Wednesday, February 18, 2009

Country Lacks Firm Hand on the Steering Wheel

It is a curious situation: because South Africans have been so absorbed with their own political drama, they have not appreciated sufficiently that the world's economy is imploding.

Because the other countries of the world have been so absorbed with their economies imploding, the dangerous disintegration of the African National Congress (ANC) and its consequences have been largely bypassed.

Call it the case of the intersecting blind spots.

Gradually, the harsh reality of the global economic meltdown is beginning to be appreciated locally, and it could not be happening at a worse time. The election now looms. The ANC's leadership is in disarray. The party's most visible protagonist is its youth leader whose latest contribution has been to encourage protest ers against the institutions led by members of his own party using ethnic epithets against its own minister, no less.

It's heart-warming that a party should encourage internal debate, but encouraging protesters while they do damage to the property of your own government is absurd. If that is not a firing offence, what is?

ANC youth leader Julius Malema has apologised and, as far as he is concerned, that's the end of the issue. The words can be forgiven, but the implications cannot be wished away. Malema's actions have been "condemned" by the party, but it seems incapable of controlling him.

One of the reasons why it can't is because Malema is so representative of many of the new wave of leaders who have swept into high positions on the coat-tails of the new president; arrogant, malicious, malignant and corrupt.

Malema's indecision about whether the ANC is the party of popular protest or the party of government reflects a larger tension in the party itself. I have always had the disconcerting feeling that the ANC as government wants all sides of all issues; it wants to be both the party protesting and the party delivering.

It's a bit like someone driving a car but only holding the steering wheel with the lightest grip. It could veer out of control at any moment. As passengers, at the risk of being accused of being back-seat drivers, we are constantly trying to encourage the drivers to take responsibility for driving the car in which we are all travelling and to please, urgently, get a better grip on the steering wheel. While the road is straight, the consequences of a light grip on the steering wheel are not significant. They can actually be positive as the driver taps the steering wheel this way and that on the advice of well-meaning back-seat drivers. But when a sharp bend looms, you really want the driver to be fully conscious and totally engaged.

Yet what we have is a caretaker president, who frankly is looking like the best man for the job, and a president all-but-designate, who is increasingly looking he would be the worst man for the job.

Throughout the campaign so far, Zuma has given us lots of indications that he would be a warm-hearted, gregarious, facilitating and forgiving president, which is presumably why the corrupt elements in the party and those with ideological axes to grind find him so enthralling.

But he has given no indication he would be capable of landing decisively on one side of an issue or another; in other words, that he would have a strong grip on the steering wheel. And about that bend in the road; it's looking increasingly like a hairpin, and yet South Africans seem only dimly aware of the consequences.

I was reading recently The Economist's analysis of the global banking crisis, and there were parts of it that were truly amazing.

Did you know the last time there was a run on a British bank Benjamin Disraeli was prime minister? Did you know that every second hedge fund in Europe and the US is likely to go bankrupt?

So far, the US government has injected $125bn into the nine largest financial institutions. It has in addition provided $55,8bn in exchange for equity stakes in AIG, Freddie Mac and Fannie Mae.

Governments outside the US invested or committed to invest $162,6bn in banks and insurance companies last year.

It is glibly assumed in SA that our banks are unlikely to need help and that they are well capitalised and well regulated.

International comparisons seem to bear this out. An international banker told me recently that according to their calculations, the average 9,2% tier one capital was something called "core equity", which is apparently something the tier one capital of many US and European banks was not.

Tangible book value to total assets of German banks was a ratio of about 50:1 while in SA it is about 15:1.

Nevertheless, Finance Minister Trevor Manuel put only R5bn in contingency reserve.

Trust me, he is going to need more than that.

SA's economy is more vulnerable to an international downturn than it seems.

We are, after all, a trading nation. We have recently also been on a consumption binge. At its recent results, Absa announced that its bad debt charges as a percentage of its advances had increased 140% to 5,7%. In practical terms, this meant it was repossessing 38 houses and 1300 vehicles every month.

It may not be the best time, but the government and the Nedlac grouping convened to advise on this problem really need to be more out there and proactive. Getting a firmer grip on the steering wheel requires a much better understanding of the running condition of the vehicle and state of the road than we seem to have.

They also need to include a scenario plan for a real hairpin bend.

1 Opinion(s):

Joe King said...

We would be safer sitting in the passenger seat of a muscle car over Chapmans Peak during rainy season with Stevie wonder at the wheel.