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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.

To put it another way, the government is bust. It is again printing money to cover its spiralling costs, and inflation is rising. And given that there’s an election looming in 2018, Zimbabwe’s ruling party, ZANU-PF doesn’t want to cut-back. Far from it, it wants to carry on spending, as fast as it can.

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.

The ConversationIn 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”.

Roger Southall, Professor of Sociology, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

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.

This article first appeared in the Daily Maverick.

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.

Untapped potential

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.

The ConversationBut 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.

Dr Tanya Zack, Visiting senior lecturer, University of the Witwatersrand. This article was originally published on The Conversation. Read the original article.

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.

The ConversationWinning 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.

Peter Hain, Visiting Adjunct Professor at Wits Business School, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

Cape Town water crisis: 7 myths that must be bust

- David Olivier

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.

South East Queensland, Australia, became one of the most water-efficient communities in the western world because of their Target 140 campaign. Their “Millenium Drought” from 2006 - 2008 prompted residents to reduce water usage from 300 litres per person per day to 129 litres per person per day. Cape Town’s savings are already below 100 litres per person per day, and dropping.

Cape Town’s superior performance is due to its campaign introducing some pretty original stunts. For example:

  • Only in Cape Town’s campaign might the mayor knock on your door

  • 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.

Municipal road cleaning uses non-potable water. Golf courses use non-potable water. The business and industrial sectors combined, of which tourism is only one part, use less than 15% of the city’s water.

Homes in informal settlements tend to use only 40 litres per day. Informal settlements as a whole only use 4.7% of Cape Town’s water.

On reflection

The ConversationBlame 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.

David W. Olivier, Postdoctoral Research Fellow, Global Change Institute, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

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.

Less well-known, but as important to those who want to understand what is happening in the country, is consultant and activist Crispian Olver’s enticingly-titled “How to Steal a City”.

Take some courage

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.

The ConversationWhile 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.

Anton Harber, Caxton Professor of Journalism, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

Philanthropy can reduce inequality

- William Gumede

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.

William Gumede is Associate Professor in the Wits School of Governance. This article was originally published in the Sunday Independent. Read the original article.


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