Zimbabwe’s financial system is living on borrowed time - and borrowed money
- Roger Southall
Zimbabwe’s financial system increasingly resembles a house of cards
Were one card to give way – for instance, if South Africa’s power utility, Eskom, were to have the temerity to suggest that Zimbabwe actually pay for the electricity that it’s supplying the country – the entire edifice would collapse.
The rot goes back to the early 2000’s. ZANU-PF profligacy had been fuelled by acontinuous cycle of simply printing more money, and resultant runaway inflation. Mega-inflation meant that ordinary people lost their pensions and whatever savings they had, as the Zimbabwe dollar lost its value and people resorted to barter or the use of other currencies.
Ultimately, the government faced no choice but to accept reality. In 2008 it scrapped the Zimbabwe dollar in favour of a basket of other currencies, although within a short time, this meant in effect the reign of the US dollar.
“Dollarisation” allowed for the pursuit of more rational policies by the coalition Government of National Unity which followed the disputed 2008 election. However, its control of the electoral machinery ensured that ZANU-PF won a resounding victory in the 2013 election. Within a short space of time it returned to its familiar policy mix of profligacy, corruption and populist economics.
Yet ZANU-PF faced major problems. Above all, “dollarisation” meant that the cost of Zimbabwe’s exports on international markets was high. Worse, the dramatic collapse in agricultural production since the early 2000s (following the appropriation of white farms) alongside the decimation of the country’s manufacturing industries meant that there was relatively little to export anyway. Tobacco production has recovered a little, but the quality is less than it used to be, so returns are relatively less.
Meanwhile government insistence that mines should be 51% Zimbabwean owned has done nothing to entice inward investment or boost exports.
In short, the capacity of the economy to earn US dollars by selling goods externally has fallen dramatically, and the supply of money circulating within the country has dried up. Unemployment stands at around 90%.
President Robert Mugabe’s latest response has been to replace finance minister Patrick Chinamasa, who had been warning of the structure’s fragility in ever more urgent tones. The new finance minister is Ignatius Chombo, a party loyalist, who will brook no talk of any need for structural reform.
The bond notes
Faced by a looming crisis, the ZANU-PF government has resorted to three key strategies.
One has been the issue of “bond notes” (of different denominations) by the Reserve Bank of Zimbabwe. Officially, they’re designed to swell the amount of money in circulation within the country. The problem is that apart from having no value outside the country, nobody trusts them as they have been issued by a ZANU-PF government, and it was this government that presided over the hyperinflation.
ZANU-PF’s announcement that it was issuing bond notes was met with a run on the banks as depositors sought to withdraw dollars as fast as they could. Their assumption was that this was a government ploy to reintroduce the Zimbabwean dollar. The Reserve Bank of Zimbabwe responded by limiting the amount of dollars individuals could withdraw.
People are reluctant to use the bond notes. But they’re still sometimes forced to accept them because of the sheer shortage of “real” money. As a result when they can, they rush off to the local bus station where they can sell them for dollars to currency traders – albeit illegally.
The second strategy has been the rapid expansion of country’s ability to manage electronic transactions. Its aim has been to expand the amount of money in circulation without using up “real” dollars.
Accordingly, government employees are now largely paid electronically Similarly, government employees (and everyone else) now pay nearly all their bills within the country electronically.
And Zimbabweans are rarely able to convert the notional sums of dollars they hold in the bank into real cash – unless they make use of the currency traders in illegal transactions.
Meanwhile, with the rate of inflation continuing to rise combined with the widespread lack of faith in the banks, many Zimbabweans spend their bank balances on consumer goods as quickly as possible rather than attempting to “save”. After all, if times get hard, you won’t be able to get rid of your bond notes, but you may be able to sell your fridge.
Fanciful financial system
But it’s the third strategy which the government has pursued which is really fuelling a fanciful financial system.
Since 2013, government expenditure has steadily increased year by year, despite the country earning very little internationally. The ZANU-PF government may have hoped to fund this by its old trick of literally printing money, that is, by expanding the supply of bond notes.
But such was the negative popular sentiment that the Reserve Bank of Zimbabwe seems to have restricted their issue. Supposedly the issue of bond notes is backed by a USD$200 loan by the Afreximbank, but no-one really knows how many have been issued because the central bank provides no information.
What the government has done instead is to fund its rising costs by issuing treasury bills (whereby the government touts for loans on the capital market against promises of later redemption). No-one in their right mind would want to buy them, but Zimbabwe’s banks today have little option. As inward investment into the country has dried up to a trickle, there is little else for them to spend their money on, and the interest rates that the government promises to pay are, at face value, attractively high.
The coalition government of national unity recorded budget surpluses for three of the four full years in which the opposition controlled the Treasury. For its part, the ZANU-PF government recorded deficits of USD$186 million and USD$125 million in 2014 and 2015. Recently, the then finance minister Chinamasa projected a deficit of USD$1.41 billion for 2017. As of June 30, 2017, there were USD$2.5 billion worth of Treasury bills on issue.
In other words, the spending will continue. Zimbabwe’s financial system is living on borrowed time and borrowed money. It will again end in financial ruin, as it did in 2008. But all ZANU-PF cares about is ensuring that it wins the next election and allowing its political elite to “eat”.
Global developmental institution needs to be accountable on Lonmin
- Nomonde Nyembe and Palesa Madi
The time to account has come for the International Finance Corporation, a member of the World Bank Group.
The International Finance Corporation (IFC) is the largest global development institution with an exclusive focus on the private sector in developing countries. It has not been held accountable for the violation of its own policy in a number of instances, including cases relating to high-profile issues in South Africa.
As an institution within the World Bank, the IFC advances economic development by investing in projects of a commercial nature and/or providing advice and support for such projects. Being both an institution within the World Bank and an ostensibly development-focused finance institution, it goes without saying that this body provides a great deal of funding to countries in the Global South.
The IFC boasts that over the past five decades it has provided finance in excess of $25-billion in Sub-Saharan Africa alone. It goes without saying therefore that the IFC is a powerful financial player and as such has potential to significantly impact the lives of people all over the world, by simply performing its function: providing finance. It is often said that with power comes responsibility. However, responsibility is not bred through power but through accountability. Sadly, the IFC, an important and global financial and economic player operates neither responsibly nor accountably.
Accountability and responsibility can be achieved in a variety of ways; an obvious example is that citizens hold their governments accountable by using the right to vote. But, where there is an imbalance of power, repositories of power are held accountable through court processes. Independent and efficient court processes present an opportunity for the disempowered to at the very least air their grievances, be heard and at most hold those in power accountable through orders and judgments. This, however, is not the case for the IFC. As with many development finance institutions, the Articles of Agreement establishing the IFC, and signed by member states provides that:
“Actions may be brought against the Corporation only in a court of competent jurisdiction in the territories of a member in which the Corporation has an office, has appointed an agent for the purpose of accepting service of process, or has issued or guaranteed securities.”
Upon reading this provision, one might come to the conclusion that the IFC does not have immunity from court processes but instead places conditions on the manner in which such court processes may be conducted. That interpretation has not, however, been adopted by a US District Court in a case brought in relation to the Mundra plant in India.
The IFC provided a $450-million loan for the construction of the Tata Mundra plant in India. Following the IFC’s failure to take necessary reasonable steps to prevent harm in the affected community as is required in terms of its own policy (the Policy on Social and Environmental Sustainability and the Performance Standards) the plant project destroyed the local marine environment, fish populations and sources of water used for drinking and irrigation.
When the affected Indian community tried to sue the IFC in the United States, where the head office of IFC is based, the court declared that the IFC had immunity and therefore could not be sued. This is because the US had enacted a law which granted it the power to determine whether the IFC would have immunity, it did not make a determination to that effect however. Essentially, this decision means that if the IFC finances projects and as a result of the projects, there are social and environmental consequences, the IFC cannot be held legally accountable. What’s worse is that even if such social and environmental consequences occur as a result of the IFC not upholding its own policy, affected persons or communities cannot sue IFC, in the US. This position is worsened in South Africa because, unlike the US, our statute books do contain a provision that provides absolute immunity to the IFC and other financial institutions like it. So, without juridical court process, how would one go about holding the IFC accountable?
As it stands, the only possible manner in which to potentially hold the IFC accountable is through the Office of the Compliance Advisor/Ombudsman (CAO). The CAO is the independent recourse mechanism for projects supported by the IFC. The mandate of the CAO is to address the concerns of individuals or communities affected by IFC projects and to foster greater public accountability of the IFC. The IFC receives complaints from persons or communities that are affected by IFC funded projects. The CAO achieves its mandate though dispute resolution (with the relevant and willing stakeholders), compliance auditing and advice to the IFC. Sadly, even this means of accountability is lacking. Our experience evidences that an affected mine community in South Africa sought redress from the CAO, with very little success.
In June 2015, the women of Sikhala Sonke, an organisation based in Marikana, Rustenburg, lodged a complaint with the CAO concerning the IFC’s investment in Lonmin PLC, the platinum mining company. In 2007, the IFC made a $50-million investment in Lonmin which was earmarked for Lonmin’s Local Economic Development Programme. This funding was granted to ensure that Lonmin contributed to the development of nearby communities by providing infrastructure, basic services and poverty eradication programmes.
Having seen no positive changes to the living conditions of those living around Lonmin (as envisioned in the IFC loan and Performance Standards), Sikhala Sonke, with the assistance of the Centre for Applied Legal Studies, lodged a complaint with the CAO. The complaint highlighted concerns related to access to housing, water, and sanitation, and ensuring sound and effective environmental management, gender empowerment, education and black economic empowerment.
Following the complaint, Sikhala Sonke participated in a dispute resolution process with Lonmin, facilitated by the CAO. Despite Sikhala Sonke’s good faith efforts, nearly 17 months after lodging the complaint with the CAO, and nearly 10 months of engagement with Lonmin resulting in only three separate meetings, no progress was made on the issues which formed the core of the Sikhala Sonke’s complaint to the CAO.
The process failed to yield a resolution to any of the issues. The process failed to foster greater public accountability of the IFC. Consequently, Sikhala Sonke withdrew from the process and requested that the CAO commence with the compliance process. Sikhala Sonke then moved on to the second phase of the CAO accountability process: compliance, in the hopes that this instead, would ensure accountability. To date, however, this has not proved itself to be true.
While Sikhala Sonke hopes that the CAO’s compliance process will ensure a full analysis of the reasons for the IFC and Lonmin’s failure to comply with the IFC’s policy and the IFC’s failure to ensure that Lonmin complied with its policy, seemingly this process yet again will yield no fruit. Sikhala Sonke has been waiting for the CAO’s compliance report since May 2017, having pulled out of the dispute resolution process in March 2017. Technically, the CAO has 45 days to publish a compliance appraisal; this period expired close to three months ago. Numerous engagements with the CAO, expose the fact that this delay in finalising the compliance appraisal. It is worth noting that the CAO also rejected a complaint triggered by its own CEO on the basis that “the nexus between the (IFC’s) E&S performance issues … and the tragic outcomes of the August 2012 dispute (the Marikana Massacre) is insufficiently established”. Further elaborative of the CAO’s inability to hold the IFC accountable is the complaint lodged on Net1.
In April 2016, the IFC invested $107-million in Net1 UEPS Technologies Inc. (Net1). Net1’s subsidiary, Cash Paymaster Services (Pty) Ltd (CPS) is the company that was awarded a tender by the South African Social Security Agency (SASSA) for the payment of social grants. The awarding of this tender to Net1’s subsidiary was declared unlawful and invalid and set aside by the Constitutional Court. It is on this basis that NGO’s Corruption Watch, Black Sash and Equal Education lodged a complaint with the CAO in an attempt to hold the IFC accountable for investing in Net1, despite knowing of Net1’s legal woes. The NGOs submitted that there was lack of due diligence on the part of the IFC in respect of the IFC’s policy. The CAO has considered the NGO’s complaint and instead of investigating it further, rejected the complaint. Steadfast as they are however, the NGOs intend to submit an amended complaint.
It goes without saying that development is important and that the work of the IFC can positively contribute to development of many countries. With that said, such development cannot be at the cost of people’s livelihoods and their environment; it should be instead be inclusive, people-focused and elected, sustainable. The IFC is well aware of this; hence its Policy on Social and Environmental Sustainability and the Performance Standards. The above examples illustrate a number of occasions where the IFC has not been held accountable for the violation of this policy.
Affected persons cannot sue the IFC and the only mechanism they can use — the CAO — takes very long periods of time to finalise its compliance reports, when it does choose to investigate the complaints. It’s imperative that the IFC and other development financial institutions, like it, adhere to the notion of development that is inclusive, people-focused and elected, sustainable. At the core of this development model is ensuring accountability either by means of the courts or an effective and efficient CAO. The time has come for the CAO to actually hold the IFC accountable and the time has come for us to hold it accountable for failing to do so.
Nomonde Nyembe and Palesa Madi are attorneys at the Centre for Applied Legal Studies, based at Wits University.
Johannesburg’s inner city: the Dubai of southern Africa, but all below the radar
- Tanya Zack
Over the last 20 years Johannesburg has become an intense wholesale and retail centre for local hawkers and for traders from all over sub-Saharan Africa.
Billions of rand worth of fast fashion is sold annually in the traditional central business district and in 20 large Chinese shopping malls west of the inner city.
It is a vast, booming, low-end globalised trade that has transformed space and pioneered a retail phenomenon in the inner city for the sale of cheap clothing, shoes, household wares and accessories. Informal estimates based on bus passenger numbers and spending reported in the survey suggest that cross border shoppers are spending over R10 billion each year in Johannesburg’s CBD.
A new study into cross-border shopping in the inner city maps the shops and the goods sold. Researchers did detailed interviews with 300 retailers and 400 cross border shoppers as well as hotel managers and bus operators that service the flow of shoppers who travel to Johannesburg from countries including Mozambique, Zimbabwe, Malawi, Lesotho, Swaziland and Zambia.
The survey gave the first concrete insights into a vast trading web that operates in the cash economy and below the radar of formalised planning regulation. Yet it is an economy yielding four times the annual turnover of an average regional sized shopping mall.
The extent of the trade isn’t really known. And the scale of cross border shopping is widely disputed in City offices and among property investors. But the survey shows that the city of Johannesburg should acknowledge that its inner city has developed into the shopping hub of sub-Saharan Africa. Some retailers have dubbed it the Dubai of South Africa. That ambition – that it be a global retail centre – should be embraced in economic strategy and in physical plans to upgrade the area.
Hive of unreported activity
The research focuses on 53 city blocks within the Johannesburg CBD anchored by more than 3000 shops. These are streets that bustle with street traders, ground level shopping alleys and high rise shopping centres. The shopping zone is close to rail, bus and taxi infrastructure. It is also served by cross border bus depots and hotels.
The shopping hub is intense with throngs of pedestrians and determined shoppers crowding the streets on any given day. Buildings that have outlived their usefulness as office space and medical suites have been appropriated and converted at a rapid rate – primarily by migrant Ethiopian traders - to shopping centres hosting thousands of cupboard sized shops.
This activity has developed over two decades. It started as a quiet encroachment of space in the mid-1990s when Ethiopian survivalist entrepreneurs, who had fled their country to seek political asylum in South Africa, rented space in almost empty office towers. The space grew first incrementally and then in rapid bursts to become a burgeoning economic enclave created through the dramatic occupation and subdivision of space.
Based on the interviews, we calculated that the annual profit takings in the city blocks we surveyed amounts to close to R7 billion profit every year. But this is likely to be a major underestimate.
The sample survey indicates that about 70% of the shoppers contributing to these profits are cross border shoppers. Each shopper is spending an average of R14 364 on goods per shopping trip. In addition R3 497 is spent on other services including transport.
A large number of bus companies is linked to the trade. On one day 51 bus companies were operating from 19 sites. In that same week, a moderate shopping season of the year (mid August), 465 buses carrying up to 60 passengers - many of these being shoppers - left Johannesburg to neighbouring countries.
Johannesburg as a violent city
But retailers and shoppers face enormous risks. The dependence on cash poses a big risk in an area rife with crime and corruption and where law enforcement agencies appear to be complicit in illegal activities.
Over 60% of retailers interviewed said they had been physically attacked or assaulted. And 38% had regularly “gifted” police officers.
For shoppers the risk is also extreme. A third of shoppers interviewed had been exposed to violent crime. They travel in groups and hide their money. They depend heavily on the security and storage facilities of hotels and bus depots for safety.
These levels of crime are a major break on Johannesburg’s ability to maximise the benefits of these shopping trips. Shoppers are spending an average of 2.5 days on each trip. But they spend comparatively little on accommodation and almost nothing on entertainment. And they are too fearful to spend more time in Johannesburg than their shopping requires.
Most said they didn’t use city restaurants, preferring to lock themselves in their hotel rooms in the early evening. And retailers said they would like extended shopping hours but they close shops around 5pm because of safety concerns.
Cross border shoppers are international visitors to Johannesburg. Their visits increase the demand for services, products and good infrastructure – all of which attract jobs and investment in the inner city. They require and inspire new investment in buildings, maintenance, entertainment services, transportation services and accommodation establishments. They transform buildings and environments. And they attract and support new cultural enclaves and diversity.
Shoppers and retailers say they would like to increase their investment in shopping in the inner city, there are signs of renewed interest from property investors and a number of new shopping centres have been developed in recent years.
But this potential will go untapped unless the city changes its attitude and tackles the risks in the area. Crime – particularly crime committed by law enforcement officers – must be curbed. By recognising and celebrating this sub-Saharan African shopping hub Johannesburg can take full advantage of the benefits of being the region’s shopping hub. In turn that could lead to Johannesburg becoming the host of choice for shoppers and retailers in this international trade.
South Africa shows why collaboration is key to tackling global crime networks
- Peter Hain
Professor Peter Hain talks to The Conversation Africa’s Charles Leonard about alleged illicit financial transactions centred around South Africa’s President.
Lord Peter Hain tabled a series of allegations in the UK’s House of Lords relating to the possible role of British banks in alleged money laundering and illicit financial transactions centred around South Africa’s President Jacob Zuma and the Gupta family. The Conversation Africa’s Charles Leonard asked him to explain why he took the step. Hain, who was a vocal anti-apartheid activist, was born in South Africa but grew up in the UK.
In the House of Lords you said the illicit transactions were “part of a flagrant robbery of South African taxpayers”. What do you mean by this?
As I explained in my speech, the Guptas, a family from India that relocated to South African have, with the connivance of the South African Presidency, been getting government contracts and allegedly thereby robbing taxpayers of billions.
On regular visits to South Africa – most recently last month – I have been stunned by the systemic transnational financial network facilitated by the Guptas and the presidential family, the Zumas. If there had been more proactive and genuine cooperation between the multi-jurisdictional law enforcement agencies – and within and between the banks, which have been moving money for the alleged Gupta/Zuma laundering network – the devastation wrought on South Africa could have been significantly reduced. And perhaps, the financial institutions involved would have been better able to mitigate their exposure.
So does it point to South Africans benefiting from the illicit transactions?
I had delivered by hand to Philip Hammond, the Chancellor of the Exchequer, printouts of transactions, and named a British bank concerned. I asked that he again refers these to the UK’s Serious Fraud Office, the National Crime Agency and the Financial Conduct Authority for investigation.
This information allegedly shows illegal transfers of funds from South Africa made by the Gupta family over the last few years from their South African accounts to accounts held in Dubai and Hong Kong. Many of the transactions are legitimate. But many certainly are not.
The illicit transactions were flagged internally in the bank concerned as suspicious. But I am reliably informed that the bank was told by the UK headquarters to ignore it. That is an iniquitous breach of legal banking practice in the UK, which I trust ministers would never countenance. It is also an incitement to money laundering. This has self-evidently occurred in this case, sanctioned by a British bank, as part of the flagrant robbery of South African taxpayers. They have lost millions of pounds and many billions of their local currency, the rand.
Was there a specific event that triggered your request to the Chancellor?
I was asked by senior African National Congress figures and stalwarts to do this. My relationships with them go back more than half a century when we stood shoulder to shoulder fighting apartheid.
As before, my latest information has been supplied by South African whistle-blowers deep inside the system who are disgusted by the corruption at the heart of the state.
What do you hope to achieve?
There are disturbing questions around the complicity – witting or unwitting – of UK global financial institutions in the Gupta/Zuma transnational network. There are also disturbing questions about these institutions’ wilful blindness to the reality that the laundering process often necessitates financial systems with lax regulation and controls. Unless we urgently find ways to leverage our respective capabilities to coordinate and influence action between the law enforcement and banking sectors we cannot win this battle. This coordination needs to happen domestically here in the UK as well as globally.
Unless we use the opportunity to crack down meaningfully, those who want to break the law will always be one step ahead. We must therefore get the international authorities to close down any money laundering networks.
As someone who fought against apartheid, how do you feel about having to take up a campaign against the country’s democratically elected government?
Having been active along with my brave parents in the anti-apartheid struggle it’s painful for me to witness corruption within a monopoly capital elite around Zuma’s family and their close associates the Gupta brothers.
But we should look closer to home, here in the UK. The complicity of our financial institutions in this, as well as the responsibility of law enforcers and regulators in all the concerned jurisdictions, should make government ministers and parliamentarians hang their heads in shame. Just as they were complicit in sustaining apartheid, so today they are complicit in sustaining the corrupt power elite in South Africa which is now betraying the legacy of Nelson Mandela and the anti-apartheid struggle.
Winning the war against financial crime will require coordination, influence, action and accountability between multi-jurisdictional law enforcement agencies. The success of criminal networks also relies on the action or inaction – and cooperation or non-cooperation – of the relevant law enforcement authorities.
One of South Africa’s biggest cities, Cape Town, is gripped by a rising panic.
People are haunted by the idea that they may soon have to queue for water, carefully rationed out by local authorities under the watchful eye of the army.
But these doomsday scenarios need to be tempered. It’s true that the first step to getting people motivated to save water is to create the “impression of a crisis”. In Cape Town, however, this impression is being blown out of proportion by a number of myths that are perpetuated in social and popular media.
Myth 1: Lack of preparedness
This myth has it that the City of Cape Town saw the drought coming but didn’t prepare for it.
Climate trends over the past 40 years gave no indication of the drought’s timing, intensity or duration. In fact, dams were overflowing in winter 2014. The weather forecasts gave no indication that the 2015 drought would continue over another year.
A study by the University of Cape Town came out a few weeks ago, saying that the odds of the drought carrying over again into 2017 were less than one in one thousand. Understandably, they exonerate the Cape’s government from blame for the water crisis.
Myth 2: Lack of enforcement
This myth has it that the city didn’t enforce restrictions to curtail water wastage.
Only in Cape Town’s campaign were the top 100 water users’ street names published
Only in Cape Town’s campaign were water tariffs structured meticulously to cater for indigent households
Cape Town’s campaign outperforms South East Queensland’s, making Cape Town one of the best water saving cities in the world. Cape Town’s example as a water saving city was highlighted at the 2015 C40 Cities Award in Paris, where Cape Town’s Water Conservation and Water Demand Management Programme won first prize, beating 91 cities including Copenhagen and Paris.
Myth 3: Unfair targeting
This myth has it that water saving campaign unfairly targets the residential sector.
The residential sector uses 66% of the City of Cape Town’s municipal water supply. Business, industry and government combined use far less.
Houses in warm climates use at least half of their water outdoors. Houses with swimming pools in Cape Town use far more water than those without. This shows that not only is the residential sector using the vast majority of municipal water, but traditionally, most of the water used by this sector is for luxury purposes.
Myth 4: Lots of water is being lost to leaks
Water lost from the system is called “non-revenue water”. Australia and New Zealand have the best water systems in the world, and lose 10%. South Africa as a whole comes in on par with the world average of 36.6%. Cape Town loses only 15% of its water. It’s close to being one of the best systems in the world.
Myth 5: Desalination plants are the answer
Australia’s desalination plants took two years to build and cost AUs$18 billion . A desalination plant large enough to accommodate Cape Town’s needs (450 megalitres per day) would cost 15 billion rand to build and then millions more to maintain.
There is a chance that by the time such a plant is built, the drought would be over. The city would be left with a very expensive white elephant.
Myth 6: “Day Zero” is inevitable
Cutting water use is the most important, fastest and most cost-effective way to avoid Day Zero. Nevertheless, due to the severity of the crisis, water supply schemes are also being built. These range from smaller desalination plants to groundwater extraction. These projects should be supplying up to 240-million extra litres into our system by May 2018. These new supplies, combined with target water savings, can get Cape Town through next year’s summer.
Myth 7: The water wastage blame game
Water wastage provokes anger and indignation, as it should. But some are unfairly blamed.
Fire fighting uses non-potable water from estuaries and reservoirs as well as potable water from hydrants. Fire hydrants fall under “non-revenue water”. They can’t use seawater because salt damages the equipment.
Blame shifting, fault finding and panic are usual reactions to water crises all over the world. Some anxiety is good, as it motivates water saving, but blame shifting actually pushes responsibility away, and causes water wastage. The best attitude Cape Town’s people can adopt is for every person to do their best, together. The world is watching, let’s set them an example to follow.
Two books that tell the unsettling tale of South Africa’s descent
- Anton Harber
South Africa has produced two must-read thrillers in the past week.
They are non-fiction, yet are as gripping and readable as any page-turner.
Veteran investigative journalist Jacques Pauw’s “The President’s Keepers” has, within a week, become a global best seller. It has had the advantage of the best available marketing push by South Africa’s State Security Agency, under the illusion that they were going to stop the book. The State Security Agency sent a cease and desist letter to a defiant Pauw and his publisher, claiming the exposé is in violation of the Intelligence Services Act.
I recommend you read them together. It will take some courage, as they are a most unsettling combination, but worth it.
Pauw’s book takes you on his journey to uncover the nature of Jacob Zuma’s presidency and its impact on South Africa, a trip that begins in the small Western Cape town of Riebeek-Kasteel and goes, via Moscow, to the Tshwane coffee bars where he meets his sources. Much of what emerges has been reported in bits and pieces elsewhere, but he weaves it together with great storytelling skill, and adds some important new revelations.
It is the most comprehensive picture of the rot at the heart of the Zuma presidency and the toll it has taken on important state institutions. Once he has worked through the tax collector, the South African Revenue Service, the National Prosecuting Authority, and the police, one is left gasping for air at the scale and depth of the destruction.
I don’t think it is necessary to weigh up the accuracy of his much-detailed and well-documented story, except to say that Pauw is a veteran muckraker whose credentials for getting sources to talk, putting his hands on the evidence, weaving all this into readable horror-stories, and withstanding the attacks of those who would stop him, are well established. So much so that the onus is on his detractors to disprove what he is saying. Even if half of it is true, it is chilling.
Oil for the ANC’s political machinery
Olver’s book might be even more important. It’s an insider’s view of how corruption has become the oil that keeps the ruling African National Congress’s political machinery working. Olver was sent in by ANC leaders to help clean up the metropolitan Nelson Mandela Bay region on the country’s east coast and pave the way for local politician and national football boss Danny Jordaan’s 2016 mayoral election campaign. At the same time, Olver was commissioned by then Minister of Finance Pravin Gordhan to clear out the rot in the city structure.
Olver’s story of how he identified and drove out the worst culprits in the city’s corruption, is heartening. He shows that it can be done when you have the political will, and Olver’s toughness. But he also describes how every cent raised to fund Jordaan’s campaign was exchanged for a job or a tender.
The ANC political engine runs on the fuel of transactional politics; without the offerings of jobs and tenders, the machine grinds to a halt. His tale provides rare insight into how the party funding system works as a driver of corruption.
Olver himself starts off as a knight in shining armour, but finds himself increasingly compromised as time passes, until he loses his political backing and flees the region.
Both these writers showed great courage. Pauw left the peace and quiet of running a country restaurant in Riebeek-Kasteel, knowing that this book would bring him the kinds of threats and harassment he experienced in the 1980s when he exposed the dark heart of apartheid’s police hit squads. Olver had to have a bodyguard at his side, so tough was the fight to regain control of the party and city.
Pauw’s book is a triumph of investigative reporting, but also contains a worrying critique of some of its practitioners. Pauw details at least three instances when his fellow reporters have allowed themselves to become part of the partisan mudslinging aimed at driving the good people out of state institutions, and protecting the venal. It is striking that some of the same names come up in all three instances, and all are centred around the local Sunday Times.
While South Africans can celebrate the important role investigative reporters have played in exposing state capture, they should be reminded that some have facilitated it, wittingly or unwittingly.
The act of giving by business, and wealthy and skilled individuals can make important contributions to solving our pressing problems.
This is in light of the failure of the state, continuing deep levels of poverty, unemployment and inequality.
Philanthropy could be divided into three basic forms: giving by companies, wealthy individuals and ordinary citizens. In many emerging democracies and markets such as South Africa, corporates and rich individuals, may sometimes have acquired their riches on the back of exploitation of the poor, through state capture and even corruption.
Philanthropy can lead to greater social solidarity between the well-off and the poor, trigger positive social change, and overall make citizens more resilient in the face of state collapse. The act of giving can be described as a form of active citizenship.
Funding from philanthropists improves public service delivery where the state fails. It can improve policy-making, provide new ideas to tackle complex problems and give the issues of the poor, marginalised and minorities greater prominence.
It can help reduce economic, social and political inequalities - across race, class and gender. But it can also reduce civic inequalities of voice, access and participation between the poor and the better-off.
It can potentially strengthen civil society - a strong civil society strengthens democracy, public service delivery and accountability of public and elected representatives.
Off course, philanthropy, especially big philanthropy - giving by large companies and very wealthy individuals - also potentially has its drawbacks. The unequal power, influence and money between the wealthy and the ordinary citizen could lead to the marginalisation of the ordinary citizen in civic life.
In fact, the disparities in wealth between the rich and the poor, especially in new democracies such as South Africa, could cause “civic inequality”, the inequality between the ability of the rich and the poor to get their voices heard, to participate in public life and access resources.
Such “civic” inequality comes on top of the already economic, social and race inequality between the wealthy and the poor. The wealthy can disproportionally influence society’s priorities. Wealthy donors can often side uncritically with corporate interests, which may be inimical to those of the poor.
As a case in point, big global philanthropists - who have more money in many cases than individual developing countries, now often determine the policies and priorities of African and other developing countries.
Such big global philanthropists in some cases support groups, forms of democracy and market economies which are palatable to Western governments and interest groups, but which are not necessarily useful to recipient countries.
Unlike governments, wealthy donors are often beholden to public, democratic institutions’ and civil society scrutiny.
This means that wealthy donors are often not adequately held accountable. It is often difficult for the public to surmise the funding motives of wealthy donors.
Many wealthy donors are often not responsive to the needs of the communities they purport to fund. Ironically, Peter and Jennifer Buffett, the son and daughter-in-law of the US entrepreneur Warren Buffett, and wealthy philanthropists in their own right - have warned that philanthropists like themselves may engage in “philanthropic colonialism”. This is the tendency of wealthy donors to think they know the needs - and solutions - of the communities they fund better than the recipients.
Nevertheless, while the focus is often on big philanthropy, giving by ordinary citizens, or citizen philanthropy, is as important. Citizen giving involves ordinary citizens giving amounts they can afford to good causes.
But citizen philanthropy does not only mean giving money, but offering one’s time and skills to help the destitute.
South Africa needs to reinvigorate a culture of citizen philanthropy - which was there in the 1970s and 1980s during the apartheid era.
Then, in many poor communities, conscientious local community members selflessly helped others, sharing the little they had with others more destitute, and providing a shoulder to lean on to those in despair.
In the democratic era, many citizens have withdrawn from philanthropy, arguing that the “legitimate” state should now step in to help the vulnerable. Yet, as state failure increases, leaders that promised much are now becoming increasingly self-serving and many democratic institutions that are supposed to protect the vulnerable are blunted, big corporate and wealthy individual, and citizen philanthropy is now more needed than ever.
Many citizens feel they do not matter, have little impact, and cannot contribute to change. This is not true. Every little bit helps.
The black middle class questions whether black professionals should become more engaged in philanthropy.
The black middle class entered the market economy in 1994, after having been prohibited from owning property, deprived of quality education and high-end jobs because of Bantu education and the apartheid jobs colour bar.
They build their post-apartheid assets - mortgages, vehicles and furniture using debt. However, state failure has meant that they are paying an additional premium for private schooling, health and security, as well as paying higher interest rates on everything from insurance to car loans, because most had no credible financial history, collateral and income in the pre-1994 era.
In addition, many black middle-class individuals have to pay a black tax - paying for the upkeep of poorer cousins. Not surprisingly, many will baulk at providing more “philanthropy” to those unrelated to them. Nevertheless, South Africa needs a new generation of black middle-class philanthropists.
Young black professionals should also get more involved in civic engagement - donating to and volunteering in charities and civil society organisations, and helping the vulnerable outside one’s immediate family circle.
Older, but lapsed activists who were involved during the Struggle, and who may now have become disillusioned should re-engage - sharing their skills to help others.
Currently, solidarity across race, class and ideology is often absent in South Africa. Some white middle-class citizens either argue there is now a black government that should be looking after its “own”, that black capitalists should help, or feel its “patronising” to help poor blacks. Some black capitalists also say now that there is a black government, individual black people must pull themselves up by their own bootstraps.
The lack of social solidarity between the rich and poor undermines social cohesion.
Black political capitalists, many who ironically made their money through political connections in the ANC and the state, through BEE and state tenders, are rarely giving. Furthermore, black political capitalists and traditional white capitalists are increasingly moving money to “safe havens” abroad.
But big corporate and wealthy individual philanthropists who give must do so in more effective ways. At present, many of them have not often focused on social justice issues, causes and organisations.
They often also shy away from supporting programmes strengthening democracy, for fear of being seen to anger the government. They often also do not focus on reducing inequalities - of opportunity, race, gender, class and opportunity.
Yet, boosting social justice initiatives, democracy institutions and reducing inequality are at the heart of strengthening citizen and society resilience.
But big corporate and wealthy individual philanthropists sometimes side uncritically with “big” interests - such as organised business, on policies which may undermine the poor.
They are often also not responsive to the communities they purport to serve. Yet philanthropists must help people who have identified their own needs to come up with their own solutions.
They are also not transparent about why they choose certain priorities, whom they fund and the reasons for not supporting others.
In a democracy, big corporate and wealthy individual philanthropists must also be publicly scrutinised. This will improve the impact of their philanthropy.
Robert Mugabe’s endgame in Zimbabwe holds various lessons for his South Africa's Jacob Zuma as he too considers his prospects towards the end of his presidency.
The first, obviously, is that while, from the pinnacle of power, a country’s president may feel the monarch of all he can survey, it is always possible that the blade of the guillotine is just around the corner.
Accordingly, it is always prudent to keep at least two bags packed for a hasty exit: one full of suit, shirts, underwear and socks, another full of foreign currency (preferably dollars or Euros). You just never know how things might pan out, so it is best to be prepared.
Following the almost-coup, Mugabe has been in a stronger position than many African dictators before him because the African Union has in recent years become a lover of democracy and a hater of coups. It therefore now demands that changes of leadership must have at least a veneer of constitutionality.
This has always been the Zimbabwean military’s weak point during this past week of flirting with political power. Hence its insistence that, despite its take-over of the airwaves, State House and parliament, alongside its house-arrest of the president and his family, its actions are not a coup.
In turn, this has provided Mugabe with a considerable degree of wriggle room, which he has sought to exploit to the full. Indeed, it has remained his key bargaining chip, not least because the African Union does not want to be seen as party to the overthrow of a hero of African liberation.
Explicit political actor
Zuma will feel confident that whereas in Zimbabwe the army has long been deeply involved in the ruling party’s internal affairs and the wider political arena, the South African National Defence Force is not an explicit political actor. He stands in no fear of a military coup (or even a Zimbabwe-style non-coup). Yet he does have to worry about what happens within his political party, the African National Congress (ANC).
Even if his favoured candidate, Nkosazana Dlamini-Zuma, were to win the party leadership at the ANC’s December congress, Zuma’s continuing as South African President might be seen as a political embarrassment. If strong contender Cyril Ramaphosa wins, even more urgent calls will be made from within the ANC for the him to be “recalled” because he will be viewed as an electoral liability.
It is a fair bet that, whoever wins, an excuse will be made for a delegation from the party leadership to visit the president and to ask him to stand down. Just ask former President Thabo Mbeki who was fired by his own ANC. If Zuma refuses to cooperate, then the ANC might turn to parliament, where enough ANC MPs might feel emboldened to vote with the opposition to dethrone him.
Fighting for survival
Like Mugabe, Zuma will be battling for a dignified exit. Even more urgently, he will be fighting for survival. In previous years, Mugabe may have feared the prospect of retribution for his sins, and would have been determined to secure immunity from prosecution.
Now, at 93, he is confident that once out of office he will be left in peace. He may or may not appreciate the irony that, unlike his country’s last white ruler Ian Smith, he will not be able to stay in Zimbabwe after he has been forced to stand down, but he will know that he has to leave.
Neither the army nor Zanu-PF will want him hanging around, fearing his ability to continue pulling strings. So off he must go, to South Africa, Dubai or Singapore (anywhere with a few decent shops for his shopaholic wife Grace). His major immediate concern then, we may presume, is safe passage and immunity for his family. We may further presume, that there is lots of money stashed away in foreign bank accounts to keep the crocodile from the door.
Zuma’s tricky position
Zuma is differently placed. If he loses the Presidency he stands in all sorts of dangers, not least of which is prosecution for past financial crimes and the prospect of his ending his days in prison. In other words, he has much more to bargain for, and he will be doing so from a considerably weaker position. Not least of his problems is that he is a lot younger than Mugabe, so could spend quite a few years in jail.
Zuma’s major strength is that, whoever wins the party leadership, the ANC will probably want to grant him immunity and get him out of the way, as otherwise they face the prospect of their former leader facing a corruption trial during the lead up to elections in 2019.
But for a start, there is no provision for presidential immunity in the constitution, and its grant would face a strong challenge in the courts. Furthermore, if the Gupta or other Zuma allies in the project of “state capture” were to be prosecuted, Zuma could face being dragged into court as a witness.
In short, Zuma will realise that it will make sense to hot-foot it out of the country, preferably to a comfortably authoritarian country which will turn down requests for extradition.
The fickle people
What Mugabe is learning now, and it is something of which Zuma should take good note, is that the people are an ungrateful lot, and are likely to turn against you just when you most need their support. Up till a week ago, it was presumed that Mugabe retained the backing of all who mattered in Zanu-PF and that he would again be its candidate for president at the next election. But now, like many a dictator, he is having to learn fast that the people no longer love him.
Past allies, like the war veterans, had already turned against him, repudiating his apparent bid for his wayward wife, Grace, to replace him. Zanu-PF Youth leader, Kudzai Chipanga, initially declared his willingness to “die for Mugabe” and labelled Major-General Constantino Chiwenga, the leader of the non-coup, a traitor when the army first intervened. After being locked up, he shamefacedly read out an abject apology, begging forgiveness, and pleading the inexperience of youth.
This has been followed by all 10 provincial organisations of Zanu-PF calling for Mugabe to go, and even encouraging ordinary people to join the marches being organised by opposition parties and civil society demanding his dismissal.
Zuma is too wily a politician not to know that once he loses the party presidency, his support base will drain away, and that he will become known as yesterday’s man. Yet like Mugabe, he will take comfort from the regional body, the Southern African Development Community (SADC), for there is nothing his fellow presidents dread more than the prospect of any one of their number facing impeachment.
He will also know that, unlike Mbeki, whose stature in Africa remains high, he has no viable future as a roving ex-president. Zuma will know that if he wants to enjoy his retirement in peace, he has to leave South Africa before he gets tangled up in court proceedings.
His best option will be to grab those two suitcases, make a hasty exit and move in next door to Bob and Grace in Dubai.
SA moves one step closer to sugar tax, and healthier lifestyle
- Karen Hofman and Aviva Tugendhaft
South Africa has joined only a handful of countries in the world close to imposing a sugary drinks tax.
A new bill that imposes a tax on sugary drinks has cleared the first of three hurdles in South Africa’s law-making process. One of two houses of parliament has approved what is being called a health promotion levy. The bill is expected to be passed by the other, The National Council of Provinces, and then signed in by the President. Implementation is expected in April 2018, but industry interference may still have an impact. The Conversation Africa’s Health and Medicine Editor Candice Bailey spoke to Karen Hofman and Aviva Tugendhaft about the tax.
How important is the sugary drinks tax and why?
The decision by South Africa’s Parliament is a very far sighted decision. It shows that the country’s parliamentarians fully understand the health implications of a product that is excessively high in sugar and has no nutritional value.
The sugary drinks tax – or health promotion levy – is expected to prevent a wide-range of obesity related non-communicable diseases. These include diabetes, cancer, stroke and heart disease. This is important because South Africa’s public health sector is severely overburdened. Public hospitals are seeing on average of 25 000 new hypertensive cases a month as well as 10 000 new diabetic patients each month. These are estimated to be only half of the real numbers because both are silent conditions.
The effect of the reduction in the prevalence of non-communicable diseases will be twofold: it will help the country to implement National Health Insurance (NHI) as an overwhelmed health system will be a barrier to NHI. And it will reduce the negative effect that chronic non-communicable diseases have on economic growth because of the impact on the workforce due to increased absenteeism and decreased productivity.
Already, there are signs that obesity related diseases are affecting the country’s economic growth rate.
The sugary drinks tax will also help people make healthier choices. In Mexico, after a sugary drinks tax was implemented soda consumption decreased by between 7% and 10% and water consumption increased.
Lastly, tackling chronic noncommunicable diseases will ensure that South Africa doesn’t lose the gains it has made in life expectancy after the introduction of antiretrovirals to treat HIV infections. Life expectancy has improved to 62.5 years of age after falling as low as 52.1 at the height of the AIDS pandemic in 2003. Without further policies to promote health, the country’s life expectancy is likely to reverse. This has been seen in countries like Brazil.
The initial lobby was for a 20% sugar tax. But in the end it was only 11%. Is it good enough?
It’s a start. The sugar tax is similar to the one introduced in Mexico which contributed to a 17% reduction in the consumption of sugary beverages among poor people.
Once the tax is implemented in South Africa it will be monitored and an evaluation will be done to establish if it has helped.
What will this levy mean for consumers?
The industry is clearly against the tax. This was illustrated by the fact that the chairperson of the finance committee in parliament, Yunus Carrim, spoke out about industry interference in the process.
The beverage industry sees South Africa and sub-Saharan Africa as their growth market This means that they will continue to find a way to increase profits. We’re expecting to see the industry change their products in an effort to ensure their bottom line is not affected. The tax will be levied on sugar content, which will hopefully encourage industry to lower the sugar content in its drinks and create healthier alternatives.
The sugar tax has been criticised because it deals with only one factor among a myriad that lead to obesity. What’s your response?
This is true. But that criticism only stands if you view it as a single event. The levy is the first step in a very long journey of a range of different interventions that will need to happen.
This was also the case with tobacco. The first step was a tobacco tax. This halved smoking rates over two decades. It was followed by the banning of advertisements and very clear labelling about the dangers of tobacco.
The health promotion levy – which research shows is by far the most effective mechanism – will need to be followed by clear and transparent labelling. We need to move away from just having sugar levels listed in grams on the back of cans. There should be labels in large letters on the front of cans informing consumers about the number of teaspoons of sugar they’re drinking.
The second intervention should be marketing and advertising regulations of these drinks, particularly to children.
The right to work and debarment in the financial market
- Robert Vivian
It is troubling in a constitutional democracy that laws exist allowing people to be deprived of their livelihoods without any inquiry at all.
Who in their right mind would believe there is a law on our statute books which is interpreted and applied in such a way that it makes it possible for an employer to deprive an employee, without the due process of law and without any proper inquiry, indeed any inquiry at all, of their livelihood nationwide and without any demonstrable knowledge of the legal requirements?
Once the employee is debarred in this way from working, the only means left for them to regain employment is to approach the courts at enormous personal cost and risk.
Such a system has no place on the statute book. It is outrageous and should evoke a great sense of injustice and anger within any normal person. How did this situation become possible?
The withdrawal, with immediate effect, of the guideline on the determination of reappointment of debarred representatives (July 13 2011) announced by the Financial Services Board (FSB), the regulator, on October 20 2017, has highlighted the existence of this questionable system. This withdrawal has made the way a debarred person can become un-barred even more unclear.
The Financial Advisory and Intermediary Services (FAIS) Act, which contains inter alia the debarment system, is testimony that the impossible can become possible. The impossible is that someone without the slightest idea about law or fundamental legal principles, was let loose to draft a piece of legislation that, even more inconceivable, got past industry consultative bodies, law advisers, parliamentary committees, and Parliament itself, and now, is tolerated by the judiciary. For this piece of legislation to even exist in a constitutional democracy is troubling, to say the least.
The right to work is part of the fundamental principle of liberty.
Anyone must be able to sell his or her services. If not, that person is doomed, by force, to starvation. For this reason, society has always been disturbed when someone comes along and attempts to stop people from working. One need only think of the concern that exists, and has for centuries, with issues such as restraints of trade, closed shop agreements, national minimum wages, job reservation which was practiced in the apartheid era, the exclusion of Jews in Nazi Germany from the economy and so on.
These measures are all a cause of great concern because they impinge on the fundamental right to work and on liberty.
In the late 1800s, people began to lobby for laws to keep others out of their professions, to deny outsiders the right to work, crying "public interest". Many suspected, though, that this exclusion was driven by self-interest, private interest and not public interest. The medical profession began to lobby for licensing and registration of doctors, dentists, nurses, pharmacists and so on. Other professions, such as lawyers, followed suit. Then came the Great Depression when barbers, beauticians, undertakers, chiropractors and so on joined the stampede for registration and licensing to keep others out and thereby to protect themselves, always crying "public interest".
These, at least, had a system. Pressure to exclude others from their guild came from the "professions", not the government. To join a guild usually required years of education, training, experience and joining a professional society which had its rules of conduct. Once in, it was difficult to expel a member. This is not surprising since the expelled member would be deprived of the right to work. The member to be expelled had to be accused of a breach of the professional code, and then subject to an impartial disciplinary action following due process. But, always, in the end, with recourse to an independent judiciary, well-schooled in the understanding that "no man shall be deprived of his right to life, liberty or property without the due process of law". So, admission to a guild and expulsion from a guild for misconduct is something well-known and very strictly controlled as countless court cases testify.
And now, along comes FAIS; the most amateurish, unconstitutional piece of legislation imaginable. It requires many ordinary, everyday employees in the financial industry to be registered, and soon, if left to go its way, will include everybody.
There is no guild, no professional body, no meaningful qualifications, no years of specialised experience, no professional code of conduct, no impartial disciplinary committee. By law virtually everyone holding some position, even a salesman, must be registered with their employer. If any unfortunate soul falls foul of their employer, that employer can arbitrarily, without inquiry, deregister the employee by indicating that he is not fit and proper and thereby debar the employee. According to a recent Supreme Court of Appeal decision, at that point, the employee cannot work in the financial industry anywhere in the entire country. The employer advises the FSB, the regulator, of the debarment. The FSB puts the name of the employee on its website and that is the end of any hope for that employee of getting employment in the industry until the debarment is lifted.
This process beats restraints of trade hands down. If the employer wants to stop an employee from competing – just debar the employee. It beats the closed shop agreement. If the union does not want non-members working in the industry – just get the employer to debar the employee.
More recently, the judiciary has become complicit in this outrageous system.
In case you think I am joking, read the judgement of Odinfin (Pty) Ltd v Reynecke (906/2016) ZASCA 115, 21 which was handed down in September 2017. To do his job, Reynecke, a salesman, had to be registered, in terms of FAIS, with his employer. In August 2010, he obtained employment with Odinfin. Three years later, in April 2013, while still employed with Odinfin, he secured an offer of employment with Nedbank. He was faced with a problem when Nedbank wanted to put him through an induction process. To attend the induction process, he told Odinfin that he was on the road selling policies. Odinfin worked out he was seeking alternative employment and had misrepresented the truth about what he was doing. So Odinfin commenced disciplinary proceedings against him. Reynecke tendered his resignation with immediate effect.
Odinfin pointed out that he had to serve four weeks’ notice and that they intended to hold the disciplinary proceedings within that four-week period. Reynecke was expected to attend. He did not. The disciplinary process continued in absentia and found him guilty. He was fired with immediate effect. Odinfin then updated its register, removing Reynecke’s name and branding him as a person who is not fit and proper. Odinfin notified the FSB which, without any inquiry of its own, entered Reynecke’s name on its register as a person who is not fit and proper.
Nedbank checked the FSB register, found Reynecke branded as not fit and proper and withdrew its offer of employment. Country-wide, Reynecke became unemployable.
At this point the judiciary entered the fray. Reynecke approached the High Court for relief. Even though Odinfin opposed the application, without providing any reasons, the High Court, not surprisingly, set aside the debarment and Nedbank employed him.
Unemployed and unemployable country-wide for nine months, Reynecke returned to court in 2014 and sued Odinfin for his lost income. In the High Court he won his case and Odinfin was ordered to pay him the nine-months salary. However, in September this year, the Supreme Court of Appeal overturned (rightly in my view, with respect) this ruling, with costs being awarded against Reynecke.
The court expressed no unease whatsoever with this legislatively created, absurd system of debarment. In fact, in an earlier case, the Supreme Court of Appeal ruled that the moment the employer debars the employee, the employee is debarred nation-wide with no need to wait for the FSB to get involved.
This amateurish debarment process violates the most basic principles embodied in the rule of law and constitutionalism. What is clear is that modern legislation poses a great threat to freedom and liberty. Careless legislation makes it possible for all institutional safeguards to fail and prove ineffective in protecting our fundamental liberty such as the right to work.
To summarise, this debarment process exists because legislative drafting, industry consultative bodies, parliamentary committees, Parliament itself and now the courts, all institutions designed to ensure that fundamental rights, what the Americans call unalienable rights, are protected, failed. This is but one example of many.
Thisarticle first appeared online onwww.businesslive.co.za. Robert Vivian is Professor of Finance and Insurance at the University of the Witwatersrand. The
Designer proteins, the new generation of HIV vaccines being put to the test
- Penny Moore and Lynn Morris
South Africa has made tremendous advances in providing lifesaving antiretroviral therapy for HIV infected people.
The country has the largest treatment programme in the world.
Despite this, the HIV epidemic continues to ravage key populations, especially young women. In 2016 there were more than 270,000 new infections in South Africa – a figure which has been fairly consistent in recent years.
This continued spread of the disease suggests that treatment will not ultimately end this epidemic. An HIV vaccine remains an urgent need.
Many HIV vaccines have already been tested, using approaches that have led to effective vaccines for other infectious diseases. A trial in Thailand in 2009 was the first HIV vaccine to show some protective effect. But the 31% protection it offered was too low to warrant a wider roll out.
Follow-up trials to try and confirm the results in the Thai trial are now underway, including a large scale study of 5 400 volunteers in South Africa.
While the world waits for the outcomes of these trials, researchers have turned to new strategies based on lessons learnt from studying the immune system of HIV-infected people. For example, researchers now know, in extraordinary detail, how the immune system of some HIV-infected people is able to make rare antibodies, called broadly neutralising antibodies.
When tested in the laboratory these antibodies are able to block various strains of HIV from across the world. These are precisely the types of antibodies that a vaccine should ideally elicit. And scientists are using their findings as a roadmap to develop the next generation of HIV vaccines.
Three new vaccine concepts, all based on cutting edge protein engineering, will shortly, or have already entered human trials and have the potential to revolutionise the HIV vaccine field.
Kickstarting the immune system
All humans have millions of B cells in their bodies that produce antibodies and protect them from an infection. But only a small number of these B cells have the potential to produce the broadly neutralising antibodies that fight the HIV virus.
In the first new concept, high-tech nanoprotein engineering has enabled scientists to develop a designer protein called eOD-GT8. The protein is specifically engineered to trigger these rare B cells, and turn them into the broadly neutralising antibodies.
In studies in mice, this “designer” protein was able to kickstart the process and set the immune system down the right pathway to fight the virus.
Over the next year eOD-GT8 will be tested in small-scale trials in humans to determine whether targeting these rare B cells is an effective way to generate the right kind of HIV antibodies.
Making a good mimic of HIV
A second challenge in HIV vaccine design has been to make a good mimic of the HIV proteins that broadly neutralising antibodies recognise.
This approach, of presenting the immune system with a close mimic of viral proteins, has been the basis of most vaccines, including the polio and hepatitis vaccines.
But the challenge with the HIV protein that is targeted by broadly neutralising antibodies is that it rapidly falls apart when it is produced in a laboratory. As a result, it is not a good mimic. For the past 10 years, scientists have tried to come up with new ways of preserving the complex structure of this HIV protein.
Only recently, using an African virus isolated many years ago, vaccine researchers have finally learned how to biologically “glue” this envelope protein together using chemical bonds, resulting in a good mimic of the protein as it exists on the virus.
This stable protein, called BG505.SOSIP has shown promise in vaccine studies in monkeys, where we now see better antibodies than with previous proteins.
BG505.SOSIP will also soon be tested in small-scale trials in Africa and the US to see whether humans also recognise this protein, and make antibodies that would be able to block virus infection.
Training the immune system
The third new approach is based on how antibodies and HIV change over time in infected people. Research in South Africa and in the US has shown that antibodies become “broader” over many years, through an “arms race” between the virus and the immune system. As antibodies attempt to stop the virus, it mutates to escape and changes its coat.
Newly emerging antibodies learn to recognise the different coats the virus has tried. In doing so, some antibodies become experts at recognising every form of HIV. Eventually this leads to antibodies able to recognise viruses from across the world, the broadly neutralising antibodies that vaccines aim to elicit.
In a trial that started in August, scientists in the US are using this knowledge to vaccinate volunteers with four different coat proteins representing viral changes, in the same order seen in an HIV infected person. The hope is that this will train the immune system to recognise many different viruses, so that in the event of a future virus exposure, these antibodies will provide broad protection against HIV infection.
Towards an AIDS-free future
The next two years will therefore be a critical phase for HIV vaccines. Not only will we learn whether more traditional approaches, such as the Thai vaccine, can be improved enough to roll out.
We will also learn whether these three entirely new concepts, the result of years of research by scientists across the world, can reshape the HIV prevention landscape and, hopefully, take us closer to ending the HIV pandemic.