When Markets Discipline Politics

President Jacob Zuma continues to be in conflict with his own Finance Minister, Pravin Gordham, over fiscal policy (and propriety in the management of public finances). The markets trust the latter. The former has more power, including the coercive apparatus of South Africa’s administrative state. Having just presided over a disastrous outing for the ruling ANC in this month’s municipal elections, Zuma needs to create more policy wiggle room for his floundering administration. And Gordham’s commitment to fiscal discipline stands in the way. So far the markets’ reaction to Zuma’s machinations at the Finance Ministry have managed to discipline intra-ANC elite politics. But as Zuma gets closer to retirement (or being forced out) it is unclear how much he is willing to continue humoring the markets…

The revelation on Tuesday that Gordham may be forced out via (likely dubious) charges of improper conduct while he served as head of the South African Revenue Service sent the rand tumbling, again.

This is the third time the police unit, known as the Hawks, have questioned Gordhan. Earlier this year, just days before he was set to deliver a crucial budget speech, the Hawks demanded Gordhan answer written questions. Then in May, rumors of Gordhan’s imminent arrest sent the currency tumbling, just as ratings agencies were assessing South Africa. Gordhan was not arrested then, and went on lead South Africa’s recent economic recovery, assuring international investors of the country’s stability.

Screen Shot 2016-08-24 at 11.13.59 AMAnalysts believe Gordhan is the target of president Jacob Zuma and his political allies. The two are reported to be at loggerheads over the management of South Africa’s state-owned enterprises, especially the national carrier South African Airways. Gordhan’s office has delayed bailing out the embattled carrier until a new board is appointed (effectively removing those close to Zuma, according to reports). Gordhan’s office has also curbed spending on plans to build a new nuclear power plant.

Earlier this week, a cabinet briefing announced that Zuma himself would now directly oversee state-owned companies. Analysts say the move allows Zuma to maintain political power and protect his interests after historic losses in this month’s local government elections. Zuma’s office has denied that there is a rift between the president and the finance minister. According to reports, Gordhan is determined to resist pressure to resign

For more on this visit Quartz Africa:

Several African public figures (and associates) mentioned in the Panama Papers

The Guardian has an excellent summary of what you need to know about the Panama Papers, the data leak of the century from the Panama-based law firm Mossack Fonseca.The firms specializes, among other things, in incorporating companies in offshore jurisdictions that guarantee secrecy of ownership.

Here is a map of the companies and clients mentioned in the leaked documents (source). Apparently, the entire haul (2.6 terabytes of data) has information on 214,000 shell companies spanning the period between 1970 to 2016.

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The leaked documents show links to 72 current or former heads of state and government. So far the highest-ranking public official most likely to resign as a result  of the leak is the Prime Minister of Iceland, Sigmundur Gunnlaugsson (see story here and here)

For a list of African public officials mentioned in the leaked documents see here. And I am sure we are going to hear a lot about all these rich people in developing countries.Screen Shot 2016-04-03 at 9.18.42 PM

Closer to home, the Daily Nation reports that Kenya’s Deputy Chief Justice, Kalpana Rawal, “has been linked to a string of shell companies registered in a notorious Caribbean tax haven popular with tax dodgers, dictators and drug dealers.” Justice Rawal has been dodging retirement for a while. May be after the latest revelations might find a reason to call it quits.

The ICIJ website has neat figures summarizing some of the findings from the massive data haul. Also, here is a Bloomberg story on the tax haven that is the United States. 

On Zumaphobia and the policy failures of the ANC

A lot has been written about Jacob Zuma’s failures as president of South Africa, most recently his odd decision to fire his widely respected finance minister, Nhanhla Nene. Zuma replaced Nene with an unknown ANC MP, David van Rooyen, only to replace van Rooyen with former finance minister Pravin Gordhan after intense pressure from the media and the markets.

Sources indicate that Mr. Nene was fired for holding the line on fiscal discipline.

Much of the analysis so far has focused on President Jacob Zuma — his increasing personalization of power within the ANC, corruption, and even his private life.

But in an interesting piece Andile Mngxitama questions this Zuma-centric narrative, instead focusing attention on wider policy failures within the ANC. Mngxitama argues (correctly, I believe) that:

Both Mbeki and Zuma are ANC cadres through and through and it’s the party policy that determines what they do. Zuma has not strayed from the ANC policies and no one has yet made this claim in any meaningful way. So, if it’s not policy that is the problem, how do we judge Zuma’s performance?

The main problem is that his detractors fundamentally agree with the ANC policies and they have therefore chosen to find fault with Zuma the man and thereby rob us of a useful analysis of why things are falling apart. A shift from Zuma to policy would also show that his presidency is a product of policy; the template for things to fall apart was designed by his predecessors.

Zuma’s sin, which has been missed by the analysts, who are too driven by “Zumaphobia”, is that he has not been able or willing to halt the downward spiral, which is essentially a byproduct of ANC policies. The main policy plank of the ANC since it took over in 1994 has been correctly described as neoliberalism – the privileging of capitalism as the driver of society.

The implications of this policy direction are to increasingly remove the state from society and the economy and allow the profit motive to determine who gets what service. The state privatises assets and those it keeps are similarly managed as if they are capitalist entities.

The piece at times sounds anti-market. But don’t let that distract you from its succinct understanding of the political economy challenges facing South Africa.

In 2008 the ANC recalled then President Thabo Mbeki. There is no reason to believe that President Jacob Zuma has totally eclipsed the party machinery. Indeed this has been made clear by his quick retreat after the brazen attempt to weaken the finance ministry.

Recent events in South Africa suggest that the party of Mandela is no longer(if it ever was) the voice of the people. But this outcome cannot be pinned on Zuma. The party elite, including Zuma, largely remain hostage to the post-apartheid political settlement. Meanwhile, the country’s deplorable economic indicators are adding fuel to the fire that is the Economic Freedom Fighters (which is increasingly sounding more and more mainstream and in tune with the frustrations not just of South Africans, but younger Africans in general north of the Limpopo). On a recent tour of London the EFF leader, Julius Malema, held meetings with CEOs of companies with interests in South Africa — a signal that these companies appreciate the potency of his message of economic freedom.

Mbembe on the State of South African Politics

Rainbowism and its most important articles of faith – truth, reconciliation and forgiveness – is fading. Reduced to a totemic commodity figure mostly destined to assuage whites’ fears, Nelson Mandela himself is on trial. Some of the key pillars of the 1994 dispensation  – a constitutional democracy, a market society, non-racialism – are also under scrutiny. They are now perceived as disabling devices with no animating potency, at least in the eyes of those who are determined to no longer wait. We are past the time of promises. Now is the time to settle accounts.

But how do we make sure that one noise machine is not simply replacing another?

That is Wits professor Achille Mbembe writing on the state of politics in South Africa. The whole piece is definitely worth reading (also liked this response from T. O. Molefe).

Economic elites in South Africa (both black and white) are playing with fire. The lessons of Zimbabwe were not learned. The implementation of Mugabe’s land reform project was a disaster, but there is no question that the levels of land inequality in Zimbabwe were simply politically untenable. Something had to give.

One need not be against everything neoliberal (whatever that means) to acknowledge that the same situation holds in South Africa, and that something will have to give. Consider Bernadette Atuahene’s observations on the land situation in South Africa:

When Nelson Mandela took power in South Africa in 1994, 87 percent of the country’s land was owned by whites, even though they represented less than ten percent of the population. Advised by the World Bank, the ruling African National Congress (ANC) aimed to redistribute 30 percent of the land from whites to blacks in the first five years of the new democracy. By 2010 — 16 years later — only eight percent had been reallocated.

In failing to redistribute this land, the ANC has undermined a crucial aspect of the negotiated settlement to end apartheid, otherwise known as the liberation bargain. According to Section 25 of the new South African constitution, promulgated in 1994, existing property owners (who were primarily white) would receive valid legal title to property acquired under prior regimes, despite the potentially dubious circumstances of its acquisition. In exchange, blacks (in South Africa, considered to include people of mixed racial descent and Indians) were promised land reform.

Rapid economic growth and mass job creation could have masked the structural inequalities that exist in South Africa. Instead the country got Jacob Zuma and a super wealthy deputy president (and BEE beneficiary), both of whom are singularly out of touch with the vast majority of South Africans.

There is no doubt that South Africa needs a complete reorganization of its political economy. The question is whether the process will be managed by a “moderate” outfit like the ANC; or whether leaders will continue to sit on their hands and allow voices of less moderate groups like the Economic Freedom Fighters to gain traction.

ps: Just in case it is not obvious, South Africans are unambiguously better off now — as a people — than they were under apartheid rule.

Presidential Salaries in Africa

Paul Biya of Cameroon earns $610,000 per annum, 229 times the earnings of the average Cameroonian.* Screen Shot 2015-07-22 at 10.31.57 PM

Think about it for a second: Paul Biya earns $210,000 more than Barack Obama.

Notice that these figures do not include all manner of allowances.

Source: Daily Nation

*Note that the interns at the Daily Nation mixed up Mauritania and Mauritius. The CNN bug is contagious.

Most read posts in 2014

Here are the top posts in 2014

1. Corruption under apartheid South Africa: This post was top partly because of the 2014 South African elections. More on the legacies of apartheid era corruption and rent-seeking in South Africa here.

2. Kenya Security Laws (Amendment) Bill 2014: This bill (now an Act of Parliament) is further evidence of Uhuru Kenyatta’s autocratic tendencies. I personally don’t think that he is an incarnation of Moi or other dictators of years gone. Rather, Mr. Kenyatta is a poor administrator who likes taking shortcuts to get quick results. As I argued in a related post, the Security Laws (Amendment) Act 2014 could potentially severely limit civil liberties in Kenya.

3. Did European Colonialism Benefit Africans? The popularity of this post is perhaps a reminder that more research is needed on the long-run effects of colonialism not just in Africa but in other formerly colonized places as well. So far all the literature tells us is that colonialism was bad, but that the Western institutions that Europeans spread around the globe are good. More recently we’ve seen evidence that pre-colonial institutions in the colonies were pretty resilient in the face of colonial intrusion; and have had lasting effects (also remember that the duration and intensity of colonialism varied widely across the globe). One avenue of research that I have been exploring is how pre-colonial institutions interacted with colonial administrations, and how this shaped the institutions that emerged out of the independence wave of the early 1960s. More on this in the new year.

4. Why Raila Odinga Lost: A sizable proportion of Kenyans still believe that Odinga was robbed in the March 2013 election in Kenya. I disagree. In my own projections on this blog – merging disaggregated opinion polls with historical district turnout rates (perks of having a case with tight ethnic voting) – I found Mr. Kenyatta to be ahead of Mr. Odinga by about 740,000 votes, or 7.2 percentage points (which was close to the final official figure of 6.7% difference between the two).

I don’t think that Kenyatta won in the first round, but do believe that we would have trounced Odinga in a runoff anyway. Which is why I have never come to terms with the unanimous Supreme Court decision granting Kenyatta victory on the basis of less than 9000 votes out of 12.3 million cast.

5. Understanding Uganda’s Military Adventurism Under Museveni: General President Museveni has managed to create an image of himself as the anti-terror hatchet man in the wider horn of Africa region. Ugandan troops are the backbone of the AU mission in Somalia (AMISOM). Since his triumphant entry into Kampala in 1986 Museveni has also been involved in conflicts in Rwanda, the DRC, Sudan, C.A.R, and more recently South Sudan. Because of the degree of militarization of the Ugandan state and recent public displays of intra-elite friction, I think Uganda will continue to inch up in the coup sweepstakes ahead of the 2016 election.

Quick Hits

Haiti wants to join the African Union 

Partisan stats: Of red-state moochers and blue state makers 

Romney’s elusive tax plan (funny)

Zuma’s failed presidency and South Africa’s labor unrest

Mo Ibrahim Prize goes unclaimed, again

Kenya might be seeing the origins of insurgency (More details on this soon)

Quick hits


The Atlantic has a nice piece on the legacy of Meles Zenawi, the ailing Ethiopian Premier.


The African Union elected South African Nkosazana Dlamini-Zuma to head its executive arm, the AU Commission. Ms Dlamini-Zuma is a former wife of the polygamist South African President Jacob Zuma. I hope that with Pretoria’s success in having her elected to head the AU South Africa will take a more proactive role in leading the regional organization. As I have stated before, I think the organization needs “owners” in the form of diplomatically powerful custodians. Being the region’s biggest economy, South Africa is well placed to provide strong leadership to the African Union, if it wanted to.

Still on the AU Summit, Ethiopian Prime Minister Meles Zenawi has been conspicuously absent, fueling speculation that he is critically ill. Rumors abound that Mr. Zenawi has left the country for a Belgian hospital – the Saint-Luc University Hospital in Brussels (where he is believed to be receiving treatment for an acute case of hematologic cancer). Some opposition groups have suggested that Mr. Zenawi may have died in hospital. The last time he was seen in public was on the 19th of June. Mr. Zenawi has led Ethiopia since 1991. His record has been a mixed bag of aggressive and ambitious development projects (with results, growth has averaged over 8.4% over the last ten years) and militarism and authoritarian tendencies that have seen many opposition members detained, exiled or killed.

And in Somalia, BloombergBusinessweek reports on the massive corruption in the Transitional Federal Government.

The nearly 200-page report lists numerous examples of money intended for Somalia’s Transitional Federal Government (TFG) going missing, saying that for every $10 received, $7 never made it into state coffers.

The report, written by the U.N. Monitoring Group on Somalia and Eritrea and obtained by The Associated Press Monday, says government revenues aren’t even clear: The Ministry of Finance reported revenues of $72 million in fiscal year 2011, while the accountant general reported revenues of $55 million.

The Somali Government remains an unrepresentative shell, propped up by African Union forces and barely in control anywhere outside of Mogadishu. No elections are in sight (and rightly so. I have never been a fan of rushed post-conflict elections. See Liberia circa 1997 for details), instead the UN and the AU are presiding over a process in which Somali power brokers will put together a list of electors to appoint the next parliament. The current government’s mandate expires the 20th of August (next month).

South Africa and the AU [Rant and rave alert!!]

As you may already know South African candidate for the AU Commission Chair Nkosazana Dlamini-Zuma (ex-wife of president Zuma) failed to get elected. Instead the AU extended Mr. Jean Ping’s term till June. Ms Dlamini-Zuma intends to vie for the seat again in June.

South Africa and its backyard (SADC member states) had lobbied hard for Ms Dlamini-Zuma.

The South African Business Day reports:

Mzukisi Qobo of the University of Pretoria says: “It is clear that this is an intensely divisive campaign, and plays into the hands of those who view SA as harbouring intentions of running roughshod over other countries. Unity in the AU is a facade reinforced by a poorly conceived notion of pan-Africanism.

“Africa’s political elites still think very much in terms of regional groupings — east Africa, north Africa, southern Africa and west Africa — as well as along the colonial lines of Francophone, Lusophone and Anglophone. These are realities that are there.”

SA’s foreign policy stance has been back and forth, which may have caused more divisions with countries like Nigeria and Egypt.

 But political analyst Steven Friedman does not think policy “flip-flopping” was the reason Ms Dlamini-Zuma did not get the post. With its economic infrastructure strength, other countries feared that SA would dominate Africa politically if given a chance, he says.

To which I say, why not?

What would be so wrong with a reasonably stable and important regional player taking charge of the rudderless dictators’ club institution that is the AU? The organization’s failures in the recent past – including in Libya, Sudan, Cote d’Ivoire, Somalia, Zimbabwe, DRC, Central African Republic, etc – have been partly because no single country has managed to emerge as its de facto leader and ultimate guarantor (forget the delusional late King of Kings, he was a clown on steroids).

Instead of having a strong leadership – whether by a single country or by a group of regional representatives – the AU has opted to have weak leadership in the form of a Commission headed by nondescript individuals political lightweights unable to rally the member countries to any respectable cause. The only time the club’s dictators are ever united is when they dump on the ICC and all other manner of foreign infringement on their “sovereignty” (which to them means the right to starve, jail or murder their citizens). The existing post of a rotating presidency has also been a complete sham.

Obiang was the latest one to occupy the post. Yes, Teodoro Obiang Nguema Mbasogo of Equatorial Guinea. This guy.

May be this episode will end Pretoria’s navel-gazing and encourage it to focus on having a coherent Africa policy that will provide strong leadership for the AU.

A leaderless organization of 54 states, new $200m headquarters or not, is a useless organization.

For more on this see here and here.

Also, check out this thought-provoking piece on the symbolism of the new AU headquarters.

Quick hits

Follow the goings on in the DRC (especially this election season) over at Alex Engwete’s blog.

Living under the shadow of Kony and his men in Eastern CAR.

On a related note, the Ugandan army’s dirty war in the Congo and CAR.

Shame on the ANC. But there is still hope for cleaner politics in South Africa. The ANC is an over-size coalition with a high chance of internal breakup in the not so distant future. It might even occur sooner, over the Zuma succession. And this time it might not be a rather benign COPE affair. You can read more on the controversial bill over at the Economist.

Trying God? Churches claim to have cured HIV positive congregants. This goes beyond faith, it is naked exploitation. And a call for government involvement.

And lastly, a very dictator Christmas (via Blattman)