Why it would be in everybody’s interests to regulate cryptocurrencies
- Desné Masie
Cryptocurrencies originated as an alternative payment mechanism to traditional currencies.
There are growing calls for regulation of the cryptocurrency market, which is rapidly approaching a market capitalisation of $1 trillion. But there’s little agreement about the forms this should take.
If the case for government regulation is strong, the case for a clear, coordinated regulatory approach is even stronger. It would increase the flow of institutional capital into cryptocurrency markets. And that would further strengthen corporate governance in cryptocurrency companies.
The trick for regulators is to balance investor protection and systemic stability with the need to protect innovation and encourage capital formation in different legal systems.
At present the regulatory environment is a muddle because there’s rapid divergence in the regulation of cryptocurrencies across jurisdictions. Countries like Japan, while thorough, have a more open approach. China is more strict.
Sovereign governments need to develop coherent frameworks for cryptocurrency oversight. But solutions will only be found through international cooperation in this cross-border market.
Cryptocurrencies originated as an alternative payment mechanism to traditional currencies. But they are now also traded on spot exchanges as highly speculative investment assets.
Recent spin-off crowd funding opportunities such as initial coin offerings have become a particular cause of concern. These involve startup cryptocurrency companies offering initial investment stakes in new token issues. China and Vietnam have banned them. Japan has taken a friendlier attitude while the UK and the US have adopted a wait and see approach. South Africa, like many other developing countries, offers zero protection to investors in initial coin offerings.
These different responses are due to different legal definitions of cryptocurrencies. The rapidly evolving technology behind them doesn’t help the situation either.
The precise nature of an initial coin offerings depends on its structure as well as its context which can change quickly and have hybrid characteristics of financial instruments.
The definition, and hence legal treatment, of the tokens issued under an initial coin offering can be as diverse as a currency, commodity, security, property, loan, deposit, derivative or forex contract. Agreeing a taxonomy of cryptocurrencies defined by how they’re used is clearly one of the most urgent tasks facing regulators.
Towards a taxonomy of cryptocurrencies
Cryptocurrency expert Lawrence Wintermeyer has argued that distributed ledger technology powered digital assets could be organised into three potential buckets: cryptocurrencies, cryptocommodities, and cryptotokens.
But the lack of harmonisation across jurisdictions is a wider problem than nomenclature.
Cryptocurrency companies sometimes use the distributed nature of these assets – which sit on digital ledgers held by multiple token holders – to argue that there is no issuer. They also sometimes argue that these assets are not securities, and that they should therefore not be subjected to a particular jurisdiction’s securities laws.
There are also clear cross border regulatory gaps. What makes it difficult to reconcile these is that the assets can easily be transferred and their origins are difficult to trace. Tokens could be issued in a more token-friendly jurisdiction like Japan. The same tokens could land up in the hands of unassuming retail investors in stricter jurisdictions such as the US.
Avoiding money laundering and financial crime
This cross border confusion allows token companies to pick and choose jurisdictions with favourable rules. This could make money laundering easier.
There are a few steps governments can take to close these gaps.
They should support investment in technology that makes the provenance of tokens clearer while preserving their encryption. Regulators could then enforce an “indicator of origin” as a standard. This would make it less easy for the assets to be transferred illegally.
Offshore centres like Jersey have got a lot of bad press in recent the backlash against international financial centres. But there’s a great deal to learn from well-regulated offshore jurisdictions. They are beginning to take the lead with potential applications of international best practice and corporate governance for cryptocurrencies. They offer investors in digital assets an extra set of gatekeepers’ eyes, and potentially, a more calculated risk.
In jurisdictions like Jersey issuers of initial coin offerings have to jump through quite a few hoops. This includes using a regulated service provider which has to make an application to the Jersey companies registry for a consent. The service provider is among a number of requirements that provide checks in relation to anti-money laundering and countering the financing of terrorism.
Current frameworks and global co-ordination
But what could a coordinated global regulatory approach to cryptocurrencies look like?
Harmonisation via a code of conduct or voluntary signatory to a global compact could certainly stop token companies from cherry picking jurisdictions to their advantage. Not being signatories to the codes would place token companies outside the market.
Standard regulatory codes are particularly critical for some pockets of the investment community. For example, there has been a significant surge in the establishment of investment funds looking to invest in initial coin offerings on behalf of sophisticated investors.
Standard codes for institutional investors in the first instance, could help both regulation as well as innovation. Institutional investors, unlike retail investors, can withstand, and even benefit from, the upside of volatility over time.
For now, the poorly regulated speculative hoarding of cryptocurrencies reduces the potential of assets like this to become a public good. This ultimately affects the potential value of the tokens by amplifying volatility.
Paying attention to this is important for investors and regulators as well as issuers. There will also have to be a degree of self regulation by issuers as global regulators get up to speed.
Post Zexit: Lessons for Ramaphosa on building an inclusive state
- Adam Habib
Cyril Ramaphosa has unfairly been criticised by political commentators for his attempt to negotiate Jacob Zuma's resignation.
But it is a perfectly sensible strategy. Ramaphosa is facing an arduous task and is correctly concerned with having to economically and politically rejuvenate South Africa after the disastrous rule of Jacob Zuma. This would be greatly assistedif he had a coherent and cohesive organisation with which to effect this agenda. A messy exit for Zuma undermines this approach as it would fracture the ANC in important ways. A voluntary resignation by Zuma, by contrast, would keep the ruling political party relatively more cohesive, thereby enabling Ramaphosa to refashion it in ways that can be used to rebuild South Africa's economic, political and even institutional foundations.
Of course, opposition politicians and commentators do not have to worry about these issues. This allows them to make easy and glib statements about how the matter should be handled. To be fair, if opposition parties and civil society had not mobilised society against the corrupt practices of the Zuma administration, there would never have been the incentive within the ANC to act against Zuma. It is only the prospect of electoral loss and eroding political legitimacy that has galvanised forces within the ANC to rid itself of Zuma and some of the obnoxious individuals who support him. But now that the political will has emerged within the ANC, it is important that the transition be undertaken in a manner that enables the building of bridges through which our economic and political future can be recalibrated.
This does not mean that reflection is not required on the current Ramaphosa talks. It is necessary, but the emphasis should be far less on the strategy and more on the terms of the settlement. There is now some discussion with many opposition leaders and commentators critical of a prospective agreement that allows Zuma's legal costs to be paid for by the state, and his family to have an ongoing security detail. I am more pragmatic on these issues than some of the critics. I recognise that these matters are in part related to actions undertaken during his tenure as President and therefore there may be some legitimacy to his demand for legal costs being paid by the state. I also think that his family could be under threat and security may indeed be warranted, although I am of the view that this has to be time bound, and reassessed after a year.
To be honest, this is not where the real substance of the matter lies. The serious deliberation needs to focus on whether Zuma should be pardoned if he is found guilty. This cannot be decided now because he has not yet been found guilty of anything. But if he were to be, should Zuma be pardoned? I know of many who would be opposed to this because he should not be treated differently to any other citizen. But what if there is a real prospect of violence in KwaZulu-Natal if Zuma is jailed? Is peace not a sufficient outcome for Zuma's pardon?
There is of course a danger in making this trade off. It could enshrine a practice where 'strong men' are not held accountable for their crimes because of their capacity to create mayhem. Can we continue to allow ourselves to be held hostage to such violence? It is after all important for there to be consequences for illegal actions, otherwise there is no incentive for economic and political elites to be accountable. But the converse is also true. Some political leaders, mainly of a populist orientation, are capable of either violence or stoking the fires of division that can undermine an economic and political revitalisation. This is not only true of Zuma, but also of other opposition politicians who too were implicated in corruption, tax evasion and the like, and used radical rhetoric and populist demagoguery to mask their misdeeds. Are we as a collective society willing to stay the course in all of these cases or are we pragmatic enough to temper justice if peace and inclusive prosperity is to be the outcome?
Obviously, these options need not be as irreconcilable as they are presented here. Justice could be tempered but not deferred. A corrupt politician found guilty of tax evasion could have assets confiscated but not be imprisoned. Politicians, as in apartheid, were not held accountable for their many crimes, but were forever politically isolated. In Zuma's case, if he were to be found guilty, he could be pardoned, but penalised with the loss of some assets and barred from holding public office. More importantly, those around him who corruptly enriched themselves, like the Guptas, could be held accountable. Monies swindled into foreign jurisdictions could be tracked and repatriated with the help of foreign governments and international security services. They could be imprisoned, or at least, permanently barred from South Africa with all of their domestic assets confiscated. Serious consequences can flow even if justice is pragmatically applied in this case.
I argue for neither of these options for now. A decision need not be made immediately. After all, Zuma is presumed innocent until found guilty by a court of law. But it is important that there is substantive deliberation in society about the substance of this issue so that at least first principles and parameters can be established. It is these first principles and parameters that should be collectively deliberated and that Ramaphosa would have to consider and apply if a decision is to be made in this regard.
What are the lessons to be learnt from Zuma's tenure in office and his travails? There are many for multiple stakeholders. For potential autocrats, populist demagogues and their supporters, it would be wise to note that however powerful one may seem at first, sooner or later in a democracy, political power reorganises itself and circumstances emerge to hold them accountable.
To the sycophants and supporters of Zuma in 2008, who now have him as their political nemesis, remember that spectacle without thought got us to where we are today. Sensible deliberative conversation cannot be substituted by political spectacle if we want productive outcomes that are in line with our social justice obligations. There were many innocent individuals, Kwezi perhaps being the most tragic, that were hurt by political spectacle and thoughtless activism. If they are truly repentant in this regard, then this cannot involve simply an apology, but more importantly, a change in political practice. The substance of this must be the enablement of thoughtful deliberation in which we think through how to advance social justice in a programmatic way and implement it in a manner that builds social coalitions and mobilises society across divides, rather than fracturing it even further in the pursuit of short term political ends.
There is a place for mass action and societal mobilisation in this regard. After all, there would never have been the incentive for the ANC to act against Zuma had this not happened. But mass action has to be complemented with progressive intra-institutional action if progressive public policy is to be implemented and consolidated. And this cannot be done in one grand act. Rather, it has to be progressively built in a series of small actions, each of which has a snowballing logic that ultimately cascades into an overall transformation of the political and socioeconomic system that enables the establishment of an inclusive democracy.
To the journalistic cohort and the commentariat, there is the lesson of speaking truth to power. Almost all journalists and political commentators would rhetorically subscribe to this statement. But have they truly internalised what this means, for it does not simply require speaking truth to state power, but also to societal power; to the leadership of social movements, to the general secretary of the trade unions and their federations, and to the leaders of opposition parties. It requires them to critically analyse the strategies deployed by the opposition and to call them out when this is necessary. It requires journalists not to romanticise the opposition, or to become uncritical supporters of a coalition of the wounded where the lowest common denominator is the basis for political action. It requires that we do not repeat the mistake of 2008 where, in the dislike for Mbeki, we embraced all those who stood against him. But is this not what is happening when journalists thank opposition politicians for not engaging in violent social action, or when they remain silent when public property is destroyed in the ostensible pursuit of social justice, or when school children are terrified by social activists because of the bigotry of their school principal or governing board. Speaking truth to power requires more than challenging the state. It requires the emotional and political courage to speak to those within our midst and to hold them accountable when their behaviour violates the founding principles of the inclusive democracy that we hope to build.
Perhaps most importantly, there is a lesson for the economic elite and corporate South Africa. We are today in this politically and socially polarised moment because of the structural inequality which we collectively refused to address. We have another opportunity to correct for this deficit, for without it, the long term sustainability of the corporate sector is itself imperilled. This requires a willingness to give up some economic benefits in the interests of broader social development. It requires a more appropriate balance to be struck between short-term profitably and long term sustainability. It requires a willingness to consider tax increases, or social investment obligations, or curbs on executive remuneration or dividend payments, in order to address the greater inequality within our society. Ultimately, it requires a willingness to partner the state, and not co-opt it, in a project of inclusive economic development where inequality, as much as poverty, is addressed. Only then will the long term viability of corporate South Africa itself be assured.
Finally, there is of course the lesson for Cyril Ramaphosa. In late 2007, just after the ANC's Polokwane conference, I authored two short essays, the first on the fall of Mbeki and the other on the lessons for Zuma. In the latter, I reflected on the challenge of inequality and the political aloofness that it engenders, and why it was so necessary to address these as part of a greater project of political and socioeconomic emancipation. I was of course not the only one advocating this. There were many other voices suggesting the same agenda. But Zuma did not heed these messages and he paid the ultimate political price. This same lesson needs to now be heard by Ramaphosa. Ultimately one's presidential tenure in South Africa, and one's political legacy, will truly be determined by one's success in developing an inclusive economic agenda.
This will not happen through some grand overthrow of the political and economic status quo, or through the delinking from the world economy as is so often suggested by some on the far left. Rather it will happen in the messy politics of mobilising societal coalitions - business, labour and civil society - in an inclusive economic agenda. It will require all social partners to sacrifice their immediate short-term goals for a more equitable medium-term sharing of the spoils. It will require Ramaphosa's administration to think through the kind of economic reforms that are feasible in the contemporary moment, yet sufficiently transformative that they have a cumulative effect, which creates a conducive environment for greater emancipation. Most importantly it will require political leadership where the President is capable of persuading and even corralling social partners, into a shared economic and social agenda, even if it requires some short-term economic, political and social compromises.
These are the considerations, and their practical policy and strategic implications, which we should be deliberating. But this is not the case. Even those surrounding Ramaphosa are not sufficiently reflecting on these matters for they are caught up in the immediate political machinations of intra-party squabbles and keeping the political opposition at bay. But our long-term collective future is ultimately going to be determined by these discussions, not by the short term political machinations. Is there not an urgency then, for all of us to collectively participate and engage on these weighty matters rather than being entranced by the political spectacle of 'great men politics’?
Professor Adam Habib is the Vice-Chancellor and Principal of the University of the Witwatersrand
Monitoring populations helps to put the right health services in place
- Mark Collinson and Kobus Herbst
Fourteen years ago SA researchers first picked up rising rates of high blood pressure in the population that led to people dying earlier than expected.
But it wasn’t in the bustling urban metropolis of Johannesburg in South Africa’s economic hub where this cardio-metabolic disease epidemic was first found. The trends – that people were increasingly dying from stroke – were picked up in one of the country’s most rural sub-districts.
The findings contributed to South Africa’s National Department of Health drawing up a policy to introduce “integrated” primary health care. And through this policy, chronic conditions such as high blood pressure can be tested and treated at the clinics set up primarily to provide antiretrovirals to HIV positive people.
The discovery was not coincidental. It emanated from work done in a health and demographic surveillance system set up in 1992 in Bushbuckridge, Mpumalanga. The site is run jointly by the South African Medical Research Council and Wits University’s Rural Public Health and Health Transitions Research Unit.
The project collects population and health and socio-economic data on communities in an impoverished and developmentally constrained part of the country over a long period of time.
Health and demographic surveillance systems like these help researchers understand how factors around health, social and economic wellbeing affect people and the societies that they live in.
These systems are an important part of advanced population registration systems. And nations with complete systems are the world’s most developed. A key reason for this is that they can determine if services are meeting the needs of the population.
The site in Bushbuckridge is one of three surveillance systems running in South Africa. The other two sites are in rural Limpopo: Dikgale at the University of Limpopo, and the Africa Health Research Institute in rural KwaZulu-Natal. These sites collectively follow a population of about 300 000 people.
The data being collected is expected to provide deep evidence-based insights into major health and socio-economic challenges facing the country which in turn will enable the government to design and evaluate targeted, evidence-informed policy solutions.
Giving government a heads-up
When surveillance systems work well, the information that is collected forms part of the national statistics platform of the country. It helps researchers understand detail and dynamics that they are unable to derive from a census.
This is because censuses are only able to see people at one point in time. Surveillance systems can provide detail on changing patterns and the processes affecting these changes. Together, the surveillance system data and census data give policymakers a sound basis to evaluate policies that are not working.
Surveillance system data provides deep and granular insights into the health and wellbeing of a community. They help governments understand the changing dynamics of a particular population. This, in turn, helps them understand what sort of interventions are needed. Here are some examples:
Data will give a better idea of how and why people move between rural and urban areas and insights into what health and socio-economic services they are getting or being excluded from.
Tracking the number of pregnancies can provide valuable information about whether or not there are adequate maternal health and family planning services in place.
Looking at why people are dying is important to understanding if health services need to be adapted or preventative services strengthened.
Understanding how people’s levels of education and socio-economic status affect their wellbeing.
Falling through the cracks
Surveillance systems do have challenges. One is that the data come from specific geographic locations. Researchers can’t easily tell what happens beyond these boundaries.
This is why it’s important to have surveillance systems in both rural and urban settings so that researchers can understand livelihoods and monitor bi-directional, migration flows linking poor, rural communities with urban centres.
With investment from the Department of Science and Technology, data and data systems from the current three centres are being harmonised, and four more surveillance systems are being set up. Three will be in urban settings in Gauteng, eThekwini and the Western Cape and one in a rural setting in the Eastern Cape. This harmonised network is called the South African Population Research Infrastructure Network (SAPRIN), which is hosted by The Medical Research Council
The full SAPRIN platform will include 550,000 people –- around 1% of South Africa’s census population. The platform will form a network that will be able to generate high-quality evidence to respond to some of South Africa’s biggest issues, which include poverty, inequality, unemployment, education and poor access to effective health care.
It will do this by linking to the public sector’s health system records as well as public school attendance registers and have access to the statistics around social grants. This will help researchers understand how people are using the services that the government has made available.
The bigger picture
Inadequate or even misleading evidence for planning is a complex problem in all countries, but especially low and middle-income countries. It arises due to limitations in infrastructure, especially in poorer parts of the country, and the costs involved for people registering key events in their lives.
How democracies can be held hostage by party machinations
- Vishnu Padayachee, Jannie Rossouw and Mashupye Herbert Maserumule
The Conversation Africa asked academics what lessons can be learnt, and how the ANC can redeem itself in the post-Zuma era.
Jacob Zuma’s late night announcement that he would step down as president of South Africa followed days of tense negotiations within the governing African National Congress (ANC). The Conversation Africa asked academics what lessons can be learnt, and how the ANC can redeem itself in the post-Zuma era.
Is this the biggest political crisis that South Africa has faced since democracy?
Vishnu Padayachee, the University of the Witwatersrand: Its equivalent to the recall of President Thabo Mbeki in 2008. For the people of South Africa to have been forced to suffer through this is hard to believe. The crises have lost the country much ground, locally and internationally.
Jannie Rossouw, the University of the Witwatersrand: This will surely go down as one of the biggest political crises faced by South Africa in the post apartheid era. The situation became highly slippery as Zuma appeared to be defying calls by his party to resign. International experiences tells us that a stand off like that could easily develop into raging conflict.
Zuma’s expressions during the interview he had with the national broadcaster hours before he finally resigned did not help the situation. In addition to claiming that he did nothing wrong, he seemed to be making veiled threats.
Mashupye Maserumule,Tshwane University of Technology: The steps to remove Zuma plunged the country into a political crisis. It exposed the dissonance between political processes of the African National Congress (ANC) as the governing party and those of the state, particularly around the party’s succession battle.
This has been a neglected lacuna, which started to show when Mbeki was recalled. At that time the big question was: what are the implications of the ANC’s concept of “recall” on South Africa’s constitutional democracy? This is because the recall wasn’t congruous with the provisions of the country’s constitution to remove a president. But it was never adequately debated and Zuma’s removal brought back these unresolved issues.
Can the ANC salvage itself?
Vishnu Padayachee, the University of the Witwatersrand: For the ANC to salvage itself, a renewal is needed. It has to develop a new culture of inclusive and democratic politics at all levels. To do this, it will have to pay more attention to political education instead of regurgitating the political education of the camps. This is totally inappropriate for the 21st Century.
It must attack corruption with greater vigour and visible energy than it has done in the past.
But it must also attend to the critical tasks of re-igniting growth, creating employment, reducing the income and wealth inequality in addition to prioritising service delivery. For this, the Cyril Ramaphosa-led ANC needs a new progressive macroeconomic policy framework. This must be state led in the first phase to “crowd in” domestic and foreign investment through the opportunities created by rising growth and effective demand.
Jannie Rossouw, the University of the Witwatersrand: To salvage itself, the ANC must eradicate corruption and replace corrupt and incompetent cabinet ministers. It must be clear after the replacement of Zuma that the ANC puts the people of South Africa first, rather than the interests of politicians.
Mashupye Maserumule, Tshwane University of Technology: Firstly, a governing party in a constitutional democracy needs to have exemplary leadership.
There are several other lessons the ANC must learn for it to emerge from this fiasco.
The first is that its internal political processes have implications on the administration of the state. These should be synchronised with those prescribed in the country’s Constitution.
Secondly, it shouldn’t compromise in its fight against corruption, and should pursue ethical leadership on all levels in the organisation from its branches to its regions, provinces and its national leaders.
Thirdly, the ANC’s integrity commission must start to bite, without fear or favour. It should be well-resourced. In addition, the ANC should invest more in the political education of its cadres.
But lastly, it should also outgrow the nostalgic streak of being a liberation movement and embrace the reality that it is a governing party in a constitutional democracy.
What does this mean for democracy in South Africa?
Vishnu Padayachee, the University of the Witwatersrand: South Africa’s hard won democracy has simply become a charade. If democracy is to be strengthened there are several things that have to change: how the President of the republic is elected; how members of parliament are elected and held accountable and how officers of parliament are elected. South Africa also has to find ways of creating new mechanisms for citizen to participate in the democracy between elections.
After 1994 South Africa simply re-positioned itself in the flawed structures of democracy that it inherited. The country should have taken time to re-think its position to ensure a more effective and functioning democracy where the people would come first.
Jannie Rossouw, the University of the Witwatersrand: Democracy in South Africa will be stronger. Zuma’s resignation shows that it is possible to remove a corrupt president through constitutional measures.
The problem was that Zuma confused support he had as a result of being in power as personal popularity. This is a mistake many powerful people in politics, government and private business make. It is therefore not surprising that his support in the ANC Parliamentary Caucus slipped quickly once it became clear that his grip on power started slipping.
But the constitutional drama raises questions about the conduct of the ruling party to have kept Zuma in power so long after his corrupt conduct. For this, the ANC owes all South Africans an apology.
Mashupye Maserumule, Tshwane University of Technology: The developments show that South Africa’s democracy is vulnerable to manipulation by party political processes. The processes of the leadership succession in the ANC ran roughshod over the supremacy of the Constitution of the country.
But in the end, Zuma was a disaster and the ANC’s decision to ask him to step down was the correct one. Even if Zuma was a good state president who had lost the presidency of his party, he would still have been coerced to resign, as it happened with Thabo Mbeki.
How many Messiahs can one country take? What kind of president will Cyril Ramaphosa be?
Matamela Cyril Ramaphosa – forgive me, President Ramaphosa – is self-evidently a private and reserved human being. Since his decision to contest the leadership of the African National Congress (ANC), he has been the subject of an endless series of “think-pieces”, more or less informed including by this author, as well as a year or more of attack videos and smears from those he ultimately defeated at the 2017 ANC elective conference. His private life has been examined, and people have tried to double-guess every move he has made, or should have made, or is about to make.
The man must be squirming. Worse than the attention, however, is his recent elevation to Messiah status in the media and the popular imagination. He maketh Zuma to bugger off. He maketh the currency to rise and pessimism to fall; he will cleanse where others defiled; and he may lead South Africans towards the promised land – or, for the non-believers, will it be down the garden path?
Messiahs are an expression of the need for the yoke of oppression to be lifted, by a god-anointed action man (there are precious few female Messiahs in history) who does what mere mortals cannot. Nelson Mandela was South Africa’s first Messiah, but was seemingly born for the role, relished it, and given the massive damage to economy and society in late apartheid, almost everything he did was inevitably positive. The economy grew, rainbows were believed in, the national football team Bafana Bafana were football champions. Anything was possible.
In Ramaphosa’s case, the context is horribly similar. The economy has been smashed by the labyrinthine tendrils of corruption and state capture that have insinuated themselves into every aspect of public life, compounding those already present in the private sector.
For every state owned enterprise there is a private sector player like KPMG, and for every bribe that is accepted, someone else offered it. Zuma tended his corrupt garden well, and South Africa feels like it is the early 1990s again: political killings are rife in KwaZulu-Natal, the economy is in tatters, racial tensions are high, the poor are getting poorer, the rich richer, and the country’s sports people seem unable to win a game of tiddly-winks.
What kind of president?
What kind of president will Ramaphosa be? Will he, like Zuma’s predecessor Thabo Mbeki, gravitate towards foreign affairs, the African continent, and playing a global role in various summits and multilateral bodies? Or will he be more Zuma-like, and regard the secret and security forces as his natural base?
The last 10 days should have answered part of this question. Because of Ramaphosa’s chess moves the country has seen the true colours of everyone in the ANC’s top six leadership and beyond. He and all South Africans now know where many of his enemies are. Those desperate to be reborn Ramaphosa-ites have become visible, and he knows (as South Africans do) who can be trusted and who not. He has forced people to play their roles out in public, for all to see and learn, and better to understand the challenges he faces.
More importantly, the state utility Eskom has been completely reconfigured with a new board, and fear has begun to percolate through to all those eating South Africa’s public funds.
But the most significant moves were left to the very end. Zuma’s last day as president – not in any way coincidentally – began with the news that the home of the powerful Gupta family had been raided and arrests had been made.
The second masterstroke was to allow Zuma to show his true colours in a rambling interview on state television to the nation. Everyone was given a taste of what Ramaphosa has had to deal with.
For years the world has been fed several myths about Zuma. That he was steeped in strategy and that he was a master tactician. There was also the fable that he had dirt on everyone and would never be outmanoeuvred, that even a wounded lion is dangerous, that he may be down but never out, and so on.
Instead, the terrible sadness of a crumpled bully was in evidence on SABC TV. He spent 30 minutes spinning silly yarns about the lack of accusations or evidence against him, insisting he was innocent, trying to blame anyone but himself. It laid bare the truth – Zuma is merely PW (Botha) rebooted. Apartheid president Botha, nicknamed the Groot Krokodil (big crocodile), was a hardliner who refused to leave office and alienated everyone even in his own National Party.
Zuma’s incoherent television appearance was an old jackal meeting an old krokodil. Each filled with a sense of victimhood, denying any wrongdoing, both responsible for destroying the economy, the social fabric, and any number of lives. Ramaphosa left Zuma to show all South Africans his overweening vanity, his inability to distinguish right from wrong, and his arrogance. Shakespeare could not have plotted it better. Ramaphosa emerged as the true strategist.
A mere mortal
Ramaphosa is no Messiah, and when the post-Zuma champagne corks stop popping, South Africans need to assess him as a mere mortal. One who is inheriting a country laid almost as bare as the country Mandela inherited in 1994.
Ramaphosa has a massive job ahead of him, in trying to reignite national pride, self-belief, and mutual trust. He also has to salvage the ANC’s reputation and win the next election in 2019, no mean feat in itself. It would also be nice to win a match or two.
The man, rather than the Messiah, has shown he can move multiple chess pieces at once – and win. The last 10 days have seen him completely eclipse his enemies within, having defeated those without when he was elected ANC president in December. This will be a quiet president, in place of Zuma’s inane giggling and braggadocio that has gone. But as the saying goes, always watch the quiet ones…
As we ponder the State of the Nation, what do we need to address?
- Imraan Valodia
Addressing unacceptably high level of inequality should be the focus of President Ramaphosa’s economic policies.
Inequality is the key challenge all South Africans should be talking about. Levels of inequality in South Africa are among the highest in the world – the statistics are quite telling: the top 10% of the population earn about 60% of all income and own 95% of all assets. This pattern of earnings and wealth is not the basis for a sustainable society. Addressing this unacceptably high level of inequality should be the focus of President Ramaphosa’s economic policies.
While we all breathe a sigh of relief that the Zuma years have ended, it is worth reflecting on the fact that increasing levels of inequality in the Thabo Mbeki years formed the basis for a consolidation of political forces that coalesced to give rise to Zuma.
During much of the Mbeki era, the economy grew at much higher levels than we have today, but the benefits accrued disproportionately to high-income groups. That, more than anything else, probably led to the dissatisfaction and populism that gave rise to Zuma. Cyril Ramaphosa’s rise to power has generated a lot of hope and optimism, especially on the economic front. His challenge now is to use this space to place the economy on a growth path that is sustainable and which addresses the structural inequalities in our society. It is imperative that this is done because economic inequality goes hand in hand with political power – the wealthy exert too much power in society. This power generates what economists call “rent-seeking” activity – those with power shift the economy from productive and innovative activity to lobbying and attempting to shift the rules of the system to favour themselves and their cronies.
Inequality is the key challenge all South Africans should be talking about. Levels of inequality in South Africa are among the highest in the world – the statistics are quite telling: the top 10% of the population earn about 60% of all income and own 95% of all assets. This pattern of earnings and wealth is not the basis for a sustainable society. Addressing this unacceptably high level of inequality should be the focus of President Ramaphosa’s economic policies.
So how can Ramaphosa ensure that the high levels of inequality are addressed and that economic growth is based on economic activity aimed at expanding the size of the economy where growth favours low-income groups?
At a conceptual level, the task is quite simple. Addressing inequality requires policies that will increase the level of income for low-income groups at a rate that is greater than that for middle and high-income groups. This requires that any costs of economic stabilisation and adjustment be borne disproportionately by higher income groups. This simple conceptual framework should form the basis of any consensus on our economic policies – we have now reached the point where pay-offs must be skewed towards low-income groups if we want our country to grow, and if we want that growth to be sustainable.
Generating higher levels of employment and creating more jobs will of course increase the earnings of low-income groups. Over 65% of young South Africans are unemployed - a frightening thought. Economic policy should therefore promote jobs especially for young South Africans. Government has used a tax-incentive scheme to promote employment among youth. While there are some critiques of the scheme, policies that, for a limited period, subsidize employment of young workers should be expanded. Of course these jobs must translate into permanent secure employment that pays decent wages and not be used as an excuse to create another underpaid class of workers.
The pattern of inequality among those that do have jobs is of great concern. Those at the top end of the income distribution have experienced large increases in their earnings while incomes at the bottom end are extremely low – 47% of those with jobs earn incomes that are below R3,500 per month. The proposed national minimum wage of R3,500 – a policy which President Ramaphosa was instrumental in shaping – will go a long way to raising the incomes of the poor. Policy should now focus on curbing the growth in incomes of those who are at the top end of the earning scale. Addressing this involves challenging the ideology that the super-wealthy are entitled to the benefits of their economic activity. As I have argued above, through rent-seeking behaviour, wealthy elites earn their income from distorting the economy to their own benefit. Policies such as a wealth tax will go some way to addressing this issue. But the wealthy also need to demonstrate their commitment to this country by realising obscene wealth can only be gained when there is obscene poverty. Closing the income-gap is the moral imperative of those who hold economic power in South Africa.
Our economy continues to be dominated by large firms, who often behave in an unethical fashion. Take for example, the issue of school uniforms, which is being investigated by the Competition Commission – it does appear to be the case that small enterprises are unable to enter this market. Cartels in food markets, including basic commodities such as bread, have placed a heavy burden of prices on low-income consumers. The commission recently did a study of 2,150 mergers over the period 2009 to 2016. They found that 70% of the 31 sectors of the economy in the study have firms that dominate the market – that is, one firm has more than 45% of the market share in that sector. Strengthening competition policy, as contained in the Competition Amendment Bill and adequately resourcing the competition authorities will begin to address this challenge and create opportunities for new entry into markets that are dominated by a few very large firms.
At the other end, government should focus more attention on the informal economy – where large numbers of South Africans, especially women, earn their incomes. Here, city by-laws are important. In most South African cities by-laws are designed to curb economic activity rather than promoting economic opportunities for the informal economy to grow.
The role of the public sector is critical for addressing inequality. Through the provision of public services, our society has made significant strides to address poverty. Policies such as the child support grant and the pensions system play a critical and effective role to raise the incomes of the most vulnerable members of our society. In the critical areas of public health and education most South Africans have access to services. But quality levels are poor. Policies should focus on significantly improving the quality of services. State-owned enterprises are critical for improving public infrastructure and delivering quality services. President Ramaphosa has acted decisively to address the challenges in Eskom. He needs similarly to address the challenges of poor leadership, corruption, a lack of a clear purpose and mandate, and poor services delivery in a number of other state-owned enterprises.
Corruption is not only a problem in the public sector. The recent failures in companies such as Steinhoff, the corruption associated with the Guptas, the outrageous earnings in the upper echelons of the corporate sector, and the questionable ethics of some of our auditing firms highlights the need for government to adequately regulate economic activity in the private sector. In modern capitalist economies, the state plays an important role to regulate the economy to protect the interests of society from unethical and selfish economic behaviour in the private sector. Our regulatory systems are inadequate and the pensions of millions of South Africans have been compromised in debacles such as Steinhoff. President Ramaphosa needs to act decisively to restore our confidence in the private sector just as much as he does for the public sector.
South Africans of all walks of life have played a role in ending the Zuma years of corruption and economic mismanagement and, once again, creating the possibility to hope for a better future for all South Africans. We have a responsibility to hold the new leadership to achieving the goal of a society envisioned in our Constitution.
Professor Imraan Valodia is the Dean of the Faculty of Commerce, Law and Management at Wits University. This article was first published in the Daily Maverick.
Growth and inclusive development must be prioritised to move SA forward
- Adam Habib
South Africa’s young democracy has emerged intact, albeit severely battered, from Jacob Zuma's tempestuous era.
Cyril Ramaphosa is the new leader at the helm, and has to chart a strategic course that is beneficial to all South Africans. We have survived a multifaceted political and socioeconomic crisis in which trust has eroded between much of the citizenry, the political elite and the now departed President.
Our society is ravaged by extreme levels of inequality, with the gap having increased exponentially in the post-apartheid era, resulting in a fractured, polarised populace.
Ramaphosa has to develop an innovative strategic agenda that addresses both this trust deficit and the inequality challenge. This has to involve a focus on growth, attracting investment, and rebuilding the economy, while simultaneously addressing the fundamental challenge of inequality, coupled with poverty and unemployment. We need a pioneering plan that both creates an environment conducive to growth and enables inclusive development, thereby strengthening the foundations of democracy.
South Africa achieved some economic growth in the last two decades, even if it is at a level far lower than we would have preferred. However, growth is a necessary, but not sufficient condition for inclusive development. While it is true that much has been delivered – electricity, water, sanitation and social support grants – and that poverty rates have declined in certain years of the post-apartheid era, our society simultaneously has been ravaged by the scourge of inequality in the last two decades. We overtook Brazil to become the most unequal society in the world. Since 1994, inclusive of the period of the Zuma presidency, inequality has grown every single year.
A new agenda requires a recognition that regulation is also essential in order to channel resources to education, healthcare, infrastructure and small business development. None of this is going to happen without a reconsideration of tax rates, remuneration caps, more measured profitability and longer term investment horizons – measures that mainstream business has opposed for so long.
It is also incumbent upon all social actors – the private and public sectors, civil society, active citizens and the fourth estate, among others – to confront power and transform society towards the inclusive vision that we collectively share. It is my view that two powerful sets of stakeholders – corporate leaders and the political elite – are not sufficiently appreciative of the extent of the challenge of inequality.
Some executives in the corporate sector, and in particular the private sector economists who serve them, assume that with economic growth, inequality will automatically stabilise and subsequently erode. Thomas Piketty, in Capital in the Twenty-First Century, explicitly demonstrates that inequality will continue to grow across the world unless there is a clear political attempt to counter the structural dynamics that facilitate it.
The political elite, on the other hand, recognise the threat that inequality poses, but cannot muster the political will to do anything about it. Some erroneously assume that by addressing poverty, we will automatically reduce inequality, a view that is expressed in the economic chapter of the National Development Plan (NDP). The NDP therefore proposes to expand livelihood opportunities at the lower end of society through a series of reforms: a new industrialisation plan targeting employment, expanding educational opportunities, and financing new entrepreneurs. These are important recommendations that will grow the economy, increase employment opportunities and address poverty. But they will not address inequality.
The essential problem is that even if we get livelihoods growing at the bottom end of society through employment and financial support for new entrepreneurs and the like, the income of those at the upper end of society is likely to grow even faster. This is because the rich have assets – property, stocks, bonds – and it is these assets which will ensure that the incomes of the rich will grow faster. The net effect is that even if poverty erodes, inequality will grow faster. This is essentially what happened in South Africa, Russia, India and China in the last 20 years.
The only way in which economic inequalities can be addressed is if the expansion of livelihood opportunities at the base of society is coupled with either containing the enrichment at the top of society, or ensuring that the bottom grows faster than the top.
The struggle for social justice in South Africa is a struggle for structural reforms. What this means is that when there is growth, it must be accompanied by redistribution and social upliftment. For example, if we allow for the development of private housing estates, then it must include mandatory housing for low income households.
As we institute minimum wages, we should consider caps on executive remuneration and stakeholder dividends. Tax must be structured in a manner that promotes long-term investments rather than treating short-term capital flows on an equivalent level. If we focus on tax incentives and subsidies for youth training, this must be accompanied by protecting the existing employment of workers in the enterprise. We may need to consider export zones and industries that are granted exemption from some existing labour regulations, but this has to be accompanied by concomitant investments in surrounding communities or downstream social projects.
There should be BBBEE mechanisms that allow for new entrants into industry who do not cater just for the politically connected and the economic elite. Procurement opportunities for businesses, both foreign and local, could be tied to simultaneous investments in universities and schools. Similarly, private hospitals should be obliged to, in some way, allocate a percentage of their resources to providing services for poor people.
Essentially, our development strategy and regulations should be focused on establishing an appropriate balance between growing our economy and stewarding it in an inclusive direction. This should be one of the considerations at the top of the agenda of Ramaphosa’s next Cabinet meeting. The President has the opportunity to rebuild the state but it requires imaginative political leadership that has been missing from South Africa for over a decade. It is important for him and the new Cabinet to establish collaborative channels within government and with other societal actors to develop a new roadmap for South Africa.
This week has demonstrated that even though our democracy is in its infancy, it has proven to be resilient and robust enough to self-correct, unlike many other countries around the world. This may be due to our active citizenry, strong civil society, an independent fourth estate, trade union movements and pressure from the private sector. However, these are the same social actors that will have to work together to develop a social pact; a pact that will require compromises of all of us so that South Africa stays on its democratic and developmental course in the long-term.
The fundamental lesson is that if we are truly committed to social inclusion and addressing inequality, then there is a need to change not only our leaders, but our politics itself. There has to be a new politics of accountability that is principled yet pragmatic, peaceful yet robust, infused with integrity, yet responsive to the real needs of our citizenry, and in particular to the poor in our society. Only then can the promise and hopes of the last few days for a peaceful, democratic and inclusive South Africa truly be realised.
Professor Adam Habib is the Vice-Chancellor and Principal of the University of the Witwatersrand
Five priorities SA’s new administration should focus on
- Anthoni van Nieuwkerk
What the new administration should do as a matter of priority to recover a state damaged by corruption and nepotism.
Times of political transition bring turmoil and uncertainty. But if the country’s national security is not threatened, minds can focus on what an incoming administration should do to proceed with the business of governance. This should be in the minds of South Africans as the country navigates through a difficult political process.
President Jacob Zuma has been in power for the past eight years. While there were some notable achievements, his period in power was marked by a period of corruption and nepotism during which well connected individuals extracted favours from the Zuma network of associates, the Gupta family being the most obvious cast of characters. This process of state capture was made possible by the president’s lack of moral direction, exemplified by accusations of rape and theft.
The challenge now is to recover a damaged state and a fractious political environment.
The levers of power
The new administration will be composed of a new executive in the form of the newly elected president as head of state. In South Africa’s case, parliament will elect the president who has the authority to appoint political colleagues (mostly trusted friends and allies) to head up departmental portfolios. These appointments collectively make up the cabinet which is responsible for setting overall policy direction.
In a robust democracy a cabinet and its president (the executive) is held accountable by the legislature. Over the past few years parliament’s oversight role went by the wayside, overridden by the overwhelming role of the ruling party.
In South Africa’s post-apartheid period, senior civil servants – directors general and their deputies – have played an equally important role in shaping policy direction. A new administration often sees new senior bureaucrats taking their seats close to their political principals. Those that are replaced either retire or find a place in academia or the private sector, where they are able to add value given experience of the management of the affairs of state.
Assuming this falls into place, what should the new administration do as a matter of priority?
Manage the public mood: Political stability remains the bedrock of any successful transition. The most important immediate priority is to offer credible evidence of a competent team in charge. South Africa and the world at large needs to see a strong government taking charge. The recent attempt by the ruling party’s Secretary General, Ace Magashule, to explain Zuma’s recall is a model of how not to manage change.
Stabilise the African National Congress: Perception management should extend to the affairs of the ruling party. The ruling party matters because it determines the composition of government. It deploys loyal cadres to occupy senior positions in government.
In addition, without party unity and public support the outcome of the 2019 national election are unpredictable. A collapsing ruling party (and opportunistic coalition formations will lead to political instability, preventing any new team from achieving much.
The evidence so far of coalition governance (particularly in South Africa’s large metropolitan areas such as Pretoria/Tshwane and Nelson Mandela Bay) does not inspire confidence. . This is largely because South Africa doesn’t have experience of “compromise governance”.
Arguably, a strong and united political opposition might be able to keep a weakened ruling party on its toes, provided disgruntled comrades do not revert to tried-and-tested methods of political thuggery, as experienced in KwaZulu-Natal.
Address the economy: The most difficult challenge for the incoming administration relates to unemployment, poverty and inequality. Unemployment has remained stubbornly high, last count had it at 27.7%, and economic growth has collapsed over the years to less than 1%. Without growth there won’t be a reduction in poverty and inequality.
It’s government’s job to create an enabling environment for stakeholders to invest and grow the economy. It must ensure that citizens develop skills and use them in decent jobs. And social partners can then search for common ground in addressing the country’s developmental deficits.
Strengthen the state: Any new administration will falter if the machinery of the state is unable or unwilling to deliver social services. Addressing crime and lawlessness is also key, as its unchecked cancerous growth undermines and paralyses the national will.
Reassure international partners: a recalibration of the nation’s foreign, trade and security policies and strategies is needed. South Africa is a trading nation and needs partners in Africa and further afield. It needs to invest in peace and stability and its soldiers. And its diplomats and development workers must be professional at their job. This requires a rethink of the instruments of the country’s foreign policy.
All in all, the new administration will have a lot of governance challenges on its plate. It therefore needs to throw its weight behind a consultative process to establish a social and economic compact that will address the challenges of inclusive growth, poverty and inequality. This compact also needs to come up with answers to the question: how do we enable our youth to embrace tomorrow’s complex world of work?
Ramaphosa’s moment of hope is built on a fragile foundation
- Roger Southall
Cyril Ramaphosa’s first state of the nation speech restored dignity and decorum to parliament, and pressed all the right buttons.
He was gracious to all (even giving thanks to Zuma for facilitating what the African National Congress (ANC) has termed “the transition”), before launching into the delivery of a peroration which proclaimed the breaking of a new dawn. South Africa’s “moment of hope”, which was to be founded on the legacy of Nelson Mandela, had returned.
Ramaphosa combined extensive tribute to the heroes of the ANC’s liberation struggle with the gospel of social inclusion according to the Holy Writ of the Freedom Charter. This was time to move beyond the recent period of discord, disunity and disillusionment.
The speech was delivered with panache and confidence. It had style, declaring to the nation and the world that he, Cyril Ramaphosa, was in charge.
But along with the style, there was the solid substance. The overall impression was that Ramaphosa intends to impose a new coherence and efficiency on government. Although acknowledging the calamity of the dismally low rate of economic growth, he was upbeat about the future, about the reviving fortunes of the commodities market, and the upturn in the markets.
Deservedly, Ramaphosa was to be allowed to enjoy the applause, as opposition members rose to their feet alongside the ANC MPs to give him a standing ovation which went far beyond ceremonial ritual. After the disaster of Zuma, it would seem to have given a massive fillip to South African pride and confidence.
It also gave the opposition parties a problem. With Zuma gone and a credible ANC president in place, they are facing an uphill electoral battle.
The new President committed to ensuring ethical behaviour and leadership, and to a refusal to tolerate the plunder of resources by public employees or theft and exploitation by private businesses. Critically, this would entail a transformation in the way that state-owned enterprises such as the power utility Eskom would be run.
There would be a new beginning at state-owned enterprises. They would no longer be allowed to borrow their way out of their financial difficulties. Competent people would be appointed to their boards, and there would be an appropriate distancing of their strategic role from operational management. And board members would be barred from any involvement in procurement.
This would be all part and parcel of a much wider reconfiguration of government, presumably a code for the reduction in the number of departments and a reduction in the size of ministerial ranks.
Ramaphosa also committed to hands-on government, promising that he would be visiting each department over the forthcoming year.
The forging of a social compact between government, business and labour would define the new era. A part of it would come from a new presidential economic advisory council. There would be summits for jobs and investment; convening of a youth working group to promote youth enterprise and employment and a summit for the social sector to forge a new consensus with NGOs and civil society.
This would add up to the construction of a “capable state” to foster much needed economic recovery. There would be concerted efforts to promote and aid small and medium business and revive manufacturing. Stress was laid on the importance of arriving at consensus around a mining charter, a document designed to guide transformation in this industry.
Due reference was made to preparing South Africa to embrace the fourth and fifth industrial revolutions and the encouragement of scientific innovation and new technology. And there was an explicit undertaking from Ramaphosa that he would take personal responsibility to ensure that social grants would get paid. And “no individual person in government” would be allowed to obstruct social grants delivery, a brutal albeit indirect put down of the minister concerned.
The one aspect of the speech which would have raised eyebrows among the Davos crowd was Ramaphosa’s re-iteration of the ANC government’s commitment to the expropriation of land without compensation as part of radical economic transformation. This highlighted the ANC’s proposed change to the constitution adopted at its recent national conference.
But that commitment was also fudged by linking any expropriation to ensuring agricultural production and food security. Cynics may argue that this was simply a form of words. In the context of Ramaphosa’s general investment seeking demeanour, agricultural capital and international business are unlikely to be unduly alarmed. But if they are wise, they will take it as a warning to come to the party of “social transformation”.
A long game
Ramaphosa has played a long game since he was passed over for president in the mid-90s in favour of Thabo Mbeki. After playing a key role in crafting the constitution, he left politics, made a lot of money by spearheading the first round of black economic empowerment, and then returned to politics to play what must at times have been a mortifying role as deputy president under Zuma. He suffered a great deal of criticism for being complicit in the Zuma-era corruption because of his silence – silence he would have reckoned was necessary to secure his rise to the top.
Clearly, Ramaphosa is not above criticism. He is no saint. He lives in the shadow of the massacre of miners at Marikana. Only towards the end of the ANC leadership race did he let fly against corruption and state capture.
Yet it could so easily have been so different. What would the mood have been now if Nkosazana Dlamini-Zuma had won the ANC leadership? Few would have been convinced that she would have been able or willing to leave the legacy of the corruption of the Zuma years behind. In contrast, although there is extensive acknowledgement that Ramaphosa will meet considerable opposition from within the ANC patronage machine if he is to realise his ambitions, he has indeed provided hope.
Yet the irony is that we need to pay due deference to David Mabuza, Premier of the province of Mpumalanga. If it had not been for his last moment tactic of throwing his provincial delegates’ votes behind Ramaphosa at the ANC conference to thwart a Dlamini-Zuma victory at the ANC national conference, South Africa would be having to face a very different future.
In true ANC style, the irony is that the moment of hope was facilitated by someone who has been portrayed, even from within the party, as a political hoodlum.
The City of Johannesburg is planning to provide 24-hour clinics in an attempt to increase access to health care. Why it is a good idea.
In 2017, the City of Joburg started extending its clinic hours at 13 of its 81 clinics, which close at 6pm instead of 4pm. But a resolution passed by the council means that the service will be extended at clinics elsewhere . Health and medicine editor Candice Bailey spoke to Professor Laetitia Rispel about the pros and the cons of setting up a 24-hour clinic service.
Why are 24-hour clinics such a good idea?
There are three reasons why, in principle, the idea of extending clinic hours is a good one.
Firstly, it increases access for the working population.
Secondly, it means that people are able to access services at a more appropriate level. Let’s take an average person who works in a shopping centre as a cashier or a cleaner. They depend on the public health care system. If their closest clinic closes at 4pm in the afternoon they have to use private health providers. But because they have limited cash they choose to go to outpatient facilities at hospitals. As a result, hospitals become overburdened because they also have to provide care for ill patients in wards, deal with medical emergencies and serious accidents. In 2016/17, the hospitals dealt with around 5 million visits to the outpatient departments.
And thirdly, illness doesn’t keep to office hours. People get ill at night and need medical care. If a clinic was open they would be able to see someone after hours.
Does Johannesburg have the capability to do it?
There are close to 100 clinics in Johannesburg. Some fall under the auspices of the City of Johannesburg while others are community health centres run by the Gauteng province. Of these 81 fall under the City of Joburg.
The community health centres run 24 hours a day and are better equipped than the city’s clinics. They have midwife obstetric units and provide a comprehensive range of services including x-rays and rehabilitation. Some also employ doctors.
The city is now planning to open its own run clinics 24 hours a day. At the moment these are only open for eight hours a day and only have nursing staff, with weekly visits by doctors.
From a logistical point this could be done. But running services on a 24-hour basis is a costly exercise and to implement it properly the city would need to plan carefully. The financial implications could provide the biggest obstacles.
There are a few things it should consider. Firstly, it would not be necessary for all the services to be rolled out on a 24 hour basis. Vaccinations, for example, do not need to be administered at midnight. But there are certain types of services that should be available on an ongoing basis like maternity services.
Secondly, the clinics would need to be properly staffed to ensure that health professionals get the necessary breaks.
Another thing to consider is that given the urban setting and the crime rates in Johannesburg, they would also need security services on a full time basis.
And lastly, the operation would also need admin services on board to be truly efficient.
What’s the current state of clinic services
The city’s clinics don’t function as well as they should, because of under-investment in primary health care services.
Many are poorly staffed and there aren’t enough medical doctors to support them. Nurses are at the coalface: they work under difficult conditions and often don’t have doctors to bounce ideas off on how to support patients with more complicated conditions.
There are often long queues and the clinics run out of essential medication. As a result, it’s not uncommon for people to visit a clinic but leave without the appropriate treatment.
In many clinics there are also structural problems – inadequate waiting space for patients, lack of backup generators, or access for disabled individuals.
What problems will the city have in setting up a 24 hour operation?
It will be complicated. Given that these two sets of clinics are administered by different levels of government there isn’t much coordination between them. What complicates even more is that the province is run by the African National Congress while the city of Johannesburg is run by a coalition of parties led by the Democratic Alliance.
They would need to work together if it’s ever going to work. Primary health care – as the first point of call for all people – needs health care authorities to work together.
2018 Budget Speech: A unilateral increase on the least progressive tax component – VAT – will harm the poor and lower-income earners.
The rumoured VAT hike as part of the 2018 Budget Speech poses the risk of eroding the spending power of poor and lower-income households, exacerbating poverty and increasing inequality.
VAT is a regressive tax
Value added tax (VAT) – charged on most goods and services at a rate of 14% – is levied irrespective of how much somebody earns, making it a regressive tax. In fact, taxes on goods (VAT plus excise duty) hit the poor hardest. The lowest earning 10% spend 13.8% of their disposable income on these taxes compared to 12.6% of the highest earning 10%.
The Davis Tax Committee admits that raising the VAT rate would increase inequality. It would also make basic goods more expensive and necessitate a proportional increase in social grants and wages in order to maintain the buying power of the poor and workers. At the same time, the statistical model used by the National Treasury to support a VAT increase rests on highly improbable assumptions.
While VAT is successful if considered solely from the perspective of revenue-raising, and ignoring its potential negative impact on the poor, where other options are available taxes that hit the poor hardest, make the consumption of basic goods more expensive, and increase inequality should not be entertained.
South Africa’s tax structure
Overall, taxation in South Africa is mildly progressive, meaning the wealthier pay a higher share of overall taxes. However, given the extreme levels of inequality in South Africa the system is not progressive enough. Further, taxes paid by households are less progressive than in comparative developing countries.
As shown in Table 1, the share of revenue from personal income tax (PIT) fell from 43% in 1999 to 30% in 2007. This is despite strong growth in the number of PIT taxpayers and significant wage growth amongst higher-income earners. It is largely due to falling PIT rates and strong corporate profits, and the consistently high share of VAT. The significant decrease in the tax rate for the highest earners is shown in Table 2 – their tax rate fell from 45% in 1990 to 41% in 2016 (in the two decades prior to democracy it averaged 51%). Importantly, a SARS study shows that the share of tax paid by those earning above R1million has fallen between 2006 and 2015, and fallen more than their share of overall taxable income, meaning their relative contribution has declined.
The share of corporate income tax (CIT) in the overall tax mix rose prior to 2007/8 (Table 1) on the back of strong corporate profits, and better tax collection, and fell subsequently with slower economic growth. While corporate profits boomed, the CIT rate was decreased from 50% in 1990 to 28% in 2016/17 (Table 2). According to the World Bank’s Doing Business Index South Africa’s effective corporate tax rate (“total tax and contribution rate”) is well below emerging market peers and the fifth lowest in Africa.
VAT has contributed 24% - 27% of tax revenue and been held constant at 14% since 1993.
Table 1: Share of overall tax revenue for select forms of tax
Personal income tax (PIT)
Corporate income tax (CIT)
Value added tax (VAT)
Capital gains tax (CGT)
Net wealth tax
Table 2: Tax rates
PIT highest earners
Corporate income tax (CIT)
Value added tax (VAT)
Despite wealth inequality in South Africa being extreme – the top 10% of South Africans hold at least 90-95% of its wealth, while the top 1% holds 50% or more of its wealth – taxation on wealth, or income from wealth held, is low. This includes direct taxation on assets (such as property), income from holding assets (such as capital gains) and inheritance.
Capital gains tax (CGT), for example, raised only R17 billion in 2016/17, a mere 1.5% of tax revenue. Because not all capital gains are taxed, in 2017, individuals only paid a rate of 16% on capital gains, and companies 22%. Tax on inheritance – estate duty – is levied at only 20% and raises revenue worth 0.05% of GDP compared with the OECD average of 0.2%.
South Africa has no annual “net wealth tax” that would tax the total value of wealth held in a given year.
Considering that large amounts of wealth were accumulated under apartheid, that this wealth is passed between generations, and that black earners have less assets to begin with and must support a higher number of dependents, these low taxes on wealth are indefensible and perpetuate inequality.
Tax administration and tax evasion and avoidance
The ability of SARS to raise the requisite revenue has been undermined by state capture. Tax expert, Judge Dennis Davis, notes the “erosion of the integrity of SARS” while previous SARS managers point to a loss of expertise. Specialist units pursuing tax evasion have been gutted while there is indication that companies and individuals associated with state captured are not tax compliant.
At the same time capital flight and tax evasion and avoidance are endemic although the exact cost is difficult to pinpoint; various estimates suggest that it runs into many billions of rand. One estimate calculates that illicit financial flows from South Africa constitute between 5-9% of all trade, little tax will be paid on such funds.
What should happen to VAT?
Instead of uniformly raising VAT:
The list of zero-rated items (products upon which VAT is not charged) should be increased targeting goods bought by the poor such as: bread, poultry, flour, candles, soap, basic medicines, pay-as-you-go airtime and education-related goods. While this will also benefit higher-income earners the share of disposable income spent on these goods by the poor is higher. Even taking into account the benefit to wealthier households and the potential capture of some gains by retailers, this will have positive distributional outcomes (and generally no less so than other pro-poor government policies excepting social grants which are highly redistributive). It will also assist in ensuring basic needs of poorer households are met.
A higher VAT rate (for example, 20%) should be levied on luxury goods. These include goods bought only by the rich, for example, yachts, as well as upper segments of other goods markets, for example, fancy cars, expensive fridges, and so on. The selection of items should not place goods that poorer households save for beyond their reach. Given the existing tax administration systems this can be feasibly implemented. Further, given that a higher share of luxury items are imported, this should not unduly dampen domestic demand and could modestly assist in closely the balance of payments.
These changes could be made in a tax neutral manner.
Alternatives to a VAT increase
The revenue gap could be closed through:
Repairing the administrative capacity of SARS, including its ability to tackle tax avoidance and evasion by corporates and the wealthy. This requires a change in executive management and various administrative measures, as well as governance reforms aimed at greater independence.
Raising personal income tax, particularly on the highest earners. For example, in 2015, an effective tax rate of 40% on those earning between R500,000 and R1 million and 45% on those earning above R1 million would have raised additional revenue of R5.4 billion and R5.3 billion respectively (although some seepage is likely to occur).
Increasing corporate income tax. In 2015, effective tax rates of 30%, 32% and 35% would have raised an additional R13 billion, R26 billion and R45 billion respectively (although this is likely to be somewhat less due to avoidance and/or a fall in taxable profit).
Instituting an annual net wealth tax. International comparisons suggest this could raise anywhere between R22 billion and R154 billion, although this degree of uncertainty as a result of a lack of adequate data.
Instituting a land tax, particularly on unused land, and increasingly property taxes, particularly on non-residents and those owning multiple homes.
Increasing other taxes on property or income from property such as capital gains tax, estate duty and securities transaction tax. For example, levying capital gains tax in line with a top marginal tax bracket of 45% could raise at additional R4 billion.
In a country plagued with high levels of poverty and inequality every instrument must be brought to bear on solving these challenges, the tax system is one tool. A detailed process of engagement with all social partners should be undertaken to find an appropriate means of raising the required revenue.
A unilateral increase on the least progressive tax component – VAT – will harm the poor and lower-income earners.
The country cannot mature into a full-blown democracy until major reforms are undertaken.
The State of the Nation Address by South Africa’s new president, Cyril Ramaphosa, heralds a new dawn for the country. After a decade of maladministration, venal politics, corruption and the wrecking of a number of important state institutions, any alternative would have filled South Africans with optimism.
There is little doubt that, even if they are dealing with the same party, the leadership, determination and discipline that Ramaphosa will bring to their politics will be very different to the last decade under Jacob Zuma.
Although South Africans should be thankful for the persistence and courage of opposition parties, civil society, courts and media, an obvious fact shouldn’t be forgotten. Ultimately it was the ANC itself that was the agent of change. The ANC, not the Constitutional Court, nor the vocal opposition Economic Freedom Fighters (EFF), nor the media, nor South Africa’s citizens, brought Zuma’s calamitous and corrupt reign to an end.
Laying aside the ecstatic optimism that’s marked the end of the Zuma era, and looking at the detail of Ramaphosa’s speech in parliament, the question that comes to minds is: what does it promise?
No ordinary speech
First, this was not any old ordinary state of the nation address. It was the speech of an incoming president laying out his vision, not really a programme of what government hopes to achieve over the coming year. The hope, sense of renewal and determination was evident throughout: to root out corruption; rebuild state capacity; enable jobs; support education; re-industrialise the economy.
Ramaphosa said he would personally drive and ensure throughput. What a breath of fresh air on a number of levels: responsible leadership; concrete ideas; and, finally, a speech actually written by a leader.
Second, this state of the nation address promises serious action to stabilise the state as well as to spur South Africa’s depressed economy. But growth, development, reducing inequality and turning the tide on rampant unemployment requires a capable state. Ramaphosa clearly understands this. He has a mammoth task ahead of him. Fortunately, he’s not short of ideas. He:
focused at length on making 2018 the year of turning the tide on corruption;
had specific points on how to intervene decisively to sort out the parlous state of state owned enterprises. In particular, he accepts that many of the problems at the state owned enterprises are structural. For example, he said that it was vital to remove directors from having any role in procurement.
insisted on reviewing the size of the state bureaucracy;
hinted that nonperforming ministers will lose their jobs; and
stressed the need for government to lead in creating an environment of stability and certainty.
Third, the speech was carefully balanced to keep the markets happy, but also with an eye on rectifying South Africa’s past injustices. For example, he talked about the need to expropriate land without compensation. But he was careful in his wording, adding that it had to be done in a way that “increases agricultural production and ensures food security”.
South Africans produced a collective sigh of relief. A tumultuous era has ended and there’s a silver lining to the cloud that has been hanging over the country.
Need for vigilance
South Africans shouldn’t relax. Politicians must be held accountable. But for this to truly work, the country needs to change its electoral system. The current balance of power means that citizens aren’t able to hold their political representatives accountable, including their president. It is no accident that the executive, and Zuma in particular, were able to use parliament to make a mockery of citizens’ concerns and the constitution.
The party-list proportional representation system means that South Africans elect representatives who don’t have any real link to their needs and interests in the areas in which they live and work. Instead, candidates are nominated and elected on party lists. This has rendered parliament a lame-duck. Decisions in parliament aren’t made by the people’s representatives – they’re made by the party in power.
South Africans have come a long way since 1994, but the country’s constitutional and political institutions are products of their time – a time of real, and understandable fear about ensuring that the country never returned to the horrors of apartheid. The ironic result is that ordinary citizens – especially as represented in parliament – don’t have the means to affect change.
The democratic miracle is stillborn. The country cannot mature into a full-blown democracy until major reforms are undertaken. If Ramaphosa really wants to seize this new dawn, if he really wants to change the course of South Africa’s democratic history, he needs to think even more boldly.
The reconstruction of South Africa’s shattered state is vital. But as he does so he could also reconfigure it. It needs deep, structural change to properly empower the people to hold political representatives accountable. Acting in this way would trigger two further developments: the ANC would, finally, have to transform itself from being a liberation movement into a political party; and citizens could start to realise that the party is not equivalent to the state.
South Africa must resist another captured president: this time by the markets
- Vishwas Satgar
The ANC has made a dangerous habit of bringing post-apartheid South Africa to the brink of instability and the common ruin of all.
The resignation of former President Jacob Zuma and his replacement by Cyril Ramaphosa was such a moment. It brought home the point that the over-concentration of power in the office of the president has clearly not worked.
A rethink on president-centred politics and the threats it poses to the democracy are crucial for the post-Zuma period. South Africa needs to re-imagine democratic practice, leadership and how power works.
Some sections of South African society have reduced the Zuma problem to a corruption problem. Dismantle Zuma’s kleptocratic network, the argument goes, and all is solved. Zuma’s demise and a few high profile prosecutions will suffice.
But another view on the Zuma problem – and one with which I concur – suggests it is a problem of contending class projects inside the ANC. The neoliberal class project under Presidents Nelson Mandela and Thabo Mbeki saw South Africa integrated into global markets. It maintained stability through modest redistributive reforms. This project laid the basis for a new black middle class to emerge while systematically weakening labour and the left.
But it surrendered the state (including the presidency) to transnational capital and the power of finance.
The Zuma project, on the other hand, advanced looting as the basis of accumulation and class formation. The extra-constitutional state that emerged deepened the macroeconomic, institutional and legitimacy crisis of the ANC-led state. The left and labour, aligned with the ANC in the tripartite alliance, were co-opted and divided. Both these projects are entrenched in the ANC.
Now what? Messiah-centred presidential politics is extremely dangerous. This is particularly true in a country of extreme inequality and with a formal concentration of power in the office of the president. If politics is not represented, thought and acted beyond this, South Africa is going to repeat historical mistakes.
Since the ANC’s December 2017 conference the media, the banks and international institutions have been talking up a narrative of the “Cyril effect”. Zuma’s removal is attributed to this. In fact the Cyril effect is a narrative of capture of South Africa’s new president by transnational and financial capital.
South Africa’s democracy cannot afford another captured president beholden to credit rating agencies, currency fluctuations, investment flows and business perceptions. South Africa’s democracy has to be grounded in the needs of its citizens and the mandates given by its Constitution.
The ‘Cyril effect’ is hyperbole
The end of Zuma was in fact not because of the Cyril effect. In the main Zuma was removed by the people’s effect which connected the dots of corruption, a mismanaged state and rapacious capitalism.
This resistance was expressed over 15 years through various institutions and social forces. These included:
Battles inside the South African Communist Party (SACP) against Zumafication but which led to expulsions;
By feminists during Zuma’s rape trial and subsequently through #RememberKhwezi;
The powerful voice of liberation struggle veterans like Ahmed Kathrada and others who called for Zuma to resign.
The ANC’s legitimacy crisis
As a result of all this activity the crisis of legitimacy in the ANC – and the ANC state – has deepened. This has placed immense pressure on the party to act. In this context, Ramaphosa is playing out his role out of necessity and to secure the ANC’s electoral fortunes.
For middle class and rich South Africans Ramaphosa’s state of the nation speech represented a return to normalcy – a democracy that works for a few. That’s not to say that the new president didn’t make some important announcements in his state of the nation address. This included his comments about state owned enterprises, redistributive state programmes and anti-corruption mechanisms.
Nevertheless, the speech struck chords that resonated with the “return to normalcy” narrative.
But South Africans can’t repeat the mistake made in 1994 when progressive civil society demobilised. The people’s effect has to continue to shape a post-Zuma democracy in the interests of all. The ANC has abused majority support and cannot be trusted with the future of South Africa.
People’s power has to be strengthened and continuously mobilised around strengthening democratic institutions, ending corruption, fundamental economic transformation and advancing systemic alternatives to the climate crisis.
Africa’s rich fossil finds should get the air time they deserve
- Julien Benoit
Palaeontology, like much else in the cultural landscape, has a strong western influence and bias.
Students are more likely than not to be given textbooks and external readings from Europe and North America no matter where they are in the world.
I often think about my own experiences as a palaeontology student in France now that I’m lecturing the subject at a South African university. Back in those days, I knew more about North American and British fossils than about those from my own country. The textbooks haven’t changed much since. So, when I started as a lecturer at Wits University in 2017, I wondered if I should just be talking to my students about North America’s fossil record, or Britain’s.
There are, of course, some good books written on the subject from an African perspective. But these are nowhere near as ubiquitous as the works of palaeontologists from North America and Europe.
I decided to set the usual textbooks aside and to create my own lecture series based only on African literature about palaeontology and the continent’s fossil heritage. There were two reasons for this. The first is that while Africa is widely acknowledged as the birthplace of humankind, its incredibly varied fossil record is often overlooked.
And secondly, how can the continent hope to produce world-class scientists in the future if students aren’t learning about their own heritage.
From single cells to complex organisms, from sea to land, from small to giant, the continent’s many and breathtakingly diverse landscapes and the soils beneath them have witnessed and recorded all the great transitions in the history of life on Earth. It is crucial to give this unique heritage the attention it deserves so that current students and future generations can better understand the evolutionary processes that have brought us to this point.
Some crucial moments in time
Life originated in seas, and the African fossil record documents the origin of multicellular organisms two billion years ago in what is today Franceville, a city in Gabon. Fossils in Namibia, meanwhile, represent the Ediacarian biotope, the earliest discovered marine ecosystem, dating back 600 million years and made up entirely of strange, pneumatic creatures that floated.
The rise of fish, too, is well represented in Africa’s fossil records. Fossils embedded in South African rocks that date back 320 million years offer evidence of lobe-finned fish (the same family as coelacanths). They’re the ancestors of all terrestrial vertebrates – that is, amphibians and reptiles.
You may think that one of these fish evolved into a walking creature whose new legs took it from the water to the land. But the very first transition from sea to land wasn’t actually achieved by a vertebrate. It was a scorpion, as a fossil also found in South Africa has taught us.
Some fossils found outside modern-day Africa also hold lessons about the continent.
Mesosaurus was a small crocodile-like animal that lived 300 million years ago. Mesosaurus fossils have been found in both Africa – Zimbabwe, Namibia and South Africa – and in Brazil in South America. Its fossil presence in those two very different places made Mesosaurus very important, since this proved that what are today two separate continents were once part of a giant landmass (along with Antarctica, Madagascar and Australia). It was a “supercontinent” called Gondwana.
It was on Gondwana that the earliest dinosaurs were born. And they thrived across what is today Africa. For instance, fossils show that the tallest animal which ever lived – the Giraffatitan, which stretched to a huge 12 meters – roamed modern-day Tanzania. Peeling back layers that were formed 100 million years ago in the Cretaceous in parts of North Africa yielded evidence of predatory carnivorous dinosaurs like the Spinosaurus (which you may recognise from the Jurassic Park films). These beasts were as big, or sometimes larger, than the famous North American Tyrannosaurus rex.
The next transition came 66 million years ago. Dinosaurs died out and mammals diversified. These mammals’ fossil records show them to be the ancestors of some of Africa’s most famous wildlife, like elephants.
And of course, there were humans – or there would be, eventually. The earliest hominim fossil was found in Chad; it dates back between six and seven million years. Time moved, landscapes shifted; and, 300 000 years ago, the continent’s first recorded fossil hunters emerged. Fossils and other evidence have revealed that the earliest representatives of our own species, Homo sapiens, collected fossil sea shells in Morocco.
This is but a quick glimpse into what I want my students to learn. By teaching them how amazingly rich and diverse their palaeontological heritage is, I aim to inspire this new batch of future scientists to keep studying the evolution of different species.
Only by educating more students about their past will academics have a chance to reach out to communities across Africa, raising awareness about the importance of the continent’s fossil heritage to us all, and ultimately give to Africa what the continent really deserves: more African palaeontologists.
Consequences of the Zuma regime will linger for a long time
- Ran Greenstein
The flood of obituaries to the Zuma presidency are likely to stream in for some time to come.
But how should the nine-year period of President Jacob Zuma’srule be understood in its historical and theoretical contexts?
We can answer the question by applying a theoretical lens that distinguishes between state, government and ruling party as three dimensions of politics. The state is the overall machinery of power comprising different institutions and practices. It tends to persist over time even when parties, politicians and cabinets shift. Government is a formal structure of ministries and policies which may change every few years. The ruling party is an actor that plays a role in running the government, depending on circumstances.
The balance between the three dimensions is not fixed. Together they form what is often called “the regime”. This refers not only to structures, policies and practices, but also to a less tangible “ethos” that gives sense of coherence to the entire set of institutional relationships.
The post-apartheid era has seen three terms of rule, dominated by the same party, the African National Congress (ANC). For most of the post-apartheid period they were led by three very different personalities – Nelson Mandela, Thabo Mbeki and Jacob Zuma. Each was governed by a different ethos: reconciliation and nation building under Mandela, and building a technically capable state under Mbeki.
So what was Zuma’s ethos, and how does the period of his rule compare to his predecessors’?
The primary challenge for the Mandela government was to merge different political institutions and traditions into a coherent whole while maintaining social and political stability. The ethos of reconciliation dominated. This required a reformist approach – keeping the old style of management while gradually changing personnel and policies. An orderly but gradual shift of power was needed to ensure that the volatile environment did not get in the way of a new political order being built.
This approach ensured a peaceful transition. But it was also problematic. Many senior apartheid and Bantustan bureaucrats kept their positions. Even when they were replaced, their ethos and mode of operation prevailed.
With the transition to the Mbeki period, changes in state, government and party became evident. The primary challenge shifted from ensuring stability to enhancing modernity; from racial reconciliation to technical proficiency; from creating a unified state to making it efficient.
The new imperatives were centralising planning and designing and implementing policies. The idea of the “African Renaissance” served as a unifying ethos. But it had ambiguous effects. On the one hand it presented a vision of unity and development. On the other it led to racially-inspired delusions, as was the case with Mbeki’s AIDS denialism and his support for Robert Mugabe’s regime in Zimbabwe.
The biggest problem of the Mbeki period was that its attempts at centralisation excluded voices from the margins of politics and non-state actors. In turn this undermined the quest for policy effectiveness, a failure that was to serve as the background for the Zuma period.
Man of the people
Zuma’s appeal was due precisely to his being so unlike his illustrious predecessors. Neither a giant of the struggle like Mandela nor an aloof intellectual like Mbeki. Instead, he was seen as a man of the people. Not known for grand policy visions, he was expected to be pragmatic, seeking practical solutions instead of ideological purity.
His lack of commitment to specific policies meant that he was supported by opposing factions that thought him malleable. In short, a man for – almost – all people. Even his ethical transgressions weren’t seen as obstacles. They made him more human instead.
And human, all too human, he proved to be. Dispensing with the need to offer grand visions for the state, or claim competence in government, or manage the party with impartiality, Zuma used power to advance a single goal: self enrichment. The ethos was clear: grab as much and as fast as you can.
The strategy he adopted was to mix and match individuals and structures to serve the one goal. His approach had three components which he pursued systematically. These were to control:
parts of the state that would help shield him from accountability, in particular the criminal justice system;
aspects of government that facilitated access to resources: minerals and energy, state-owned enterprises, ultimately the treasury; and
party institutions to neutralise opponents, particularly those who could undermine him.
The rest he discarded. Areas of government not directly relevant to looting resources received no attention. Left to their own devices, spheres such as education, health, welfare, public safety, housing, agriculture, water, were handled with no interference from the top.
Corruption and its aftermath
Corruption on a large scale preceded Zuma and is likely continue for a long time after him. The difference is that he opened the gates for political entrepreneurs to enrich themselves by creating looting opportunities.
The impunity that guided his actions permeated all state institutions. But there was resistance: within the state the court system remained largely intact and, in many cases, fought back as did the Public Protector. Large sections of the media, NGOs, the political opposition, and principled individuals all played a role. Enclaves within government – the Treasury in particular – continued to perform their role as long as they could.
Eventually the tide turned, heralding a new transition of power in the ANC. So, what lessons can we draw from a period that saw the state subordinated to the whims of a small number of people using it to their own ends?
One key takeaway is that free media and civil society voices, independent courts and accountability mechanisms, and honest politicians are all necessary. South Africa came very close to losing the battle against abusive and exploitative state power. The consequences of this will be with the country for a long time to come, which is why continued vigilance is essential.
Want to solve complex health issues? Train scholars to think across disciplines
- Sharon Fonn
A number of factors affect both the distribution and prevalence of disease and the effectiveness of interventions to prevent or reduce disease.
These factors are social, physical, environmental and historical. It follows, then, that challenges in public health require a multidisciplinary approach.
This means that if researchers want to make an impact on public health they can’t just have a thorough grounding in their own discipline. They also need to be literate in other research approaches and methods. Knowledge generated from various theories of learning suggest alternative insights and interventions that may be effective in making this a reality.
Various programmes have been developed to help scholars engage in multidisciplinary research. One of them is the Consortium for Advanced Research Training in Africa (CARTA). The aim of the programme is to build a critical mass of effective researchers to improve health outcomes in sub-Saharan Africa. And, since there’s a scarcity of African-led public health research, it’s also working to develop researchers with cross-disciplinary competencies. Once their training is done, these scientists should be capable of heading multidisciplinary research teams.
The programme is focused on scholars in sub-Saharan Africa. But the model has international relevance. Globally, there are major health challenges that need to be addressed by innovative research. The approach developed under CARTA could be adapted to other contexts and would prepare PhD candidates to address complex health problems in different countries and geographies.
The consortium brings together nine African universities, four African research centres and a number of partners from the global North. Since 2011, a cohort of new PhD students have joined the programme each year making a total of 165. They have all received structured, supplementary training over a three-year period. This supplements the PhD training they’re receiving at their home universities, which is almost always discipline-specific. The programmes’ focus, on the other hand, is multidisciplinary.
One of the key parts of their training is a series of joint advanced seminars. There are four of these for each cohort, and they’re residential; the fellows gather in different countries and locations for four weeks at a time. The seminars promote knowledge sharing and they also provide a supportive network of researchers within and between cohorts.
One of the most important elements of the seminars is how they’re taught. Many sub-Saharan universities are poorly funded and classes are huge, especially at undergraduate level. This means that didactic teaching is often the norm: the lecturer is the “sage on a stage” who talks without letting students engage.
By contrast, the seminars use participatory and experiential learning. Teaching sessions are informal, inviting critique and robust discussion. They challenge hierarchy – for example junior lecturers are encouraged to debate professors. Value is measured by the coherence of an argument or the robustness of evidence, not on the status of the person making the point. This encourages fellows to use evidence and theory to defend their argument; it reinforces that there is no hierarchy between disciplines.
CARTA’s approach to teaching also shows how a multidisciplinary approach can work in practice. For example, sessions can be co-facilitated by an epidemiologist and an anthropologist.
A valuable experience
So, is all of this working? To provide some answers, data has been drawn on from across the cohorts. The fellows were asked questions about their experiences and learning.
The evidence suggests that the seminars, and the broader programme, is bearing fruit. PhD students who have attended the programme show that they are able to think and work across disciplines.
Some have made changes to their research question, choice of literature, study design and analysis plan. One, from the second cohort, wrote:
I never thought of how law could influence healthcare provision for the aged, especially in terms of access to postreproductive care services. … I am trying to expand my research … in this direction.
Another wrote that after the second seminar “I joined the social science network at my home institution and I actively participate with the hope to learn and acquire more skills in qualitative research”.
Three fellows also reported that they were using mixed methods in research outside of their PhD studies:
Training on mixed methods has influenced me. I applied for a local institution competitive grant using mixed methods approach to explore noise pollution in a teaching hospital. I won the grant and I have already completed the qualitative aspect of the study – my first attempt at qualitative research.
Fellows also reported that they’d found ways to communicate better to a wider range of disciplinary colleagues.
Some unanswered questions
There are gaps in the data. A way to assess whether each PhD fellow gained sufficient breadth and depth has not yet been found. There is confidence that the PhD fellows can engage meaningfully across disciplines, but it has not assessed whether multidisciplinary training makes for a better statistician or social scientist.
It is also unknown if the ability to work across disciplines or maintain anti-hierarchical values will be sustained. The world of science, government, funding agencies, universities and research institutions is largely still structured around scholarly disciplines. Most institutions remain conservative when it comes to hierarchy, so fellows may find it hard to sustain anti-hierarchial approaches.
And longer-term follow up to assess the impact of the programme on the production of research evidence and its impact will need to be done.
Still, the process evaluation suggests the path is the right one. And there is no reason that other organisations or institutions can’t adopt and adapt the model for their own contexts.
Analysis: Unpacking the tax proposals in the 2018/19 National Budget though publicly available data.
The government’s tax proposals to fill the gap in revenue, announced in the Budget last week, have generated a lot of comment. The left has been extremely critical of the increase in VAT, from 14% to 15%, arguing that VAT is regressive, and it places an undue burden on the poor. The right, however, has applauded the tax proposals as the best that could be done in very difficult circumstances. Sadly, there has been a lot of assumption, obfuscation and very little fact and clear thinking in evaluating these tax proposals. Almost none of the analysis has been based on the excellent data on tax in South Africa which are publicly available.
The Budget is about more than just about income and expenditure. It should provide a vision for the economy, which deals with the current challenges but also offers an insight into the type of society we want to build. The key message in the 2018-19 Budget is that South Africa’s public finances are in very bad shape, and we have to find more revenue. The Budget proposes that we all need to tighten our belts and make sacrifices to get out of trouble and to get the economy on a sustainable growth path. It asks all citizens to pay more, and all income groups to share in the burden. At the same time, however, the Treasury has decided to leave corporate tax unchanged.
As South Africans, we should all be asking the Finance Minister: “Why do only some of us have to make sacrifices? And, why can the sacrifice not be distributed an appropriately proportional manner and include company taxes?” We believe that Business, in the interests of a holistic growth and public finance strategy, should have proposed and supported an increase the company tax rate. Thankfully after many years of silence, leaders in business have been outspoken about the challenges in our society and have made commitments to work toward addressing the high levels of inequality in our society. But talk is cheap, and it is easy to sign a pledge when little is at stake. Unless Business gets serious about joining everyone else in making sacrifices, and taking on its appropriate proportion of the sacrifice, one can’t but help wonder whether it is all talk and no action.
The Budget could have been a mechanism to build a consensus across class divides which continue to undermine the sustainability of the economy. The political moment was perfect. An increase in VAT and an additional R13 billion in revenue from a 2% increase in the corporate rate would have demonstrated that the private sector is committed to accelerating sustainable and equitable growth. It would have been a small sacrifice for business and would have gone a long way to generate more revenue, and so creating some scope better to address poverty on the expenditure side of the Budget. As it turns out the 2017/18 Budget will be remembered for the first VAT increase in post-Apartheid South Africa. It should have been the Budget remembered for all social groups, including Business, coming together to address our economic challenges.
Raising revenue is a delicate balancing act, and raises important issues of equality and fairness. This is why it is critical that both policy decisions and public debate are informed by evidence. We use the available data to make three arguments. First, given the dire economic situation in South Africa, the decision to raise VAT deserves careful consideration. Second, we argue that any evaluation of the tax proposals has to look at all of the available tax measures, including personal income taxes (PIT) and company taxes. In our view, the increase in VAT should have been accompanied by an increase in the rate for company taxes, which is currently 28% and has been falling. Third, our view is that the message of the Budget should have been that that collective sacrifice from all taxpayers is required to stabilize public finances. The burden to do this must fall disproportionally on those that have a greater ability to pay – the rich and the private sector. We argue that the government has failed to take advantage of a political moment which we believe would have allowed it also to raise the corporate tax rate. But these decisions are not only political, and here we consider the economic evidence.
The South African government has three main tax policy instruments – PIT, VAT and company taxes, which respectively make up 37%, 25% and 18% of total tax revenues. In this article, we discuss two other taxes: excise taxes and fuel levies. Excise taxes are taxes on specific goods such as alcoholic beverages, soft drinks and cigarettes – the so-called sin taxes. The tax is included in the price of the good when it is purchased. Similarly, the fuel levy is a tax that is included in the price of petrol and other fuels. Excise taxes and fuel levies, respectively, contribute 5% and 3% of total revenue. The biggest contributors to tax revenue are PIT, VAT and company taxes and we should, in evaluating the tax proposals, focus on these. In the tax literature, we often refer to direct taxes and indirect taxes. Direct taxes are that we directly pay to SARS: PIT and company taxes. An indirect tax is a tax that is paid when something else is purchased and the tax is included in the price of the good purchased. The main indirect tax is VAT. Excise taxes and fuel levies are also indirect taxes.
One of the key considerations in evaluating taxes, is the distributional effect – that, whether the burden falls on the rich, or the poor, or both. We concern ourselves both with how much each group pays, and how much of the burden falls on each group, relatively to their ability to pay. The tax is progressive if the burden falls mainly on the rich; regressive if the burden falls mainly on the poor; and neutral if the burden is spread equally across all classes. A tax should not make the level of inequality worse – so a regressive tax is a bad policy. Government should be using the Budget to improve income distribution and skew policies to favour the poor.
Ideally, one should look at both taxes and expenditure at the same time so assess whether the Budget is progressive, regressive or neutral in terms of inequality. To keep to the main issues that concern us here, we only discuss the revenue side of the Budget. However, it is important to note that because of social grants and other social support in South Africa, the expenditure side of the Budget is strongly progressive. And, even though we have problems with state capacity, our government successfully pays out the social grants. The principle is that if poor households are hurt by any taxes, they should be compensated on the expenditure side of the Budget by above-inflation increases in social grants.
The key tax policy proposals in the 2017/18 Budget are: an increase in VAT from 14% to 15%. Slight amendments were made to PIT, to protect lower-income groups against inflation by decreasing the amount of PIT they pay. And, the company tax rate was left unchanged at 28%. Excise taxes and fuel levies were increased.
First, let’s assess whether, theoretically, VAT is regressive or progressive, and whether it does place an unfair burden on the poor. For tax evaluation purposes, we concern ourselves not only with how much different groups pay but also with how much, proportionately, different groups pay; that is, what is the tax burden relative to the ability to pay. Let us compare two citizens, A and B. A, a low-income South Africa earns R30,000 per annum and spends all her income because she cannot afford to save. B, a high-income South African, earns R3-million per annum and, being wealthy, spends 50% of her income, saving and investing the rest. For simplicity, we assume that all of A’s and B’s expenditure is on goods that attract VAT. At 15% VAT, A pays R4,500 in VAT (15% of her income) while B pays R225, 000 in VAT (7.5% of income). In this scenario, VAT is regressive because, although A contributes significantly more to the VAT pool, relative to their incomes, A is paying more than B. A is paying 15c in each rand earned while B is paying only 7.5 cents in each rand earned. In theory, and in this simple scenario, VAT has to be regressive because it is a tax on consumption and, compared to the rich, the poor consume larger proportions of their income. However, in reality the impact of VAT is determined by how it is implemented and what goods are included in the VAT net and which not. In South Africa, we have extensive zero-rating of basic goods, and this has a big impact on whether or not VAT is regressive.
Table 1 shows the annual income earned by households by income classes in 2011 prices. It is calculated by ranking all households in South Africa from the lowest income household to the highest and then dividing the households into ten groups with an equal number of households. This table demonstrates how unequal income distribution is in South Africa, where we have a few very rich people and many poor people. In the poorest decile, on average, households earn R 17,534 per annum; about R1,461 per month. In richest decile, on average, households earn R517,323 per month, about R43,110 per month.
Let us then look at what the different income classes share of spending, VAT and other indirect taxes looks like. The left-hand panel in the table below shows us almost all we need to know. The poorest South African have 0.54% of disposable income and their share of VAT is 0.47%. The richest South Africans have 56.66% of disposable income and pay 59.56% of VAT. The panel on the right shows cumulative shares. So, quintiles 1-5 have 7.32% of disposable income and their share of VAT is 6.55%. The increase in VAT, from 14% to 15%, is expected to raise R22.9-billion. In total, quintiles 1-9 will pay about R9.26-billion (43.34%) while quintile 10 will pay R13.63-billion. The poorest quintile in contrast will pay just over R1-million. Clearly, the rich will pay a lot more of the bill in absolute terms.
Progressivity of indirect taxes in South Africa
Source: The Distributional Impact of Fiscal Policy in South Africa, World Bank Group.
But as we said earlier, we shouldn’t only ask how much each of the deciles pay. We should in fact be more concerned about their tax burdens relative to their ability to pay: relative to how much they earn, how much of VAT does each of the deciles pay in South Africa?
The table below shows us how much South African households spend on indirect taxes as a proportion of their income – VAT, excise taxes, and fuel levies. For the purpose of assessing the impact of VAT, we must focus on the blue bit of the bar graph. The blue bars are increasing slightly but consistently from left to right, from 9.5% to about 12% - this means that the poorest pay 9 cents in each rand they earn, while the richest pay about 12 cents in each rand they earn. Each of the income classes pays a little more than the class that are poorer. The conclusion is that VAT, in South Africa, is not regressive. Rather, it is very mildly progressive. It is not a great story (we would like taxes to be strongly progressive) but empirically it is not the case that the increase from 14% to 15% will place a disproportionate burden on the poorest South Africans. To be clear, poor households are worse off from having to pay the increase in VAT but rich households are proportionately more worse off. The result is that as long as the taxes collected are spent on poor households, the net effect is that inequality should fall.
Incidence of indirect taxes in South Africa
Source: The Distributional Impact of Fiscal Policy in South Africa, World Bank Group.
The received wisdom in the debate on VAT in South Africa is that it is regressive. As we have demonstrated above, VAT is in fact mildly progressive, but this is not true for all indirect taxes. In the graph above, the blue portion of the bar shows the incidence of VAT, the red the incidence of excise taxes, and the green the incidence of fuel levies. Taken together, VAT, excise taxes and fuel levies are regressive – the poorest pay 17c in each rand while the richest pay about 16c in each rand spent. This is regressive because the poor are paying more tax than the rich for each Rand that they spend. However, it is excise tax, not VAT that causes the regressivity. The poorest decline earns only 0.54% of income, but pays 3.44% of the excise tax. In comparison, the richest decile earns 56.66% of income and yet contributes only 29.21% of the excise tax. In other words, VAT and fuel levies are not regressive. Excise taxes are strongly regressive. We should note that this evidence is undisputed and all studies of the incidence of VAT in South Africa have reached this conclusion. VAT is not regressive in South Africa because the zero-rating of basic goods does a very good job to protect the poorest South African.
Excise taxes are regressive because relative to their disposable income, the poor spend disproportionately more on goods that attract excise taxes – cold drinks, cigarettes and alcohol; the so-called sin taxes. The Budget proposals to increase these sin taxes will place a further and disproportionate burden on the poor. This is a complex issue: quite clearly, the commonly held view that increasing sin taxes is good policy raises complex distributional issues. The Budget has also increased the fuel levy. Taken together, these proposals on indirect taxes do in fact place an undue burden on the poor but it is important to distinguish the effects of each of these taxes.
Having clarified that VAT in South Africa is not regressive, it is worth investigating why the Treasury may have chosen to increase the VAT rate over the other tax options available. Tax authorities often tax about the three E’s in tax policy – equity, ease of administration, and efficiency. We have dealt with the equity consideration (though there is a bit more on that below); VAT is not regressive. From an ease of administration perspective, VAT is a transparent tax (we all know how much VAT we pay). From an efficiency perspective, there are two considerations – how much money does the state collect for a small change in the rate of tax, and how much of what the state should collect does it actually collect (i.e. how easy is it to evade the tax). VAT has great advantages on both these scores. Studies that have been done show that the gap between what should be collected and what is actually collected is very small indeed – its much smaller in South Africa than in comparable countries. For these reasons, VAT is an extremely attractive option when it is important to quickly and cost-effectively raise revenue. This is especially so if there is a well-functioning VAT system, with a zero-rating provision that protects the most vulnerable citizens from the pernicious characteristics of VAT.
In total, through the adjustments announced in the Budget, government is raising an additional R36-billion in tax revenue. The bulk of this, R22-billion, is expected to come from the increase in the VAT rate. From the perspective of the 2017-18 Budget, the problem with VAT in South Africa is not that it is regressive, but that it is not strongly progressive. In other words, because VAT is by far the largest proportion of the tax adjustment, the overall impact of the adjustment is spread more or less equally among all income classes.
In a country that has a relatively equal distribution of income, it may be acceptable for the burden of an adjustment to be borne equally among all classes. South Africa, however, has a distribution of income that is among the most unequal in the world. The top decile in South Africa earns 60% of all the income and owns 95% of all the assets. The objective of economic policy, if we are trying to build a sustainable and humane economy, should be to change this unequal distribution of income and assets. Conceptually, it is quite simple. Addressing inequality requires policies that will increase the level of income for low-income groups at a rate that is greater than that for middle and high-income groups. This requires that the costs of economic stabilisation and adjustment are borne disproportionately by higher income groups. Essentially, it is a question of “proportionality” – in our context if any burden is to be fair, the rich should, proportionately, pay a lot more than the poor.
How could the tax proposals have been better crafted to be more equitable? There are two other sources of taxes – personal income tax (PIT) and company taxes. We briefly assess each of these in turn. In the 2017/18 Budget government is making only minor changes to PIT by adjusting tax brackets, to protect tax payers against inflation for low income group only. By not adjusting the rates for high income earners, government will raise an additional R6.8-billion.
There are two problems with PIT in South Africa. First, low-income groups fall outside the income tax net, so anything that government ‘gives back’ to the payers through the tax system (for example, by reducing tax rates), excludes the poorest groups. The tax threshold is just over R75,000, so anyone who earns less is outside the tax net. Second, because of the highly unequal distribution of income relative to the size of the population, we have very few taxpayers in the highest income groups – there are only 109,783 individuals in the highest income bracket. Raising tax rates for high income earners affects a small group of tax payers and therefore does not generate a large amount of revenue. In deciding not to make any further changes to the PIT, government has argued that in the last Budget government added a new top income tax bracket of 45% for those earning above R1.5-million. Furthermore, the increase in VAT effects all individuals when they spend their incomes; on balance, there was probably not a lot that could have been done in the short term about PIT.
A number of commentators, especially leaders in business who have commented on the Budget, say that while the VAT increase is undesirable, it is the best of the options available. They go on to say that it is a very good thing that the tax rate on companies, currently at 28%, was not increased. The arguments made to support this are varied, and deserve investigation. Firstly, we need economic growth, which requires higher levels of investment by businesses, and raising the company tax rate will not promote new investment. In the Budget Review, government makes the argument that most of our trading partners have been decreasing the rate of company taxes, which limits the space for South Africa to increase corporate tax. Both of these are fair arguments. But there are arguments on the other side too. A 2% increase in company taxes would have generated about R13-billion.
Economically and politically it may have been a good thing to raise company taxes to 30%. That South Africa’s economy is highly concentrated is not debatable. Companies that operate in highly concentrated monopolistic markets earn high ‘monopoly profits’. These profits should be taxed at higher rates. In addition, no other country has an income distribution like ours and not many countries have such high levels of economic concentration. This requires action beyond joining the “race to the bottom” in corporate tax rates. Furthermore, the investment argument above has some flaws – investment is driven not only by tax rates. The standard of infrastructure, policy certainty and the like are more important considerations. Unlike VAT, where the rate has remained unchanged in post-Apartheid South Africa, the company tax has been decreasing since the early 1990s, when it was at 50%. The argument that decreasing the company tax rate will boost private investment has been made since the early 1990s and throughout the period, private investment has been low and falling. In our view, the burden of the fiscal adjustment should be shared among all taxpayers including the corporate sector and there are just as good economic arguments for a small increase in company taxes.
We believe that the Treasury has failed to capitalise on a political moment which would have allowed it to raise the corporate tax rate. An increase in the corporate tax rate would have positive implications for the distribution of the tax system, and would have ensured that those most able to contribute to plugging the hole in South Africa’s public finance are the ones that carry a higher burden of tax. We also argue strongly for a progressive tax architecture. But for this to be achieved, we have shown that VAT is not in fact regressive, and that the highly regressive nature of excise tax must be addressed. Finally, we must emphasise the in South Africa we are fortunate to have excellent data that make evidence-based discussions about these important issues possible.
Imraan Valodia, Dean of Commerce, Law and Management, and David Francis, Researcher in Economics in the Office of the Dean in the Faculty of Commerce, Law and Management. This article was originally published on the Daily Maverick.
- Peter Cooper
The story of Dr Trudy Thomas, a pioneer of community health care in South Africa.
Healthy Outrage is an apt title for a story that describes the journey Dr Trudy Thomas travelled during the various stages of her life. Thomas was the pioneer of community health programmes in South Africa. Her work spanned more than half a century, stretching through the dark years of apartheid and into the democratic era when she was asked to run the department of health in the Eastern Cape province after the 1994 elections.
Thomas entered the public health arena at a time when health services were heavily skewed towards white people under the apartheid government. This meant that resources were disproportionately allocated by the state and the vast majority of black South Africans received poor quality and inferior services.
In 1994 the dawn of democracy brought the constitutional promise of healthcare for all. But the optimism of the time was soon to wear thin: for Thomas too. Even before the new government’s first term was up, she had begun to express her disdain at the deterioration of healthcare.
And two decades later the public health care system remains in shambles. In the Eastern Cape, the health care system has collapsed. A report released by the human rights lobby group Section 27 revealed severe doctor shortages, a lack of ambulances and hospitals without water or essential equipment. Thomas contributed to the report when it was researched.
In Healthy Outrage, she describes how many of her experiences, particularly as a doctor dealing largely with children, provoked outrage. But her response was a “healthy” and constructive one. When faced with a problem she would sum up the key issues and then to go about addressing them, often with very limited resources.
The book is well written and is a fascinating read about one of the relatively unsung South African heroes of the past half-century. One of its main messages is how, with relatively few resources, a few people with integrity, commitment and hard work can achieve so much.
Thomas was born in 1936 and describes her early life of growing up in a working class family in Krugersdorp where her father was a miner on the gold mines. She excelled at school and went on to study medicine at the University of the Witwatersrand.
She soon struck up a relationship with Ian Harris. After they’d completed their studies they got married and went on to do their internships at what is now Chris Hani Baragwanath Academic Hospital in Johannesburg.
This proved to be a valuable preparation for the next phase of their lives as they learned practical skills in most areas of medicine. Thomas was struck by the enormous burden of preventable diseases that she saw in children, both infectious and nutrition related.
During this time the Sharpeville massacre took place and many of the injured were brought to Baragwanath Hospital where she was part of the team treating them. This had an important influence on her political outlook.
She and her husband moved to a remote health facility called St Matthews Mission in the Eastern Cape where they took over as the medical team. Thomas concentrated on the children’s ward; her training at Baragwanath Hospital stood her in good stead.
Serving the community
Thomas put enormous energy into travelling throughout the community providing primary health care.
She had very limited resources but used them to maximum effect with the full buy-in of the community. As she states in her book, this was community outreach long before the term was coined. It was only in 1978 that an International Conference on Primary Health Care in the Soviet Union led to the well known Declaration of Alma Ata which emphasised that effective primary care is fundamental to the health and well-being of any community. Thomas was well ahead of her time.
In 1974, the family moved to East London and it was here that Thomas’s political profile developed further. She got involved with the human rights organisation, the Black Sash, and also struck up a solid relationship with the charismatic black consciousness leader Steve Biko and his immediate family and associates.
I first met Thomas in 1976 while working at Cecilia Makiwane Hospital in what was then the Ciskei homeland. As a young doctor, I was enormously impressed with her clear views on how primary healthcare and community health complemented curative hospital care.
Thomas was put in charge of community health at the hospital and its 14 clinics. Despite her political opposition to the homeland policy she typically decided to make the most of the situation. For example, she coordinated an immunisation campaign that virtually eliminated measles in the region in the early 1980s, something the country hasn’t managed to achieve 35 years later.
At the helm
Thomas was full of hope and optimism when the first democratically elected government took over in 1994 and, somewhat to her surprise, was appointed to run the provincial health department in the Eastern Cape.
As one of the poorest provinces in the country, the challenge of developing an integrated and effective health system was enormous. She travelled the length and breadth of the province and achieved a great deal.
But her honesty and inability to toe the party line eventually led her into political disfavour and she was not appointed to a second term in 1999.
This didn’t stop her. She took up the fight against HIV and AIDS. She resigned from the African National Congress because of the government’s attitude to HIV and AIDS but continued to set up structures to assist and support AIDS orphans.
Africa should treat Tillerson visit with scepticism
- John J Stremlau
US President Donald Trump promised in late January that his Secretary of State Rex Tillerson would make an “extended” visit to Africa in March.
In a letter to all African leaders, he reportedly described the purpose of the visit as reaffirming “the partnerships and values we share with the African Union, member states and citizens across the continent”.
Similar language was used when the US State Department finally announced Tillerson’s March 6-13 trip. Spokesperson Heather Nauert said he would discuss ways
(the US) can work with our partners to counter terrorism, advance peace and security, promote good governance, and spur mutually beneficial trade and investment.
If true, Tillerson would be covering the same issues that have motivated similar African tours by every US Secretary of State since the end of the Cold War. Typically, these trips have reiterated or augmented long-running bi-partisan US government programmes welcomed by African partners. These have included public health, agricultural development, alternative energy, and trade. The biggest ticket item on trade is the large unilateral concessionary agreement the US Congress has reaffirmed allowing African products preferential access to US markets.
African leaders would be right to note that unless these few partnership agreements are reaffirmed, America’s declining importance and influence on the continent that has accelerated under the Trump presidency, will continue.
Reasons for scepticism
Realistically, Tillerson’s mission will produce few benefits for Africa, or for US-Africa relations. There are three reasons why Africans should view his trip with scepticism.
One is the trip’s limited nature. Geographically it is restricted to the so-called “arc of instability”. Tillerson is visiting just five of Africa’s 54 countries: Chad, Djibouti, Ethiopia, Kenya and Nigeria. Evidently counter terrorism is America’s main Africa concern.
If Trump and Tillerson were seriously interested in issues of trade, public health, and good governance he would have at least included democratic South Africa on his agenda. On 23 February I queried an official involved in planning the trip whether South Africa would be on the final agenda. He said he doubted it because it was still forming a government and making [cabinet] selections.
Instead, Tillerson has prioritised repressive governments and ones under states of emergency.
The second reason that Tillerson can’t be expected to deliver much is that the US hasn’t shown much appetite for diplomatic engagement with Africa since Trump became president. In contrast, the US military is already deeply engaged in the struggle against counter terrorism. And it’s difficult to see what Tillerson can add. To be fair, Defence Secretary Jim Mattiss, is eloquent in endorsing active diplomacy over military means in preventing and resolving conflicts. Yet neither Trump or Tillerson has announced an overarching Africa policy. No Assistant Secretary for Africa has been named, important embassies, including in South Africa, lack ambassadors.
This is in sharp contrast to the US’s active engagement on the military front. Six months ago General Thomas Walhauser, Commander of US Africa Command, outlined a clear policy for this region. It included forging mutually African partnerships, as well as with China, Japan and the European countries. It also included the establishment of military bases in Djibouti and elsewhere.
Finally, Tillerson has no credibility. He has been publicly criticised and even mocked by his commander-in-chief. Rumours persist that he will resign or be fired. And any claims that the government he represents means what it says is undermined by Trump’s own false or misleading statements. He made an astounding 2436 during his first 406 days as president.
The required response
So how might African leaders respond to Tillerson?
African countries set a dignified precedent earlier this year in their expressions of dismay when Trump reportedly compared African countries to dirty toilets. It would be reasonable for the African Union to reiterate its regret and disappointment over America’s declining relevance and importance as a partner in advancing mutual concerns, beyond counter terrorism.
Africans should also remind Tillerson of their appreciation of China’s increasing importance as their leading development partner. He should be made aware of the fact that the US is missing opportunities for mutually beneficial bilateral development cooperation.
In addition, he should be reminded that there’s room for cooperation between Africa, China and the US. In the past three years The Carter Centre in Atlanta has sponsored a project involving African, Chinese, and US military experts and security officials. The project has made progress in identifying areas of trilateral cooperation in the Horn and Lake Chad Basin – troubled areas Tillerson will visit. But so far neither Trump nor Tillerson has shown any signs of engaging China.
Amid the uncertainties of the Trump era other less prominent Africa-US relations may prove to be more vital to protecting and advancing Africa’s interests than traditional US diplomatic channels, including the office of Secretary of State. After all, Tillerson serves a president whose domestic hold on power appears increasingly vulnerable. And it’s worth recalling that since the 1990s Congress has consistently supported expanding economic and political partnerships with Africa. The reason for this is that congressmen have been pressed to do so by African-Americans as well as other sympathetic elements in America’s diverse civil society, business, and philanthropic sectors.
Networks such as these, as well as close ties at state and local government level that stretch throughout Africa may indeed be more important in the long run.