net worth of consumers fell dramatically and that they are tremendously depressed. They will be very conservative in time to come, spending little, which will slow down growth. In the US, says Altman, major drops in corporate profits are likely “because consumers are deeply frightened and have stopped spending on discretionary items”. This will create a vicious circle where less spending, lower incomes and higher unemployment will lead to even weaker economies.
Post-crisis unemployment is on the decline worldwide, and South Africa is no exception. With the pressures being felt in most countries, it is speculated that much of the South African Diaspora may return home. Roux says it is a good thing as we need their skills, but he is not sure there will be enough jobs for them back home under present conditions.
Roux says that typically governments have tended to solve such problems with fiscal policy, spending more and/or reducing taxes. But this creates longer term problems as debt levels rise. Most experts believe using monetary and fiscal stimuli will be relatively ineffective.
Like Altman many analysts believe a return to normalcy is a very long way off. “The West’s financial system is already a shadow of its former self,” says Altman. To keep the balance sheets stable, Western financial institutions will have to reduce their leverage much more by withdrawing credit from the world for at least three to four years, he believes.
China steps into the void
Against this background ongoing global power shifts are also likely to be affected one way or another, and even accelerated. Evidence of this is the prominence China’s Premier and Russia’s Prime Minister Vladimir Putin will enjoy at this year’s World Economic Forum Annual Meeting in Davos-Klosters, Switzerland, from 28 January to 1 February. Wen Jiabao will occupy centre stage when he addresses a special session on the first day of the meeting, while Putin will address the opening meeting. The theme will be shaping a post-crisis world. In previous years the influential Davos gathering was always dominated by the G8 major industrialised countries.
“China has become a global power whose cooperation is essential to relaunch global economic growth,” said Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. It is clear China, will achieve a stronger relative global position. It is already the world’s strongest country in terms of liquidity. There is also a growing view that a US led by Obama and less distracted by the war in Iraq will understand that the United States’ most important bilateral relationship should be with China.
China’s leap to centre stage was also evident in November when a meeting of the G20 countries, proposed by France’s President Nicolas Sarkozy and hosted by President George Bush, was held to discuss ways out of the global economic crisis. With foreign exchange reserves close to $2 trillion China is one country that can come to the aid of countries hard hit by the crisis, either directly or by injecting cash into the International Monetary Fund. This meeting was ample evidence of the power shifts taking place.
According to Prof Roux the Western nations have realised that they cannot tackle the crisis alone. “So they invited China, they invited Saudi Arabia, because they wanted these countries to bail them out, to supply some cash. I think we certainly are looking at a reconfiguration at the global economic and the political level,” he says. Instead of just one super power, America, the world will in future be looking at a number of major powers.
Altman says the crisis has significantly weakened the US and Europe, accelerating trends that are “shifting the world’s centre of gravity away from the United States”. With the unfolding recession heralding the deepest global economic slump since the 1930s, Altman says for the medium term it is clear that the global roles of the US and Europe will shrink along with their economies.
India, Saudi Arabia & Russia
Other countries of which the G8 are forced to take much more notice in the rapidly shifting pattern of global power relations are Saudi Arabia and India. British Prime Minister Gordon Brown has already approached the wealthy oil-producing Saudi Arabia to bolster the IMF’s coffers, while the country was a prominent presence at the G20 meeting.
For Russia the global financial crisis could not have come at a worse time, says Steven Sestanovich in a special brief for the Council on Foreign Relations. Just when the country was making good progress on all fronts and had high confidence in the future, re-establishing herself as global player, the crush came, plunging its stock market by 70% and causing an outflow of 20% of its forex reserves. The crisis, together with the steep drop in oil prices took a toll on Russia's resource-based economy, slowing growth and sending unemployment higher, says Sestanovich.
“That has put Russia's leaders under tremendous pressure as they try to prevent an explosion of social protest that could threaten their rule.” With US$500 billion still in forex reserves Russia remains financially strong, but the global crisis will slow down its geopolitical ambitions.
Initial responses to the crisis by Russia tend to point to a flexing of its muscles with some hints of tightening authoritarian rule, increased anti-Western rhetoric and punitive measures for those countries not carrying out its wishes. For example, in January Russia cut off the natural gas supplies to Ukraine r to punish, it seems, Western-leaning Ukraine for seeking to join NATO and the European Union.
However, despite the muscle flexing, Russia has also consistently emphasised throughout the crisis so far the importance of further reform, cooperation with other countries and a view that it sees the crisis as part of a large shift in the international balance of power. Russian President Dmitry Medvedev is on record saying that the emerging economies, especially in Asia, will have to be the leaders in unravelling the world economic crisis. Russia wants to be a leading part of this transformation and it will be interesting to see what Putin tells the WEF meeting in Davos.
Increased risk of conflicts
Meanwhile, there can be little doubt that the global economic crisis is also threatening the established political order and relations between nations. The European Union’s development aid commissioner Louis Michel warns that the effects of the global recession will fuel existing conflicts, spark terrorism and jeopardise global security in general. Other world leaders such as French President Nicolas Sarkozy have echoed these sentiments.
Aid to many underdeveloped nations – particularly in Africa – is also likely to come under pressure because of the crisis. Together with existing grinding poverty in many of these countries, exacerbated by droughts, diseases and high global food prices, the stage is set for more conflicts and instability. Researchers Raymond Fisman of Columbia Business School and Edward Miguel of the Centre of Evaluations for Global Action University of California say a 5 percent drop in national income in African countries increases the risk of civil conflict in the following year to 30 percent.
A new Bretton Woods?
Since 1944 world finance has been governed in terms of the Bretton Woods agreement reached by the 44 Allied nations fighting Hitler. That agreement created the World Bank and the International Monetary Fund and aimed to increase and spread international trade in order to minimise the possibility of future wars and to avoid another Great Depression. Now, almost 65 years later that agreement has dramatically run out of steam.
Together the outcome of the recent G8, G20 and other meetings and the forthcoming WEF meeting in Davos may yet lead to a new Bretton Woods type of agreement, taking the world into a new era. Until that much uncertainty will prevail.
The global economic crisis of 2008 – which most experts agree is far from over – is turning into a major shakeout of the world as we know it. The world that will emerge on the other side of the crisis is bound to be very different and the crisis is having a far bigger impact in far more ways than most of us can yet imagine.
It is not merely about economics or banking systems. It affects global power relations, the internal stability of countries, political systems, financial and business systems, the war on poverty and disease, unemployment, consumer behaviour, property markets, entire industries such as the automobile industry, the fight against global warming, the scramble for resources, ideologies, food production and security....yes, almost every aspect of life as we know it.
As Prof Andre Roux, Director of the Institute of Futures Research at the University of Stellenbosch puts it: “It is a trend break, a disruption of previous beliefs about relations between variables, stakeholders, organisations, ideologies, and paradigms. What we have here is a trend break similar to the Great Depression, the two world wars, the fall of the Berlin wall, 9/11. So, life will not be the same as it was a year ago.”
While revolutionary changes are starting to take place in many spheres such as the motorcar industry, or the newspaper industry, it is especially in the two areas of global power relations and financial systems – closely intertwined in our globalised world – where the biggest impacts are being felt. From there it is a ripple effect that touches everything else.
Balance between state and markets
“A very important issue already emerging is a re-examination of the balance between state and markets,” says Prof Roux. “Some say capitalism has failed, others say it is misunderstood. I don’t think capitalism will go away. But at the same time I think we are rediscovering the fact that even in capitalism governments and states do have a role to play.”
Roger C Altman, a former US Deputy Treasury Secretary, writing in the latest edition of Foreign Affairs, says the US and some European governments have nationalised their financial sectors in contradiction of modern capitalism in an attempt to re-establish stability.
“Much of the world is turning a historic corner and heading into a period in which the role of the state will be larger and that of the private sector will be smaller,” says Altman. The crisis, he says, reflects the greatest regulatory failure in history.
Systems overhaul
On January 15 the World Economic Forum released its report entitled The Future of the Global Financial System; A Near-Term Outlook and Long-Term Scenarios which it had developed in collaboration with global strategy consulting firm Oliver Wyman.
According to the report, with the onset of the current financial crisis, an initial unwinding of global imbalances that were built up over the past decade has been experienced after years of expansionary monetary policies, financial deregulation and excessive credit utilization.
The report explores a near-term outlook for global financial system characterized by an expanded scope for regulatory oversight, back to basics in the banking sector, some restructuring by alternative investment firms and the emergence of a new set of winners and losers in the insurance industry.
Over the long-term, the report finds that a range of external forces and critical uncertainties have the power to significantly shape the global financial system. In particular, the World Economic Forum’s study found that the pace of geo-economic power shifts from today’s advanced economies to the emerging world and the degree of international coordination on financial policy are the two most critical uncertainties for the future of the global financial system.
Future scenarios
The report came up with four future scenarios, each describing key forces and turning points that could fundamentally shape the governance and structure of the global financial system in the next decade. In the first, called Financial Regionalism, three major blocs on trade and financial policy take shape. In the second, called Re-engineered Western-centrism a highly coordinated and financially homogenous world has yet to face up to the realities of shifting power and the dangers of regulating for the last crisis rather than the next. In the third, called Fragmented Protectionism, the world is characterized by division, conflict and currency controls that deepen the long-term effects of the financial crisis. And in the fourth, Rebalanced Multilateralism, initial disagreement is overcome in the context of rapidly shifting geo-economic power.
Another report released two days earlier by the World Economic Forum predicts a rather gloomy scenario ahead in which massive government spending to support financial institutions will threaten the already precarious fiscal positions in countries such as the US, United Kingdom, France, Italy, Spain and Australia.
Global Risks 2009 identifies deteriorating fiscal positions, a hard landing in China, a collapse in asset prices, gaps in global governance and interconnected risks stemming from the scramble for natural resources and climate change policy as the pivotal risks facing the world this year.
Interconnected risks
With major developed economies under severe pressure due to massive spending by governments to bail out failing financial institutions, it is unlikely much financial assistance will be given to poor nations to fight global warming as pledged by developed nations at the UN climate change conference in Bali.
Roux agrees that due to the financial squeeze fighting diseases, poverty alleviation or global warming may not top the agendas of countries. The downside is that even temporary setbacks can have a long-term effect as deteriorations might become irreversible. Roux also fears that this situation could undo the investments of the last few years in the search for alternative energy sources.
Altman supports a similar view, pointing out that with Obama about to inherit a US$1 trillion plus budget deficit, the largest ever incurred by any country in history, international spending in the form of aid and donations will not be forthcoming. The IMF will have to provide, and that institution too is stretched to the limit. And Altman believes Western capital markets will not return to full health for years.
Consumer depression
Prof Roux also points out that in most countries, but especially the US and Europe, the net worth of consumers fell dramatically and that they are tremendously depressed. They will be very conservative in time to come, spending little, which will slow down growth. In the US, says Altman, major drops in corporate profits are likely “because consumers are deeply frightened and have stopped spending on discretionary items”. This will create a vicious circle where less spending, lower incomes and higher unemployment will lead to even weaker economies.
Post-crisis unemployment is on the decline worldwide, and South Africa is no exception. With the pressures being felt in most countries, it is speculated that much of the South African Diaspora may return home. Roux says it is a good thing as we need their skills, but he is not sure there will be enough jobs for them back home under present conditions.
Roux says that typically governments have tended to solve such problems with fiscal policy, spending more and/or reducing taxes. But this creates longer term problems as debt levels rise. Most experts believe using monetary and fiscal stimuli will be relatively ineffective.
Like Altman many analysts believe a return to normalcy is a very long way off. “The West’s financial system is already a shadow of its former self,” says Altman. To keep the balance sheets stable, Western financial institutions will have to reduce their leverage much more by withdrawing credit from the world for at least three to four years, he believes.
China steps into the void
Against this background ongoing global power shifts are also likely to be affected one way or another, and even accelerated. Evidence of this is the prominence China’s Premier and Russia’s Prime Minister Vladimir Putin will enjoy at this year’s World Economic Forum Annual Meeting in Davos-Klosters, Switzerland, from 28 January to 1 February. Wen Jiabao will occupy centre stage when he addresses a special session on the first day of the meeting, while Putin will address the opening meeting. The theme will be shaping a post-crisis world. In previous years the influential Davos gathering was always dominated by the G8 major industrialised countries.
“China has become a global power whose cooperation is essential to relaunch global economic growth,” said Professor Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. It is clear China, will achieve a stronger relative global position. It is already the world’s strongest country in terms of liquidity. There is also a growing view that a US led by Obama and less distracted by the war in Iraq will understand that the United States’ most important bilateral relationship should be with China.
China’s leap to centre stage was also evident in November when a meeting of the G20 countries, proposed by France’s President Nicolas Sarkozy and hosted by President George Bush, was held to discuss ways out of the global economic crisis. With foreign exchange reserves close to $2 trillion China is one country that can come to the aid of countries hard hit by the crisis, either directly or by injecting cash into the International Monetary Fund. This meeting was ample evidence of the power shifts taking place.
According to Prof Roux the Western nations have realised that they cannot tackle the crisis alone. “So they invited China, they invited Saudi Arabia, because they wanted these countries to bail them out, to supply some cash. I think we certainly are looking at a reconfiguration at the global economic and the political level,” he says. Instead of just one super power, America, the world will in future be looking at a number of major powers.
Altman says the crisis has significantly weakened the US and Europe, accelerating trends that are “shifting the world’s centre of gravity away from the United States”. With the unfolding recession heralding the deepest global economic slump since the 1930s, Altman says for the medium term it is clear that the global roles of the US and Europe will shrink along with their economies.
India, Saudi Arabia & Russia
Other countries of which the G8 are forced to take much more notice in the rapidly shifting pattern of global power relations are Saudi Arabia and India. British Prime Minister Gordon Brown has already approached the wealthy oil-producing Saudi Arabia to bolster the IMF’s coffers, while the country was a prominent presence at the G20 meeting.
For Russia the global financial crisis could not have come at a worse time, says Steven Sestanovich in a special brief for the Council on Foreign Relations. Just when the country was making good progress on all fronts and had high confidence in the future, re-establishing herself as global player, the crush came, plunging its stock market by 70% and causing an outflow of 20% of its forex reserves. The crisis, together with the steep drop in oil prices took a toll on Russia's resource-based economy, slowing growth and sending unemployment higher, says Sestanovich.
“That has put Russia's leaders under tremendous pressure as they try to prevent an explosion of social protest that could threaten their rule.” With US$500 billion still in forex reserves Russia remains financially strong, but the global crisis will slow down its geopolitical ambitions.
Initial responses to the crisis by Russia tend to point to a flexing of its muscles with some hints of tightening authoritarian rule, increased anti-Western rhetoric and punitive measures for those countries not carrying out its wishes. For example, in January Russia cut off the natural gas supplies to Ukraine r to punish, it seems, Western-leaning Ukraine for seeking to join NATO and the European Union.
However, despite the muscle flexing, Russia has also consistently emphasised throughout the crisis so far the importance of further reform, cooperation with other countries and a view that it sees the crisis as part of a large shift in the international balance of power. Russian President Dmitry Medvedev is on record saying that the emerging economies, especially in Asia, will have to be the leaders in unravelling the world economic crisis. Russia wants to be a leading part of this transformation and it will be interesting to see what Putin tells the WEF meeting in Davos.
Increased risk of conflicts
Meanwhile, there can be little doubt that the global economic crisis is also threatening the established political order and relations between nations. The European Union’s development aid commissioner Louis Michel warns that the effects of the global recession will fuel existing conflicts, spark terrorism and jeopardise global security in general. Other world leaders such as French President Nicolas Sarkozy have echoed these sentiments.
Aid to many underdeveloped nations – particularly in Africa – is also likely to come under pressure because of the crisis. Together with existing grinding poverty in many of these countries, exacerbated by droughts, diseases and high global food prices, the stage is set for more conflicts and instability. Researchers Raymond Fisman of Columbia Business School and Edward Miguel of the Centre of Evaluations for Global Action University of California say a 5 percent drop in national income in African countries increases the risk of civil conflict in the following year to 30 percent.
A new Bretton Woods?
Since 1944 world finance has been governed in terms of the Bretton Woods agreement reached by the 44 Allied nations fighting Hitler. That agreement created the World Bank and the International Monetary Fund and aimed to increase and spread international trade in order to minimise the possibility of future wars and to avoid another Great Depression. Now, almost 65 years later that agreement has dramatically run out of steam.
Together the outcome of the recent G8, G20 and other meetings and the forthcoming WEF meeting in Davos may yet lead to a new Bretton Woods type of agreement, taking the world into a new era. Until that much uncertainty will prevail.
Zuma more equal than others as ANC continues assault on judiciary
The assault by the ANC and allies on the judiciary and the propaganda war of deliberately creating misconstrued perceptions continues. The ANC issued a statement in its online newsletter explaining why it stood by Jacob Zuma after this week’s Supreme Court of Appeal judgement. The statement mainly revolves around the principle of a person being assumed innocent until proven guilty in a court of law and that this was a right that should also be afforded to Zuma. However, of considerable interest is some of the revealing language used in the statement.
For instance, the ANC says the matter is not merely about Zuma, but about the “principles and practises” upon which the ANC intends “to build a new society” that is “democratic, just and equitable”. This statement smacks of ideological patronisation and begs the question what the ANC has been doing these past 14 years and why do we yet again need new practises and principles to yet again build a new society.
The statement goes on to say it wants a society in which there is “an independent, impartial and fair judiciary” that safeguards the rights and interests of all people. The use of the word “fair” in this context by the ANC is a new one. The independence and impartiality of the judiciary should, in itself, automatically imply fairness.
However, every time the judicial process has gone against Zuma, the ANC has implied that there was a conspiracy against him and that he could not expect a fair trial. At times the judiciary and individual judges were attacked and ridiculed by ANC and alliance leaders. Whenever judgement went in favour of Zuma, the ANC expressed satisfaction with the fairness and independence of the judiciary as it is. The use of the word “fair” is therefore added in this context – the process having gone against Zuma - to strengthen the propagated perception that Zuma cannot expect a fair trial.
Independence, impartiality and fairness is accepted by the ANC in the judicial context only in as far as the actions of the judiciary are aligned in keeping with the preconceived ideas, demands and expectations of the ANC, the alliance and their leaders.
The statement argues for Zuma to be treated equally with all other citizens under the Constitution, which nobody will deny as being his right. However, the ANC fails to acknowledge that Zuma has been treated more equal than most and has in fact frequently been elevated above the law by the ANC and allies. This is borne out by the fact that Zuma and his legal team have squandered millions in taxpayers’ money in Zuma’s numerous legal attempts to drag out proceedings against him apparently in the hope that eventually the charges against him will go away, to have various legal proceedings thrown out on technicalities or to altogether avoid Zuma having to defend himself in an open and impartial court of law that is good enough for every other South African citizen.
In addition the ANC and allies have, whenever the process went against Zuma or when there was a chance it could go against him, organised mass marches, rallies and demonstrations and have resorted to threats and what might amount to hate speech against the judiciary and those seeking the rule of law and justice in the Zuma case – certainly no ordinary action in an ordinary criminal case of just another South African who demands equality before the law.
It also comes as no surprise that the ANC – though its parliamentary Chief Whip Myamezeli Booi - has already called for ANC lawyers to review the National Prosecuting Authority Act with a view to its possible amendment because, in their view, the latest two judgements in the Zuma case showed that senior judges disagreed on how to interpret the Act. What Booi and the ANC fail to acknowledge is that the five appeal court judges disagreed with one high court judge – more than enough reason to accept that the interpretation of the five appeal judges is the correct one. That also happens to be the one that went against Zuma. Therefore once more, the perception of suspicion and unfairness must again be strengthened in building a case for the law to be changed. The ANC will no doubt soon also again proceed with its legislative attempts in Parliament to bring the judiciary under political control and create a Zimbabwe-style puppet judiciary.
For instance, the ANC says the matter is not merely about Zuma, but about the “principles and practises” upon which the ANC intends “to build a new society” that is “democratic, just and equitable”. This statement smacks of ideological patronisation and begs the question what the ANC has been doing these past 14 years and why do we yet again need new practises and principles to yet again build a new society.
The statement goes on to say it wants a society in which there is “an independent, impartial and fair judiciary” that safeguards the rights and interests of all people. The use of the word “fair” in this context by the ANC is a new one. The independence and impartiality of the judiciary should, in itself, automatically imply fairness.
However, every time the judicial process has gone against Zuma, the ANC has implied that there was a conspiracy against him and that he could not expect a fair trial. At times the judiciary and individual judges were attacked and ridiculed by ANC and alliance leaders. Whenever judgement went in favour of Zuma, the ANC expressed satisfaction with the fairness and independence of the judiciary as it is. The use of the word “fair” is therefore added in this context – the process having gone against Zuma - to strengthen the propagated perception that Zuma cannot expect a fair trial.
Independence, impartiality and fairness is accepted by the ANC in the judicial context only in as far as the actions of the judiciary are aligned in keeping with the preconceived ideas, demands and expectations of the ANC, the alliance and their leaders.
The statement argues for Zuma to be treated equally with all other citizens under the Constitution, which nobody will deny as being his right. However, the ANC fails to acknowledge that Zuma has been treated more equal than most and has in fact frequently been elevated above the law by the ANC and allies. This is borne out by the fact that Zuma and his legal team have squandered millions in taxpayers’ money in Zuma’s numerous legal attempts to drag out proceedings against him apparently in the hope that eventually the charges against him will go away, to have various legal proceedings thrown out on technicalities or to altogether avoid Zuma having to defend himself in an open and impartial court of law that is good enough for every other South African citizen.
In addition the ANC and allies have, whenever the process went against Zuma or when there was a chance it could go against him, organised mass marches, rallies and demonstrations and have resorted to threats and what might amount to hate speech against the judiciary and those seeking the rule of law and justice in the Zuma case – certainly no ordinary action in an ordinary criminal case of just another South African who demands equality before the law.
It also comes as no surprise that the ANC – though its parliamentary Chief Whip Myamezeli Booi - has already called for ANC lawyers to review the National Prosecuting Authority Act with a view to its possible amendment because, in their view, the latest two judgements in the Zuma case showed that senior judges disagreed on how to interpret the Act. What Booi and the ANC fail to acknowledge is that the five appeal court judges disagreed with one high court judge – more than enough reason to accept that the interpretation of the five appeal judges is the correct one. That also happens to be the one that went against Zuma. Therefore once more, the perception of suspicion and unfairness must again be strengthened in building a case for the law to be changed. The ANC will no doubt soon also again proceed with its legislative attempts in Parliament to bring the judiciary under political control and create a Zimbabwe-style puppet judiciary.
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