Podcasts from the Edge

From South African Airways to Eskom’s transition from coal and private investment in South African harbours, the political noise surrounding any meaningful movement or reform in South Africa’s political economy can often drown out the facts, or at least that facts the reformers say they see. Listen in as Peter Bruce talks to Public Enterprises Minister and former Finance Minister Pravin Gordhan about his satisfaction with the process underway to effectively privatise SAA, big hints around the introduction of private capital into South African harbours, where it has never been allowed, and political support, says, the minister, “at the highest level” for Eskom CEO Andre de Ruyter despite regular publics attacks on his person. Sure, Eskom will make some future investments in gas and maybe even a little nuclear. But the leap into renewables and battery storage will be “phenomenal”.

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There’s no denying Johannesburg has seen better days. It is dirty and broken and now the centre of a Covid-19 firestorm as the Delta variant runs through South Africa’s financial hub. But don’t underestimate Johannesburg’s resilience and deep love for it that much of its population has. Listen here to Peter Bruce talking to Shawn Theunissen, freshly-appointed President of the Johannesburg Chamber of Commerce and Industry. He’s the face of business that the local government, such as it is, talks to. Almost everything about Johannesburg is up in the air ahead of local government elections later this year and while the new JCCI boss is careful to call even the most daunting problems “challenges” he has a clear sense of community and purpose that may make a real difference. Maybe.

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How come China gets to be vastly corrupt and grow so strong at the same time? Why can’t we do that in South Africa? Is their corruption better than ours? Actually, it may be. Peter Bruce talks to leading economic historian Keith Breckenridge about a new book that studies the nature of corruption across 15 economies in an attempt to explain why corruption in China has not damaged growth the way it has here. The answer in the book, says Breckenridge, is that Chinese officials are incentivised to be corrupt and to cut corners that make things happen. It’s just bizarre….

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As Ebrahim Patel ploughs on, recasting South African industry in his own image, good news stories on the ground are hard to find and one of the minister of trade, industry and competition’s frequently used weapons in his drive to promote localisation and import substitution, the Industrial Development Corporation, reported losses of R3.8bn last year. That’s a big number and testament to the quality of companies that its political masters (Patel) is driving it to invest in. In this edition of Podcasts from the Edge Peter Bruce talks to Nick Steen, a rock- hard former CEO with long, bittersweet experience in the local textiles industry that Patel is determined to protect. Do we have a future in textiles? Steen says we do, but not the way Patel imagines it…

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Can South Africa compete in the global automotive industry as our economy stutters and stalls while our main car export destinations — Britain and the European Union — set their own markets tough new targets in emissions and carbon foot print (they’ll want to know how the electricity powering SA car manufacturing is generated).? There is no room here for being second best. We are either at the top of our game or we can pack it in. There are, of course, bright spots and reasons to be cheerful. Australia lost its car industry but we have kept our and it is doing well. In this edition of Podcasts From the Edge, Peter Bruce talks to Justin Barnes, Executive Director of the Toyota-Wessels Institute for Manufacturing Studies. Barnes, the lead consultant in the creation of the SA Automotive Industry MasterPlan, is no starry-eyed optimist but he tells Bruce there’s good reason to believe we can continue to hold our own small but perfectly formed place in the automotive firmament.

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Peter Bruce gets a history lesson from South Africa’s top economic historian, Prof Keith Breckenridge. Trying to draw parallels between South Africa now, an economic wasteland coming out of a devastating pandemic, and South Africa a hundred years ago, an economic wasteland devastated by the deprivations of war and the Spanish flu, Bruce finds some unpleasant truths — World War 1 might have been followed in the US by the roaring twenties then but there was nothing roaring about the 1920’s here and the same is likely to apply now. Back then we suffered crippling strikes and an overvalued currency that made it hard to export. At the same time, the outline of what our industrial skeleton began to take shape. The ANC is still trying to recapture some of that confidence but, as Breckenridge points out, the same opportunity the colonialists and Afrikaner nationalists missed in failing to give property rights to the poor, where they live, is being actively reproduced by the ANC now as it empowers tribal authority at the expense of the people.

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As the policy debate around localisation — or import substitution — as a formula for reindustrialising South Africa heats up, the lines are being drawn between fervent advocates of the government line on making imports as expensive as possible and trade liberals arguing for as few barriers to imports as possible, both Business Unity SA and Business Leadership SA have produced helpful research that tries to slow the argument down and to focus on where localisation makes sense and where it might not. The report was written by economist and Intellidex partner Peter Attard Montalto, who chats here to Peter Bruce on Podcasts From the Edge about where constructive opportunities for localisation might lie, and the work the government and its many diplomatic outposts might do in promoting the best possible results of localisation, which is to export. Are we doing enough to develop new markets?

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If President Cyril Ramaphosa needed to take anything out of his two-day appearance at the Zondo Commission last week then he would have needed to put a lot more in than he did. Instead, he was allowed by his inquisitors to have his cake and eat it without ever being asked how even one example of grand corruption may actually have worked. Listen to former Cosatu leader and Gauteng Premier Mbhazima Shilowa talk to Peter Bruce about the centrality of party funding in corruption, the way forward for our politics, why a disastrous ANC will probably sweep the upcoming local elections and what needs to be donate make the way we create wealth more inclusive. If we want to avoid awful stories like Absa losing CEO’s of the quality of Daniel Minele then unions need to be sitting on the boards of South African companies. Business doesn’t want that and, frankly, neither do the unions. Which is why the state may need to find the courage to bang some heads together.

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In this latest edition of Podcasts from the Edge Peter Bruce talks to Seriti Resources CEO Mike Teke about the choppy waters suddenly surrounding the agreement to take over the vast coal-mining resources of South32. Combined with the Anglo American coal business Seriti has already acquired, the South32 mines would make Mike Teke the biggest single coal-supplier to Eskom, SA’s debt-drunk power utility. But there’s a problem — one of the South 32 mines supplies directly to Eskom’s critical Duvha power station and it loses money with every delivery. Teke says he won’t do the deal until Eskom agrees a better coal price for the supplying mine. The National Treasury won’t give it permission to pay. But without the mine Duvha would close and that would bring even more chaos to the power grid. What is to be done? South 32, desperate to get rid of the assets, has since offered Seriti $250m over the next decade. That’ll help, says Teke but he still wants to hear what the Treasury does with a second approach from Eskom. He wants the current price of R280/t of coal increased to R550 a tonne. That may sound a lot but Teke reminds Bruce that coal export prices are now well above R1000/t. A deal will be done, says Teke, and he’d even be prepared to share ownership of the Duvha mine if one of the many losing bidders for the South 32 assets would like to try their luck.

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Government has banned sales of alcohol for 19 weeks overall since the beginning of the Covid-19 crisis in South Africa last year. New research, paid for by Distell but conducted independently of the company, says that not only has that cost the economy R2bn a week in growth and much more in excise taxes, but that it hasn’t has much effect at all on hospitals, which according to the government the bans were implemented to protect. The research is explosive. The 60 per cent drop in trauma at South African hospitals matches similar trauma unit statistics from all over the world during other lockdowns. They neither the UK (down 57%), Italy (-57%) to the US (-54%) banned the sale of alcohol. So why us? Listen to the latest edition of Podcasts from the Edge with Peter Bruce as he talks to Ian McGorian, who did the research, and to SA Liquor Brand Owners Association chair Sibani Mngado to try and unpack the slippery thinking that drives the huge and influential anti-alcohol lobby in South Africa and inside its government, which should perhaps know better.

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